Ediston Property Investment Company plc | Annual Report and Accounts 2022
Property Investment Company plc
ANNUAL REPORT AND ACCOUNTS 2022
Ediston Property Investment
Company plc is a Real Estate
Investment Trust (REIT) listed
on the London Stock Exchange.
Our objective is to provide
shareholders with an attractive
level of income, coupled with the
prospect of income and capital
growth, through investing in
UK commercial property.
Strategic Report
1Ediston Property Investment Company plc – Annual Report and Accounts 2022
Highlights
FINANCIAL
as at 30 September 2022
TOTAL ASSETS
£313.7m
(2021: £303.0 million)
EPRA VACANCY RATE*
6.5%
(2021: 8.6%)
EPRA NAV PER SHARE*
94.9p
(2021: 89.6p)
RENT COLLECTED IN THE YEAR
98.2%
(2021: 95.7%)
NAV TOTAL RETURN*
11.5%
(2021: 9.6%)
WEIGHTED AVERAGE UNEXPIRED
LEASE TERM*
4.5 years
(2021: 5.0 years)
ANNUALISED DIVIDEND PER SHARE
5.00p
(2021: 4.42p)
DIVIDEND COVER*
81.2%
(2021: 119.0%)
OPERATIONAL
as at 30 September 2022
Sold four office assets and two leisure assets for £69.5m.
15 lease transactions completed with a contracted rent of £2.5m
per annum.
98.2% of rent due was collected.
Portfolio is now 100% in retail warehousing, in line with the new
investment strategy, with cash available for further investment at
the appropriate time.
A summary of the Company’s financial record since inception can be found on page 102.
Strategic Report 1-37
Our assets | Key information 1
At a Glance 2
Our Investment Manager’s Approach 4
Chairman’s Statement 6
Our Progress | Strategy 10
Investment Manager’s Review 12
Sustainability Report 16
Finance Report 24
Principal and Emerging Risks 27
Section 172 34
Governance 38-67
Board of Directors 38
Corporate Governance Statement 40
Report of the Audit and Risk Committee 45
Report of the Nomination Committee 50
Report of the Remuneration Committee 52
Directors’ Remuneration Report 53
Directors’ Report 56
Directors’ Responsibilities Statement 67
Financial Statements 68-99
Independent Auditor’s Report 68
Consolidated Statement
of Comprehensive Income 75
Consolidated Statement of Financial Position 76
Consolidated Statement of Changes in Equity 77
Consolidated Statement of Cash Flow 78
Notes to the Consolidated
Financial Statements 79
Company Statement of Financial Position 94
Company Statement of Changes in Equity 95
Notes to the Company Financial Statements 96
Shareholder
Information 100-112
Shareholder Information 100
Glossary of Terms, Definitions and
Alternative Performance Measures 103
Unaudited Supplementary Information –
Ongoing Charges 106
Notice of Annual General Meeting 107
Corporate Information 112
THIS DOCUMENT IS IMPORTANT AND REQUIRES
YOUR IMMEDIATE ATTENTION. If you are in any doubt
about the action you should take, you are recommended
to seek your own financial advice from your stockbroker,
bank manager, solicitor, accountant or other financial
adviser authorised under the Financial Services and
Markets Act 2000 (as amended by the Financial Services
Act 2012) if you are in the United Kingdom or, if not,
from another appropriately authorised financial adviser.
If you have sold or otherwise transferred all your Ordinary
Shares in Ediston Property Investment Company plc,
please forward this document, together with the
accompanying documents immediately to the purchaser
or transferee, or to the stockbroker, bank or agent
through whom the sale or transfer was effected for
transmission to the purchaser or transferee.
* Alternative performance measure
2 Ediston Property Investment Company plc – Annual Report and Accounts 2022
At a Glance
We acquire assets where we can add value
through active asset management. Properties
that can be enhanced to institutional grade
are key targets. The experience and depth of
our Investment Manager’s team gives us the
resources and capability to execute this strategy.
An important outcome for the year was the successful implementation of the strategy to
focus, for the foreseeable future, on investment in the retail warehouse sector. The Company
sold its office and leisure assets, and now has cash available for reinvestment in additional
retail warehouse properties, at the appropriate time. The Investment Manager has extensive
experience as a developer, investor and asset manager of retail warehouse assets.
The Company has a well-located portfolio of good-quality assets, which offers a reliable income stream and with
opportunities to enhance and improve income and value through active asset management.
Going forward, the Company’s intention is to invest its available cash in retail warehouse assets, which strengthen the
portfolio structure and are accretive to both capital growth and dividend cover.
READ MORE ABOUT
Our Strategy
ON PAGES 10 TO 11
READ MORE ABOUT
Sustainability
ON PAGES 16 TO 23
Case Study
Resilience in retail: why
retail warehouses are
still winners
READ MORE ON PAGE 15
3Ediston Property Investment Company plc – Annual Report and Accounts 2022
Strategic Report
74.1%
100%
7.9%
15.0%
7.6%
4.7%
3.9%
60.9%
Our retail
warehouse assets
AS AT 30 SEPTEMBER 2022
Well-let retail warehouse parks with good income
streams and asset management angles.
NUMBER OF PROPERTIES
11
PORTFOLIO VALUE
£231.4m
CONTRACTED RENT
£16.2m
WEIGHTED AVERAGE UNEXPIRED
LEASE TERM
4.5 years
EPRA VACANCY RATE
6.5%
AVERAGE RENT PER SQ. FT.
£14.72
PORTFOLIO COMPOSITION AS AT 30 SEPTEMBER 2022
Retail warehouse
Retail warehouse parks
Location exposure
Scotland (27.2%)
Wales (26.1%)
North West (16.9%)
Yorkshire (15.2%)
North East (8.4%)
East Midlands (6.2%)
SECTOR EXPOSURE TOP FIVE TENANTS
B&Q Ltd
B&M Retail Ltd
Marks & Spencer plc
Boots UK Limited
Pets at Home Limited
Tenants < 3.9%
4 Ediston Property Investment Company plc – Annual Report and Accounts 2022
Hold
and review
Buy
Sell
Our Investment Manager’s Approach
A retail warehouse specialist
We aim to add value at all stages of the
investment process. This is achieved
through the expertise and skills of
the team at our Investment Manager,
Ediston Properties Limited.
Sector
specialisms
Understanding tenants’
needs and how the
assets operate in their
micro environments.
Market
knowledge
Well-informed and
connected Investment
Manager with an extensive
agency network.
Buy
Detailed due diligence and
forensic cash-flow analysis.
Environmental, Social and
Governance (ESG) issues
integrated into investment
decisions.
Hold and review
Credible and implementable
business plan, which considers
ESG factors, to deliver positive
asset performance; keep on top
of market sentiment and price
potential; and deliver income
and capital growth.
Sell
Sell assets and recycle
capital, with the objective
of reinvesting in properties
with asset management angles
to exploit. Consider ESG
credentials of each asset when
forming any disposal strategy.
Targeted
investment
‘Core-plus’ properties
with asset management
angles to add value
are targeted.
5Ediston Property Investment Company plc – Annual Report and Accounts 2022
Strategic Report
Experienced
and well advised
The Investment Manager has a focused
and talented team of real estate experts,
with extensive experience in UK property
markets, especially in the retail warehouse
sector.
The Investment Manager understands
how the assets fit into the local and
economic environment, and what
opportunities and risks exist beyond
general market movements.
AVERAGE EXPERIENCE
OF THE EDISTON TEAM
21 years
CONTRACTED RENT PER ANNUM
OF ALL ASSET MANAGEMENT
DEALS COMPLETED
£2.5m
NUMBER OF INVESTMENT
TRANSACTIONS COMPLETED
6
Unlocking
value
The Investment Manager is well-
resourced and seeks to identify value-
adding opportunities for each asset.
The generous ratio of surveyors to
properties ensures asset management
initiatives can be identified and properly
followed through to execution.
Generally, three to six projects are
allocated to each surveyor and, given
the diverse skill-set of the team, it is
usual to have more than one member
of the team involved on a project.
Targeted
investment
The Investment Manager seeks to
identify assets that are mispriced or
are capable of being managed to a higher
value, through a detailed analysis of risk
and the property fundamentals, combined
with good knowledge of the local
occupational market.
The Investment Manager looks to
acquire assets that can be improved
to institutional grade property. The
investment policy is not benchmarked
against a traditional property relative
return benchmark. It is more important for
the Company to create a portfolio where
each asset can ultimately offer a strong
and potentially improving cash flow.
6 Ediston Property Investment Company plc – Annual Report and Accounts 2022
Chairman’s Statement
For the Company, the most obvious and
immediate impact has been the deterioration
in the share price, which has moved down from
78.8 pence per share at the half year to 67.6
pence at the year end. Due to a reduction in
property values, the Company has seen a fall in
Net Asset Value at 30 September, following five
quarters of increases.
There are no doubt more real estate bumps in
the road to navigate over coming months, with
a slowing economy and rising interest rates. A
sizeable one in the short term will be the impact
of the expected mark down in market
valuations at the end of December, based on
transactional evidence over the quarter.
External geopolitical factors will also remain a
significant factor in determining the direction of
the economy. The Board will continue to
manage risk proactively and where possible
ensure the Company is as resilient as it can be
to whatever lies ahead. Despite the economic
and political difficulties that emerged in 2022,
the Company, with its new investment focus
and cash to invest, should emerge from this
period of disruption in a strong position.
OVERVIEW
The sale of the office and leisure properties has
increased the retail warehouse exposure in the
property portfolio from 74.1% to 100% of our
invested assets. At the year end, the Company
held £31.0m in the debt disposal account
earmarked specifically for reinvestment, as well
as £50.2m in its operational account.
In my interim statement in May, I commented
that, whilst the retail warehouse market had
flourished in the first part of the year, the
macro-economic position was becoming
more challenging due to world events and
rising inflation. Behind this caution was the
expectation of higher interest rates and
a squeeze on business investment and
consumer spending to bring inflation under
control. This has happened against a
background of political chaos in the UK.
The consequent spike in gilt rates has created a
wave of fear in real estate markets as investors
grapple with the pricing implications of needing
higher returns on equity to compensate, and
much higher borrowing costs than anticipated.
This is reflected in the widened discounts across
the closed-ended sector.
RENT COLLECTED IN THE YEAR
98.2%
NAV PER SHARE
94.9p
“The Company has executed
its investment strategy
outlined in my statement last
year and is now focused on
the retail warehouse sector
for the foreseeable future.”
7Ediston Property Investment Company plc – Annual Report and Accounts 2022
Strategic Report
PORTFOLIO ACTIVITY
It has been an exceptionally busy year, with
the Investment Manager’s report providing full
information. The key highlights are:
1) Sales
The four office assets in Bath, Birmingham,
Newcastle and Edinburgh, and the leisure
assets at Hartlepool and Telford, were
sold. The total capital raised from the
six transactions was £69.5m. The sales
achieved one of the key strategic objectives
set last year.
2) Asset Management
The strategic priorities of protecting rent and
enhancing NAV were achieved. Fifteen lease
transactions involving £2.5m of rent were
completed during the year, with one further
deal concluding post the year end. The void
management target was also achieved with
the reduction in the EPRA Vacancy Rate
from 8.6% to 6.5%. This all contributed to
the value of the retail warehouse assets
improving during the year.
RENT COLLECTION
In total, 98.2% of rent due was collected at the
year end. Contracted rent had fallen at the year
end from 12 months ago due to the loss of
income from the office and leisure property
sales and the deferral of the reinvestment of the
sale proceeds. The objective is to replace as
much of this income as possible through
reinvestment in suitable retail warehouse assets.
GEARING AND CASH RESOURCES
The Company’s total debt is unchanged at
£111.1m, at a blended ‘all-in’ fixed rate of 2.9%.
The loans do not mature until 2025 and 2027.
Gearing on 30 September 2022 was 35.41%
of total assets, a slight decrease from last year
end. Gearing is within investment policy limits
and covenants.
As at 30 September 2022, the Company
held £81.2m of cash. Of this sum, £31.0m is
contained within the security pool and consent
from the lender is required where Loan-to-Value
(LTV) levels at the time the funds are utilised is
above 35%.
Given the focus on the sector, the Investment
Manager has provided more information in its
review later on in this report. What does come
through from the analysis is the strength of the
Company’s income stream. The credit rating
of 85.0% of the tenant line-up is rated by Dun
& Bradstreet as having a lower than average
risk of business failure. The average rent
passing (including the smaller coffee and kiosk
units, which command higher rents but
ignoring vacant units) is £14.72 per sq. ft. The
Company is aware that many of its retailers are
making money from this rental base and, with
void levels low, it augurs well for rental growth.
What makes the sector especially interesting
is that the investment story is much more than
the attractive levels of rent and capital value as:
1) click-and-collect continues to grow, with
out-of-town parks well placed to provide
this function;
2) retailers remain attracted to the better
configured space on retail parks;
3) new revenue opportunities exist from
creating new spaces such as drive-thru
units and electrical vehicle (EV) charging
points; and
4) densities can be increased with the potential
for introducing other uses.
Sustainability
I am delighted that the Company is embracing
its sustainability responsibilities and has made
further progress during the year in charting its
way to net zero. The Sustainability Working
Group, comprising the team from the
Investment Manager, Savills, Imogen Moss and
myself, is proving effective in maintaining the
required momentum. It is satisfying that the
Investment Manager has secured another
green star to last year’s rating following
the Company’s participation in the 2022
GRESB survey.
The ESG activities are more fully described
on pages 16 to 23. This is more detailed
disclosure than the previous year and hopefully
informative for shareholders.
“The completion of the office sales and the
disposal of the two leisure assets during the
year has shifted the asset mix from 74.1% to
100% invested in the retail warehouse sector.”
INVESTMENT AND SHARE PRICE
PERFORMANCE
The Company’s Net Asset Value (NAV) per
share increased by 5.9% with an annualised
NAV total return as at 30 September 2022 of
11.5%. Like-for-like property values increased
by 10.3% over the period.
Despite the increase in NAV, the share price
has declined 8.4% over the year from 73.8
pence to 67.6 pence. Allowing for the payment
of the dividend, the share price total return
was -2.3%.
The increase in NAV for the year was driven
by the improvement in valuations in the retail
warehouse portfolio due to a combination of
yield shift and the gains from asset management
initiatives. Some of this value was lost in the last
quarter due to markets falling back on economic
concerns, the general rise in borrowing costs
and the political turmoil. The sale of the office
portfolio was completed below the September
2021 valuation, and was a drag on performance
for the year. However, the sale was prescient as
it is highly likely that, if these assets had not been
sold, the current valuation of the offices would
be below the sale value, creating a larger offset
to the retail warehouse gains.
INVESTMENT STRATEGY
Asset Allocation
The completion of the office sales and the
disposal of the two leisure assets during the
year has shifted the asset mix from 74.1% to
100% invested in the retail warehouse sector.
Uninvested cash resources will be invested
into the sector, maintaining a 100% exposure
for the foreseeable future and in line with the
revised strategy. The Investment Manager had
intended for the Company to be fully invested
by the half year. However, due to the
uncertainty and re-pricing of the market, it was
decided that it was prudent to hold cash until
the right opportunities were available, and the
extent of the correction was more visible.
In considering retail warehouse investments,
it is important to note that the sector is not
one homogenous group of assets. Investment
performance can be influenced by many
factors, including planning restrictions on
users, tenant focus, tenant mix, size and
layout of units, the size of the overall scheme,
availability of car parking, accessibility, the
nature of the catchment, supply of competing
space, property management, sustainability
factors, the affordability of the prevailing rent,
opportunities to add space and alternative
use values. The dispersion of returns can be
significant across the sector, accentuating
the importance of stock selection and an
experienced Investment Manager.
8 Ediston Property Investment Company plc – Annual Report and Accounts 2022
Chairman’s Statement continued
BOARD MATTERS
I would like to thank the Board, Investment
Manager and all the agents that provide
services to the Company for their hard work.
We have made some Board changes
during the year as part of our succession plan.
I would like to welcome Karyn Lamont, who
joined the Board on 1 September, as our
new Audit and Risk Committee Chair. She will
stand for election at the AGM in February 2023.
Karyn is a chartered accountant, a former audit
partner at PwC and an experienced non-
executive director on other collective funds,
including as audit chair. Imogen Moss became
the Senior Independent Director on 1 June
this year. These changes result from Robin
Archibald stepping down from both these
positions to enable a well-managed handover
and transition to take place before he retires
from the Board at the AGM in 2023.
Robin has been on the Board since the
Company floated in October 2014. During
his time of service he has made an immense
contribution to the management oversight of
the Company, and I would like to thank him not
only for that but also for all the wise counsel
and support he has given me personally. I
know Robin will remain active in the Investment
Trust sector with his other board appointments
and we wish him well with these roles.
The end of my tenure is also in sight, having
joined the Board at the same time as Robin.
The Board has asked me to continue as
Chairman in the coming year and I will,
therefore, stand for election at the forthcoming
AGM. It is my intention to stand down no later
than the AGM in 2024 and between now and
then will work with my fellow directors on
identifying a new Chair.
The Board has not revised its base remuneration
levels in five years. The only modifications to
Board remuneration in that period related to
changes in roles and the introduction of the
arrangements relating to Robin Archibald’s
remuneration. The Remuneration Committee
has concluded that a modest increase is now
justified based on its assessment of market
rates following the recruitment process
undertaken this year. The proposed increases
are significantly below the rate of inflation over
the last five years. Shareholders are being asked
to approve an increase in the remuneration cap
to £275,000, giving the Board the flexibility it
might need over its composition in future years
and to manage succession. Full details of the
proposals are set out in the Remuneration
Report on page 53.
ANNUAL GENERAL MEETING (AGM)
Shareholders are invited to attend the
Company’s AGM to be held at 1 St Andrew
Square, Edinburgh EH2 2BD on 24 February
2023. The AGM notice is set out on pages 107
to 108.
Those shareholders who are unable to attend
the AGM in person are encouraged to raise any
questions in advance with the Administrator at
epic.reit@jtcgroup.com (please include ‘EPIC
AGM’ in the subject heading). Questions must
be received by 5.00 p.m. on 10 February 2023.
Any questions received will be replied to by
either the Investment Manager or Board, via the
Administrator, before the AGM. A shareholder
presentation will be made available on the
Company website following the AGM, updating
shareholders on the activities of the Company.
OUTLOOK
The decision to delay the reinvestment of the
sales proceeds from the office and leisure
disposals has undoubtedly put the Company
in a better position to take advantage of the
current market uncertainty and setback in asset
valuations. We can expect some interesting and
attractive opportunities to arise over the coming
months, given the expected further falls in
market valuations. Real estate markets are now
much quicker to adjust than in the past so
these opportunities could come quickly.
However, the Investment Manager has no
specific timetable in mind for the reinvestment
and will be led by opportunity and to the extent
that the market has re-priced. The timing will
also be driven by the need to ensure the
Company remains financially resilient to the
effects of any sustained market downturn.
DIVIDENDS
In my report last year, I stated the Board’s
commitment to a covered dividend and the
prospect of further dividend progress as
contracted rental income continued to improve.
I also highlighted that the likely mismatch
between sales and reinvestment could lead
to a period of uncovered dividends and that,
if prudent to do so, the shortfall would be made
up from reserves.
Delaying the reinvestment of capital from
the sales has meant the period of uncovered
dividend has become longer than was
anticipated. The Board believes the way the
Company has responded to the changed
market conditions is both responsible and
appropriate. The Company is well funded to
continue to pay the current monthly dividend. It
is the intention of the Board to maintain the
dividend at 5.0 pence per share. The
expectation remains that when the available
capital is invested the dividend will be covered.
LONG-TERM GROWTH STRATEGY
The Board’s immediate focus is on NAV per
share with the active management of the
current assets and ensuring that capital is
invested on an accretive basis for the medium
term. Longer term, the Board would like to
grow the equity base of the Company to
improve liquidity, lower the cost base per
share and enlarge the investment opportunity
set, but this will depend in no small part on the
recovery of the Company’s share price rating.
Although the issue of new equity is unlikely
in the short term, due to the share price being
at a discount to NAV, the Board is asking
shareholders to renew our non-pre-emptive
authority of 10%, so that we are in a better
position to use ‘tap issuance’ if we were able to
do so. We will consider other means of raising
capital if there are substantial acquisitions to
be financed. In any fund raising, the interests
of existing shareholders will be of paramount
importance in how we price and structure any
new issuance or take on any new gearing.
“ The Board’s immediate focus is on NAV per share
with the active management of the current assets and
ensuring that capital is invested on an accretive basis
for the medium term.”
9Ediston Property Investment Company plc – Annual Report and Accounts 2022
Strategic Report
However, it will mean the payment of an
uncovered dividend in the meantime.
The immediate focus is on managing the
existing assets to protect the NAV per share
and ensure the income is maximised to reduce
the extent of the uncovered dividend. The
Investment Manager did an excellent job in
this regard during the COVID-19 Crisis and is
well-positioned to do so during a period of
economic difficulty.
The attractiveness of large parts of the retail
warehouse sector was recognised by investors
in the early part of the year and the consequent
increase in buying activity started to drive yields
down and prices up. The general correction
in the last quarter has brought this to an end
for the moment. However, the fundamentals
remain attractive with many of the tenants in
the sector making money from the rebased
rents, void levels are low and the click-and-
collect model continues to grow in popularity.
There is good prospect that investor interest will
return when confidence improves and pressure
on asset sales is reduced as open-ended
property fund redemptions normalise. This will
not only benefit the Company’s NAV but should
also flow through to an improved share price
and a reduction in the discount. Whether this
will be evident in the second half of the new
financial year will remain to be seen.
Nevertheless, the Board is confident that the
Company will be able to emerge from the
current turbulence in a strong position to reap
the benefits of better times ahead.
William Hill
Chairman
10 Ediston Property Investment Company plc – Annual Report and Accounts 2022
Our Progress | Strategy
Making progress in
a changing market
Income protection and
growth
To support dividend payments
to investors.
Progress in the period
Letting vacant space, securing extensions
of existing leases and completing
Agreements for Lease (AFL) to generate
new income streams. Regular dialogue with
tenants to secure their ongoing occupation
and to maximise rent collection.
Targets
Complete further lettings, rent reviews
and lease extensions to protect, and
enhance where possible, the Company’s
income stream.
Sale proceeds to be reinvested into
suitable retail warehousing assets,
at the appropriate time.
Void management
To minimise the vacancy rate across
the portfolio.
Progress in the period
The EPRA Vacancy Rate decreased
to 6.5% at the year end.
Targets
To let any voids and maintain a low
vacancy rate.
NAV management
Through the active asset management
of the portfolio.
Progress in the period
NAV per share increased 5.9% in the
period because of valuation improvements
in the retail warehouse portfolio, and
the completion of proactive asset
management initiatives.
Targets
To actively manage the portfolio to protect
the NAV against economic headwinds. To
undertake refurbishment and repositioning
projects that generate capital value uplifts
to improve the NAV or help offset any
valuation declines.
Regulatory and
operational
To ensure compliance with
regulations and to maintain
resilience of operations.
Progress in the period
Changes in management resource, regular
and ad hoc meetings between agents,
and reporting on specific issues, as well
as meeting new regulatory and reporting
requirements, including on ESG issues.
Targets
Maintain, and improve where possible,
strong operational standards and
regulatory compliance.
Transactional activity
To refresh the portfolio and
enhance the prospect of income
and capital growth.
Progress in the period
Sold four office and two leisure assets,
in line with the Company’s strategy.
Targets
Sale proceeds to be reinvested into suitable
retail warehousing assets, at the
appropriate time. The objective
is income and capital growth.
Market value
Aim to maintain an orderly market in
the Company’s shares and a strong
rating for the shares.
Progress in the period
Share price decreased by 8.4% in the
period, principally because of changing
market conditions brought about by
economic and political events outside
of the Company’s control.
Targets
Good secondary market liquidity to
help narrow discount, ideally pricing to
levels close to NAV, to give prospects
for equity growth.
OUR STRATEGIC PRIORITIES
11Ediston Property Investment Company plc – Annual Report and Accounts 2022
Strategic Report
NAV TOTAL
RETURN
11.5%
2022 11.5%
2021 9.6%
2020 -16.6%
2019 -0.8%
2018 8.9%
NAV total return reflects the growth or
reduction in net assets as well as dividends
paid to shareholders. The Board considers
this is an important overall measure of value
delivered to shareholders.
SHARE PRICE TOTAL RETURN
-2.3%
2022 -2.3%
2021 54.6%
2020 -35.3%
2019 -17.0%
2018 7.7%
Share price total return reflects the
movement in share price as well as
dividends paid to shareholders.
ANNUALISED DIVIDEND
PER SHARE
5.00p
2022 5.00p
2021 4.42p
2020 4.88p
2019 5.75p
2018 5.75p
A key objective is to provide an attractive
and sustainable level of dividend to
shareholders.
EPRA VACANCY RATE
6.5%
2022 6.5%
2021 8.6%
2020 5.1%
2019 2.9%
2018 5.7%
EPRA Vacancy Rate measures the
percentage of investment property space
that is vacant, based on ERV. The Board
monitors the vacancy rate closely to ensure
the Company’s income is maximised.
AVERAGE PREMIUM/DISCOUNT
OF SHARE PRICE TO NAV
-17.9%
2022 -17.9%
2021 -22.1%
2020 -33.2%
2019 -11.6%
2018 -1.6%
The average premium or discount of the
share price to NAV is monitored by the
Board. The Board believes that long-term
total return will be the driver of the rating
of the Company’s shares, but that factors
outside the Company’s control will influence
market pricing.
ONGOING CHARGES
1.4%
2022 1.4%
2021 1.4%
2020 1.4%
2019 1.4%
2018 1.3%
Operating costs incurred by the Company
expressed as a proportion of its average
net assets. See definition on page 105 for
more detail.
KEY PERFORMANCE INDICATORS
12 Ediston Property Investment Company plc – Annual Report and Accounts 2022
INTRODUCTION
It has been a busy year for the Company, which
has seen improvement across several areas.
The NAV has increased, the EPRA Vacancy
Rate has fallen, rent collection has improved
further and 15 asset management transactions
have been completed.
The revised strategy to sell office and
leisure assets to focus investment on the
retail warehouse sector has been successfully
completed. During the period, all six of the
office and leisure assets were sold, meaning
the Company now only holds retail warehouse
assets and has cash available for reinvestment.
The first half of the financial year saw
positive momentum build across the
portfolio, driven by the continued recovery of
the retail warehouse market. Yields hardened
as investors recognised the attributes of the
retail warehouse sector and tenants continued
to lease space.
The Interim Report cautioned that headwinds
were building, which they did, and they are
now affecting the Company. Rising inflation,
interest rates and energy costs, coupled with
political instability, have reduced consumer
confidence and put a squeeze on household
incomes. Reductions in disposable income
could affect the retail market, including retail
warehousing. Discretionary spending
and the purchasing of ‘big-ticket’ items
will be particularly affected. The fact that
the Company’s portfolio is underpinned by
convenience-led tenants, has low average rents
and a reduced vacancy rate is important and
should help make the portfolio more defensive
to these reductions in consumer spending.
PORTFOLIO VALUE
£231.4m
CONTRACTED RENT
PER ANNUM OF ALL ASSET
MANAGEMENT DEALS
£2.5m
If retailers are impacted, there is an increased
likelihood of them using Company Voluntary
Arrangements (CVAs) and other insolvency
processes to reduce costs. The Company is
in a better position to deal with these
challenges than it was during the COVID-19
Crisis, which it weathered well in terms of
sustaining income.
However, the increase in gilt yields has put all
property valuations under downward pressure.
The Company’s property portfolio reduced in
value by 2.5%, on a like-for-like basis, at
30 September 2022. Further, larger declines
are likely as the property market reprices due to
the rise in gilt yields. The expectation is that the
property portfolio will fall in value as at
31 December 2022, with the potential for
further volatility thereafter.
Despite the more measured short-term outlook,
the fundamentals of the retail warehouse sector
remain robust. Supply of available space is low,
tenant demand is holding up, occupiers are still
doing deals and we continue to identify and
complete asset management transactions that
secure income.
We expect the retail warehouse sector to be
the most resilient and flexible part of the retail
market, which can adapt to the changing
needs of tenants and the integration of their
omnichannel strategies. Having sold assets
and with cash in the bank, the Company is well
placed to capitalise on any investment
opportunities that are identified in a re-priced
market, but only at the right time and price for
the Company.
“We expect the retail
warehouse sector to be the
most resilient and flexible
part of the retail market,
which can adapt to the
changing needs of tenants
and the integration of their
omnichannel strategies.”
Investment Manager’s Review
13Ediston Property Investment Company plc – Annual Report and Accounts 2022
Strategic Report
PROPERTY VALUATION
The Company’s property portfolio is valued by
Knight Frank on a quarterly basis throughout the
year. As at 30 September 2022 it was valued at
£231.4m, a like-for-like increase of 10.3% over
the reporting period. The increase was driven
by falling yields in the retail warehouse portfolio,
albeit there was a decrease in the property
valuation in the final quarter as some of the
yield improvement was reversed.
EPRA VACANCY RATE
During the period the EPRA Vacancy Rate
decreased from 8.6% to 6.5%. This was due
to the sale of the office at St. Philips Point in
Birmingham, which had vacant floors, and the
letting of vacant units in the retail warehouse
portfolio. Letting the remaining vacant units
remains a key focus.
RENT
Over the year, the Company’s contracted
rent has reduced from £20.8m to £16.2m.
This is principally because of the sale of the
office and leisure properties, and the fact that
the sales proceeds have not been reinvested.
It is anticipated that the income will be replaced
when suitable assets are acquired.
Rent collection for the year, as at 30 September
2022, was 98.2%, an improvement from 95.7%
in the prior year.
IMPLEMENTING THE REVISED STRATEGY
Last year the Company announced its strategy
to sell its office and leisure assets to focus on
the retail warehouse sector. During the period,
the Company sold its four office assets in Bath,
Birmingham, Edinburgh and Newcastle for a
headline price of £61.9m. This was 3.3% below
the property valuations at the time of the sales.
Once deductions for topped up rents and
rent-free periods were factored in, the net
receipt to the Company was £60.0m.
The Company also disposed of its two leisure
units, both of which were let to Mecca Bingo.
The Lanyard, Hartlepool, was sold for £2.6m.
This was 16.4% above the valuation. The second
leisure property, Southwater Square, Telford,
was sold to an owner occupier for £5.0m, which
was 67% above the property valuation.
The next phase of investment activity will
be focused on the retail warehouse sector.
Whilst the Company recognises the benefits
of being fully invested, the deterioration in
NUMBER OF ASSET
MANAGEMENT DEALS
15
the market, coupled with the economic and
political challenges, means that it is carefully
reviewing opportunities to ensure that the
cash is deployed in appropriate assets,
at the correct price, at the right time. Despite
the recent challenges, we still believe the
prospects are attractive for retail warehousing,
both in absolute terms and relative to other
sectors of the real estate market.
AVERAGE RENT OF ALL DEALS
COMPLETED (PER SQ. FT.)
£12.32
Thirteen of the 15 deals were completed in the retail warehouse assets, securing £1.8m of
rent per annum, of which £0.6m was additional rent. These are summarised as follows:
− at Kingston Retail Park in Hull, The Range signed a 15-year lease on a 14,500 sq. ft.
unit;
− also at Hull, Greggs signed a 10-year lease with a five-year tenant break option on a
2,000 sq. ft. unit;
− at Prestatyn Shopping Park, The Tech Edge leased a vacant unit of 1,300 sq. ft. on a
five-year lease;
− at Clwyd Retail Park, Rhyl, Now to Bed leased 8,017 sq. ft. on a three-year lease;
− at Barnsley, Bensons downsized from a unit of 10,000 sq. ft. into one of 5,036 sq. ft. and
signed a five-year lease;
− Jysk then signed a 10-year lease with a five-year break option on the unit vacated by
Bensons;
− in one other deal at Barnsley, One Below, occupying a 4,996 sq. ft. unit on a short-
term lease, committed to the park for five years;
− at Widnes Shopping Park, Card Factory signed a five-year lease, without break, on a
1,590 sq. ft. unit;
− at Stirling, Harry Corry signed a five-year lease extension on its 9,968 sq. ft. unit,
meaning its lease will now expire in February 2027;
− also at Stirling, Pets at Home agreed to remove its break option, due in 2024, meaning
the lease now expires in June 2029; and
− in a third deal at Stirling, existing tenant Bensons signed an agreement for lease on a
9,977 sq. ft. unit. On completion of landlord works it will sign a 10-year lease.
At Prestatyn Shopping Park, JD Sports signed a 10-year lease with breaks at years four
and seven on a 7,623 sq. ft. unit, which was previously occupied by New Look. New Look
was occupying the unit on a turnover rent basis following the approval of its CVA. Under
the terms of the CVA landlords were entitled to break the leases.
We considered that the terms of the CVA were below market, so we took the opportunity
to exercise the break clause and identified JD Sports as a more suitable tenant for the
space. The rent received from JD Sports is 44.0% higher than the rent being paid by
New Look.
At Coatbridge, Glasgow, we completed an AFL with existing tenant B&Q, to secure them
on the park for a further 10 years. B&Q had a lease expiry in December 2022. As part of
the transaction, B&Q will downsize from 102,000 sq. ft. to 79,960 sq. ft. Aldi has signed
an AFL for a 20,000 sq. ft. unit which will be created in the space vacated by B&Q.
Planning permission has been obtained for the change to food use. On completion of the
landlord works, Aldi will enter into a 20-year lease without break, subject to five-yearly rent
reviews linked to RPI.
One asset management transaction completed in each of the office and leisure portfolio.
These are detailed on the following page. Both properties were then sold during the period.
TOTAL SQ. FT. OF ALL
DEALS COMPLETED
206,814
PORTFOLIO ACTIVITY
The Company has continued to deliver
asset management transactions across the
portfolio, which have helped reduce the EPRA
Vacancy Rate and secure the Company’s
income stream.
During the period the Company completed 15
transactions across the office, leisure and retail
warehouse assets.
14 Ediston Property Investment Company plc – Annual Report and Accounts 2022
57%
28%
6%
8%
1%
4
9
2
PROPERTY PORTFOLIO AS AT 30 SEPTEMBER 2022
Location Name Sub-sector
Market value
range (£m) Tenure
Widnes Widnes Shopping Park Retail Warehouse 35-40 Leasehold
Prestatyn Prestatyn Shopping Park Retail Warehouse 25-30 Freehold
Stirling Springkerse Retail Park Retail Warehouse 25-30 Heritable
Hull Kingston Retail Park Retail Warehouse 20-25 Freehold
Rhyl Clwyd Retail Park Retail Warehouse 15-20 Freehold
Sunderland Pallion Retail Park Retail Warehouse 15-20 Freehold
Wrexham Plas Coch Retail Park Retail Warehouse 15-20 Freehold
Coatbridge B&Q Retail Warehouse 15-20 Heritable
Haddington Haddington Retail Park Retail Warehouse 15-20 Heritable
Daventry Abbey Retail Park Retail Warehouse 10-15 Leasehold
Barnsley Wombwell Lane Retail Park Retail Warehouse 10-15 Freehold
At the office in Newcastle, Citygate II, UNW LLP
signed an extension to its leases, to expire
in March 2032, with a tenant break option
in March 2027.
At Hartlepool, Mecca Bingo signed a 10-year
reversionary lease with a seven-year tenant
break option on its 31,284 sq. ft unit. The lease
expiry date was extended to September 2032,
with a break option in September 2029.
POST PERIOD END ACTIVITY
Post period end, at Wombwell Lane Retail
Park, Barnsley, B&M agreed to extend its
occupation at the park by 10 years.
The lease now expires in September 2037
and the passing rent increased by 6.0%.
To facilitate the deal, B&M was granted a
15-month rent-free period. This underscores
B&M’s commitment to the location.
OUTLOOK
Despite the growing economic and property
market headwinds, there is still occupational
demand for the Company’s properties. There
is interest in not only the Company’s vacant
units, but also in let units where we are trying
to accommodate the demand by right sizing
tenants to secure their ongoing occupation.
The fact that we can modify units to match
tenant requirements demonstrates the flexibility
offered by retail warehouse parks.
Protecting income and growing it where
possible remains a key focus. There
will be challenges to contend with, but with
a reshaped portfolio (with no office or leisure
exposure), a good tenant line up, a low vacancy
rate (6.5%) an attractive WAULT (4.5 years) and
ongoing asset management opportunities, the
Company has a robust platform on which to
build. Further, the Company has cash available
for investment into a re-priced market, at the
appropriate time.
Calum Bruce
Investment Manager
Investment Manager’s Review continued
NUMBER OF TENANTS INVOLVED IN
ASSET MANAGEMENT DEALS
14
NUMBER OF ASSETS WITH
ASSET MANAGEMENT ACTIVITY
9
EPRA VACANCY RATE
6.5%
TENANT COVENANT PROFILE
DUN & BRADSTREET RISK
RATINGS – PORTFOLIO
NUMBER OF DEALS
Minimum
Lower than average
Higher than average
High
Other
New lettings
Lease extensions
Agreements for lease
15Ediston Property Investment Company plc – Annual Report and Accounts 2022
Strategic Report
Case Study
Resilience in retail: why retail
warehouses are still winners
Since the COVID-19 Crisis began, retail warehousing has demonstrated
its resilience – holding up much better than most other areas of the UK
retail market. But now, as we contend with a cost of living crisis, does
the sector still have more to offer?
We believe it does. That’s why the Ediston
Property Investment Company has become
a retail warehouse specialist. During the
period, we sold the last of our office and
leisure holdings. With every week that passes,
we are reassured that this was the right thing
to do.
Retail warehousing’s strengths shone
during the pandemic. Many stores in retail
parks were able to stay open even during the
most stringent lockdowns. Their out-of-town
locations proved attractive, and online and
offline shopping worked in harmony.
But these attractions aren’t transitory. The
‘omnichannel’ approach – which combines
online and offline shopping – has found
permanent favour with both retailers and
the public. Its most obvious manifestation
is the click-and-collect model, which allows
customers to browse and order from the
comfort of their homes before picking up
in person.
As ever, convenience is king. Click-and-
collect gives you the chance to try on
clothes or check that you’re happy with
your goods. It allows for quicker transactions
as you pick up your purchases rather than
wait for delivery. And it avoids the need to
wait at home until your order arrives.
Crucially, omnichannel still has room to grow.
For example, several retailers have improved
their click-and-collect offers. That’s because
consumers love it. And retail warehouses
provide the combination of logistics and
location that makes it work best.
Retail parks have other attractions for
customers too. Out-of-town locations work
well for many commuters, allowing people
to pick up items on their way home from
work, with retail parks typically having later
operating hours than town centres. Also, retail
parks generally offer free parking – making an
afternoon’s shopping cheaper, more
convenient and much less stressful than
trying to negotiate the more congested city
centre, where parking is often more difficult.
Another advantage of retail parks is that
they increasingly offer charging points for
EVs. Some clean-energy companies are
working with park owners to roll out EV
charging nationwide. With EVs set to account
for a third of all road vehicles by the end of
this decade, charging points adds to retail
parks’ attractiveness as ‘one-stop’
destinations – where you can shop, eat out
and charge your car all in one go.
Meanwhile, retailers benefit from the
omnichannel model because customers
tend to make additional purchases when they
come to collect their goods. Industry reports
suggest that around 40% of click-and-collect
customers make other purchases in store
when they pick up online orders. And both
customers and retailers benefit from savings
on postage and packing.
Then there’s flexibility. Retailers know that
their needs can change rapidly. To make
the most of their outlets, they often want
to contract or expand. Retail warehousing
is inherently flexible, as units can be split,
combined or swapped to give tenants the
space that best fits their requirements.
That flexibility extends to function too.
Retail warehouses can serve as shops,
distribution hubs and storage depots rolled
into one.
And they can accommodate drive-thru
facilities, which are consistently popular
with consumers and are the preferred
option for many of the coffee and fast-food
operators. We have built drive-thrus on
several of our sites. We believe that
development is a good way to build
‘something from nothing’ on land we
already own. It allows us to create new
income streams, and capital upside,
in a risk-controlled way.
With challenges ahead, out-of-town retail
parks are the retail outlets that look best
placed to thrive. In part, that’s down to the
convenience-led nature of their tenants,
including variety and discount retailers.
But it’s also because retail parks simply
cater to current shopping habits better than
the high street. That’s why we continue to
see retail warehouses as long-term winners
– and why we intend to focus exclusively on
the sector for the foreseeable future.
16 Ediston Property Investment Company plc – Annual Report and Accounts 2022
Sustainability Report
Introduction
The Company recognises the
importance of the real estate
industry addressing ESG issues and
the important role responsible
property investment plays in helping
the transition to a net zero world.
The Company has committed to
achieving net zero carbon by 2050
for all managed assets and is
dedicated to placing sustainability
at the heart of its strategy.
The Company has continued to make
good progress with its ESG objectives
and delivered improvements across most
areas of its sustainability strategy. At the
centre of this strategy, the Company is working
with tenants, suppliers, service providers
and local communities to deliver social
and environmental value, alongside financial
value, as well as supporting the United Nations
Sustainable Development Goals (UN SDGs).
Good governance and engagement with
stakeholders in the Company continues to be
at the forefront of the Company’s activities as a
listed and regulated investment company.
During the year the Company progressed
development of its Net Zero Carbon
Commitment and Net Zero Carbon Roadmap,
including its first Scope 3 Greenhouse Gas
(GHG) Emissions report. The Company’s
Net Zero Carbon Roadmap outlines key
projects and timelines needed for the Company
to achieve its target by 2050. Its delivery
strategy specifies actions and measures for the
pathway to net zero operations and
developments, capturing performance
improvement opportunities and gradually
reducing the portfolio and corporate carbon
footprints.
Focus area Target
HEALTH, SAFETY AND WELLBEING
Ensuring safety and promoting wellbeing
of staff, tenants and members of the public
across the portfolio
Continue to ensure that all incidents are resolved within the
required timeframe.
Achieve over 90% scores on Health & Safety Risk Rating
across all managed properties.
Develop and implement a tenant and community engagement
programme to promote health and wellbeing initiatives.
ESG DISCLOSURE AND
TRANSPARENCY
Committed to open and transparent
disclosure of operational performance and
the wider impacts
Achieve Gold Standard for disclosing in line with EPRA sBPR.
Achieve 3-star GRESB rating.
Align the Company’s sustainability objectives with the UN
SDGs.
Strengthen alignment with the TCFD recommendations.
MANAGING ENVIRONMENTAL
IMPACTS
Minimising environmental impacts through
proactive management of energy, waste,
water, materials use and associated
carbon emissions across the portfolio
Develop and implement sustainability action plans for all
operationally managed assets.
Procure 100% renewable electricity for landlord controlled
common areas.
Achieve 10% reduction in like-for-like energy intensity for our
managed offices, measured against 2019 baseline, m
3
/ m
2
.
Develop a pathway for achieving net zero carbon in operation.
Maintain zero waste to landfill.
Improve measurement of water consumption and waste
management.
SUSTAINABLE BUILDING DESIGN
Applying sustainable design principles into
development and refurbishment strategies
to create places that are efficient, healthy,
comfortable, productive and resilient
Commit to and promote a set of chosen standards for
sustainable design for new construction, fit out and
refurbishment.
Engage occupiers to support the delivery of their sustainability
programmes for fit out and refurbishment.
Disclosure of the Company’s GHG emissions and EPRA Sustainability Performance measures can be found on pages 61 to 64.
* Targets revised in 2022, ensuring that the overarching goals are well supported, and target year moved to 2023 where relevant.
17Ediston Property Investment Company plc – Annual Report and Accounts 2022
Strategic Report
This year the Company completed its first
physical climate-related risk assessments,
covering 10 retail warehouse assets. These
identify and assess the risks associated with
the transition to a low carbon economy.
To support the Company’s goals within its
four focus areas, the ESG objectives have
been integrated into Asset Sustainability Plans
(ASPs) for its multi-tenanted properties, with
good progress made against them. These
plans outline specific targets and initiatives for
all operationally managed assets, aimed at
improving environmental efficiency, health
and wellbeing, and tenant and community
engagement on environmental and social
issues. Example initiatives include habitat
creation, the installation of bug hotels and
planters, LED lighting replacements, metering
upgrades and installation of EV charging
points. The Company has also supported
charitable initiatives throughout the year. The
Company intends to expand these initiatives.
The progress made during the period has been
recognised externally, most notably by GRESB
which awarded the Company a 2-star rating.
This is an improvement on the scores received
in prior years. It has increased by 17 points
from 52 in 2020 to 69 in 2022. The Company
has also been awarded the EPRA sBPR Gold
Award for the third consecutive year.
In the upcoming year, the Company will
continue to implement initiatives in line with
its Net Zero Carbon Roadmap. As part of the
plan, the Company is aiming to promote and
engage occupiers on sustainable construction,
fit out and refurbishment standards.
Target year 2022 Progress Relevant SDGs
2020 onwards Ongoing – another year with no unresolved incidents within the required timeframe.
2021 onwards All managed properties have achieved Gold or Silver rating (> 90% score), with
three assets with Gold rating in place. An improvement from last year.
2021 onwards Biodiversity and habitat creation initiatives have been implemented.
2021
Gold Award received for the Company since 2020.
2023*
Achieved a score of 69/100, a 10-point improvement from last year and gained a
2-star GRESB rating for the first time.
2020 The Company continues to align its ESG strategy and objectives to the UN SDGs.
2020 onwards Completed physical climate risk modelling for 10 assets, focused on hazard
identification and exposure, and undertook a portfolio transition climate-related
risks and opportunities assessment.
2021 onwards Annual ASP review completed and continued implementing the improvement actions.
2023*
A 5% increase from 84% in 2021 to 89% renewable energy purchased in 2022.
2023 n/a Target is no longer relevant due to the portfolio changes and is being revised. New
energy target for retail portfolio will be set in 2023.
2022*
Net Zero Carbon Roadmap developed this year.
2020 onwards
Zero waste to landfill maintained.
2021 onwards
Implementation of SavlQ for environmental reporting and data quality checks
completed.
2021 onwards
Limited new construction, fit out and refurbishment activity during 2022. Being
developed for implementation for potential future projects.
2021 onwards
Established a process for rolling out green lease clauses to encourage information
sharing and landlord – tenant cooperation on improving building performance.
Progress key:
Ongoing Achieved
18 Ediston Property Investment Company plc – Annual Report and Accounts 2022
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SCOPE OF THE
NET ZERO
CARBON TARGET
Sustainability Report continued
NET ZERO COMMITMENT
The Company has committed to achieving net zero carbon by 2050 for all managed assets, with interim carbon reduction targets by 2030 to be
formulated for Scopes 1 and 2 GHG emissions. The strategy covers net zero carbon in operation and embodied carbon from new developments,
refurbishments and fit-out works, as well as corporate business travel.
BUILDING OPERATIONAL GHG EMISSIONS 2022 %
tonnes CO
2
e
Our net zero
commitment scope
GHG Protocol Category
Landlord Purchased
Energy
Scopes 1, 2 & Scope 3 Fuel- and Energy-
Related Activities
180 1.459%
Tenant Purchased Energy Scope 3 – Downstream Leased Assets 11,859 96.404%
Landlord Water Scope 3 – Purchased Goods & Services 0.5 0.004%
Landlord Waste Scope 3 – Waste Generated in Operations 0.9 0.008%
Landlord Refrigerants Scope 1 – 0.0%
Purchased Goods &
Services
Scope 3 – Purchased Goods & Services,
Upstream Transmission & Distribution
261 2.125%
TOTAL: 12,302 100%
Total Operational Emissions
CO
2
e per 1,000 sq. ft.
7.9
Net Zero Commitment and Roadmap
98.5%
0.4%1.1%
GHG EMISSIONS BY SCOPE
Scope 1
Scope 2
Scope 3
BASELINE GHG EMISSIONS BY SCOPE
The baseline GHG emissions report,
commissioned by the Company, provides
GHG emissions data in tonnes carbon dioxide
equivalent (tCO
2
e) for 2022 and covers both
landlord and tenant emissions across Scopes
1, 2 and 3.
− Scope 1 – Direct GHG emissions from
landlord controlled operations such as
combustion of fuels in owned or controlled
boilers and refrigerant gases.
− Scope 2 – Indirect emissions from landlord
purchased electricity.
− Scope 3 – Other indirect emissions
associated with the portfolio activities
that are not captured within Scope 2.
This includes emissions from purchased
goods and services, capital goods, landlord
water use, and waste generated, tenant
purchased energy (downstream leased
assets) and other fuel- and energy-
related emissions.
Corporate GHG emissions in scope of the net
zero carbon commitment relates to business
travel, which is reported separately from the
portfolio GHG emissions figures in the table
below. During the baseline period, the
Company had no direct or indirect corporate
emissions, including no company vehicles, to
be accounted as Scopes 1 and 2.
For the portfolio Scope 1 and 2 reporting
methodology please refer to pages 61 to 64.
19Ediston Property Investment Company plc – Annual Report and Accounts 2022
Strategic Report
Scope 3 emissions are reported in accordance
with the revised edition of the GHG Protocol
Corporate Accounting and Reporting Standard
and the GHG Protocol Corporate Value Chain
(Scope 3) Standard. Purchased goods and
services and capital goods cover embodied
emissions from new developments,
refurbishments and property management.
The methodology used to estimate the supply
chain emissions from purchased goods and
services and capital goods is based on the
Exiobase environmentally extended input-
output dataset. The input-output analysis is a
top-down model able to take into account
transactions between activities measured in
monetary units and extend them at the
environmental level in terms of GHG emissions.
Scope 3 tenant emissions were estimated based
on the actual tenant energy use data obtained for
2021 and gap-filled using the Chartered
Institution of Building Services Engineers
benchmark, which provided the energy intensity
by unit type and tenant operations across the
office and retail properties.
At present, the Company is unable to report
emissions from tenant fit-out, whilst new
construction and refurbishments activity was
limited during 2022. The Company will engage
its tenants and work to capture the embodied
carbon data for future projects.
Measurement Engagement Reduction Renewables Offsetting
BUILDING
OPERATIONAL
EMISSIONS
Scope 1 + 2 + 3
EMBODIED
CARBON
Scope 3
CORPORATE
EMISSIONS
Scope 1
RELEVANT
SDGS
Undertake a Scope
3 emissions
assessment
Pilot an operational
carbon emissions
assessment
for new acquisitions
Pilot embodied
carbon assessment
for a new
development and
develop system to
capture emissions
data
Reduce embodied carbon of new
developments and refurbishments
Reduce business travel emissions through better measurement and
greener options
Influence occupiers to reduce embodied
carbon of fit-out works
Reduce operational energy demand through improved data
measurement and operational efficiency
Influence occupiers to improve
operational efficiency
Gradually switch
towards 100%
renewable
electricity sources
Offset residual
emissions
2022 2030
Interim Carbon
Reduction Target
2050
Net Zero
Carbon
During the baseline period, the Company
had no direct or indirect corporate emissions,
including no company vehicles, to be accounted
as Scopes 1 and 2. Corporate GHG emissions
in scope of the Company’s net zero carbon
commitment relates to business travel, which
will be reported from 2023.
NET ZERO ROADMAP
The Company’s roadmap to net zero follows a
carbon management hierarchy that focuses on
measurement, reduction and stakeholder
engagement, with offsetting being introduced
later, as the final option for the residual
emissions in scope.
20 Ediston Property Investment Company plc – Annual Report and Accounts 2022
Sustainability Report continued
The Company has prepared its disclosures addressing the eleven recommendations of the Task Force on Climate-Related Financial Disclosures
(TCFD) and it is largely consistent with the specific recommended disclosures for All Sectors. These disclosures are made on a voluntary basis.
In this section climate-related governance and risk management processes are outlined and are aligned with the TCFD pillars for Governance. The
disclosures for TCFD Strategy and Metrics and Targets pillars are consistent with most of the recommended disclosures. The climate-related risks
and opportunities that have been identified over the short, medium, and long term have been described. The climate-related metrics, including
Scope 1, 2 and 3 emissions and other performance indicators and targets are disclosed.
The Company remains committed to further strengthening its alignment to the recommendations. It will continue to assess the impact of the
identified climate-related risks and opportunities on the Company’s business operations, strategy and financial performance. Additional climate-
related metrics will be considered when reviewing the delivery strategy of the Net Zero Carbon Roadmap. This would improve the Company’s
understanding of climate-related risk and opportunities, how they change over time, and thereby inform the investment strategy.
GOVERNANCE
The organisation’s
governance around
climate-related risks and
opportunities
MANAGEMENT’S ROLE IN ASSESSING AND MANAGING CLIMATE-RELATED RISKS AND
OPPORTUNITIES
The Company’s approach to managing environmental impacts and its governance are outlined within the
Company’s Sustainability Policy. The Sustainability Working Group oversees the Sustainability Programme and
management of climate-related risks and opportunities, to ensure risk management objectives are met and aligned
with the overall business risk management framework. The Sustainability Working Group acts as a body to ensure
the Company identifies and considers climate-related risks and opportunities. In light of emerging trends and new
regulations, the Sustainability Working Group evaluates targets and advises on actions to help mitigate climate-
related risks.
The Sustainability Working Group is chaired by the Company’s Chair and is attended by Imogen Moss, the Investment
Manager, and independent sustainability advisers. It meets at least half-yearly, and receives regular updates from the
Investment Manager on day-to-day performance. Where required, internal stakeholders, such as asset managers, or
external stakeholders are invited to Working Group meetings to provide updates and insights to support decision-
making.
BOARD OVERSIGHT OF CLIMATE-RELATED RISKS AND OPPORTUNITIES
The Investment Manager has the responsibility for the day-to-day performance management and implementation of
the Company’s Sustainability Policy, reporting at least half-yearly to the Sustainability Working Group and the Board.
The Sustainability Working Group updates the Board regularly to help with considerations of climate-related risks and
opportunities in decision making, including when guiding and reviewing strategy, business planning and risk
management processes.
STRATEGY
The impacts of climate-
related risks
and opportunities on the
organisation’s business,
strategy, and financial
planning
The Company acknowledges its increasing exposure to climate-related risks and opportunities, and the
corresponding impacts. Climate change has been added to the Company’s risk register. The assessment of
climate-related risks and opportunities, and the impacts this has on the Company, are considered when making
business decisions.
In 2022, the Company completed its first physical climate risk assessment of 10 assets, as well as the portfolio
transition risk assessment in line with the TCFD recommendations. The outcomes of both assessments help to
inform the continuous improvement of the Company’s risk register. This ensures that climate-related risks are
appropriately captured, and addressed when asset level or portfolio level decisions are being made.
CLIMATE-RELATED RISKS AND OPPORTUNITIES OVER THE SHORT, MEDIUM, AND LONG TERM
The Company has been working to improve its understanding of the climate-related and wider ESG impacts on
its operations in the short (2025), medium (2030-2032) and long term (2050), and has evolved the strategy and
approach in relation to climate change.
The Company has identified climate-related risks such as potential damage to assets due to flooding, the increasing
cost to upgrade buildings, compliance with new standards and regulations, and reputational risk. The Company has
also identified climate-related opportunities, including the reduction of operational costs due to improvement in
resource efficiency, declining cost of renewable energy, and the potential opportunities around changing customer
preferences, especially where younger generations are considering greener investment options.
The Company is committed to achieving net zero carbon by 2050, thereby managing future risks and supporting the
transition to a low carbon economy. The Company’s Net Zero Carbon Roadmap demonstrates the Company’s efforts
to mitigate climate change within its sphere of influence. Please refer to page 18 for details of the Company’s Net Zero
Carbon Commitment.
Climate-Related Financial Disclosures
21Ediston Property Investment Company plc – Annual Report and Accounts 2022
Strategic Report
RISK MANAGEMENT
How the organisation
identifies, assesses, and
manages climate-
related risks
The Audit and Risk Committee assesses the risks faced by the Company and ensures that appropriate mitigating
controls are in place. Failure to manage ESG, including climate-related physical and transition risks, is one of the
Company’s risks and is governed by the Company’s risk management processes. The Investment Manager and
the Company’s sustainability adviser update the Board on emerging ESG trends and risks on a regular basis. This
process is supported through the development and use of ASPs. The ASPs are a tool to guide decisions making,
as they evaluate environmental and social performance of properties and present actions for business planning.
PHYSICAL RISK ASSESSMENT
The Company understands that climate change generates material risks and opportunities, which can affect
buildings’ performance now and in the future. Assessing the physical climate change risks can help to inform
creation of adaptation and mitigation measures and improve buildings’ resilience.
The physical risk assessment looked at medium (2030) and longer term (2050 and 2100) time periods and was
based on three of the Intergovernmental Panel on Climate Change Representative Concentration Pathways (RCP)
scenarios. These were:
− RCP2.6 – 2 Degree. A moderate scenario leading to warming at the end of the 21st century of probably less than
2°C, relative to the pre-industrial period.
− RCP4.5 – Partial Mitigation. An intermediate scenario at the end of the 21st century of more than 2°C, relative to
the pre-industrial period.
− RCP8.5 – Most severe scenario leading to a warming at the end of the 21st century of probably more than 4°C,
relative to the pre-industrial period.
The work was supported by the Company’s sustainability adviser, Savills Sustainability, who has been instructed to
provide a report on the climate-related physical risks that apply or may apply to 10 selected assets within the
Company’s retail portfolio. Munich RE’s ‘Location Risk Intelligence Platform’ was used to assess the hazard
exposures for selected assets. The individual hazard scores and associated risk ratings were used to determine the
climate change risk materiality for each hazard in scope of the assessment. The following climate hazards were
included in this assessment: sea level rise, river flood, tropical cyclone, drought stress, precipitation stress, heat
stress and fire weather stress.
Overall, the portfolio assessed has shown a low-medium risk to physical hazards and corresponding potential impacts.
One retail park in the assessment has shown a high risk that relates to sea level rise. This is due to its coastal location
and low elevation. However, the asset is in an area protected by flood defences.
The table below shows a summary of the model outputs under RCP 8.5 (Business as Usual) by 2050 for 10 assets
selected for the first assessment.
No risk/Low risk Low Medium High
Physical hazard Examples of potential impacts 2050 Change 2050 Change 2050 Change 2050 Change
River flood
Significant damage and repair
costs 8
No
change – – – – 2
No
change
Tropical
cyclone
Extreme damage to buildings
and wider in infrastructure 10
No
change – – – – – –
Drought
stress
Soil subsidence affecting asset
stabilit y 5 +1 4 -2 1 +1 – –
Precipitation
stress
Significant damage and repair
costs – – 8 -2 2 +2 – –
Heat stress
Opportunity for structural
deformation; energy costs
due to cooling 3 -7 7 +7 – – – –
Fire weather
stress
Damage to infrastructure,
damage and repair costs 3 -6 7 +6 – – – –
i) The change between current baseline data and 2050 under RCP 8.5.
ii) Drought Current data is not available. As 2030 is closest to 2022 and RCP8.5 is the closest scenario to current GHG concentrations, the
Drought Stress RCP8.5 2030 data values were used as the nearest possible data points.
The comprehensive assessment report informs the Company’s approach to climate-related risks and its TCFD
disclosures, and includes site-specific summaries. Where risk was assessed to be medium or high, site-specific
resilience assessments will be undertaken to more fully understand the implications and timeframes.
A workshop was held to present the findings of the report to the Company’s investment and asset managers, as
well as the Finance Director. In addition, the Sustainability Working Group and Board have been informed about the
results of the assessment.
22 Ediston Property Investment Company plc – Annual Report and Accounts 2022
Sustainability Report continued
RISK MANAGEMENT
CONTINUED
How the organisation
identifies, assesses, and
manages climate-
related risks
TRANSITION RISK ASSESSMENT
To assess the materiality of the potential transition risks identified, the Company held a workshop session led by
independent sustainability advisers and attended by the Investment Manager. The assessment was then
completed through in-depth discussions led by the Investment Manager.
Main climate change transition risks and opportunities identified by the Company relate to policy and regulation,
market and social changes, and reputation. These risks were assessed for the short (2025) and medium term
(2032). The risk assessment was conducted based on the existing risk management scoring methodology, which
considers the likelihood and impact associated with the identified risks.
The Company’s risks management process is detailed on page 27. Mitigation measures include the Company’s
development of a Net Zero Pathway, and the development of fit out and refurbishment standards for sustainable
design.
The Company continues to monitor and ensures compliance with the current and emerging legislative
requirements in relation to energy efficiency and climate change. A total of 45% (2021, 39%) of the assessed
portfolio holds A – B Energy Performance Certificate (EPC) ratings. 32% holds grade C ratings.
There are currently two units still graded F – G and the Company will seek to take corrective action to improve the
performance of such units, so to ensure that the portfolio is well placed to address the compliance requirements
with the Minimum Energy Efficiency Standard.
METRICS AND TARGETS
Disclosure of the metrics
and targets used to assess
and manage relevant
climate-related risks and
opportunities
Disclosure of the Company’s Scope 1 and 2 GHG emissions and EPRA Environmental Performance measures can
be found on pages 61 to 64. In 2022, the Company has reported its Scope 3 GHG emissions for the first time. The
Company’s portfolio operational Scope 3 emissions include the indirect GHG emissions resulting from the
purchase and procurement of goods and services, as well as from tenant purchased energy. While they are under
the indirect influence of the Company, it acknowledges the importance of measuring and monitoring Scope 3
emissions, and identifying ways to incentivise tenants, suppliers and other value chain partners to reduce
emissions under their direct control.
Scopes 1 and 2 GHG Emissions 2020-2022
0 50 100 150 200 250 300 350 400
239
380
136
323
307
168
208
91
43
Scope 2
–market based
Scope 2
–location based
Scope 1
Tonnes CO
2
e
2022
2021
2020
The Company set targets to manage its environmental impacts, including targets for renewable energy
procurement, energy intensity and a pathway for achieving net zero carbon in operation, and in embodied carbon
from new developments, refurbishments and fit-out works as well as in corporate business travel.
23Ediston Property Investment Company plc – Annual Report and Accounts 2022
Strategic Report
2022 PERFORMANCE UPDATE
2022 PERFORMANCE METRICS
Metrics Unit 2020 2021 2022
Absolute
change
Like-for-like
change
Total Landlord energy procured MWh 2,685 3,512 1,622 -54% -17%
Total landlord Scope 1 & 2 GHG emissions tCO
2
e562687304-56%-25%
Total landlord Scope 1 & 2 GHG emissions intensity tCO
2
e/£m net rental income 27.8 34.1 18.8 -45% –
Total landlord water consumption m
3
7, 318 3 ,0 4 8 1, 28 8 -5 8% -3 3%
Percentage of waste recycled or re-used % 27 29 33 14% -4%
% rental units achieved EPC rating of ‘C’ or above % 87 72 81 13% –
17%
like-for-like decrease
in total energy procured
by landlord
25%
like-for-like decrease
in landlord Scope 1 & 2
GHG emissions
100%
waste diverted from landfill
11
ASPs in place
91%
scored on health and
safety risk ratings for all
managed properties
Summary and Key Achievements
KEY ACHIEVEMENTS
GRESB Real Estate
Sustainability Benchmark
− Achieved a 69/100 score in the
2022 assessment, a 10-point
improvement from 2021. This
is a total of 17 points increase
since the first submission
in2020.
− Achieved a two ‘Green Star’
GRESB rating.
EPRA Sustainability
Best Practice
Recommendations
− Retained the Gold Award for
the third year.
24 Ediston Property Investment Company plc – Annual Report and Accounts 2022
The positive net asset value performance
this year has been driven by general yield
improvement in the retail warehouse portfolio,
combined with the effect of the 15 asset
management transactions completed. The
strategic decision to sell the remaining office
and leisure properties has provided significant
cash reserves. This gives the Company
funds to deploy at the right time and at the
right level, as well as retaining sufficient
cash to manage operationally through
current economic uncertainty.
RENTAL INCOME
During the year, 98.2% of contracted
income was collected (2021: 95.7%), of which
86.9% was collected within seven days. The
remaining 1.8% is expected to be collected.
This is an improvement on prior years and
is also better than the collection rates pre-
pandemic. The focus on rent collection
continues to contribute to the improvement
in payment rates.
The Company’s contracted rent at the year end
was £16.2m (2021: £20.8m).
TOTAL PROFIT
£21.5m
NET ASSETS
£200.5m
RENT COLLECTED
98.2%
The decrease in the year can be largely
explained by the sale of the office and
leisure properties which contributed £5.1m
to the contracted rent, offset by the asset
management initiatives completed in the year.
Rent free periods as a percentage of
contracted rent at the year end was 3.1% (2021:
9.3%) which equates to £0.5m (2021: £1.9m).
This has fallen due to tenants coming out of
their rent-free periods and the effect
of the office disposals where there were a
number of rent-free periods in place.
The portfolio continues to provide long-term
stability to the Company’s income. This is
demonstrated by 85.0% of our tenants having a
lower than average risk of business failure,
according to Dun & Bradstreet. The EPRA
Vacancy Rate has fallen from 8.6% to 6.5% due
to the letting of vacant units in the period and
the sale of the office in Birmingham which had
some vacant space. The WAULT at year end
was 4.5 years (2021: 5.0 years). The decrease
was due to the passing of another year offset
by the 15 asset management transactions
completed in the year. The disposals also
impacted on the ability to show a like-for-like
comparison.
“The strategic decision
to sell the remaining
offices and leisure
properties has
provided significant
cash reserves.”
Finance Report
25Ediston Property Investment Company plc – Annual Report and Accounts 2022
Strategic Report
INCOME STATEMENT
Rental income for the year was £16.4m (2021: £17.4m). This decrease of £1.0m was due to the disposal of several assets in the year, which have yet
to be replaced, offset partially by asset management transactions.
Revenue expenditure in the year was £4.8m (2021: £3.0m), including £2.1m property specific expenditure and £1.7m relating to the Investment
Manager’s fee. Net financing costs were £3.0m (2021: £3.1m), a decrease on the prior year due to the sale proceeds earning some interest in the
year. Revenue profit decreased to £8.6m (2021: £11.3m). This decrease of 23.9% is largely due to the fall in rental income following the sale of all the
office and leisure assets, plus the increase in property expenditure which relates to £1.1m of voids paid in the year and for costs relating to
transactions which have not concluded. Administration expenses are £0.6m higher due to the increases in investment manager fees and other
operational costs in the year, such as auditors’ fees.
The positive movement in the value of our investment properties of £15.9m, combined with a loss of £3.0m on the properties sold, has enabled the
Company to report a total profit of £21.5m. The sale proceeds received for the office and leisure assets sold during the year was £3.1m higher than
their acquisition costs.
2022
(£m)
2021
(£m)
Rental and other income 16.4 17.4
Property expenditure (2.1) (1.0)
Net rental income 14.3 16.4
Administration expenses (2.7) (2.0)
Net financing costs (3.0) (3.1)
Revenue profit 8.6 11. 3
Gain on revaluation of investment properties 15.9 4.6
Loss on sale of investment properties (3.0) 1.2
Accounting profit after tax 21.5 17.1
EPRA and diluted EPRA earnings per share 4.06p 5.34p
Dividend per share 5.00p 4.42p
Basic and diluted earnings per share 10.17p 8.10p
EPRA PERFORMANCE MEASURES
As a member of EPRA, we support EPRA’s drive to bring consistency to the comparability and quality of information provided to investors and other
key stakeholders of property company reports. We therefore continue to include performance measures, which are based on EPRA methodology.
It should be noted that there is no difference between the Company’s IFRS and EPRA NAV in this year’s accounts, or in any of our
accounts to date.
2022 2021
EPRA earnings £8.6m £11.3m
EPRA earnings per share 4.06p 5.34p
Diluted EPRA earnings per share 4.06p 5.34p
EPRA NAV per share 94.86p 89.69p
EPRA cost ratio (including direct vacancy costs) 29.6% 18.4%
EPRA cost ratio (excluding direct vacancy costs) 23.6% 18.0%
EPRA net initial yield 5.9% 6.2%
EPRA topped up net initial yield 6.1% 6.9%
EPRA Vacancy Rate 6.5% 8.6%
NET ASSET VALUE (NAV)
At 30 September 2022 our net assets were £200.5m, equating to net assets per share of 94.86 pence (2021: 89.69 pence). This is summarised in
the table below:
£ million Pence per share
NAV at 30 September 2021 189.6 89.69
Increase in value of investment properties (net of capital expenditure plus gain on sale and transaction costs) 12.9 6.11
Net earnings in the year 8.6 4.06
Less: dividends paid in the year (10.6) (5.00)
NAV at 30 September 2022 200.5 94.86
The NAV is predominantly represented by our investment properties, which have a fair value of £231.4m at the year end. This is included in the
financial statements as Investment Properties at £227.5m with the difference relating to lease incentives. The remaining £27.0m of net liabilities is
made up of: i) (£110.4m) of debt; ii) £50.2m of cash and cash equivalents; and iii) £33.2m of net current assets.
26 Ediston Property Investment Company plc – Annual Report and Accounts 2022
Finance Report continued
DEBT
The Company has two debt facilities with Aviva
Commercial Finance Limited, totalling £111.1m,
less amortised costs of £0.7m. One facility, of
£56.9m, will mature in 2025 and the other, of
£54.2m, will mature in 2027. The facilities have
an all-in blended, fixed interest rate of 2.86%.
The Company is fully compliant with all debt
covenants and has significant headroom
against income and asset cover breach
covenants. Property values covering the two
facilities would need to drop by more than 23%
and 35% respectively, from the 30 September
2022 valuations, for the LTV covenant to be
breached.
Gearing (debt to total assets) was 35.4%
at the year end (2021: 36.7%). Whilst this is
higher than the Board’s target range of 30-35%,
it is in conformity with the Company’s
Investment Policy as it lay within these
boundaries when drawn down.
Further details are included in Note 13 of the
financial statements.
CASH
As at 30 September 2022, the Company had
cash and cash equivalents of £50.2m with a
further £31.0m drawn and held in a disposals
account under the debt facility. Cash held is
significantly higher than usual due to the sales
proceeds collected in the year, from the sale of
the office and leisure assets, which will be used
to assist with future asset management and
investment opportunities.
DIVIDENDS
The Company has paid monthly dividends at
an annual rate of 5.00p per share. Historically,
the Company has had covered dividends but at
year ended 30 September 2022, dividend
cover was 81.2% (2021: 119.0%). Using the
annual dividend of 5.00p per share and the
share price of 67.15p as at 30 September 2022,
the Company’s dividend yield is 7.4%.
The Board declared a dividend of 0.4167 pence
per share for the month of September which
was paid in October 2022 and expects to
continue with this consistent monthly rate in the
near term.
The Company continues to monitor the
aggregate distributions made to ensure
compliance with REIT regulations, which, with
some flexibility on timing, require a REIT to
distribute 90% of tax-exempt rental income as
Property Income Distributions (PIDs): a
condition that the Company has met since
inception.
TAX
As a REIT, income and capital gains from the
property rental business are exempt from
corporation tax and the tax charge for the year
is, therefore, nil. The Company recovers all of
its VAT cost.
The Company continues to meet all the REIT
requirements, ensuring that REIT status is
maintained.
Neelum Yousaf
Director of Finance, Ediston Investment
Services Limited
27Ediston Property Investment Company plc – Annual Report and Accounts 2022
Strategic Report
The principal risks and emerging risks have all been reviewed in detail, including the significant economic risks
that might impact the Company and the attainment of its investment objectives. The Board recognises that there
are risks and uncertainties that could have a material effect on the Company’s financial results. Under the 2019
AIC Code of Corporate Governance (the ‘AIC Code’), directors of listed companies are required to confirm in the
annual report that they have performed a robust assessment of the Company’s emerging and principal risks,
including those that would threaten its business model, future income and asset value performance, solvency or
liquidity and pricing of the Company’s shares.
The Group’s risk register is the core element
of the risk management process. The register
is prepared, in conjunction with the Board, by
the Investment Manager and Administrator,
is updated regularly and is the assessment of
all the detailed operational, performance and
other risks that might impact on the Company,
and how these risks are potentially mitigated by
Board or third-party service provider controls.
The Directors review and challenge the risk
register on a regular basis, assessing the
likelihood of each risk, including identifying
emerging risks and significant changes to
recognised risks, the potential impact on the
Group and the strength of controls operating
over each risk.
The Board tries to identify emerging risks,
defined as potential trends, sudden events
or changing risks, which are characterised
by a high degree of uncertainty in terms of
probability of occurrence and possible effects
on the Company – the COVID-19 pandemic,
ESG and events in Ukraine, with their economic
impact being examples. Once emerging risks
become sufficiently clear, they may be treated
as specific risks and added to the Company’s
matrix of significant risks.
The Board works closely with the Investment
Manager and advisers to the Company to try
and manage the risks, including emerging risks,
as best as it can. The central aims remain to
preserve net income for the Company, maintain
resilience in the Company’s day-to-day
operations (including the Company meeting
its regulatory obligations and obligations to its
stakeholders), preservation of capital values
and the price at which shares are traded where
it can, whilst looking to the longer term to try
and find strategic direction for positive rather
than simply protective returns.
The impact of exposure to a particular sector,
for example retail, the impact of share price
volatility on shareholder returns, the effects of
gearing (when returns are negative) and the
continuing risks of an uncertain economic and
political environment in the UK have all resulted
in challenges, and emerging opportunities,
during the financial year. In particular, the
change in strategic direction has resulted in the
disposal of the office and leisure parts of the
portfolio, meaning that the Company is now
focused on retail warehousing which proved
more resilient during the COVID-19 Crisis than
other UK commercial property categories.
Recent events in Ukraine and their impact on
European economies, coinciding with inflation
and cost of living issues in most developed
economies, are presenting new challenges
post the pandemic lock downs, as is the
prospect of increasing interest rates to how
returns might be earned.
For the purposes of reporting, the concentration
is on the medium to longer term for the
significant changes that are impacting on the
UK commercial property sector. The eventual
outcomes are difficult to assess or predict with
any accuracy but are as challenging as most
commercial property companies in UK will
have faced in recent decades and are likely to
transform the way in which office, retail and
industrial property is used.
The Board, identifies risk under the following
categories:
− investment strategy (including sustainability
considerations) and performance;
− premium/discount level and share price
volatility;
− financial, which includes the impact of
gearing;
−regulatory;
− operational; and
− economic, governmental and exogenous
risks outside the Company’s control.
These categories of risk are broken into
individual key risks with an assessment of
potential impact, controls and mitigation in
place and changes in that environment since
the previous year end and any other comments
on the risk. The risks include those that may be
more remote but, should they arise, would have
an impact, given the nature of a property
investment company with tangible assets
compared to a widely diversified listed equity
portfolio, health and safety being an example.
Details of the principal and emerging risks facing
the Company are set out in the following table.
Principal and Emerging Risks
28 Ediston Property Investment Company plc – Annual Report and Accounts 2022
Investment strategy and performance
RISK
Strategic direction of the Company and how and where it invests.
Impact Controls and mitigation in place Change in the year
Deployment of the Company’s capital in areas
of the market that are poorer in their return
prospects or more affected by structural changes
and exogenous risks than other investment areas,
with an adverse impact on income and capital
values, as well as opportunity cost.
Sustainability is a key part of the investment
review process in making and retaining
investments and how they are developed.
The Board formally reviews the Company’s
investment objectives, policy and strategies
for achieving them on an annual basis, or
more regularly, if appropriate. This includes an
examination of the Company’s current situation,
strengths and weaknesses, and how this compares
with a wider UK commercial property peer group.
During its strategy sessions the Board considers
how the assets are positioned and might be better
positioned for the longer term.
There has been increased focus on sustainability
as evidenced by the reports on this subject and
the establishment of a specific working group as
part of the investment committee.
Each quarterly Board meeting includes a detailed
discussion on asset and income performance and
changes in the portfolio as well as an assessment
of property market trends, which is reported on by
the Investment Manager, the Company’s broker
and with input from the valuer.
Increased
Following a strategic review, the Company has
changed the focus of its investment to retail
warehouse assets, which included the disposal
of office and other assets and re-deployment of
resultant cash.
Exogenous risk has increased with inflation at
highest level for decades, rising interest rates and
the geopolitical events in Eastern Europe impacting
on supply, including energy and political security.
RISK
Significant exposure to a specific property sector, tenant, and geographic location or to lease expiries.
Poor asset allocation.
Impact Controls and mitigation in place Change in the year
Downturn in an area to which the Company has
significant exposure resulting in a reduction in
the capital value of investment properties and a
reduction in NAV.
Significant tenant failure causing a material
reduction in revenue profits, impacting on cash
flow and dividends.
The investment policy and its restrictions/limits
are set by the Board and are reviewed quarterly.
The limits are monitored by the Investment
Manager. The Board and Investment Manager
also review, at least quarterly, other
key metrics, such as principal property sector
weightings, to ensure these remain appropriate
even where there may be no formal limits
on exposure.
Board approval memorandums state whether
there are any concentration issues, which links
in with overall strategic imperatives.
The AIFM and Depositary monitor compliance
with the investment policy and will highlight any
breaches of concentration limits.
The Investment Manager is proactive in monitoring
developments in the retail industry, anticipating
issues, and where appropriate replacing struggling
tenants with those with stronger covenants. Retail
warehousing proved to be the most resilient of the
retail sub-sectors, and has seen increased
investment demand, which has led to an increase
in property valuations during the year.
Increased (by focusing on particular
property sub-sector)
Heightened by recent exogenous events that
have accelerated the impact on certain property
sectors – some more than others – but with an
impact on all UK commercial property.
The Company’s portfolio has moved to a position
where it is now 100% invested in retail warehouse
assets. The retail warehouse assets are in good
locations, with strong covenants, at affordable
rent levels and have low voids. The portfolio
WAULT (30 September 2022) is 4.5 years.
In adopting changes in strategic direction,
there is exposure to more retail tenants than
was previously the case, as the office and leisure
assets have been sold. The Company is now
focused, for the foreseeable future, in a specific
property sector, whilst retaining some capacity to
apply more generalist exposure at a future date.
Principal and Emerging Risks continued
29Ediston Property Investment Company plc – Annual Report and Accounts 2022
Strategic Report
Investment strategy and performance continued
RISK
Lack of investment opportunities reducing the ability to acquire properties at the required return.
Poor investment decisions, incomplete due diligence and mistimed investment of capital.
Impact Controls and mitigation in place Change in the year
Inappropriate use of capital that hinders investors’
long-term returns.
Reduction in revenue profits, impacting on cash
flow and dividends.
Cash drag from uninvested cash and interest
cost on drawn down debt.
Regular review of property performance against
acquisition and disposal plans.
Experienced Investment Manager who sources
assets that meet agreed investment criteria.
Linkage with overall strategic objectives for
the Company.
The Investment Committee scrutinises and
approves all proposed acquisitions. The Board
reviews the portfolio performance at each
quarterly meeting and, through the Management
Engagement Committee, conducts a formal
annual review of the performance of the
Investment Manager.
Comprehensive profit and cash flow forecasting is
undertaken, which models the impact of property
transactions at Group level and over the medium
to longer term.
The Investment Manager has recognised
expertise in the retail warehouse sector and good
connections to assist investment in that sub-sector.
There is a reduced fee paid to the Investment
Manager for cash held available for investment.
Increased (by focusing on single sector)
Following changes in strategic direction, the
Investment Manager is tasked with investing
the available cash from asset sales to achieve
the Company’s investment objective. Re-
deployment of capital is made more difficult
by the significant economic risks affecting
property and markets generally.
RISK
Sustainability of dividend payments.
Impact Controls and mitigation in place Change in the year
The Company should, as far as practical, maintain
dividend payments at a sustainable level, with
adjustments upwards when it is financially
appropriate to do so.
Dividend cuts have a dramatic impact on the
Company where sustainable dividend is a
substantial proportion of the total return
package to shareholders.
Dividend level (and any prospective adjustments)
is reviewed regularly by the Board.
The Board aims to have a sustainable dividend
and tries to only make changes if they can be
sustained for the long term.
In times of market volatility, dividend level is
reviewed at least monthly, as was the case during
the COVID-19 Crisis when income receipts
appeared under pressure for the commercial
property sector as a whole.
Increased
The holding of cash post asset sales has created
an uncovered dividend. There are sufficient
reserves and cash to maintain the dividend until
the cash is reinvested. There is a risk that this
position could change if there was a long delay or
replacement assets provided insufficient income.
Consistent monthly dividend at 5.00p annualised
(increased in the previous year from 4.00p
annualised but still down from a peak of 5.75p
annualised in 2019).
30 Ediston Property Investment Company plc – Annual Report and Accounts 2022
Principal and Emerging Risks continued
Premium/Discount level and share price volatility
RISK
Secondary market share price volatility and insufficient secondary market liquidity to cope with secondary market selling.
Impact Controls and mitigation in place Change in the year
The Company’s share price could be impacted
by a range of factors, causing it to be higher than
(at a premium) or lower than (at a discount) the
underlying net asset value per share. Fluctuations
in the share price may not be reflective of the
underlying investment portfolio and depend
on supply and demand for the shares, market
conditions, general investor sentiment and
other factors, including political and economic
uncertainties.
The Company does not have a significant free
float of shares and as has been apparent in the
past, relatively small sales or purchases of shares
can produce volatile pricing. In common with
many generalist UK property vehicles, the rating
of the Company’s shares has been dramatically
impacted since the advent of the COVID-19 Crisis
in the second quarter of 2020 and more recently
by the geopolitical and economic crisis.
The Board monitors closely the market in the
Company’s shares, including significant purchases
and sales.
Through the Investment Manager and the
Company’s broker, institutional investors are
kept in regular touch directly with developments
in the Company, positive and negative. The
broker and Investment Manager are in regular
contact with existing shareholders and
prospective shareholders to try and maintain
an active market in the Company’s shares.
The Company announces portfolio and any other
significant activity between its quarterly net asset
value announcements and publication of its
interim and final accounts.
The Company can allot shares, and has done so,
where there has been demand in the secondary
market and issuance has not been dilutive to
existing shareholders’ interests.
The Company also takes the annual authority
to buy back shares. However, the Company’s
intention is to be fully invested and geared, so the
use of share buybacks would require a change in
the strategic direction of the Company, not least
in having liquidity in the portfolio that could only
be found through realising longer-term assets.
The Board reviews the strategic direction of the
Company regularly to ensure that application of
the investment policy, the returns generated from
it and the objectives of the shareholders are being
met. The Company has a Marketing Committee
that focuses on trade in the Company’s shares
and how the corporate message is being
communicated to existing and prospective
new investors.
The Marketing Committee, in consultation
with the PR consultant, undertakes advertising
(if appropriate) and engages media (print and
online) where it can, to try and raise awareness
of the Company to retail investors who could buy
the Company’s shares via the platforms.
Increased
The Board and Investment Manager continue
to communicate with shareholders to reinforce
the value approach taken to investing in UK
commercial properties and not least the resilience
of the income from the portfolio.
Having recovered following the COVID-19
pandemic, recent market uncertainty has caused
the discount to widen materially, in common with
many other closed-ended property investment
funds.
31Ediston Property Investment Company plc – Annual Report and Accounts 2022
Strategic Report
Financial
RISK
Gearing and non-compliance with debt facility terms.
Impact Controls and mitigation in place Change in the year
Gearing will accentuate returns if the cost of
debt is less than the equity returns or have the
reverse effect if equity returns are less than the
cost of debt.
A substantial fall in the property asset values or
rental income levels could lead to a breach of
financial covenants within the Group’s debt funding
arrangements. This could lead to a modification in
the costs of funding or in extremis cancellation of
debt funding, if the Company is unable to service
the debt.
The Board reviews the level of gearing on a
regular basis.
The borrowing facilities have prescribed covenants
and the Board signs off quarterly returns to the
debt provider on asset and income cover.
The Investment Manager presents for Board
review quarterly cash flow forecasts prepared
from the level of detail of individual properties,
tenants and future rental projections.
The Company has its portfolio reviewed and
reported on by an external valuer each quarter.
The Board intends to maintain gearing at 30%
of Company gross assets at drawdown but will
not exceed 35%, at the time of drawdown.
In the current circumstances, the level of gearing
has exceeded 35% but the covenants, which are
based on Loan-to-Value and income cover,
remain well covered.
Covenants are reviewed on a regular basis.
Compliance certificates and reports for the lender
are prepared on a quarterly basis by the Investment
Manager then reviewed and signed by a Director.
Increased
Higher levels of cash reduce the impact of
falling values. However, it weakens the income
cover until investment is made in income
returning assets.
The Board will continue to monitor the level
of gearing closely.
The Board is closely appraised of the level of
cover over debt covenants on net income and
asset levels.
There is no immediate need to re-finance debt,
with the first tranche not repayable until 2025.
However, the Board is monitoring the debt market
closely as it will need to plan appropriately if
re-financing terms are likely to be materially
adverse to those in place.
Regulatory
RISK
Non-compliance with laws, regulations and governance codes.
Impact Controls and mitigation in place Change in the year
The Company is required to comply with REIT
rules, the Listing Rules, Disclosure Guidance and
Transparency Rules, the UK and AIC Corporate
Governance Code, IFRS accounting standards
and UK legislation (including the UK Bribery Act,
Modern Slavery Act, The Criminal Finances Act
2017, Market Abuse Regulations, GDPR and
Health & Safety regulations).
The Company uses an experienced tax adviser,
auditor, investment manager, broker, property
managing agent, property valuation agent,
depositary, administrator and firm of solicitors to
provide advice and support throughout the year.
The Company and its agents have a strong
compliance culture, with regular risk reviews
undertaken by the Audit and Risk Committee.
The resilience of the key Company agents was
reviewed during the year. No failings have arisen,
despite the more difficult operating conditions for
many businesses.
No change
Changes in the regulatory environment over the
year have not had a significant impact on the risk
profile of the Company.
32 Ediston Property Investment Company plc – Annual Report and Accounts 2022
Principal and Emerging Risks continued
Regulatory continued
RISK
REIT status and structure of the Company.
Impact Controls and mitigation in place Change in the year
The Company and its two operating subsidiaries
must be managed in the context of both REIT
regulations in relation to the property assets held
and income distributed and the structure of the
Group, with income and costs allocated between
the subsidiaries and the Company.
A REIT compliance schedule is produced
quarterly by the Administrator to ensure
compliance.
REIT compliance is covered by external tax
advisers, including when major acquisitions
are being considered.
No change
Operational
RISK
The Company is reliant on third-party service providers, including Ediston as Investment Manager and AIFM and JTC (UK)
Ltd as Administrator, and key teams and individuals at these service providers. Failure of the operational activities or internal
controls at these service providers, or exposure to cyber risk through them, could result in adverse consequences for
the Company.
Impact Controls and mitigation in place Change in the year
Risk of failure in third-party providers of services
resulting in a material adverse effect to the
Company’s financial position, through operational
inefficiency, compliance breach or reporting
inadequacies, with reputational or governance
impacts as potential consequences to the
Company as well.
The Board is ultimately responsible for any actions
taken by the Company but relies on external
agents to perform their duties competently. The
Audit and Risk Committee reviews the services
provided for purposes of accurate and timely
financial and risk reporting; the Board for any
compliance or operational breaches; and there is
an annual review by the Management Engagement
Committee of all service providers.
Any significant failings or breaches are brought
to the attention of the Board when they occur
and are followed up for rectification accordingly,
rather than having to wait for the periodic Board
meeting cycle.
No change
33Ediston Property Investment Company plc – Annual Report and Accounts 2022
Strategic Report
Economic, governmental & exogenous
RISK
Weak economic and/or political environment, including the impacts of geo-political events, rising inflation and interest rates.
Impact Controls and mitigation in place Change in the year
Lower occupational demand impacting on
income, cash flow, rental growth, property
valuations and capital performance.
Reduced consumer spending, particularly on
discretionary items and/ or ‘big-ticket’ items,
could impact tenants and their ability to pay rent.
Rising inflation is causing the price of goods and
materials used in construction to increase. Costs
to refurbish or develop are increasing and many
contractors will only hold tender prices for two
weeks, as opposed to the usual four.
The economic landscape in most developed
markets is looking increasingly challenged despite
relaxation of many of the COVID-19 restrictions,
causing heightened uncertainty in listed and
unlisted markets and for UK commercial property.
Out of the Company’s control to a large extent.
Executing asset management initiatives remains
a high priority, and cash control continues to be
a strong focus. This ensures that the income is
maximised, and voids are minimised across the
property portfolio.
Sensitivity analysis of the portfolio is undertaken
regularly via a comprehensive cash flow model,
which includes stress testing of cash flows and
capital values against loan covenants and the
operational requirements of the business,
including the payment of monthly dividends.
The Company carefully considers the budgets
and timing of developments/ refurbishment
projects to ensure that there is enough
contingency to allow for unexpected cost
increases and/or delays.
The Board and Investment Manager regularly
review the economic backdrop and strategic
implications on the portfolio as regards investment
and disinvestment, holding of cash, gearing levels
and operational costs to try and protect the
Company, its net income and its asset value
against external challenges.
Increased
Whilst the impacts of the COVID-19 Crisis and
economic consequences of it are better
understood, there are new headwinds that
means the economic and political environment
in the UK and beyond remains uncertain.
War in Ukraine, rising inflation, increasing interest
rates, and the cost of living crisis are all risks that
have emerged during the period, and which could
have a negative effect on the property portfolio.
This may result in lower occupational demand
and lower rent collection levels. It could also affect
the terms on which debt is obtained. Although
partially mitigated by the Company’s good-quality
assets, low vacancy rate, long WAULT and strong
covenants, the continuing uncertainty increases
the risk to returns from the UK commercial
property market as a whole.
34 Ediston Property Investment Company plc – Annual Report and Accounts 2022
The Directors consider that in conducting the business of the Company over the course of the year they have
complied with Section 172(1) of the Companies Act 2006 (the ‘Act’) by fulfilling their duty to promote the success
of the Company and to act in the way they consider, in good faith, would be most likely to promote the success of
the Company for the benefit of its members as a whole, whilst also considering the broad range of stakeholders
who interact with and are impacted by the Company’s business, especially with regard to major decisions.
Since the Company’s inception in 2014,
the Board has taken its responsibilities to all
the Company’s stakeholders as a foremost
role in every scheduled Board meeting and
annually when relationships with all the key
stakeholder groups are considered by the
Management Engagement Committee and
the Marketing Committee.
The purpose of the Company is to act as
an investment vehicle to provide, over time,
financial returns (both income and capital) to
its shareholders. Investment vehicles, such as
the Company, are long term and typically
externally managed, have no employees, and
are overseen by an independent non-executive
board of directors. The role of the Investment
Manager is particularly important, acting in an
executive capacity, in engaging with stakeholders
in the Company and reporting on developments,
positive and negative, to the Board.
ROLE OF THE BOARD
The Board, which comprises five independent
non-executive Directors, two women and three
men, has a broad range of skills and experience
across all major functions that affect the
Company. The Board retains responsibility for
taking all decisions relating to the Company’s
investment objective and policy, gearing,
corporate governance and strategy, and for
monitoring the performance of the Company’s
service providers. The Board is engaged with
the activities of the Company and all the Board
members have relevant direct experience for
supporting the activities of the Company,
including substantial experience on other
collective funds and on property-related matters.
The Board aims to ensure that the Company
operates in a transparent culture where
all parties are treated with respect and
provided with the opportunity to offer practical
challenge and participate in positive debate,
which is focused on the aim of achieving
the expectations of shareholders and other
stakeholders alike. The Board, with the
assistance of the Management Engagement
Committee, reviews the culture and manner in
which the Investment Manager operates at its
scheduled meetings and through its annual
performance review. Regular reporting and
feedback from the other key service providers is
also sought and reviewed by the Management
Engagement Committee on an annual basis.
The Board is conscious of the ways it promotes
the Company’s culture and ensures, as part
of its regular oversight, that the integrity of the
Company’s affairs is foremost in the way that
the Company’s activities are managed and
promoted. The Board works closely with the
Investment Manager and the Administrator in
reviewing how stakeholder issues are handled,
ensuring good governance and responsibility
in managing the Company’s affairs, as well
as visibility and openness in how the affairs
are conducted.
As the Company is externally managed and
has no employees, the Board considers the
key stakeholders to be shareholders, providers
of debt facilities, agents of the Company,
including the Investment Manager, business
partners, tenants of the portfolio and the
community affected by the portfolio.
The Board is acutely aware of its responsibilities
to all the stakeholders in the Company and
has considered the following:
(a) the likely consequences of any decision in
the long term;
(b) the need to foster and retain the Company’s
business relationships with suppliers,
customers and others;
(c) the impact of the Company’s operations on
the community and the environment;
(d) the desirability of the Company maintaining
a reputation for high standards of business
conduct; and
(e) the need to act fairly towards, and ensure
equal treatment of, members of the
Company.
The Company regularly interacts with a variety
of stakeholders important to its success and
strives to strike the right balance between
communication and direct engagement.
Members of the Board have visited and made
detailed enquiry on all the assets in the portfolio
and have periodic meetings with all the key
stakeholders, as well as being entirely open
to contact with stakeholders where there are
issues to discuss.
Understanding the stakeholders’ views
influences the Company’s investment strategy,
including its focus on acquiring and managing
the assets for the future which should provide
net income to meet the dividend objectives
set and have the possibility of capital growth.
Engagement and understanding
Section 172
35Ediston Property Investment Company plc – Annual Report and Accounts 2022
Strategic Report
When it is in the interests of the Company to
dispose of an asset, the Investment Manager
will do so in order to re-deploy the cash into
assets that can generate future returns,
including through applying intensive asset
management to those assets. The Board is
also mindful of how shareholders are affected
by the secondary market liquidity in the
Company’s shares and how the shares are
rated relative to its NAV and income stream.
The Board tries to promote secondary market
interest in the Company’s shares as part of
its ongoing commitment to existing and
future shareholders.
In the last year, there has been development on
both the investment strategy to focus on retail
warehouse assets, having disposed of office
and leisure assets in the meantime, and in
promoting the shares of the Company to the
retail investment community to respond directly
to changes in the investment landscape for
UK commercial property and the need for
sustainable income. The Investment Manager
has also had continued direct contact with the
institutional and wealth managers invested
in the Company, particularly explaining the
change in strategic direction and how that is
progressing, as well as providing comfort on
the stability of the portfolio on what continued
to be difficult market conditions for UK
commercial property.
STAKEHOLDERS
ENGAGEMENT WITH SHAREHOLDERS
As a public company listed on the London
Stock Exchange, the Company is subject to the
Listing Rules and the Disclosure Guidance and
Transparency Rules. The Listing Rules include
a principle that a listed company must ensure
that it treats all holders of the same class of
shares that are in the same position equally in
respect of the rights attaching to such shares.
With the assistance of regular discussions with
and the formal advice of the Company’s legal
counsel, Administrator and corporate broker,
the Board abides by the Listing Rules at all
times, as it does with other statutory provisions.
Likewise, the Board is kept appraised of
developments in corporate governance
guidance, reporting standards and other
non-statutory provisions, and does its best
to anticipate and comply or explain why it
does not comply.
To continue to preserve and grow the business,
the Company needs a well-informed and
supportive shareholder base, and engagement
with prospective investors. The Investment
Manager has developed relationships with
key shareholders and prospective investors.
It is in regular contact with investors and
reports back to the Board. The Company is
owned predominately by institutional and
wealth managers but also has an increasing
number of private investors who have invested
via the Execution Only platforms.
During discussions, shareholders often ask for
additional information around certain aspects
of the Company. Where it is appropriate to do
so, the Investment Manager will provide this
detail. For example, in the past years additional
requests have been made on ESG matters,
which are covered in more detail in the Directors’
Report. The degree of dividend cover and
impact on revenue of disposals and acquisitions
has also been an area of closer focus.
The Company will continue to engage with
shareholders to ensure that there is an
understanding of stakeholders’ views on
investment strategy, corporate developments,
governance and other issues such as the
importance of sustainable income, asset
growth potential and ESG.
The Company has routine engagement with
shareholders and prospective investors through
the publication of interim and annual accounts,
the Annual General Meeting (AGM) and regular
news and quarterly NAV updates, all published
on the Company website. Whilst the Investment
Manager and broker take the lead on
shareholder engagement, the Board is available
to meet with shareholders as required. During
the year, the Chairman had meetings with a
number of the Company’s leading shareholders.
The Company has also engaged with
shareholders on specific matters set out
below, which influenced actions and outcomes
this year:
− security of monthly dividends;
− income protection and review of costs;
− asset management initiatives, and changes
in the makeup of the portfolio following the
redirection of strategy; and
− general property market updates.
At the Company’s 2022 AGM, resolutions 2
and 5, which related to the Remuneration
Report and the re-election of Mr Archibald,
were both passed but received 15.05%
and 15.80% votes against respectively from
shareholders. The Board engaged with voting
agencies and shareholders to understand and
address any concerns that they had regarding
these resolutions. To address any perceived
governance concerns connected to
Mr Archibald’s roles on the Board, (as Senior
Independent Director and Audit and Risk
Committee Chair), on 1 June 2022 Imogen
Moss assumed the role of Senior Independent
Director (SID) and on 1 September 2022 Karyn
Lamont was appointed to the Board and took
over as Audit and Risk Committee Chair.
Mr Archibald, having served almost nine years
on the Board, is not standing for re-election at
the forthcoming AGM.
The Board is conscious of the importance of
good dialogue with shareholders, particularly if
concerns are being expressed through voting,
and welcomes shareholders’ views on all the
operations of the Company.
36 Ediston Property Investment Company plc – Annual Report and Accounts 2022
Section 172 continued
STAKEHOLDERS CONTINUED
ENGAGEMENT WITH THE
INVESTMENT MANAGER
The Investment Manager is responsible for the
implementation of the investment strategy and
the day-to-day investment decisions, including
identifying assets for acquisition or disposal.
The Board engages constructively with the
Investment Manager to ensure that the
expectations of shareholders are being met
and it is aware of the challenges being faced,
including meeting the long-term objectives for
the Company’s growth. The Board and the
Investment Manager maintain an ongoing open
dialogue on key issues facing the Company.
This dialogue takes the form of regular Board
meetings and regular but more informal contact,
as appropriate, including additional ad hoc
Board and Board Committee meetings. This
ensures that the Company and the Investment
Manager have aligned interests to safeguard the
Company’s position and to try and ensure the
future success of the Company.
The Board regularly reviews the Company’s
performance against its investment objective
and undertakes an annual strategy review
meeting to ensure that the Company is
positioned well for the future delivery of its
objective for its shareholders. The Board
receives presentations from the Investment
Manager at every Board meeting to help it to
exercise effective oversight of the Company’s
strategy and the performance of the Investment
Manager. The Board, through the Management
Engagement Committee, reviews formally
the performance of the Investment Manager,
at least annually. Apart from reviewing the
Company’s performance, comparison
is drawn with wider market metrics and
other UK commercial property investment
companies to put performance into
perspective. In reviewing performance, all
the KPIs are taken into account, including
net asset value total return, shareholder total
return and income sustainability.
ENGAGEMENT WITH TENANTS
It is important for the Company to maintain
good relationships with tenants by ensuring
that they are satisfied with the properties that
they lease and the service they receive from the
managing agents. The Board has delegated
responsibility for engaging with tenants to the
Investment Manager. A key part of the intensive
asset management approach adopted is for
the Investment Manager to have and to apply a
wide knowledge of both existing and potential
tenants, what their perceived requirements
might be, and how these can be matched by
the Company’s portfolio now and in the future.
The Investment Manager regularly speaks to
and meets with tenants and prospective tenants.
This allows the Company to complete asset
management initiatives, such as refurbishment
projects or leasing events with some certainty
on tenant opportunities and requirements. The
Investment Manager works closely with tenants
to expedite matters on the asset management
initiatives and will continue to assist tenants
where required in implementing ESG initiatives
and operating in a socially conscious manner.
Establishing good relationships with tenants
helps the Investment Manager identify and
complete asset management initiatives and
can make discussions around leases more
straightforward.
ENGAGEMENT WITH LENDERS
The Company has two long-term debt facilities,
both with Aviva, maturing in 2025 and 2027.
The facilities are subject to covenants and
restrictions, and lender consent is required
for certain asset management transactions.
A good and strong relationship is essential and
not just in connection with updates on loan
asset and interest cover under the covenants
and reporting requirements, but also on future
acquisitions and disposals. The Investment
Manager is in regular contact with Aviva to
keep it appraised of ongoing property portfolio
matters and general market updates so that
they have a full understanding of the Company
and how it is performing. The lender
undertakes property site visits to understand
the asset base and how the Company’s
business plans are being implemented.
ENGAGEMENT WITH BUSINESS
PARTNERS AND KEY SERVICE
PROVIDERS
The Board seeks to maintain constructive
relationships with the Company’s suppliers,
either directly or through the Investment
Manager, with regular communications and
meetings. The Management Engagement
Committee conducts an annual review of the
performance and terms and conditions of the
Company’s main service providers to ensure
that they are performing their responsibilities in
line with Board expectations and providing
value for money.
Service providers are fundamental to the
success of the Company in all its respects,
such as business support and governance, as
well as engaging with other stakeholders. The
aim is to maintain long-term and high-quality
‘business partners’ to align the Company with
its agents and to provide continuity, whilst the
Company pursues its investment strategy.
The Board has most regular contact with the
two main service providers, the Investment
Manager and the Administrator, through
quarterly and ad hoc Board meetings. The
Chairman and Audit and Risk Committee Chair
meet these service suppliers more regularly.
There has also been regular contact with the
Company’s public relations firm to try and
ensure that there is good communication with
the market on the Company’s activities; the
valuer attends most of the Board meetings;
there is regular dialogue with the Company’s
broker and sponsor; and oversight of the
depositary and registrar arrangements. There
is also contact throughout the year with the tax
adviser and the audit firm as required.
37Ediston Property Investment Company plc – Annual Report and Accounts 2022
Strategic Report
ENGAGEMENT WITH LOCAL
COMMUNITIES AND THE ENVIRONMENT
The ESG considerations are embedded into
the investment decision-making process and
throughout the Company’s period of ownership
of particular assets. The Company’s ESG policy
is publicly available on the Company’s page on
the AIC website.
As a member of EPRA, the Company has
adopted EPRA’s sBPR. sBPR intends to raise
the standards and consistency of sustainability
reporting for listed real estate companies
across Europe. Each year, EPRA recognises
companies that have issued best-in-class
annual sustainability performance reports. The
Company has retained its sBPR Gold Award.
The Company subscribes to GRESB and has
seen an improvement in its rating, and now has
two green stars. The Board is also implementing
a pathway to achieve net zero carbon.
In its Sustainability Policy, the Company states
that it will maximise its social and community
contribution to the markets in which it operates.
It remains an objective of the Company to
continue to develop a tenant and community
engagement programme to promote health
and wellbeing initiatives.
The Board is committed to operating in a
responsible and sustainable manner, having
regard for the Company’s tenants, suppliers,
local communities and the environment. In
order to achieve this, the Board has adopted a
Sustainability Policy, which has been developed
to place ESG factors at the heart of the
Company’s investment objectives and to guide
the way it operates. More information on this
subject is provided on pages 16 to 23.
KEY BOARD DECISIONS AND SPECIFIC
EXAMPLES OF STAKEHOLDER
CONSIDERATIONS DURING THE YEAR
The Board is fully engaged in both oversight
and the general strategic direction of the
Company, and is closely involved in its day-to-
day operations. During the year, the Board’s
main strategic discussions focused on asset
management, rent collection, dividend strategy
and future growth planning, which included
regular direct and indirect communication with
the Company’s main shareholders and use of
the Company’s advisers as necessary. Time was
also spent in ensuring the Board met corporate
governance requirements, which continue to
evolve, and that an attractive dividend continued
to be paid to shareholders throughout the year.
APPOINTMENT OF A NEW DIRECTOR
Shareholders’ interests are best served by
ensuring a smooth and orderly succession on
the Board which serves to provide continuity
and maintain the Board’s open and collegiate
style, with all the requisite skills for a Board
which requires to be closely engaged in all
the affairs of the Company. With this in mind,
the Board has continued to progress its
succession plans during the year, resulting
in the appointment of a new director, Karyn
Lamont who was also appointed as Audit
and Risk Committee Chair. Ms Lamont
is a chartered accountant with a wealth of
experience in collective funds and audit
services. In addition to the appointment of
a new Director to the Board, there were also
other changes to the Board composition.
DIVIDEND
The Board recognises the importance of
dividends to shareholders and has, therefore,
maintained monthly dividend payments
throughout the year. The Board took the
decision to continue paying a dividend rate
of 5.0 pence annualised from 1 October 2021
to 30 September 2022, and would continue
keep this under review. Pre-pandemic, the
dividend was 5.75 pence annualised but was
reduced to 4.0 pence per share for some
months during the depths of the COVID-19
Crisis before being increased to 5.0 pence.
The Board will continue to monitor the dividend
and would consider an increase if there was
security and sustainability in any increase for
both dividend and cash cover.
Paying an attractive level of dividends to
shareholders remains a priority, subject to
having the cash, distributable reserves and,
ideally, covered rental income to do so. The
REIT regulations also require the Company to
distribute, subject to the detailed regulations,
90% or more of net rental income by way
of dividend.
Therefore, the prudential payment of dividends
based on cash receipts and meeting the
REIT requirements can result in an upward
recalibration of dividends, either by increasing the
monthly rate or by payment of a special dividend.
The Strategic Report on pages 2 to 37 has
been approved by the Board and is signed
on its behalf by:
William Hill
Chairman
13 December 2022
38 Ediston Property Investment Company plc – Annual Report and Accounts 2022
Board of Directors
The Board comprises five Directors,
all of whom are non-executive and
independent of the Investment Manager.
The Directors are responsible for the determination of the Company’s Investment Policy and the overall
supervision of the Company. The Directors have complementary skills to bring to the Board, as well as
considerable experience of property, listed markets and closed-ended funds. All of the Board members
have demonstrated, and re-confirmed, that they have more than adequate time to commit to their roles.
The current Directors are as follows:
William Hill
Board Chairman and Chair of the Investment
and Valuation Committee
William qualified as a chartered surveyor with Drivers Jonas in 1985. He left in
1989 to join Schroders and became head of its real estate investment division
in 1991. He successfully grew the business to over £10bn of assets under
management, including securing a mandate to manage a listed property
investment trust. William resigned from this position in November 2013 to set
up his own consultancy business, remaining a consultant to Schroders for a
further five years. He is a past chairman of the Association of Real Estate
Funds and has recently been re-appointed to the Board as senior non-
executive director. He is a past master of the Worshipful Company
of Chartered Surveyors. William provides particular expertise through his
extensive knowledge of the UK commercial property sector and of property
investment vehicles. He is also passionate about sustainability, completing
two courses run by the University of Cambridge Institute for Sustainable
Leadership in Sustainable Finance and Sustainable Real Estate.
Current other appointments
He is a board member of Old Oak Park Royal Development Corporation
and chair of its planning committee. He is a member of investment
committees for Ashby Capital and two ‘family’ offices. His pro bono work
includes chairman of the Chartered Surveyors Training Trust and a member
of the investment committees for the Worshipful Company of Goldsmiths
and Guy’s & StThomas’ Foundation.
Karyn Lamont
Chair of the Audit and Risk Committee
Karyn is a chartered accountant, formerly a partner with PwC, where she
spent over 25 years providing a range of audit and advisory services mainly
within the financial services sector, including investment trust and property
companies. Her key areas of expertise are accounting, controls assurance
(including oversight of third-party service providers), corporate transactions,
risk management, regulation and governance. In the last five years, Karyn
has built a portfolio of non-executive appointments, mainly in the financial
services sector.
Current other appointments
Karyn is currently non-executive director, and audit committee chair,
at the North American Income Trust Plc, the Scottish American Investment
Company Plc, Scottish Building Society and iomart Group plc.
39Ediston Property Investment Company plc – Annual Report and Accounts 2022
Governance
Robin Archibald
Non-executive Director
Robin Archibald has over 30 years’ experience of
working in the corporate finance and corporate
broking industries, including roles with Samuel
Montagu, SG Warburg Securities, NatWest Wood
Mackenzie and Winterflood Investment Trusts,
where he was head of corporate finance and
broking for 10 years before retiring in 2014.
He qualified as a chartered accountant with
Touche Ross in 1983. Since the early 1990s,
Robin has concentrated on advising and managing
transactions in the UK closed-ended funds sector
and has gained a wide experience in fund raising,
reorganisations and restructurings for all types of
listed funds.
Robin provides corporate finance and broking
expertise and a wide knowledge of the closed-
end funds sector. Robin has been closely involved
in all manner of co-ordinating and advisory
activities involving the Company since its inception.
Robin continues to demonstrate experience and
substantial time commitment for the activities of
the Company as an independent non-executive
Director, having served as Audit Chair and Senior
Independent Director of the Company during the
last financial year. Robin is not standing for
re-election at the forthcoming AGM and will stand
down from the Board at that time, just short of nine
years’ service on the Board, since being appointed
in May 2014.
Current other appointments
Robin is a director on four other investment
company boards. He is chairman of Albion
Technology and General VCT PLC, having formerly
been audit chair of the company and one of its
pre-merger predecessors, since 2010. He is also
senior independent director and audit chairman of
Capital Gearing Trust PLC (May 2015 appointment
to board) and audit chairman of Shires Income
(May 2017) and a senior independent director of
Henderson European Focus Trust plc (March 2016).
Imogen Moss
Chair of the Management Engagement
Committee and Senior Independent Director
Imogen has over 30 years’ experience as a
solicitor in the real estate sector, advising UK
and international institutional investors, listed and
unlisted property companies, private equity funds,
sovereign wealth vehicles, public bodies and
family offices on all types of complex commercial
and residential real estate transactions. She was
a partner for over 20 years at international law
firm Allen & Overy LLP, and the global head
of real estate for six years, before retiring in
December 2020.
During her legal career, in addition to advising on
the real estate aspects, Imogen advised on the
corporate aspects of indirect property transactions,
so is familiar with all property holding vehicles and
investment structures. She brings this legal and
real estate expertise to the Board, particularly in
her role as Chair of the Management Engagement
Committee and her participation on the Investment
and Property Valuation Committee and the
Sustainability Working Group. From 2014 until
2018, Imogen was also on the Strategic Advisory
Board of the Investment Property Forum.
Since retirement, Imogen has been working
with Rare, leaders in diversity graduate
recruitment, coaching and mentoring students
from disadvantaged backgrounds interested in
a career as a commercial solicitor at the leading
London law firms.
Imogen has no other relevant board appointments.
Jamie Skinner
Chair of the Marketing, Nomination and
Remuneration Committees
Jamie is a qualified accountant and a fellow of the
Chartered Institute for Securities and Investment.
Jamie joined Cazenove & Co in 1989 as a corporate
finance executive working principally on investment
companies and also other sector IPO activity, and
in 1995 he was appointed Managing Director of the
Johannesburg office.
In 1999, he joined Martin Currie Investment
Management Limited as a director and in 2014
was appointed Head of Client Services. He served
as President and CEO of The China Fund, Inc.
until 2012, President and CEO of The Taiwan
Fund, Inc. until 2014 and President of the Martin
Currie Business Trust until 2015. He also served
on the boards of Martin Currie, Inc. and the Martin
Currie Japan Absolute Return Fund up to his
retirement from Martin Currie on 31 July 2018.
Jamie brings both knowledge of managing
closed-ended funds and corporate broking
experience, including experience in the marketing
of funds.
Current other appointments
Jamie is a non-executive director of the Asian
Opportunities Absolute Return Fund Limited,
the Asian Equity Special Opportunities Portfolio
Limited and is audit chair of both Baillie Gifford
Shin Nippon plc and the Ashoka India Equity
Investment Trust plc.
40 Ediston Property Investment Company plc – Annual Report and Accounts 2022
Sound governance is at the heart
of the Board’s efforts to ensure
that the Company continues to
meet the investment objective and
policy expected by shareholders,
as well as implementing the strategy
established for the Company
and challenging any changes
in strategic direction.
Succession planning has been a key
focus for the Board during the year, with
the recruitment of a new non-executive
Director to act as Audit and Risk Committee
Chair and the appointment of a new SID.
The Board will continue to put governance
and communication as central to the
Company’s operations.
Chairman’s
Introduction
The Board is committed to maintaining
a high-quality corporate governance
framework. The following statement reports
on how the Board, supported by the
Committees that it has established, has
achieved this over the course of the year.
The Board has been guided by the best
practice principles established by the
Financial Reporting Council (FRC), which it
has continued to adopt and, importantly for
an investment company, the AIC Code of
Corporate Governance 2019 (the ‘AIC Code’).
The Board believes that reporting under the
AIC Code provides more relevant information
for an investment company than reporting
under the UK Corporate Governance Code.
William Hill
Chairman
Corporate Governance Statement
41Ediston Property Investment Company plc – Annual Report and Accounts 2022
Governance
limit on the Chairman’s tenure, as approved by
the FRC. Despite this, Mr. Hill has given notice
of his intention to stand down from the Board
no later than the 2024 AGM when he will have
served as Chair for over nine years. Further
details of the Company’s intentions surrounding
his impending succession can be found in the
Nomination Committee report on page 50.
SENIOR INDEPENDENT DIRECTOR
Robin Archibald acted as Senior Independent
Director for the first nine months of the financial
year, with Imogen Moss replacing him in
June 2022. The Senior Independent Director
helps support the Chairman and the general
corporate activities of the Company and is
available as a point of contact for shareholders,
should they have a particular concern which
is unable to be resolved through the normal
channels, such as the AGM. Ms Moss, who is
also the chair of the Management Engagement
Committee, draws on her considerable real
estate, legal and commercial experience in the
sector in fulfilling the role.
OTHER NON-EXECUTIVE DIRECTORS
The other non-executive Directors on the
Board, Jamie Skinner appointed in 2017,
Robin Archibald appointed in 2014 and
Karyn Lamont appointed in 2022, have had
Committee responsibilities during the period
as set out below and are very engaged in the
activities of the Group, working closely with
both the Chairman and the Senior Independent
Director in fulfilling their responsibilities
BOARD COMMITTEES
The Board has established six committees
to focus on specific activities of the Company,
under the chairmanship of different members
of the Board, and ultimately all reporting to the
full Board. The activities of these committees
are set out in their specific reports later in this
report, with the exceptions of the Marketing
Committee, the Management Engagement
Committee and the Investment and Property
Valuation Committee, which are covered below.
A Sustainability Working Group, under the
oversight of the Investment and Property
Valuation Committee, has also been formed
comprising William Hill, Imogen Moss and the
Investment Manager.
MARKETING COMMITTEE
The Marketing Committee comprises the
full Board and is chaired by Jamie Skinner.
The Administrator attends the meetings as
Secretary to the Committee. In addition,
representatives of the Investment Manager and
the Company’s PR agent are also invited to
attend. It is considered appropriate that all
Directors are members of the Committee due
to the size of the Board and importance of all
Board members remaining up to date with
marketing matters. The Committee’s terms of
reference were reviewed during the year and
are available on the Company’s website. The
terms of reference include the responsibilities
of the Marketing Committee, which in principle
are to review the Company’s marketing strategy
and to ensure that this is in line with the aims
and objectives agreed by the Board and the
Investment Manager and in accordance with
a marketing budget that is agreed annually.
The Marketing Committee met twice during the
year to discuss the Company’s media plan and
review the marketing budget and expenditure
for 2022/23. The Board approved a marketing
budget of £95,000 for the period 1 October
2021 to 30 September 2022 and have
approved a similar budget for the forthcoming
year. A key consideration of the Committee is to
reach the retail investor community, with yield
from this alternative asset class being a driver
of potential demand for the Company’s shares.
The growth in investors through platforms on
the share register over the last few years has
been evidence of the success of this strategy,
even during the more difficult times in the worst
parts of the COVID-19 pandemic.
A detailed evaluation of the Committee was
undertaken as part of the Board’s annual
performance evaluation. The Committee was
found to be functioning well, and the Board
was pleased with the level of press coverage
achieved through the combined efforts of
Kaso Legg, the Company’s PR agent, the
Committee and the Investment Manager, as
well as the continued coverage of shareholders
in the Company.
MANAGEMENT ENGAGEMENT
COMMITTEE
The Management Engagement Committee
comprises the full Board and is chaired by
Imogen Moss. The Administrator attends the
meetings as Secretary to the Committee and
representatives of the Investment Manager also
attend, other than when their own performances
are being reviewed.
“Sound governance is at the heart of the
Board’s efforts to ensure that the Company
continues to meet the investment objective
and policy expected by shareholders.”
BOARD
The Board consists solely of non-executive
Directors under the chairmanship of William Hill.
All the Directors are considered by the Board
to be independent of the Investment Manager.
However, taking account of voting agency
criticism last year, Robin Archibald is no longer
Senior Independent Director, nor Audit Chair, but
continues to be an active member of the Board.
The Board’s policy on tenure is that continuity
and experience are considered to add
significantly to the strength of the Board and, as
such, no limit on the overall length of service of
any of the Company’s Directors, including the
Chairman, has been imposed. However, where
practical, the tenure of Directors is managed in
accordance with governance guidelines. As part
of its succession planning, the Board reviews the
structure, experience and diversity of the Board
on an ongoing basis. The Board has introduced
new Directors since the inception of the
Company and as recently as this year with the
appointment of Karyn Lamont, who replaced
Robin Archibald as Audit and Risk
CommitteeChair.
The Board considers the other activities of
non-executive Board members to ensure that
there are no conflicts of interest, and that
Directors are able to apply the appropriate
amount of time and skill to the activities of a
small and highly engaged Board and are not
‘over boarded’. The Board recognises the
benefit of having highly experienced Directors
who have skills and contemporary experience
drawn from elsewhere and encourages this as
part of its make-up, so long as it does not
create conflict or any constraints in being able
to fulfil responsibilities to the Company. During
the year, there were changes made to roles
filled as well as the Board’s composition. The
Board welcomed a fifth Director, Karyn
Lamont, on 1 September 2022, details of which
are contained within the Nomination Committee
report on page 50. There were role changes
which included Robin Archibald stepping down
as Senior Independent Director and Chair of
the Audit and Risk Committee. Imogen Moss
took over the role of the Senior Independent
Director on 1 June 2022 and Karyn Lamont
was appointed as the Audit and Risk
Committee Chair on 1 September.
CHAIRMAN
The Chairman is William Hill who was
independent on appointment and is still
considered to be independent. The Chairman
has been in post for just over eight years and
his skills and experience in real estate fund
management are considered to add significantly
to the strength of the Board. The Chairman is
responsible for setting the agendas for Board
meetings, managing the meeting timetable and
facilitating open and constructive dialogue during
the meetings. The Company is subject to the AIC
Code and therefore there is no requirement for a
42 Ediston Property Investment Company plc – Annual Report and Accounts 2022
Corporate Governance Statement continued
MANAGEMENT ENGAGEMENT
COMMITTEE CONTINUED
It is considered appropriate that all Directors are
members of the Committee due to the size of
the Board and importance of all Board members
remaining up to date with the performance of
the Company’s key service providers and the
fees charged. The Committee’s terms of
reference are reviewed annually, and minor
updates were made during the year. The
updated terms are available on the Company’s
website. The terms of reference include the
responsibilities of the Management Engagement
Committee, which in principle are to review
regularly the fees and terms of appointment
of, and the performance by, the Investment
Manager, the AIFM, the Administrator and the
other key service providers appointed by the
Company. The Company’s Auditor and tax
adviser are not included in this review as their
appointments fall under the remit of the Audit
and Risk Committee. In carrying out its review,
the Committee considers feedback obtained
from the Investment Manager, AIFM and
Administrator on their own performances
in response to a series of questions raised
by the Chair. The Committee also receives
assessments completed by the Investment
Manager and the Administrator on the other
service providers with whom they work closely.
Additional confirmations were requested this
year on the procedures in place for managing
personal data and cyber security risks. The
Committee also leads on the appointment of
new service providers and the renegotiation of
any terms of appointment where appropriate.
As part of the AIFM’s review, the Committee
noted that the AIFM has complied with its
relevant obligations under the AIFMD and
REIT regulations, and no operational issues
or concerns were raised during the year.
At the Board’s request, an external audit
review of the AIFM function and the AIFM’s
processes and reporting procedures was
carried out by IQ-EQ at the beginning of the
year. The Committee noted no material
issues were identified. Where best practice
recommendations were made, the AIFM has
confirmed these are being implemented and
should be completed by the end of 2022.
The Committee reviewed the fee arrangements
for the AIFM and Investment Manager, which
were last amended in December 2020, and
concluded that these were still reasonable.
As part of the Administrator’s review, it was
agreed that the Administrator’s annual fee
in respect of accounting and administration
services will be increased from £115,000 to
£130,000 and its annual fee in respect of
company secretarial services from £62,000
to £70,000, in both cases from 1 January
2023. These increases were considered
to be in line with the market for such services.
The Administrator’s fees have not been
increased since its original appointment
in December 2019.
Following its review and having challenged
fee and service levels as appropriate, the
Committee was satisfied that the key service
providers were operating satisfactorily and
could continue to perform their functions,
under an adequate system of operating and
internal controls. The Committee therefore
recommended the retention of all existing
service providers to the Company. This will
be kept under review alongside the regular
monitoring of performance and costs
throughout the year. Where necessary,
feedback has been provided to service
providers on their performance.
A detailed and rigorous evaluation of the
Management Engagement Committee
was undertaken as part of the Board’s
annual performance evaluation. Overall,
the Committee was found to be functioning
well and the skills and experience of the
members were considered appropriate.
INVESTMENT AND PROPERTY
VALUATION COMMITTEE
The Investment and Property Valuation
Committee comprises William Hill (Chair) and
Imogen Moss, with the remaining Directors
acting as alternates. William Hill, as a chartered
surveyor, and Imogen Moss, as a property
lawyer, both have substantial experience of the
UK commercial property market. The Committee
meets ad hoc to deal with ongoing investment
transactions and property management issues.
When the timing coincides with Board meetings
some of its business is dealt with during these
meetings. Sustainability also falls under its remit
and is managed by a Sustainability Working
Group comprising the membership of the
Committee and the Investment Manager.
The role of the Investment and Property
Valuation Committee is to authorise, decline
or make recommendations on any property
transaction proposed by the Investment
Manager, including those in which capital
expenditure exceeds the limits set out in the
Investment Manager’s Delegation Agreement.
The Committee also considers the impact of
the Company’s activities in connection with
sustainability issues and uses external input
for the purposes of developing a sustainability
strategy in conjunction with the Investment
Manager. The Committee’s terms of are
available on the Company’s website.
The Committee met at regular Board meetings
during the year and the following sales were
discussed:
− the leisure asset at Southwater Square,
Telford;
− the leisure asset at the Lanyard, Hartlepool;
− the office asset at St. Philips Point,
Birmingham;
− the office buildings in Edinburgh (145
Morrison Street) and Newcastle (Citygate II);
and
− the office building at Midland Bridge House,
Bath.
The Committee members were also consulted
by the Investment Manager on potential
acquisitions (authorising due diligence spend
when required) and other transactions that
were within the discretion of the Investment
Manager. The Investment Manager is
continuing to pursue opportunities in both the
investment and occupational markets that are
expected to benefit the Company on both a
capital and income basis.
The Committee liaises closely with Knight Frank
LLP (Knight Frank), the Company’s valuer, and
reviews the quarterly valuation reports prior
to these being provided to the wider Board.
Knight Frank is invited to present the valuations
at each quarterly Board meeting and provide
the Directors with the opportunity to ask
questions and provide challenge.
The Company has engaged Savills plc as
sustainability consultant, to assist with its
ongoing commitment to ESG. The Company’s
Sustainability Working Group, which met three
times during the year, comprises William Hill,
Imogen Moss and the Investment Manager.
It maintains close contact with Savills plc
on all matters related to the Company’s ESG
initiatives. During the year, the Company has
continued to develop its ESG strategy, including
its net zero carbon commitments. Further detail
is included on pages 16 to 23. The Board
recognises the importance of the property
sector committing to working towards net
carbon zero status and this will continue to
be a key focus for the Investment Committee
during the 2023 financial year.
An evaluation of the Committee was
undertaken during the period and the Board is
satisfied that the Committee’s membership and
its operation are satisfactory, and the diversity
of skills and experience of the two primary
members are considered appropriate.
43Ediston Property Investment Company plc – Annual Report and Accounts 2022
Governance
PURPOSE AND CULTURE
The Company has a clear and consistent
purpose, which forms the foundation of its
strategic objectives. The Company’s culture,
which underpins the achievement of this
purpose, is informed by a number of factors,
including its focus on long-term sustainable
income as part of good overall total return, and
openness and transparency with stakeholders
in what the Company is doing. This attitude
is at the heart of how the Directors fulfil their
duty under s172 of the Companies Act 2006
and the Board feels strongly that its policies,
practices and behaviours contribute effectively
to the success of the Company and all of
its stakeholders.
OPERATIONAL STRUCTURE
The basis on which the Group aims to generate
value over the longer term is set out in its
investment objective and investment policy
as contained on page 57.
Ediston Investment Services Limited acts as
the AIFM and investment manager and
provides portfolio and risk management
services, including ensuring compliance
with the Group’s investment policy and the
requirements of the Alternative Investment
Fund Managers Directive, pursuant to the
Management Agreement. Management
services, including property investment advice
and advising on the acquisition, development,
leasing, management and sale of the Group’s
properties, are delegated to Ediston Properties
Limited under the Investment Manager’s
Delegation Agreement. The Management
Agreement and the Investment Manager’s
Delegation Agreement set out the matters over
which the Manager has authority and the limits
beyond which Board approval must be sought.
All other matters, including investment and
dividend policies, corporate strategy, gearing,
corporate governance procedures and risk
management, are reserved for the approval
of the Board of Directors. The Board receives
full information on the Group’s investment
performance, assets, liabilities projected cash
flow and other relevant information in advance
of Board meetings.
JTC acts as the Company’s administrator and
company secretary. As administrator, JTC is
responsible for maintaining the Company’s
books and records, preparing the management
and financial accounts, and calculating, in
conjunction with the Investment Manager, the
Company’s NAV. As Company Secretary, JTC is
also responsible for ensuring regulatory
compliance and supporting the Board’s
corporate governance process and its
continuing obligations. In addition, JTC is
responsible for liaising with the Company, the
Investment Manager and the Registrar in
relation to dividend payments, as well as
general secretarial functions required by the
Companies Act.
The Company also draws on various advisory
and service inputs, from agents such as the
Company’s broker and legal adviser.
The Group must also operate within any
constraints placed upon it by its external
financing arrangements. The details of loan
covenants are included in Note 13 to the
Consolidated Financial Statements.
MEETINGS AND ATTENDANCE
The Board meets formally on a quarterly
basis and also holds a strategy meeting every
year. There are also ad hoc meetings, which
are generally called to approve the monthly
dividends, quarterly NAVs, trading updates,
specific announcements on portfolio activity
and other general corporate matters. The
Administrator attends all the scheduled
meetings and representatives of the AIFM,
Investment Manager, the external Auditor and
other advisers are invited to attend as required.
In addition to the scheduled Board and
Committee meetings, there were a further
three Board and Committee meetings during
the year. These meetings included Board
meetings in relation to the sale of Company’s
office assets. Attendance at the scheduled
Board and Committee meetings throughout the
year can be seen in the table at the bottom of
this page.
Apart from its contribution at main Board
meetings, the Investment and Property Valuation
Committee also had a number of adhoc
committee meetings during the course of the
year as did the Nomination Committee, as part
of the succession planning for the Company.
The below table sets out the Directors’
attendance at the scheduled meetings during
the year.
BOARD OF DIRECTORS
Audit and Risk
Committee
Membership
Full Board with
Karyn Lamont*
as Chair
Management
Engagement
Committee
Membership
Full Board with
Imogen Moss
as Chair
Investment
and Property
Valuation
Committee
Membership
William Hill (Chair)
and Imogen Moss
Marketing
Committee
Membership
Full Board with
Jamie Skinner
as Chair
Nomination
Committee
Membership
Full Board with
Jamie Skinner
as Chair
Remuneration
Committee
Membership
Full Board with
Jamie Skinner
as Chair
* Appointed as Audit and Risk Committee Chair on 1 September 2022, replacing Robin Archibald who continues as a non-executive Director until the AGM in 2023.
Board
Audit and Risk
Committee
Marketing
Committee
Nomination
Committee
Remuneration
Committee
William Hill 5/5 3/3 2/2 3/3 2/2
Robin Archibald 5/5 3/3 2/2 3/3 2/2
Jamie Skinner 5/5 3/3 2/2 3/3 2/2
Imogen Moss 5/5 3/3 2/2 3/3 2/2
Karyn Lamont* 1/1 1/1 1/1 1/1 1/1
* Karyn Lamont was appointed on 1 September 2022.
44 Ediston Property Investment Company plc – Annual Report and Accounts 2022
Corporate Governance Statement continued
STATEMENT OF COMPLIANCE
WITH AIC CODE
The Listing Rules require the Board to
report on compliance with the AIC Code
provisions throughout the accounting period.
The Company has complied throughout the
accounting year ended 30 September 2022
with the provisions set out in Sections 5 to 9 of
the AIC Code with one exception. Due to the
size of the Board and the nature of the
Company’s business, the Board considers it
appropriate for the entire Board, including the
Chairman, to fulfil the role of the Audit and Risk
Committee (8.2.29).
GOING CONCERN
Under the AIC Code, the Board needs to
consider whether it is appropriate to adopt
the going concern basis of accounting in
preparing the Financial Statements. The Board
continues to adopt the going concern basis
and the detailed consideration is contained
on page 65.
VIABILITY STATEMENT
The viability statement, under which the
Directors assess the prospects of the Group
over a longer period, is on page 65.
ASSESSMENT OF PRINCIPAL
AND EMERGING RISKS
The Board undertook a robust assessment of
the Company’s emerging and principal risks
during the year. Particular focus was given to
those risks the Board felt posed a threat to the
Company’s future performance, ability to carry
on business as a REIT and the liquidity of the
Company’s assets and its subsidiaries. Further
details can be found on pages 27 to 33.
The Audit and Risk Committee has reviewed
the effectiveness of the Company’s internal
control systems, as well as those of the AIFM,
Investment Manager and Administrator. A
continuing process, by way of quarterly reports
from the Investment Manager giving full details
of the Company’s financial position, has been
established for identifying and evaluating the
risks faced by the Company. The Audit and
Risk Committee report on pages 45 to 49
provides additional details around the internal
controls assessment completed during the
year.
RELATIONS WITH SHAREHOLDERS
The Board welcomes the views of the
Company’s shareholders, both institutional
and retail, and places great importance on
communication with them. The Investment
Manager takes a leading role in relation to the
day-to-day communications with shareholders.
The Chairman has also met with shareholders
during the year. The Marketing Committee also
provides a means for the Board to engage with
the Company’s external advisers who cover this
area, such as the Company’s broker and PR
agents. All Board members are available to
meet shareholders when required to discuss any
significant issues and to address any concerns
or queries that shareholders may have.
During the year, an opportunity was given for
independent discussion with the Chairman and
other members of the Board if shareholders
wanted it. The Board receives quarterly
reports from the Company’s broker, as well as
contact between scheduled Board meetings
where required.
The Board encourages shareholders to vote on
the resolutions to be proposed at the AGM.
Those retail shareholders who hold their shares
through an investment platform are reminded
that, although they may not have direct voting
rights, most investment platforms have
processes in place to allow shareholders
to cast votes. Investors holding shares through
platforms should contact their investment
platform directly for further information. An
increase in the number of investors who exercise
their right to vote will help the Company reflect
the views of its widening shareholder base.
Low voting turnout runs the risk of minority views
having a disproportionate impact on the ability to
implement the business of the Company to be
approved in General Meetings.
RELATIONS WITH OTHER
STAKEHOLDERS
The Board recognises the importance of its
relationships with its key stakeholders, in
particular its tenants, key service providers,
lenders and the wider community affected by
its investment activities. Understanding the
views of these stakeholders has influenced the
Company’s investment strategy during this and
previous years, including its commitment to
acquiring and managing assets which have the
possibility of capital growth. Specific examples
of stakeholder engagement and consideration
during the year can be found in the s172
Statement on pages 34 to 37.
45Ediston Property Investment Company plc – Annual Report and Accounts 2022
Governance
Report of the Audit and Risk Committee
The Audit and Risk Committee has a key role
in risk assessment and in reporting during the
year, as well as overseeing the quality of interim
and year-end reporting.
Strong reporting to stakeholders remained a
key focus throughout the year and is reflected
in the year-end reporting and engagement
with stakeholders.
COMPOSITION OF THE AUDIT
AND RISK COMMITTEE
The Audit and Risk Committee comprises
the full Board and is chaired by Karyn Lamont
who took over the role from Robin Archibald
on 1 September 2022. Due to the size of the
Group and the independent non-executive
nature of the Directors, the Board considers it
appropriate for all the Directors to be members
of the Committee. The Committee’s terms of
reference were reviewed during the year and
are available on the Company’s website.
The Board is satisfied that, in line with the
recommendations of the AIC Code of Corporate
Governance, at least one member of the Audit
and Risk Committee has recent and relevant
financial experience, and that the Committee as
a whole has competence relevant to the sector
in which the Company operates, bringing a
broad range of skills and experience to bear.
The current Audit and Risk Committee has
three qualified accountants, all with relevant
commercial experience in property or
investment companies and the other members
of the Committee are experienced corporate
practitioners with knowledge of reporting and
risk in the listed company and commercial
property environment. As the Chair of the Board
was independent on appointment, it is
considered appropriate for him to be a member
of the Audit and Risk Committee.
RESPONSIBILITIES OF THE
AUDIT AND RISK COMMITTEE
The Audit and Risk Committee is tasked with
ensuring the financial and other reporting of the
Group is accurate, complete and appropriately
audited and reported thereon. The Committee
consists wholly of independent non-executive
Directors and operates within detailed terms of
reference, which are reviewed and amended
from time to time as circumstances change.
The Committee reviews internal procedures
and reports from advisers and agents, to
ensure that the Group’s significant risks have
been identified and that suitable steps have
been taken to ensure that the controls in place
appropriately mitigate these risks.
Responsibilities of the Committee How they have been discharged
Consideration of the half-year and annual Financial Statements,
the appropriateness of the accounting policies applied, and any
financial reporting judgements and key assumptions.
The Committee met formally three times during the year to consider the
Interim Report, the audit plan and the Annual Report. At these meetings,
the Committee also reviewed the Group’s key risks. The Investment
Manager and Administrator attended all meetings and the Auditor attended
the meeting at which the Annual Report was discussed. The Chair of the
Committee also liaised with the Auditor during the year, to discuss the audit
plan and the results of the audit of the Annual Report, and reported the
results of these interactions to the Committee. The significant judgements
and estimates made in the Financial Statements, each of which was
considered by the Committee, are detailed on page 79. Other significant
matters considered by the Committee in relation to the Financial
Statements during the year are detailed in the table on page 48.
Consideration of the adoption of the going concern basis and
long-term viability of the Company.
The Committee carried out a going concern assessment during which it
considered all reasonably available information about the future financial
prospects of the Company, the possible outcomes of events and changes
in conditions and realistic possible responses to such events and
conditions, including strategic changes proposed and made. Following
such assessment, the Committee considered that it was appropriate to
adopt the going concern basis of accounting and reviewed the going
concern statement to ensure any significant issues were described in a
concise and understandable form. The Committee conducted a review of
the viability statement on page 65 and concluded that this was a fair
representation of the Company’s future prospects and that the period of
the viability statement remained appropriate.
Evaluation of the effectiveness of the risk management and internal
control procedures.
The Investment Manager and Administrator maintain a risk matrix which
covers the Group’s key risks and includes the Group’s key internal
controls over its principal financial systems, including information
technology, cyber security and wider operational risks. This matrix also
considers exogenous risks, outside the control of the Company, and how
to mitigate, where practical, the impact of these risks, should they arise.
From a review of this matrix, periodic amendment thereto, a review of
regular management information and discussion with the Investment
Manager and Administrator, the Committee confirms it has completed
a review of the effectiveness of the risk and control procedures.
46 Ediston Property Investment Company plc – Annual Report and Accounts 2022
Report of the Audit and Risk Committee continued
Responsibilities of the Committee How they have been discharged
Consideration of the narrative elements of the Annual Report, including
whether the Annual Report taken as a whole is fair, balanced and
understandable and provides the necessary information for shareholders
to assess the Group’s business model, strategy and performance.
The Committee has reviewed the content and presentation of the Annual
Report and discussed how well it achieves the reporting criteria opposite.
As disclosed on page 67, the Committee concluded that the Annual
Report is fair, balanced and understandable.
Each Committee Chair reviews and comments on the narrative connected
to the Committees they chair to ensure that the Committee activities of the
year are reflected and that the governance statements taken as a whole
reflect the Company’s oversight and governance regime.
Evaluation of reports received from the Auditor with respect to
the annual Financial Statements.
The Auditor’s planning report, areas of audit focus and the related
timetable, which is prepared in conjunction with the Investment Manager
and Administrator, was considered by the Committee in advance of the
audit work commencing. At the conclusion of the audit, the Committee
discussed the audit findings report with the Auditor, Administrator and
Investment Manager.
The Independent Auditor’s Report on pages 68 to 74 highlights their view
of the areas of greatest risk of misstatement and these points were
discussed with the Committee.
Monitoring developments in accounting and reporting requirements
that impact on the Group’s compliance with relevant statutory and
listing requirements.
The Company ensures through its legal adviser, Administrator, Investment
Manager, AIFM and Auditor, that any developments impacting on its
responsibilities are discussed at Committee or Board meetings.
The Committee continues to monitor ongoing developments in
accounting and reporting requirements. Any new standards are
highlighted in Note 1 to the Consolidated Financial Statements.
The Board also reviews adherence to the various governance requirements
affecting the Group, endeavours to meet those requirements, including any
changes thereto, and explains if governance requirements have not been
met and the reasons why they have not been met in the circumstances of
the Group.
Management of the relationship with the external Auditor, including the
terms of their appointment and related fees, and the evaluation of the
scope, effectiveness, independence and objectivity of their audit.
The Auditor attended the meeting at which the Annual Report was
discussed and had contact with the Chair of the Committee on a
number of occasions throughout the year. The scope of the audit was
discussed at the planning stage along with the staffing and timing of
audit procedures to ensure that an effective audit could be undertaken.
Following a request for a significant increase in the proposed audit fee, the
Committee investigated the level of fees being paid by similar companies
as well as understanding the drivers behind the trends for increasing audit
fees more generally in the market. After due consideration, the increase in
audit fees was approved.
The Committee has also reviewed the independence and objectivity of
the Auditor and has considered the effectiveness of the audit.
Reviewing, in conjunction with the Investment and Property Valuation
Committee, the external property valuations.
Each quarter, the Audit and Risk Committee is involved in the review
and reporting of the external property valuations and the Company’s
NAV, in questioning the external valuer on the basis of the valuation
reports and issues that might have an impact on current and future
valuations.
Oversight of the Group’s taxation and structural compliance. The Committee considers the Group’s ability to meet its taxation
requirements and in meeting the REIT obligations, as well as the structural
requirements of managing subsidiaries which contain the assets of the
Group and the debt obligations.
Consideration of the resolutions to be proposed at the AGM. The Committee reports to the Board on the resolutions to be proposed
at the AGM of the Company and why these should be recommended by
the Board, including taking account of recommendations from the other
Committees of the Board.
47Ediston Property Investment Company plc – Annual Report and Accounts 2022
Governance
MEETINGS
The Committee met formally three times
during the year and attendance is set out
on page 43. The meetings were in sufficient
detail and committed sufficient time to allow
the Committee to consider all the matters of
importance and the Committee was satisfied
that it received full information in a timely
manner to allow it to fulfil its obligations.
The formal Audit and Risk Committee meetings
were also attended by representatives of the
Investment Manager, the Administrator, the
Auditor and the Tax Adviser, as appropriate,
depending on the agenda for each meeting.
The Audit and Risk Committee Chair held a
number of preparatory discussions with the
Investment Manager, the Administrator and
Auditor to ensure they delivered in line with
the scope of services and were well placed to
hold a constructive discussion with the Audit
and Risk Committee. The Committee also
offered to meet with the Auditor without other
parties present and the Auditor is always able
to raise any issues of concern directly with the
Committee Chair.
RISK MANAGEMENT AND
INTERNAL CONTROLS
As set out in the Corporate Governance
Report on pages 40 to 44, the Board has
ultimate responsibility for effective management
of risk for the Group, including determining its
risk appetite and identifying both principal and
emerging risks. It is also responsible for the
Company’s system of internal control and
for reviewing its effectiveness. The Audit and
Risk Committee serves as a governance body
to provide support to the Board in fulfilling
those responsibilities.
The Company has no direct employees and the
Board has delegated its activities to third-party
service providers, principally the Investment
Manager, the AIFM, the Administrator and the
Depositary. The risk matrix is developed jointly
by the Administrator and the Investment
Manager and is then reviewed regularly by
the Audit and Risk Committee.
The Directors receive and consider quarterly
reports from the Investment Manager, giving full
details of the portfolio and of all aspects of the
financial position of the Group. This includes
forecasts and management accounts, which
allow the Board and Committee to assess the
Company’s activities and review its performance.
The Board and Investment Manager have agreed
clearly defined investment criteria, specified
levels of authority and exposure limits – reports
on these are provided regularly to the Board
with discussions with the Investment Manager
as appropriate.
The AIFM reports in writing to the Board on
operations and compliance issues prior to
each meeting, and otherwise as necessary.
The Investment Manager reports directly to
the Audit and Risk Committee concerning the
internal controls applicable to the Investment
Manager’s investment and general office
procedures. The Audit and Risk Committee
also receives a regular report from the
Depositary whose duties in respect of
investments, cash and similar assets include:
safekeeping; verification of ownership and
valuation; and cash monitoring. This report
would detail any material irregularities the
Depositary detected, whilst undertaking
their cash flow monitoring, ownership
verification and compliance oversight
services to the Group.
Where available, the Committee also reviews
the independent third-party assurance reports
on the processes and controls provided by
their key service providers.
Additional ad hoc reports are received as
required. The Directors have access to the
advice and services of the Administrator, who is
responsible to the Board for ensuring that Board
procedures are followed and that applicable
rules and regulations are complied with.
The review procedures detailed above
have been in operation during the year and
the Board has discharged its duty to review
the effectiveness of internal controls. The
procedures are designed to manage rather
than eliminate risk and, by their nature, can
only provide reasonable, but not absolute,
assurance against material misstatement
or loss.
The Committee discussed the need for an
internal audit function, noting that the Group
has no direct employees and all activities are
outsourced to third parties. Various assurances
are received from those third parties under
the risk management framework. In light of
this review, it was decided that there was
no current requirement for an internal audit
function as the Committee was satisfied that
they receive appropriate reporting on internal
controls and risk management.
THE AUDITOR
As part of the review of Auditor independence
and effectiveness, Grant Thornton UK LLP
(Grant Thornton) has confirmed that they
are independent of the Company and have
complied with relevant auditing standards.
In evaluating Grant Thornton’s performance,
the Audit and Risk Committee has taken
into consideration the standing, skills and
experience of the firm and of the audit team.
The Committee assessed the effectiveness of
the audit process through the quality of the
formal reports it received from Grant Thornton at
the planning of the audit, together with the
contribution that Grant Thornton made to the
discussion of any matters raised in these reports
or by Committee members. The Committee also
took into account observations made by the
Investment Manager and the Administrator.
Grant Thornton has been the Company’s
Auditor since the Company’s launch in 2014.
Following rotation, the audit principal, William
Pointon, took over as lead audit partner for the
30 September 2021 year end and, therefore,
the year ended 30 September 2022 is the
second year of his tenure. The Company was
satisfied with the continuity of service with the
audit process provided by Grant Thornton. The
Committee having considered the effectiveness
of the audit, including reviewing the Audit
Quality Inspection Reports in relation to Grant
Thornton UK LLP published by the Financial
Reporting Council, has recommended the
continuing appointment of Grant Thornton to
the Board. Grant Thornton’s performance will
continue to be reviewed annually, applying all
relevant guidance and best practice. According
to regulation, there is a mandatory requirement
to undertake an audit tender at least every 10
years and to rotate auditors after 20 years.
Grant Thornton have been appointed as the
Company’s Auditors since 2014 and therefore
the Company will need to carry out an audit
tendering process no later than 2024. The Audit
and Risk Committee will oversee this process
in the upcoming year.
In relation to the provision of non-audit
services by the Auditor, all non-audit work
to be carried out by Grant Thornton must be
approved in advance by the Audit and Risk
Committee and any special projects must also
be approved in advance to avoid compromising
the independence of Grant Thornton as
Auditor. A separate team within Grant Thornton
would have the responsibility for completing
non-audit work, should it arise. Grant Thornton
does not provide any tax services to the
Company. There were no non-audit fees
incurred during the year ended 30 September
2022, nor in the previous year.
48 Ediston Property Investment Company plc – Annual Report and Accounts 2022
Report of the Audit and Risk Committee continued
ANNUAL REPORT AND
FINANCIAL STATEMENTS
The Board of Directors is responsible for
preparing the Annual Report and Financial
Statements. The Audit and Risk Committee
considers the form and content of the Annual
Report and Financial Statements, and any
significant areas of complexity, judgement
and estimation that have been applied in
the preparation of the Financial Statements.
The Committee has received reports and
recommendations from the Investment
Manager and the Auditor setting out the
significant areas. These areas of judgement and
estimation were discussed with the Investment
Manager during the year and with the Auditor at
the time the Audit and Risk Committee reviewed
and agreed the Auditor’s Group audit plan, and
when the Auditor presented its findings at the
conclusion of its year-end audit.
The significant matters are noted in the table
below:
Matter Audit and Risk Committee action
VALUATION AND EXISTENCE OF THE
INVESTMENT PROPERTY PORTFOLIO
The Group’s property portfolio accounted for 72.5% of its total assets
as at 30 September 2022. Although valued by an independent firm of
valuers, Knight Frank, the valuation of the investment property portfolio is
inherently subjective, requiring significant judgement by the valuers.
Errors in the valuation could have a material impact on the Group’s NAV.
Further information about the property portfolio and inputs to the
valuations are set out in Note 9 to the Consolidated Financial Statements.
The Investment Manager liaises with the valuers on a regular basis
to ensure they have up to date management information to value the
portfolio. The valuers also report directly to the Board at each quarterly
meeting in relation to both the property market as a whole and the
Company’s property portfolio. The Audit and Risk Committee reviewed
the results of the valuation procedure throughout the year and discussed
in detail the process of producing each of the quarterly valuations with
the Investment Manager and valuer.
The Committee discussed with the Auditor the work performed to
confirm the valuation and existence of the properties in the portfolio.
The Committee also discussed the September valuation with Knight
Frank to ensure that it understood the assumptions underlying the
valuation and sensitivities inherent in the valuation and any significant
area of judgement.
INCOME RECOGNITION
Incomplete or inaccurate income recognition could have an adverse
effect on the Group’s NAV, earnings per share, its level of dividend
cover and compliance with REIT regulations.
The Audit and Risk Committee reviewed the Investment Manager’s
and Administrator’s processes and controls around the recording of
investment income. It also compared the final level of income received
for the year to the budget and forecasts. The Committee and Board
was closely involved with the Investment Manager throughout the last
12 months, commenting on review of the testing the resilience of cash
received and receivable against the Company’s financial obligations and
ability to meet dividend payments.
CALCULATION AND PAYMENT OF MANAGEMENT FEES
Incorrect interpretation of the relevant provisions in the Management
Agreement and/or incorrect calculation of the fees payable to the AIFM
could result in an error in the Financial Statements and an incorrect
payment to the Manager.
The Committee has discussed the provisions in the Management
Agreement relating to the fee and the controls over fee payments,
including the process for calculating any adjustment for any uninvested
cash per the amendment to the Management Agreement in late 2017.
It has satisfied itself that the underlying calculations and assumptions
are in accordance with the Management Agreement, as is the timing of
payment. The Committee also reviewed the AIFM’s commitment to invest
a proportion of its management fees into the shares of the Company.
VALUATION OF INVESTMENTS IN SUBSIDIARIES
The Group’s property portfolio is held through its two subsidiaries
and the carrying value of the Investment in subsidiary undertakings
in the Company balance sheet at 30 September 2022 is £200,553,000.
These investments are held at cost less any impairment required under
IAS 36. Given volatility in property valuations and changes in the
portfolio, an impairment exercise was carried out.
The Committee considered the need to carry out an impairment
assessment of the carrying value of the investment in subsidiaries. The
Investment Manager, with the support of an external agency, established
an impairment model. The Committee was involved in reviewing the key
assumptions used in the model as well as the cash flows and outputs
from the model. This resulted in a slight impairment within the Company
Balance Sheet for the investment within EPIC No.1 of £1.33 million and a
reversal of the impairment for the investment within EPIC No. 2 to the
sum of £18.85 million.
GOING CONCERN ASSESSMENT
The Directors are required to prepare the Financial Statements on
a going concern basis unless they intend to liquidate the Company
or have no alternative but to do so.
In assessing the Company’s going concern, the Committee has taken
into consideration the current economic situation, the principal risks
facing the Company, its loan covenants and liquidity position. The
Company’s going concern statement can be found on page 65.
49Ediston Property Investment Company plc – Annual Report and Accounts 2022
Governance
CONCLUSION WITH RESPECT
TO THE ANNUAL REPORT AND
FINANCIAL STATEMENTS
The Audit and Risk Committee has concluded
that the Annual Report and Financial Statements
for the year ended 30 September 2022, taken as
a whole, are fair, balanced and understandable
and provide the information necessary for
shareholders to assess the Group’s business
model, strategy and performance.
The Audit and Risk Committee has reported
its conclusions to the Board of Directors.
The Audit and Risk Committee reached this
conclusion through knowledge of the Company
and its activities, and a detailed process of
review of the accounts and enquiries of the
various parties involved in the preparation of
the Annual Report and Financial Statements.
COMMITTEE EVALUATION
An evaluation of the Committee was
undertaken as part of the Board’s annual
performance evaluation. The skills and
experience of the members were found to
be appropriate, including recent and relevant
financial experience, industry experience
and transitioning of roles on the Committee.
The Committee was found to be functioning
effectively and all Committee members
were satisfied with the overall workings
of the Committee.
Karyn Lamont
Chair of the Audit and Risk Committee
13 December 2022
50 Ediston Property Investment Company plc – Annual Report and Accounts 2022
Report of the Nomination Committee
COMPOSITION OF THE
NOMINATION COMMITTEE
The Nomination Committee comprises the full
Board and is chaired by Jamie Skinner. The
Board considers that, given its size, it is more
efficient to have a Nomination Committee that
includes the entire Board and believes that this
enables all Directors to be kept fully informed of
any Board composition issues that arise,
including the diversity of experience, collective
competence of the Board, evaluation of its
membership and planning for succession. The
Committee’s terms of reference were reviewed
during the year and are available on the
Company’s website.
RESPONSIBILITIES OF THE
NOMINATION COMMITTEE
The role of the Nomination Committee is to
ensure that there is a formal, rigorous and
transparent procedure for retention and
evaluation of existing Directors in the roles
they perform and for the appointment of new
Directors to the Board. The Committee assists
the Board in ensuring that its composition
is regularly reviewed and refreshed so that
it is effective and able to operate in the best
interests of the Company and its shareholders.
The Committee has various functions, the most
important of which are:
− annual review of the structure, size and
composition (including the skills, experience,
independence, knowledge and diversity) of
the Board and making recommendations to
the Board with regard to any changes;
− review and nomination of candidates for the
approval of the Board to fill vacancies with
ultimate determination of appointments
made by the Board;
− ensuring a formal, rigorous and transparent
procedure is in place for the orderly
appointment of new directors to the Board;
− succession planning for Directors, taking into
account the challenges and opportunities
facing the Company, and the skills and
expertise needed on the Board;
− reviewing the time required from individual
Directors, including the Chairman, Audit
and Risk Committee Chair and chairs
of the various Committees. Performance
evaluation is used to assess whether the
Directors are effective in fulfilling their duties;
− considering the recommendations for
annual re-election and appointment to
specific roles on the Board; and
− assisting the Chairman of the Board with
the implementation of an annual evaluation
process to assess the overall performance
and effectiveness of the Board, its
Committees and its individual members,
including consideration of the balance of
skills, experience, and knowledge of the
Board, its diversity, its independence, how it
works together as a unit, and other factors
relevant to the Board’s effectiveness.
MEETINGS AND ACTIVITY
DURING THE YEAR
The Nomination Committee meets formally
at least annually and also when required.
There were three committee meetings during
the last year, excluding the recruitment activity
described below. At the formal meetings, the
Committee discussed succession planning
and also reviewed the results of the annual
evaluation of the effectiveness of the Board,
its Committees and its individual members.
During the year, the Nomination Committee
was engaged in an extensive recruitment
campaign to find and appoint a new Audit
Chair. This involved establishing a detailed
specification for the role; various meetings and
discussions with the recruitment consultant
appointed for the search, Fletcher Jones;
review of a long list of potential candidates,
reducing it to a short list of interviewees;
and the interviewing of candidates. Given that
the appointment was for audit chair, detailed
examination was conducted for the specific
skills and experience required for a property
investment company and to replace the skills
and experience of the former Audit Chair, who
is not standing for re-election in 2023, having
served on the Board since inception of the
Company. Following the interview stage, the
Committee unanimously agreed to recommend
to the Board that Karyn Lamont was the
best candidate. Karyn was appointed as an
independent non-executive Director and Audit
Chair on 1 September 2022, bringing the Board
to two female and three male directors.
Karyn Lamont is a chartered accountant with
over 30 years of professional experience of
collective funds, and has also provided audit
services to a range of clients across the UK’s
financial services sector. Upon her appointment,
Karyn assumed the role of Audit and Risk
Committee Chair, replacing Robin Archibald.
Karyn acts as audit chair on other boards on
which she serves. Robin will continue to act as
a non-executive Director until he steps down
at the forthcoming AGM. There will, therefore,
be a period with both Karyn and Robin serving
on the Board to ensure a smooth transition.
The Administrator attends the meetings
as Secretary to the Committee. In addition,
representatives of the Investment Manager are
invited to attend as required and participate
in the succession planning, but not in any
succession decisions taken.
SUCCESSION PLANNING
During the year, the key areas of focus for the
Committee were Board tenure, succession
planning and addressing independence issues
raised by governance agencies last year in
respect of roles fulfilled by Robin Archibald
and how he was remunerated.
Two members of the Board have served on
the Board since the Company’s inception in
May 2014, being the Chairman, William Hill,
and Robin Archibald, formerly Audit and Risk
Committee Chair and Senior Independent
Director. In order to adhere to governance
guidelines on tenure, Mr Archibald will stand
down from the Board at the forthcoming AGM,
having relinquished his role as Audit and Risk
Committee Chair to Karyn Lamont, appointed
to the Board on 1 September 2022, and his
role as Senior Independent Director to Imogen
Moss, as of 1 June 2022. Ms Moss has
served on the Board since 2020. Mr Archibald
continues to provide corporate finance support
to the Company and help in the transition of his
former roles to Board colleagues until he
stands down at the 2023 AGM.
The Board is engaged in finding a successor
to William Hill. It is expected that Mr Hill will
stand down no later than the AGM in early
2024. During the succession process, the
Board has increased to five members but,
depending on the balance of skills found as
part of the succession, may reduce to four
members again in the future. It is intended
to retain an experienced, engaged and
relatively small non-executive Board,
whilst aiming to meet diversity and other
governance requirements.
As described fully in the Remuneration Report,
Board remuneration has been increased for
the first time since 2018, with the base level
of non-executive remuneration being set at
£37,000 per annum (up from £35,000 per
annum) and additional remuneration being
payable for accentuated roles, such as
Chairman and Audit and Risk Committee
Chair, and for chairing individual committees.
DIVERSITY
The Board has had diversity of construction in
its considerations ever since the formation of
the Company in 2014. The Board’s approach
is to appoint the best possible candidates,
considered on merit and against objective
criteria (and in accordance with the Equality Act
2010). Appointments to the Board are made
on merit and objective criteria, in the context
of complementing and expanding the skills,
knowledge and experience of the Board as a
whole. The Board currently consists of three
men and two women with wide and diverse
experience, yet specific skill and experience
to the asset class. All the members of the
Board have been drawn from diverse working
and social experience. Ethnic diversity will also
be taken into account and considered in future
Board appointments.
51Ediston Property Investment Company plc – Annual Report and Accounts 2022
Governance
BOARD EVALUATION
During the year, a rigorous evaluation of the
performance of the Board, its Committees and
individual Directors was carried out through
an assessment process led by the Nomination
Committee Chair. The process was conducted
through the completion of questionnaires
tailored to suit the nature and needs of the
Company. A number of issues were raised
and discussed with individual board members,
none of which had negative connotations for
the performance of the Board or its members.
Overall, the Board was determined to be
functioning well in meeting the challenges
and requirements of the Company. Areas of
particular strength included the balance of
skills and experience on the Board and the
level of engagement and commitment shown
by all members. The Board’s close working
relationship with the Investment Manager and
detailed knowledge of the Company’s assets,
services provided by external advisers, strategy
and the issues the Company faces were also
noted as part of the evaluation.
The evaluation of the Chairman was led by
the Chair of the Nomination Committee, with
contributions from the other Directors. The
Nomination Committee continues to recognise
the Chairman’s extensive knowledge of the
property sector, ESG, and sustainability, and
the ways in which this benefitted the Company.
The Committee concluded that, under
the chairmanship of Mr Hill, the Board
and its individual members had performed
satisfactorily during the year and had met
the challenges faced by the Company during
recent years.
The Committee considered whether
there was any need for an independent
Board evaluation. The Board carried out an
independent evaluation during the period
ending 30 September 2019. The Committee
agreed that an external evaluation was not
required for the year ending 30 September
2022 but will review this again for future
periods, particularly after Board succession in
the current cycle has been completed.
COMMITTEE EVALUATION
An evaluation of the Committee was
undertaken as part of the Board’s annual
performance evaluation. The Committee was
deemed to be functioning well and the diversity
of skills and experience of its members were
considered appropriate and sufficient to ensure
informed debate and constructive challenge to
the Board nomination process.
Jamie Skinner
Nomination Committee Chair
13 December 2022
52 Ediston Property Investment Company plc – Annual Report and Accounts 2022
Report of the Remuneration Committee
COMPOSITION OF THE
REMUNERATION COMMITTEE
The Remuneration Committee comprises the
full Board and is chaired by Jamie Skinner.
Given the size of the Board, all Directors are
members of the Remuneration Committee.
The Board believes that this enables all
Directors to be kept fully informed of any issues
that arise, including time commitment, levels
of remuneration for different Board roles and
specific roles required of Board members which
justify different remuneration arrangements.
The Committee operates in such a way that
individual assessment of Directors’ performance
and remuneration issues are considered
without conflict. The Committee takes
into account recommendations from the
Nomination Committee.
No Director is involved in any determination
of their own evaluation, remuneration or
election for re-appointment to the Board.
The Committee’s terms of reference were
reviewed during the year and are available
on the Company’s website.
RESPONSIBILITIES OF THE
REMUNERATION COMMITTEE
The Committee is responsible for determining
and agreeing with the Board the framework and
policy for the remuneration of the Company’s
Chairman and non-executive Directors.
The duties of the Remuneration Committee are:
− determining and agreeing with the Board the
framework and policy for the remuneration of
the Company’s Chairman and non-executive
Directors, pursuant to the Company’s
Articles of Association and taking into
account Board committee responsibilities
and any other roles undertaken;
− in determining such policy, taking into
account all factors which it deems
necessary including relevant legal and
regulatory requirements, the provisions
and recommendations of the AIC Code
of Corporate Governance and associated
guidance;
− when setting the Remuneration Policy for
Directors, reviewing and having regard to
remuneration trends across the Investment
Companies sector (where relevant) and
in particular remuneration for alternative
asset classes such as property and other
unquoted assets;
− reviewing the ongoing appropriateness
and relevance of the Remuneration Policy;
− setting the remuneration of non-executive
Directors and ensuring that no individual
Director is involved in any decisions as to
their own remuneration;
− ensuring that contractual terms on
termination, and any payments made,
are fair to the individual and the Company,
that failure is not rewarded and that the
duty to mitigate loss is fully recognised;
− agreeing the policy for authorising claims
for expenses for the Directors;
− taking into account any activities outside
the normal scope that are engaged in
by individual Board members, requiring
consideration of additional remuneration
and agree the policy for authorising one-off
payments deemed fair and reasonable
for extra work and duties undertaken by
individual members of the Board; and
− considering such other matters as are
referred to the Committee by the Board
in relation to remuneration.
MEETINGS
The Remuneration Committee meets formally
at least once a year and also when required.
There have been two formal meetings during
the year, at which the Committee reviewed the
Board’s remuneration including any proposed
changes or additional remuneration to Directors
for services provided outside the normal course
of duties. The Administrator attends the
meetings as Secretary to the Committee.
ACTIVITIES DURING THE YEAR
REMUNERATION POLICY
The Company’s Remuneration Policy can be
found in the Director’s Remuneration Report
on page 53. The Remuneration Policy was last
approved by shareholders at the AGM held on
23 February 2021.
During the last year, the Committee carried out
a review of the Remuneration Policy, including
the cap on Board remuneration. In light of the
Board’s current succession planning, increasing
Board membership from four to five members
during the transition and the increase to Board
remuneration enacted this year, the cap on
Board remuneration is being increased to
£275,000 from its existing limit of £250,000
subject to shareholder approval. The updated
Remuneration Policy, which can be found
on page 53, will therefore be presented to
shareholders for approval at the forthcoming
AGM in 2023.
This proposed increase should allow for
sufficient headroom in order for the Company
to manage Board succession and the changes
to overall Board remuneration enacted this year.
As reported in the accounts last year,
a detailed review of Board emolument levels
was undertaken by the Committee during
the 2020 and 2021 financial years, supported
by a fee analysis report prepared by the
Administrator, external advice from advisers
and considering the time commitment
and input required from Directors. Board
emoluments had not increased since 2018
as, due to the COVID-19 Crisis and pressures
on the Company, the Board agreed that the
potential increases should not be implemented.
During the last year, the Committee carried
out a further review of Board remuneration,
including an updated peer group fee analysis
report prepared by the Administrator. The
Company also appointed an additional director
during the year with that process providing
helpful insight into market levels for director
fees. Following this review, the Committee
recommended to the Board an increase of
£2,000 to the base non-executive directorial
fee (from £35,000 to £37,000) as well as an
additional increase of £2,000 to the Chairman
of the Board, effective 1 October 2022.
Due to role changes on the Board, adjustments
were made to the remuneration of Directors as
shown below:
− effective 1 June 2022, Imogen Moss was
awarded an additional fee of £2,000 per
year, for acting as SID and £1,000 per year
for her role as Chair of the Management
Engagement Committee;
− effective 1 September 2022, Karyn Lamont
joined the Board as the new Audit and Risk
Committee Chair and was awarded the
standard base fee of £35,000 per year plus
an additional £10,000 for acting as Audit
and Risk Committee Chair.
In relinquishing his roles as Audit and Risk
Committee Chair and SID, Mr Archibald’s
remuneration has been reduced by £12,000
per annum (£10,000 for acting as Audit and
Risk Committee Chair and £2,000 for acting
as SID). During the year, Mr Archibald received
an additional remuneration of £10,000 per
quarter in recognition of the additional services
he rendered that go beyond duties normally
expected of a non-executive Director. This
payment will continue until his retirement
from the Board on 24 February 2023 and the
pro-rated amount to that date will be £16k.
The anticipated Board remuneration for
the year ending 30 September 2023 is
shown on page 54 of the Directors’
Remuneration Report.
COMMITTEE EVALUATION
Following a review of the Committee, the skills
and experience of the members were found to
be appropriate. Committee meetings were
considered effective and efficient, and all
members contributed appropriately.
Jamie Skinner
Remuneration Committee Chair
13 December 2022
53Ediston Property Investment Company plc – Annual Report and Accounts 2022
Governance
Directors’ Remuneration Report
The Board considers annually the level of fees paid to each Director. This review assesses: the individual responsibilities of the Board member under
the Committee structure; anticipated input required to oversee the Company’s activities in the future; and how Board remuneration is structured for
other alternative asset class boards, such as property.
Whilst the Board has final determination of the level of Directors’ fees, the Remuneration Committee is responsible for assessing whether the current
fee levels are appropriate. The Remuneration Committee takes external input where required in its assessment and takes into account the results of
Directors’ evaluation and Board succession issues. The Remuneration Committee’s Report can be found on page 52.
BOARD REMUNERATION
The Company’s view is that the remuneration of the Directors should: reflect the experience of the Board as a whole, and the time commitment
required; be fair; comparable with that of similar companies; and be specific to the requirements of the Company. The level of remuneration should
be appropriate and sufficient to attract and retain the quality, experience and competence of directors needed to oversee the Company properly and
to reflect its specific circumstances at any given time, including in response to out of the ordinary events.
The fees for the Directors are determined within the limit set out in the Company’s Articles of Association. Directors’ fees are fixed and are payable in
cash, monthly in arrears. No element of the Directors’ remuneration is performance related, nor does any Director have any entitlement to pensions,
share options, any long-term incentive plans or termination protections from the Company. The Company may periodically also choose to benchmark
Directors’ fees with an independent review, to ensure they remain fair and reasonable. In the nature of the Company, there may be circumstances
where additional remuneration is paid to Directors for requirements outside the normal activities of the Board or where the scope requires specific
commitment from individual Directors over and above the standard time commitment. Directors are also eligible to receive out of pocket expenses
for approved expenses incurred wholly and exclusively in fulfilling Company duties.
The Directors hold their office in accordance with the Articles of Association and their appointment letters. No Director has a service contract with
the Company, nor are any such contracts proposed. The Directors’ appointments can be terminated in accordance with the Articles of Association
and without compensation.
The current remuneration fee limit is £250,000 per annum, as was previously approved by shareholders at a General Meeting. The Remuneration
Policy is being updated to reflect an increase in the aggregate Director fee limit by 10% to £275,000 from £250,000 to provide headroom for
succession planning and possible increases in Board membership in the future. This revised Remuneration Policy will be presented to shareholders
for approval at the forthcoming AGM in 2023.
DIRECTORS’ EMOLUMENTS FOR THE YEAR
The Directors who served during the year received the following emoluments (excluding employers’ National Insurance contributions) in the form of fees:
Basic
fees
2022
£’000
Additional
fees
2022
£’000
Total amount
salary and fees
2022
£’000
Basic
fees
2021
£’000
Additional
fees
2021
£’000
Total amount
salary and fees
2021
£’000
William Hill (Chairman) 52.0 – 52.0 52 – 52
Robin Archibald* 45.5 40.0 85.5 47 40 87
Imogen Moss** 36.0 – 36.0 35 – 35
Jamie Skinner 38.0 – 38.0 38 – 38
Karyn Lamont*** 3.8 – 3.8 –––
Total 175.3 40.0 215.3 172 40 212
* Robin Archibald stepped down from his roles as SID on 1 June 2022 and Audit and Risk Committee Chair on 1 September 2022. He received an additional remuneration of
£40,000 per annum in recognition of the services he provided to the Company described in the Remuneration Committee Report on page 52.
** Imogen Moss became SID on 1 June 2022.
*** Karyn Lamont was appointed to the Board on 1 September 2022 and assumed the role as Audit and Risk Committee Chair on that date.
Note: Members of the Board were reimbursed for travel and accommodation expenses incurred in connection with their duties for the Company, which in aggregate amounted to
£2,140 (2021: £428). No additional fees or special remuneration were paid during the year, other than to Mr Archibald.
54 Ediston Property Investment Company plc – Annual Report and Accounts 2022
FUTURE BOARD EMOLUMENTS
The anticipated Board remuneration for the year ending 30 September 2023 is shown below:
Expected fees
for year ending
30 September
2023
£’000
Non-executive Director base rate 37
Additional Fee for Chairman 19
Additional Fee for SID 2
Additional Fee for Chair of the Audit and Risk Committee 10
Additional Fee for Chair of the Remuneration Committee 1
Additional Fee for Chair of the Nomination Committee 1
Additional Fee for Chair of the Management Engagement Committee 1
Additional Fee for Chair of the Marketing Committee 1
RELATIVE IMPORTANCE OF SPEND ON PAY
The table below shows the actual expenditure during the year in relation to Directors’ remuneration and shareholder distributions in the financial year:
2022
£’000
2021
£’000 % change
Aggregate Directors’ remuneration* 175.3* 172* 1.92
Aggregate dividends paid to shareholders 10,560 9,334 13.13
* This does not include the additional remuneration of £40,000 that was paid to Robin Archibald.
DIRECTORS’ SHAREHOLDINGS
The Directors, including connected parties, who held office at the year end and their interests (all beneficial) in the Ordinary Shares of the Company
as at 30 September 2022 and 30 September 2021 were as follows:
Ordinary
Shares
30 September
2022
Ordinary
Shares
30 September
2021
William Hill 171,580 144,893
Robin Archibald 109,093 109,093
Jamie Skinner 100,000 100,000
Imogen Moss 89,195 76,069
Karyn Lamont – –
Total 469,868 430,055
No additional shares in the Company have been bought since 30 September 2022.
MANAGEMENT SHAREHOLDINGS
Although not forming part of this report, it is also noted that the senior personnel of the Investment Manager held in aggregate 2,618,148 Ordinary Shares
of the Company as at 30 September 2022 (2021: 1,984,667 Ordinary Shares). As at 13 December 2022, these holdings were 2,622,845 Ordinary Shares.
As part of its fee arrangement under the Management Agreement (amended in 2020), Ediston Investment Services Limited will continue to purchase
shares in the Company each quarter following publication of the net asset value and following receipt of its management fee. The commitment is to
apply 20% of the management fee to acquire shares in the Company. The commitment expires on 21 December 2023.
Directors’ Remuneration Report continued
55Ediston Property Investment Company plc – Annual Report and Accounts 2022
Governance
COMPANY PERFORMANCE
The Board is responsible for the Company’s investment strategy and performance, whilst the management of the investment portfolio is ultimately
delegated to the Investment Manager. The graph below compares, for the period from launch to 30 September 2022, the total return (assuming all
dividends are reinvested) to ordinary shareholders compared to the FTSE All-Share Index. This index was chosen as it is considered an indicative
measure of the expected return from an equity stock. A more detailed explanation of the performance of the Company for the year ended
30 September 2022 is given in the Strategic Report.
Share price total return
FTSE All-Share Index total return
140
160
180
80
120
100
60
30 Sep 2014
1 Jan 2015
31 Dec 2015
31 Mar 2016
31 Mar 2015
30 Jun 2015
30 Jun 2016
30 Sep 2017
30 Sep 2016
31 Dec 2016
31 Mar 2017
30 Jun 2017
30 Sep 2018
31 Dec 2018
31 Mar 2019
30 Jun 2019
30 Sep 2019
31 Dec 2019
31 Mar 2020
30 Jun 2020
30 Sep 2021
30 Jun 2021
31 Mar 2021
31 Dec 2020
30 Sep 2022
30 Jun 2022
31 Mar 2022
30 Sep 2020
31 Dec 2017
31 Mar 2018
30 Jun 2018
30 Sep 2015
It is a company law requirement to compare the performance of the Company’s share price to a single broad equity market index on a total return
basis. However, it should be noted that constituents of the comparative index used above are typically larger in size than the Company. The Company
does not have a benchmark index.
Since its launch in October 2014, the gross assets of the Company have grown from initial assets of £95m to total assets of £314m as at
30 September 2022.
VOTING AT ANNUAL GENERAL MEETING
At the Company’s AGM, held on 24 February 2022, shareholders approved the Annual Report on Directors’ Remuneration for the year ended
30 September 2021 with 84.95% of the votes cast in favour of the resolution. Those shareholders who voted against the remuneration report
were all contacted following the meeting to address issues that they had in voting against the resolution.
An ordinary resolution for the approval of this Annual Report on Directors’ Remuneration, as well as an ordinary resolution to approve the Directors’
Remuneration Policy, will be put to shareholders at the forthcoming AGM.
On behalf of the Board.
Jamie Skinner
Remuneration Committee Chair
13 December 2022
56 Ediston Property Investment Company plc – Annual Report and Accounts 2022
Directors’ Report
The Directors present their report and Financial Statements of the Group for the year to 30 September 2022. The Corporate Governance Statement
on pages 40 to 44 forms part of their report.
INFORMATION CONTAINED ELSEWHERE IN THE ANNUAL REPORT
Information required to be part of this Directors’ Report can be found elsewhere in the Annual Report as indicated in the table below and is
incorporated into this report by reference:
Board of Directors Pages 38 to 39
Governance Statement Pages 40 to 44
Report of the Audit and Risk Committee Pages 45 to 49
Report of the Nomination Committee Pages 50 to 51
Report of the Remuneration Committee Page 52
Directors’ Remuneration Report Pages 53 to 55
PRINCIPAL ACTIVITIES AND STATUS
09090446). It is an investment company as defined by Section 833 of the Companies Act 2006.
in issue. The Ordinary Shares are listed on the premium segment of the Official List and traded on the London Stock Exchange’s Main Market. The
Group follows the REIT regime for the purposes of UK taxation.
The Company is a member of the Association of Investment Companies (AIC).
RESULTS AND DIVIDENDS
The results for the year are set out in the Financial Statements on pages 75 to 93.
It is the policy of the Directors to declare and pay dividends as monthly interim dividends. The Directors do not, therefore, recommend a final
dividend. Shareholder approval of the Company’s dividend policy is sought at each AGM.
The interim dividends paid during the year were as follows, with the annualised dividend rate for the year to 30 September 2022 of 5.00 pence per share:
Payment date Rate per share
Twelfth interim dividend for the prior year 29 October 2021 0.4167p
First interim dividend 30 November 2021 0.4167p
Second interim dividend 31 December 2021 0.4167p
Third interim dividend 31 January 2022 0.4167p
Fourth interim dividend 28 February 2022 0.4167p
Fifth interim dividend 31 March 2022 0.4167p
Sixth interim dividend 29 April 2022 0.4167p
Seventh interim dividend 31 May 2022 0.4167p
Eighth interim dividend 30 June 2022 0.4167p
Ninth interim dividend 29 July 2022 0.4167p
Tenth interim dividend 31 August 2022 0.4167p
Eleventh interim dividend 30 September 2022 0.4167p
The interim dividends paid/announced subsequent to the year end were as follows:
Payment date Rate per share
Twelfth interim dividend 31 October 2022 0.4167p
First interim dividend for the year ending 30 September 2023 30 November 2022 0.4167p
Second interim dividend 30 December 2022 0.4167p
A breakdown of the distributions paid, analysed between Property Income Distributions (PIDs) and Non-PIDs (see glossary and definitions), is
provided on page 100.
57Ediston Property Investment Company plc – Annual Report and Accounts 2022
Governance
DIVIDEND POLICY
Subject to market conditions and the Group’s performance, financial position and financial outlook, it is the Directors’ intention to continue to pay
sustainable and covered dividends to shareholders on a monthly basis. Following the disposal of the office and leisure properties during the year, the
dividend will be uncovered for a period of time. It is the expectation of the Board that when the sales proceeds are fully reinvested, the dividend will
become covered once more. The Board considers the Company has sufficient reserves and cash resources to continue to pay the dividend at its
current level pending the reinvestment of its cash. For the year ended 30 September 2022, the annualised dividend was 5.00 pence per share.
In determining the level of future dividends, the Board will seek to ensure that any dividend is sustainable over the medium term, taking into account
dividend cover and the projected income performance of the Group. The Board also has to consider the distributions required in order for the Company
to qualify as a REIT.
It is the Board’s intention that shareholders will continue to be given the opportunity to vote on the dividend policy annually at the AGM as the
dividends are all paid as interim dividends.
SUBSIDIARY COMPANIES
The Company has a 100% interest in EPIC (No.1) Limited (company number: 09106328) and EPIC (No.2) Limited (company number: 10978359), both
property investment companies, details of which are set out on page 87 to the Consolidated Financial Statements. These companies hold the Group’s
property investments and have the loan facilities in place as at 30 September 2022.
INVESTMENT OBJECTIVE
The Company’s investment objective is to provide shareholders with an attractive level of income together with the prospect of income and capital growth.
INVESTMENT POLICY
The Company pursues its investment objective by investing in a diversified portfolio of UK commercial properties.
The Group can invest principally in one or more of the three commercial property sectors; office, retail (including retail warehouses) and industrial,
without regard to a traditional property market relative return benchmark. In line with its revised investment strategy, announced last year, the Group
has sold its office and leisure properties and is entirely invested currently in retail warehouse assets.
The Group invests predominantly in income-producing investments. Investment decisions are based on analysis of, inter alia, prospects for future
income and capital growth, sector and geographic prospects, tenant covenant strength, lease length, sustainability factors, initial and equivalent
yields and the potential for active asset management of the property.
The Group does not invest in other investment companies or funds. However, the Group may hold property through special purpose vehicles and is
permitted to invest in joint ventures that hold real estate directly. The Group is also permitted to forward fund purchases of properties on a pre-let or
a non-pre-let basis and obtain options over properties.
Investment risk is spread across a variety of assets with a diverse range of tenants, lease lengths and covenant strengths. Investment risks can also
be managed by investing across geographical areas and sectors. However, although the Company can invest in all the principal commercial property
sectors, it does not diversify for diversification’s sake. There is no constraint in the prospectus limiting the maximum weighting in any of the principal
property sectors. Instead, the focus is on asset performance and to let properties, where possible, to low-risk tenants. Although the Group has not
set any maximum geographic exposure or maximum weightings in any of the principal property sectors, it may invest no more than 25% of total
assets, at the time of investment, in other sectors such as leisure, residential, student residential, healthcare and hotels. Speculative development
(i.e. properties under construction which have not been pre-let) is restricted to a maximum of 10% of total assets at the time of investment or
commencement of the development. Pre-let development is also restricted to a maximum of 10% of total assets at the time of investment or
commencement of the development.
The Group is permitted to invest cash held for working capital purposes and awaiting investment in cash deposits, gilts and money market funds.
The Board currently intends that gearing, calculated as borrowings as a percentage of the Group’s gross assets, will not exceed 30% at the time of
drawdown. In any event, gearing will not exceed a maximum of 35% at the time of drawdown.
Any material change to the investment policy will require the prior approval of shareholders.
FINANCIAL RISK MANAGEMENT
Details of the financial risk management objectives and policies followed by the Directors can be found on pages 27 to 33.
FUTURE DEVELOPMENTS
The likely future developments of the Company are contained in the Strategic Report on pages 2 to 37.
DIRECTORS
Biographical details of the Directors, all of whom are non-executive, can be found on pages 38 to 39.
It is the Board’s policy that Directors do not have service contracts, but each new Director is provided with a letter of appointment. The Directors’
letters of appointment are available on request at the Company’s registered office during business hours.
58 Ediston Property Investment Company plc – Annual Report and Accounts 2022
Directors’ Report continued
DIRECTORS CONTINUED
The Articles of Association require that each Director retires by rotation and be re-elected at least every three years. The Board has agreed that, in
accordance with governance best practice and the provisions of the AIC Code, Directors will all stand for election annually at each AGM.
Accordingly, William Hill, Jamie Skinner and Imogen Moss will retire at the AGM and, being eligible, offer themselves for re-election, and Karyn
Lamont, who joined the Board on 1 September, will be offering herself for election. As Robin Archibald will be stepping down from the Board at the
AGM, he will not be standing for re-election. The Directors’ appointment dates and the date of their last election are shown below:
Director
Date of original
appointment
Most recent date
of re-election
William Hill 17/06/2014 24/02/2022
Robin Archibald 17/06/2014 24/02/2022
Jamie Skinner 01/07/2017 24/02/2022
Imogen Moss 01/04/2020 24/02/2022
Karyn Lamont 01/09/2022 –
The Directors believe that the Board has an appropriate balance of skills, experience, independence and knowledge of the Company and the sector
in which it operates to enable it to provide effective strategic leadership and proper guidance of the Company. The Board confirms that, following the
evaluation process set out in the Report of the Nomination Committee on page 51, the performance of each of the Directors is, and continues to be,
effective and demonstrates commitment to the role. The Board believes, therefore, that it is in the interests of shareholders that, at the AGM, each of
them be re-elected and elected, where appropriate.
DIRECTORS’ DEEDS OF INDEMNITY
The Company has entered into deeds of indemnity in favour of each of the Directors. The deeds of indemnity give each Director the benefit of an
indemnity, out of the assets and profits of the Company, to the extent permitted by the Companies Act 2006 and subject to certain limitations against
liabilities incurred by each of them in the execution of their duties and exercise of the powers as Directors of the Company. A copy of each deed of
indemnity is available for inspection at the Company’s registered office during normal business hours.
CONFLICTS OF INTEREST
Under the Companies Act 2006, a Director must avoid a situation where he or she has, or could have, a direct or indirect interest that conflicts, or
possibly may conflict, with the Company’s interests. The requirement is very broad and could apply, for example, if a Director becomes a director of
another company or a trustee of another organisation. The Companies Act 2006 allows directors of public companies to authorise conflicts and potential
conflicts, where appropriate, where the Articles of Association contain a provision to this effect. The Company’s Articles of Association give the Directors
authority to approve such situations.
The Company maintains a register of Directors’ conflicts of interest, which have been disclosed and approved by the other Directors. This register is
kept up to date and the Directors are required to disclose to the Administrator any changes to conflicts or any potential new conflicts.
INVESTMENT MANAGER AND AIFM
Ediston Investment Services Limited has been appointed as the Company’s AIFM and Investment Manager, and provides portfolio and risk
management services, including ensuring compliance with the Group’s investment policy and the requirements of the Alternative Investment Fund
Managers’ Directive (AIFMD), through the Management Agreement. Management services, including advising on the acquisition, development, leasing,
management and sale of the Group’s properties, are delegated to Ediston Properties Limited under the Investment Manager’s Delegation Agreement.
Both agreements are subject to 12 months’ notice, other than in a breach scenario.
The AIFM is entitled to an annual fee of 0.95% of the Group’s NAV up to £250m, 0.75% of the NAV over £250m and 0.65% for assets over £500m,
payable quarterly. The AIFM fee on any cash held available for investment is reduced to 0.475% per annum while such cash remains uninvested.
The last contractual amendments took place in December 2020, when a side letter to the Management Agreement provided that the management
fee payable would be reduced by £40,000 per annum and a commitment from the AIFM to apply each quarter 20% of the management fee to
buying shares in the Company. Some additional amendments were also made to the Management Agreement and the Investment Manager’s
Delegation Agreement, principally relating to the management resource to be applied and what should happen if a satisfactory replacement was not
found for Danny O’Neill if he was no longer involved with the Investment Manager.
Under the requirements of the AIFMD, the Company has appointed a Depositary with oversight duties including share issues, buy backs, dividend
payments and adherence to investment limits. The Company’s Depositary is IQ-EQ Depositary Company (UK) Limited.
SHARE CAPITAL
Information on the Company’s Share Capital, including voting rights, as at 30 September 2022 can be found in Note 16 to the Consolidated
Financial Statements.
59Ediston Property Investment Company plc – Annual Report and Accounts 2022
Governance
SUBSTANTIAL INTERESTS IN SHARE CAPITAL
As at 30 September 2022, the Company had received notification of the following holdings of voting rights (under the Financial Conduct Authority’s
Disclosure Guidance and Transparency Rules):
30 September 2022
Investor
Number of
Ordinary Shares
held
Percentage
held*
Columbia Threadneedle Investments 35,295,223 16.70
Quilter Investors 21,500,000 10.17
Momentum Global Investment Management 18,533,192 8.77
Hargreaves Lansdown, stockbrokers (EO) 16,919,426 8.01
Investec Wealth & Investment 15,492,224 7.33
Interactive Investor (EO) 10,553,499 4.99
AXA Framlington Investment Managers 8,500,000 4.02
* Based on 211,333,737 Ordinary Shares in issue as at 30 September 2022. Source RDI 30 September 2022 report and DTR5 Disclosure notices. The Company has only one class
of share.
Since the year end, the Company has been notified of the following changes in holding of voting rights in the Company:
− Columbia Threadneedle Investments changed to 36,149,756 Ordinary shares (17.11%)
− Momentum Global Investment Management changed to 18,523,192 Ordinary shares (8.76%)
− Hargreaves Lansdown, stockbrokers (EO) changed to 17,321,778 Ordinary shares (8.20%)
− Investec Wealth & Investment changed to 15,531,478 Ordinary shares (7.35%)
− BlackRock changed to 11,803,781 Ordinary shares (5.59%)
− Interactive Investor (EO) Changed to 10,747,078 Ordinary shares (5.09%)
− Mattioli Woods changed to 6,712,899 Ordinary shares (3.18%)
− AXA Framlington Investment Managers has changed to 1,500,000 Ordinary shares (3.31%)
There have been no other changes notified to the Company in respect of the above holdings, and no other new holdings notified, since the year end.
RELATED PARTY TRANSACTIONS
Any related party transactions during the period to 30 September 2022 can be found in Note 17 to the Consolidated Financial Statements.
DIRECTORS’ SHAREHOLDINGS
Information on the Directors’ shareholdings as at 30 September 2022 can be found in the Directors’ Remuneration Report on page 54.
OTHER COMPANIES ACT 2006 DISCLOSURES
− There are no significant restrictions concerning the transfer of securities in the Company (other than certain restrictions imposed by laws and
regulations such as insider trading laws); no agreements known to the Company concerning restrictions on the transfer of securities in the
Company or on voting rights; and no special rights regarding control attached to securities.
− Pursuant to the Company’s loan facility, mandatory prepayment may be required in the event of a change of control of the Company; there are no
other significant agreements that the Company is a party to that might be affected by a change of control of the Company following a takeover bid.
− There are no agreements between the Company and the Directors providing for compensation for loss of office that occurs because of a
takeover bid or other corporate events.
ARTICLES OF ASSOCIATION
These are available on the Company’s website at http://www.epic-reit.com/investor-information/ or by application to the Administrator.
Any amendment to the Company’s Articles of Association may only be made by passing special resolution of the shareholders of the Company.
BRANCHES OUTSIDE THE UK
The Company does not have any branches outside the UK.
POLITICAL DONATIONS
No political donations were made during the year.
EMPLOYEES
The Group has no employees and therefore no employee share scheme or policies for the employment of disabled persons or employee
engagement.
SHARE ISSUANCE AUTHORITY
TAP ISSUANCE
At the AGM held on 24 February 2022, shareholders granted authority for the Company to issue up to 70,437,535 Ordinary Shares under its tap issuance
authority, without first offering them to existing shareholders in proportion to their existing holdings. Since that date, the Company has not issued Ordinary
Shares under this authority. The Company has in place approval from the Financial Conduct Authority for a block listing, under which currently 9,369,393
shares can be issued, allowing the issuance of shares under the tap issuance authority to be made on a timely and cost-efficient basis.
60 Ediston Property Investment Company plc – Annual Report and Accounts 2022
Directors’ Report continued
SHARE ISSUANCE AUTHORITY CONTINUED
TAP ISSUANCE continued
This shareholder authority will expire on 23 May 2023 or at the 2023 AGM, whichever is the earlier and, recognising the advantages to existing
shareholders from the Company being able to issue shares under such tap issuance in order to satisfy ongoing market demand, the Company will
be proposing resolutions at the AGM to renew and extend this authority. The Company will only issue shares under the tap issuance authority at a
premium to the prevailing NAV at the time of issue to avoid dilution to existing shareholders’ interests. Any authority granted by the passing of these
resolutions would continue until the AGM expected to be held in early 2024.
2023 AGM
Shareholders are invited to attend the Company’s AGM to be held at 1 St Andrews Square, Edinburgh EH2 2HN on 24 February 2023. The AGM
notice is set out on pages 107 to 111.
Those shareholders who are unable to attend the AGM in person are encouraged to raise any questions in advance with the Administrator at epic.
reit@jtcgroup.com (please include ‘EPIC AGM’ in the subject heading). Questions must be received by 5.00 p.m. on 10 February 2023. Any questions
received will be replied to by either the Investment Manager or Board via the Administrator before the AGM. A shareholder presentation will be made
available on the Company’s website updating shareholders on the activities of the year.
RESOLUTIONS TO BE PROPOSED AT THE AGM
There are 14 resolutions being proposed at the forthcoming AGM, 11 as ordinary resolutions, including approval of the Annual Report and Audited
Financial Statements for the year ended 30 September 2022 (resolution 1), and 3 as special resolutions, requiring the majority of the votes cast and
75% of the votes cast to be in favour of the resolutions, respectively, in order for the resolutions to carry. Further information on these resolutions is
given below.
ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS (RESOLUTION 1)
The first resolution being put to shareholders is the receipt of the Annual Report and Audited Financial Statements for the year ended 30 September 2022.
DIRECTORS’ REMUNERATION REPORT AND REMUNERATION POLICY (RESOLUTION 2 AND 3)
The Directors’ Remuneration Policy and Annual Report on Directors’ Remuneration, which can be found on pages 53 to 55, provide detailed
information on the remuneration arrangements for the Directors of the Company. Shareholders will be asked to approve the Annual Report on
Directors’ Remuneration (resolution 2). The Directors’ Remuneration Policy, which includes an increase to the aggregate cap on Board remuneration,
is also being put to shareholders at the 2023 AGM and will be proposed as an ordinary resolution.
AUDITOR (RESOLUTIONS 4 AND 5)
The Independent Auditor’s Report can be found on pages 68 to 74. Grant Thornton UK LLP has indicated its willingness to continue in office with the
Company and separate resolutions will be proposed at the AGM to re-appoint them (resolution 4) and to authorise the Directors to determine their
remuneration (resolution 5).
RESOLUTIONS TO ELECT AND RE-ELECT DIRECTORS (RESOLUTIONS 6 TO 9)
The assessment of the Directors performance and the recommendation to re-appoint the Directors can be found on pages 51 and 58. Resolutions 6
to 8 propose the re-appointment of William Hill, Imogen Moss and Jamie Skinner. Resolution 9 proposes the election of Karyn Lamont.
RESOLUTION TO APPROVE DIVIDEND POLICY (RESOLUTION 10)
Subject to market conditions and the Company’s performance, financial position and financial outlook, it is the Directors’ intention to pay an attractive
level of dividend income to shareholders on a monthly basis. In order to be able to continue paying a consistent dividend on a regular basis, and to
ensure that sufficient distributions are made to meet the Company’s REIT status, the Company intends to continue to pay all dividends as interim
dividends. Recognising that this means that shareholders will not have the opportunity to vote on a final dividend, the Company will instead propose a
non-binding resolution to approve the Company’s dividend policy at the AGM (resolution 10). This non-binding resolution to approve the Company’s
dividend policy is proposed annually.
AUTHORITY TO ALLOT SHARES (RESOLUTION 11)
The Board continues to have growth as part of their strategic priorities and the ability to issue shares under existing shareholder authorities granted
at an AGM and without having to incur the costs of publishing a prospectus is part of that strategic positioning and an economic way of growing
where it can be applied.
Resolution 11 along with resolution 12, which is described below, are intended to authorise the Board to allot shares in the capital of the Company
and to grant rights to subscribe for or to convert any security into shares in the Company on a non-pre-emptive basis.
Accordingly, resolution 11 authorises the Board to allot Ordinary Shares generally and unconditionally in accordance with section 551 of the
Companies Act up to an aggregate nominal value of £704,375.35or, if less, the aggregate nominal amount representing 33.33% of the issued
Ordinary Share capital of the Company at the date of the passing of resolution 11.
The Board believes that the passing of resolution 11 is in shareholders’ interests given that:
− the authority is intended to be used to fund the growth of the Company, thereby mitigating the potential dilution of investment returns for existing
shareholders; and
− shares issued under this authority will only be issued where the issue price per share is greater than the prevailing net asset value per share and
should therefore not be dilutive to the net asset value per existing share.
61Ediston Property Investment Company plc – Annual Report and Accounts 2022
Governance
DISAPPLICATION OF STATUTORY PRE-EMPTION RIGHTS (RESOLUTION 12)
In accordance with the provisions of the Company’s Articles of Association and the Listing Rules, the directors of a premium listed company are not
permitted to allot new shares (or grant rights over shares) for cash at a price below the NAV per share of those shares without first offering them to
existing shareholders in proportion to their existing holdings.
Resolution 12, which is a special resolution, seeks to provide the Directors with the authority to issue shares or sell shares held in treasury, under
resolution 11, on a non-pre-emptive basis for cash (i.e. without first offering such shares to existing shareholders pro-rata to their existing holdings) up
to an aggregate nominal amount of £211,334 or, if less, the aggregate nominal amount representing 10 per cent. of the issued Ordinary Share capital
of the Company at the date of the passing of resolution 12.
The authorities sought under resolutions 11 and 12 will only be used to issue shares at a premium to net asset value and only when the Directors
believe that it would be in the best interests of the Company to do so.
The authorities granted under resolutions 11 and 12 will expire at the conclusion of the next AGM of the Company after the passing of the resolutions,
or on the expiry of 15 months from the passing of the resolutions, whichever is earlier, unless they are previously renewed, varied or revoked.
AUTHORITY TO MAKE MARKET PURCHASES OF ORDINARY SHARES (RESOLUTION 13)
In common with most other investment companies, the Company takes annual buyback authority as part of the strategy to potentially enhance
liquidity in the shares. However, given that the Company is fully invested in relatively illiquid assets and has structural gearing in place, the exercise of
significant buybacks is not as available to the Company as it would be for those investment companies with relatively liquid portfolios and no structural
gearing. The Company is engaged in a growth strategy, subject to market conditions, and for these reasons it is unlikely that the Company will buy
back Ordinary Shares in the near term. Any buyback of Ordinary Shares will be subject to the Companies Act 2006 (as amended), the Listing Rules
and within guidelines established by the Board from time to time (which take into account the income and cash flow requirements of the Company).
Resolution 13 will be proposed as a special resolution and seeks to provide the Directors with the authority to purchase up to 31,678,927 Ordinary
Shares or, if less, the number representing approximately 14.99% of the Company’s Ordinary Shares in issue at the date of the passing of resolution
13. Any shares purchased by the Company may be cancelled or held in treasury. The Company does not currently hold any shares in treasury.
For each Ordinary Share, the minimum price (excluding expenses) that may be paid on the exercise of this authority will not be less than £0.01. Under
the Listing Rules, the maximum price that may be paid on the exercise of this authority must not exceed the higher of: (i) 105% of the average of the
middle market quotations (as derived from the Daily Official List of the London Stock Exchange) for the shares over the five business days immediately
preceding the date of purchase; and (ii) the higher of the last independent trade and the highest current independent bid on the trading venue on
which the purchase is carried out.
This authority will expire at the conclusion of the next AGM of the Company after the passing of resolution 13 or on the expiry of 15 months from the
passing of resolution 13, whichever is earlier, unless it is previously renewed, varied or revoked.
NOTICE PERIOD FOR GENERAL MEETINGS (RESOLUTION 14)
Resolution 14 is being proposed to reflect the provisions of the Companies Act 2006 relating to meetings and the minimum notice period for listed
company General Meetings being 21 clear days, but with an ability for companies to reduce this period to 14 clear days (other than for AGMs),
provided that the Company offers facilities for shareholders to vote by electronic means and that there is an annual resolution of shareholders
approving the reduction in the minimum period for notice of General Meetings (other than for AGMs) from 21 clear days to 14 clear days. The Board is
therefore proposing resolution 14 as a special resolution to ensure that the minimum required period for notice of General Meetings of the Company
(other than for AGMs) is 14 clear days.
The approval will be effective until the earlier of 15 months from the passing of the resolution or the conclusion of the next AGM of the Company when
it is intended that a similar resolution will be proposed. The Board intends that this flexibility of a shorter notice period to be available to the Company
will be used only for non-routine business and only where needed in the interests of shareholders as a whole.
RECOMMENDATION ON RESOLUTIONS TO BE PROPOSED AT THE AGM
The Directors consider the passing of the resolutions to be proposed at the AGM to be in the best interests of the Company and its shareholders,
and likely to promote the success of the Company for the benefit of its shareholders as a whole. Accordingly, the Directors unanimously recommend
that shareholders should vote in favour of the resolutions, as they intend to in respect of their own beneficial shareholdings amounting to 469,868
Ordinary Shares.
SUSTAINABILITY PERFORMANCE
The Company recognises that its activities have both direct and indirect environmental and social impacts, and it is committed to operating in a
responsible and sustainable manner. The Investment Manager acquires and manages properties on behalf of the Company and has responsibility
for the day-to-day management and implementation of the Company’s Sustainability Policy. Progress on implementing the Sustainability Policy is
disclosed within the Sustainability Report on pages 16 to 23. The Company aligns its disclosure of sustainability performance with the majority of the
EPRA sBPR. The Company continues to report the GHG emissions in line with the GHG Protocol Corporate Accounting and Reporting Standard.
62 Ediston Property Investment Company plc – Annual Report and Accounts 2022
Directors’ Report continued
SUSTAINABILITY PERFORMANCE CONTINUED
REPORTING METHODOLOGY
The Company’s reporting boundary is based on the principle of operational control, meaning that GHG emissions are accounted for where the
Company has the authority, via its managing agents, to introduce and implement its operating policies and procedures. Using this principle, emission
activities within assets held by the Company are excluded where there is limited or no operational control. Examples of this includes instances where
tenants are responsible for their own supply of utilities, heating and waste disposal. The Company is externally managed and does not occupy any
offices for its business activities, nor does it own or lease any vehicles.
We aim to report as complete and accurate data as feasible and practicable. Where data was found to be partially incomplete for a specific period, and
actual consumption was available for the other periods to predict the missing usage with reasonable confidence, we have taken a daily consumption
figure and multiplied it by the missing number of days to estimate the data gaps. As such, the data is then a sample of comparative data from a similar
period historically. Where this is not possible, the assets with incomplete data sets were excluded from the report unless noted otherwise. Please see
‘Disclosure coverage – number of properties’ on pages 62 to 64 for information of our environmental data coverage.
Scope 1 and Scope 2 location-based GHG emissions were calculated using the UK Government GHG Conversion Factors for Company Reporting
for the respective reporting periods. Scope 2 market-based GHG emissions were calculated using the European Residual Mixes factors (version
2018) and the zero emissions factor for the Renewable Energy Guarantees of Origin backed electricity supplies. The proportion from renewable
sources is based on renewable energy purchases. There was no onsite renewable energy generation to account for in 2021 and 2022.
The intensity ratios for energy and water are expressed as landlord procured utility per net lettable floor area. Net rental income was selected as a
basis for Direct and Indirect (Scopes 1 and 2) GHG emissions intensity. Only assets that were owned and managed during the full reporting year (12
months), with sufficient data availability, were included in the calculation of emission intensity.
The environmental and social performance data was reviewed and checked by Savills (UK) Limited, acting as sustainability consultants. No
restatements to 2021 datasets published last year were made, apart from for the water dataset, which has been restated due to increased availability
of data.
ENVIRONMENTAL PERFORMANCE MEASURES
In 2022, the Company procured 1,622 MWh of energy for use across the managed offices and retail properties, which is a 54% absolute decrease
and 17% like-for-like decrease compared with 2021. The comparatively lower energy use is largely linked to the disposal of several assets, vacant
assets, issues with a power supply due to roadworks as well as installation of energy efficient equipment and behavioural changes onsite. Further
to this, total water consumption saw a like-for-like reduction of 33% largely due to the deactivation of a water meter at one asset.
Scopes 1 and 2 GHG emissions for the year to 30 September 2022 total 303.6 tonnes CO
2
e (2021: 686.9 tonnes CO
2
e). The Company’s like-for-like
Scopes 1 and 2 emissions decreased by 25% accordingly. The decrease in the Scope 2 market-based emissions reflects the increase in renewable
electricity procured at sites included in the like-for-like comparison. The renewable electricity purchases accounted for 87% of the total electricity
purchased during the year (2021: 84%). Further to this, the renewable electricity purchases just for landlord controlled common areas excluding
vacant units saw an increase of 5% in 2022 and now accounts for 89% of the total electricity purchased for common areas (2021: 84%).
Over the past two years, the Company developed ASPs for 11 assets for which it has operational control. This enables it to identify potential
opportunities to enhance the overall sustainability performance of its portfolio. The reporting scope for waste covered six assets. The remaining
assets are not included in the reporting scope for waste due to either the Company only managing litter picking and landscaping at the site or a lack
of available waste data at the site. In 2022, the total managed and reported waste was 66.1 tonnes, of which 33% was re-used or recycled and none
sent directly to landfill.
GREENHOUSE GAS EMISSIONS
tCO
2
e
EPRA indicator
Managed portfolio Like-for-like
2021 2022
%
change 2021 2022
%
changeOffices Retail TOTAL Offices Retail TOTAL
Direct emissions
GHG-Dir-Abs,
GHG-Dir-LfL
Scope 1* 380.0 0 380.0 136.0 0 136.0 -64% – –0%
Indirect emissions
GHG-Indir-Abs,
GHG-Indir-LfL
Scope 2 – location based** 184.3 122.5 306.8 52.8 114.7 167.5 -45% 121.0 91.2 -25%
Scope 2 – market based** 4.0 86.8 90.8 5.7 37.7 43.4 -52% 84.8 37.3 -56%
Total Direct
and Indirect
Scopes 1 and 2 564.4 122.5 686.9 188.8 114.8 303.6 -56% 121 91.2 -25%
Disclosure coverage –
number of properties
2 of 2 7 of 9 9 of 11 2 of 2 11 of 11 13 of 13 – – ––
GHG emissions
intensity
GHG-Int
Scopes 1 and 2, tonnes
CO
2
e/£million net rental income***
28.0 6.1 34.1 11.7 7.1 18.8 -45% – ––
* Scope 1: Direct GHG emissions from controlled operations such as combustion in owned boilers.
** Scope 2: Indirect GHG emissions from the use of purchased electricity, heat or steam.
*** Scope 2 Location-based emissions are used for reporting total emissions and GHG emissions intensity.
63Ediston Property Investment Company plc – Annual Report and Accounts 2022
Governance
ENERGY CONSUMPTION
MWh
EPRA indicator
Managed portfolio Like-for-like
2021 2022
%
change 2021 2022
%
changeOffices Retail TOTAL Offices Retail TOTAL
Electricity
Elec-Abs, Elec-LfL
Landlord controlled areas 868 577 1,445 273 593 866 -40% 570 471 -17%
Proportion from renewable sources
– all landlord controlled areas
99% 60% 84% 95% 83% 87% 3% 61% 79% 18%
Proportion from renewable sources
– landlord controlled common
areas
100% 61% 84% 100% 84% 89% 5% 100% 100% 0%
Fuels
Fuels-Abs, Fuels-LfL
Landlord controlled areas 2,067 0 2,067 756 0 756 -63% – –0%
Proportion from renewable sources – – – ––––– ––
Total energy* Total landlord procured 2,935 577 3,512 1,029 593 1,622 -54% 570 471 -17%
Proportion estimated 0% 2% 1% 6% 11% 8% – – ––
Disclosure coverage –
number of properties
2 of 2 7 of 9 9 of 11 2 of 2 11 of 11 13 of 13 – – ––
Energy intensity
Energy-Int
Landlord procured, kWh/m
2
190.5 7.3 – 66.7 7.6 ––– ––
* There are no district heating and cooling systems in place (DH&C-ABS, DH&C-LFL).
WATER CONSUMPTION
m
3
EPRA indicator
Managed portfolio Like-for-like
2021 2022
%
change 2021 2022
%
changeOffices Retail TOTAL Offices Retail TOTAL
Water
Water-Abs,
Water-LfL
Landlord procured 2,669 379 3,048 913 375 1,288 -58% 214 145 -33%
Proportion estimated 0% 0% 0% 39% 8% 30%
Disclosure coverage –
number of properties
2 of 2 4 of 6 6 of 8 2 of 2 4 of 6 6 of 8 – 3 of 6 3 of 6 –
Water intensity
Water-Int
Landlord procured, m
3
/m
2
0.17 0.00 0.03 0.06 0.005 0.01 – – ––
WASTE MANAGEMENT
Tonnes
EPRA indicator
Managed portfolio Like-for-like
2021 2022
%
change 2021 2022
%
changeOffices Retail TOTAL Offices Retail TOTAL
Total weight of waste
by disposal route
Waste-Abs,
Waste-LfL
Recycled or Re-used 10.5 17.6 28.1 8.5 13.1 21.6 -23% 17.6 13.1 -25%
Incineration with energy recovery 45.1 23.5 68.6 22.9 21.6 44.5 -35% 24.2 21.6 -11%
Sent to landfill – – – – – – – – – –
TOTAL 55.6 41.1 96.7 31.4 34.7 66.1 -32% 41.8 34.8 -17%
Proportion estimated – – – – – – – – ––
Disclosure coverage –
number of properties
2 of 2 4 of 10 6 of 12 2 of 2 4 of 10 6 of 12 – – ––
Proportion of waste
by disposal route
Waste-Abs, Waste-
LfL
Recycled or Re-used 19% 43% 29% 27% 38% 33% 4% 42% 38% -4%
Incineration with energy recovery 81% 57% 71% 73% 62% 67% -4% 58% 62% 4%
Sent to landfill 0% 0% 0% 0% 0% 0% – 0% 0% 0%
64 Ediston Property Investment Company plc – Annual Report and Accounts 2022
Directors’ Report continued
BUILDING CERTIFICATION
EPRA indicator
2021 2022
Number of units % floor area Number of units % floor area
Energy Performance
Certification (EPCs)
Cert-Tot
A-B rated 45 40% 64 45%
C-E rated 69 59% 66 53%
F-G rated 2 2% 21.5%
Disclosure coverage – % of net lettable area 99% 100%
SOCIAL PERFORMANCE MEASURES
The Company reported on all applicable EPRA sBPR social performance metrics. For an externally managed company with no employees, this is
limited to the Board of Directors’ gender diversity, asset health and safety, and community engagement measures.
EPRA indicator 2021 2022
Gender diversity*
Diversity-Emp
Board of Directors Female 25% 40%
Male 75% 60%
Employee metrics:
Gender diversity (Diversity-Emp), Gender pay ratio
(Diversity-Pay), Employee training and development
(Emp-Training), Employee performance appraisals
(Emp-Dev), New hires and turnover (Emp-Turnover),
Employee health and safety
H&S-Emp
Ediston Property Investment Company plc is an externally managed investment
company. All the Company’s day-to-day management and administrative functions
are outsourced to third parties. The Company has no employees.
Asset health and safety assessments
H&S-Asset
Proportion of assets 100% 100%
Asset health and safety compliance
H&S-Comp
Number of incidents; unresolved within the
required timeframe
0 0
Community engagement, impact assessments
and development programmes
Comty-Eng
Proportion of assets 0% 38%
* Gender diversity ratio as at 30 September 2022.
GOVERNANCE PERFORMANCE MEASURES
FY 2021 FY 2022
Composition of the highest governance body
Gov-Board
Number of executive Board members 0 0
Number of independent/non-executive
Board members
4 5*
Average tenure on the governance body 5.1 6.1
Number of independent/non-executive
Board members with competencies relating
to environmental and social topics
2 2
Please refer to pages 38 to
39 for details
Process for nominating and selecting
the highest governance body
Gov-Selec
Please refer to page 50,
Nomination Committee
Process for managing conflicts of interest
Gov-CoI
Please refer to page 58,
Conflicts of Interest
* Karyn Lamont Joined the Board on 1 September 2022.
BUSINESS ETHICS
As an investment vehicle the Company does not provide goods or services in the normal course of business and does not have customers.
Accordingly, the Directors consider that the Company does not fall within the scope of the Modern Slavery Act 2015 and is not, therefore, obliged to
make a slavery and human trafficking statement. In any event, the Company considers its supply chains to be of low risk as its suppliers are typically
professional advisers.
In line with the requirements of The Criminal Finances Act 2017, the Directors confirm that the Company has a commitment to zero tolerance towards
the criminal facilitation of tax evasion.
In order to ensure compliance with the UK Bribery Act 2010, the Directors confirm that the Company has zero tolerance towards bribery and a
commitment to carry out business openly, honestly and fairly. In considering the appointment of Directors, the Company will continue to show no bias
for age, gender, race, sexual orientation, marital status, religion, nationality, ethnic or national origins, or disability.
65Ediston Property Investment Company plc – Annual Report and Accounts 2022
Governance
GOING CONCERN
The Board regularly monitors the Company’s ability to continue as a going concern. The Strategic Report describes in detail the financial position,
rental income and debt facilities as at 30 September 2022. The Board believes that the Company remains well placed to navigate effectively through a
prolonged period of uncertainty and to mitigate the risks presented by it. We draw comfort from the Company’s robust balance sheet and high-quality
portfolio of commercial property assets let to a wide range of strong tenant covenants highly diversified by tenant and location.
The Directors have taken into consideration the current economic downturn, the principal risks facing the Company, its loan covenants and liquidity
position. The Directors have also considered scenario analysis on the impact of different levels of rent collection across the portfolio and, over varying
timescales, on the Company’s financial position and the Company’s ability to reduce outflows such as dividends, in extremis, were liquid resources
to be required. The Company and the Investment Manager have so far been able to ensure the operational and trading integrity of the Company, and
under all of these scenarios the Group, has sufficient cash resources to continue its operations, and remains compliant with its loan covenants, for a
period of at least 12 months from the date of approval of the accounts. Sensitivity analysis and modelling has been undertaken to support this.
The Company and Investment Manager have assessed that values would need to drop by 23% in EPIC No.1 and 35% in EPIC No.2 respectively,
based on the 30 September 2022 valuations, for the Loan-to-Value covenant to be breached. This would be a dramatic decline and considered to be
remote. Beyond these drops, cure rights are available under the facility agreement to rectify any breach and the Company has cash reserves to do
so if required.
With this information and bearing in mind the nature of the Group’s business and assets, the Directors consider that the Group has adequate
resources to continue in operational existence over the medium term and believe that the Company has the ability to meet its financial commitments
for a period of at least 12 months from the date of approval of the accounts. For these reasons, the Directors continue to adopt the going concern
basis in preparing the accounts.
POST BALANCE SHEET EVENTS
There were no significant events after the reporting date which requires disclosure.
VIABILITY STATEMENT
In accordance with the AIC Code and FRC Guidance on Risk Management, Internal Controls and Related Financial and Business Reporting, the
Directors have assessed the prospects of the Company and its subsidiaries (the Group) over a period longer than the 12 months required by the
‘Going Concern’ provision noted above.
The Board considers the Company, with no fixed life, to be a long-term investment vehicle with a longer-term strategic objective and business model.
For purposes of the viability statement, the Board has decided that three years is an appropriate period over which to report, irrespective of the
exogenous risks the Company is facing. The Board considers that this period reflects a balance between a longer-term investment horizon and the
inherent uncertainties in current markets.
In assessing the viability of the Group over the review period, the Directors have focused on the following factors:
− Cash flow: The Group was established over eight years ago and the aim is for it to continue to grow in size in the medium to longer term. The
Board regularly considers the current cash flow model which is a detailed cash flow model covering a longer time period than three years. This
review does not indicate any matters that would give concern over the Group’s longer-term viability. The property portfolio held by the Group is
expected to change over the longer term and the growth strategy will be influenced by market conditions outside the Company’s control. The
Investment Manager is expected to undertake property acquisitions and sales in line with the Company’s investment objective and policy and,
therefore, the longer the time horizon considered, the higher the degree of uncertainty over the exact constituents of the Group’s investment
property portfolio or the Company’s market rating.
− Sensitivity analysis: On balance, the Board considers that a period of three years is an appropriate length of time over which a detailed sensitivity
analysis can be conducted for a closed-ended fund, investing in an illiquid asset class, whilst retaining a reasonable level of accuracy regarding
forecast rental income, costs and valuation movements in the portfolio. Sensitivities were performed to analyse the impact to the Company if there
were (i) increased void times due to not letting the vacant space in the forecast timeline, (ii) a severe loss of income and (iii) a fall in asset values which
could cause breaches in loan covenants. These scenarios provided the Board and Asset Manager with the comfort that there was scope in the cash
flow model to cope with unforeseen circumstances.
− Risk factors: The Company is subject to both endogenous and exogenous risk factors, the latter being difficult to predict. The time horizon of
three years takes account of the principal risks and uncertainties as shown on pages 27 to 33 of this Annual Report.
Although a three-year period is considered a satisfactory period to use in consideration of the Company’s viability, the inherent expectation is that the
Company, with no continuation or other dated events, will be able to continue beyond that period.
The three-year viability assessment considered the Group’s cash flows, dividend cover, REIT compliance provisions, debt covenants and other key
financial ratios over the period. These metrics are subject to sensitivity analysis which involves flexing a number of assumptions underlying the forecast,
including stress in the property market resulting in a decrease in the capital values of the property portfolio, or a decline in the occupational market,
which could result in defaults by existing tenants or delays in letting vacant space in the portfolio.
66 Ediston Property Investment Company plc – Annual Report and Accounts 2022
Directors’ Report continued
VIABILITY STATEMENT CONTINUED
The potential impact of the principal risks was also considered. Exogenous risks such as inflation, interest rates and the associated cost of living crisis,
in particular, have a direct impact on the UK economy and UK commercial property market. The Directors also recognised that these risks could have
an impact on longer term emerging risks such as behavioural changes, political or regulatory changes, advances in technology, environmental factors
and economic conditions or demographic changes. The Company’s operational risks and resilience of portfolio and provision of services have also
been taken into account.
The three-year review considers whether re-gearing might be required and forecasts compliance with the covenants of the Company’s current debt
facilities and any revised debt arrangements. Current debt facilities have maturity dates of May 2025 and December 2027. Unless the loan covenants
are breached, only one of these loans will fall due for re-finance within the three-year time horizon considered. Interest rates have been fixed for the
duration of each loan, at an overall blended rate of 2.86%, and an assumption has been made for the re-finance rates in 2025. At the time of approval
of this report, the Group held sufficient cash balances to finance currently identified capital expenditure within the Group’s existing property portfolio
and to meet the operational cash requirements of the Company.
Based on the results of this analysis, the Directors have a reasonable expectation that the Company will be able to continue in operation and to meet
its liabilities as they fall due, over the three-year period of their assessment from the date of approval of this Report.
REQUIREMENTS OF THE LISTING RULES
Listing Rule 9.8.4 requires the Company to include specified information in a single identifiable section of the Annual Report or a cross reference
table indicating where the information is set out. The Directors confirm that there are no disclosures required in relation to Listing Rule 9.8.4.
By order of the Board
JTC (UK) Limited
Administrator
13 December 2022
67Ediston Property Investment Company plc – Annual Report and Accounts 2022
Governance
Directors’ Responsibilities Statement
The Directors are responsible for preparing the Annual Report, including the Director’s Remuneration Report and the financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have to prepare the Group
Financial Statements in accordance with UK-adopted international accounting standards and have elected to prepare the parent company financial
statements in accordance with United Kingdom Generally Accepted Accounting Practice, including FRS 101 ‘Reduced Disclosure Framework’ (UK
Accounting Standards and applicable law).
Under company law the Directors must not approve the Group and Company financial statements unless they are satisfied that they give a true and
fair view of the state of affairs and profit or loss of the Group and the Company for that period. In preparing these Financial Statements, the Directors
are required to:
− select suitable accounting policies and then apply them consistently;
− make judgements and accounting estimates that are reasonable and prudent;
− state whether applicable UK-adopted international accounting standards have been followed for the Group financial statements and United
Kingdom Accounting Standards, comprising FRS 101 have been followed for the Company financial statements,, subject to any material
departures disclosed and explained in the Financial Statements; 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 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 the Company and enable them to ensure that
the Financial Statements and the Directors’ Remuneration Report comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are
also responsible for safeguarding the assets of the Group and the Company and hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website.
Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
The Directors consider the Annual Report and the Financial Statements, taken as a whole, provide the information necessary to assess the Group and
Company’s performance, business model and strategy and are fair, balanced and understandable.
DIRECTORS’ RESPONSIBILITY STATEMENT UNDER THE DISCLOSURE GUIDANCE AND TRANSPARENCY RULES
To the best of our knowledge:
− the Group Financial Statements, prepared in accordance with UK-adopted international accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the Group and the undertakings included in the consolidation taken as a whole;
− the Company Financial Statements, prepared in accordance with United Kingdom Accounting Standards, comprising FRS 101, give a true and
fair view of the assets, liabilities and financial position of the Company; and
− the Annual Report, including the Strategic Report and the Directors’ Report, includes a fair review of the development and performance of the
business and the position of the Group and Company, together with a description of the principal risks and uncertainties that they face.
DISCLOSURE OF INFORMATION TO THE AUDITOR
The Directors confirm that:
− so far as each Director is aware, there is no relevant audit information of which the Group and Company’s auditor is unaware; and
− the Directors have taken all the steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit
information and to establish that the Group and Company’s Auditor is aware of that information.
William Hill
Chairman
13 December 2022
68 Ediston Property Investment Company plc – Annual Report and Accounts 2022
Independent Auditor’s Report to the Members of Ediston Property Investment Company plc
OPINION
OUR OPINION ON THE FINANCIAL STATEMENTS IS UNMODIFIED
We have audited the financial statements of Ediston Property Investment Company plc (the ‘parent company’) and its subsidiaries (the ‘group’)
for the year ended 30 September 2022, which comprise the Consolidated Statement of Comprehensive Income, the Consolidated and
Company Statements of Financial Position, the Consolidated and Company Statements of Changes in Equity, the Consolidated Statement of
Cash Flow and Consolidated and Company notes to the financial statements, including a summary of significant accounting policies. The
financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and UK-adopted
international accounting standards. The financial reporting framework that has been applied in the preparation of the parent company financial
statements is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 101 ‘Reduced Disclosure
Framework’ (United Kingdom Generally Accepted Accounting Practice).
In our opinion:
− the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 30 September 2022
and of the group’s profit for the year then ended;
− the group financial statements have been properly prepared in accordance with UK-adopted international accounting standards;
− the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting
Practice; and
− the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the ‘Auditor’s responsibilities for the audit of the financial statements’ section of our report. We are independent of
the group and the parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK,
including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance
with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
CONCLUSIONS RELATING TO GOING CONCERN
We are responsible for concluding on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the group’s and the parent
company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our report to
the related disclosures in the financial statements or, if such disclosures are inadequate, to modify the auditor’s opinion. Our conclusions are based
on the audit evidence obtained up to the date of our report. However, future events or conditions may cause the group or the parent company to
cease to continue as a going concern.
Our evaluation of the directors’ assessment of the group’s and the parent company’s ability to continue to adopt the going concern basis of
accounting included:
− Obtaining an understanding of the process applied to prepare the going concern assessment and their identified risks;
− Assessing management’s ability to prepare accurate forecasts by comparing previous forecasts to actual results, challenging any material
variances and considering their impact on the current year’s forecast;
− Checking the mathematical accuracy and logic of management’s going concern model for both base case and stressed case scenarios,
including their calculations for future covenant compliance covering the going concern period;
− Challenging the key assumptions used by management in each of the modelled scenarios by comparing these to corroborative evidence and
considered any indications of contradictory evidence obtained from audit work in other areas;
− Considering the appropriateness of downside sensitivity scenarios modelled by management, taking into account current economic conditions
(such as a significant decline in property values) and the group’s historic performance. We also applied further sensitivities to consider the impact
on the group’s liquidity and its ability to meet its debt covenants resulting from significant deterioration in property values; and
− Assessing the adequacy of disclosures relating to going concern within the annual report and accounts 2022.
In our evaluation of the directors’ conclusions, we considered the inherent risks associated with the group’s and the parent company’s business
model including effects arising from macro-economic uncertainties, we assessed and challenged the reasonableness of estimates made by the
directors and the related disclosures and analysed how those risks might affect the group’s and the parent company’s financial resources or ability to
continue operations over the going concern period.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the group’s and the parent company’s ability to continue as a going concern for a period of at least twelve
months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the
financial statements is appropriate.
In relation to the group’s and the parent company’s reporting on how they have applied the UK Corporate Governance Code, we have nothing
material to add or draw attention to in relation to the directors’ statement in the financial statements about whether the directors considered it
appropriate to adopt the going concern basis of accounting.
The responsibilities of the directors with respect to going concern are described in the ‘Responsibilities of directors for the financial statements’
section of this report.
69Ediston Property Investment Company plc – Annual Report and Accounts 2022
Financial Statements
OUR APPROACH TO THE AUDIT
Overview of our audit approach
Materiality
Key audit
matters
Scoping
Overall materiality:
Group: £3,007,000, which represents 1.5% of the group’s net assets.
Parent company: £2,732,000, which represents 1.5% of the parent company’s net assets at the planning
stage of the audit.
Key audit matters were identified as:
− Valuation of investment properties (same as previous year); and
− Occurrence of revenue (same as previous year).
Our auditor’s report for the year ended 30 September 2021 included one key audit matter that has not
been reported as a key audit matter in our current year’s report. This relates to Going concern which was
included as a key audit matter as a result of the uncertainties relating to the Covid-19 pandemic. The
exclusion of going concern from our current year’s report reflects our risk assessment, wherein the group’s
continued improvement in profitability and performance over the past several years, combined with
decreased uncertainty surrounding the impact of Covid-19 has informed a lower risk assessment relating to
these matters. Therefore, we no longer consider this a key audit matter.
We performed an audit of the financial statements of the parent company and of the financial information of
all other components, being EPIC (No. 1) Limited and EPIC (No. 2) Limited, using component materiality (full
scope audit). There has been no change in the scope of the audit from the prior year.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement, were of
most significance in our audit of the financial statements of the current period and
include the most significant assessed risks of material misstatement (whether or
not due to fraud) that we identified. These matters included those that had the
greatest effect on: the overall audit strategy; the allocation of resources in the audit;
and directing the efforts of the engagement team. These matters were addressed
in the context of our audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
Description
Disclosures
Audit response
Our results
KAM
In the graph below, we have presented the key audit matters, significant risks and other risks relevant to the audit.
Potential
financial
statement
impact
High
Low
Low
Key audit matter
High
Extent of management judgement
Compliance
with laws and
regulations
Compliance
with REIT rules
Impairment of
subsidiaries
Management
override of
controls
Valuation of
investment
properties
Occurrence
of revenue
Going concern
Significant risk Other risk
70 Ediston Property Investment Company plc – Annual Report and Accounts 2022
Independent Auditor’s Report to the Members of Ediston Property Investment Company plc continued
KEY AUDIT MATTERS CONTINUED
Key Audit Matter – Group How our scope addressed the matter – Group
VALUATION OF INVESTMENT PROPERTIES
We identified valuation of investment properties as one of the most
significant assessed risks of material misstatement due to error.
The group’s investment property portfolio totals £227 million (2021:
£278 million) and is held at fair value under International Accounting
Standard (IAS) 40 ‘Investment Property’.
The valuation of investment properties requires significant judgement
and estimation by the external valuers engaged by Management.
These include yield profiles and estimated rental values. Inaccurate
inputs and assumptions could result in a material misstatement in the
financial statements.
Relevant disclosures in the Annual Report and Accounts 2022
− Financial statements: Note 9, Investment properties
− Audit and Risk Committee report: Page 48, Valuation and existence
of the investment property portfolio
In responding to the key audit matter, we performed the following audit
procedures:
− Obtaining the year end valuations of each property directly from the
management expert. We assessed the competence, credentials,
independence and objectivity of the management expert through
independent research and understanding the terms of their agreement
with the group;
− Using the experience and expertise of our internal property valuation
specialists, we challenged and corroborated the key assumptions,
judgements and inputs used in the valuations of properties;
− Undertaking meetings with the management expert to understand
specific inputs used in the valuations and challenge specific
assumptions and factors impacting the valuations;
− Carrying out industry research by the internal valuation team in order to
assess the appropriateness of these key assumptions including
estimated rental value, comparable yields and void periods;
− Testing rental and capital lease incentives that affect valuations by
agreeing these to underlying lease agreements; and
− Assessing whether the disclosures in the financial statements are
compliant with IAS 40 ‘Investment Property’.
Our results
From the audit work performed, we found that the valuation methodologies
and the assumptions made by management are in line with the
comparable market evidence. We have not identified any material
misstatements in the valuation of investment properties.
OCCURRENCE OF REVENUE
We identified occurrence of revenue as one of the most significant
assessed risks of material misstatement due to fraud.
Under ISA (UK) 240 ‘The Auditor’s Responsibilities Relating to Fraud
in an Audit of Financial Statements’, there is a rebuttable presumption
that there are risks of fraud in revenue recognition.
Revenue for the group consists of rental income from investment
properties. This income is based on tenancy agreements as well as
rental guarantee clauses contained in certain sale and purchase
agreements. These lease agreements include terms in relation to
lease incentives and other arrangements which increases the risk of
fraud.
Inaccurate revenue recognition could have an adverse impact on the
group’s net asset value, earnings per share, its level of dividend cover
and compliance with the Real Estate Investment Trust (REIT)
regulations.
Revenue is recognised in accordance with the Group’s accounting
policy and International Financial Reporting Standard (IFRS) 16
‘Leases’.
Relevant disclosures in the Annual Report and Accounts 2022
−
Financial statements: Note 1(B) Revenue recognition
− Audit and Risk Committee report: Page 48, income recognition
In responding to the key audit matter, we performed the following audit
procedures:
− Assessing whether the group’s revenue recognition accounting policy
and disclosures are in accordance with IFRS 16 ‘Leases’;
− Agreeing rental income to supporting evidence including signed lease
agreements and tenancy schedules;
− Creating and comparing our expectation of rental and accrued income
(taking into account lease incentives and rental guarantees) to the
financial statements and seeking corroborative evidence of any
differences greater than our acceptance range; and
− Agreeing 100% of lease incentives and other arrangements to
underlying lease agreements and assessed whether management
accounted for the arrangement in accordance with accounting policies.
Our results
From the audit work performed we did not identify any material
m
isstatements in relation to revenue occurrence and recognition or in our
assessment of the accounting policy in accordance with IFRS 16.
We did not identify any key audit matters relating to the audit of the financial statements of the parent company.
71Ediston Property Investment Company plc – Annual Report and Accounts 2022
Financial Statements
OUR APPLICATION OF MATERIALITY
We apply the concept of materiality both in planning and performing the audit, and in evaluating the effect of identified misstatements on the audit
and of uncorrected misstatements, if any, on the financial statements and in forming the opinion in the auditor’s report.
Materiality was determined as follows:
Materiality measure Group Parent company
Materiality for financial
statements as a whole
We define materiality as the magnitude of misstatement in the financial statements that, individually
or in the aggregate, could reasonably be expected to influence the economic decisions of the
users of these financial statements. We use materiality in determining the nature, timing and extent
of our audit work.
Materiality threshold £3,007,000, which is 1.5% of the group’s net
assets.
£2,732,000, which is 1.5% of the parent
company’s net assets at the planning stage of
the audit.
Significant judgements made by auditor in
determining materiality
In determining materiality, we made the
following significant judgements:
− Net Asset Value (NAV) is a key performance
indicator (KPI) used to measure the
performance of the group and is of primary
interest to the users of the financial
statements; and
− 1.5% was considered to be an appropriate
percentage as it is in line with industry
practice.
Materiality for the current year is higher than the
level that we determined for the year ended
30 September 2021 to reflect the increase in
the group’s net assets.
In determining materiality, we made the
following significant judgements:
− The nature of the company’s activity as a
Real Estate Investment Trust;
− Net Asset Value (NAV) is a KPI and is of
primary interest to the users of the financial
statements, and is therefore considered the
most appropriate benchmark; and
− 1.5% was considered to be an appropriate
percentage as it is in line with industry
practice.
Materiality for the current year is lower than the
level that we determined for the year ended
30 September 2021 to reflect the lower net
assets of the parent company at the planning
stage of the audit, on which materiality is
based.
Performance materiality used
to drive the extent of our testing
We set performance materiality at an amount less than materiality for the financial statements as
a whole to reduce to an appropriately low level the probability that the aggregate of uncorrected
and undetected misstatements exceeds materiality for the financial statements as a whole.
Performance materiality threshold £2,255,000, which is 75% of financial statement
materiality.
£2,049,000, which is 75% of financial statement
materiality.
Significant judgements made by auditor in
determining performance materiality
In determining performance materiality, we
made the following significant judgements:
− the key functions are outsourced, and no
significant control deficiencies have been
identified; and
− no significant misstatements were identified
in the prior years.
In determining performance materiality, we
made the following significant judgements:
− the key functions are outsourced, and no
significant control deficiencies have been
identified; and
− no significant misstatements were identified
in the prior years.
Specific materiality We determine specific materiality for one or more particular classes of transactions, account
balances or disclosures for which misstatements of lesser amounts than materiality for the
financial statements as a whole could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial statements.
Specific materiality We determined a lower level of specific
materiality for the following areas:
− Items in the revenue column of the
Consolidated Statement of Comprehensive
income;
− Expenses directly relating to investment
properties; and
− Related party transactions including
Directors’ remuneration.
We determined a lower level of specific
materiality for the following areas:
− Related party transactions including
Directors’ remuneration.
Communication of misstatements to the
Audit and Risk Committee
We determine a threshold for reporting unadjusted differences to the Audit and Risk Committee.
Threshold for communication £150,000 and misstatements below that
threshold that, in our view, warrant reporting on
qualitative grounds.
£137,000 and misstatements below that
threshold that, in our view, warrant reporting on
qualitative grounds.
72 Ediston Property Investment Company plc – Annual Report and Accounts 2022
Independent Auditor’s Report to the Members of Ediston Property Investment Company plc continued
OUR APPLICATION OF MATERIALITY CONTINUED
The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance for potential uncorrected misstatements.
FSM: Financial statements materiality
PM: Performance materiality
TFPUM: Tolerance for potential uncorrected misstatements
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
We performed a risk-based audit that requires an understanding of the group’s and the parent company’s business and in particular matters related to:
Understanding the group, its components, and their environments, including group-wide controls
− The Group consists of the parent company and two trading entities, EPIC (No. 1) Limited and EPIC (No. 2) Limited;
− The Group’s accounting process is outsourced to a third-party provider, who provides accounting and financial support for the Group and parent
company operations; and
− In assessing the risk of material misstatement of the group financial statements and its components, we considered the knowledge obtained from
prior year audits, the significant transactions undertaken by each entity in the current year and the existing control environment.
Identifying significant components
− An evaluation of the group and its components to assess the significance of that component and to determine the planned audit r
esponse based
on the relevant materiality thresholds. We assessed that the parent company and its two subsidiaries, EPIC (No. 1) Limited and EPIC (No. 2)
Limited were significant components. Significance was determined as a percentage of the group’s investment properties and rental income.
Type of work to be performed on financial information of parent and other components (including how it addressed the key audit
mat
ters)
− Full scope audits using component materiality were carried out by th
e group engagement team on the financial information of all significant
components including disclosures in the annual report and accounts. These procedures covered 100 percent of rental income and valuation of
investment properties;
− A substantive approach using professional judgement to determine the extent of testing required over each item in the financial statements for the
group including its components;
− Assessed the design and implementation of the processes and controls in relation to the investment property valuation process and revenue
recognition process; and
− We identified the valuation of investment property and occurrence of revenue as key audit matters and the procedures performed in respect of
these have been included in the key audit matters section of our report.
Performance of our audit
− All procedures were performed by the Group engagement team, there are no component auditors.
Changes in approach from previous period
− There were no significant changes to the scope of the audit from prior year.
O
THER INFORMATION
The directors are responsible for the other information. The other information comprises the information included in the annual report and accounts,
other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Net assets
£200,469
FSM
£3,007
1.5%
PM
£2,255
75%
TFPUM
£752
25%
Net assets
£182,107
FSM
£2,732
1.5%
PM
£2,049
75%
TFPUM
£683
25%
OVERALL MATERIALITY – GROUP (£’000s) OVERALL MATERIALITY – PARENT COMPANY (£’000s)
73Ediston Property Investment Company plc – Annual Report and Accounts 2022
Financial Statements
OUR OPINIONS ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006 ARE UNMODIFIED
In our opinion, the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act
2006.
In our opinion, based on the work undertaken in the course of the audit:
− the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is
consistent with the financial statements; and
− the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT UNDER THE COMPANIES ACT 2006
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we
have not identified material misstatements in the strategic report or the directors’ report.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our
opinion:
− adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from
branches not visited by us; or
− the parent company financial statements and the part of the directors’ remuneration report to be audited are not in agreement with the
accounting records and returns; or
− certain disclosures of directors’ remuneration specified by law are not made; or
− we have not received all the information and explanations we require for our audit.
CORPORATE GOVERNANCE STATEMENT
The Listing Rules require us to review the directors’ statement in relation to going concern, longer-term viability and that part of the Corporate
Governance Statement relating to the group’s and the parent company’s compliance with the provisions of the UK Corporate Governance Code
specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement
is materially consistent with the financial statements or our knowledge obtained during the audit:
− the directors’ statement in the financial statements about whether the directors considered it appropriate to adopt the going concern basis of
accounting in preparing the financial statements and the directors’ identification of any material uncertainties to the group’s and the parent
company’s ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements;
− the directors’ explanation in the annual report and accounts as to how they have assessed the prospects of the group and the parent company,
over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a
reasonable expectation that the group and the parent company will be able to continue in operation and meet their liabilities as they fall due over
the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions;
− the directors’ statement that they consider the annual report and financial statements taken as a whole is fair, balanced and understandable and
provides the information necessary for shareholders to assess the group’s and the parent company’s performance, business model and strategy;
− the directors’ confirmation in the annual report that they have carried out a robust assessment of the principal and emerging risks facing the
group and the parent company and the disclosures in the annual report that describe the principal risks, procedures to identify emerging risks
and an explanation of how they are being managed or mitigated;
− the section of the annual report that describes the review of the effectiveness of group’s and the parent company’s risk management and internal
control systems, covering all material controls, including financial, operational and compliance controls; and
− the section of the annual report describing the work of the Audit and Risk Committee, including significant issues that the Audit and Risk
Committee considered relating to the financial statements and how these issues were addressed.
RESPONSIBILITIES OF DIRECTORS FOR THE FINANCIAL STATEMENTS
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the financial statements and for
being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either
intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether
due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
74 Ediston Property Investment Company plc – Annual Report and Accounts 2022
Independent Auditor’s Report to the Members of Ediston Property Investment Company plc continued
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS CONTINUED
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances
of non-compliance with laws and regulations. We design procedures in line with our responsibilities,
outlined above, to detect material misstatements in respect of irregularities, including fraud. Owing to the inherent limitations of an audit, there is an
unavoidable risk that material misstatements in the financial statements may not be detected, even though the audit is properly planned and
performed in accordance with ISAs (UK).
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below:
− We obtained an understanding of the legal and regulatory frameworks applicable to the group and the company and the industry in which they
operate. We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from
our sector experience and through discussion with the directors and management. We determined that the most significant laws and regulations
were UK-adopted international accounting standards (for the group), Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ (UK
GAAP) (for the parent company), the Companies Act 2006, the UK Corporate Governance Code, the REIT rules and the relevant provisions of
HMRC’s regulations applicable to a Real Estate Investment Trust company;
− We enquired of the directors and management to obtain an understanding of how the group and the company are complying with those legal and
regulatory frameworks and whether there were any instances of non-compliance with laws and regulations and whether they had any knowledge
of actual or suspected fraud. We corroborated the results of our enquiries through our review of the minutes of the Company’s board meetings;
− We assessed the susceptibility of the group’s and the company’s financial statements to material misstatement, including how fraud might occur
by evaluating management’s incentives and opportunities for manipulation of the financial statements. This included an evaluation of the risk of
management override of controls. Audit procedures performed by the engagement team in connection with the risks identified included:
• evaluation of the design and implementation of controls that management has put in place to prevent and detect fraud;
• testing journal entries, including manual journal entries processed at the year end for financial statements preparation; and
• challenging the assumptions and judgements made by management in its significant accounting estimates.
− These audit procedures were designed to provide reasonable assurance that the financial statements were free from fraud or error. The risk of not
detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error and detecting irregularities that
result from fraud is inherently more difficult than detecting those that result from error, as fraud may involve collusion, deliberate concealment,
forgery or intentional misrepresentations. Also, the further removed non-compliance with laws and regulations is from events and transactions
reflected in the financial statements, the less likely we would become aware of it;
− The engagement partner’s assessment of the appropriateness of the collective competence and capabilities of the engagement team included
consideration of the engagement team’s:
• understanding of, and practical experience with, audit engagements of a similar nature and complexity, through appropriate training and
participation;
• knowledge of the industry in which the group and the company operate; and
• understanding of the legal and regulatory frameworks applicable to the group and the company.
− We communicated relevant laws and regulations and potential fraud risks to all engagement team members, including internal specialists, and
remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
OTHER MATTERS WHICH WE ARE REQUIRED TO ADDRESS
Following the recommendation of the Audit and Risk Committee, we were appointed by Ediston Property Investment Company plc on 8 January
2015 to audit the financial statements for the year ended 30 September 2014 and subsequent financial periods.
The period of total uninterrupted engagement including previous renewals and reappointments of the firm is 9 years, covering the periods ended
30 September 2014 to 30 September 2022.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the group or the parent company and we remain independent
of the group and the parent company in conducting our audit.
Our audit opinion is consistent with the additional report to the Audit and Risk Committee.
USE OF OUR REPORT
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report
and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and
the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
William Pointon
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
13 December 2022
Financial Statements
DocuSign Envelope ID: 8DFC304C-16D6-4F71-9897-8AA55625A553
Consolidated Statement of Comprehensive Income
For the year ended 30 September 2022
properties realised during the year
9
(3,014 ) (3,014 )
Total
income 16,426 12, 906 29,332 17,371 5,834 23,205
Expenditure
Investment management fee
2
(1,703 )
(1,703 )
(1,687 )
(1,687 )
Other expenses
3
(3,212 )
(3,212 )
(1,914 )
(1,914 )
Total
expenditure (4,915 )
(4,915 ) (3, 601 )
(3,601 )
Movement
in expected credit losses 11
Profit before finance costs and
taxation
Net finance costs
Interest receivable
4
Interest payable
5
(3,003 )
(3,003 )
(3,109 )
(3,109 )
Profit before taxation
Taxation
6
Profit
and total comprehensive
income for the year
Basic
and diluted earnings per share
8
The total column of this statement represents the Group’s Consolidated Statement of Comprehensive Income, prepared in accordance with IFRS.
The supplementary revenue return and capital return columns are prepared under guidance published by the Association of Investment Companies.
All revenue and capital items in the above statement are derived from continuing operations.
No operations were acquired or discontinued in the year.
The accompanying notes are an integral part of these Financial Statements.
Ediston Property Investment Company plc – Annual Report and Accounts 2022 75
Year ended 30 September 2022 Year ended 30 September 2021
Notes
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
Rental income
Total revenue
Unrealised gain on revaluation of
investment properties
(Loss)/gain on sale of investment
9
76 Ediston Property Investment Company plc – Annual Report and Accounts 2022
Consolidated Statement of Financial Position
As at 30 September 2022
Notes
As at
30 September
2022
£’000
As at
30 September
2021
£’000
Non-current assets
Investment properties 9 227 , 465 277 ,984
Current assets
Trade and other receivables 11 35,978 13 , 3 9 0
Cash and cash equivalents 12 50,235 11 , 6 4 2
Total assets 313, 67 8 303, 01 6
Non-current liabilities
Loans 13 (1 10 , 4 4 3 ) (1 10,277 )
(1 10, 4 4 3 ) (1 10,277 )
Current liabilities
Trade and other payables 14 (2,767 ) (3, 1 90 )
Total liabilities (113, 2 10 ) (1 13,467 )
Net assets 200,468 18 9 , 5 4 9
Equity and reserves
Called-up equity share capital 16 2, 1 1 3 2 ,11 3
Share premium 12 5 , 5 5 9 12 5 , 5 5 9
Capital reserve – investments held (32,957 ) (42,7 10 )
Capital reserve – investments sold 6, 71 4 3,56 1
Special distributable reserve 82,07 5 82 ,7 1 1
Revenue reserve 16,964 18 , 3 15
Equity shareholders’ funds 200,468 18 9 , 5 4 9
Net asset value per Ordinary Share 15 94.86 p 89 .69 p
The accompanying notes are an integral part of these Financial Statements.
Company number: 09090446.
The Financial Statements on pages 75 to 93 were approved by the Board of Directors on 13 December 2022 and signed on its behalf by:
William Hill
Chairman
77Ediston Property Investment Company plc – Annual Report and Accounts 2022
Financial Statements
Consolidated Statement of Changes in Equity
For the year ended 30 September 2022
Notes
Share capital
account
£’000
Share premium
£’000
Capital
reserve –
investments held
£’000
Capital
reserve –
investments sold
£’000
Special
distributable
reserve
£’000
Revenue
reserve
£’000
Total equity
£’000
As at 30 September
2021 2, 1 1 3 1 25 ,55 9 (42,710 ) 3,56 1 82, 71 1 1 8,3 1 5 1 89 ,54 9
Profit and total
comprehensive
income for the year – – 15,920 (3,014 )
Transfer between
unrealised and
realised reserves – – (6,167 ) 6,167 –
Transactions with
owners recognised
in equity:
Dividends paid 7 – – – (10,568 )
Transfer from special
reserve – – –
As at 30 September
2022 2, 1 13 1 25,559 (32,957 ) 6, 71 4 82,0 7 5 16, 964 200,468
For the year ended 30 September 2021
Notes
Share capital
account
£’000
Share premium
£’000
Capital
reserve –
investments held
£’000
Capital
reserve –
investments sold
£’000
Special
distributable
reserve
£’000
Revenue
reserve
£’000
Total equity
£’000
As at 30 September
2020 2, 1 13 125,559 (4 7 ,365 ) 2,3 82 83, 162 15,922 18 1 ,7 73
Loss and total
comprehensive
income for the year – – 4, 6 5 5 1,1 7 9 – 11 , 2 7 6 1 7,11 0
Transactions with
owners recognised
in equity:
Dividends paid 7 – – – –
(9,334 )
Transfer from special
reserve – – – – (451 )451
As at 30 September
2021 2, 1 1 3 1 25 ,55 9 (42, 71 0 ) 3,56 1 82, 71 1 1 8,3 1 5 1 89 ,54 9
The accompanying notes are an integral part of these Financial Statements.
(10,568 )
(636 ) 663
78 Ediston Property Investment Company plc – Annual Report and Accounts 2022
Consolidated Statement of Cash Flow
For the year ended 30 September 2022
Notes
Year ended
30 September
2022
£’000
Year ended
30 September
2021
£’000
Cash flows from operating activities
Profit before tax 21,487 17,11 0
Adjustments for:
Interest payable 3,003 3,109
Unrealised revaluation gain on property portfolio (15,920 ) (4,6 5 5 )
Loss/(gain) on sale of investment property realised 3,0 1 4 (1, 1 79 )
Operating cash flows before working capital changes 1 1 ,58 4 14 , 3 8 5
Decrease in trade and other receivables 54 7 1, 8 2 3
Decrease in trade and other payables (42 0 ) (49 2 )
Net cash inflow from operating activities 11 , 7 11 15 , 716
Cash flows from investing activities
Capital expenditure (3,2 07 ) (10 , 3 4 5 )
Acquisition of investment properties – (21,640 )
Sale of investment properties 67 ,704 27 ,953
Deposits with Aviva (2 4, 21 0 ) –
Net cash inflow/(outflow) from investing activities 4 0, 2 87 (4,0 3 2 )
Cash flows from financing activities
Dividends paid (10 , 5 6 8 ) (9,334 )
Interest paid (2 ,8 37 ) (3,01 6 )
Net cash outflow from financing activities (1 3,405 ) (12, 3 5 0 )
Net increase/(decrease) in cash and cash equivalents 38,5 93 (666 )
Opening cash and cash equivalents 11 , 6 4 2 12 , 3 0 8
Closing cash and cash equivalents 12 50,235 11 , 6 4 2
The accompanying notes are an integral part of these Financial Statements.
79Ediston Property Investment Company plc – Annual Report and Accounts 2022
Financial Statements
Notes to the Consolidated Financial Statements
1. ACCOUNTING POLICIES
(A) BASIS OF PREPARATION
BASIS OF ACCOUNTING
These Consolidated Financial Statements have been prepared in accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006 and in accordance with IFRS adopted pursuant to UK adopted international accounting standards. The
accounts have been prepared on a historical cost basis, except for investment property valuations that have been measured at fair value.
The Notes and Financial Statements are presented in pounds sterling (being the functional currency and presentational currency for the Company)
and are rounded to the nearest thousand except where otherwise indicated.
GOING CONCERN
Under the AIC Code, the Board needs to report whether the business is a going concern. In considering this requirement, the Directors have taken
the following into account:
− the Group’s projections for the next three years, in particular the cash flows, borrowings and occupancy rate;
− the ongoing ability to comply comfortably with the Group’s financial covenants (details of the loan covenants are included in Note 13);
− the risks included on the Group’s risk register that could impact on the Group’s liquidity and solvency over the next 12 months (details of risks are
included in the Strategic Report on pages 1 to 37); and
− the risks on the Group’s risk register that could be a potential threat to the Group’s business model (details of risks are included in the Strategic
Report on pages 1 to 37).
The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic
Report. The Strategic Report also includes the Group’s risks and risk management processes.
The Directors made an assessment of going concern, under the guidelines of the AIC. Details of this assessment is included in the Directors’ Report
on page 65.
Furthermore, the Company and Investment Manager have assessed that values would need to drop by 23% in EPIC No.1 and 35% in EPIC No.2
respectively, based on the 30 September 2022 valuations, for the Loan-to-Value covenant to be breached. This would be a dramatic decline and
considered to be remote. Beyond these drops, cure rights are available under the facility agreement to rectify any breach.
With this information and bearing in mind the nature of the Group’s business and assets, the Directors consider that the Group has adequate
resources to continue in operational existence over the medium term and believe that the Company has the ability to meet its financial commitments
for a period of at least twelve months from the date of approval of the accounts. For these reasons, the Directors continue to adopt the going
concern basis in preparing the accounts.
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of Financial Statements requires management to make estimates and assumptions that affect the amounts reported for assets and
liabilities as at the year-end date and the amounts reported for revenue and expenses during the period. The nature of the estimation means that
actual outcomes could differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis.
KEY ESTIMATES
The only significant source of estimation uncertainty relates to the investment property valuations. The fair value of investment properties is
determined by independent real estate valuation experts using recognised valuation techniques. The properties have been valued on the basis of
‘Fair Value’ in accordance with the current editions of Royal Institution of Chartered Surveyors (RICS) Valuation – Global Standards, which incorporate
the International Valuation Standards, and the RICS UK National Supplement. Investment property under construction is subject to a higher
estimation uncertainty than that of investment property due to the estimation required for future expenditure, which is factored into the valuation
models for any such properties. In line with the recommendation of the European Public Real Estate Association, all properties have been deemed to
be Level 3 under the fair value hierarchy classification set out below. This is described in more detail in Note 9. Revisions to accounting estimates are
recognised in the year in which the estimate is revised if the revision affects only that year, or in the year of the revision and future years if the revision
affects both current and future years.
The fair value measurement for the assets and liabilities are categorised into different levels in the fair value hierarchy based on the inputs to valuation
techniques used. The different levels have been defined as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at the measurement date.
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3: unobservable inputs for the asset or liability. Value is the Directors’ best estimate, based on advice from relevant knowledgeable experts, use
of recognised valuation techniques and on assumptions as to what inputs other market participants would apply in pricing the same or a similar
instrument. As explained in more detail in Note 9, all investment properties are included in Level 3.
The Group recognises transfers between levels of the fair value hierarchy as of the end of the reporting period during which the transfer has occurred.
KEY JUDGEMENTS
Key judgements relate to property acquisitions where different accounting policies could be applied and operating lease contracts. These are
described in more detail below, or in the relevant notes to the Financial Statements.
PROPERTY ACQUISITIONS AND BUSINESS COMBINATIONS
The Group acquires real estate either as individual properties or as the acquisition of a portfolio of properties either directly or through the acquisition
of a corporate entity.
80 Ediston Property Investment Company plc – Annual Report and Accounts 2022
1. ACCOUNTING POLICIES CONTINUED
KEY JUDGEMENTS CONTI
NUED
OPERATING LEASE CONTRACTS – THE GROUP AS LESSOR
The Group has determined, based on an evaluation of the terms and conditions of the arrangements, particularly the duration of the lease terms
and minimum lease payments, that it retains all the significant risks and rewards of ownership of these properties and so accounts for the leases
as operating leases. Management has applied judgement by considering key new leases this year and have assessed that no lease exceeds a term
of 40 years and as such determined that the terms and conditions of the arrangements do not result in a transfer of significant risks and rewards of
ownership of these properties and that these should therefore be accounted for as operating leases.
The leases, when signed, are for between 5 and 35 years. At the inception of the lease, management do not consider any extension of the leases to
be reasonably certain and, as such do not factor any lease extensions into their considerations of lease incentives and the treatment of rental income.
BASIS OF CONSOLIDATION
The Consolidated Financial Statements comprise the Financial Statements of the Company and its two subsidiaries drawn up to 30 September
2022. Subsidiaries are those entities, including special purpose entities, controlled by the Company and are detailed in Note 10. Control exists when
the Company is exposed, or has rights, to variable returns from its investment with the investee and has the ability to affect those returns through its
power over the investee. In assessing control, potential voting rights that presently are exercisable are taken into account. The financial statements
of subsidiaries are included in the Consolidated Financial Statements from the date that control commences until the date that control ceases.
In preparing the Consolidated Financial Statements, intra-Group balances, transactions and unrealised gains or losses have been eliminated in full.
Uniform accounting policies are adopted for all companies within the Group.
(B) REVENUE RECOGNITION
RENTAL INCOME
R
ental income, excluding VAT, arising on investment properties is accounted for in the Statement of Comprehensive Income on a straight-line basis
over the terms of the individual leases.
Lease incentives, including rent-free periods and payments to tenants, are allocated to the Statement of Comprehensive Income on a straight-line
basis over the lease term or on another systematic basis, if applicable. Where income is recognised in advance of the related cash flows, an
adjustment is made to ensure that the carrying value of the relevant property, including accrued rent disclosed separately within ‘trade and other
receivables’, does not exceed the external valuation.
The Group may from time to time receive surrender premiums from tenants who break their leases early. To the extent they are deemed
capital receipts to compensate the Group for loss in value of property to which they relate, they are credited through the capital column of the
Statement of Comprehensive Income to capital reserves. All other surrender premiums are recognised within rental income in the Statement
of Comprehensive Income.
INTEREST INCOME
Interest income is accounted for on an accruals basis.
SERVICE CHARGES AND EXPENSES RECOVERABLE FROM TENANTS
Where service charges and other expenses are recharged to tenants, the expense and the income received in reimbursement are offset within
the Statement of Comprehensive Income and are not separately disclosed, as the Directors consider that the Group acts as agent in this respect.
Service charges and other property-related expenses that are not recoverable from tenants are recognised in expenses on an accruals’ basis.
(C) OTHER EXPENSES
Expenses are accounted for on an accruals’ basis. The Group’s investment management and administration fees, finance costs and all
other
expenses are charged to revenue through the Statement of Comprehensive Income.
(D) DIVIDENDS PAYABLE
Dividends are accounted for in the period in which they are paid. All the dividends are paid as interim dividends and the divide
nd policy is put to
shareholders for approval.
(E) TAXATION
The Group is a UK REIT and is thereby exempt from corporation tax on both net rental profits and chargeable gains arising on prop
erties using
within its exempt property business. In order to retain UK REIT status, certain ongoing criteria must be maintained. The main criteria are as follows:
− at the start of each accounting period, the assets of the Tax-exempt Business must be at least 75% of the total value of the Group’s assets;
− at least 75% of the Group’s total profits must arise from the Tax-exempt Business;
− at least 90% of the tax-exempt rental business profits must be distributed in the form of a Property Income Distribution within 12 months of the
end of the period; and
− the Group must hold a minimum of three properties with no single property exceeding 40% of the total values of the properties used within the
Tax-exempt Business.
The Directors intend that the Group should continue as a UK REIT for the foreseeable future, with the result that deferred tax is not recognised on
temporary differences relating to the property rental business which is within the UK REIT structure.
Taxation on any profit or loss for the period not exempt under UK-REIT regulations comprises current and deferred tax. Taxation is recognised in the
Statement of Comprehensive Income except to the extent that it relates to items recognised as direct movements in equity, in which case it is also
recognised as a direct movement in equity.
Notes to the Consolidated Financial Statements continued
81Ediston Property Investment Company plc – Annual Report and Accounts 2022
Financial Statements
Current tax is the expected tax payable on the taxable income for the period, using tax rates and laws enacted or substantively enacted at the
year-end date.
Deferred tax is provided using the liability method on all temporary differences at the reporting date between the tax bases of assets and liabilities,
and their carrying amounts for financial reporting purposes calculated using rates and laws enacted or substantively enacted by the end of the period
expected to apply. Deferred tax assets are recognised only to the extent that it is probable that taxable profit will be available against which
deductible temporary differences, carried forward tax credits or tax losses can be utilised. The amount of deferred tax provided is based on the
expected manner of realisation or settlement of the carrying amount of assets and liabilities. In determining the expected manner of realisation of an
asset, the Directors consider that the Group will recover the value of investment property through sale. Deferred tax relating to items recognised
directly in equity is recognised in equity and not in profit or loss.
(F) INVESTMENT PROPERTIES
Investment properties are properties held to earn rentals or for capital appreciation, or both, and are accounted for using the fair value model.
Investment properties are revalued quarterly with resulting gains and losses recognised in profit or loss. These are included in the Consolidated
Statement of Financial Position at their fair values.
Investment properties consist of land and buildings that are not occupied for use by or in the operations of the Group or for sale in the ordinary
course of business but are held to earn rental income together with the potential for capital and income growth.
Investment properties are initially recognised at the fair value of consideration given, including transaction costs associated with the investment
property. Any subsequent capital expenditure incurred in improving investment properties is capitalised in the period incurred and included within
the book cost of the property.
After initial recognition, investment properties are measured at fair value, with gains and losses recognised in the Statement of Comprehensive
Income. Fair value is based on an open market valuation provided by Knight Frank LLP, Chartered Surveyors, at the year-end date using recognised
valuation techniques appropriately adjusted for unamortised lease incentives, lease surrender premiums and rental adjustments.
The determination of the fair value of investment properties requires the use of estimates such as future cash flows from assets (including lettings,
tenants’ profiles, future revenue streams, capital values of fixtures and fittings, plant and machinery, any environmental matters and the overall repair
and condition of the property) and discount rates applicable to those assets. These estimates are based on local market conditions existing at the
reporting date.
In terms of IAS 40, investment property under construction is measured at fair value, with gains and losses recognised in the Statement of
Comprehensive Income. Fair value is based on an open market valuation provided by Knight Frank LLP, Chartered Surveyors, at the year-end date.
The determination of the fair value of investment property under construction requires the use of estimates such as future cash flows from assets
(including lettings, tenants’ profiles, future revenue streams, capital values of fixtures and fittings, plant and machinery, any environmental matters
and the overall repair and condition of the property) and discount rates applicable to those assets. These estimates are based on local market
conditions existing at the reporting date.
Investment property is derecognised when it has been disposed of or permanently withdrawn from use and no future economic benefit is expected
from its disposal. On derecognition, gains and losses on disposals of investment properties are recognised in the Statement of Comprehensive
Income and transferred to the capital reserve – investments sold. Recognition and derecognition occurs on the completion of a sale.
(G) CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash in hand and short-term deposits in banks with an original maturity of three months or le
ss.
(H) TRADE AND OTHER RECEIVABLES
Rents receivable, which are generally due for settlement at the relevant quarter end, are recognised and carried at the original invoice amount less
an allowance for any uncollectable amounts. An expected credit loss methodology is applied to applicable trade and other receivables. Expected
credit losses are recognised in the Statement of Comprehensive Income as part of the ongoing assessment. Any incurred losses are written off
when identified.
The Group applies the IFRS 9 simplified approach to measuring the expected credit losses (ECLs) for trade receivables whereby the allowance
or provision for all trade receivables are based on the lifetime ECLs. The Group considers historical defaults over the expected life of the trade
receivables and any information related to the debtors available at year end to determine forward-looking estimates of possible defaulting.
This is consistent with the approach followed in prior periods.
(I) INTEREST-BEARING LOANS AND BORROWINGS
All loans and borrowings are initially recognised at the fair value of the consideration received net of arrangement costs assoc
iated with the
borrowing. After initial recognition, all interest-bearing loans and borrowings are subsequently measured at amortised cost; any difference is
recognised in the Statement of Comprehensive Income over the period of the borrowing using the effective interest method. Amortised cost is
calculated by taking into account any loan arrangement costs and any discount or premium on settlement.
The Company discloses the bases and impact of early repayment of debt and also the fair value of the loans but includes the creditor amounts on
the accounting policy above.
82 Ediston Property Investment Company plc – Annual Report and Accounts 2022
1. ACCOUNTING POLICIES CONTINUED
(J) PROPERTY ACQUISITIONS
Where property is acquired, via corporate acquisitions or otherwise, management considers the substance of the assets and activit
ies of the
acquired entity in determining whether the acquisition represents the acquisition of a business or the acquisition of an asset.
Where such acquisitions are not judged to be an acquisition of a business, they are not treated as business combinations. Rather, the cost to acquire
the corporate entity is allocated between the identifiable assets and liabilities of the entity based on their relative fair values at the acquisition date.
Accordingly, no goodwill or additional deferred taxation arises. Otherwise, acquisitions are accounted for as business combinations.
(K) RESERVES
SHARE PREMIUM
T
he surplus of net proceeds received from the issuance of new shares over their par value is credited to this account and the related issue costs are
deducted from this account. The reserve is non-distributable. The initial share premium account, on the launch of the Company in 2014, was
transferred to the special distributable reserve, following shareholder approval and successful application to court.
CAPITAL RESERVES
The following are accounted for in the capital reserve – investments sold:
− realised gains and losses arising on the disposal of investment properties.
The following are accounted for in the capital reserve – investments held:
− increases and decreases in the fair value of investment properties held at the period end.
REVENUE RESERVE
The net profit arising in the revenue column of the Statement of Comprehensive Income is added to or deducted from this reserve which is available
for paying dividends. Where the Company’s revenue reserve is insufficient to fund the dividends paid, a transfer can be made to this reserve from the
special distributable reserve.
SPECIAL DISTRIBUTABLE RESERVE
Shortly after the launch of the Company, an application to Court was successfully made for the cancellation of the initial share premium account,
which allowed the balance of the share premium account at that date to be transferred to the special distributable reserve. This reserve is available
for paying dividends and buying back the Company’s shares.
CAPITAL MANAGEMENT
The Group’s capital is represented by the Ordinary Shares, share premium, capital reserves, revenue reserve and special distributable reserve. The
Group is not subject to any externally imposed capital requirements.
The capital of the Group is managed in accordance with its investment policy, in pursuit of its investment objective. Capital management activities
may include the allotment of new shares, the buy back or re-issuance of shares from treasury, the management of the Group’s discount to net asset
value and consideration of the Group’s net gearing level.
There have been no changes in the capital management objectives and policies or the nature of the capital managed during the year.
(L) CHANGES IN ACCOUNTING POLICIES
The accounting policies adopted are consistent with those of the previous financial year.
S
TANDARDS ISSUED BUT NOT YET EFFECTIVE
The following standards have been issued but is not effective for this accounting period and has not been adopted early:
− IAS 1 (amended) – Amendments regarding classifications of liabilities, and disclosure of accounting policies – effective from 1 January 2023
− IAS 8 (amended) – Amendments regarding the definition of accounting estimates – effective from 1 January 2023.
− IAS 12 (amended) – Amendments regarding deferred tax on leases and decommissioning obligations – effective from 1 January 2023.
− IFRS 17 – Amendments to IFRS 17 ‘Insurance Contracts’ (Amendments to IFRS 17 and IFRS 4) – effective from 1 January 2023.
Adoption of the new or amended standards and relevant interpretations in future periods is not expected to have a material impact on the financial
statements of the Group.
The Group does not consider the adoption of any new standards or amendments, other than those noted above, to be applicable to the Group.
Notes to the Consolidated Financial Statements continued
83Ediston Property Investment Company plc – Annual Report and Accounts 2022
Financial Statements
2. INVESTMENT MANAGEMENT FEE
Year ended
30 September
2022
£’000
Year ended
30 September
2021
£’000
Investment management fee 1,703 1,687
Total 1,703 1,687
Ediston Investment Services Limited has been appointed as the Company’s Alternative Investment Fund Manager (AIFM) and Investment Manager,
with the property management services of the Group being delegated to Ediston Properties Limited. Ediston Investment Services Limited is entitled
to a fee calculated as 0.95% per annum of the net assets of the Group up to £250m, 0.75% per annum of the net assets of the Group over £250m
and up to £500m and 0.65% per annum of the net assets of the Group over £500m. The management fee on any cash available for investment
(being all cash held by the Group except cash required for working capital and capital expenditure) is reduced to 0.475% per annum while such cash
remains uninvested. The Management fee is reduced by £40,000 per annum pursuant to the side letter agreement entered into in December 2020.
Ediston Investment Services Limited has committed to investing 20.0% of the quarterly management fee in the Company’s shares each quarter
commencing from 1 October 2020 to 21 December 2023. Refer to Note 17 for further information.
3. OTHER EXPENSES
Year ended
30 September
2022
£’000
Year ended
30 September
2021
£’000
Direct operating expenses for investment properties:
– from which income is received 2,077* 1,016
– from which income is not received – –
Administration fee 190 179
Valuation and other professional fees 174 157
Directors’ fees 216 212
Public relations and marketing 83 73
Auditor’s remuneration for:
Audit services:
– fees payable for the audit of the consolidation and the parent company accounts 80 42
– fees payable for the audit of subsidiaries, pursuant to legislation 45 36
Listing and registrar fees 73 46
Other 274 153
Total 3,212 1,914
* Direct property expenses includes transaction costs for potential acquisitions not concluded.
The movement in expected credited losses, which was previously grouped with other expenses, has been reconsidered and whilst this is immaterial,
it has been presented separately on the face of the Consolidated Statement of Comprehensive Income, in line with the requirements of IAS 1.
4. INTEREST RECEIVABLE
Year ended
30 September
2022
£’000
Year ended
30 September
2021
£’000
Deposit interest 22 –
Total 22 –
5. INTEREST PAYABLE
Year ended
30 September
2022
£’000
Year ended
30 September
2021
£’000
Loan interest 2,837 2,938
Amortisation of loan set-up costs 166 165
Bank interest – 6
Total 3,003 3,109
84 Ediston Property Investment Company plc – Annual Report and Accounts 2022
6. TAXATION
Year ended
30 September
2022
£’000
Year ended
30 September
2021
£’000
Total tax charge – –
A reconciliation of the corporation tax charge applicable to the results at the statutory corporation tax rate to the charge for the year is as follows:
Year ended
30 September
2022
£’000
Year ended
30 September
2021
£’000
Profit/(loss) before taxation 21,487 17,110
UK tax at a rate of 19.0% (2021: 19.0%) 4,082 3,251
Effects of:
REIT exempt profits (1,751) (2,228)
REIT exempt gains/losses (2,452) (1,109)
Excess management expenses of residual business 121 86
Total tax charge – –
The Company served notice to HM Revenue & Customs that the Company, and its subsidiaries, qualified as a REIT with effect from 31 October
2014. Subject to continuing relevant UK-REIT criteria being met, the profits from the Group’s property rental business, arising from both income and
capital gains, are exempt from corporation tax.
The Group has unutilised tax losses carried forward in its residual business of £3,202,000 at 30 September 2022 (2021: £2,566,000). No deferred
tax asset has been recognised on this amount as the Group cannot be certain that there will be taxable revenue profits arising within its residual
business from which the future reversal of the deferred tax asset could be deducted. Although the Group anticipates sufficient capital profits, these
cannot be offset against losses which are revenue in nature.
7. DIVIDENDS
Twelve monthly dividends of 0.4167 pence per share, at a total cost of £10,568,000 (2021: Seven monthly dividends of 0.3333 pence per share and
five monthly dividends of 0.4167 pence per share, at a total cost of £9,334,000) were paid during the year. This equates to an annualised dividend of
5.00 pence (2021: 4.42 pence) per share.
Since the year end, interim dividends, each of 0.4167 pence per share, have been paid on 31 October 2022 and 30 November 2022. A further
interim dividend, of 0.4167 pence per share, will be paid on 30 December 2022. This monthly dividend of 0.4167 pence per share equates to an
annualised dividend level of 5.00 pence per share. All of the distributions made by the Company have been Property Income Distributions (PIDs).
8. EARNINGS PER SHARE
Basic and diluted earnings per share.*
Year ended 30 September 2022 Year ended 30 September 2021
£’000
Pence
per share £’000
Pence
per share
Revenue earnings 8,581 4.06 11, 276 5.34
Capital earnings 12,906 6.11 5,834 2.76
Total earnings 21,487 10.17 17,110 8.10
Average number of shares in issue 211,333,737 211,333,737
* There is no difference between basic and diluted earnings per share (2021: no difference).
Notes to the Consolidated Financial Statements continued
85Ediston Property Investment Company plc – Annual Report and Accounts 2022
Financial Statements
9. INVESTMENT PROPERTIES
Freehold and leasehold properties
As at
30 September
2022
£’000
As at
30 September
2021
£’000
Opening book cost 320,694 315,611
Opening unrealised depreciation (42,710) (47,365)
Opening fair value 277,984 268,246
Movements for the period
Acquisitions – 21,850
Sales – proceeds (67,704) (27,953)
– (Loss)/gain on sales (3,014) 1,179
Transfer to unrealised reserves on properties sold 6,167 –
Capital expenditure 4,279 10,007
Movement in book cost (60,272) 5,083
Unrealised gains on investment properties 29,772 10,798
Unrealised losses on investment properties (13,852) (6,143)
Unrealised movement during the year 15,920 4,655
Transfer between unrealised and realised reserves for properties sold (6,167) –
Movement in fair value 9,753 4,655
Closing book cost 260,422 320,694
Closing unrealised depreciation (32,957) (42,710)
Closing fair value 227,465 277,984
During the year ended 30 September 2022, the Group sold the properties at Bath, Newcastle, Edinburgh, Birmingham, Hartlepool and Telford. The
Group received a net amount of £67,704,000 (2021: £27,953,000) from investments sold during the year. The total book cost of the investments when
it was purchased was £64,551,000 (2021: £26,774,000). These investments have been revalued over time and, until it was sold, any unrealised gains/
losses were included in the fair value of the investments.
During the year, expenditure totalling £4,279,000 (2021: £10,007,000), including capitalised lease incentives, incurred in improving investment
properties, has been capitalised to the book cost of the property.
The fair value of the investment properties reconciled to the appraised value as follows:
As at
30 September
2022
£’000
As at
30 September
2021
£’000
Closing fair value 227,465 277,984
Lease incentives held as debtors (Note 11) 3,970 5,361
Appraised market value per Knight Frank 231,435 283,345
Changes in the valuation of investment properties:
Year ended
30 September
2022
£’000
Year ended
30 September
2021
£’000
(Loss)/gain on sale of investment properties (3,014) 1,179
Unrealised profit realised during the year 6,167 –
Gain on sale of investment properties realised* 3,153 1,179
Unrealised gains on investment properties 9,753 4,655
Total gain on revaluation of investment properties 12,906 5,834
* Represents the difference between the sales proceeds, net of costs, and the property valuation at the time of sale.
86 Ediston Property Investment Company plc – Annual Report and Accounts 2022
9. INVESTMENT PROPERTIES CONTINUED
The gain/loss on revaluation of investment properties reconciles to the movement in appraised market value as follows:
Year ended
30 September
2022
£’000
Year ended
30 September
2021
£’000
Total gain on revaluation of investment properties held at the year end 9,753 4,655
Purchases – 21,850
Capital expenditure 4,279 10,007
Sales – net proceeds (64,551) (26,774)
Movement in fair value (50,519) 9,738
Movement in lease incentives held as debtors (1,391) 632
Movement in appraised market value (51,910) 10,370
At 30 September 2022, the investment properties were valued at £231,435,000 (2021: £283,345,000) by Knight Frank LLP (Knight Frank), in their
capacity as external valuers. This includes no investment property under construction (2021: £Nil). The valuation was undertaken in accordance with
the current editions of RICS Valuation – Global Standards, which incorporate the International Valuation Standards, and the RICS UK National
Supplement. Fair value is based on an open market valuation (the price that would be received to sell an asset, or paid to transfer a liability, in an
orderly transaction between market participants at the measurement date), provided by Knight Frank on a quarterly basis, using recognised valuation
techniques as set out in the Group’s accounting policies.
The Group is required to classify fair value measurements of its investment properties using a fair value hierarchy, in accordance with IFRS 13 ‘Fair
Value Measurement’. In determining what level of the fair value hierarchy to classify the Group’s investments within, the Directors have considered the
content and conclusion of the position paper on IFRS 13 prepared by the European Public Real Estate Association (EPRA), the representative body
of the publicly listed real estate industry in Europe. This paper concludes that, even in the most transparent and liquid markets, it is likely that valuers
of investment property will use one or more significant unobservable inputs or make at least one significant adjustment to an observable input,
resulting in the vast majority of investment properties being classified as Level 3.
Observable market data is considered to be that which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary and
provided by independent sources that are actively involved in the relevant market. In arriving at the valuation Knight Frank will have to make
adjustments to observable data of similar properties and transactions to determine the fair value of a property and this will involve the use of
considerable judgement.
Considering the Group’s specific valuation process, industry guidance, and the level of judgement required in the valuation process, the Directors
believe it appropriate to classify the Group’s assets within Level 3 of the fair value hierarchy.
All leasehold properties are carried at fair value rather than amortised over the term of the lease. The same valuation criteria are applied to leasehold
and freehold properties. All leasehold properties have more than 100 years remaining on the lease term.
The Group’s investment properties, which are all commercial properties, are considered to be a single class of assets. There have been no changes
to the valuation technique used through the period, nor have there been any transfers between levels.
The key unobservable inputs made in determining the fair values are:
− estimated rental value (ERV): the rent at which space could be let in the market conditions prevailing at the date of valuation; and
− net equivalent yield: the equivalent yield is defined as the internal rate of return of the cash flow from the property, assuming a rise to ERV at the
next review, but with no further rental growth.
Information on these inputs is disclosed below:
30 September 2022 30 September 2021
Range
Weighted
average Range
Weighted
average
Estimated rental value per sq. ft. per annum £5 – £42.82 £12.90 £5 – £43 £13.80
Net equivalent yield 5.5% – 8.0% 6.96% 6.0% – 9.8% 7.0%
The ERV for the total portfolio is not materially different from the contracted rent which is disclosed on page 24.
A decrease in the net equivalent yield applied to the portfolio by 0.25% will increase the fair value of the portfolio by £11,087,000 (2021: £10,500,000),
and consequently increase the Group’s reported income from unrealised gains on investments. An increase in yield by 0.25% will decrease the fair
value of the portfolio by £9,243,699 (2021: £9,800,000) and reduce the Group’s income.
The management of market price risk is part of the investment management process and is typical of a property investment company. The portfolio
is managed with an awareness of the effects of adverse valuation movements through detailed and continuing analysis, with an objective of
maximising overall returns to shareholders. Investments in property and property-related assets are inherently difficult to value due to the individual
nature of each property. As a result, valuations are subject to substantial uncertainty. There is no assurance that the estimates resulting from the
valuation process will reflect the actual sales price even where such sales occur shortly after the valuation date. Such risk is minimised through the
appointment of external property valuers. The basis of valuation of the property portfolio is set out in detail in the accounting policies.
Notes to the Consolidated Financial Statements continued
87Ediston Property Investment Company plc – Annual Report and Accounts 2022
Financial Statements
Any changes in market conditions will directly affect the profit and loss reported through the Statement of Comprehensive Income. Details of the
Group’s investment property portfolio held at the balance sheet date are disclosed in Note 9. A 10% increase in the value of the investment
properties held as at 30 September 2022 would have increased net assets available to shareholders and increased the net income for the year by
£23,000,000 (2021: £28,000,000); an equal and opposite movement would have decreased net assets and decreased the net income by an
equivalent amount.
The calculations are based on the investment property valuations at the respective balance sheet date and are not representative of the year as a
whole, nor reflective of future market conditions.
10. INVESTMENT IN SUBSIDIARIES
EPIC (No.1) Limited is a wholly owned subsidiary of Ediston Property Investment Company plc and is incorporated in England and Wales (Company
number: 09106328) with registered address The Scalpel, 18th Floor, 52 Lime Street, London EC3M 7AF. EPIC (No.1) Limited was incorporated on
27 June 2014 and began trading on 5 May 2015. On 5 May 2015, the ownership of the property portfolio held by the Company at that date was
transferred to EPIC (No.1) Limited. The net asset value of EPIC (No.1) Limited as at 30 September 2022 was £96,727,000 (2021: £102,605,000). The
loss of EPIC (No.1) Limited for the year to 30 September 2022 was £1,026,000 (2021: £4,716,000 profit).
EPIC (No.2) Limited is a wholly owned subsidiary of Ediston Property Investment Company plc and is incorporated in England and Wales (Company
number: 10978359) with registered address The Scalpel, 18th Floor, 52 Lime Street, London EC3M 7AF. EPIC (No.2) Limited was incorporated on
23 September 2017, having been established to hold the five properties acquired by the Group and to enter into the Group’s additional loan facility.
The net asset value of EPIC (No.2) Limited as at 30 September 2022 was £99,011,000 (2021: £81,412,000). The profit of EPIC (No.2) Limited for the
period to 30 September 2022 was £23,149,000 (2021: £12,680,000).
11. TRADE AND OTHER RECEIVABLES
As at
30 September
2022
£’000
As at
30 September
2021
£’000
Secured balance held with loan provider 31,047 6,837
Capital and rental lease incentives 3,970 5,361
Rent receivable (net of allowance for expected credit losses) 865 1,175
Other debtors and prepayments 96 17
Total 35,978 13,390
The secured balance held with the loan provider represents monies that have been drawn under the Group’s loan facilities, which are not currently
invested in properties and which have been placed in a secured account with Aviva until required. The balance includes interest receivable of
£90,000 (2021: £186,000). These monies are available for reinvestment in the Group’s investment property portfolio or, if necessary, could be used to
partially repay the Group’s borrowings. During the year ended 30 September 2022, the Company deposited an additional sum of £24,209,000 to the
secured account (2021: utilised £1,646,000 from the secured amount).
Capital and rental lease incentives consist of £3,435,000 (2021: £3,717,000) being the prepayments for rent-free periods recognised over the life of
the lease, £570,000 (2021: £1,644,000) relating to capital incentives paid to tenants, and £33,000 (2021: £Nil) of lease premium being the premium
paid by the tenant. As set out in the accounting policy for rental income, an adjustment is made for these amounts to the fair value of the investment
properties (see Note 9) to prevent double counting.
Rent receivable is shown net of an allowance for expected credit losses balance of £34,000 (2021: £85,000). The movement in the allowance is
shown below and reflected in the Statement of Comprehensive Income.
Allowance for expected credit losses
As at
30 September
2022
£’000
As at
30 September
2021
£’000
Opening balance as at 30 September 85 700
Reversal of allowance for expected credit losses (51) (615)
Closing balance as at 30 September 34 85
12. CASH AND CASH EQUIVALENTS
All cash balances at the year end were held in cash, current accounts or deposit accounts.
As at
30 September
2022
£’000
As at
30 September
2021
£’000
Cash and cash equivalents 50,235 11,6 42
Total 50,235 11,6 42
88 Ediston Property Investment Company plc – Annual Report and Accounts 2022
13. LOANS
As at
30 September
2022
£’000
As at
30 September
2021
£’000
Principal amount outstanding 111,076 111,076
Set-up costs (1,612) (1,612)
Amortisation of loan set-up costs 979 813
Total 110,443 110,277
The Group’s loan arrangements are with Aviva Commercial Finance Limited.
The Group has loans totalling £56,920,000, which carry a blended fixed interest rate of 2.99% and mature in May 2025. This rate is fixed for the
period of the loan as long as the LTV is maintained below 40%, increasing by 10 basis points if the Loan-to-Value is 40% or higher. These loans are
secured over EPIC (No.1) Limited’s property portfolio.
The Group also has a loan totalling £54,156,000, which carries a fixed interest rate of 2.73% and matures in December 2027. This rate is fixed for the
period of the loan as long as the LTV is maintained below 40%, increasing by 10 basis points if the LTV is 40% or higher. This loan is secured over
EPIC (No.2) Limited’s property portfolio. At year end, the covenants were both below 40 per cent LTV.
The Group’s weighted average cost of borrowings remained 2.86% at 30 September 2022.
Under the financial covenants relating to the loans, the Group has to ensure that for each of EPIC (No.1) Limited and EPIC (No.2) Limited:
− the Historic Interest Cover and Projected Interest Cover, each being the passing rental income as a percentage of finance costs and generally
calculated over a period of 12 months to/from the calculation date, is at least 300%; and
− the LTV ratio, being the adjusted value of the loan as a percentage of the aggregate market value of the relevant properties, must not exceed 50%.
Breach of the financial covenants, subject to various cure rights, may lead to the loans falling due for repayment earlier than the final maturity dates
stated above. The Group has complied with all the loan covenants during the year. Under the terms of early repayment relating to the loans, the cost
of repaying the loans on 30 September 2022, based on the yield on the treasury 5% 2025 and treasury 4.25% 2027 plus a margin of 0.5%, would
have been approximately £111,520,000 (2021: £120,268,000), including repayment of the principal of £111,076,000 (2021: £111,076,000).
The fair value of the loans based on a marked-to-market basis, being the yield on the relevant treasury plus the appropriate margin, was £98,682,000
as at 30 September 2022 (2021: £114,918,000). This includes the principal amount borrowed. Analysis of net debt:
Cash and cash
equivalents
2022
£’000
Borrowing
2022
£’000
Net Debt
2022
£’000
Cash and cash
equivalents
2021
£’000
Borrowing
2021
£’000
Net debt
2021
£’000
Opening balance 11,642 (110,277) (98,635) 12,308 (110,112) (97,804)
Cash flows 38,593 2,837 41,430 (666) – (666)
Non-cash flows –(3,003)(3,003) –(165)(165)
Closing balance 50,235 (110,443) (60,208) 11,642 (110,277) (98,635)
14. TRADE AND OTHER PAYABLES
As at
30 September
2022
£’000
As at
30 September
2021
£’000
Rental income received in advance 406 1,320
VAT payable to HMRC 471 549
Investment management fee payable 438 437
Loan interest payable 444 444
Capital expenditure payable – 2
Other payables 1,008 438
Total 2,767 3,190
The Group’s payment policy is to ensure settlement of supplier invoices in accordance with stated terms.
15. NET ASSET VALUE
The Group’s net asset value per Ordinary Share of 94.86 pence (2021: 89.69 pence) is based on equity shareholders’ funds of £200,468,000 (2021:
£189,549,000) and on 211,333,737 (2021: 211,333,737) Ordinary Shares, being the number of shares in issue at the year end.
The net asset value calculated under IFRS above is the same as the EPRA net asset value at 30 September 2022 and 30 September 2021.
Notes to the Consolidated Financial Statements continued
89Ediston Property Investment Company plc – Annual Report and Accounts 2022
Financial Statements
16. CALLED-UP EQUITY SHARE CAPITAL
Allotted, called-up and fully paid Ordinary Shares of 1 pence par value Number of shares £’000
Opening balance as at 30 September 2021 211,333,737 2,113
Issue of Ordinary Shares ––
Closing balance as at 30 September 2022 211,333,737 2,113
The Company did not issue any Ordinary Shares in the last two financial years. The Company did not hold any shares in treasury during the previous
two years. Under the Company’s Articles of Association, the Company may issue an unlimited number of Ordinary Shares but issuance is subject to
shareholder approval.
Ordinary shareholders are entitled to all dividends declared by the Company and to all of the Company’s assets after repayment of its borrowings
and ordinary creditors. Ordinary shareholders have the right to vote at meetings of the Company. All Ordinary Shares carry equal voting rights.
17. RELATED PARTIES
There have been no material transactions between the Company and its Directors during the year other than amounts paid to them in respect of
expenses and remuneration for which there were no outstanding amounts payable at the year end.
Ediston Investment Services Limited has received investment management fees of £1,703,000 in relation to the year ended 30 September 2022
(2021: £1,687,000), of which £438,000 (2021: £437,000) remained payable at the year end. Ediston Investment Services Limited received no
development management fees in relation to the year ended 30 September 2022 (2021: £257,000).
Ediston Investment Services Limited acquired 541,000 shares in the Company during the year ended 30 September 2022 (2021: 374,215) as part of
its commitment to reinvest 20% of its quarterly management fee.
The aggregate shareholding of the Manager and its senior personnel as at 30 September 2022 is 2,618,148 (2021: 1,984,667) shares, 1.2% (2021:
0.9%) of the issued share capital as at that date.
18. OPERATING SEGMENTS
The Board has considered the requirements of IFRS 8 ‘Operating Segments’. The Board is of the view that the Group is engaged in a single unified
business, being property investment, and in one geographical area, the United Kingdom, and that therefore the Group has no segments. The Board
of Directors, as a whole, has been identified as constituting the chief operating decision maker of the Group. The key measure of performance used
by the Board to assess the Group’s performance is the total return on the Group’s net asset value. As the total return on the Group’s net asset value
is calculated based on the net asset value per share calculated under IFRSs as shown at the foot of the Consolidated Statement of Financial Position,
the key performance measure is that prepared under IFRSs. Therefore, no reconciliation is required between the measure of profit or loss used by
the Board and that contained in the Financial Statements.
The view that the Group is engaged in a single unified business is based on the following considerations:
− one of the key financial indicators received and reviewed by the Board is the total return from the property portfolio taken as a whole;
− there is no active allocation of resources to particular types or groups of properties in order to try to match the asset allocation of an index or
benchmark; and
− the management of the portfolio is ultimately delegated to a single property manager, Ediston Properties Limited.
19. FINANCIAL INSTRUMENTS
Consistent with its objective, the Group holds UK commercial property investments. In addition, the Group’s financial instruments comprise cash and
receivables and payables that arise directly from its operations. The Group does not have exposure to any derivative instruments.
The Group is exposed to various types of risk that are associated with financial instruments. The most important types are credit risk, liquidity risk
and interest rate risk. There is no foreign currency risk as all assets and liabilities of the Group are maintained in pounds sterling. The Group has
insignificant exposure to market price risk related to financial instruments.
The Board reviews and agrees policies for managing the Group’s risk exposure. These policies are summarised below and have remained
unchanged for the period under review. These disclosures include, where appropriate, consideration of the Group’s investment properties which,
whilst not constituting financial instruments as defined by IFRSs, are considered by the Board to be integral to the Group’s overall risk exposure.
90 Ediston Property Investment Company plc – Annual Report and Accounts 2022
19. FINANCIAL INSTRUMENTS CONTINUED
SECURITIES FINANCING TRANSACTIONS (SFT)
The Company has not, during the year to 30 September 2022 (2021: same), participated in any: repurchase transactions; securities lending or
borrowing; buy-sell back transactions; margin lending transactions; or total return swap transactions (collectively called SFT). As such, it has no
disclosure to make in satisfaction of the EU regulations on transparency of SFT.
The following table summarises the Group’s financial assets and liabilities into the categories required by IFRS 7 ‘Financial Instruments: Disclosures’:
As at 30 September 2022 As at 30 September 2021
Held at fair
value through
profit or loss
£’000
Financial
assets and
liabilities at
amortised cost
£’000
Held at fair
value through
profit or loss
£’000
Financial
assets and
liabilities at
amortised cost
£’000
Financial assets
Trade and other receivables –31,912 –8,012
Cash and cash equivalents –50,235 –11,642
–82,147 –19,654
Financial liabilities
Loan –(110,443) –(110,277)
Trade and other payables –(1,890) –(1,321)
– (112,333) – (111,598)
Apart from the Aviva loans, as disclosed in Note 13, the fair value of financial assets and liabilities is not materially different from their carrying value in
the financial statements.
CREDIT RISK
Credit risk is the risk that a counterparty will be unable or unwilling to meet a commitment that it has entered into with the Group. At the reporting
date, the Group’s financial assets exposed to credit risk amounted to £82,147,000 (2021: £19,654,000), consisting of cash of £50,235,000 (2021:
£11,642,000), the secured balance held with the loan provider of £31,047,000 (2021: £6,837,000) and rent receivable of £865,000 (2021: £1,175,000).
In the event of default by a tenant, if it is in financial difficulty or otherwise unable to meet its obligations under the lease, the Group will suffer a rental
shortfall and incur additional expenses until the property is re-let. These expenses could include legal and surveyor’s costs in re-letting, maintenance
costs, insurances, rates and marketing costs, and may have an adverse impact on the financial condition and performance of the Group. The Board
receives regular reports on concentrations of risk and any tenants in arrears. The Investment Manager monitors such reports in order to anticipate,
and minimise the impact of, defaults by occupational tenants. In assessing the probability of default of the individual debtor. The Directors have
considered a number of factors including history of default, past experience, future expectations as well as the support the debtor receives from its
parent company and the ability to settle the amount receivable when due.
Where there are concerns over the recoverability of rental income, the Group monitors creditworthiness of the tenants and makes provision for
potential bad debts based on the ECL model. The Group considers historical defaults over the expected life of the trade receivables and any
information related to the debtors available at year end to determine forward-looking estimates of possible defaulting. This is consistent with the
approach followed in prior periods. Given an improved rent profile of tenants and having considered their ability to pay, the wider expected credit
losses considered by the Group has reduced to £34,000 at 30 September 2022 from £85,000 at 30 September 2021. Having given consideration
to these criteria, the Group has determined that there are no additional expected credit losses other than those already recognised. As at
30 September 2022, collection plans are in place to recover any outstanding amounts. There were no other financial assets that were either
past due or considered impaired at 30 September 2022 or at 30 September 2021.
At 30 September 2022, the Group held £47,382,000 (2021: £8,789,000) with RBS and £2,853,000 (2021: £2,853,000) with Bank of Scotland plc.
Bankruptcy or insolvency of the bank holding cash balances may cause the Group’s ability to access cash placed with them to be delayed, limited or
lost. Both RBS and Bank of Scotland plc are rated by all the main rating agencies. Should the credit quality or the financial position of the banks
currently employed significantly deteriorate, cash holdings would be moved to another bank. As at 30 September 2022, ‘S&P Global Ratings’ credit
rating for RBS was A-1 and Moody’s was P-1. The equivalent credit ratings for Bank of Scotland plc were A-1 and P-1, respectively. There has been
no change in the fair values of cash or receivables as a result of changes in credit risk in the current or prior periods.
Notes to the Consolidated Financial Statements continued
91Ediston Property Investment Company plc – Annual Report and Accounts 2022
Financial Statements
LIQUIDITY RISK
Liquidity risk is the risk that the Group will encounter difficulties in realising assets or otherwise raising funds to meet financial commitments. The
Group’s investments comprise commercial properties.
Property and property-related assets in which the Group invests are not traded in an organised public market and are relatively illiquid assets,
requiring individual attention to sell in an orderly way. As a result, the Group may not be able to liquidate quickly its investments in these properties at
an amount close to their fair value in order to meet its liquidity requirements.
The Group’s liquidity risk is managed on an ongoing basis by the Investment Manager and monitored on a quarterly basis by the Board. In order to
mitigate liquidity risk the Group has a comprehensive nine-year cash flow forecast that aims to have sufficient cash balances, taking into account
projected receipts for rental income and property sales, to meet its obligations for a period of at least 12 months. At the reporting date, the maturity
of the financial assets was:
FINANCIAL ASSETS AS AT 30 SEPTEMBER 2022
Three months
or less
£’000
More than
three months
but less than
one year
£’000
More than
one year
but less than
three years
£’000
More than
three years
£’000
Total
£’000
Cash and cash equivalents 50,235 – – – 50,235
Secured balance held with loan provider 31,047 – – – 31,047
Rent receivable 865 – – – 865
Total 82,147–––82,147
FINANCIAL ASSETS AS AT 30 SEPTEMBER 2021
Three months
or less
£’000
More than
three months
but less than
one year
£’000
More than
one year
but less than
three years
£’000
More than
three years
£’000
Total
£’000
Cash and cash equivalents 11,642 – – – 11,642
Secured balance held with loan provider 6,837 – – – 6,837
Rent receivable 1,175 – – – 1,175
Total 19,654–––19,654
At the reporting date, the financial liabilities on a contractual maturity basis were:
FINANCIAL LIABILITIES AS AT 30 SEPTEMBER 2022
Three months
or less
£’000
More than
three months
but less than
one year
£’000
More than
one year
but less than
three years
£’000
More than
three years
£’000
Total
£’000
Loan – – 56,920 54,156 111,076
Interest payable on loan 802 2,378 5,927 3,439 12,546
Other payables 1,446 – – – 1,446
Total 2,248 2,378 62,847 57,595 125,068
FINANCIAL LIABILITIES AS AT 30 SEPTEMBER 2021
Three months
or less
£’000
More than
three months
but less than
one year
£’000
More than
one year
but less than
three years
£’000
More than
three years
£’000
Total
£’000
Loan – – – 111,076 111,076
Interest payable on loan 802 2,378 6,389 6,162 15,731
Other payables 877 – – – 877
Total 1,679 2,378 6,389 117,238 127,684
Included in the tables above are payments due to Aviva, including interest payable, in connection with the loans as detailed in Note 13.
As at 30 September 2022, the Group remain in compliance with the loan covenants.
As at 30 September 2022, EPIC 1 reported a LTV of 38.10% (LTV of less than 50% required), the historical interest cover was reported at 349.74%
(historical interest cover of at least 300% required) and the projected interest cover was reported at 493.81% (projected interest cover of at least
300% required).
As at 30 September 2022, EPIC 2 reported a LTV of 32.78% (LTV of less than 50% required), the historical interest cover was reported at 627.54%
(historical interest cover of at least 300% required) and the projected interest cover was reported at 557.03% (projected interest cover of at least
300% required).
92 Ediston Property Investment Company plc – Annual Report and Accounts 2022
19. FINANCIAL INSTRUMENTS CONTINUED
INTEREST RATE RISK
Some of the Group’s financial instruments will be interest-bearing. They are a mix of both fixed and variable rate instruments with differing maturities.
As a consequence, the Group is exposed to interest rate risk due to fluctuations in the prevailing market rate. The Group’s exposure to floating
interest rates gives cash flow interest rate risk and its exposure to fixed interest rates gives fair value interest rate risk.
The following table sets out the carrying amount of the Group’s financial instruments that are exposed to interest rate risk:
As at 30 September 2022 As at 30 September 2021
Fixed rate
£’000
Variable rate
£’000
Fixed rate
£’000
Variable rate
£’000
Cash and cash equivalents –50,235 –11,642
Secured balance held with loan provider –31,047 –6,837
Loan (110,443) – (110,277) –
VARIABLE RATE
An increase of 1% in interest rates would have increased the reported profit for the year and increased the net assets at 30 September 2022 by
£813,000 (2021: 0.5% £92,000), a decrease of 1% in interest rates would have had an equal and opposite effect. These calculations are based on the
variable rate balances at the respective balance sheet date and are not representative of the year as a whole, nor reflective of actual future
conditions.
FIXED RATE
Considering the effect on the loan balance, it is estimated that an increase of 1% in interest rates as at the balance sheet date would have decreased
its fair value by approximately £3,373,000 (2021: 0.50% £2,500,000) and a decrease of 1% would have increased its fair value by approximately
£3,390,000 (2021: 0.50% £2,600,000). As the loan balance is recognised in the Consolidated Financial Statements at amortised cost, this change in
fair value would not have resulted in a change in the reported loss for the year, nor the net assets of the Group at the year end.
20. CAPITAL COMMITMENTS
The Group had contractual commitments totalling £62,100 in relation to new frontages and roofs overclad of units 1A-1C, Stirling, as at 30 September
2022 (30 September 2021: £4,666,000).
21. OPERATING LEASES
The Group leases out its investment properties under operating leases. These properties are measured under the fair value model as the properties
are held to earn rentals. All leases are non-cancellable with a weighted average unexpired lease term of 4.5 years (2021: 5.0 years).
The Group’s investment properties are leased to tenants under the terms of property leases that include rent reviews as determined at the inception
of the lease. These reviews can be linked to RPI, fixed rate or stepped rent increases.
The following table sets out the maturity analysis of leases receivables, showing the undiscounted lease payments under non-cancellable operating
leases receivable by the Group:
As at
30 September
2022
£’000
As at
30 September
2021
£’000
Year 1 12,795 19,448
Year 2 11,510 16,136
Year 3 10,182 14,267
Year 4 7,8 57 12,887
Year 5 6,680 10,643
Year 6 and onwards 16,026 27,507
Total 65,050 100,888
The largest single tenant at the year end accounted for 9% (2021: 6.4%) of the contracted rent.
Notes to the Consolidated Financial Statements continued
93Ediston Property Investment Company plc – Annual Report and Accounts 2022
Financial Statements
22. ALTERNATIVE INVESTMENT FUND MANAGERS (AIFM) DIRECTIVE
Ediston Investment Services Limited has been authorised as an AIFM by the Financial Conduct Authority under the AIFMD regulations and
became the Group’s AIFM with effect from 24 February 2016. In accordance with the AIFMD, information in relation to the Group’s leverage and the
remuneration of the Company’s AIFM is required to be made available to investors. Ediston Investment Services Limited has provided disclosures
on its website, https://www.ediston.com/about-us-ediston-investment-services-limited/, incorporating the requirements of the AIFMD regulations
regarding remuneration.
The Group’s maximum and actual leverage levels at 30 September 2022 are shown below:
Leverage ratio
Leverage exposure
Gross
method
Commitment
method
Maximum limit 3.00 3.00
Actual 1.3 1.3
For the purposes of the AIFMD, leverage is any method which increases the Group’s exposure, including the borrowing of cash and the use of
derivatives. It is expressed as a percentage of the Group’s exposure to its net asset value and is calculated on both a gross and commitment method.
Under the gross method, exposure represents the sum of the Group’s positions after deduction of cash balances, without taking account of any
hedging or netting arrangements. Under the commitment method, exposure is calculated in a similar manner as the Company doesn’t have any
hedging or netting arrangements.
The leverage limits are set by the AIFM and approved by the Board, and are in line with the maximum leverage levels permitted in the Company’s
Articles of Association. The AIFM is also required to comply with the gearing parameters set by the Board in relation to borrowings.
Detailed regulatory disclosures to investors in accordance with the AIFMD are contained on the Company’s website.
23. SUBSEQUENT EVENTS
No significant events have occurred between the statement of financial position date and the date when the financial statements have been
approved, which would require adjustments to, or disclosure in the financial statements.
94 Ediston Property Investment Company plc – Annual Report and Accounts 2022
Notes
As at
30 September
2022
£’000
As at
30 September
2021
£’000
Non-current assets
Investment in subsidiary undertakings 3 200,553 177,448
200,553 177,448
Current assets
Trade and other receivables 4 3,077 3,521
Cash and cash equivalents 5 2,958 2,989
6,035 6,510
Total assets 206,588 183,958
Current liabilities
Trade and other payables 6 (1,304) (1,143)
Total liabilities (1,304) (1,143)
Net assets 205,284 182,815
Equity and reserves
Called-up equity share capital 7 2,113 2,113
Share premium 125,559 125,559
Capital reserve – investments sold 4,649 4,649
Capital reserve – investments held (9,112) (32,217)
Special distributable reserve 82,075 82,711
Revenue reserve – –
Equity shareholders’ funds 205,284 182,815
Net asset value per Ordinary Share 10 97.15p 86.51p
The accompanying notes are an integral part of these Financial Statements.
Company number: 09090446.
The Company made a profit for the year ended 30 September 2022 of £33,037,000 (2021: loss of £8,955,000).
The Company Financial Statements on pages 94 to 99 were approved by the Board of Directors on 13 December 2022 and signed on its behalf by:
William Hill
Chairman
Company Statement of Financial Position
As at 30 September 2022
95Ediston Property Investment Company plc – Annual Report and Accounts 2022
Financial Statements
Notes
Share capital
account
£’000
Share premium
£’000
Capital
reserve –
investments held
£’000
Capital
reserve –
investments sold
£’000
Special
distributable
reserve
£’000
Revenue
reserve
£’000
Total equity
£’000
As at 30 September
2021 2,113 125,559 (32,217) 4,649 82,711 – 182,815
Profit and total
comprehensive
income for the year ––23,105––9,93233,037
Transactions with
owners recognised
in equity:
Issue of Ordinary Shares 7 –––––––
Dividends paid 2 –––––(10,568)(10,568)
Transfer from special
reserve ––––(636)636–
As at 30 September
2022 2,113 125,559 (9,112) 4,649 82,075 – 205,284
For the year ended 30 September 2021
Notes
Share capital
account
£’000
Share premium
£’000
Capital
reserve –
investments held
£’000
Capital
reserve –
investments sold
£’000
Special
distributable
reserve
£’000
Revenue
reserve
£’000
Total equity
£’000
As at 30 September
2020 2,113 125,559 (32,289) 4,649 83,162 – 183,194
Profit and total
comprehensive
income for the year ––72––8,8838,955
Transactions with
owners recognised
in equity:
Issue of Ordinary Shares 7 –––––––
Dividends paid 2 –––––(9,334)(9,334)
Transfer from special
reserve ––––(451)451–
As at 30 September
2021 2,113 125,559 (32,217) 4,649 82,711 – 182,815
The accompanying notes are an integral part of these Financial Statements.
Company Statement of Changes in Equity
For the year ended 30 September 2022
96 Ediston Property Investment Company plc – Annual Report and Accounts 2022
1. ACCOUNTING POLICIES
BASIS OF PREPARATION
The Company Financial Statements have been prepared in accordance with FRS 101: Reduced Disclosure Framework and applicable legal and
regulatory requirements of the Companies Act 2006.
The accounts have been prepared on a historical cost basis. The notes and financial statements are presented in pounds sterling (being the
functional currency and presentational currency for the Company) and are rounded to the nearest thousand except where otherwise indicated.
The major accounting policies of the Company are set out below and have been applied consistently throughout the current and prior year.
The results of the Company have been included in the Group’s Consolidated Financial Statements as presented on pages 75 to 93. The accounting
policies adopted are consistent with those adopted by the Group as stated in Note 1 to the Consolidated Financial Statements. The only additional
policy applied is in relation to investments in subsidiary undertakings and this is set out below.
The Company has taken advantage of the following exemptions permitted under FRS 101:
− an exemption from preparing the Company cash flow statement and related notes;
− an exemption from listing any new or revised standards that have not been adopted or providing information about their likely impact; and
− an exemption from disclosing transactions between the Company and its wholly-owned subsidiaries.
Shareholders were informed about the Company’s intention to use the above disclosure exemptions in the Annual Report and Accounts 2017 and no
objections have since been received. A shareholder holding, or shareholders holding in aggregate, 5% or more of the total allotted shares in Ediston
Property Investment Company plc may serve objections to the future use of the disclosure exemptions on Ediston Property Investment Company
plc, in writing, to its registered office (The Scalpel, 18th Floor, 52 Lime Street, London EC3M 7AF) to be received not later than 90 days prior to the
end of Company’s relevant reporting period.
GOING CONCERN
The Financial Statements are prepared on the going concern basis as explained for the Consolidated Financial Statements on page 79.
INVESTMENTS IN SUBSIDIARY UNDERTAKINGS
Investments in subsidiary undertakings are stated at cost less, where applicable, any provision for impairment under the provisions of IAS 36. A
provision for impairment is recognised to reflect the recoverable amount (Note 3) of the subsidiaries. In accordance with IAS 36, provisions for
impairment will be reduced or increased dependent on the assessment of the recoverable amount of the subsidiary in future. The value of
investments can never exceed costs.
CAPITAL MANAGEMENT
The Company’s capital is represented by the Ordinary Shares, Share Premium, Capital Reserves, Revenue Reserve and Special Distributable
Reserve and is managed in line with the policies set out for the Group on page 82.
COMPANY PROFIT FOR THE FINANCIAL YEAR AFTER TAX
Under Section 408 of the Companies Act 2006, the Company is exempt from the requirement to present its own profit and loss account. The profit
after tax for the year was £33,037,000 (2021: £8,955,000).
The Company does not have any employees (2021: nil). Details of the Directors’ fees paid during the year are disclosed in the Group’s Remuneration
Report and in Note 3 to the Consolidated Financial Statements. All of the Directors’ fees were paid by the parent company, although £217,000 (2021:
£202,000) was subsequently re-allocated to the subsidiaries to reflect the work completed by the Directors in relation to the property assets held by
those companies.
Audit fees in relation to the parent company only were £70,000 (2021: £42,000), excluding VAT. There were no non-audit fees paid to Grant Thornton
UK LLP by the Company during the year (2021: nil).
2. DIVIDENDS
Details of dividends paid by the Company are included in Note 7 to the Consolidated Financial Statements.
Notes to the Company Financial Statements
97Ediston Property Investment Company plc – Annual Report and Accounts 2022
Financial Statements
3. INVESTMENTS IN SUBSIDIARIES
As at
30 September
2022
£’000
As at
30 September
2021
£’000
Opening balance – Investment in EPIC (No.1) Limited 99,527 104,160
Opening balance – Investment in EPIC (No.2) Limited 77,921 73,216
Opening balance – Investments in subsidiaries 177,448 177,376
Impairment loss – EPIC (No.1) Limited (509) (4,633)
Impairment loss reversal – EPIC (No.2) Limited 23,614 4,705
Closing balance – Investment in EPIC (No.1) Limited 99,018 99,527
Closing balance – Investment in EPIC (No.2) Limited 101,535 77,921
Closing balance – Investments in subsidiaries 200,553 177,448
At 1 October 2017, the Company had a single equity investment in a wholly owned subsidiary, EPIC (No.1) Limited. During the year ended 30 September
2018, EPIC (No.1) Limited repurchased £19,520,000 of the equity previously issued to the Company.
During the year ended 30 September 2018, the Company subscribed for shares in a newly incorporated subsidiary, EPIC (No.2) Limited.
The Company’s two property-owning subsidiaries above has seen an increase in investment property values over the course of the year to
30 September 2022. Details of the movement in the fair value of the investment properties of the Group are set out in Note 9 to the Consolidated
Financial Statements. At 30 September 2022, an assessment of potential impairment of the equity investment in EPIC (No.1) Limited and EPIC (No.2)
Limited was conducted, pursuant to the principles of IAS 36: Impairment of Assets. The net assets of EPIC (No.1) were lower than its carrying value
which resulted in an impairment, and the net assets of EPIC (No. 2) Limited were higher than its carrying value which triggered an impairment write
back. Following the principles of IAS 36 an impairment of £509,000 (2021: £4,633,000 impairment) was identified for EPIC (No.1) and a write back
of £23,614,000 (2021: £4,705,000) in EPIC 2 was determined.
In terms of IAS 36, an asset should be carried at no more than their recoverable amount. The recoverable amount is determined as the higher of an
asset’s fair value less costs of disposal (FVLCOD) and its value in use. The cost of disposal used in determining the recoverable amount was 1.5%
of the fair value of the asset. The value in use of an asset is the present value of the future cash flows expected to be derived from the asset.
In the assessment of this impairment, consideration was given to the nature of the assets and liabilities of the subsidiaries and a suitable
determination of the recoverable amount of the investment in the subsidiaries. In line with the requirements of IAS 36, the value in use of each
subsidiary was determined using projected cash flows over a five-year period using a discount rate of 7.7% (2021: 7%) and an expected growth rate
of 2% for periods beyond the projected period of five years. The valuation technique is the sum of the fair value of the different components within the
subsidiaries. Properties are carried at fair value, cash and working capital are held at amortised cost, which is considered its fair value. The fair value
of debt was discounted based on a blended discount rate of 7.05% for EPIC (No.1) Limited and a discount rate of 6% for EPIC (No.2) Limited. The fair
value hierarchy of the assets has been assessed as part of the fair value less costs of disposal, the assessment sits as a level 3 asset (refer to the
accounting policies in the group accounts for the definition of a level 3 asset). The cost of disposal used in determining the recoverable amount was
3% of the fair value of the asset. The inputs to the calculations are subject to a high degree of estimation uncertainty.
EPIC (No.1) Limited has a FVLCOD of £99,018,000, which is considered an appropriate recoverable amount. The impairment thus reflects the
amount by which the carrying value of £99,527,000 exceeds the recoverable amount of the investment in EPIC (No.1). A reasonably possible increase
of 10% in the fair value of EPIC 1’s property values would result in a recoverable amount of £104,160,000 this is limited to the original purchase price
of the subsidiary in line with the principals of IAS36. Similarly, a decrease of 10% in the fair value of the subsidiary would result in a decrease in the
recoverable amount to £88,866,000.
EPIC (No.2) Limited has a FVLCOD of £101,535,000, which is considered an appropriate recoverable amount. A write back of previous impairment of
£23,614,000 has therefore been raised, as the recoverable amount of the investment in EPIC (No.2) Limited exceeds its carrying amount of £77,921,000.
A reasonably possible increase of 10% in the fair value of EPIC 2’s property values would result in a recoverable amount of £105,505,000 this is limited to
the original purchase price of the subsidiary in line with the principals of IAS36. Similarly, a decrease of 10% in the fair value of the subsidiary would result
in a decrease in the recoverable amount to £90,937,000.
See Note 10 to the Consolidated Financial Statements on page 87 for further details on the Group structure.
98 Ediston Property Investment Company plc – Annual Report and Accounts 2022
4. TRADE AND OTHER RECEIVABLES
As at
30 September
2022
£’000
As at
30 September
2021
£’000
Amount due from subsidiary undertakings 3,052 3,504
Other receivables and prepayments 25 17
Total 3,077 3,521
The amount due from subsidiary undertakings is a short-term balance, which arises from the re-allocation of the Group VAT payment and certain
expenses between members of the Group on a quarterly basis and is settled in cash shortly after each quarter end.
Based on the assessment of impairment of the subsidiaries, there are no expected credit losses related to the amounts due from subsidiary undertakings.
5. CASH AND CASH EQUIVALENTS
All cash balances at the year end were held in cash, current accounts or deposit accounts.
6. TRADE AND OTHER PAYABLES
As at
30 September
2022
£’000
As at
30 September
2021
£’000
VAT payable to HMRC 471 549
Investment management fee payable 438 437
Other payables 395 157
Total 1,304 1,143
The Company’s payment policy is to ensure settlement of supplier invoices in accordance with stated terms.
7. SHARE CAPITAL
Allotted, called-up and fully paid Ordinary Shares of 1 pence par value Number of shares £’000
Opening balance as at 30 September 2021 211,333,737 2,113
Issue of Ordinary Shares ––
Closing balance as at 30 September 2022 211,333,737 2,113
During the year to 30 September 2022, the Company did not issue any Ordinary Shares (year ended 30 September 2021: did not issue any Ordinary
Shares). The Company did not buyback or resell from treasury any Ordinary Shares during the year (2021: nil). The Company did not hold any shares
in treasury. Under the Company’s Articles of Association, the Company may issue an unlimited number of Ordinary Shares.
Ordinary shareholders are entitled to all dividends declared by the Company and to all of the Company’s assets after repayment of its borrowings
and ordinary creditors. Ordinary shareholders have the right to vote at meetings of the Company. All Ordinary Shares carry equal voting rights.
Notes to the Company Financial Statements continued
99Ediston Property Investment Company plc – Annual Report and Accounts 2022
Financial Statements
8. FINANCIAL INSTRUMENTS
The Company’s risks associated with financial instruments and the policies for managing its risk exposure are consistent with those detailed in Note
19 to the Consolidated Financial Statements on pages 89 to 92.
With regards to the categorisation required by IFRS 7 ‘Financial Instruments: Disclosures’ all of the Company financial assets and liabilities are
categorised as ‘financial assets and liabilities at amortised cost’. The Company’s financial assets consist of trade and other receivables and cash and
cash equivalents. The Company’s financial liabilities consist of trade and other payables.
At the reporting date, the Company’s financial assets exposed to credit risk amounted to £6,010,000 (2021: £6,493,000), consisting of the
Company’s cash balance of £2,958,000 (2021: £2,989,000) and current account balances due from its wholly-owned subsidiaries of £3,052,000
(2021: £3,504,000).
The maturity of the Company’s financial liabilities (on a contractual maturity basis) at 30 September 2022 was as follows:
Three months
or less
£’000
More than three
months but less
than three years
£’000
More than
three years
£’000
Total
£’000
Other payables 833 – – 833
The maturity of the Company’s financial liabilities (on a contractual maturity basis) at 30 September 2021 was as follows:
Three months
or less
£’000
More than three
months but less
than three years
£’000
More than
three years
£’000
Total
£’000
Other payables 594 – – 594
The Company’s only financial instrument exposed to interest rate risk at 30 September 2022 was its cash balance of £2,958,000 (2021: £2,989,000),
which received a variable rate of interest. An increase of 1% in interest rates would have increased the reported profit for the year, and the net assets
at year end, by £30,000 (2021: 0.50% £15,000). A decrease of 1% in interest rates would have had an equal and opposite effect. These calculations
are based on the variable rate balances at the respective balance sheet date and are not representative of the year as a whole, nor reflective of actual
future conditions.
9. RELATED PARTY TRANSACTIONS AND TRANSACTIONS WITH THE INVESTMENT MANAGER
Other than transactions between the Company and its wholly owned subsidiaries, in relation to which the Company has adopted the permitted
exemption allowed by FRS 101, related party transactions are the same for the Company as for the Group. For details, refer to Note 17 to the
Consolidated Financial Statements on page 89. The fees payable to the Directors and the Investment Manager are initially paid by the Company, but
may be reallocated, in whole or in part, to the subsidiaries.
10. NET ASSET VALUE
The Company’s NAV per Ordinary Share of 97.15 pence (2021: 86.51 pence) is based on equity shareholders’ funds of £205,284,000 (2021:
£182,815,000) and on 211,333,737 (2021: 211,333,737) Ordinary Shares, being the number of shares in issue at the year end.
100 Ediston Property Investment Company plc – Annual Report and Accounts 2022
TAX STRUCTURE
Ediston Property Investment Company plc is tax resident in the UK and is a REIT under Part 12 of the Corporation Tax Act 2010, subject to
continuing compliance with the REIT rules and regulations. The main REIT rules with which the Group must comply are set out in the section entitled
‘Taxation’ on page 80.
A REIT does not pay UK corporation tax on the profits (income and capital gains) derived from its qualifying property rental businesses in the UK
and elsewhere (the Tax-Exempt Business), provided that certain conditions are satisfied. Instead, distributions in respect of the Tax-Exempt Business
will be treated for UK tax purposes as UK property income in the hands of shareholders (see further below for details on the UK tax treatment of
shareholders in a REIT). A dividend paid by the Company relating to profits or gains of the Tax-Exempt Business is referred to in this section as a PID.
However, UK corporation tax remains payable in the normal way in respect of income and gains from the Company’s business (generally including
any property trading business) not included in the Tax-Exempt Business (the residual business). Dividends relating to the residual business are
treated for UK tax purposes as normal dividends. Any normal dividend paid by the Company is referred to as a Non-PID Dividend.
Distributions to shareholders may potentially include both PID and Non-PID Dividends as calculated in accordance with specific attribution rules. The
Company provides shareholders with a certificate setting out how much, if any, of their dividends is a PID and how much is a Non-PID dividend. A
breakdown of the dividends paid in relation to the years ended 30 September 2021 and 30 September 2022 is set out below. Details of all the
dividends paid since the Company’s launch are available at www.ediston-reit.co.uk.
Distribution Ex-dividend date Payment date
PID
(per share)
Non-PID
(per share)
Total
(per share)
In relation to the year ended 30 September 2021:
First interim 07/11/20 29/11/20 0.3333p – 0.3333p
Second interim 12/12/20 31/12/20 0.3333p – 0.3333p
Third interim 16/01/21 31/01/21 0.3333p – 0.3333p
Fourth interim 13/02/21 28/02/21 0.3333p – 0.3333p
Fifth interim 12/03/21 31/03/21 0.3333p – 0.3333p
Sixth interim 16/04/21 30/04/21 0.3333p – 0.3333p
Seventh interim 14/05/21 28/05/21 0.4167p – 0.4167p
Eighth interim 11/06/21 30/06/21 0.4167p – 0.4167p
Ninth interim 16/07/21 30/07/21 0.4167p – 0.4167p
Tenth interim 13/08/21 31/08/21 0.4167p – 0.4167p
Eleventh interim 10/09/21 30/09/21 0.4167p – 0.4167p
Twelfth interim 15/10/21 30/10/21 0.4167p – 0.4167p
Total in relation to the year ended 30 September 2021 4.5000p – 4.5000p
In relation to the year ended 30 September 2022:
First i n terim 11/11/21 30/11/21 0.4167p – 0.4167p
Second interim 09/12/21 31/12/21 0.4167p – 0.4167p
Third interim 13/01/22 31/01/22 0.4167p – 0.4167p
Fourth interim 10/02/22 28/02/22 0.4167p – 0.4167p
Fifth interim 10/03/22 31/03/22 0.4167p – 0.4167p
Sixth interim 07/04/22 29/04/22 0.4167p – 0.4167p
Seventh interim 12/05/22 31/05/22 0.4167p – 0.4167p
Eighth interim 16/06/22 30/06/22 0.4167p – 0.4167p
Ninth interim 14/07/22 29/07/22 0.4167p – 0.4167p
Tenth interim 11/08/22 31/08/22 0.4167p – 0.4167p
Eleventh interim 15/09/22 30/09/22 0.4167p – 0.4167p
Twelfth interim 13/10/22 31/10/22 0.4167p – 0.4167p
Total in relation to the year ended 30 September 2022 5.0004p – 5.0004p
UK TAXATION OF PIDS
A PID is, together with any property income distribution from any other REIT company, treated as taxable income from a UK property business. The
basic rate of income tax (currently 20%) will be withheld by the Company (where required) on the PID unless the shareholder is entitled to receive
PIDs without income tax being deducted at source and they have notified the Registrar of this entitlement sufficiently in advance of a PID being paid.
Shareholders who are individuals may, depending on their particular circumstances, either be liable to further UK income tax on their PID at their
applicable marginal income tax rate, incur no further UK tax liability on their PID, or be entitled to claim repayment of some or all of the UK income tax
withheld on their PID.
Corporate shareholders who are resident for tax purposes in the UK will generally be liable to pay UK corporation tax on their PID and if income tax is
withheld at source, the tax withheld can be set against their liability to UK corporation tax or against any income tax which they themselves are
required to withhold in the accounting period in which the PID is received.
Shareholder Information
101Ediston Property Investment Company plc – Annual Report and Accounts 2022
Shareholder Information
UK TAXATION OF NON-PID DIVIDENDS
Under current UK legislation, most individual shareholders who are resident in the UK for taxation purposes receive a tax-free dividend allowance of
£2,000 per annum (with effect from April 2018, previously £5,000) and any dividend income (including Non-PID Dividends) in excess of this allowance
is subject to income tax.
UK resident corporate shareholders (other than dealers and certain insurance companies) are not liable to corporation tax or income tax in respect of
UK dividends provided that the dividends are exempt under Part 9A of the Corporation Tax Act 2009.
UK TAXATION OF CHARGEABLE GAINS IN RESPECT OF ORDINARY SHARES IN THE COMPANY
Any gain on disposal (by sale, transfer or redemption) of Ordinary Shares by shareholders resident in the UK for taxation purposes will be subject to
capital gains tax in the case of an individual shareholder, or UK corporation tax on chargeable gains in the case of a corporate shareholder.
For the purposes of calculating chargeable gains, the following table sets out the price at which the Company has issued significant numbers of
shares since launch:
Date of issuance
Share price
(per share)
27 October 2014 100.00p
8 July 2015 108.00p
8 December 2017 111.75p
No shares were issued during the year.
The statements on taxation above are intended to be a general summary of certain tax consequences that may arise in relation to the Company and
shareholders. This is not a comprehensive summary of all technical aspects of the taxation of the Company and its shareholders and is not intended
to constitute legal or tax advice to investors.
The statements relate to the UK tax implications of a UK resident individual investing in the Company (unless expressly stated otherwise). The tax
consequences may differ for investors who are not resident in the UK for tax purposes. The statements are based on current tax legislation and
HMRC practice, both of which are subject to change at any time, possibly with retrospective effect.
Prospective investors should familiarise themselves with, and where appropriate should consult their own professional advisers on, the overall tax
consequences of investing in the Company.
CONTACTS
Investor relations Information on Ediston Property Investment Company plc, including the
latest share price: www.ediston-reit.com
Registrar:
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
T: 0370 707 1079
E: www.investorcentre.co.uk/contactus
Enquiries about the following administrative matters should be addressed
to the Company’s Registrar:
− Change of address notification;
− Lost share certificates;
− Dividend payment enquiries;
− Dividend mandate instructions. Shareholders may have their dividends
paid directly into their bank or building society accounts by completing
a dividend mandate form. Tax vouchers, where applicable, are sent
directly to shareholders’ registered addresses; and
− Amalgamation of shareholdings. Shareholders who receive more than
one copy of the Annual Report are invited to amalgamate their
accounts on the share register.
Shareholders can view and manage their shareholdings online at www.
investorcentre.co.uk, including updating address records, making
dividend payment enquiries, updating dividend mandates and viewing the
latest share price. Shareholders will need their shareholder reference
number, which can be found on their share certificate or a recent dividend
tax voucher, to access this site. Once signed up to Investor Centre, an
activation code will be sent to the shareholder’s registered address to
enable the shareholder to manage their holding.
102 Ediston Property Investment Company plc – Annual Report and Accounts 2022
ANTICIPATED FINANCIAL CALENDAR 2023
January 2023 Announcement of Net Asset Value as at 31 December 2022
24 February 2023 Annual General Meeting
April 2023 Announcement of Net Asset Value as at 31 March 2023
May 20223 Publication of Half Yearly Report for the six months to 31 March 2023
July 2023 Announcement of Net Asset Value as at 30 June 2023
October 2023 Announcement of Net Asset Value as at 30 September 2023
December 2023 Publication of Annual Report for the year to 30 September 2023
It is the intention of the Board that dividends will continue to be announced and paid monthly.
HISTORIC RECORD
Total assets
less current
liabilities
£’000
Shareholders’
funds
£’000
Property
portfolio
£’000
EPRA net
asset value
per share
p
Share price
p
Premium/
(discount)
%
EPRA
earnings per
share
p
Dividends
per share
p
Ongoing
charges*
%
27 October 2014 (launch statistics) 93,171 93,171 76,700 98.07 100.0 1.9 – – –
Year ending
30 September 2015 176,044 136,586 136,400 106.49 109.5 2.8 4.15 5.09 1.4
30 September 2016 189,114 137,331 181,410 107.07 103.4 (3.4) 5.90 5.50 1.5
30 September 2017 202,062 145,816 173,410 111.32 106.5 (4.3) 6.34 5.50 1.5
30 September 2018 353,450 243,670 333,850 115.30 109.0 (5.5) 6.60 5.69 1.3
30 September 2019 339,706 229,760 319,175 108.72 85.4 (21.5) 6.66 5.75 1.4
30 September 2020 291,885 181,773 272,975 86.01 50.9 (40.8) 5.9 4.88 1.4
30 September 2021 299,826 189,549 283,345 89.69 73.8 (17.6) 5.34 4.42 1.4
30 September 2022 310,911 189,384 231,435 94.86 67.6 (28.8) 4.06 5.00 1.4
* Excludes direct operating expenses for investment properties as these are variable in nature and tend to be specific to lease events occurring during the period.
KEY INFORMATION DOCUMENT
Investors should be aware that the Packaged Retail and Insurance-based Investment Products Regulation (PRIIPs) Regulation requires the AIFM, as
the PRIIP manufacturer, to prepare a key information document (KID) in respect of the Company. This KID must be made available to retail investors
prior to them making any investment decision and is available on the Company’s website. The Company is not responsible for the information
contained in the KID and investors should note that the procedures for calculating the risks, costs and potential returns are prescribed by law. The
figures in the KID may not reflect the expected returns for the Company and anticipated performance returns cannot be guaranteed.
INVESTMENT PLATFORMS
The Board encourages shareholders to vote on the resolutions to be proposed at the AGM. Those retail shareholders who hold their shares through
an investment platform are reminded that, although you may not have an automatic voting right, most investor platforms have processes in place to
allow you to cast your vote and you should contact your investment platform directly for further information and to do so in good time before returning
your votes.
HOW TO INVEST
Shares in Ediston Property Investment Company plc are listed on the main market of the London Stock Exchange (LSE: EPIC).
As with any publicly quoted company, the shares can be bought and sold on the stock market. This can be done directly through a platform provider
or through a wealth manager, financial adviser or stockbroker.
An option is to use one of the platform providers who offer an ‘execution only’ service. Links to such providers are available on the Company’s
website at www.ediston-reit.com. Potential investors should note that by clicking on any of the links contained thereon, you will leave the Company’s
website and go to an external website. The Company is not responsible for the content or accuracy of these external websites.
Please remember that the value of investments and the income from them is not guaranteed and can go down as well as up. Also, past performance
is not a reliable indicator of future performance and investors might not get back the original amount invested.
WARNING TO SHAREHOLDERS – BEWARE OF SHARE FRAUD
Fraudsters use persuasive and high-pressure tactics to lure investors into scams. They may offer to sell shares that turn out to be worthless or
non-existent, or to buy shares at an inflated price in return for an up-front payment.
If you are approached fraudulently please inform the Financial Conduct Authority (FCA) by using the share fraud reporting form at www.fca.org.uk/
consumers where you can find out more about investment scams. You can also call the FCA Consumer Helpline on 0800 111 6768. If you have
already paid money to share fraudsters you should contact Action Fraud on 0300 123 2040.
Shareholder Information continued
103Ediston Property Investment Company plc – Annual Report and Accounts 2022
Shareholder Information
The Company uses a number of technical terms in reporting its results and this glossary is to assist investors in their understanding of these terms.
The Company uses alternative performance measures (APMs). APMs do not have a standard meaning prescribed by GAAP (“generally accepted
accounting principles”) and therefore may not be comparable to similar measures presented by other entities. The APMs used by the Company are
highlighted in the glossary below.
Administrator The entity that provides administration and company secretarial services to the Company pursuant to the administration
agreement, being JTC (UK) Limited.
Administration
Agreement
The agreement between the Administrator and the Company which establishes services to be provided and any terms
thereto.
AIC Association of Investment Companies. This is the trade body for Closed-end Investment Companies (www.theaic.co.uk).
AIFMD Alternative Investment Fund Managers Directive. Issued by the European Parliament in 2012 and 2013, the Directive
requires the Company to appoint an Alternative Investment Fund Manager (AIFM). The Board of Directors of a Closed-
ended Investment Company, nevertheless, remains fully responsible for all aspects of the Company’s strategy, operations
and compliance with regulations.
AIFM Alternative Investment Fund Manager. The entity that provides portfolio management and risk management services to
the Company and which ensures the Company complies with the AIFMD. The Company’s AIFM is Ediston Investment
Services Limited.
Basic Total Earnings
per Share
Total profit/(loss) after taxation divided by the weighted average number of Ordinary Shares in issue during the period.
Break Clause/Option A clause in a Lease which provides the landlord or tenant with an ability to terminate the Lease before its contractual
expiry date.
Closed-end Investment
Company
A company with a fixed issued ordinary share capital which is traded on a stock exchange at a price not necessarily
related to the Net Asset Value of the company and where shares can only be issued or bought back by the company in
certain circumstances. This contrasts with an open-ended investment company, which has units not traded on an
exchange but issued or bought back from investors at a price directly related to the Net Asset Value.
Company Ediston Property Investment Company plc (Company number 09090446). The Annual Report and Accounts of the
Company consolidate the results of its subsidiary undertakings, details of which are contained in Note 10 to the
Consolidated Financial Statements, collectively referred to as ‘the Group’. References throughout this document to ‘the
Company’ may also encompass matters relevant to the subsidiary undertakings.
Contracted Rent* The annualised rent adjusting for the inclusion of rent subject to rent-free periods and rental guarantees.
Covenant Strength* This refers to the quality of a tenant’s financial status and its ability to perform the covenants in the Lease.
COVID-19 Crisis The health and attendant economic, financial and social crises that emerged in early 2020 and are still having significant
adverse impacts on financial markets globally, including on commercial property markets.
Debt Utilised The debt facilities with Aviva £111,076,000, less the secured balance held in a blocked account £31,047,000, which is
available for future acquisitions and capital expenditure.
Depositary Under AIFMD rules, the Company must appoint a Depositary, whose duties in respect of investments, cash and similar
assets include: safekeeping; verification of ownership and valuation; and cash monitoring. The Depositary’s oversight
duties include, but are not limited to, oversight of share buy backs, dividend payments and adherence to investment
limits. The Company’s Depositary is IQ-EQ Depositary Company (UK) Limited.
Discount (or Premium)
of Share Price to NAV*
If the share price is less than the Net Asset Value per share, the shares are trading at a discount. If the share price is
greater than the Net Asset Value per share, the shares are trading at a premium. The discount (or premium) is calculated
by reporting the difference between the Net Asset Value per share and the Share Price as a percentage of the Net Asset
Value per share.
Dividend The income from an investment paid to shareholders. The Company currently pays dividends to shareholders monthly.
Dividend Cover* Revenue profit for the period, excluding exceptional items, divided by dividends paid during the period.
Dividend Yield* Calculated using the annual dividend as a percentage of the share price.
Dividends per Share Dividends declared for the year.
EPRA The European Public Real Estate Association, the industry body for European REITs. The Company reports, where it is
appropriate using the EPRA basis, otherwise it reports using financial statistics which provide the same result.
EPRA Cost Ratio
(including direct
vacancy costs)*
The ratio of net overheads and operating expenses against gross rental income (with both amounts excluding ground
rents payable). Net overheads and operating expenses relate to all administrative and operating expenses.
EPRA Cost Ratio
(excluding direct
vacancy costs)*
The ratio calculated above, but with direct vacancy costs removed from net overheads and operating expenses balance.
EPRA Earnings
per Share*
Recurring earnings from core operational activities. A key measure of a company’s underlying operating results from its
property rental business and an indication of the extent to which current dividend payments are supported by earnings.
Glossary of Terms, Definitions and Alternative Performance Measures
* Alternative Performance Measure.
104 Ediston Property Investment Company plc – Annual Report and Accounts 2022
EPRA NAV* NAV adjusted to include properties and other investment interests at fair value and to exclude certain items not expected
to crystallise in a long-term investment property business model. Makes adjustments to the IFRS NAV to provide
stakeholders with the most relevant information on the fair value of the assets and liabilities within a real estate investment
company with a long-term investment strategy. At 30 September 2022 and 30 September 2021, the EPRA NAV was the
same as the IFRS NAV.
EPRA Net Asset Value
(NAV) per Share*
EPRA NAV at the year-end divided by the number of Ordinary Shares in issue at that date.
EPRA Net Asset Value
(NAV) per Share
increase*
EPRA NAV at 30 September 2022 minus the NAV at 30 September 2021. This is then divided by the opening EPRA NAV
to compute the percentage increase in the period.
EPRA Net Initial Yield* The annualised rental income based on cash rents passing at the year end less non-recoverable property expenditure
expressed as a percentage of the gross market value of the property portfolio.
EPRA Topped Up Net
Initial Yield*
Calculated by adjusting the EPRA Net Initial Yield in respect of the expiration of rent-free periods or other unexpired lease
incentives such as discounted or step rents.
EPRA Vacancy Rate* Estimated Market Rental Value (ERV) of vacant space expressed as a percentage of the ERV of the whole portfolio. The
vacancy rate excludes those properties which are under development or major refurbishment.
Equivalent Yield* The internal rate of return of the cash flow from the property, assuming a rise to ERV at the next review but with no further
rental growth.
ESG Environmental, Social and Governance issues that are increasingly factored into the analysis of how corporate entities,
including investment companies, conduct their activities.
Escrow Funds placed in custody or trust until a certain condition has been fulfilled. For example, amounts provided by the seller of
a property to cover rent-free periods or vacant units and generally held by a legal firm and released to the Group gradually
over the length of the rent-free or vacant period to compensate for the anticipated rental shortfall for an agreed period
subsequent to purchase.
Estimated Rental Value
(ERV)*
The estimated annual market rental value of a property as determined by the Company’s External Valuer. This will
normally be different from the actual rent being paid.
External Valuer An independent external valuer of a property. The Company’s External Valuer is Knight Frank LLP and detailed
information regarding the valuation of the Company’s properties is included in the accounting policies and Note 9 to the
Consolidated Financial Statements.
Fixed and Minimum
Uplift Rents
Rents subject to fixed uplifts at an agreed level on agreed dates stipulated within the Lease, or rents subject to contracted
minimum uplifts at specified review dates.
Gearing Unlike open-ended investment companies, Closed-end Investment Companies can borrow to invest. This term is used to
describe the level of borrowings that an Investment Company has undertaken. The higher the level of borrowings, the
higher the gearing ratio. This is expressed as a percentage of the principal value of borrowings against total assets and is
not the same as Loan-to-Value, which is calculated as described below.
Group The Company and its subsidiaries, EPIC (No.1) Limited and EPIC (No.2) Limited.
GRESB Global ESG Benchmark for Real Assets.
Increase/decrease in
NAV*
The movement in NAV in the period, shown in total and as a movement per share. Expressed in whole numbers and as a
percentage.
Investment Manager’s
Delegation Agreement
The investment management agreement under which certain management services are delegated to Ediston Properties
Limited.
Investment Manager The Company’s Investment Manager, pursuant to the Investment Managers’ Delegation Agreement, is Ediston Properties
Limited. The Investment Manager is responsible for the day-to-day management of the Company and advises the Group
on the acquisition of its investment portfolio and on the development, management and disposal of UK commercial
assets in its portfolio.
Lease A legally binding contract between a landlord and a tenant which sets out the basis on which the tenant is permitted to
occupy a property, including the Lease length.
Lease Incentive A payment used to encourage a tenant to take on a new Lease, for example by a landlord paying a tenant a sum of
money to contribute to the cost of a tenant’s fit-out of a property or by allowing a rent-free period.
Lease Re-gear This term is used to describe the renegotiation of a Lease during the term and is often linked to another Lease event; for
example, a Break Clause/Option or Rent Review.
Lease Surrender An agreement whereby the landlord and tenant bring a Lease to an end other than by contractual expiry or the exercise of
a Break Clause/Option. This will frequently involve the negotiation of a surrender premium by one party to the other.
Like-for-like
Movement*
The like-for-like increase (or decrease) in the property portfolio is calculated as the movement in the fair value of the
property portfolio excluding any properties bought or sold in the period.
Loan-to-Value* Debt outstanding and drawn at the period end, net of any cash held in the Lender deposit account, expressed as a
percentage of the market value of all property assets.
* Alternative Performance Measure.
Glossary of Terms, Definitions and Alternative Performance Measures continued
105Ediston Property Investment Company plc – Annual Report and Accounts 2022
Shareholder Information
Manager Used from time to time and as appropriate to the text, refers to Ediston Properties Limited and Ediston Investment
Services Limited, providing the investment management and AIFM services as applicable.
Management
Agreement
The management agreement between the Company and Ediston Investment Services Limited, under which Ediston
Investment Services Limited is appointed to provide portfolio and risk management services.
Net Assets (or
Shareholders’ Funds)
This is calculated as the value of the investments and other assets of an Investment Company, plus cash and debtors,
less borrowings and any other creditors. It represents the underlying value of an Investment Company at a point in time.
Net Asset Value (NAV)
per Ordinary Share
(or ‘IFRS NAV’)
This is calculated as the net assets of the Group calculated under its accounting policies as set out on page 88 divided by
the number of shares in issue, excluding those shares held in treasury. This is the number disclosed at the foot of the
Consolidated Statement of Financial Position on page 76. At 30 September 2022 and 30 September 2021, the IFRS NAV
was the same as the EPRA NAV.
NAV Total Return* The growth in NAV plus dividends reinvested, and this can be expressed as a percentage of NAV per share at the start of
the year.
Net Income The net income from a property after deducting ground rent and non-recoverable expenditure.
Net Initial Yield* The initial Net Income from a property at the date of purchase, expressed as a percentage of the gross purchase price
including the costs of purchase.
Non-PID Non-Property Income Distribution. The dividend received by a shareholder of the Company arising from any source other
than profits and gains of the Tax-Exempt Business of the REIT Group. This is similar to a dividend paid by any other
company resident in the UK. From 6 April 2018, individual shareholders who are resident in the UK for taxation purposes
are entitled to a tax-free dividend allowance of £2,000 per annum. Any dividend income (including Non-PID Dividends but
excluding PIDs) in excess of this allowance is subject to income tax. UK resident corporate shareholders (other than
dealers and certain insurance companies) are not liable to corporation tax or income tax in respect of UK dividends
provided that the dividends are exempt under Part 9A of the Corporation Tax Act 2009.
Ongoing Charges* Operating costs incurred by the Company, expressed as a proportion of its average Net Assets over the reporting year.
The costs of buying and selling investment properties and the costs of buying back or issuing Ordinary Shares are
excluded. The calculation also excludes direct operating expenses for investment properties and the allowance for
expected credit losses, as these are variable in nature and tend to be specific to lease events occurring during the period.
Please refer to page 106 for calculation.
Ordinary Shares The main type of equity capital issued by conventional Investment Companies. Shareholders are entitled to their share of
both income, in the form of dividends paid by the Company, and any capital growth. Ordinary Shares carry voting rights
at General Meetings of the Company.
PID Property Income Distribution. A dividend received by a shareholder of the Company in respect of profits and gains of the
tax-exempt business of the Group. Such distributions are taxable as profits of a UK property business and, in the case of
a shareholder, are chargeable to UK income tax at their highest marginal rates in the case of UK resident individuals or to
UK corporation tax in the case of UK resident companies.
Premium (or Discount)
of Share Price to NAV
If the share price is less than the Net Asset Value per share, the shares are trading at a discount. If the share price is
greater than the Net Asset Value per share, the shares are trading at a premium. The premium (or discount) is calculated
by reporting the difference between the Net Asset Value per share and the Share Price as a percentage of the Net Asset
Value per share.
Property Total Return* The valuation movement plus net income (after deducting interest payable) expressed as a percentage of the opening
book value together with the time weighted value for capital expenditure incurred during the year, all of which is net of
Debt Utilised.
REIT Real Estate Investment Trust. A company that complies with Part 12 of the Corporation Tax Act 2010. Subject to the
continuing relevant UK-REIT criteria being met, the profits from the property business of a REIT, arising from both income
and capital gains, are exempt from corporation tax.
Rent Review A periodic review of rent during the term of a Lease, as provided for within a Lease agreement.
Reversion Increase in rent estimated by the Company’s External Valuer, where the passing rent is below the ERV. The increases to
rent arise on rent reviews and lettings.
SAV IQ Sustainability data reporting platform, used for ESG reporting.
Share Price The price of a share at a point in time as quoted on a stock exchange. The Company’s Ordinary Shares are quoted on the
Main Market of the London Stock Exchange.
Share Price
Total Return*
The percentage change in the Share Price assuming dividends are reinvested to purchase additional Ordinary Shares at
the prevailing share price.
SORP Statement of Recommended Practice ‘Financial Statements of Investment Trust Companies and Venture Capital Trusts’
issued by the AIC.
Surrender Premium The amount received from tenants who break their leases early, or paid to tenants in order to reclaim vacant possession
of the property.
Total Assets This is calculated as the value of the investment properties and other assets of the Company, plus cash and debtors.
* Alternative Performance Measure.
106 Ediston Property Investment Company plc – Annual Report and Accounts 2022
Total Return The return to shareholders calculated on a per share basis by adding dividends paid in the period to the increase or
decrease in the Share Price or NAV. The dividends are assumed to have been reinvested in the form of Ordinary Shares
or Net Assets, excluding any cost of reinvestment.
UK Corporate
Governance Code
or UK Code
A code issued by the Financial Reporting Council which sets out standards of good practice in relation to board
leadership and effectiveness, remuneration, accountability and relations with shareholders. All companies with a Premium
Listing of equity shares in the UK are required under the Listing Rules to report on how they have applied the UK Code in
their Annual Report and Accounts.
Voids* The amount of rent relating to properties which are unoccupied and generating no rental income. Stated as a percentage
of ERV.
WAULT* Weighted Average Unexpired Lease Term. The average lease term remaining to first break, or expiry, across the portfolio
weighted by contracted rental income (including rent-frees). The calculation excludes properties allocated as
developments.
* Alternative Performance Measure.
Unaudited Supplementary Information – Ongoing Charges
September 2022
£’000
September 2021
£’000
September 2020
£’000
Investment management fee (Note 2) 1,703 1,687 1,882
Other expenses (Note 3) 3,212 1,914 2,160
Less: direct property costs (Note 3) (2,077) (1,016) (512)
Less: Allowance for expected credit losses (Note 3) – –(700)
Operating costs (A) 2,838 2,585 2,830
Average net assets for the 12 months ended September (B) 200,715 182,637 198,743
Ongoing charges (A/B) 1.42% 1.42% 1.42%
In accordance with AIC guidance, the Company calculates the Ongoing Charges (the recurring operating and investment management costs, as a
percentage of average net assets) for the Annual Report on a consistent basis with those published in previous years, to facilitate comparison. The
Ongoing Charges definition is contained on page 105.
The KID, contains a measure of costs (Reduction in Yield – ‘RIY’) calculated in accordance with EU PRIIPS regulations. The KID (dated 18 February
2022), on the Company’s website, is published by the Company’s AIFM under rules prescribed by the FCA and indicates an RIY of 3.55%. The
differences between the RIY and the Ongoing Charges consist primarily of the costs of gearing (1.6%), direct property costs (1.03%) and transaction
costs relating to making purchases for the portfolio. Per EU PRIIPS regulations, the period over which figures are averaged in the KID can be longer
than the 12 months applicable to the Ongoing Charges, which uses annual audited figures for the year, thus further contributing to the difference
between these two cost measures.
Glossary of Terms, Definitions and Alternative Performance Measures continued
107Ediston Property Investment Company plc – Annual Report and Accounts 2022
Shareholder Information
Notice of Annual General Meeting
NOTICE IS HEREBY GIVEN that the ninth Annual General Meeting of Ediston Property Investment Company plc (the “Company”) will be held at the
offices of Ediston Investment Services Limited at 1 St Andrew Square, Edinburgh EH2 2BD on 24 February 2023 at 2.00 p.m. for the purposes of
considering and, if thought fit, passing the following resolutions, of which resolutions 1 to 11 (inclusive) will be proposed as ordinary resolutions and
resolutions 12 to 14 (inclusive) will be proposed as special resolutions:
ORDINARY RESOLUTIONS
1. THAT the Annual Report and Audited Financial Statements for the year ended 30 September 2022 be received and adopted.
2. THAT the Directors’ Remuneration Report for the year ended 30 September 2022 be approved.
3. THAT the Remuneration Policy be approved.
4. THAT Grant Thornton UK LLP be re-appointed as the Company’s Auditor until the conclusion of the next Annual General Meeting.
5. THAT the Directors be authorised to determine the Auditor’s remuneration for the year to 30 September 2023.
6. THAT William Hill be re-elected as a Director of the Company.
7. THAT Imogen Moss be re-elected as a Director of the Company.
8. THAT Jamie Skinner be re-elected as a Director of the Company.
9. THAT Karyn Lamont be elected as a Director of the Company.
10. THAT the Company’s dividend policy to pay 12 interim dividends per financial year be approved.
11. THAT, in addition to any existing authority, in accordance with section 551 of the Companies Act 2006, the Directors be generally and
unconditionally authorised to exercise all powers of the Company to allot shares in the capital of the Company and to grant rights to subscribe for,
or to convert any security into, shares in the Company (the ‘Securities’) up to an aggregate nominal amount of £704,375.35 or, if less, the
aggregate nominal amount equal to 33.33% of the Company’s issued share capital immediately prior to the passing of this resolution, provided
that this authority shall, unless renewed, varied or revoked by the Company, expire at the conclusion of the next Annual General Meeting of the
Company or on 15 months from the passing of this resolution, whichever is the earlier, save that the Company may, before such expiry, make
offers or agreements which would or might require Securities to be allotted and the Directors may allot Securities in pursuance of such offer or
agreement notwithstanding that the authority conferred by this resolution has expired.
SPECIAL RESOLUTIONS
12. THAT, subject to the passing of resolution 11, the Directors be given the general power, pursuant to section 570 of the Companies Act 2006 (the
‘Act’), to allot equity securities (as defined in section 560 of the Act) for cash pursuant to the authority under section 551 of the Act, either
conferred by resolution 11 or by way of a sale of treasury shares, as if section 561 of the Act did not apply to any such allotment, provided that this
power:
a. expires at the conclusion of the next Annual General Meeting of the Company after the passing of this resolution or on the expiry of 15 months
from the passing of this resolution, whichever is the earlier, unless renewed, varied or revoked by the Company prior to or on such date, and
save that the Company may, before such expiry, make offers or agreements which would or might require equity securities to be allotted after
such expiry and the Directors may allot equity securities in pursuance of any such offer or agreement notwithstanding that the power
conferred by this resolution has expired; and
b. shall be limited to the allotment of equity securities for cash up to an aggregate nominal amount of £211,334 or, if less, the aggregate nominal
amount equal to 10% of the nominal value of the issued share capital of the Company immediately prior to the passing of this resolution.
108 Ediston Property Investment Company plc – Annual Report and Accounts 2022
SPECIAL RESOLUTIONS CONTINUED
13. TO authorise the Company generally and unconditionally to make market purchases (within the meaning of section 693(4) of the Companies Act
2006) of Ordinary Shares of £0.01 each provided that:
a. the maximum aggregate number of Ordinary Shares that may be purchased is 31,678,927 Ordinary Shares or, if less, 14.99% of the issued
Ordinary Share capital of the Company immediately prior to the passing of this resolution (excluding treasury shares);
b. the minimum price (excluding expenses) which may be paid for each Ordinary Share is £0.01;
c. the maximum price (excluding expenses) which may be paid for each Ordinary Share is the higher of:
i. 105% of the average market value of an Ordinary Share in the Company for the five business days prior to the day the purchase is made; and
ii. the higher of the last independent trade and the highest current independent bid on the London Stock Exchange; and
d. unless previously varied, revoked or renewed, the authority hereby conferred shall expire at the conclusion of the Company’s next Annual
General Meeting or on 15 months from the date of the passing of this resolution, whichever is the earlier, save that the Company may, before
the expiry of the authority granted by this resolution, enter into a contract to purchase Ordinary Shares which will or may be executed wholly or
partly after the expiry of such authority.
14. THAT the Company be and is hereby generally and unconditionally authorised to hold General Meetings (other than Annual General Meetings) on
14 clear days’ notice, such authority to expire at the conclusion of the next Annual General Meeting of the Company or 15 months from the
passing of this resolution, whichever is the earlier.
By order of the Board.
JTC (UK) Limited
Administrator
Registered office: The Scalpel, 18th Floor, 52 Lime Street, London EC3M 7AF
13 December 2022
Notice of Annual General Meeting continued
109Ediston Property Investment Company plc – Annual Report and Accounts 2022
Shareholder Information
NOTES TO THE NOTICE OF ANNUAL GENERAL MEETING
ENTITLEMENT TO ATTEND AND VOTE
Only those members registered in the Company’s register of members at:
− close of business on 22 February 2023; or,
− if this meeting is adjourned, the time which is 48 hours before the time fixed for the adjourned meeting,
− shall be entitled to vote at the Annual General Meeting (the ‘meeting’). Changes to the register of members after the relevant deadline shall be
disregarded in determining the rights of any person to attend, speak and vote at the meeting.
Pursuant to regulation 41 of the Uncertificated Securities Regulations 2001, entitlement to attend and vote at the meeting and the number of votes
which may be cast thereat will be determined by reference to the register of members of the Company at close of business on the day which is two
working days before the day of the meeting. Changes to entries on the register of members after that time shall be disregarded in determining the
rights of any person to attend and vote at the meeting.
WEBSITE GIVING INFORMATION REGARDING THE MEETING
Information regarding the meeting, including the information required by section 311A of the Companies Act 2006 (the ‘Companies Act’), can be
found at www.epic-reit.com.
ATTENDING IN PERSON
Shareholders are invited to attend the meeting in person.
APPOINTMENT OF PROXIES
A member entitled to attend and vote at the meeting convened by the above Notice is entitled to appoint one or more proxies to exercise all or any of
the rights of the member to attend, speak and vote in his/her place. You may appoint more than one proxy provided each proxy is appointed to
exercise rights attached to different shares. A proxy need not be a member of the Company but must attend the meeting to represent you. If a
member wishes to appoint more than one proxy and therefore requires additional proxy forms, the member should contact the Company’s Registrar,
Computershare Investor Services PLC (‘Computershare’), The Pavilions, Bridgwater Road, Bristol BS99 6ZY (Telephone; +44 (0)370 707 1079). A
proxy need not be a member of the Company.
To be valid any proxy form must be received by post or (during normal business hours only) by hand by the Registrar at Computershare Investor
Services PLC, The Pavilions, Bridgwater Road, Bristol BS99 6ZY, no later than 48 hours before the time appointed for holding the meeting or any
adjourned meeting.
CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so by using the
procedures described in the CREST Manual. CREST Personal Members or other CREST sponsored members, and those CREST members who
have appointed a service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action
on their behalf.
In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a ‘CREST Proxy
Instruction’) must be properly authenticated in accordance with Euroclear UK & International Limited’s specifications, and must contain the
information required for such instruction, as described in the CREST Manual (available via www.euroclear.com/CREST). The message, regardless of
whether it constitutes the appointment of a proxy or is an amendment to the instruction given to a previously appointed proxy must, in order to be
valid, be transmitted so as to be received by the issuer’s agent (ID 3RA50) by the latest time(s) for the receipt of proxy appointments, being no later
than 48 hours before the time appointed for holding the meeting or any adjourned meeting. For this purpose, the time of receipt will be taken to be
the time (as determined by the time stamp applied to the message by the CREST Application Host) from which the issuer’s agent is able to retrieve
the message by enquiry to CREST in the manner prescribed by CREST. After this time any change of instructions to proxies appointed through
CREST should be communicated to the appointee through other means.
CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear UK & International Limited
does not make available special procedures in CREST for any particular message. Normal system timings and limitations will, therefore, apply in
relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a
CREST Personal Member, or sponsored member, or has appointed a voting service provider, to procure that his/her CREST sponsor or voting
service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any
particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting system providers are referred, in
particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.
The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities
Regulations 2001.
Any corporation which is a member can appoint one or more corporate representatives who may exercise on its behalf all of its powers as a member
provided that they do not do so in relation to the same shares.
Any person holding 3 per cent. or more of the total voting rights of the Company who appoints a person other than the Chair of the meeting as his/
her proxy will need to ensure that both he/she and his/her proxy complies with their respective disclosure obligations under the UK Disclosure and
Transparency Rules.
110 Ediston Property Investment Company plc – Annual Report and Accounts 2022
NOTES TO THE NOTICE OF ANNUAL GENERAL MEETING CONTINUED
CHANGING OR REVOKING PROXY INSTRUCTIONS
To change your proxy instructions simply submit a new proxy appointment using the methods set out above. Any amended proxy appointment
must be received no later than 2.00 p.m., on 22 February 2023 and any amended proxy appointment received after the cut-off time will
be disregarded.
If you have appointed a proxy and would like to change the instructions using another proxy form, please contact Computershare
on +44 (0)370 707 1079 and ask for another proxy form.
If you submit more than one valid proxy appointment in respect of the same share for the purposes of the same meeting, the appointment last
delivered or received shall prevail in conferring authority on the person named in it to attend the meeting and speak and vote. If the Company is
unable to determine which appointment was last validly received, none of them shall be treated as valid in respect of the relevant share(s).
In order to revoke a proxy instruction you will need to inform the Company by sending notice in writing clearly stating your intention to revoke your
proxy appointment to Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol BS99 6ZY accompanied by the power of
attorney or other authority (if any) under which the revocation notice is signed or a notarially certified copy of such power or authority). The revocation
notice must be received no later than 2.00 p.m., on 22 February 2023.
In the case of a member which is a company, the revocation notice must be executed under its common seal or signed on its behalf by an officer of
the company or an attorney for the company.
If you attempt to revoke your proxy appointment but the revocation is received after the time specified above then your proxy appointment will remain
valid (unless you attend the meeting and vote in person).
NOMINATED PERSONS
Any person to whom this Notice is sent who is a person nominated under section 146 of the Companies Act to enjoy information rights (a ‘Nominated
Person’) may, under an agreement between him or her and the member by whom he or she was nominated, have a right to be appointed (or to have
someone else appointed) as a proxy for the meeting. If a Nominated Person has no such proxy appointment right or does not wish to exercise it, he
or she may, under any such agreement, have a right to give instructions to the member as to the exercise of voting rights.
The statement of the rights of members in relation to the appointment of proxies does not apply to Nominated Persons. The rights described in those
notes can only be exercised by members of the Company.
The main point of contact for a Nominated Person in terms of their investment in the Company remains the member by whom he or she was
nominated (or perhaps a custodian or broker who administers the investment) and a Nominated Person should continue to contact them (and not the
Company) regarding changes or queries relating to their personal details and their interest in the Company (including any administrative matters). The
only exception to this is where the Company expressly requests a response from a Nominated Person.
APPOINTMENT OF PROXY BY JOINT MEMBERS
In the case of joint holders, where more than one of the joint holders completes a proxy appointment, only the appointment submitted by the most
senior holder will be accepted. Seniority is determined by the order in which the names of the joint holders appear in the Company’s register of
members in respect of the joint holding (the first-named being the most senior).
CORPORATE REPRESENTATIVES
A corporation which is a member can appoint one or more corporate representatives who may exercise, on its behalf, all its powers as a member
provided that no more than one corporate representative exercises powers over the same share.
WITHHELD VOTES
A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against the relevant resolution. If
you either select the ‘Discretionary’ option or if no voting indication is given, your proxy will vote or abstain from voting at his or her discretion. Your
proxy will vote (or abstain from voting) as he or she thinks fit in relation to any other matter which is put before the meeting.
ISSUED SHARES AND TOTAL VOTING RIGHTS
As at 13 December 2022, which is the latest practicable date before publication of this notice, the Company’s issued share capital comprised
211,333,737 Ordinary Shares of £0.01 each. Each Ordinary Share carries the right to one vote at a General Meeting of the Company and, therefore,
the total number of voting rights on that date is 211,333,737. No shares are held in treasury.
The Company’s website will include information on the number of shares and voting rights.
QUESTIONS
Members are encouraged to raise any questions in advance of the meeting with the Administrator at epic.reit@jtcgroup.com (please include ‘EPIC
AGM’ in the subject heading). Questions must be received by 5.00 p.m. on 10 February 2023. Any questions received will be replied to by either the
Investment Manager or Board via the Administrator before the meeting.
Members have the right to ask questions at the meeting in accordance with section 319A of the Companies Act.
Notice of Annual General Meeting continued
111Ediston Property Investment Company plc – Annual Report and Accounts 2022
Shareholder Information
STATEMENTS PURSUANT TO SECTION 527 OF THE COMPANIES ACT
Under section 527 of the Companies Act, members meeting the threshold requirements set out in that section have the right to require the Company
to publish on a website a statement setting out any matter relating to: (i) the audit of the Company’s accounts (including the auditor’s report and the
conduct of the audit) that are to be laid before the meeting; or (ii) any circumstances connected with an auditor of the Company ceasing to hold office
since the previous meeting at which annual accounts and reports were laid in accordance with section 437 of the Companies Act. The Company
may not require the members requesting any such website publication to pay its expenses in complying with sections 527 or 528 of the Companies
Act. Where the Company is required to place a statement on a website under section 527 of the Companies Act, it must forward the statement to the
Company’s Auditor not later than the time when it makes the statement available on the website. The business which may be dealt with at the
meeting includes any statement that the Company has been required under section 527 of the Companies Act to publish on a website.
The request:
− may be sent to the Company in hard copy form or in electronic form (see below);
− either set out the statement in full or, if supporting a statement sent by another member, clearly identify the statement which is being supported;
− must be authenticated by the person or persons making it (see below); and
− be received by the Company by close of business on 17 February 2023, which is at least one week before the meeting.
SUBMISSION OF HARD COPY AND ELECTRONIC REQUESTS AND AUTHENTICATION REQUIREMENTS
Where a member (or members) wishes to request the Company publish audit concerns, the request must be made by either sending:
− a hard copy request signed by the member, stating their full name, address and shareholder reference number to: Administrator, Ediston Property
Investment Company plc, c/o JTC (UK) Limited, The Scalpel, 18th Floor, 52 Lime Street, London EC3M 7AF; or
− a request stating their full name, address and shareholder reference number to: Epic.reit@jtcgroup.com. Please state ‘AGM’ in the subject line of
the email.
SHAREHOLDERS’ POWER TO REQUIRE CIRCULATION OF RESOLUTIONS FOR AGMS
Members representing 5% or more of the total voting rights of all the members, or at least 100 persons (being either: (a) members who have a right to
vote at the meeting and hold shares on which there has been paid up an average sum, per member, of £100; or (b) persons satisfying the
requirements set out in section 153(2) of the Companies Act) may:
− require the Company, under section 338 of the Companies Act, to give notice of a resolution which may properly be moved at the meeting. Any
such request, which must comply with section 338(4) of the Companies Act, must be received by the Company no later than six weeks before the
date fixed for the meeting; and
− require the Company, under section 338A of the Companies Act to include a matter (other than a proposed resolution) in the business to be dealt
with at the meeting. Any such request, which must comply with section 338A(3) of the Companies Act, must be received by the Company no later
than six weeks before the date fixed for the meeting.
DOCUMENTS ON DISPLAY
Copies of the letters of appointment of the non-executive Directors’ and the Company’s articles of association are available for inspection at the
Company’s registered office during normal business hours. If you wish to inspect any of these documents, you should email Epic.reit@jtcgroup.com
to arrange an appointment.
VOTING
Voting on all resolutions will be conducted by way of a poll rather than a show of hands. This is a more transparent method of voting as member
votes are to be counted according to the number of shares held. As soon as practicable following the meeting, the results of the voting and the
number of proxy votes cast for and against and the number of votes actively withheld in respect of each of the resolutions will be announced via a
regulatory information service and also placed on the Company’s website.
COMMUNICATION
Except as provided above, members who have general queries about the meeting should telephone Computershare’s helpline on +44 (0)370 707 1079.
Calls cost 5.1p per minute plus your phone company’s access charge. Calls outside the United Kingdom will be charged at the applicable international
rate. Lines are open between 09:00 – 17:30, Monday to Friday excluding public holidays in England and Wales. No other methods of communication
will be accepted.
You may not use any electronic address provided in this notice of Annual General Meeting, or in any related documents for communicating with the
Company for the purposes other than those expressly stated.
112 Ediston Property Investment Company plc – Annual Report and Accounts 2022
DIRECTORS
William Hill
Robin Archibald
Karyn Lamont
Imogen Moss
Jamie Skinner
REGISTERED OFFICE
REGISTERED NUMBER
09090446
Registered in England and Wales
AIFM
Ediston Investment Services Limited
Level 13, Broadgate Tower
20 Primrose Street
London EC2A 2EW
INVESTMENT MANAGER
Ediston Properties Limited
Level 13, Broadgate Tower
20 Primrose Street
London EC2A 2EW
ADMINISTRATOR AND
COMPANY SECRETARY
JTC (UK) Limited
The Scalpel, 18th Floor
52 Lime Street
London EC3M 7AF
LEGAL ADVISER
Dickson Minto W.S.
Level 13, Broadgate Tower
20 Primrose Street
London EC2A 2EW
PROPERTY VALUER
Knight Frank LLP
55 Baker Street
London W1U 8AN
INDEPENDENT AUDITOR
Grant Thornton UK LLP
30 Finsbury Square
London EC2A 1AG
TAX ADVISER
BDO LLP
55 Baker Street
London W1U 7EU
REGISTRAR
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS13 8AE
CORPORATE BROKER
Investec Bank PLC
30 Gresham Street
London 3C2V 7QN
DEPOSITARY
IQ-EQ Depositary Company (UK) Limited
Two London Bridge
London SE1 9RA
PUBLIC RELATIONS
Kaso Legg Communications
40 Queen Street
London EC4R 1DD
WEBSITE
www.ediston-reit.com
Corporate Information
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Ediston Property Investment Company plc
The Scalpel, 18th Floor
52 Lime Street
London EC3M 7AF
WWW.EDISTON-REIT.COM