TIDMIPT
RNS Number : 1432L
ISIS Property Trust Limited
31 August 2012
To: RNS
Date: 31 August 2012
From: ISIS Property Trust Limited
Interim results for the six months ended 30 June 2012
-- Dividend of 4.0 pence per share for the period
-- Dividend yield of 9.5 per cent as at 30 June 2012
-- Net asset value per share total return of 1.7 per cent for the six months to 30 June 2012
-- Net asset value total return since launch of 75.2 per cent
-- Share price decreased by 6.7 per cent in the six month period
to 84.5 pence as at 30 June 2012
The Chairman, Peter Crook, stated:
The turbulent economic background, both in the UK and globally
put pressure on the UK commercial property market during the first
half of 2012. Total returns for the six months were 1.2 per cent,
as measured by the Investment Property Databank UK quarterly and
monthly funds index ('IPD') with capital values decreasing by 1.7
per cent.
The property portfolio achieved a total return of 2.3 percent
over the period with capital values falling by 1.1 per cent. The
five year performance remains positive with an annualised total
return of 0.5 per cent, ahead of IPD which recorded -1.6 per cent
per annum. The Company's net asset value ('NAV') of 96.4 pence per
share as at 30 June 2012 represented a total return of 1.7 per cent
for the first half of the year. The NAV continues to be negatively
impacted by the swap contract which was valued as a liability of
GBP7.6 million at the period end, accounting for 10.1 pence per
share, although this liability will unwind over the remaining four
and a half years of the contract. There was no material movement in
the swap valuation over the six months.
The Company's share price decreased by 6.7 per cent over the
period, to 84.5 pence per share at 30 June 2012, down from 90.6
pence per share as at 31 December 2011. The shares were trading at
a discount to net asset value of 12.3 per cent at the end of June
2012, compared to a discount of 8.2 per cent at the start of the
period.
Property Market
All ten segments of the UK property market identified by IPD saw
lower total returns in the six months to June than in the previous
six month period. Central London offices continued to out-perform,
reflecting its status as an international destination and the view
among overseas investors, that London represented a safe haven
outside the Eurozone for property investment. Elsewhere, the market
has been more subdued, especially in locations seen as vulnerable
to cutbacks in government spending. Total returns for offices
outside London, shops outside the south east and shopping centres
all turned negative in the period. The industrial market delivered
an above average 1.6 per cent portfolio total return, helped by a
3.3 per cent income return. The retail market outside Central
London has been affected by the weak economic environment and there
have been several high profile retail casualties. A large number of
stores have been closed and although some quickly re-let, this has
put pressure on retail rental growth and capital values, especially
for more secondary property.
Prime property has generally out-performed secondary stock and
the yield gap has widened. IPD average initial yields edged up by
10bps between December 2011 and June 2012, although this masks
considerable variation within the market. While yields on prime
stock generally held steady, secondary yields often weakened. For
offices in the South East and rest of the UK, the six month yield
shift was at least 100bps according to IPD data, putting yields in
double digits by June 2012.
The banks are starting to release more stock as they unwind
their property loans but this process has some way to go. Banks are
becoming less willing to lend on commercial property and some have
withdrawn from new lending while others have tightened their
lending conditions. Insurance companies are starting to become more
active in this market but credit availability remains
constrained.
Investment activity totalled GBP14.8bn in the six months to June
2012 compared with GBP16.1bn in the previous six months, according
to Property Data. Overseas investment at GBP7.3bn, equated to
around half of all UK commercial property transactions compared
with a historic average of just over 30 per cent. These purchases
were often London focused and/or for large lot sizes, obscuring the
extent of weakness elsewhere.
The macro-economic environment has led to a climate of
uncertainty, a focus on the downside risk and delays in committing
to decisions until the outlook is clearer. The period has been
characterised by high levels of risk aversion with investors
favouring prime property, core locations and particularly
properties with a long and secure income stream.
Portfolio
The Company sold Unit D 300 Brooklands Industrial Estate,
Weybridge for GBP6.35 million, which reflected a net initial yield
of 8.9 per cent. The unit is an older specification distribution
unit built in 1979. Whereas the initial yield appeared attractive
the lease of the premises expires in September 2014. The price
obtained was in excess of the valuation at GBP5.975 million and the
proceeds were used to reduce the level of gearing in the
portfolio.
Against a background of capital values trending downwards,
effective asset management is the key to protecting and where
possible enhancing capital values. At Unit 2 Eastern Road,
Bracknell, Proctor & Gamble entered into a 10 year lease, with
a break at the fifth year, and a rent of GBP223,000 per annum. This
deal was secured within three months of the previous tenant
vacating and resulted in a 6.6 per cent or GBP400,000 uplift in
value. At Unit 1, King George Close, Romford the lease was extended
giving an unexpired term of 15 years subject to the tenant
receiving the equivalent of 9 months rent free. This increased the
value of the industrial unit by GBP100,000 or 4.7 per cent.
The Company has taken advantage of the strength of the West End
office market and has carried out a scheme of refurbishment on
three floors of its flagship property at 14 Berkeley Street London
W1. These floors have been let successfully at rents of up to GBP75
per square foot. Furthermore the common areas have been refurbished
to a very high standard to reflect the prime location of the
building. The occupier of the ground floor car showroom has also
carried out a comprehensive refurbishment subsequent to agreeing a
new lease on the basis of an extension of the term from 2013 to
2025, with a break in 2020. The showroom rent has been increased
from GBP180,000 to GBP200,000 per annum, with a further uplift to
GBP210,000 per annum in 2013. Over the period the value of Berkeley
Street has increased by a further 2 per cent to GBP17.4 million
with GBP276,000 of capital expenditure having been made on the
property.
Property rental and capital values have tended to be more
resilient in London and the South East where 60.5 per cent by value
of the Company's properties are located. However, values in the
regions are increasingly under pressure, with falls recorded on
properties, particularly where terms are becoming short and where
rents paid are well in excess of current market rental values.
As a result of the new lettings at Bracknell and Berkeley
Street, the void rate of the portfolio has fallen from 4.8 per cent
in December to 2.1 per cent in June 2012. This low level of voids
compares favourably with the IPD benchmark figure of 8.7 per cent.
As a result of new lettings and the sale of Weybridge the average
weighted unexpired lease term has increased from 8.8 years to 9.0
years, in spite of effluxion of time.
Dividends
To date the Company has paid one interim dividend of 2.0 pence
per share for the current financial year, with a second interim
dividend of 2.0 pence per share to be paid on 31 August 2012.
Borrowings
At the period end the Company's level of debt was at GBP42
million, down from GBP47 million at 31 December 2011, following the
sale of the property at Weybridge. The net gearing, after deducting
cash was at 32.6 per cent of the value of the portfolio as at 30
June 2012, having been at 36.1 per cent at the year end. This is
well within the loan to value covenant limit of 60 per cent of
total assets. The current rate of interest is 5.55 per cent on
GBP40 million of the debt, which is fixed with an interest rate
swap. The remaining GBP2 million of the debt drawn down incurs
interest at one month LIBOR plus 45 bps.
Outlook
The current year is expected to see continued pressure on rents,
capital values and the income streams. However, property remains
attractive to investors seeking a high and stable income return,
especially in an era of ultra-low gilt yields. The UK is also one
of the world's largest, mature, liquid and transparent property
investment markets. These aspects will continue to support the
market, especially prime assets, core locations and well-let
property. Performance will continue to be strongly influenced by
stock selection and the effects of asset management. The uncertain
market outlook and financial constraints has led to a stalling of
many development projects and once demand starts to revive, areas
of tight supply could see a swift turnaround. As the economic and
financial market outlook becomes clearer, property is expected to
deliver stronger total returns, underpinned by income.
The Manager accepts the challenges and also recognises the
opportunities that the current market presents. The Company intends
to keep levels of borrowing at a prudent level during this period
of volatility and uncertainty, but will continue to seek to refresh
and enhance the quality of the portfolio.
Enquiries to:
The Company Secretary
Northern Trust International Fund Administration Services
(Guernsey) Limited
Trafalgar Court
Les Banques
St Peter Port
Guernsey GY1 3QL
Tel: 01481 745001
Fax: 01481 745051
I McBryde
S Macrae
F&C Asset Management plc
Tel: 0207 628 8000
ISIS Property Trust Limited
Consolidated Statement of Comprehensive Income
Six months Six months Year to
to 30 June to 30 June 31 December
2012 2011 2011
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------ ------------ -------------
Revenue
Rental income 4,587 4,363 9,252
------------ ------------ -------------
Total revenue 4,587 4,363 9,252
Losses on investment properties (1,395) (869) (258)
------------
3,192 3,494 8,994
------------
Expenditure
Investment management fee (375) (377) (764)
Direct operating expenses of let
rental property (161) (60) (462)
Provision for bad debts (1) (48) 70
Amortisation of lease surrender premiums (87) (77) (154)
Administration fee (32) (30) (63)
Valuation and other professional
fees (55) (52) (106)
Directors' fees (64) (64) (127)
Other expenses (51) (60) (137)
------------
Total expenditure (826) (768) (1,743)
------------ ------------ -------------
Net operating profit before finance
costs 2,366 2,726 7,251
------------ ------------ -------------
Net finance costs
Interest receivable 9 6 16
Finance costs (1,163) (1,134) (2,313)
------------ ------------ -------------
(1,154) (1,128) (2,297)
------------ ------------ -------------
Net profit from ordinary activities
before taxation 1,212 1,598 4,954
Taxation on profit on ordinary activities (228) (250) (479)
------------ ------------ -------------
Profit for the period 984 1,348 4,475
Other comprehensive income:
Net gain/(loss) on cash flow hedges,
net of tax 267 (14) (1,957)
------------ ------------ -------------
Net comprehensive profit for the
period, net of tax 1,251 1,334 2,518
------------ ------------ -------------
Dividends paid per share (note 3) 4.00p 4.00p 8.00p
------------ ------------ -------------
Basic and diluted earnings per share
(note 4) 1.30p 1.78p 5.92p
------------ ------------ -------------
This financial information has been prepared on the basis of the
accounting standards and policies set out in the Annual Report and
Accounts for the year ended 31 December 2011.
All items in this statement derive from continuing
operations.
All of the profit for the period is attributable to the owners
of the Company.
ISIS Property Trust Limited
Consolidated Balance Sheet
As at As at As at
30 June 30 June 31 December
2012 2011 2011
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
----------- ----------- -------------
Non-current assets
Investment properties (note
2) 119,490 128,526 126,580
----------- ----------- -------------
119,490 128,526 126,580
Current assets
Trade and other receivables 3,300 3,046 3,087
Cash and cash equivalents 2,832 3,954 3,456
----------- ----------- -------------
6,132 7,000 6,543
----------- ----------- -------------
Total assets 125,622 135,526 133,123
-----------
Non-current liabilities
Interest-bearing bank loan (42,266) (50,237) (47,259)
Interest rate swap (5,863) (4,216) (6,225)
(48,129) (54,453) (53,484)
----------- ----------- -------------
Current liabilities
Trade and other payables (2,824) (2,816) (3,291)
Interest rate swap (1,762) (1,733) (1,666)
(4,586) (4,549) (4,957)
Total liabilities (52,715) (59,002) (58,441)
----------- ----------- -------------
Net assets 72,907 76,524 74,682
----------- ----------- -------------
Represented by:
Share capital 756 756 756
Special distributable reserve 66,345 67,664 66,345
Capital reserve 13,962 14,748 15,359
Other reserve (7,513) (5,835) (7,778)
Revenue reserve (643) (809) -
Equity shareholders' funds 72,907 76,524 74,682
----------- ----------- -------------
Net asset value per share
(note 5) 96.37p 101.16p 98.72p
ISIS Property Trust Limited
Consolidated Statement of Changes in Equity
Six months Six months Year to
to 30 June to 31 December
2012 30 June 2011
2011
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------ ----------- -------------
Opening net assets 74,682 78,216 78,216
Net profit for the period 984 1,348 4,475
Dividends paid (note 3) (3,026) (3,026) (6,052)
Movement on fair value
of interest rate swap 267 (14) (1,957)
------------
Closing net assets 72,907 76,524 74,682
------------ ----------- -------------
ISIS Property Trust Limited
Consolidated Cash Flow Statement
Six months Six months Year to
to 30 June to 30 June 31 December
2012 2011 2011
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------ ------------ -------------
Cash flow from operating activities
Net operating profit for the period
before taxation 1,212 1,598 4,955
Adjustments for:
Losses on investment properties 1,395 869 258
(Increase) / decrease in operating
trade and other
receivables (212) 549 507
(Decrease)/increase in operating trade
and other payables (302) (34) 379
Net finance costs 1,154 1,128 2,296
------------ ------------ -------------
3,247 4,110 8,395
Taxation paid (377) (446) (597)
------------
Net cash inflow from operating activities 2,870 3,664 7,798
------------ ------------ -------------
Cash inflow/(outflow) from investing
activities
Purchase of investment properties - (7,445) (7,459)
Sale of investment properties 6,349 - 2,960
Capital expenditure (656) (16) (404)
Interest received 9 6 16
------------ ------------ -------------
Net cash inflow /(outflow) from investing
activities 5,702 (7,455) (4,887)
------------ ------------ -------------
Cash flow from financing activities
Dividends paid (3,026) (3,026) (6,052)
Bank loan interest paid (705) (239) (523)
Payments under interest rate swap arrangement (465) (897) (1,787)
Bank loan (paid back)/ drawn down (5,000) 10,000 7,000
------------ ------------ -------------
Net cash (outflow)/inflow from financing
activities (9,196) 5,838 (1,362)
------------ ------------ -------------
Net (decrease)/increase in cash and
cash equivalents (624) 2,047 1,549
Opening cash and cash equivalents 3,456 1,907 1,907
------------ ------------ -------------
Closing cash and cash equivalents 2,832 3,954 3,456
------------ ------------ -------------
ISIS Property Trust Limited
Notes to the Interim Report
for the six months to 30 June 2012
1. The condensed consolidated financial statements have been
prepared in accordance with International Financial Reporting
Standards ('IFRS'), IAS 34 'Interim Financial Reporting' and the
accounting policies set out in the statutory accounts of the Group
for the year ended 31 December 2011. The condensed consolidated
financial statements do not include all of the information required
for full annual financial statements and should be read in
conjunction with the consolidated financial statements of the Group
for the year ended 31 December 2011, which were prepared under full
IFRS requirements.
2. Investment properties
Six month period to
30 June 2012
GBP'000
-------------------------------------
Opening valuation 126,580
Purchases and capital expenditure 656
Sales (6,350)
Losses on investment properties (1,396)
-------------------------------------
Closing valuation 119,490
-------------------------------------
3. Dividends
Six months ended Six months ended Year ended 31
30 June 2012 30 June 2011 December 2011
Rate (pence) Rate (pence) Rate
GBP'000 GBP'000 GBP'000 (pence)
---------------- ---------- ------------- ---------- ------------- ---------- ---------
Fourth interim
dividend 1,513 2.00 1,513 2.00 1,513 2.00
First interim
dividend 1,513 2.00 1,513 2.00 1,513 2.00
Second interim
dividend - - - - 1,513 2.00
Third interim
dividend - - - - 1,513 2.00
---------------- ---------- ------------- ---------- ------------- ---------- ---------
3,026 4.00 3,026 4.00 6,052 8.00
---------------- ---------- ------------- ---------- ------------- ---------- ---------
A second interim dividend for the year to 31 December 2012, of
2.00p per share, will be paid on 31 August 2012 to shareholders on
the register at close of business on 17 August 2012.
4. Earnings per share are based on 75,650,000 shares, being the
weighted average number of shares in issue during the period (30
June 2011 and 31 December 2011 - 75,650,000). Earnings for the six
months to 30 June 2012 should not be taken as a guide to the
results for the year to 31 December 2012.
5. The net asset value per ordinary share is based on net assets of GBP72,907,000 (30 June 2011 - GBP76,524,000 and 31 December 2011 - GBP74,682,000) and 75,650,000 ordinary shares (30 June 2011 - 75,650,000 and 31 December 2011 - 75,650,000) being the number of ordinary shares in issue at the period end.
6. 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 segment of business, being property investment,
and in one geographical area, the United Kingdom, and that
therefore the Group has only a single operating segment. 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 of the Group's net asset value, as calculated
under IFRS, and therefore no reconciliation is required between the
measure of profit or loss used by the Board and that contained in
the condensed consolidated financial statements.
7. No Director has an interest in any transactions which are or
were unusual in their nature or significant to the Group. F&C
Asset Management received fees for its services as Investment
Managers. The total charge to the Consolidated Statement of
Comprehensive Income during the period was GBP375,000 of which
GBP190,000 remained payable at the period end. The Manager also
received an administration fee of GBP32,000 of which GBP16,000
remained payable at the period end.
The Directors of the Company received fees for their services
totalling GBP64,000, of which GBPnil remained payable at the period
end.
8. The accounts have not been audited or reviewed under the
requirements of ISRE 2410 'Review of interim financial information
performed by the independent auditor of the Company'.
9. The Group results consolidate those of IPT Property Holdings
Limited ('IPTPH'), a wholly-owned subsidiary. IPTPH is incorporated
in Guernsey and its principal business is that of an investment and
property company.
10. The Interim Report, together with this statement will be
available at the Company's website address,
www.isispropertytrust.com during August 2012.
ISIS Property Trust Limited
Statement of Principal Risks and Uncertainties
The Company's assets consist of direct investments in UK
commercial property. Its principal risks are therefore related to
the UK commercial property market in general but also the
particular circumstances of the properties in which it is invested
and their tenants. Other risks faced by the Company include
economic, strategic, regulatory, management and control, financial
and operational and compliance with banking covenants. These risks,
and the way in which they are mitigated and managed, are described
in more detail under the heading Principal Risks and Uncertainties
within the Report of the Directors in the Company's Annual Report
for the year ended 31 December 2011. The Company's principal risks
and uncertainties have not changed materially since the date of
that report and are not expected to change materially for the
remaining six months of the Company's financial year.
Directors' Responsibility Statement in
Respect of the Half-yearly Financial Report
We confirm that to the best of our knowledge:
-- the condensed set of consolidated financial statements have
been prepared in accordance with IAS34 'Interim Financial
Reporting';
-- the Chairman's Statement constituting the Interim Management
Report together with the Statement of Principal Risks and
Uncertainties include a fair review of the information required by
the Disclosure and Transparency Rules ('DTR') 4.2.7R, being an
indication of important events that have occurred during the first
six months of the financial year and their impact on the condensed
set of consolidated financial statements; and
-- the Chairman's Statement together with the consolidated
financial statements include a fair review of the information
required by DTR 4.2.8R, being related party transactions that have
taken place in the first six months of the current financial year
and that have materially affected the financial position or
performance of the Company during that period, and any changes in
the related party transactions described in the last Annual Report
that could do so.
On behalf of the Board
Peter Crook
Chairman
30 August 2012
This information is provided by RNS
The company news service from the London Stock Exchange
END
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