Investor Centre

Section 172 Statement

Statement on stakeholder relationships made under Section 172(1) of the Companies Act

The Directors consider that, in conducting the business of the Company over the course of the year ended 31 December 2021, they have complied with Section 172(1) of the Companies Act 2006 (“the Act”).

The business is externally managed and the Group has no employees.  The Board is of the opinion that its conduct and that of its external Management Team culminated from decisions made in good faith to promote the success of the Company for the benefit of all of its members, having regard to the impact of those decisions on the following matters:

  • the interests of the workforce, for whom the Chairman of the Remuneration Committee has special responsibility and who are also represented on the Board by the three Prestbury directors;
  • business relationships with suppliers, customers and other counterparties, where engagement is managed in the main by the Investment Adviser with a view to fostering good two way communication with respect for all staff and respecting supplier payment terms;
  • the community and the environment, where the Board takes overall responsibility and where the ESG Committee has specific focus;;
  • the reputation of the Company for high standards of business conduct, monitored by the Board with input from advisers including the Company’s broker;
  • fair treatment as between all members of the Company where the Investment Adviser engages routinely and where the Chairman of the Company and other Independent Directors make themselves available for meetings as appropriate, seeking to respond to any shareholder feedback in a constructive and open way; and
  • the likely long term consequences of decisions made by the Board on all stakeholders.

The strategy of the Company was initially laid out in the AIM Admission document issued in May 2014 and was approved by the Board at that time.  Any material deviation from or amendment of that strategy is subject to Board and, if necessary, shareholder approval.  At least annually, the Board considers a business plan and budget for the delivery of its strategic objectives and the Investment Adviser reports at least quarterly against the delivery of the budget and the strategic objectives of the business.

Through regular engagement with its stakeholders, the Board aims to gain a rounded and balanced understanding of the impact of its decisions.  In the main, that information is gathered in the first instance by the Investment Adviser and communicated to the Board in its regular quarterly meetings and otherwise as required.

The key strategic decisions for the Board are those relating to asset acquisitions, lease variations, financing, disposals, and distributions, including the interaction of these decisions with our ESG Policy.  Where these types of transaction, or any other material transaction or decision, is considered, the Board has regard to its obligations under Section 172 of the Act.  The principal non-routine decisions made by the Board in 2021 are as follows.

The most material non routine decision in the year was the variation to the Merlin leases, summarised on page 17. In reaching its decision on the terms of the lease regears, the Board had specific regard to the long term success of the Company, to the sustainability of the Company’s and tenant’s businesses and, through the enhanced ESG reporting, to the environment.

The Company maintained appropriate levels of support for the Group’s tenants as the Covid-19 pandemic and the responses to it continued to evolve, continuing the open and constructive dialogue which commenced in 2020 and where the long term success of the Company formed the bedrock of decisions made.

The Board carefully assessed the impact on stakeholders of the return to the pre-Covid, progressive dividend policy and was able to conclude that it was in the best interest of stakeholders to increase the dividend rate by 8.2% from July 2021.

Considering the Group’s responsibilities to the community and to meeting the Company’s obligations to comply with all legal and regulatory requirements, the Board decided during the year to escalate its ESG reporting and to enhance its ESG capabilities which culminated in the establishment of an ESG Committee, chaired by the Chairman of the Company, Martin Moore.  Expert external advisors were appointed to conduct a materiality review and to work on the further development of the Group’s ESG policy and reporting standards.

The Board, Nomination Committee and Management Team have been working closely together to implement the recruitment process to replace the four Independent Directors prior to the end of their recommended nine year term. Key features of these procedures include:

  1. an aim to preserve the balance of skills, experience and diversity of thought on the Board to continue the Company’s strong long term track record;
  2. to adhere to the Company’s Diversity and Inclusion Policy in the recruitment process;
  3. to use suitably qualified external consultants with a brief to search among a diverse candidate pool; and
  4. to complete the process with a balance between allowing for appropriate handover periods without undue additional cost to shareholders.  The proposed timetable allows for a period of overlap between the outgoing and incoming directors to ensure adequate training and handover, in particular for the roles of Chairman and Chairman of the Audit Committee, and the Board will be temporarily enlarged as a result.

While the Group has no employees, the Board has regard to the interests of the individuals who are responsible for delivery of the management and advisory services to the Company.  Three of the seven Directors are representatives of the Investment Adviser and, in their capacity as directors and majority owners of the Investment Adviser, have direct responsibility for the employees of the companies providing services to the business.  In addition, the Chairman of the Remuneration Committee has responsibility for workforce engagement so that there is a direct line of communication from the workforce to the Independent Directors.  There have been no strategic initiatives or transactions in the year that were considered to have a direct bearing on the employees of the Investment Adviser or its workforce.

TThe Board has been kept informed of any relevant developments in the workforce.  The Investment Adviser has confirmed that none of the workforce has been furloughed through the Covid pandemic or made redundant, that all members of the workforce have continued to be paid their salaries in full, and that the Investment Adviser and its associated companies have not drawn on the Government’s Job Retention Scheme or any other Covid related support.  Steps are taken to protect the physical and mental wellbeing of the workforce, as far as possible.  This includes access to a confidential helpline for physical and mental health issues which is provided by the Investment Adviser’s private medical insurer.

In the Board’s annual review of the internal control environment operating in the business, the appropriateness of staffing levels and staff qualifications are kept under review, but it is noted that the Board does not have direct responsibility for any employees.

In the main, the Company’s suppliers, customers and counterparties are professional firms such as lenders, property agents, accounting and law firms, tenants with which we have longstanding relationships, and transaction counterparties which are generally large and sophisticated businesses or institutions.  Where material counterparties are new to the business, checks, including anti money laundering checks, are conducted prior to transacting any business to ensure that no reputational or legal issues would arise from engaging with that counterparty.  The Company also reviews the compliance of all material counterparties with relevant laws and regulations such as the Modern Slavery Act 2015.  All Group entities have a policy of paying suppliers in accordance with agreed terms as noted in the Supplier Payment Policies within this report.

The interaction of Group entities with the wider community and their impact on the environment is relatively limited as a result of the Group’s business operations being entirely related to investment in properties let on very long leases, where the operation of the properties, their upkeep and environmental impact is the responsibility of the occupational tenants.  The Board’s approach to sustainability is explained in the Report of the ESG Committee.

The Board is mindful that the ability of the Company to continue to conduct its investment business and to finance its activities depends in part on the reputation of the Board and Management Team.  The risk of falling short of the high standards expected and thereby risking the reputation of the Company is included in the Board’s review of the Company’s risk register.  The Board aims to maintain high standards of conduct and requires the Investment Adviser to do likewise under the terms of its appointment. 

The investor relations programme is designed to promote formal engagement with major investors, generally defined as those holding more than approximately 1% of the shares in the Company.  Major investors are offered meetings after each results announcement or other significant announcements.  The Board and Management Team also engage with investors and potential investors who request meetings on an ad hoc basis throughout the year.  All Company announcements and formal shareholder presentations are made available on the Company’s website.

Recognising the great importance of engaging with the Company’s shareholders, the Board oversees the Management Team’s investor relations programme which is supported by the Company’s brokers and financial PR advisers.  The Board and Management Team aim to be open with shareholders and available to them, subject at all times to compliance with relevant securities laws.

Feedback from our shareholders is an important part of the Board’s decision making process.  We receive such feedback both directly and through intermediaries such as brokers and analysts.  The feedback received is a natural part of the open dialogue we aim to have with our investors and, when appropriate and within the rules on sharing company information, the opinions of shareholders are sought in advance of decisions being made.  During the financial year there have been fewer matters to discuss with shareholders than in 2020 as the impact of the Covid related rent concessions has abated and the share price discount has closed.  Shareholder feedback was sought by the Investment Adviser on the impact of the Merlin lease regears and reported to the Board.

The AGMs held in 2020 and 2021 were held in compliance with Covid restrictions in force at the time therefore shareholders were not able to attend.  However, levels of proxy voting remained high with approximately three quarters of the issued shares being voted in each year.  Where public health regulations do not present any obstacles, the whole Board intends to attend each Annual General Meeting.  Where that is not possible, we will continue to keep lines of communication with shareholders open, including the facility for shareholders to submit questions by email or post ahead of the AGM.

The Company has a single class of shares in issue with all members of the Company having equal rights therefore balancing the interests of shareholders among themselves is not an issue for the Company.

The investment strategy of the Group is focussed on medium to long term returns and as such the long term is firmly within the sights of the Board when all material decisions are made.

Martin Moore
Director

Sandy Gumm
Director

9 March 2022