F&C COMMERCIAL PROPERTY TRUST LTD
To: RNS
Date: 05 April 2016
From: F&C Commercial Property Trust Limited
Results in Respect of the Year Ended 31 December 2015 (audited)
Highlights
* Net asset value total return of 15.9 per cent
* Share price total return of 2.8 per cent
* Portfolio total return of 14.3 per cent, compared with a total return of
13.3 per cent from the IPD benchmark
* Maintained dividend of 6.0p per Ordinary Share, providing a yield of 4.5
per cent based on the year-end share price
* Dividend cover increased to 80.6% from 50.5%, with net income increasing by
£15.4 million in the year
Chairman's Statement
Introduction
2015 was a positive year for the Company as it continued to build on its strong
long term record. With a new ten year loan at a significantly lower interest
rate in place and the next continuation vote aligned to the maturity of that
loan, the focus for the year was driving income and value creating asset
management rather than any further corporate change.
Performance for the Year
The net asset value ('NAV') total return for the year was 15.9 per cent and the
share price total return was 2.8 per cent. The total return from the portfolio
was 14.3 per cent, which compares favourably with a total return of 13.3 per
cent from the Investment Property Databank ('IPD') Quarterly Universe.
The share price at the year-end was 134.4p, representing a discount of 0.6 per
cent to the NAV per share of 135.2p.
The following table provides an analysis of the movement in the NAV per share
for the year:
Pence
NAV per share as at 31 December 2014 122.1
Unrealised increase in valuation of direct property 13.8
portfolio
Realised increase in valuation of direct property 0.3
portfolio
Increase in valuation of interest rate swap 0.1
Other net revenue 4.9
Dividends paid (6.0)
---------
NAV per share as at 31 December 2015 135.2
---------
Performance in the year was driven by capital growth in the portfolio of 9.2
per cent. The strongest returns were experienced in the logistics and
industrial sector in the South East with the logistics 'big box' properties
performing particularly well.
In absolute terms, the most significant contributors to returns were:
* London, St Christopher's Place Estate - reflecting yield compression and
rental growth on all elements of the Estate.
* Manchester, 82 King Street - a number of the vacant office floors in the
property were refurbished and let.
* London, Cassini House, St James's Street - reflecting the strength of
investment demand and strong rental growth.
* Southampton, Upper Northam Road, Hedge End - there was a letting of a
vacant unit to Amazon during the first half of 2015 on a new 10 year lease.
The share price, which had been predominantly trading at a double digit premium
to NAV for the last two years, fell significantly in the last quarter of the
year and was at a discount of 0.6 per cent at the year end. This is consistent
with lower expectations for capital growth in UK commercial property values and
this trend has been experienced by the other companies in the sector.
The UK commercial property market is continuing to deliver good performance but
there are signs that investment momentum may be easing. There are concerns
about pricing, particularly in London, and the market is entering a phase of
the cycle where yield compression and the rate of rental growth are both
expected to level off.
Borrowings and Loan Refinancing
The Company entered into a £260 million ten year loan agreement with Legal &
General Pensions Limited ('L&G') on 31 December 2014, refinancing its previous
£230 million bonds and a £30 million bank loan. The L&G loan carries a fixed
interest rate of 3.32 per cent per annum. The Company also has a £50 million
bank loan with a term to 28 June 2017 on which the interest rate is fixed,
through an interest rate swap of the same notional value and duration, at 4.88
per cent per annum. The Group's total borrowings amount in aggregate to £310
million with a weighted average interest rate of 3.57 per cent per annum.
Gearing, net of cash, at the end of the year was 19.0 per cent.
Dividends and Dividend Cover
Twelve monthly interim dividends, each of 0.5p per share, were paid during the
year maintaining the annual dividend of 6.0p per share and providing a dividend
yield of 4.5 per cent based on the year-end share price. Barring unforeseen
circumstances, the Board intends that dividends in 2016 will continue to be
paid monthly at the same rate.
The Company's level of dividend cover for the year (excluding capital gains on
properties) was 80.6 per cent, significantly ahead of the 50.5 per cent cover
achieved last year. This is as a result of net income increasing by £15.4
million in the current year, the majority of which was attributable to the
following:
Reduction in interest costs
£10.5 million
Increase in rental income
£4.1 million
Reduction in non-recoverable property expenses £0.9
million
Exceptional refinancing expenses in 2014 £0.6
million
Increase in Investment Management fee £(0.7)
million
Refinancing the debt has provided the largest contribution towards the
increased level of dividend cover. The portfolio has, however, also benefited
from additional rental income, with a full year's rent being received from the
Prime Four Business Park offices in Aberdeen, significant upward rent reviews
at the offices in Cassini House, London and two vacant floors being let in
Alhambra House, Glasgow.
Board Composition
As reported last year, the Board is going through a period of change. Two new
independent non-executive Directors, Peter Cornell and David Preston, were
appointed on 1 May 2015 with Nick Tostevin, who had been a Director since the
Company's launch in 2005 and Chairman of the Audit Committee, retiring from the
Board at the close of the last Annual General Meeting on 28 May 2015. At the
same time, Trudi Clark was appointed as the new Audit Committee Chairman and
Martin Moore was appointed as Senior Independent Director.
The Board has consisted of seven Directors since May 2015. In order to
facilitate a smooth transition, the stated intention has always been that one
further long serving Director would retire at the Annual General Meeting in
2016. Accordingly, Brian Sweetland, who has been a Director since 2005, will
retire from the Board at the Annual General Meeting on 2 June 2016. On behalf
of the Board, I would like to thank Brian for all the time and effort he has
put in over the years; he has made a valuable contribution towards the ongoing
success of the Company.
This year the Company conducted an external board review that has helped
clarify the optimum approach to board succession and identified areas of
potential improvement in board process and performance.
Annual General Meeting
The Annual General Meeting will be held at 12.30pm on Thursday 2 June 2016 at
Trafalgar Court, Les Banques, St. Peter Port, Guernsey.
Outlook
There are clear signs that investors are adopting a more restrained approach to
investing across all asset classes including commercial property, which will
have contributed to the re-rating of the Company's shares. This restraint looks
set to continue, given the volatility of global financial markets and the
international macro-economic and political environment. There is also the
forthcoming EU referendum which adds a further level of uncertainty and may
lead to inactivity in the investment market and indeed the occupational
markets.
There is a general consensus that returns will now revert to being more income
driven following three years of strong capital performance. Rental growth is
expected to be positive at the all-property level, particularly on prime
assets, but rates of growth are expected to moderate over the next few years.
The Company has always adopted a prudent, low risk approach to investment and
as a consequence, has a high quality portfolio with a modest level of
borrowings. There exists a number of opportunities within the portfolio to
enhance returns further and this remains the focus of management activity with
the objective of enhancing the total return on the existing assets and
continuing to build dividend cover.
Finally, while the environment in the last several years has been positive for
property investment, your Board and the Managers are mindful that this remains
a cyclical business. They are confident that a continued well integrated
corporate and property investment strategy, combined with high quality
portfolio and strong financial position, will enable your Company to take
advantage of available opportunities that may be expected to emerge.
Chris Russell
Chairman
Managers' Review
Highlights over the Year
* Strong total return from property portfolio of 14.3 per cent compared with
13.3 per cent from the benchmark.
* Capital growth of 9.2 per cent compared with 8.2 per cent from the
benchmark.
* Gross rental income increased by £4.1 million per annum.
* Void levels remain low, following a number of successful re-lettings.
* Acquisition of a newly constructed office building in Crawley pre let to
Virgin Atlantic at a gross purchase price of £45.3 million.
Property Market Review for 2015
The market portfolio total return for the year, as measured by the Investment
Property Databank ('IPD') Quarterly Universe, was 13.3 per cent. During the
second half of the year there was some loss of momentum but performance was
supported by continued inflows of capital, especially from overseas investors
and positive rental growth.
The property market benefitted from continued economic recovery in the UK,
modest inflation, rising employment and a continued regime of low interest
rates that kept property pricing attractive against the risk-free rate.
Investment activity exceeded £70 billion to reach record levels, with the value
of transactions peaking in the second quarter. Several large hotel portfolio
and leisure deals boosted the total but most segments, apart from shopping
centres, saw activity levels above the long-run average. Overseas investors
continued to be the largest single group of buyers accounting for almost half
of all purchases. UK institutions having been net investors since early 2013
adopted a neutral position during the second half of the year. Central London
remained in favour but concerns about pricing intensified as the year
progressed and there was greater interest and activity in the regions.
Further yield compression was witnessed with the all-property initial yield
dipping below 5 per cent to finish the year at 4.8 per cent. IPD data shows all
segments of the market recording inward yield shift in the 12-month period. As
the year progressed the momentum slowed and the gap between prime and secondary
yields showed signs of stabilisation.
Offices were the top performer among the three main property sectors in 2015
with an 18.1 per cent benchmark return. The City and West End were the
strongest performing sub-components of the office sector, delivering benchmark
total returns of 20.4 per cent and 19.9 per cent respectively. Industrials
recorded 16.3 per cent with retail lagging at 9.0 per cent. As in previous
years, retail has been polarised with Central London out-performing the
regions, delivering a total return of 23.7 per cent versus 6.5 per cent for
standard retail outside London and the South East.
The income return for the year was 4.8 per cent. Benchmark capital values rose
by 8.2 per cent, driven by double digit growth for offices and industrials in
London and the South East. The retail market has seen strong capital growth in
Central London but outside London and the South East growth for standard
retails has been barely positive at 0.9 per cent.
Rental growth was 4.0 per cent but as in the previous year, it was concentrated
in the capital where City and West End offices recorded rental growth of more
than 11 per cent and Central London retail 4.7 per cent. The retail market
outside the South East has continued to experience rental decline. The
occupational market is showing signs of stabilisation and the vacancy rate
moved marginally lower to 6.7 per cent by the end of the year at the
all-property level. Rent passing rose by a modest 1.2 per cent in the year
underscoring the difficulty of capturing rental growth. This is especially
pronounced for more secondary stock. The year has seen an increased interest in
development, including some speculative development, particularly in the
logistics and industrial sector and selective office markets.
Property delivered another year of double digit total returns driven by
investment demand and continued strength in the London market but there is
polarisation and some parts of the market remain challenged
Valuation and Portfolio Growth
The Company invests in a diversified UK commercial real estate portfolio of 37
properties.
CBRE Limited independently valued the portfolio at £1,355.9 million as at 31
December 2015.
The total return from the portfolio over the year was 14.3 per cent (32nd
percentile) compared with the 13.3 per cent benchmark return. The portfolio has
delivered a strong track record of longer term performance: top quartile over
three years and top decile over five and ten years.
Market Segment - Direct Portfolio Total Benchmark Total
Property Return (%) Return (%)
St Retails - South East* 18.5 14.2
St Retails - Rest of UK - 6.5
Shopping Centres - 9.5
Retail Warehouses 7.8 6.9
Offices - City 23.0 20.4
Offices - West End 12.3 19.9
Offices - South East 10.0 18.0
Offices - Rest of UK 12.5 12.2
Industrials - South East 20.3 17.3
Industrials - Rest of UK 18.4 15.0
Other Commercial 19.2 12.3
All Segments 14.3 13.3
* Includes West End Retail
Retail Market
The Company's exposure to the "in town" retail sector is restricted to 3
holdings in total, St Christopher's Place Estate, London W1, The Broadway,
Wimbledon and a shop in Conduit Street, London W1. The value of these three
holdings is £358 million.
Strategically the Company does not own any shopping centres or traditional High
Street shops having sold 124 Princes Street, Edinburgh during the year.
St Christopher's Place Estate, London W1 is a conviction holding for the
Company and its largest asset. However, underlying this it does comprise 44
individual properties and a diversification of uses ranging from traditional
retail, restaurants, offices and a growing residential exposure.
The Estate continues to perform strongly, with a 19.0 per cent increase in its
capital value over the year. This was driven by a hardening in capitalisation
rates as a consequence of the continued demand for Central London retail
properties, and capital investment, particularly the redevelopment of 71-77
Wigmore Street which commenced at the beginning of the year and should be
completed by the end of 2016. Improvements in rental values have also been
demonstrated by retail lettings in James Street, increasing rents by 5.9 per
cent to £180 Zone A, and lettings in St. Christopher's Place increasing the
rental by 7 per cent to £200 Zone A. St Christopher's Estate should also
benefit from the investment being made into the surrounding area and the
improvements being made by adjacent owners. There are currently no retail
vacant units on the Estate.
The commercial element of the redevelopment of 71-77 Wigmore Street has already
generated a good level of interest and formal marketing has now commenced.
Meanwhile, looking ahead, a planning application has now been submitted for the
redevelopment of 1-2 Barrett Street, following extensive pre- application
consultation with the City of Westminster over the last 12 months.
At 16 Conduit Street, we are still seeing strong rental growth and an agreement
was entered into for a surrender of the existing lease, held by Christian Dior,
subject to a re-letting of the ground floor retail unit to luxury retailer MCM
at a higher rental level. The surrender and re-letting will complete in 2016.
At the Company's retail and leisure holding in Wimbledon, another round of rent
reviews with unchanged occupiers has commenced. A number of announcements have
been made concerning proposals for Crossrail 2, which will run through
Wimbledon, and active consultation has been undertaken with the Manager. The
investment value impact is likely to be positive.
Outside London, the focus has been on concluding several key initiatives. Sears
Retail Park, Solihull, is now fully let. Unit 5, the former JJB unit, was
extensively refurbished and the lease completed to TK Maxx in July at a
commencing rent of £380,000 per annum. This new tenant to the Park complements
the 2014 letting to Next at Home and since these units opened, the Park has
seen a notable increase in footfall.
At Newbury Retail Park an agreement to lease has been contracted with TK Maxx
at Unit 10 which will be extensively redeveloped on the expiry of the current
tenant's lease. The letting to TK Maxx reflects an increase in retail values to
£35 psf. The Arcadia Group vacated Unit 13 since the year-end and this has now
been let to Boots the Chemist upon their relocation from Unit 10. These new
lettings generate an income of £650,000 per annum and will enhance the retail
offer on the Park as a whole.
Office Market
The Company's exposure to the office sector amounts in total to £541 million
(39.9 per cent of the portfolio) across 17 properties and providing
approximately 40 per cent of gross rental income.
The total return on the office portfolio was 12.2 per cent compared with the
IPD benchmark total return of 18.1 per cent. This relative underperformance can
be attributed to, the Company's West End and South East properties. With regard
to the Company's West End properties, analysis suggests the portfolio
benefitted from yield compression from its prime assets earlier in the cycle
whilst the South East segment has been affected by voids at Watchmoor Park,
Camberley and Thames Valley Park, Reading.
The Company owns only one City of London office: 7 Birchin Lane, EC3. Valued at
under £20 million, the Company is not overly exposed to the expected increase
in supply in 2018. This property outperformed last year and a number of floors
are currently the subject of refurbishment. It is expected that on reletting,
rents should be achieved in excess of £60 psf, which is significantly ahead of
the previous rental level. In the West End, office floors at 2-4 King Street,
London SW1 and 17a Curzon Street, London W1 are also being refurbished.
The Company's largest exposure to the Rest of UK Offices is its holdings in
Aberdeen. The fall in the price of oil has had an impact on the Aberdeen
property market with few leasing or investment transactions taking place. The
local market is quiet, but the Company's properties are located on what has now
established itself as Aberdeen's prime out of town office location. The
buildings, which are all new and let to good covenants on long leases with
fixed rental uplifts, continue to provide strong underlying cashflows.
Elsewhere in the regional market 82 King Street, Manchester continues to build
upon its recent leasing success with lettings to Zeus Capital, Axa, Channel 4,
Odgers Berndtson, Foresight Group and Cognitive Publishing. As a result of
these lettings the vacant area in the building has reduced from 36,000 sq. ft.
to just under 16,000 sq. ft.
Industrial & Logistics
The Company has an exposure to eleven properties in this sub-sector with a
combined value of £193 million. The portfolio is underweight to industrial
estates with its main exposure being "big box" distribution units located in
core areas. Distribution and logistics had a strong year with significant
investor appetite for properties, given the attractions of the sub-sector
arising from the structural changes to retail and supportive occupier demand.
The Company's portfolio outperformed due to both yield compression and
underlying rental growth.
Of particular note was the letting of a vacant 66,700 sq. ft. unit at Hedge
End, Southampton to Amazon on a new 10 year lease, with a break at year 5, at
an annual rent £517,000 (£7.75 per sq. ft.). Several of the Company's logistics
holdings are subject to shorter lease terms and material negotiations have
progressed with their tenants to renew or regear these leases on longer lease
terms.
At the Cowdray Centre, Colchester a vacant unit was let at a rent of £75,000
per annum and more significantly, progress has been made regarding the 12 acre
development site. An outline planning application was submitted last year to
develop the site with of 154 residential units. Since the year end, this
outline planning application was determined by the local planning authority,
which approved a resolution to grant consent, subject to completing a Section
106 Agreement. Securing this consent will enable discussions to start with
volume housebuilders on the site's future.
The Alternative Property Sector
The student accommodation block, let in its entirety to the University of
Winchester on a long lease, remains the Company's only exposure to this sector.
The property produced a total return of 19.2 per cent last year. This lease is
subject to annual RPI increases and the annual rent is now £1.725 million.
Acquisitions & Sales
As previously announced, the Company purchased The Leonardo Building on the
Manor Royal Business Park, Crawley. The property was acquired part way through
its construction and the development was completed in December 2015 comprising
110,545 sq. ft. of Grade A offices. The building was pre-let to Virgin Atlantic
Ltd on a 16.5 year lease (18 months' rent free) at an initial rent of £23.5 per
sq. ft. The tenant entered into the lease in December and is currently onsite
fitting out the offices. The Company paid a total consideration of £45.3
million and the rental income due is £2.54 million per annum, equivalent to a
net initial yield of 5.6 per cent. The acquisition provides the Company with an
exposure to a new building, located in an area of the South East currently
experiencing strong occupational demand with limited new supply off a low
rental base. These supportive fundamentals should provide a platform for rental
growth.
The Company also completed the disposal of one fully let property at 124/125
Princes Street, Edinburgh at a price of £18.1 million (before costs),
reflecting a net initial yield of 5.1 per cent. The sale price exceeded the
last external valuation of £15.1 million and realised significant capital
growth following the completion of asset management initiatives that included
the refurbishment and leasing of office floors.
Property Management
The management of the Company's income remains a key activity and gross income
increased by £4.1 million over the year.
During the year we contracted 48 lease events at a total rental income over of
£1.6 million per annum and the most notable lettings are highlighted elsewhere
in this report. Fifteen rent reviews were also documented increasing annual
rental income by approximately £722,000.
Void levels were largely unchanged over the year at 4.5 per cent of estimated
rental value (excluding properties held for development). The vacant
accommodation mainly relates to office floors at 7 Birchin Lane, London EC3,
which are now being refurbished, and small office suites at St Christopher's
Place Estate.
The provision for overdue debt (90 days) at the year-end was 0.5 per cent of
gross annualised rents which is low in comparison with the size of the
Company's rent roll.
Outlook
UK property is performing well, and the Governor of the Bank of England's
announcement in January 2016 that he believes that there is no need to raise
interest rates imminently bodes well for both the investment and occupational
property markets. However there are clear headwinds with the economic effects
of the slowdown in China, higher US interest rates, sluggish growth in the
Eurozone and lower oil prices all potential issues; especially if they lead to
reduced or reversed investment and capital flows from Asia and the Middle East
in particular. The outcome of the EU referendum is unclear and this could lead
to uncertainty and inactivity, with investors holding back until the result is
known. In the occupational markets tenants may also delay making important
decisions until the result. As a generality the EU referendum may be disruptive
to the markets.
Within property, the reforms to the rating system are a further area of
uncertainty. We believe that the era of double digit total returns has drawn to
a close and the market has entered a period when income is the main driver of
total returns. The Property Managers are forecasting a market total return of
circa 6.5 per cent for 2016 and that total returns in the five years to 2020
will average 5.0 per cent per annum. In light of such an outlook, the ability
to deliver on opportunities within the portfolio that grow the income stream
will be critical. We continue to favour Central London retail, quality
logistics and South East offices but also recognise the importance of
stock-specific selection. We remain wary of secondary stock in weaker or
non-established locations.
Richard Kirby
Investment Manager
BMO REP Asset Management plc
F&C Commercial Property Trust Limited
Consolidated Statement of Comprehensive Income (audited)
Year ended Year ended
31 December 31 December
2015 2014
£'000 £'000
Revenue
Rental income 62,613 58,528
--------- ---------
Total revenue 62,613 58,528
Gains/(losses) on investment properties
Unrealised gains on revaluation of investment 110,314 150,521
properties
Gains on sale of investment properties realised 2,530 -
---------- ----------
Total income 175,457 209,049
---------- ----------
Expenditure
Investment management fee (8,100) (7,312)
Other expenses (4,204) (5,854)
---------- ----------
Total expenditure (12,304) (13,166)
----------- -----------
Operating profit before finance costs and 163,153 195,883
taxation
----------- -----------
Net finance costs
Interest receivable 194 347
Finance costs (11,708) (22,165)
----------- -----------
(11,514) (21,818)
----------- -----------
Profit before taxation 151,639 174,065
Taxation (142) (164)
---------- ----------
Profit for the year 151,497 173,901
---------- ----------
Other comprehensive income
Items that are or may be reclassified
subsequently to profit or loss
Movement in fair value of interest rate swaps 909 (52)
---------- ----------
Total comprehensive income for the year 152,406 173,849
---------- ----------
Basic and diluted earnings per share 19.0p 22.5p
All of the profit and total comprehensive income for the year is attributable
to the owners of the Company.
All of the items in the above statement derive from continuing obligations.
F&C Commercial Property Trust Limited
Consolidated Balance Sheet (audited)
As at As at
31 December 31 December
2015 2014
£'000 £'000
Non-current assets
Investment properties 1,340,061 1,195,593
------------ ------------
1,340,061 1,195,593
------------ ------------
Current assets
Trade and other receivables 19,575 21,581
Cash and cash equivalents 55,755 90,497
------------ ------------
75,330 112,078
------------ ------------
Total assets 1,415,391 1,307,671
------------ ------------
Current liabilities
Trade and other payables (26,002) (22,125)
------------ ------------
Non-current liabilities
Interest-bearing loans (307,419) (307,111)
Interest rate swaps (1,546) (2,455)
------------ ------------
(308,965) (309,566)
------------ ------------
Total liabilities (334,967) (331,691)
------------ ------------
Net assets 1,080,424 975,980
------------ ------------
Represented by:
Share capital 7,994 7,994
Share premium 127,612 127,612
Reverse acquisition reserve 831 831
Special reserve 474,529 511,933
Capital reserve - investments sold (21,408) (18,856)
Capital reserve - investments held 374,340 258,944
Hedging reserve (1,546) (2,455)
Revenue reserve 118,072 89,977
------------ ------------
Equity shareholders' funds 1,080,424 975,980
------------ ------------
Net asset value per share 135.2p 122.1p
F&C Commercial Property Trust Limited
Consolidated Statement of Changes in Equity
for the year ended 31 December 2015 (audited)
Capital Capital
Reverse Reserve - Reserve -
Share Share Acquisition Special Investments Investments Hedging Revenue
Capital Premium Reserve Reserve Sold Held Reserve Reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2015 7,994 127,612 831 511,933 (18,856) 258,944 (2,455) 89,977 975,980
Total
comprehensive
income for the
year
Profit for the - - - - - - - 151,497 151,497
year
Movement in fair
value of interest - - - - - - 909 - 909
rate swaps
Transfer in
respect of
unrealised gains - - - - - 110,314 - (110,314) -
on investment
properties
Gains on sale of
investment - - - - 2,530 - - (2,530) -
properties
realised
Transfer of prior
years' revaluation
to realised - - - - (5,082) 5,082 - - -
reserve
Transfer from
special reserve - - - (37,404) - - - 37,404 -
Total
comprehensive - - - (37,404) (2,552) 115,396 909 76,057 152,406
income for the
year
Transactions with
owners of the
Company recognised
directly in equity
Dividends paid - - - - - - - (47,962) (47,962)
At 31 December 7,994 127,612 831 474,529 (21,408) 374,340 (1,546) 118,072 1,081,424
2015
Consolidated Statement of Changes in Equity
for the year ended 31 December 2014 (audited)
Capital Capital
Reverse Reserve - Reserve -
Share Share Acquisition Special Investments Investments Hedging Revenue
Capital Premium Reserve Reserve Sold Held Reserve Reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2014 7,587 78,566 831 556,082 (18,856) 108,423 (2,403) 68,784 799,014
Total comprehensive
income for the year
Profit for the year - - - - - - - 173,901 173,901
Movement in fair
value of interest - - - - - - (52) - (52)
rate swaps
Transfer in respect
of unrealised gains
on investment - - - - - 150,521 - (150,521) -
properties
Transfer from - - - (44,149) - - - 44,149 -
special reserve
Total comprehensive
income for the year - - - (44,149) - 150,521 (52) 67,529 173,849
Transactions with
owners of the
Company recognised
directly in equity
Issue of ordinary 407 49,046 - - - - - - 49,453
share capital
Dividends paid - - - - - - - (46,336) (46,336)
At 31 December 2014 7,994 127,612 831 511,933 (18,856) 258,944 (2,455) 89,977 975,980
F&C Commercial Property Trust Limited
Consolidated Statement of Cash Flows (audited)
Year ended Year ended
31 December 31 December
2015 2014
£'000 £'000
Cash flows from operating activities
Profit for the year before taxation 151,639 174,065
Adjustments for:
Finance costs 11,708 22,165
Interest receivable (194) (347)
Unrealised gains on revaluation of investment (110,314) (150,521)
properties
Gains on sale of investment properties (2,530) -
realised
Decrease in operating trade and other 2,006 1,264
receivables
Increase in operating trade and other payables 3,877 4,299
----------- -----------
56,192 50,925
----------- -----------
Interest received 194 347
Interest and bank fees paid (11,395) (15,349)
Tax paid (147) (437)
----------- -----------
(11,348) (15,439)
----------- -----------
Net cash inflow from operating activities 44,844 35,486
----------- -----------
Cash flows from investing activities
Purchase/development of investment properties (44,914) (123,737)
Sale of investment properties 18,007 -
Capital expenditure (4,717) (7,152)
----------- -----------
Net cash outflow from investing activities (31,624) (130,889)
----------- -----------
Cash flows from financing activities
Issue of ordinary share capital, net of costs - 49,453
Dividends paid (47,962) (46,336)
Draw down of Bank Loan, net of costs - 29,768
Repayment of Bank Loan - (30,000)
Draw down of L&G Loan, net of costs - 257,679
Redemption value of Secured Bonds - (235,601)
----------- -----------
Net cash (outflow) / inflow from financing (47,962) 24,963
activities
----------- -----------
Net decrease in cash and cash equivalents (34,742) (70,440)
Opening cash and cash equivalents 90,497 160,937
----------- -----------
Closing cash and cash equivalents 55,755 90,497
----------- -----------
F&C Commercial Property Trust Limited
Principal Risks and Risk Management
The Board applies the principles detailed in the internal control guidance
issued by the Financial Reporting Council, and has established an ongoing
process designed to meet the particular needs of the Company in managing the
risks and uncertainties to which it is exposed. The principal risks and
uncertainties faced by the Company are described below and in note 2 which
provides detailed explanations of the risks associated with the Company's
financial instruments.
* Market - the Company's assets comprise principally direct investments in UK
commercial property and it is therefore exposed to movements and changes in
that market.
* Investment and strategic - poor investment processes and incorrect
strategy, including sector and geographic allocations, use of gearing,
inadequate asset management activity and tenant defaults could lead to poor
returns for shareholders.
* Regulatory - breach of regulatory rules could lead to suspension of the
Company's London Stock Exchange listing, financial penalties or a qualified
audit report.
* Management and control - changes that cause the management and control of
the Company to be exercised in the United Kingdom could lead to the Company
becoming liable to United Kingdom taxation on income and capital gains.
* Operational - failure of the Managers' accounting systems or disruption to
its business, or that of other third party service providers, could lead to
an inability to provide accurate reporting and monitoring, leading to a
loss of shareholders' confidence.
* Financial - inadequate controls by the Managers or other third party
service providers could lead to misappropriation of assets. Inappropriate
accounting policies or failure to comply with accounting standards could
lead to a qualified audit report, misreporting or breaches of regulations.
Breaching Guernsey solvency test requirements or loan covenants could lead
to a loss of shareholders' confidence and financial loss for shareholders.
The Board seeks to mitigate and manage these risks through continual review,
policy-setting and enforcement of contractual obligations. It also regularly
monitors the investment environment and the management of the Company's
property portfolio. The Managers seek to mitigate these risks through active
asset management initiatives and carrying out due diligence work on potential
tenants before entering into any new lease agreements. All of the properties in
the portfolio are insured.
F&C Commercial Property Trust Limited
Statement of Directors' Responsibilities in Respect of the Annual Financial
Report
In accordance with Chapter 4 of the Disclosure and Transparency Rules, we
confirm that to the best of our knowledge:
* The financial statements contained within the Annual Report for the year
ended 31 December 2015, of which this statement of results is an extract,
have been prepared in accordance with applicable International Financial
Reporting Standards, on a going concern basis, and give a true and fair
view of the assets, liabilities, financial position and return of the
Company;
* The Chairman's Statement and Managers' Review include a fair review of the
important events that have occurred during the financial year and their
impact on the financial statements;
* 'Principal Risks and Risk Management' includes a description of the
Company's principal risks and uncertainties; and
* The Annual Report includes details of related party transactions that have
taken place during the financial year.
On behalf of the Board
Chris Russell
Director
F&C Commercial Property Trust Limited
Notes to the audited Consolidated Financial Statements
for the year ended 31 December 2015
1. The Board has declared a twelfth, and last, interim dividend for the
year of 0.50p per share to be paid on 29 April 2016 to shareholders on the
register on 8 April 2016.
It is the Directors' intention that the Company will continue to pay dividends
monthly.
2. Financial Instruments
The Company's investment objective is to provide ordinary shareholders with an
attractive level of income together with the potential for capital and income
growth from investing in a diversified UK commercial property portfolio.
Consistent with that objective, the Group holds UK commercial property
investments. In addition, the Group's financial instruments during the year
comprised interest-bearing bank loans, cash and receivables and payables that
arise directly from its operations. The Group does not have exposure to any
derivative instruments other than the interest rate swap entered into to hedge
the interest paid on the Barclays interest-bearing bank loan.
The Group is exposed to various types of risk that are associated with
financial instruments. The most important types are credit risk, liquidity
risk, interest rate risk and market price risk. There is no foreign currency
risk as all assets and liabilities of the Group are maintained in pounds
sterling.
The Board reviews and agrees policies for managing the Group's risk exposure.
These policies are summarised below and have remained unchanged for the year
under review. These disclosures include, where appropriate, consideration of
the Group's investment properties which, whilst not constituting financial
instruments as defined by IFRS, are considered by the Board to be integral to
the Group's overall risk exposure.
Credit risk
Credit risk is the risk that an issuer or counterparty will be unable or
unwilling to meet a commitment that it has entered into with the Group.
In the event of default by an occupational tenant, the Group will suffer a
rental shortfall and incur additional costs, including legal expenses, in
maintaining, insuring and re-letting the property. The Board receives regular
reports on concentrations of risk and any tenants in arrears. The Managers
monitor such reports in order to anticipate, and minimise the impact of,
defaults by occupational tenants.
All of the Group's cash is placed with financial institutions with a long term
credit rating of A or better. Bankruptcy or insolvency of such financial
institutions may cause the Group's ability to access cash placed on deposit to
be delayed or limited. Should the credit quality or the financial position of
the banks currently employed significantly deteriorate, cash holdings would be
moved to another bank.
Liquidity risk
Liquidity risk is the risk that the Group will encounter in realising assets or
otherwise raising funds to meet financial commitments. The Group's investments
comprise UK commercial property. Property and property-related assets in which
the Group invests are not traded in an organised public market and may be
illiquid. As a result, the Group may not be able to liquidate quickly its
investments in these properties at an amount close to their fair value in order
to meet its liquidity requirements.
The Group's liquidity risk is managed on an ongoing basis by the Managers and
monitored on a quarterly basis by the Board. In order to mitigate liquidity
risk the Group aims to have sufficient cash balances (including the expected
proceeds of any property sales) to meet its obligations for a period of at
least twelve months.
Interest rate risk
Some of the Group's financial instruments are interest bearing. They are a mix
of both fixed and variable rate instruments with differing maturities. As a
consequence, the Group is exposed to interest rate risk due to fluctuations in
the prevailing market rate.
The Group's exposure to interest rate risk relates primarily to its long-term
debt obligations. Interest rate risk on long-term debt obligations is managed
by fixing the interest rate on such borrowings, either directly or through
interest rate swaps for the same notional value and duration. Long-term debt
obligations and the interest rate risk they confer to the Group is considered
by the Board on a quarterly basis. Long term debt obligations consist of a £260
million L&G loan on which the rate has been fixed at 3.32 per cent until the
maturity date of 31 December 2024. The Group also has a £50 million
interest-bearing bank loan on which the rate has been fixed through an interest
rate swap at 4.88 per cent per annum until the maturity date of 28 June 2017.
When the Group retains cash balances, they are ordinarily held on
interest-bearing deposit accounts. The benchmark which determines the interest
income received on interest bearing cash balances is the bank base rate which
was 0.5 per cent as at 31 December 2015 (2014: 0.5 per cent). The Company's
policy is to hold cash in variable rate or short-term fixed rate bank accounts
and not usually in fixed rate securities with a term greater than three months.
Market price risk
The Group's strategy for the management of market price risk is driven by the
investment policy. The management of market price risk is part of the
investment management process and is typical of commercial property investment.
The portfolio is managed with an awareness of the effects of adverse valuation
movements through detailed and continuing analysis, with an objective of
maximising overall returns to shareholders. Investments in property and
property-related assets are inherently difficult to value due to the individual
nature of each property. As a result, valuations are subject to substantial
uncertainty. There is no assurance that the estimates resulting from the
valuation process will reflect the actual sales price even where such sales
occur shortly after the valuation date. Such risk is minimised through the
appointment of external property valuers.
3. There were 799,366,108 Ordinary Shares in issue at 31 December 2015
(2014: 799,366,108).
.
At 31 December 2015, the Company did not hold any Ordinary Shares in treasury
(2014: nil).
4. The basic and diluted earnings per Ordinary Share are based on the
profit for the year of £151,497,000 (2014: £173,901,000) and on 799,366,108
(2014: 771,857,477) Ordinary Shares, being the weighted average number of
shares in issue during the year.
5. The Company owns 100 per cent of the issued ordinary share capital
of FCPT Holdings Limited, a company registered in Guernsey which was, until the
group reconstruction in 2009, the top company in the group structure. The
principal activity of FCPT Holdings Limited is now to act as a holding company
and it owns 100 per cent of the ordinary share capital of F&C Commercial
Property Holdings Limited, a company registered in Guernsey whose principal
business is that of an investment and property company, and 100 per cent of the
ordinary share capital of Winchester Burma Limited, a company registered in
Guernsey whose principal business is that of an investment and property
company.
The Company owns 100 per cent of the issued ordinary share capital of SCP
Estate Holdings Limited, a company registered in Guernsey. The principal
activity of SCP Estate Holdings Limited is to act as a holding company and it
owns 100 per cent of the ordinary share capital of SCP Estate Limited, a
company registered in Guernsey whose principal business is that of an
investment and property company, and 100 per cent of the ordinary share capital
of Prime Four Limited, a company registered in Guernsey whose principal
business is that of an investment and property company.
On 19 January 2016, the Company dissolved Accede Limited, a company
incorporated in England and Wales. This Company was dormant, having previously
acted as an investment and property company.
On 1 September 2015, FCPT Holdings Limited dissolved F&C Commercial Property
Finance Limited, a special purpose vehicle incorporated in Guernsey, having
previously acted as a vehicle to issue the interest-bearing bonds which were
repaid in full on 2 January 2015.
On 23 July 2015, the Company incorporated Leonardo Crawley Limited, a company
registered in Guernsey whose principal business is that of an investment and
property company.
On 31 July 2015, the Company acquired Crawley Holdings Limited, a company
registered in England and Wales whose principal business is that of an
investment and property company.
6. The Group had capital commitments totalling £8,852,000 as at 31
December 2015 (2014: £1,719,000). These commitments related mainly to
contracted development works at the Group's properties at St. Christopher's
Place Estate, London W1.
7. These are not full statutory accounts. The full audited accounts for
the year to 31 December 2015 will be sent to shareholders and will be available
for inspection at Trafalgar Court, Les Banques, St Peter Port, Guernsey GY1
3QL, the registered office of the Company, and from the Company's website:
www.fccpt.co.uk
All enquiries to:
The Company Secretary
Northern Trust International Fund Administration (Guernsey) Limited
Trafalgar Court
Les Banques
St. Peter Port
Guernsey GY1 3QL
Tel: 01481 745436
Fax: 01481 745186
Richard Kirby
F&C REIT Property Asset Management plc
Tel: 0207 016 3577
Graeme Caton
Winterflood Securities Limited
Tel: 0203 100 0268
F&C COMMERCIAL PROPERTY : Final Results
April 05, 2016 at 02:01 am EDT
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