Schroder Eur.r Regulatory News (SERE)

7 December 2021

SCHRODER EUROPEAN REAL ESTATE INVESTMENT TRUST PLC

("SEREIT"/ the "Company" / "Group")

FULL YEAR RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2021

 ASSET MANAGEMENT SUCCESSES UNDERPINNING VALUATION AND DIVIDEND GROWTH

-SUBSTANTIAL INVESTMENT FIREPOWER TO DRIVE FUTURE RETURNS-

Schroder European Real Estate Investment Trust plc, the company investing in European growth cities and regions, today announces its full year results for the year ended 30 September 2021.

Quarterly dividends at pre-Covid level and award of special dividend

· Continuation of pre-Covid dividend of 1.85 euro cents per share (cps)

· Additional special dividend of 4.75 cps announced, with intention to declare a further special dividend targeting approximately 4.75 cps alongside the next interim results, reflecting the profitable sale and refurbishment of Boulogne-Billancourt ("Paris B-B")

Financial highlights: Well positioned with improving earnings and low loan to value with over €40 million of investable firepower

· Net Asset Value ('NAV') of €199.5 million or 149.2 cps, (30 September 2020: €201.8 million or 150.9 cps);

· NAV total return of 3.2% based on an IFRS profit of €6.2 million (30 September 2020: 16.2% / €28.4 million) driven primarily by valuation increases in the industrial and DIY assets, together with the German office portfolio, which was offset by the write down of the Seville exposure to € nil;

· Underlying EPRA earnings of €6.6 million (30 September 2020: €8.6 million), which will increase with the redeployment of Paris B-B sale proceeds and as rent collection improves;

· Loan to Value of 16% net of cash/28% gross of cash (30 September 2020: 24% net of cash/28% gross of cash) at a weighted average total interest rate of 1.4% and a weighted average loan duration of 2.9 years, with the earliest loan maturity in 2023;

· Total dividends declared of 11.87 cps with 7.12 cps from ordinary dividends. Dividend cover of 69% for the ordinary dividends (30 September 2020: 112%), with a portion of the net sale proceeds from the disposal of Paris B-B to be allocated towards covering the shortfall in income in the short term

· Over €40 million, excluding debt, of investment firepower available and strong pipeline of acquisition opportunities, positioning the Company for future growth

Operational highlights: Asset management success and weighting to high growth sectors driving portfolio resilience

· 1.7%, or €3.5 million, increase in the like for like portfolio value to €215.7 million. Excluding the write down of the Company's sole shopping centre exposure, the portfolio value increased by €10.2 million, or 5.6%;

· Two acquisitions completed totalling approximately €10 million:

o a logistics investment in Nantes, France for €6.2 million, reflecting a net initial yield of 5.5%; and

o an additional floor totalling 1,050 sqm in the Paris Saint-Cloud office investment in Paris

· Concluded 11 new leases and re-gear events generating approximately €700,000 of annual contracted rent at a weighted average unexpired lease term of four years. This includes Hamburg's remaining floors at rents significantly above expected rental value and increasing occupancy from 80% to 100%;

· Robust rent collection of 93% during the period, including 95% for most recent quarter;

· Paris Boulogne-Billancourt refurbishment remains on track to be delivered in Q2 2022 and within cost, with the remaining 50% consideration for the refurbishment to be received in instalments over the refurbishment period;

· Retained GRESB 3 green star rating with asset specific sustainability initiatives identified to improve rating.

Sir Julian Berney Bt., Chairman, commented:

"The Company continues to be a unique and compelling proposition for investors and is well placed to benefit from the trends that have accelerated as a result of the pandemic. These include changes in occupier demand, delivering operational excellence and ensuring that sustainability priorities are instilled within the Company's investment process.

"We continue to work with the Investment Manager in the deployment of capital into new investments and earnings enhancing initiatives to further diversify the portfolio and move the dividend cover back to 100%. We will continue to employ a highly disciplined and patient approach.

The board does not believe that the current share price reflects the robust performance of the business and in particular the attractive dividend yield, opportunity to benefit from special dividends and the Winning Cities and Regions exposure."

Jeff O'Dwyer, Fund Manager for Schroder Real Estate Investment Management Limited, added:

"The ambition to continue diversifying the portfolio and drive the next phase of growth by leveraging our local expertise to originate and acquire new opportunities remains undimmed. Pleasingly, the portfolio has again demonstrated its attractive income and capital growth characteristics during what has been another challenging period. With continued market uncertainty, the Company's exposure to higher growth cities and sectors, coupled with its prudent gearing position and available investment firepower, means it is well positioned to deliver shareholder value."

The Annual Report and Accounts are also being published in hard copy format and an electronic copy of that document will shortly be available to download from the Company's webpage www.schroders.co.uk/sereit. Please click on the following link to view the document:

http://www.rns-pdf.londonstockexchange.com/rns/7471U_1-2021-12-6.pdf

The Company has submitted its Annual Report and Accounts to the National Storage Mechanism and it will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

A further announcement will be made shortly to confirm the full timetable of the fourth interim dividend.

A virtual presentation for analyst and investors will be held today at 9am GMT / 11am SAST. To register please visit: https://us02web.zoom.us/webinar/register/WN_8xsop-KDQ2eDZcJ8LLz8jA

Enquiries:

Jeff O'Dwyer

Schroder Real Estate Investment Management Limited Tel: 020 7658 6000

Ria Vavakis

Schroder Investment Management Limited Tel: 020 7658 2371

Dido Laurimore/Richard Gotla/Ollie Parsons Tel: 020 3727 1000

FTI Consulting

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Chairman's Statement

Overview

These past 18 months have been a difficult time for everyone; particularly for those who have lost family and friends or have struggled with maintaining their health and businesses. Whilst society continues to learn to live with the Covid-19 virus, the success of the vaccination programme has markedly improved the outlook over the last six months. This has given a shot in the arm to the European economy, to the point where confidence has recovered and we expect the rate of economic growth to dramatically improve over the coming quarters. This will be a welcome boost to real estate markets, provided new variants of the virus do not become dominant and result in further lockdowns.

As at 30 September 2021, the Company's diversified property portfolio was valued at €215.7 million. In addition, the Company has substantial cash reserves (circa €45m) as a result of the successful forward funding sale of the Paris office building in Boulogne-Billancourt ('Paris BB'). Over the period the portfolio was enhanced by the acquisitions of a logistics investment in Nantes, France and a further office floor in the Company's existing Saint-Cloud office investment in Paris. The portfolio now comprises 13 investments across four Western European countries in cities including Paris, Berlin, Frankfurt, Hamburg and Stuttgart. In addition, the industrial exposure has increased to 22%, focused in strong sub-markets in France and the Netherlands. The majority of the retail exposure is grocery and DIY, two segments classified as necessities which have been beneficiaries of the pandemic.

The Board is pleased with the portfolio performance during the pandemic and the Investment Manager's efforts in delivering on its asset management programme. Along with ongoing tenant engagement, this has led to valuation growth and improving rent collection. It has allowed for the dividend to be reinstated to its pre-pandemic level and for a special dividend to be declared, allowing shareholders to benefit from exceptional asset management profits.

During the period the portfolio increased on a like-for-like basis by €3.5 million, or 1.7%, and by €2.6 million, or 1.0%, post capital expenditure. Excluding the write down of the Company's sole shopping centre exposure, the portfolio value increased by €10.2 million, or 5.6%. Rent collection has steadily improved, from 89% in the first quarter to 95% in the most recent quarter. As previously flagged, the exposure to the Seville shopping centre has been materially impacted by the pandemic. As a result of the uncertainty in this sector we have written off the equity interest to nil, meaning there is no further exposure to the business. We have commenced a disposal process for the asset.

The Company's largest asset management exposure is the Paris BB office, where in September 2020 it agreed a forward sale subject to concluding a refurbishment. It is pleasing that, despite Covid-19, the refurbishment remains on programme for completion by Q2 2022 and within cost. As a result of the refurbishment meeting certain construction milestones, €1.6 million of the remaining €6.5 million pre-tax profit has been reflected in the 30 September 2021 net asset value. As previously announced, this exceptional asset management initiative has resulted in the ability to share some of the overall €28 million pre-tax profit with investors via special dividends, with the first 4.75 euro cents announced with these annual results. The intention is to declare a further special dividend in the region of 4.75 euro cents per share alongside the next interim results, which are likely to be announced in June 2022.

The remaining purchase price of Paris BB will be received in instalments over the refurbishment period. The Company has considerable investment capacity and continues to pursue suitable income orientated investment opportunities that will improve the income profile and further diversify the portfolio. Other key asset management initiatives completed during the period included the successful leasing of the Hamburg office investment at rents significantly above expected rental value which took the office occupancy from 80% to 100%, coupled with leasing agreements in Saint-Cloud. In addition, ESG initiatives have been advanced that have allowed the portfolio to maintain its three green star Global Real Estate Sustainability ('GRESB') rating.

Strategy

The long-term strategy remains to replicate the success we have achieved to date and grow the real estate portfolio, further diversifying it by location, sector, size, lease duration and tenant concentration. Identifying 'Winning Cities and Regions', coupled with the use of the Investment Manager's local expertise to source and manage investments in micro locations that will benefit from supply constraints, competing demands for uses, transport infrastructure improvements and real estate that is leased off affordable and sustainable rents, has been key to the real estate returns delivered to date.

The pandemic has heightened the need for flexibility in our strategy. As a result, the weighting we give to, and the influence of, certain themes is evolving. For example, changes to traditional office use to cater to a hybrid work from home basis have necessitated a broadened critique of the optimum office that will remain relevant. In addition, we have witnessed technological and social change fast track the need for convenience, which has impacted the retail and logistics sectors to wide degrees. At the same time, environmental, social and governance considerations are increasingly shaping portfolio management. The Company is well positioned to benefit from these changes, particularly given the quality and location of the portfolio and the strong balance sheet and cash position deriving from the Paris BB office disposal.

We continue to work with the Investment Manager in the deployment of capital into new investments and earnings enhancing initiatives to further diversify the portfolio and move the dividend cover back to 100%. We will continue to employ a highly disciplined and patient approach.

Financial results

NAV total return was 3.2% over the year based on an IFRS profit of €6.2 million. Returns were driven primarily by an increase in the valuation of our industrial and DIY assets, together with the German office portfolio, which was offset by the writedown of the Seville exposure to €nil. In addition €1.6 million of the Paris BB development pre-tax profit has been released as a result of the refurbishment remaining on cost and programme. Underlying EPRA earnings were €6.6 million, compared to €8.6 million in 2020. Earnings will further increase with the redeployment of the Paris BB sale proceeds, and as rent collection improves. The Company's NAV as at 30 September 2021 decreased marginally by €2.3 million, to €199.5 million, or 149.2 euro cents per share, over the period, almost entirely driven by the Seville writedown.

Balance sheet and debt

Third-party debt totalled €80.7 million, representing a loan to value ('LTV') net of cash of 16% against the overall gross asset value of the Company. This compares to a net LTV cap of 35%. The Company has seven loans secured by individual assets or groups of assets, with no cross-collateralisation between loans. The average weighted total interest rate of the loans is 1.4% per annum. The weighted average duration of the loans is 2.9 years, with the earliest loan maturity in 2023. All loans except Seville are in compliance with their default covenants. The Seville loan remains in cash trap and is being managed under an LTV covenant waiver to facilitate a sale. More detail of the individual loans is provided in the Investment Manager's Report. We have received approximately 50% of the Paris BB forward funding disposal proceeds with the remaining sale price due as we meet refurbishment milestones through to completion in the second quarter of 2022. These funds offer the Company significant flexibility and provide additional €55 million investment capacity (including debt) post funding of the refurbishment.

Dividends

The Company has continued to pay dividends throughout the pandemic. Improvements in rent collection, coupled with asset management successes in Hamburg and Paris, have given the Board confidence in maintaining the quarterly dividend at 1.85 euro cents per share. In addition, as previously announced, the Board expects to allocate some of the net sale proceeds from the forward sale of Paris BB. In this regard the Board is announcing a special dividend of 4.75 euro cents per share in addition to the quarterly dividend. The quarterly dividend of 1.85 euro cents is 67% covered from income received over the quarter. As announced previously, it is expected that dividends from net income will remain uncovered whilst the refurbishment of Paris BB is being undertaken. The Board expects to allocate some of the net sale proceeds from the forward funding disposal towards covering the shortfall in income from Paris BB whilst it is being refurbished and pending the reinvestment of the remainder of the sale proceeds. Total quarterly dividends declared relating to the year are 7.12 euro cents per share, with a dividend cover for the year of 69%. Including the special dividend, total dividends more than doubled to 11.87 euro cents per share versus the previous financial year.

Share price

The shares continue to trade at a discount, which as at 1 December 2021 reflected a c.20% discount to NAV. The Board remains frustrated that the share price has not reflected the recent reinstatement of the dividend to pre-pandemic levels or the intention to release approximately 9.5 euro cents per share as special dividends. Annualising the 1.85 euro cents per share quarterly dividend (to 7.4 euro cents per annum) provides an attractive 6% dividend yield based on current share price. We do not believe that the share price reflects the strength of the Company's balance sheet, proven asset management value creation and real estate exposure in growth European cities. Given the healthy cash position, the Board will continue to review the discount and its discretion to execute a share buyback programme as well as new acquisitions consistent with its 'Winning Cities and Regions' strategy.

Responsible and impact investment

Responsible and impact investment sits alongside economic and financial considerations and is reflected in the Company's values. We have maintained our three green star rating in the annual GRESB survey for 2021. We continue to review sustainability initiatives to improve on this rating. In addition, the Investment Manager has outlined a programme to work with tenants regarding their sustainability agenda and in particular data collection around water, gas, electricity and waste, which will be key to modelling each asset's respective carbon pathway.

Governance

Mainly in response to the Covid-19 pandemic, some principal changes are proposed to be introduced in the Articles, most importantly, giving flexibility to hold general meetings by electronic means, thereby enabling all stakeholders to attend and participate in general meetings at one or more satellite meeting places. The principal changes proposed to be introduced in the Articles, and their effect, are set out in more detail on pages 98 and 99 of the 2021 Report and Accounts.

Outlook

Confidence within the Eurozone has improved and expectations are for economies to move back to their pre-Covid GDP levels during 2022. Near term, markets are dealing with increasing energy costs and supply constraints, particularly regarding materials and labour, which are collectively heightening inflationary concerns. As a result, there is a risk that the European Central Bank ('ECB') will move to control inflation via an increase in interest rates, albeit we see this risk as modest. Despite this, both the Board and the Investment Manager are confident in the outlook of the Company, given the strong cash position, diversification characteristics, exposure to higher growth cities and local management expertise. Whilst we remain committed to scaling the Company and are acutely aware of the benefits that this will bring, patience will remain in our critique of new investments to improve income cover and diversification. The Company continues to be a unique and compelling proposition for investors and is well placed to benefit from the trends that have accelerated as a result of the pandemic. These include changes in occupier demand, delivering operational excellence and ensuring that sustainability priorities are instilled within the Company's investment process.

Sir Julian Berney Bt.

Chairman

6 December 2021

Investment Manager's Report

Results

The net asset value ('NAV') as at 30 September 2021 stood at €199.5 million (£171.4 million), or 149.2 euro cents (128.2 pence) per share, resulting in a NAV total return of 3.2% over the 12 months to 30 September 2021.

The table below provides an analysis of the movement in NAV during the reporting period as well as a corresponding reconciliation in the movement in the NAV euro cents per share.

1 Management reviews the performance of the Company principally on a proportionally consolidated basis. As a result, figures quoted in this table include the Company's share of the Seville joint venture on a line-by-line basis.

2 Based on 133,734,686 shares.

3 Percentage change based on the starting NAV as at 1 October 2020.

4 EPRA earnings as reconciled on page 78 of the 2021 Report and Accounts.

Strategy

The strategy over the period ended 30 September 2021 remained focused on the following key objectives:

· Growing the share price and eliminating the discount to NAV;

· Enhanced operational management to mitigate the impact of the Covid-19 pandemic on the portfolio, tenants and wider stakeholders;

· Executing asset management initiatives to enhance both the income profile and individual asset values;

· Ensuring compliance with contractual obligations particularly in respect of the refurbishment of Paris Boulogne-Billancourt ('Paris BB');

· Improving the Company's net income profile and occupancy to allow for the reinstatement of the dividend to pre-Covid levels;

· Allocating capital to enhance diversification whilst maintaining exposure to higher growth sectors in Winning Cities and Regions; and

· Managing portfolio risk in order to enhance the portfolio's defensive qualities.

Progress was made in executing the strategy and activity, which has delivered:

· Reinstatement of quarterly dividend to 1.85 euro cents per share in line with the pre-pandemic level;

· Favourable and improving rent collection over the period of 93%, increasing to 95% for the quarter ended 30 September 2021;

· Asset management of the Paris BB office refurbishment remains on budget and programme;

· Declaration of a 4.75 euro cents per share special dividend relating to part of the Paris BB profit with the intention to declare a second special dividend targeting approximately the same amount over the next nine-month period;

· Concluded 11 new leases and re-gear events (including Hamburg) across the portfolio at a weighted unexpired lease term of four years;

· Securing two new lease agreements in Hamburg resulting in full occupation and highlighting the continued demand for offices located in mixed-use areas that are accessible and affordable;

· Maintained a high occupancy level of 95%, with an average portfolio unexpired lease term of 5.3 years and 4.5 years to break;

· Acquisition of two investments: a €6.2 million logistics warehouse in Nantes, France, reflecting a 5.5% net initial yield, and an additional office floor (level 7) in the Saint-Cloud, France office investment for €2.6 million, reflecting a 7.5% net initial yield;

· Maintained a prudent gearing approach with a loan to value ('LTV') of 16% and 28% net of cash, well within the target of 35%;

· Increased the portfolio's BREEAM (the Building Research Establishment Environmental Assessment Methodology) coverage via undertaking an assessment of the Berlin asset over the year;

· Improved the portfolio's environmental characteristics via use of 100% renewable energy in Germany, increased tenant data collection and viability studies of renewable energy (e.g. solar panels at Houten);

· Issued Schroders' Sustainable Occupier Guide to all tenants across France, the Netherlands and Spain to proactively advise occupiers on low cost initiatives to achieve reduced environmental footprints, operating costs and enhanced user wellbeing.

Covid-19 impact

· Over the last six to nine months, most European countries have made significant progress with their vaccination programmes, helping to control the levels of infection, and most crucially avoiding large scale hospitalisation. Today, depending on country, around 60-80% of the population has received two jabs of a vaccine and governments have started to roll out booster jabs to prepare for winter. While some restrictions remain in place, it has allowed most countries to reopen their economies. On the back of that, economic sentiment has seen a significant uplift and high frequency indicators like mobility data show people returning to offices and going out to consume and use services.

· Whilst events of recent days have demonstrated that we must remain vigilant to pandemic challenges, it is hoped that the positive recent economic sentiment and high frequency indicators like mobility data showing people returning to offices and going out to consume and use services remains the direction of travel.

· What is clear is that the pandemic has accelerated longer term structural trends that we were already witnessing. Advancement in technology and ESG are increasingly shaping how we live, demographics and the use of real estate. The pressures around convenience, real time gratification and supply chain management have influenced logistics. Changing consumer patterns have impacted certain retail, particularly fashion and leisure, that have historically been the key points of difference for shopping centre dominance. Convenience retail such as drive through food and beverages, grocery and DIY have been favoured,with market share dramatically increasing. The optimum use of an office remains polarised across occupiers. However, as cities have reopened, we have seen an increasing shift back to the use of offices, on a hybrid work from home basis. Offices that are accessible and provide efficient use of utilities, live data, agile working and wellness elements will prosper.

· The Company's diversification has proven indispensable in navigating the pandemic. Active tenant engagement, coupled with exposure to resilient sectors such as logistics, DIY, grocery, data centres and accessible office locations, has resulted in healthy rent collection and valuation resilience. We continue to focus on the safety and well-being of our tenants, suppliers and other stakeholders, whilst also protecting shareholders' long-term interests.

Market overview

Economic outlook

Recent developments notwithstanding, the Eurozone has made a rapid recovery since most restrictions were lifted in April/May. The economy is currently on track to return to its pre-virus level by the end of this year and Schroders' forecasts that it will grow by 5% in 2022 and 2% in 2023, though regional differences remain. The main driver will be consumer spending, as households spend some of the excess savings built up during lockdown. In addition, investment is expected to grow strongly, thanks to the rebound in exports and the EU Recovery Fund. On the downside, it is possible that the jump in inflation to over 3% sparks a wage-price spiral and forces the European Central Bank ('ECB') to hike interest rates. While possible, it seems more likely that inflation will drop to 2% by the end of 2022, as supply chains normalise and the spike in energy prices falls out of the annual comparison. As such, the ECB is expected to cut quantitative easing, but to leave the refinance rate at zero until the end of 2023. For the moment however, it should be noted, that the strong recovery and increase in demand for goods on a global level has triggered a significant increase in costs for construction materials with some input materials even being temporarily unavailable. This will in the short-term impact construction activity and could cause delays or a squeeze on margins for projects under development.

Inflation and real estate yields

A key question is how might higher inflation impact European real estate? While the tighter fiscal policies of eurozone governments mean that the risk of inflation becoming stuck at 3-5% is lower than in the USA, it cannot be ruled out. On a positive note, most rents in Continental Europe are index linked, so faster inflation should feed through to rental income, albeit with a short lag on those leases which specify a cumulative percentage increase in prices before rents can be reset.

Offices

In the office market there are signs that demand is stabilising following a sharp fall in 2020. Take-up across Europe in the first half of 2021 was similar to 2009, the low point during the Global Financial Crisis ('GFC'), but leasing volumes started to recover in Q3 2021. And whereas prime office rents fell on average by 10% in the GFC, prime office rents in most cities have been stable over the last 18 months or even showed small growth. The difference reflects two factors. First, the last few years have seen less office construction than in the run up to the GFC, so vacancy rates have been lower, particularly in German, Dutch and Nordic cities. Second, occupier demand is polarising further and while secondary space is struggling, there is good demand for high-quality offices in city centres close to amenities that provide plenty of space for people to meet and collaborate. At the aggregate level, we expect that office demand will start to gain sustained momentum again from late 2021 and throughout 2022. Looking across different cities, we think that Brussels, Dusseldorf, and Rome are likely to see the weakest recoveries due to a combination of slower office employment growth in the medium term, longer commutes (Brussels, Rome) and older offices with poorer facilities. Conversely, using the same variables, we expect that Luxembourg, Lyon and Madrid will see the strongest recovery in demand over the next few years.

Retail

The outlook for the sector remains challenging. Mid-market fashion brands (e.g. H&M, Zara) are closing stores as they shift more of their business online and the slow recovery in international travel is hurting luxury retailers who rely on Asian and American tourists. Whilst several discounters are in expansion mode, they are unable to afford the same rent as mid-market brands and prefer fringe locations, or retail parks. Overall, we expect that prime shopping centre rents in Continental Europe will fall by 10% over the next two years, while retail park rents will be broadly flat. By contrast, food stores will likely see rental growth of 1.5-2% p.a. through 2022/23. Online accounts for less than 5% of food sales in most European countries and there is good demand for mid-sized units in town centres.

Logistics/industrial

Warehouse take-up in Continental Europe is on course to hit a new record in 2021. The main driver is the growth in online retail as both internet retailers and traditional retailers add more capacity and shorten delivery times. In addition, although the immediate impact is limited, we think that the current disruption of supply chains and the risk of growing geopolitical tensions will encourage companies to hold slightly higher levels of stocks and reshore some manufacturing to Europe. However, development is also on course to hit a new record this year. While two thirds of the space under construction is pre-let, the high level of new building means that rental growth in the logistics sector is likely to continue running at 2-3% through 2022/23, rather than move up a gear. Multi-let industrial estates will likely see slightly faster rental growth, due to less new supply.

Real estate portfolio

Following the sale of Paris BB, the Company owns a portfolio of 13 institutional grade properties valued at €215.7 million1. The portfolio is 95% let and located across those Winning Cities and Regions in France, Germany, Spain and the Netherlands. All investments are 100% owned except for the Metromar shopping centre, Seville, where the Company holds a 50% interest.

The table below shows the top ten properties:

1 Reflects the Company's 50% share of the Seville property valued at €14.6 million as at 30 September 2021.

The table below sets out the top ten tenants, which are from a diverse range of industry segments and represent 64% of the portfolio:

The rent collection associated with the top ten tenants over the 12-month period stood at 99.2%. The portfolio generates €15.8 million p.a. in contracted income. The average unexpired lease term is 4.5 years to first break and 5.3 years to expiry.

The lease expiry profile to earliest break is shown below. The near-term lease expiries provide asset management opportunities to: renegotiate leases; extend weighted average unexpired lease terms; improve income security; and generate rental growth. In turn, this activity benefits NAV total return.

Transactions

A key target for the Company over the remainder of 2021/22 is to redeploy the Paris BB proceeds in line with the stated objective of targeting income-producing commercial real estate in Winning Cities and Regions of Continental Europe. We have been seeking to further diversify the Company's portfolio by both number of assets and tenants, as well as increase its allocation to the high growth industrial sector.

During the third quarter of 2021, the Company completed two purchases totalling approximately €9 million:

· A €6.2 million logistics investment in Nantes, reflecting a net initial yield of 5.5% and an unexpired lease term of approximately seven years; and

· An additional floor at the Paris Saint-Cloud office complex for €2.6 million at a net initial yield of 7.5%.

Portfolio performance

Over the last 12 months the underlying property portfolio generated a total property return of 6.6%. The portfolio income return amounted to 4.9% and the portfolio capital return to 1.5% net of capital expenditure.

The strongest contributors to portfolio performance during the financial year were:

· The Hamburg office property delivering a +29% total return: favourable leasing activity and strong local investment markets resulted in a valuation increase of €4.2 million;

· The Stuttgart office property delivering a +19% total return with the asset seeing a valuation increase of €2.6 million due to improved ERV growth and yield re-rating of the Stuttgart office market;

· The Berlin DIY property and the industrial portfolio delivering an average 12% total return due to stable income and positive capital returns;

· The Seville shopping centre returns was -29% as the value of the Company's 50% interest declined by €6.7 million over the period. The value of the Company's investment in the Seville shopping centre was written down to €nil in the financial year. This reflects the recent increase in vacancy, declining rental values and increase in the risk to trading at shopping centres from the pandemic in general, which increased the pressure on the yield of the asset. This is the only asset in the portfolio where the valuers continue to adopt a material valuation uncertainty clause; and

· Most of the strong positive performance impact from the Paris BB lease re-gear and forward funded sale was taken into account in the previous year's financial returns. In the current financial year an additional pre-tax profit of €1.6 million was recognised, resulting in an additional 3% property return for this asset during the financial year. There remains approximately a further €4.8m of pre-tax development profit which could be recognised in the 30 September 2022 financial year end should certain key milestones be achieved regarding the completion of the refurbishment, expected in Q2 2022, and subsequent tenant occupation.

Finance

As at 30 September 2021, the Company's total external debt was €80.7 million, across seven loan facilities. This represents a loan to value ('LTV') net of cash of 16% against the Company's gross asset value (gross of cash LTV is 28%). Cash levels are high, as the Company has received approximately 50% from the agreed sale price of Paris BB. There is a net of cash LTV cap of 35% that restricts concluding new external loans if the Company's net LTV is above 35%. An increase in leverage above 35% as a result of a valuation decline is excluded from this cap. The current blended all-in interest rate is 1.4% and the average remaining loan term is 2.9 years.

The individual loans are detailed in the table below. Each loan is held at the property-owning level instead of the group level and is secured by the individual properties noted in the table. There is no cross-collateralisation between loans. Each loan has specific LTV and income default covenants. We detail the headroom against those covenants in the latter two columns of the table below.

1 Includes the Company's 50% share of external debt in the Seville joint venture of €11.7 million and excludes unamortised finance costs.

2 Temporary waiver for breach of LTV covenant in Seville agreed with the lender.

For the Seville shopping centre, a reduction in rental income has resulted in a requirement under the loan to retain all excess income generated by the Seville property in the property-owning special purpose vehicle. The Seville loan is being managed under an LTV covenant waiver to facilitate a sale. The loan is secured solely against the Seville investment, with no recourse back to the Company or any other entity within the Group.

The German and Spanish loans are fixed rate for the duration of the loan term. The French and Dutch loans are based on a margin above three-month Euribor. The Company has acquired interest rate caps to limit future potential interest costs if Euribor were to increase. The strike rates on the interest rate caps are between 0.25% p.a. and 1.25% p.a.

The Company entered into a revolving credit facility in relation to the Paris BB refurbishment. The maximum amount that can be drawn down is €13.6 million. €1.8 million was drawn down as at the financial year end.

Outlook

The portfolio is in a strong position to continue to deliver attractive and stable income and growth. Being exposed to a diversified portfolio that is biased towards growth European cities such as Paris, Berlin, Hamburg, Stuttgart and Frankfurt provides comfort as we expect these cities to quickly return to growth.

The resilient portfolio performance during the period has been led by our diversified, local expertise and Winning Cities and Regions strategy. As such, we are well prepared and positioned in the event of further short term Covid-19 pressures. Our strategy is therefore not changing; however, we are conscious of evolving thematic investment driven by macro-trends. There is an increasing move to a hospitality mindset and greater flexibility, particularly around office utilisation. Whilst for retail and logistics, changes in technology and social needs are heightening the need for convenience and real time gratification. This is shaping how we invest and manage real estate to deliver outperformance. Having local, multi-sector expertise will increasingly become more important, particularly as we work with our partners to deliver on sustainability initiatives. In this regard, it is pleasing to report on Schroders PLC's recent growth within the Netherlands with the acquisition of a specialist real estate team comprising 26 professionals. This ties in well with the strategy and commitment to specialist, local management.

The strength of the Company's balance sheet provides significant operational and financial flexibility. We remain active and disciplined in sourcing new investments that will diversify the portfolio whilst increasing exposure to growth sectors and Winning Cities and Regions. We expect to see more investment product over the medium term and the strengthening of local teams positions us well to continue to focus on key markets such as France, Germany and the Netherlands.

Jeff O'Dwyer

Fund Manager

Schroder Real Estate Investment Management Limited

6 December 2021

Strategic Report

Principal risks and uncertainties

The Board is responsible for the Company's system of risk management and internal control and for reviewing its effectiveness. The Board has adopted a detailed matrix of principal risks affecting the Company's business as an investment trust and has established associated policies and processes designed to manage and, where possible, mitigate those risks, which are monitored by the Audit, Valuation and Risk Committee on an ongoing basis. This system assists the Board in determining the nature and extent of the risks it is willing to take in achieving the Company's strategic objectives. Both the principal risks and the monitoring system are also subject to robust review at least annually. The last review took place in November 2021.

Although the Board believes that it has a robust framework of internal control in place this can provide only reasonable, and not absolute, assurance against material financial misstatement or loss and is designed to manage, not eliminate, risk.

From an emerging risk perspective, the Board continues to be mindful of the structural change the pandemic has the potential to expedite, which could affect the use and prospects of some real estate sectors, and is keeping this under review, particularly in connection with its decisions to re-deploy investable cash.

The principal risks and uncertainties faced by the Company have largely remained unchanged throughout the year. While the impact of the Covid-19 pandemic remains a concern from an economic and property market risk perspective, the Company's portfolio has proved to be resilient, as evidenced by rent collection levels during the year under review.

Actions taken by the Board and its Committees to manage and mitigate the Company's principal risks and uncertainties, are set out in the table below.

Risk assessment and internal controls

Risk assessment includes consideration of the scope and quality of the systems of internal control operating within key service providers, and ensures regular communication of the results of monitoring by such providers to the Audit, Valuation and Risk Committee, including the incidence of significant control failings or weaknesses that have been identified at any time and the extent to which they have resulted in unforeseen outcomes or contingencies that may have a material impact on the Company's performance or condition.

No significant control failings or weaknesses were identified from the Audit, Valuation and Risk Committee's ongoing risk assessment which has been in place throughout the financial year and up to the date of this report. The Board is satisfied that it has undertaken a detailed review of the risks facing the Company.

A full analysis of the financial risks facing the Company and its subsidiaries is set out in note 23 on pages 73 to 76 of the 2021 Report and Accounts.

Viability statement

The Board is required to give a statement on the Company's viability which considers the Company's current position and principal risks and uncertainties together with an assessment of future prospects.

The Board conducted this review over a five-year time horizon commencing from the date of this report which is selected to match the period over which the Board monitors and reviews its financial performance and forecasting. The Investment Manager prepares five-year total return forecasts for the Continental European commercial real estate market. The Investment Manager uses these forecasts as part of analysing acquisition opportunities as well as for its annual asset level business planning process. The Board receives an overview of the asset level business plans which the Investment Manager uses to assess the performance of the underlying portfolio and therefore make investment decisions such as disposals and investing capital expenditure. The Company's principal borrowings are for a weighted duration of 2.9 years and the average unexpired lease term, assuming all tenants vacate at the earliest opportunity, is 4.5 years.

The Board's assessment of viability considers the principal risks and uncertainties faced by the Company, as detailed in the Strategic Review on pages 31 to 33 of the 2021 Report and Accounts, which could negatively impact its ability to deliver the investment objective, strategy, liquidity and solvency. This includes consideration of scenario stress testing and a cash flow model prepared by the Investment Manager that analyses the sustainability of the Company's cash flows (taking into account any continued impact of Covid-19 on rent collection), dividend cover, compliance with bank covenants, general liquidity requirements and potential legal and regulatory change for a five-year period.

These metrics are subject to a sensitivity analysis which involves flexing a number of the main assumptions including macro-economic scenarios, delivery of specific asset management initiatives, rental growth and void/reletting assumptions. The Board also reviews assumptions regarding capital recycling and the Company's ability to refinance or extend financing facilities. Steps which are taken to mitigate these risks as set out in the Strategic Review on pages 31 to 33 of the 2021 Report and Accounts are also taken into account.

Based on the assessment, and having considered in detail base and downside scenarios modelling the potential ongoing impact of Covid-19, the Directors have concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the five-year period of their assessment.

Going concern

The Board believes it is appropriate to adopt the going concern basis in preparing the financial statements. A comprehensive going concern statement setting out the reasons the Board considers this to be the case is set out in note 1 on page 58 of the 2021 Report and Accounts.

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulation.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the Group and the Company financial statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. Additionally, the Financial Conduct Authority's Disclosure Guidance and Transparency Rules require the Directors to prepare the Group financial statements in accordance with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. Under company law, Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of the Group and Company for that period. In preparing the financial statements, the Directors are required to:

· select suitable accounting policies and then apply them consistently;

· state whether applicable international accounting standards in conformity with the requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union have been followed for the Group financial statements and international accounting standards in conformity with the requirements of the Companies Act 2006 have been followed for the Company financial statements, subject to any material departures disclosed and explained in the financial statements;

· make judgements and accounting estimates that are reasonable and prudent; and

· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in business.

The Directors are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are also responsible for keeping adequate accounting records that are sufficient to show and explain the Group's and Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the financial statements comply with the Companies Act 2006.

The Investment Manager is responsible for the maintenance and integrity of the Company's webpages. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Directors' confirmations

The Directors consider that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group and Company's position and performance, business model and strategy.

Each of the Directors, whose names and functions are listed in the Directors' Report confirm that to the best of their knowledge:

· the Group financial statements, which have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union, give a true and fair view of the assets, liabilities and financial position and profit of the Group;

· the Company financial statements, which have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006, give a true and fair view of the assets, liabilities, financial position and profit of the Company; and

· the Directors' Report includes a fair review of the development and performance of the business and the position of the Group and the Company, together with a description of the principal risks and uncertainties that it faces.

In the case of each Director in office at the date the Directors' Report is approved:

· so far as the Director is aware, there is no relevant audit information of which the Group and Company's auditors are unaware; and

· they have taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Group and Company's auditors are aware of that information.

Consolidated and Company Statements of Comprehensive Income

For the year ended 30 September 2021

Consolidated and Company Statements of Financial Position

As at 30 September 2021

Consolidated and Company Statements of Changes in Equity

For the year ended 30 September 2021

1 These reserves form the distributable reserves of the Company (excluding any accumulated, unrealised profits) and may be used to fund distribution of profits to investors via dividend payments. See note 1 for further detail.

Consolidated and Company Statements of Cash Flows

For the year ended 30 September 2021

Notes to the Financial Statements

1. Significant accounting policies

Schroder European Real Estate Investment Trust plc (the 'Company') is a closed-ended investment company incorporated in the United Kingdom. The consolidated financial statements of the Company for the year ended 30 September 2021 comprise those of the Company and its subsidiaries (together referred to as the 'Group'). The Group holds a portfolio of investment properties in Continental Europe. The shares of the Company are listed on the London Stock Exchange (primary listing) and JSE Limited (secondary listing). The registered office of the Company is 1 London Wall Place, London, England EC2Y 5AU.

Statement of compliance

The consolidated financial statements of the Group have been prepared under 'international accounting standards in conformity with the Companies Act 2006'.

The financial statements give a true and fair view and are in compliance with applicable legal and regulatory requirements and the Listing Rules of the UK Listing Authority.

Basis of preparation

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the Group and the Company financial statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. Additionally, the Financial Conduct Authority's Disclosure Guidance and Transparency Rules require the Directors to prepare the Group financial statements in accordance with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.

The financial statements are presented in euros, rounded to the nearest thousand. They are prepared on a going concern basis, applying the historical cost convention, except for the measurement of investment property and derivative financial instruments that have been measured at fair value.

The accounting policies have been consistently applied to the results, assets, liabilities and cash flows of the entities included in the consolidated financial statements.

Going concern

The outbreak of Covid-19, declared by the World Health Organization as a 'Global Pandemic' on 11 March 2020, has and continues to impact many aspects of daily life and the global economy, with some real estate markets having experienced lower levels of transactional activity and liquidity. Travel restrictions have been implemented by many countries and 'lockdowns' applied to varying degrees. Whilst restrictions have now been lifted in most cases, local lockdowns may continue to be deployed as necessary and the emergence of significant further outbreaks remains possible.

The Directors have examined significant areas of possible risk including: the ability of both the Investment Manager, and the Group's key suppliers, to continue to successfully implement business continuity plans during the pandemic; the non-collection of rent and service charges; the potential fall in property valuations; the refurbishment risk of the Boulogne-Billancourt, Paris asset together with future cash flow forecasts; and forward-looking compliance with third party debt covenants, in particular the loan to value covenant and interest cover ratios.

In spite of the ongoing pandemic, the portfolio's average rent collection for the financial year was very robust at 93%. Further detail is provided in the Investment Manager's Report on page 14 of the 2021 Report and Accounts.

Cash flow forecasts based on certain downside scenarios have led the Board to conclude that the Group will have sufficient cash reserves to continue in operation for the foreseeable future.

The Group has seven third party loans secured against individual assets, or groups of assets, with no cross-collateralisation. All but one of the loans are in compliance with their default covenants. The Seville loan has breached its loan to value covenant and there is a cash trap in operation. The Seville loan is non-recourse and the breach will have no further impact to the financial position of the Group with the investment already having been written down to nil. Further details of the individual loans, and headroom on both the loan to value and net income default covenants, is provided in the Investment Manager's Report on page 14 of the 2021 Report and Accounts.

After due and appropriate consideration, the Directors have not identified any material uncertainties which would cast significant doubt on the Group's ability to continue as a going concern for a period of not less than twelve months from the approval of the Annual Report and Consolidated Financial Statements.

Use of estimates and judgements

The preparation of financial statements under international accounting standards, in conformity with the Companies Act 2006, requires management to make judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expenses. These estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

The most significant estimates made in preparing these financial statements relate to the carrying value of investment properties, as disclosed in note 13, including those within joint ventures, which are stated at fair value. The fair value of investment property is inherently subjective because the valuer makes assumptions which may not prove to be accurate. The Group uses an external professional valuer to determine the relevant amounts.

The following are deemed to be the other key areas of judgement:

· Accounting for the disposal price of Paris, Boulogne-Billancourt: Management have deemed that the fair value of the asset, which was sold in December 2020, was equal to the third-party valuation of the asset which was undertaken in December 2020. The disposal price is deemed to be a fixed amount that the purchaser will pay for the asset and the remaining consideration under the sale agreement is judged to be development revenue (see below).

· Accounting for development revenue and variable consideration: When estimating an appropriate level of development revenue to be recognised in the reporting period, the Group considered the contractual penalties of not meeting certain criteria within the agreement; the total development costs incurred; the stage of completion of the refurbishment; the milestones achieved and still to be achieved; the timing of further future cash receipts from the purchaser; and the overall general development risk to form a considered judgement of revenue to be appropriately recognised in the financial statements. Further details of the estimated variable consideration are disclosed in note 14.

· Tax provisioning and disclosure: Management uses external tax advisors to monitor changes in tax laws in countries where the Group has operations. New tax laws that have been substantively enacted are recognised in the Group's and Company's financial statements. Where changes to tax laws give rise to a contingent liability, the Group discloses these appropriately within the notes to the financial statements (further details are disclosed in note 26).

· IFRS 9 expected credit losses: IFRS 9 became effective for accounting periods of entities beginning on or after 1 January 2018 and requires an impairment review to be made for certain financial assets held on the Group and Company's balance sheet using a forward-looking expected credit loss model. All receivables, inter-company and joint venture loans are considered to be such financial assets and must therefore be assessed at each reporting period for potential impairment. Where any impairment is required to be made, appropriate recognition is required in the consolidated statement of comprehensive income, together with appropriate disclosure and sensitivity analysis in the notes to the financial statements (further details are disclosed in note 6). The Seville joint venture loan has been calculated on the lifetime expected credit loss method. The following factors were considered when determining the probability of default used for the impairment provision calculation for the Seville joint venture loan: the property valuation and future potential movements; that there is an LTV breach and a cash trap in place; cash flow forecasts; the effects of the local lockdown measures in Spain on tenants and their trading; and rent collection rates. An evaluation of these factors has allowed management to make a judgement on the probability of default which is considered to be the key input for the impairment calculation. These estimates were also considered within the impairment in the investments held in subsidiaries for the parent company.

Basis of consolidation

Subsidiaries

The consolidated financial statements comprise the financial statements of the Company and all of its subsidiaries drawn up to 30 September each year. Subsidiaries are those entities, including special purpose entities, controlled by the Company. Control exists when the Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Where properties are acquired by the Group through corporate acquisitions, but the acquisition does not meet the definition of a business combination, the acquisition is treated as an asset acquisition.

Transactions eliminated on consolidation

Intra-group balances, and any gains and losses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Gains arising from transactions with joint ventures are eliminated to the extent of the Group's interest in the entity. Losses are eliminated in the same way as gains but only to the extent that there is no evidence of impairment. Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of comprehensive income, statement of changes in equity and balance sheet respectively.

Joint arrangements

Under IFRS 11, Joint Arrangements, the Group's investments in joint arrangements are classified as joint ventures. Interests in joint ventures are accounted for using the equity method, after initially being recognised at cost, in the consolidated statement of financial position.

Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to recognise the Group's share of the post-acquisition profits or losses of the investee in profit or loss.

When the Group's share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the other entity. Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group's interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

Investment property

Investment property comprises land and buildings held to earn rental income together with the potential for capital growth.

Acquisitions and disposals are recognised on an unconditional exchange of contracts. Acquisitions are initially recognised at cost, being the fair value of the consideration given, including transaction costs associated with the investment property.

After initial recognition, investment properties are measured at fair value with unrealised gains and losses recognised in profit or loss. Realised gains and losses on the disposal of properties are recognised in profit and loss in relation to the carrying value at the beginning of the accounting period. Fair value is based on the market valuations of the properties as provided by a firm of independent chartered surveyors at the reporting date. Market valuations are carried out on a quarterly basis.

As disclosed in note 24, the Group leases out all owned properties on operating leases which are classified and accounted for as an investment property where the Group holds it to earn rentals, capital appreciation, or both. Any such property leased under an operating lease is classified as an investment property and carried at fair value.

Please refer to note 13 for disclosure of key inputs, assumptions and sensitivities with respect to the fair valuation of investment properties.

Prepayments

Prepayments are carried at cost less any accumulated impairment losses.

Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by another party, the lessor, are classified as operating leases. Rental income, including prepayments, received under operating leases (net of any incentives granted by the lessor) are recognised in the statement of comprehensive income on a straight-line basis over the period of the lease. Properties leased out under operating leases are included as investment properties in the consolidated statement of financial position (note 13).

Financial assets and liabilities

Non-derivative financial assets and liabilities

Non-derivative financial assets and liabilities comprise trade and other receivables, loans to joint venture, cash and cash equivalents, loans and borrowings, and trade and other payables. These are initially recognised at fair value and subsequently measured at amortised cost and discounted as appropriate. On initial recognition the Group calculates the expected credit loss for non-derivative assets and liabilities based on lifetime expected credit losses under the IFRS 9 simplified approach.

Cash and cash equivalents

Cash at bank, and short-term deposits that are held to maturity, are carried at cost. Cash and cash equivalents are defined as cash in hand, demand deposits and short-term, highly liquid investments readily convertible to known amounts of cash and subject to insignificant risk of changes in value. For the purposes of the statement of cash flows, cash and cash equivalents consist of cash in hand and short-term deposits at banks with a term of no more than three months.

Loans and borrowings

Borrowings are recognised initially at the fair value of the consideration received less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the profit and loss over the period of the borrowings on an effective interest basis.

Borrowing costs such as arrangement fees are capitalised and amortised over the loan term.

Derivative financial assets and liabilities

Derivative financial assets and liabilities comprise interest rate caps for hedging purposes (economic hedge). These are initially recognised at cost and subsequently revalued at fair value, with the revaluation gains or losses immediately recorded in the statement of comprehensive income.

Share capital

Ordinary shares, including treasury shares, are classified as equity when there is no obligation to transfer cash or other assets. During the year ended 30 September 2020, the Company changed its accounting policy from retranslating its share capital using the closing exchange rate at the end of each reporting period to fixing the share capital at the spot rate at the date of issue, in accordance with IAS 21. The Company will no longer retranslate its share capital. This is a change in accounting policy for the Company.

Share premium

Share premium represents the excess of proceeds received over the nominal value of new shares issued. During the year ended 30 September 2020, the Company changed its accounting policy from retranslating its share premium using the closing exchange rate at the end of each reporting period to fixing the share capital at the spot rate at the date of issue, in accordance with IAS 21. The Company will no longer retranslate its share premium. This is a change in accounting policy for the Company.

Other reserves

Other reserves mainly consist of a share premium reduction reserve arising from the conversion of share premium into a distributable reserve.

Dividends

Final dividends to the Company's shareholders are recognised as a liability in the Group's financial statements in the period in which the dividends are approved by the Company's shareholders. Interim dividends are recognised when paid.

Impairment

Non-financial assets

The carrying amounts of the Group's and Company's non-financial assets, other than investment property but including joint ventures and investments held in subsidiaries, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to that asset.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. Impairment losses are recognised in the profit and loss.

Revenue

Rental income

Rental income from operating leases is recognised on a straight-line basis over the lease term. When the Group provides incentives to its tenants, the cost of incentives is recognised over the lease term, on a straight-line basis, as a reduction of rental income.

Where a rent incentive fits the definition of a lease modification under IFRS 16, the cost of incentives is recognised over the remaining lease term starting from the effective date of the lease modification, on a straight-line basis, as a reduction of rental income.

Revenue from forward funded sale contracts

Performance obligations of such contracts with a counterparty are identified at source.

The transaction price for the sale of the asset is determined with regard to the deemed fair value of the asset at the date of the transfer of the legal title to the purchaser.

Where a development obligation includes variable revenue, consideration is given to the sum of any contractual penalties; the percentage of the total development cost incurred and the stage of completion; the milestones successfully achieved and the likelihood of meeting further future milestones; the timing of future contractual receipts; and the wider overall risks attributable to the development at the end of the reporting period. A percentage of the total development revenue is then calculated with regard to these factors and recognised in the financial statements.

For specific further details with regards to the Paris, Boulogne-Billancourt forward funded sale agreement, see note 14.

Surrender premium income

Surrender premium income is recognised as revenue upon receipt.

Service charges

These include income in relation to service charges, directly recoverable expenditure and management fees. Revenue from providing services is recognised in the accounting period in which the services are rendered. Revenue from services is recognised based on the actual service provided to the end of the reporting period as a proportion of the total services to be provided and recognised over time.

Finance income and costs

Finance income comprises interest income on funds invested that are recognised in the statement of comprehensive income. Finance income is recognised on an accruals basis.

Finance costs comprise interest expenses on borrowings that are recognised in the statement of comprehensive income. Attributable transaction costs incurred in establishing the Group's credit facilities are deducted from the fair value of borrowings on initial recognition and are amortised over the lifetime of the facilities through profit and loss. Finance expenses are accounted for on an effective interest basis.

Expenses

All expenses are accounted for on an accruals basis. They are recognised in the statement of comprehensive income in the year in which they are incurred on an accruals basis.

Taxation

The Company and its subsidiaries are subject to income tax on any income arising on investment properties after deduction of debt financing costs and other allowable expenses.

Income tax on the profit or loss for the year comprises current and deferred tax. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous periods.

Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred tax is determined using tax rates (and laws) that have been enacted, or substantially enacted, by the date of the statement of financial position and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Segmental reporting

The Directors are of the opinion that the Group is engaged in a single segment of business, being property investment and in one geographical area, Continental Europe. The chief operating decision-maker is considered to be the Board of Directors who are provided with consolidated IFRS information on a quarterly basis.

Foreign currency translation

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the 'functional currency').

The functional currency of all the entities in the Group is the euro, as this is the currency in which the majority of investment takes place and in which the majority of income and expenses are incurred. The financial statements are also presented in euros.

Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the date of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions are recognised in profit or loss in the statement of comprehensive income.

Assets and liabilities held at the end of the reporting period are translated into the presentation currency at the exchange rate prevailing at that date. Foreign exchange differences arising on translation to the presentation currency are recognised in other comprehensive income in the statement of comprehensive income.

2. New standards and interpretations

New standards and interpretations adopted by the Group

New standards, amendments or interpretations, effective for the first time for financial years beginning on or after 1 January 2020, have not had a material impact on the Group or Company.

The Group has applied the following standards and amendments for the first time for its annual reporting period commencing 1 October 2020:

IFRS 3 - Business combinations

Amendments to IFRS 3 Business combinations and effective for financial years commencing on or after 1 January 2020 provides a revised framework for evaluating a business and introduces an optional 'concentration test'. The amendment will impact the assessment and judgements used in determining whether future property transactions represent an asset acquisition or business combination. As a result of the amendment it is expected that future transactions are more likely to be treated as an asset acquisition.

3. Rental and service charge income

4. Property operating expenses

All the above amounts relate to service charge expenses which are all recoverable except for €230,000 (2020: €1,719,000). This amount is the difference between property expenses and service charge income (see note 3).

5. Material agreements

Schroder Real Estate Investment Management Limited ('SREIM') is the Investment Manager to the Company. The Investment Manager is entitled to a fee together with reasonable expenses incurred in the performance of its duties. The fee is payable monthly in arrears and shall be an amount equal to one 12th of the aggregate of 1.1% of the EPRA NAV of the Group. The Investment Management Agreement can be terminated by either party on not less than 12 months' written notice, such notice not to expire earlier than the third anniversary of admission, or on immediate notice in the event of certain breaches of its terms or the insolvency of either party. The total charge to profit and loss during the year was €2,181,000 (2020: €1,945,000). At the year end €706,000 (2020: €332,000) was outstanding.

SREIM provides accounting services to the Group with a minimum contracted annual charge of €81,000 (£70,000). The total charge to the Group was €110,000 (2020: €103,000). These are included in Administrator's and accounting fees in the consolidated statement of comprehensive income. At the year end €35,000 (2020: €25,000) was outstanding.

SREIM provides administrative and company secretarial services to the Group with a contracted annual charge of €58,000 (£50,000). The total charge to the Group was €58,000 (2020: €57,000). These are included in Administrator's and accounting fees in the consolidated statement of comprehensive income. At the year end €19,000 (2020: €14,000) was outstanding.

Details of Directors' fees are disclosed in note 9.

Details of loans to Urban SEREIT Holdings Spain S.L., a related party, are disclosed in note 16.

The Company received management fees of €1,690,000 (2020: €1,458,000) from subsidiary companies during the year. The amounts recharged to subsidiaries and outstanding are provided in the following table.

6. Provision of loan made to Seville joint venture

As at 30 September 2021 the Group owned 50% of the Metromar JV, which owns a shopping centre in Seville, and had advanced €10 million as a loan and was owed interest of €1.1 million (2020: €1.0million). The loan carries a fixed interest rate of 4.37% per annum payable quarterly and matures in April 2024.

When considering an appropriate level of impairment, deemed to be a significant judgement, the Company primarily considered: the property valuation and future potential movements; debt covenant breaches; cash flow forecasts; the effects of the local lockdown measures in Spain on tenants and their trading; and rent collection rates.

A default rate of 100% has been applied to the above loan and unpaid interest at year end. The impairment provision booked during the year was €8.5 million (2020: €2.6 million) bringing the cumulative impairment to €11.1 million and the Group's investment with regard to Seville now stands at €nil.

7. Auditors' remuneration and assurance fees

The Group's total audit fees for the year are €340,000 (2020: €316,000) which includes the Group audit and the individual statutory audits. The Company's total audit fees for the year were €303,000 (2020: €277,000) which only covers the Group audit.

The interim review fee was €51,000 (2020: €51,000) which is an assurance related non-audit service and is included in the total Auditors' remuneration for the year. The auditors did not perform any other non-audit services for the Group during the year (2020: €nil).

8. Dividends received

During the year the Group did not receive any dividends from its joint venture operation Urban SEREIT Holdings Spain S.L. (2020: €67,000) (see note 15).

During the year the Company received dividends from its subsidiary undertakings. €30,385,000 (2020: €1,478,000) from OPPCI SEREIT France, €2,735,000 (2020: €1,650,000) was received from SEREIT Holdings Sàrl, €1,000 (2020: €2,000) from SCI SEREIT Directoire and €nil (2020: €580,000) from SEREIT (Jersey) Limited.

9. Other expenses

Directors are the only officers of the Company and there are no other key personnel. The Group has one employee; for further details see note 28. The Directors' annual remuneration for services to the Group was €156,882 (2020: €125,637), as set out in the Directors' Remuneration Report on pages 44 to 46 of the 2021 Report and Accounts. The total charge for Directors' fees was €180,000 (2020: €139,000), which included employer's National Insurance contributions.

10. Taxation

The effective tax rate is a weighted average of the applicable tax rates in the countries the Group has operations. A potential deferred tax asset of €394,000 (2020: €770,000) arose on tax losses which has not been provided for.

SEREIT Plc has elected to be treated as a société d'investissement immobilier cotée ("SIIC") for French tax purposes. Provided that SEREIT Plc meets certain requirements, the SIIC should be exempt from French CIT on net rental income and gains arising from interests in property. Management intends that the Group will continue to comply with the SIIC regulations for the foreseeable future. One of the conditions to maintain SIIC status requires SEREIT Plc to be listed on a regulated market complying with the requirements of the relevant EU directive (n°2004/39/CE). Following the UK's departure from the European Union effective from 1 January 2021, there is uncertainty regarding whether SEREIT Plc's listing on the London Stock Exchange would be recognised as satisfying this condition. If SIIC status were to be denied to SEREIT Plc, the estimated additional tax payable in respect of the period from 1 January 2021 to 30 September 2021 would be €1.4m.

The Group has a number of subsidiaries established in the European Union which are subject to local taxation laws and regulations. The Group continues to monitor updates to taxation laws and regulations and any potential impact on uncertain tax positions.

11. Earnings per share

Basic earnings per share

The basic earnings per share for the Group is calculated by dividing the net profit after tax attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares in issue during the year.

Diluted earnings per share

The Group has no dilutive potential ordinary shares and hence the diluted earnings per share is the same as the basic earnings per share in both 2020 and 2021.

Headline earnings per share

The headline earnings and diluted headline earnings for the Group is 4.9 euro cents per share (2020: 6.4 euro cents per share) as detailed on page 80 of the 2021 Report and Accounts.

12. Dividends paid

Interim dividends of €8,532,000 (2020: €8,659,000) were paid to the shareholders of SEREIT Plc during the year as follows:

13. Investment property

1 Excludes €439,000 of unrealised gain on the asset held for sale - Paris, Boulogne-Billancourt- prior to completion in December 2020.

Additions of €5,990,000 shown on the group cash flow statement includes capital expenditure paid in relation to Paris, Boulogne-Billancourt prior to the asset being sold in December 2020.

In 2020 and 2021, the Group held one leasehold property. The value of the respective sectors held were as follows:

The fair value of investment properties, as determined by the valuer, totals €201,075,000 (2020: €182,100,000) with the valuation amount relating to a 100% ownership share for all the assets in the portfolio.

None of this amount is attributable to trade or other receivables in connection with lease incentives. The fair value of investment properties per the consolidated financial statements of €199,727,000 includes a tenant incentive adjustment of €1,348,000 (30 September 2020: €1,007,000).

The net valuation gain on investment property of €8,134,000 (2020: €25,505,000) consists of net property revaluation gains of €8,475,000 (2020: €24,802,000) and a movement of the above mentioned tenant incentive adjustment of €341,000 (2020: €703,000).

As at 30 September 2021, the material valuation uncertainty clause has been removed from the valuation report for all directly held assets in the Group's investment property balance but still applies to the Seville shopping centre held in the joint venture investment. Please see note 16 for further details.

The fair value of investment property has been determined by Knight Frank LLP, a firm of independent chartered surveyors, who are registered independent appraisers. The valuation has been undertaken in accordance with the RICS Valuation - Global Standards 2017, incorporating the International Valuations Standards, and RICS Professional Standards UK January 2014 (revised April 2015).

The properties have been valued on the basis of 'fair value' in accordance with the RICS Valuation - Professional Standards VPS4(1.5) Fair Value and VPGA1 Valuations for Inclusion in Financial Statements which adopt the definition of fair value used by the International Accounting Standards Board.

The valuation has been undertaken using an appropriate valuation methodology and the valuer's professional judgement. The valuer's opinion of fair value was primarily derived using recent comparable market transactions on arm's length terms, where available, and appropriate valuation techniques (The Investment Method).

The properties have been valued individually and not as part of a portfolio.

The Group's total valuation fees for the year are €39,000 (2020: €41,000). The fee payable to Knight Frank LLP is less than 5% of its total revenue in any year.

All investment properties are categorised within Level 3 of the fair value hierarchy, as they use significant unobservable inputs. There have not been any transfers between Levels during the year. Investment properties have been classed according to their real estate sector. Information on these significant unobservable inputs per class of investment property is disclosed below:

Quantitative information about fair value measurement using unobservable inputs (Level 3) as at 30 September:

1 This table includes the joint venture investment property valued at €29.2 million which is disclosed within the summarised information within note 16 as part of total assets.

2 Weighted by market value.

3 Yields based on rents receivable after deduction of head rents and non-recoverables.

1 This table includes the joint venture investment property valued at €42.6 million which is disclosed within the summarised information within note 16 as part of total assets.

2 Weighted by market value.

3 Yields based on rents receivable after deduction of head rents and non-recoverables.

Sensitivity of measurement to variations in the significant unobservable inputs

The significant unobservable inputs used in the fair value measurement (categorised within Level 3 of the fair value hierarchy) of the Group's property portfolio, together with the impact of significant movements in these inputs on the fair value measurement, are shown below:

There are interrelationships between the yields and rental values as they are partially determined by market rate conditions. The sensitivity of the valuation to changes in the most significant inputs per class of investment property are shown below:

14. Realised gain/loss on sale of investment property

During the period the Group transferred the legal title of its office asset in Paris, Boulogne-Billancourt to a purchaser. As at 30 September 2020 this asset was recognised as held for sale at its fair value of €65.2 million.

The forward funded sale agreement which the Group entered into is comprised of two key performance obligations: i) to sell the asset as referenced above; and ii) to undertake a comprehensive refurbishment of the asset on behalf of the purchaser.

On 16 December 2020 the Group transferred, as part of the sale, the legal title to the purchaser for a deemed sale price of €69.8 million. In return, the Group received on the completion date an initial €52.9 million cash receipt from the purchaser and €16.9 million will be paid upon completion of certain milestones.

The forward funded sale contract also includes a development element whereby the Group will undertake a comprehensive refurbishment of the asset on behalf of the purchaser over an approximate 18 month period with completion expected in the second quarter of 2022. The amount of revenue the Group will receive for the development of the asset is variable as it is based on the Group achieving certain milestones.

When forming a judgement as to an appropriate level of development revenue to be recognised in the reporting period, the Group considered the contractual penalties of not meeting certain criteria within the agreement; the total development costs incurred; the stage of completion of the refurbishment; the milestones achieved and still to be achieved; the timing of further future cash receipts from the purchaser; and the overall general development risk.

The Group has estimated that it will receive a total development revenue of €25.5 million.

During the period €8.27 million of development cost, which is 34% of the total project expenditure, had been incurred and a sum of €9.81 million of development revenue has been recognised following consideration of the factors identified above; this was also due from the purchaser at period end. The remaining development revenue is expected to be predominantly recognised by 30 September 2022.

The total amount of the contract asset recognised by the Group that is due from the purchaser thereby totalled €26.7 million (September 2020: €nil) at the end of the financial year and is included in Trade and other receivables.

The below sensitivity table presents the change in the total development revenue expected from the purchaser if the variable consideration increases or decreases by 10%.

15. Investment in subsidiaries

During the year, OPPCI SEREIT France repurchased €40,524,000 of its own shares from SEREIT Plc and SEREIT Holdings France SAS repurchased €590,000 of its own shares from SEREIT Plc. SEREIT Plc invested €1,010,000 in SEREIT France Invest SAS, a new wholly owned subsidiary of the Company.

The Company made a full impairment for its investment in SEREIT (Jersey) Limited of €7,279,000 following the provision of loan made to the Seville joint venture which was held by SEREIT (Jersey) Limited (see note 6 for further details).

The subsidiary companies listed below are those which were part of the Group as at 30 September 2021. Unless otherwise stated, they have share capital consisting solely of ordinary shares that are held directly by the Group and the proportion of ownership of interests held equals the voting rights held by the Group.

16. Investment in joint venture

The Group has a 50% interest in a joint venture called Urban SEREIT Holdings Spain S.L. The principal place of business of the joint venture is Calle Velazquez 3, 4th Madrid 28001 Spain.

As at 30 September 2021, the joint venture in Seville, of which SEREIT holds a 50% share, had total net liabilities of €14,610,000. The Group has therefore recognised a nil interest as its investment in the joint venture and would only recognise its share of net liabilities where certain legal or constructive obligations are in force. No such obligations exist with regard to the Seville joint venture.

A reduction in rental income has resulted in a requirement under the minimum net rental income covenant in the loan agreement for the lender to retain all excess rental income generated by the Seville property in the property-owning special purpose vehicle ("SPV"). This position will continue until the rental income increases sufficiently to meet the level required under the loan. A significant fall in valuation over the financial year has resulted in a 'Hard LTV' covenant breach which leads to an automatic increase in the interest margin. The bank have agreed a waiver for Q4 2021 of the additional interest margin.

In 2020 and 2021, within total liabilities of the joint venture, there is also a loan amount of €10.0 million owed to the Group. The Group has fully impaired the loan and interest receivable from the joint venture and further details are provided in note 6. The loan is expected to mature at the same time as the above-mentioned bank loan and carries a fixed interest rate of 4.37% per annum payable quarterly.

Due to Covid-19, the Group's valuer has included the following 'material valuation uncertainty' clause with respect to the Seville shopping centre in its valuation report as at 30 September 2021:

The outbreak of Covid-19, declared by the World Health Organisation as a 'Global Pandemic' on the 11th March 2020, has and continues to impact many aspects of daily life and the global economy - with some real estate markets having experienced lower levels of transactional activity and liquidity. Travel, movement and operational restrictions have been implemented by many countries. In some cases, 'lockdowns' have been applied to varying degrees and to reflect further 'waves' of Covid-19; although these may imply a new stage of the crisis, they are not unprecedented in the same way as the initial impact.

The pandemic and the measures taken to tackle Covid-19 continue to affect economies and real estate markets globally. Nevertheless, as at the valuation date property markets are mostly functioning again, with transaction volumes and other relevant evidence at levels where an adequate quantum of market evidence exists upon which to base opinions of value.

In respect of the Metromar Shopping Centre in Seville, Spain, as at the valuation date we continue to be faced with an unprecedented set of circumstances caused by Covid-19 and an absence of relevant/sufficient market evidence on which to base our judgements. Our valuation of this asset is therefore reported as being subject to 'material valuation uncertainty' as set out in VPS 3 and VPGA 10 of the RICS Valuation - Global Standards. Consequently, in respect of this valuation less certainty - and a higher degree of caution - should be attached to our valuation than would normally be the case.

Sensitivity analysis with respect to the estimated movement in fair value of investment properties, including the Group's share of the joint venture investment property, at 30 September 2021, can be found in note 13.

For the avoidance of doubt this explanatory note, including the 'material valuation uncertainty' declaration, does not mean that the valuation cannot be relied upon. Rather, this explanatory note has been included to ensure transparency and to provide further insight as to the market context under which the valuation opinion was prepared. In recognition of the potential for market conditions to move rapidly in response to changes in the control or future spread of Covid-19 we highlight the importance of the valuation date.

17. Non-current assets held for sale

As at 30 September 2020, the Group had agreed a conditional pre-sale agreement in respect of the Boulogne-Billancourt asset in Paris.

On 16 December 2020, the Group signed a forward funded sale contract and transferred, as part of the sale, the legal title to the purchaser. The forward funded sale contract includes a development element whereby the Group will undertake a comprehensive refurbishment of the asset on behalf of the purchaser over an approximate 18 month period with completion expected in the second quarter of 2022.

See Note 14 for further details of the forward sale agreement.

18. Trade and other receivables

1 Refer to note 14 for proceeds due from the sale of Boulogne-Billancourt in Paris.

Other debtors and prepayments includes tenant incentives of €1,348,000 (2020: €1,007,000). There were no provisions against the above amounts in 2021 (2020: Nil).

19. Share capital and share premium

As at 30 September 2021, the share capital of the Company was represented by 133,734,686 ordinary shares (2020: 133,734,686 ordinary shares) with a par value of 10.00 pence.

Issued share capital

As at 30 September 2021, the Company had 133,734,686 ordinary shares (2020: 133,734,686) in issue (no shares were held in treasury). The total number of voting rights of the Company at 30 September 2021 was 133,734,686 (2020: 133,734,686).

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

20. Interest-bearing loans and borrowings

This note provides information about the contractual terms of the Group's interest-bearing loans and borrowings. For more information about the Group's exposure to interest rate risk see note 23.

Borrowings are removed from the statement of financial position when the obligation specified in the contract is discharged, cancelled or expired. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.

Bank loan - HSBC Bank Plc

The Group has a loan facility of €9.25 million with HSBC Bank Plc which was entered into during the year ended 30 September 2018.

The total amount has been fully drawn and matures on 27 September 2023. It carries an interest rate which is the aggregate of the applicable Euribor 3 months rate and a margin of 2.15% per annum payable quarterly. The facility was subject to a 1% arrangement fee which is being amortised over the period of the loan. The debt has a LTV covenant of 62.5% and the interest cover should be above 275%.

The lender has a charge over properties owned by the Group with a value of €22,225,000. A pledge of all shares in the borrowing Group company is in place.

Bank loan - BRED Banque Populaire

The Group entered into a loan facility totalling €13.0 million with BRED Banque Populaire which was entered into during the year ended 30 September 2018.

The total amount was fully drawn and matures on 15 December 2024. The loan carries an interest rate which is the aggregate of the applicable Euribor 3 months rate and a margin of 1.30% per annum payable quarterly. The facility was subject to an arrangement fee of €70,000 which is being amortised over the period of the loan. The debt has a LTV covenant of 60% and the ICR should be above 400%. The Group has purchased an interest rate cap to have risk coverage on the variation of the interest rate.

During the year ended 30 September 2020, the Group received a further €4.0 million of debt into SCI Directoire under its existing loan facility with BRED Banque Populaire. The additional loan amount carries an interest rate of 1.45% and was subject to a €30,000 arrangement fee which will be amortised over the period of the loan. The total loan facility stands at €17.0 million and matures on the original date of 15 December 2024.

The lender has a charge over property owned by the Group with a value of €42,000,000. A pledge of all shares in the borrowing Group company is in place.

Bank loan - Deutsche Pfandbriefbank AG

The Group has two loan facilities totalling €30.50 million with Deutsche Pfandbriefbank AG which were entered into during the year ended 30 September 2016.

Of the total amount drawn, €14.0 million matures on 30 June 2023 and carries a fixed interest rate of 0.85% per annum payable quarterly; the remaining €16.5 million matures on 30 June 2026 and carries a fixed interest rate of 1.31% per annum. An additional fixed fee of 0.30% per annum was payable until certain conditions relating to the Frankfurt property were fulfilled on 30 December 2016. The facility was subject to a 0.35% arrangement fee which is being amortised over the period of the loan. The debt has a LTV covenant of 65% and the debt yield must be at least 8%.

The lender has a charge over property owned by the Group with a value of €83,900,000. A pledge of all shares in the borrowing Group companies is in place.

Bank loan - Landesbank Saar

The Group entered into a loan facility of €8.6 million with Landesbank Saar on 27 March 2019.

The loan matures on 28 March 2024 and carries an interest rate of 1.40% plus Euribor 3 months per annum, payable quarterly. An additional 25bps is applied to the margin if the LTV is between 56% and 60%, or 50bps if the LTV is above 60%. The facility was subject to a €56,000 arrangement fee which is being amortised over the period of the loan. The debt has a LTV covenant of 64% and the interest cover should be above 220%. A pledge of all shares in the borrowing Group company is in place.

Bank loan - Landesbank Saar

On 25 November 2019, SCI Rumilly entered into a new loan facility with Landesbank Saar for €3.7 million.

The loan matures on 30 April 2023 and carries an interest rate of 1.30% plus Euribor 3 months per annum payable quarterly. An additional 25bps is applied to the margin if the LTV is between 52% and 56%, or 50bps if the LTV is equal to or above 56%. The facility was subject to a €46,000 arrangement fee which is amortised over the period of the loan. The debt has a maximum LTV covenant of 60% and a minimum ICR covenant of 200%. A pledge of all shares in the borrowing Group company is in place.

21. Trade and other payables