Raven Property : 2020 Annual Report

RAVEN PROPERTY GROUP LIMITED

2020 Annual Report

3

RAVEN PROPERTY GROUP LIMITED

RESULTS FOR THE YEAR ENDED 31 DECEMBER 2020

CONTENTS

	PAGE
Results Highlights	4
Chairman's Message	5
The Portfolio	6
STRATEGIC REPORT
Chief Executive's Report	28
Business Model	29
Portfolio Review	30
Finance Review	35
Environmental and Social Report	41
Risk Report	48
Viability Statement	53
GOVERNANCE REPORT
Directors	54
Corporate Governance	55
Audit Committee Report	61
Letter from the Remuneration Committee	67
Directors' Remuneration Report	71
Directors' Report	78
Independent Auditor's Report	81
FINANCIAL STATEMENTS
Group Income Statement	88
Group Statement of Comprehensive Income	89
Group Balance Sheet	90
Group Statement of Changes in Equity	93
Group Cash Flow Statement	94
Notes to the Financial Statements	96
Supplementary Information	131
Glossary of Terms	134
Appendix	135
Advisers	136
Enquiries	137

RAVEN PROPERTY GROUP LIMITED 2020 ANNUAL REPORT

4

RESULTS

HIGHLIGHTS

NET OPERATING		UNDERLYING		UNREALISED FOREIGN
INCOME		EARNINGS OF		EXCHANGE LOSSES OF
£113.1 MILLION		£19.0 MILLION		£53.7 MILLION
				ON WEAKER ROUBLE

IFRS LOSS		CASH		RENT
OF		BALANCE		RECOVERY
£14.2 MILLION		£53.1 MILLION		99%

INVESTMENT		DILUTED NAV		DISTRIBUTION PER
PROPERTY VALUE		PER SHARE		ORDINARY SHARE
RUB 112.7		40 PENCE		FOR THE YEAR
BILLION				1.25 PENCE

PORTFOLIO		SECURED		AVERAGE
OCCUPANCY		GEARING		WAREHOUSE RENT
94%		56%		RUB 4,973
				PER ANNUM PER SQM

RAVEN PROPERTY GROUP LIMITED 2020 ANNUAL REPORT

5

CHAIRMAN'S

MESSAGE

In a year where both personal and commercial priorities have been severely challenged, my message is one of relative good fortune.

The Covid -19 virus continues to dominate all agendas a year on from its initial impact and as explained in our half year results at the end of August, the welfare of our staff and support for tenants with cash flow issues has been foremost in our planning for the effects of the virus. The Russian government took a different tack from many other countries and after an initial lockdown in April, they have, to date, avoided a second lockdown, with a light touch quarantine approach. They implemented a mass vaccination programme in December in the hope that this will stem the impact of the second wave which hit the country at that time. They have also given less financial support to the business community than the majority of developed countries, partly because the small business and services sector is comparatively underdeveloped. This leaves their national balance sheet in a strong position.

We are fortunate that the majority of our warehouse space is used to support essential sectors such as the larger supermarket chains. This meant that our properties remained open during lockdown and demand for space in the second half of the year rebounded. The crisis has also accelerated the growth of the e-commerce sector in Russia which had lagged Western markets.

The greatest impact on our business has been the weakness of the Rouble since the pandemic hit. The oil price crash in April, the ever present threat of increased sanctions from both America and the EU, further potential threats on the Russian border as events in Belarus developed and conflict sparked between Azerbaijan and Armenia, all combined to depress the Rouble, especially in the last quarter of 2020. This also resulted in the lowest levels of foreign direct investment into Russia since 1994.

The outcome for the business in 2020 was strong underlying operating earnings and cash collection in Rouble terms but unrealised foreign exchange losses on Euro denominated debt held in our Russian subsidiaries and a significant reduction in our Sterling equivalent net asset value per share at the balance sheet date.

The executive team, with the support of our largest shareholders, has also continued strengthening the Company balance sheet with two significant achievements.

In September, the Company's convertible preference shares were re-designated to a mix of new ordinary shares and irredeemable preference shares, simplifying the balance sheet structure but also dealing with a potential refinancing and dilution risk in the future.

They also continued dialogue with Invesco for the purchase of all of their ordinary and preference shares after the original agreement struck in November 2019 lapsed because of the Covid impact. Together with a number of our existing shareholders, the team has agreed the purchase of all of Invesco's holdings in the Company, subject to formal shareholder and preference shareholder approval.

After two years of dealing with the fallout of the Woodford collapse and the knock on effect for the Invesco funds, the executive team can now focus on the growth of the business.

Including the purchase of the Woodford stake, the Company has distributed £62.5 million in share buy backs in the two years to 31 December 2020. That will increase to £115.8 million on the completion of the purchase of Invesco's ordinary and preference share holdings. A significant sum to be placed back into the market.

The Board have announced that they intend to issue a final distribution of 1.25p (2019: 2.25p) by way of a tender offer of 1 in 32 shares at 40p. This takes account of the very weak exchange rates at the present time and the proposed share buy back transaction. Once that transaction is completed, we intend to revert to the normal distribution timelines following our 2021 interim results.

We have also been dealing with a number of governance issues. In October we appointed two new independent non executive directors, Philip Swire and Russell Field. Russell takes over as Chair of the Audit Committee and he joins the Remuneration Committee. Philip joins the Nominations Committee. Michael Hough takes over as Chair of the Remuneration Committee and the role of Senior Independent Director. Our succession planning continues and we will look to appoint one further non executive director this year.

We have always taken our responsibility for our impact on social and environmental issues seriously but have perhaps not adequately reported on it in the past. In the second half of 2020 we began working with KPMG to develop a proper reporting framework, reflecting what we have achieved in this area to date and agreeing on pragmatic goals for both the short and longer term. Our progress is documented in the Corporate Governance section of this report.

I can only reiterate that our business is in a fortunate position today and that is testament to the efforts and support of our employees, shareholders and all other stakeholder groups. We look forward to a healthy and vibrant future.

Sir Richard Jewson

Chairman

14 March 2021

RAVEN PROPERTY GROUP LIMITED 2020 ANNUAL REPORT