Alina : Final Report 2020

ALINA HOLDINGS PLC (formerly The Local Shopping REIT plc)

REPORT FOR THE 15 MONTHS TO 31 DECEMBER 2020

Stock Code: ALNA

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Alina Holdings PLC

(formerly The Local Shopping REIT plc)

Report for the 15 Months to 31 December 2020

Alina Holdings PLC ("Alina" or the "Company") is a company registered on the Main Market of the London Stock Exchange.

In December 2020 the Company changed its accounting reference date to 31 December in each year, following which it published an interim report for the six months to its previous accounting reference date of 30 September 2020. The period reported on in this document is therefore the fifteen months between the date of the Company's previous annual report (30 September 2019) and 31 December 2020, thereby ensuring continuity in the Company's financial reporting. However, as these two periods are not of equal length, they are not directly comparable. Future financial statements will report on 12 months periods to 31 December.

Investment Strategy

The Company's current investment strategy is to identify and acquire interests in potential target businesses capable of delivering long term value for its shareholders. We intend to seek to acquire interests in companies in the leisure, hospitality and entertainment sectors within Europe. Whilst we have no specific preferred countries, our initial focus is likely to be on less developed destinations, which we consider likely to offer the best value as they emerge from the Covid-19 pandemic.

We will continue to actively manage our residual property portfolio at least until the current uncertainty overhanging the UK property market has ended and will sell properties only when the directors consider it to be in the best interests of the Company's shareholders to do so.

Chairman's Statement

Corporate Activity

During the period the directors reviewed the options open to the Company for its future strategy, in tandem with the aim of restoring trading in the Company's shares on the London Stock Exchange, which had been suspended in October 2019. This culminated in the publication, and subsequent approval by the Company's shareholders in September 2020, of proposals for the Company's new investment strategy summarised above.

On 19 November 2020, the restoration of trading in the Company's shares on the London Stock Exchange took place.

On 26 November 2020, in accordance with the new investment strategy adopted by its shareholders, the Company changed its name to Alina Holdings PLC.

Financial Performance

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The Company made a loss for the 15 months to 31 December 2020 (the "reporting period") of £0.465 million (12 months to 30 September 2019: loss £1.874 million) on an IFRS basis.

The holding value of the Company's property investment portfolio, incorporating the adjustment for the value of head leases under IFRS 16, as at 31 December 2020 was £3.092 million (30 September 2019: £3.816 million).

As at 31 December 2020, the Company held £4.073 million of cash (30 September 2019: £3.566 million).

Throughout the reporting period we continued to operate our portfolio of local shopping arcade assets. At the beginning of the period the property market continued to be affected by the political uncertainty that overhung the economy generally at that time. Whilst this was to an extent dissipated following the general election in December 2019, concerns regarding the impact of the UK's departure from the European Union continued to influence the property market throughout the period, and a number of these remain.

However, the impact of these issues was far exceeded by the COVID-19 pandemic, which profoundly affected life in the UK from March 2020 onwards. The impact of the consequent social restrictions, which have been particularly severe in the retail and leisure segments, are well known and have impacted all owners and occupiers of commercial property. In tandem with other macro-economic factors, they are likely to have long-term consequences for the nature of retail shopping and the occupation of town centres generally. However, even during the most severe lockdown restrictions, those smaller local and convenience shops supplying essential items to their localities were able to continue to trade and we were pleased at the robust reaction of many of our tenants in the face of unprecedented challenges.

Many of our tenants are local sole traders and we have done our best to support them by taking a flexible approach to rent and service charge payment patterns. We have also done our best to support our tenants in applying for the various Government grants and other support available to them. Our approach has proven beneficial and resulted in more than 90% collection of all rents due since taking control of the business. Further, during a period of immense stress, we have succeeded in reducing vacancies, and the units in our portfolio are now 91% occupied.

Our Property Assets are currently, independently valued, however, given the fact that the Company currently has no debt, and its properties have an equivalent yield of 15.7%, the Board is investigating alternative strategies to enhance the carrying value of these assets, including but not limited to the development of certain assets, or the sale thereof. The Company's main assets are located in Oldham, Bristol and Hastings.

Duncan Soukup, Chairman

7 June 2021

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Strategic Report

The Strategic Report includes the Chairman's Statement on pages 2 and 3.

Operating Review

Business Model

During the year, the business concentrated on obtaining maximum value from its property portfolio. As noted in the Chairman's Statement, during the year the directors brought forward recommendations for changing the Company's investment strategy, which were adopted by the Company's shareholders shortly before the year end.

Market Context

For much of the reporting period the Company operated under its previous investment strategy as a UK REIT specialising in local retail shopping assets and the Company continues to operate its residual property assets whilst it develops its new strategy.

Concerns over the potential impact of the UK's departure from the European Union and uncertainty over its future trading relationship with the bloc continued to influence property values and transaction volumes throughout the year. However, this effect on the market came to be dwarfed by the COVID-19 outbreak form the latter part of March 2020. The effects of the pandemic, and the measures taken by Government to contain it, were particularly felt in the retail and leisure segments. The structural consequences for some elements of the UK property market appear likely to continue for the foreseeable future. However, even during the most severe lockdown restrictions, those smaller local and convenience shops supplying essential items to their localities, typical of our assets, were largely able to continue trading, albeit at a reduced level.

Operating Results & Portfolio Performance

The Group made an IFRS loss before tax for the fifteen months to 31 December 2020 of £0.465 million (or 2.05 pence per share), compared with a loss of £1.874 million (2.34 pence per share) for the 12 months to 30 September 2019. The loss for the Group reflected the loss of income resulting from the disposal of property assets during the year and during the latter part of the preceding year under the previously prevailing policy of disinvestment, the revaluation of the remaining portfolio and the effect of currency market fluctuations on the Group's cash holdings.

The portfolio achieved gross rental income for the fifteen months period of £0.598 million (12 months to 30 September 2019: £0.764 million). This reduction principally reflected the sale of property assets during the year.

At 31 December 2020 the portfolio comprised six properties, with an annual gross rental income, after deducting head rent payments, of £0.48 million (30 September 2019: eight properties; annual rental income £0.48 million). The portfolio included 61 letting units (30 September 2019: 65 letting units). The rental income lost by the sale of assets was made up through additional lettings at the retained properties.

Asset management activities during the period focused on maximising property occupancy and opportunities for rental growth, as well as a number of repair and maintenance projects.

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Marketing and letting activities continued, albeit with appropriate precautions to address lockdown requirements.

Further details of operating performance are given in the Finance Review.

Property Sales

Following the reconstitution of the Company's board of directors in October 2019 the new directors decided that the previous programme of property sales should cease pending the formulation of the Company's new investment strategy. The sales of two properties, which had been contracted during the previous year, were completed during the reporting period, at an aggregate gross sale price of £0.355 million. The holding value of those properties in the Company's accounts at 30 September 2019 took account of agreed pricing and sales costs.

Of the six property assets now held by the Company, one asset is considered to be held for sale, at a gross sale price of £0.350 million, with anticipated execution costs resulting in a carrying value of £0.330 million.

Revaluation

The fair value of the property portfolio of six assets held at 31 December 2020 was £2.795 million (30 September 2019: eight assets, £3.465 million), based on the valuation provided by Allsop LLP, a firm of independent chartered surveyors, as at 30 September 2020. The directors considered that it was not appropriate to undertake a further valuation of the property assets during the prevailing epidemic, bearing in mind the recent date of the previous valuation. Two of the larger assets were subject to full RICS valuations, with the remainder subject to desktop updates of their previous full valuations provided by Allsop LLP in July 2019.

The holding value of the property assets in the financial statements takes account of the agreed pricing for disposal of the one remaining property considered to be held for sale and also incorporates the estimated transaction costs for the sale. The aggregate holding value of the property investment portfolio in the Company's accounts, incorporating the adjustment for the value of head leases under IFRS 16, was £3.092 million (30 September 2019: £3.816 million).

On a like-for-like basis (excluding the value of properties disposed of during the year), the property valuation at 31 December 2020 showed a reduction on the 30 September 2019 valuation of 10.42%.

Investment Property Portfolio as at 31 December 2020

Fair value per independent valuation	£2.795m
Carrying value per financial statements	£2.775m
Net Initial Yield ("IY")	14.35%
Reversionary Yield ("RY")	16.24%
Equivalent Yield ("EY")	15.7%
Rent per annum*	£0.441
Market Rent per annum*	£0.487

*Net of head rents payable.

All yields quoted exclude the residential element which is valued at a discount to vacant possession value.

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