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 2020, 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 decisions on the following matters specified in Section 172 of the Act:

  • 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;
  • the community and the environment, where the Board takes overall responsibility;
  • 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; and
  • the likely long term consequences of decisions made by the Board.

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.  Our strategy is summarised in our annual report.  In running the business, any 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.  Through regular engagement with its stakeholder groups, 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, and where these types of transaction, or any other material transaction or decision, is considered, the Board has regard to its wider obligations under Section 172 of the Act.

Specifically, during the 2020 financial year the principal non-routine decisions made by the Board related to the support extended to certain of the Group’s tenants as a result of the pressures on them from the Covid-19 pandemic.  These were in the vast majority of cases constructive, collaborative bilateral discussions between the Company and those tenants, where the various outcomes were considered to represent a good result both for the tenant businesses, including their employees and other stakeholders, and the Company and its stakeholders, including specifically its shareholders and lenders.  In the case of the Budget Hotels portfolio where the tenant implemented a Company Voluntary Arrangement (“CVA”), the process was more combative largely as a consequence of the way CVAs generally work, including the limits on information that can be provided and the lack of flexibility that is possible in accommodating suggestions or requirements from landlords either individually or in groups.  However, despite these challenges the decisions taken by the Board as to how to approach the assessment of the CVA proposals and the consequences of it were taken with the best interests of the Company and its stakeholders in the foreground, but also in weighing up the best outcome for the tenant and its stakeholders including its customers, its many employees and its suppliers.  The Board’s commitment to taking into account the long term consequences of its decisions underlies its focus on risk, including risks to the long term viability and success of the business.  These assessments led the Board to conclude that the actions taken in granting rent concessions would benefit the Company as well as its tenants.

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 external management business.

The Board has been kept informed of relevant developments in the workforce.  The Investment Adviser has confirmed that none of the workforce has been furloughed 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 have been 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.  The whole team has been required to work from home during the Government mandated lockdowns and at times during the various other ‘tiered’ restrictions.  Where office based work has been possible, teams were split and worked in rotation in and out of the office, to minimise the number of people in the office at any one time, to keep the workforce safe.  The workforce below director level also participated in a special Covid related charitable giving scheme funded by the Investment Adviser, additional to the charitable donations made in the ordinary course of its business, where each employee selected a number of charities which resulted in donations totalling £27,000 made to 32 good causes.

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 reported in the Supplier Payment Policies below and our approach to our suppliers and to payments has been unchanged throughout the pandemic.

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 Corporate Responsibility Statement.  The Board and the Investment Adviser have committed to limiting the Company’s own impact of the business on the environment where possible, including engagement with our tenants in understanding and where possible supporting their climate related targets.

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, which is conducted at least annually. 

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 and the Management Team is also available to other investors who may request meetings.  The Board and Management Team also engage with investors and potential investors who request meetings on an ad hoc basis throughout the year.  The impact of the pandemic on markets generally and specifically on the Company’s share price meant that ad hoc engagement with shareholders has been significantly more frequent than usual in 2020.

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 these discussions have included our response to the pandemic and also our approach to the discount between the share price and the Group’s net asset value, where in the main shareholders confirmed their support for the Board’s decisions.

All Company announcements and formal shareholder presentations are made available on the Company’s website.

Until 2020, the whole Board has always attended the Company’s Annual General Meeting.  However, the restrictions imposed on people gathering together that were in force at the time of the 2020 AGM meant that only one director was able to attend the meeting, with one other shareholder present at an appropriate distance and with all Covid-19 related precautions having been taken.  The Board’s intention is to return to attendance in person at the AGM in future but, where that is not possible, 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.  The Company’s Strategy and Investment Policy are set out in the annual report.

Martin Moore

Sandy Gumm

March 10 2021