F&C COMMERCIAL PROPERTY TRUST LTD
To: RNS
Date: 30 August 2017
From: F&C Commercial Property Trust Limited
LEI: 213800A2B1H4ULF3K397
Half Yearly Financial Report for the Period ended 30 June 2017
Highlights
· Share price total return of 8.8 per cent for the six months*
· 5.1 per cent net asset value total return*
· Maintained annualised dividend at 6.0 pence per share giving a yield of
4.1% on the period end share price*
* See Alternative Performance Measures
Chairman's Statement
Performance for the period
The Company's net asset value ('NAV') total return for the six month period
ended 30 June 2017 was 5.1* per cent and the ungeared total return from the
property portfolio was 5.0* per cent. This compares with a total return of 4.6
per cent from the MSCI Investment Property Databank ('IPD') All Quarterly and
Monthly Valued Funds.
The market has readjusted, following the disruption surrounding the referendum
result in June 2016, to deliver positive total returns. Capital values are now
above pre-referendum levels, and both capital and rental growth were positive
throughout the period at the all-property level. The market was supported by
strong levels of overseas buying, especially in London, and by local authority
purchases. The retail property funds have now all re-opened and institutional
net selling has moderated compared with the previous six-month period. The UK
general election result appears to have had little effect on sentiment towards
commercial property.
Although the worst fears of investors following the referendum have not been
realised, investors are cautious and focused on securing long-term stable
income streams. The property market has benefited from continued economic
growth, albeit at modest rates, and in a regime of very low interest rates.
Initial yields edged in slightly over the six month period but income was a
major driver of performance. The industrial and distribution sector and
alternatives assets out-performed the all-property average, while secondary
offices and retail have remained challenged.
The share price total return for the period was 8.8 per cent. As at 30 June
2017, the share price was 145.3p per share, a premium of 4.2 per cent on the
June NAV. This compared to a premium at the 2016 year-end of 0.7 per cent.
The Company's relative outperformance of the IPD benchmark was primarily driven
by both the completion of successful asset management initiatives and further
yield compression in the Industrial and Logistics sector. St. Christopher's
Place Estate also provided a significant contribution to performance as a
result of leasing activity, the completion of rent reviews and the completion
and letting of the development on Wigmore Street, London.
There were no purchases or sales during the period and the focus has continued
to be on driving income and value-creating asset management within the existing
portfolio. Further detail on the various property management activities
undertaken during the period and a breakdown of the performance are shown in
the Managers' Review.
The following table provides an analysis of the movement in the NAV per share
for the period:
Pence
NAV per share as at 31 December 2016 135.5
Unrealised increase in valuation of direct property portfolio 4.5
Movement in interest rate swap valuation -
Other revenue 2.4
Dividends paid (3.0)
---------
NAV per share as at 30 June 2017 139.4
---------
Dividends
Monthly dividends of 0.5p per share were paid during the period, maintaining
the annual dividend rate of 6.0p per share. The annualised dividend yield at
the end of the period was 4.1* per cent on a closing share price of 145.3p per
share. Barring unforeseen circumstances, it is the Board's intention that the
dividend will continue to be paid monthly at the same rate.
Dividend cover for the period (excluding capital appreciation on properties)
was 80.6* per cent, compared with the cover achieved for the last financial
year of 87.0 per cent. The main contributors to the fall in the level of cover
were as follows:
· There was a reduced level of rental income following the strategic sale
of the office building in Great Pulteney Street in December 2016, at a very
attractive level, reducing exposure to the West End office market. The level of
rents will increase once the proceeds of this sale have been reinvested in
property. There was also an anticipated void at Thames Valley One, Reading.
· The cover has been further impacted by an increase in the base
management fee negotiated at the start of the year following the removal of the
performance fee. The base fee rate is higher than the effective rate of total
fees earned in 2016, when the Manager did not maximise the performance fee, but
lower than the effective rate of fees earned in the previous years. The ad
valorem fee rate remains the lowest of the Company's peer group.
· The level of tax payable in the current year is projected to increase as
taxable losses are utilised.
Borrowings
The Group's borrowings comprise a £260 million term loan with Legal & General
Pensions Limited, maturing on 31 December 2024, and both a £50 million term
loan facility and an undrawn £50 million revolving credit facility with
Barclays. The Group's drawn down borrowings currently total £310 million. The
Group's total loan to value, net of cash, was 17.4* per cent at the end of the
period. The weighted average interest rate on the Group's total current
borrowings is 3.3 per cent.
Board Composition
Paul Marcuse, formerly Head of Global Real Estate for UBS Global Asset
Management, was appointed to the Board as a Non-Executive Director on 12
January 2017. Paul brings 35 years of experience in both the real estate and
finance sectors.
Peter Niven, who has been a Non-Executive Director of the Company since its
launch in 2005, and was a former Chairman, retired from the Board at the Annual
General Meeting on 31 May 2017 bringing the number of non-executive directors
back to six. I recorded in the annual report, published in April this year, our
appreciation for the time, experience and effort Peter has given to the Company
over the years since it began. Peter is the last of the Company's founding
directors to retire in favour of fresh appointments.
Outlook
There remains considerable uncertainty surrounding the Brexit negotiations, the
exit terms and the timeline for departure, and the general election result may
have further complicated matters. Developments overseas, and the UK's
relationships with EU member states and the wider world, particularly the US
and China, will be critical to the UK's future economic success.
The rapid changes taking place with regard to technology, infrastructure,
working practices and shopping patterns will also affect relativities within
property, presenting both opportunities and challenges. The markets have
benefited from a prolonged period of low interest rates and although it is
expected that changes to official rates will be well flagged and gradual, this
could now start to become a greater factor in investment decisions.
The outlook for London offices after Brexit is still highly uncertain and the
issues affecting much of the town centre retail market and secondary retail and
offices seem likely to persist. With uncertainty in the political, economic and
property spheres, it is anticipated that investors will remain focused on
securing a long-term income stream. Given pricing in other asset classes and
the prospect of securing a relatively favourable long-term contractual income
stream from property, the asset class is expected to remain in favour with
investors.
While property valuations remain high, and competition from both domestic and
foreign investors continues to be strong, the Company will maintain its primary
focus on adding value to the existing portfolio through asset management
initiatives.
Chris Russell
Chairman
* See Alternative Performance Measures
Performance Summary
Half year
ended 30 June
2017
Total Returns for the period *
Net asset value per share 5.1%
Ordinary Share price 8.8%
Portfolio return 5.0%
MSCI Investment Property Databank ('IPD') All
Quarterly and Monthly Valued Funds Benchmark 4.6%
FTSE All-Share Index 5.5%
Half year Year ended 31
ended 30 June December 2016
2017 % change
Capital Values
Total assets less current liabilities (£'000) 1,424,150 1,393,072 2.2
Net asset value per share 139.4p 135.5p 2.9
Ordinary Share price 145.3p 136.4p 6.5
FTSE All-Share Index 4,002.18 3,873.22 3.3
Premium to net asset value per share* 4.2% 0.7%
Net Gearing * 17.4% 17.2%
Half year Half year
ended 30 June ended 30 June
2017 2016
Earnings and Dividends
Earnings per Ordinary Share 6.9p 2.0p
Dividends per Ordinary Share 3.0p 3.0p
Annualised dividend yield * 4.1% 5.3%
Sources: F&C Investment Business, MSCI Investment Property Databank ('IPD') and
Thomson Reuters Eikom.
* See Alternative Performance Measures
Managers' Review
Property Market Review
The market total return for the six months to 30 June 2017, as measured by the
MSCI Investment Property Databank ('IPD') Quarterly and Monthly Valued Funds
('the benchmark') was 4.6 per cent.
The period saw the property market moving towards normalisation following the
initial shock of the referendum result and a downgrade to capital values.
Initial fears of an imminent economic recession and a flight of capital proved
misplaced, and although investors remain cautious, transaction levels have seen
a recovery. Investment in January-June 2017 totalled £27.4 billion compared
with £26.9 billion in the like period of 2016. Overseas investors, in part
attracted by the depreciation of sterling, were particularly active, with a
focus on Central London offices. Local authorities have also been investing in
property, taking advantage of low interest rates on offer from the Public Works
Loan Board. There was a polarisation in Investment activity compared with a
year earlier, with increases for Central London offices, industrials and
alternatives contrasting with falls for town centre retail and provincial
offices.
Article 50 was triggered in March 2017 and the Brexit negotiation process
commenced towards the end of the review period but June's general election
result added further uncertainty. The economy continued to deliver positive
growth but the pace has slowed. The March Budget was overtaken by events and
the programme of fiscal austerity may be modified. The Bank of England kept
interest rates and monetary policy unchanged during this period having eased
policy in the wake of the referendum result. The June meeting saw a minority of
Monetary Policy Committee members voting for a rise in interest rates. Bank
lending to commercial property remains subdued with outstanding debt on
standing investments broadly unchanged. Gilt yields drifted lower during much
of the half-year but spiked at the very end of the period to finish the period
broadly unchanged from the start of the year position.
IPD market data showed some further modest inward movement for initial yields,
largely focused on industrials and alternatives. The yield gap against ten-year
gilts has remained attractive by historic standards.
Benchmark capital values rose by 2.3 per cent in the six-month period.
Performance was supported by the income return, which was also 2.3 per cent for
the half-year at the benchmark level.
IPD data for standing investments shows rental growth of 0.9 per cent over the
review period, which represents some deceleration from the like period of 2016.
Rental growth was flat or slightly positive across most of the market segments,
with much of the rental growth focused on Industrial property and Central
London shops, where it registered 2.4 per cent and 2.3 per cent respectively.
Gross rent passing rose by 1.2 per cent during the period at the all-property
level, representing an improvement on the like period a year earlier.
Generally, prime property out-performed secondary stock on this measure. This
was especially true of retail property.
At the segment level, industrial property was a major driver of performance,
delivering an 8.1 per cent benchmark total return, with the South East
out-performing the regions. Alternative assets also did well, recording a total
return of 5.7 per cent. In the office market, London, the South East and Rest
of UK offices performed broadly in tandem at the benchmark level, eliminating
the gap between the capital and the regions seen in recent times. In retail,
most segments of the market under-performed the all-property average, with
shopping centres particularly out of favour. Central London shops had an
uncharacteristically weak start to the period, possibly affected by concerns
over the upcoming rates revaluation but out-performed in the second half of the
review period to deliver total returns broadly in line with the all-property
average.
The property market has seen a re-balancing following the shock of the
referendum result, and all-property capital values are now above pre-referendum
levels. This has been helped by overseas buying of London offices and a regime
of low interest rates. However, investors are still cautious given the
macro-economic and political backdrop and are prioritising long-term contracted
income streams. The UK market remains attractive as a large, mature,
transparent and relatively liquid option for property investors, with the
advantage of an annual income return exceeding 4 per cent.
Property Portfolio
The Company invests in a diversified UK commercial real estate portfolio of 36
properties. CBRE are external valuers to the Company and they independently
valued the portfolio at £1,363.33 million as at 30 June 2017.
The total return from the portfolio over the period was 5.0* per cent (44th
percentile) outperforming the 4.6* per cent return recorded by the benchmark.
The portfolio has delivered a strong track record of longer term performance:
second quartile over three years and top quartile over five and ten years.
Headline Returns by Sector
(Six months to 30 June 2017)
Total Return
Portfolio Benchmark
(%) (%)
All Retails 5.0 3.3
All Offices 3.0 3.7
All Industrials 9.3 8.1
Other Commercial 5.9 5.7
All Sectors 5.0 4.6
Headline Returns by Segment
(Six months to 30 June 2017)
Total Return
Portfolio Benchmark
(%) (%)
St Retails - South 6.4 4.2
East~
St Retails - Rest of 1.0 3.5
UK#
Retail Warehouses 2.9 3.2
Offices - City (4.1) 3.9
Offices - West End 8.5 3.7
Offices - South East 1.5 3.8
Offices - Rest of UK 0.9 3.7
Industrials - South 5.3 9.4
East
Industrials - Rest of 10.6 6.0
UK
Other Commercial 5.9 5.7
All Sectors 5.0 4.6
~ Includes West End Retail
# Asda Supermarket, Rochdale
Source: MSCI Investment Property Databank
Retail
The overall total return from the Company's retail properties during the period
was 5.0* per cent compared with the benchmark return of 3.3 per cent.
St. Christopher's Place Estate performed strongly over the period producing a
total return of 7.7 per cent. There have been a number of new lettings on the
Estate and overall the estimated rental value has increased by 5.4 per cent.
The redevelopment of 71-77 Wigmore Street completed and the restaurant unit has
been let to Hoppers, part of the JSK Group, on a 15 year lease at a rent in
line with proforma ERV's. The tenant is currently fitting out and the retail
unit is also under offer whilst the residential element comprising six flats
and two penthouse duplexes have all let.
Offices
The Company's office portfolio produced a total return of 3.0* per cent
compared with the benchmark return of 3.7 per cent.
Offices located in the West End, London outperformed due to the completion of
some notable asset management initiatives. The major event was the completion
of a lease event with Artemis at Cassini House, London SW1. Artemis have
committed to lease five floors for an unbroken term of 15 years. The property
will be fully refurbished with expected capital expenditure of £6.5 million.
This asset management initiative increases the rent passing from the building,
secures the major tenant for a further 15 years and de-risks lease expiries and
exposure to short term leases. The Company's City of London exposure
underperformed but the exposure is to only one property with a value of less
than £20 million.
In the South East the priority is to address voids at Watchmoor Park, Camberley
and Thames Valley Park, Reading. Given the increased appetite from developers
to consider the conversion of out of town offices to residential uses, planning
applications are being prepared to seek consent for the change of use to
residential. If the planning applications are successful, these properties may
be sold to residential developers. The performance of the rest of the UK
Offices was affected by the external valuers moving out the capitalisation rate
on the Company's Aberdeen properties, where values fell by 3.7 per cent. At
Edinburgh Business Park, Edinburgh the tenant HSBC did not renew their lease
and have vacated the property. The offices comprises 42,360 sq. ft. and this
event has led to the void rate increasing over the period. A full refurbishment
of the offices is being worked up as the availability of good quality out of
town offices is currently restricted.
Industrial and Logistics
The Company's industrial and logistics portfolio delivered a total return of
9.3* per cent compared with a benchmark return of 8.1 per cent.
During the period, the lease renewal to Mothercare at Plot E4, DIRFT Daventry,
completed which resulted in a new 10 year lease, a 5 per cent increase with
current rent and the external valuation increasing by 20 per cent over the
first quarter of 2017. All the short-term lease events in the Company's
logistics sector have now been actioned and completed and the Company has
benefitted from strong performance over the last couple of years.
We have previously reported on progress at the former Ozalid Works in
Colchester where outline consent for a residential development was secured.
We expect to exchange contracts before the year-end with a national house
builder for the sale of the site, conditional upon securing a revised planning
consent for additional residential units. A revised planning application will
be submitted shortly.
The Alternative Property Sector
The student accommodation block in Winchester benefitted from its annual RPI
linked rental increase.
Purchases and Disposals
There were no sales or acquisitions over the period.
Property Management
The void rate over the period has increased to 8.8 per cent as a result of HSBC
vacating Edinburgh Park and the completion of the development at Wigmore
Street, London which has been substantially let since the period-end. There are
a number of initiatives progressing and it is hoped this void rate will be
substantially reduced by year-end.
The provision for overdue debt (90 days) is 0.3 per cent of gross annualised
rent.
Due to the disastrous fire and tragic loss of life at Grenfell Tower and
specifically the concerns associated with fire risk from existing building
cladding systems, we are progressing a review to determine risk within the
Company's portfolio. We are viewing risk on two levels, initially in terms of
risk to life and property and secondly, in respect of liquidity of individual
assets. The exercise is backed by advice from the Government and our own
longstanding fire Consultancy partner. Each asset is being reviewed;
prioritising any asset with a residential element, presence of composite panels
and an overall building height in excess of 18 metres. The Company owns one
property of such "priority" and our review has established the cladding systems
used, in limited areas on the exterior of the building, is not the same as the
material used in Grenfell Tower and is classified as low flammability. The
construction method, materials specified and used and fire strategy employed on
site, leads us to believe this is a low risk property. We continue to work
through the portfolio to establish a database of the cladding systems and
materials used in the construction of the Company's properties and will
continue to closely monitor the situation.
Geographical Analysis
(as at 30 June 2017, % of total property portfolio)
South East 26.1
London - West End 35.0
Eastern 2.0
Midlands 12.8
Scotland 12.2
North West 10.6
Rest of London 1.3
Sector Analysis
(as at 30 June 2017, % of total property portfolio)
Offices 34.9
Retail 29.5
Retail Warehouses 16.0
Industrial 16.7
Other 2.9
Outlook
The outlook for property continues to be strongly influenced by the Brexit
negotiations and we would expect investors to remain cautious and risk averse,
and for this to favour core/core plus properties in established locations. The
current era of very low interest rates may be drawing to a close, but any
increases in official rates are likely to be small and gradual. The timing of
this is unknown but expectations of the change could lead to greater focus by
investors on yield, the scope to add value to an asset and the resilience and
flexibility of the asset over time.
Industrials, distribution and alternative assets may all provide investment
opportunities but are very expensive and we remain cautious about Central
London offices until the Brexit negotiations are further advanced. The
structural problems affecting much of the town centre regional retail market
seem likely to persist. Assuming that the economy performs in line with
consensus forecasts, and there are no major shocks, we are looking towards a
period of positive total returns, supported by the income return.
Richard Kirby
Fund Manager
BMO REP Asset Management plc
* See Alternative Performance Measures
F&C Commercial Property Trust Limited
Condensed Consolidated Statement of Comprehensive Income (unaudited)
for the six months to 30 June 2017
Notes Six months Six months Year to
to 30 June to 30 June 31 December
2017 2016 2016*
£'000 £'000 £'000
Revenue
Rental income 31,697 32,242 64,628
Gains / (losses) on investments properties
Unrealised gains/(losses) on revaluation of 5 35,502 (4,324) 9,507
investment properties
(Loss)/gains on sale of investment properties 5 (5) - 215
realised
Total income 67,194 27,918 74,350
Expenditure
Investment management fee (3,750) (2,594) (6,406)
Other expenses 3 (2,699) (2,499) (5,056)
Total expenditure (6,449) (5,093) (11,462)
Operating profit before finance costs and taxation 60,745 22,825 62,888
Net finance costs
Interest receivable - 63 69
Finance costs (5,445) (5,801) (11,269)
Loss on redemption of interest rate swap 6 - (1,283) (1,283)
(5,445) (7,021) (12,483)
Profit before taxation 55,300 15,804 50,405
Taxation (465) (129) (251)
Profit for the period 54,835 15,675 50,154
Other comprehensive income
Items that are or may be reclassified subsequently
to profit or loss
Net change in fair value of swaps reclassified to - 1,546 1,546
profit and loss
Movement in fair value of effective interest rate 285 (1,374) (717)
swaps
Total comprehensive income for the period 55,120 15,847 50,983
Basic and diluted earnings per share 4 6.9p 2.0p 6.3p
All of the profit and total comprehensive income for the period is attributable
to the owners of the Group.
All items in the above statement derive from continuing operations.
* These figures are audited.
F&C Commercial Property Trust Limited
Condensed Consolidated Balance Sheet (unaudited)
as at 30 June 2017
Notes **Restated
30 June 30 June 31 Dec
2017 2016 2016*
£'000 £'000 £'000
Non-current assets
Investment properties 5 1,344,519 1,339,691 1,306,002
Trade and other receivables 18,716 17,450 17,827
1,363,235 1,357,141 1,323,829
Current assets
Trade and other receivables 3,466 3,056 3,093
Cash and cash equivalents 74,995 43,506 85,021
78,461 46,562 88,114
Total assets 1,441,696 1,403,703 1,411,943
Current liabilities
Trade and other payables (16,959) (20,739) (18,631)
Taxation payable (587) (188) (240)
(17,546) (20,927) (18,871)
Non-current liabilities
Trade and other payables (1,624) (1,951) (1,565)
Interest-bearing loans (307,510) (307,161) (307,345)
Interest rate swaps (432) (1,374) (717)
(309,566) (310,486) (309,627)
Total liabilities (327,112) (331,413) (328,498)
Net assets 1,114,584 1,072,290 1,083,445
Represented by:
Share capital 6 7,994 7,994 7,994
Share premium 127,612 127,612 127,612
Other reserves 465,039 469,323 461,981
Capital reserves 398,151 348,608 362,654
Hedging reserve (432) (1,374) (717)
Revenue reserve 116,220 120,127 123,921
Equity shareholders' funds 1,114,584 1,072,290 1,083,445
Net asset value per share 7 139.4p 134.1p 135.5p
* These figures are audited.
** See Note 1
F&C Commercial Property Trust Limited
Condensed Consolidated Statement of Changes in Equity (unaudited)
for the six months to 30 June 2017
Share Share Other Capital Hedging Revenue
Capital Premium Reserves Reserves Reserve Reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Notes
At 1 January 7,994 127,612 461,981 362,654 (717) 123,921 1,083,445
2017
Total
comprehensive
income for the
period
Profit for the - - - - - 54,835 54,835
period
Movement in
fair value of
interest rate - - - - 285 - 285
swap
Transfer in 5
respect of
unrealised
gains on - - - 35,502 - (35,502) -
investment
properties
Loss on sale of
investment - - - (5) - 5 -
properties
realised
Transfer from
other reserve - - 3,058 - - (3,058) -
Total
comprehensive
income for the
period - - 3,058 35,497 285 16,280 55,120
Transactions
with owners of
the Company
recognised
directly in
equity
Dividends paid 2 - - - - - (23,981) (23,981)
At 30 June 2017 7,994 127,612 465,039 398,151 (432) 116,220 1,114,584
F&C Commercial Property Trust Limited
Condensed Consolidated Statement of Changes in Equity (unaudited)
for the six months to 30 June 2016
Share Share Other Capital Hedging Revenue
Capital Premium Reserves Reserves Reserve Reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Notes
At 1 January 7,994 127,612 475,360 352,932 (1,546) 118,072 1,080,424
2016
Total
comprehensive
income for the
period
Profit for the - - - - - 15,675 15,675
period
Movement in
fair value of
interest rate - - - - 172 - 172
swaps
Transfer in 5
respect of
unrealised
gains on - - - (4,324) - 4,324 -
investment
properties
Transfer from
other reserve - - (6,037) - - 6,037 -
Total
comprehensive
income for the
period - - (6,037) (4,324) 172 26,036 15,847
Transactions
with owners of
the Company
recognised
directly in
equity
Dividends paid 2 - - - - - (23,981) (23,981)
At 30 June 2016 7,994 127,612 469,323 348,608 (1,374) 120,127 1,072,290
F&C Commercial Property Trust Limited
Condensed Consolidated Statement of Changes in Equity
for the year to 31 December 2016*
Share Share Other Capital Hedging Revenue
Capital Premium Reserves Reserves Reserve Reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Notes
At 1 January 2016 7,994 127,612 475,360 352,932 (1,546) 118,072 1,080,424
Total
comprehensive
income for the
year
Profit for the - - - - - 50,154 50,154
year
Movement in fair
value of interest - - - - 829 - 829
rate swaps
Transfer in 5
respect of
unrealised gains - - - 9,507 - (9,507) -
on investment
properties
Gains on sale of 5
investment - - - 215 - (215) -
properties
realised
Transfer from
other reserve - - (13,379) - - 13,379 -
Total
comprehensive - - (13,379) 9,722 829 53,811 50,983
income for the
year
Transactions with
owners of the
Company
recognised
directly in
equity
Dividends paid 2 - - - - - (47,962) (47,962)
At 31 December 7,994 127,612 461,981 362,654 (717) 123,921 1,083,445
2016
* These figures are audited.
F&C Commercial Property Trust Limited
Condensed Consolidated Statement of Cash Flows (unaudited)
for the six months to 30 June 2017
Six months Six months Year to
to 30 June to 30 June 31 December
Notes 2017 2016 2016*
£'000 £'000 £'000
Cash flows from operating activities
Profit for the period before taxation 55,300 15,804 50,405
Adjustments for:
Finance costs 5,445 5,801 11,269
Interest receivable - (63) (69)
Unrealised (gains)/losses on revaluation of 5 (35,502) 4,324 (9,507)
investment properties
Loss/(gains) on sale of investment properties 5 - (215)
realised
Loss on redemption of interest rate swap - 1,283 1,283
Increase in operating trade and other receivables (1,313) (445) (888)
Decrease in operating trade and other payables (1,613) (3,274) (5,746)
22,322 23,430 46,532
Interest received - 63 69
Interest and bank fees paid (5,229) (5,549) (10,778)
Tax paid (118) (2) (71)
(5,347) (5,488) (10,780)
Net cash inflow from operating activities 16,975 17,942 35,752
Cash flows from investing activities
Purchase/development of investment properties 5 (1,640) (1,527) (4,099)
Capital expenditure 5 (1,380) (2,427) (6,411)
Sale of investment properties 5 - - 54,291
Net cash (outflow)/inflow from investing (3,020) (3,954) 43,781
activities
Cash flows from financing activities
Dividends paid 2 (23,981) (23,981) (47,962)
Drawdown of Bank Loan, net of costs - 49,513 49,489
Revolving credit facility arrangement costs - (486) (511)
Repayment of Bank Loan - (50,000) (50,000)
Swap breakage costs - (1,283) (1,283)
Net cash outflow from financing activities (23,981) (26,237) (50,267)
Net (decrease)/increase in cash and cash (10,026) (12,249) 29,266
equivalents
Opening cash and cash equivalents 85,021 55,755 55,755
Closing cash and cash equivalents 74,995 43,506 85,021
* These figures are audited
F&C Commercial Property Trust Limited
Notes to the Consolidated Financial Statements
for the six months to 30 June 2017
1. General information and basis of preparation
The condensed consolidated financial statements have been prepared in
accordance with the Disclosure and Transparency Rules of the United Kingdom
Financial Conduct Authority and IAS 34 'Interim Financial Reporting'. The
condensed consolidated financial statements do not include all of the
information required for a complete set of IFRS financial statements and should
be read in conjunction with the consolidated financial statements of the Group
for the year ended 31 December 2016, which were prepared under full IFRS
requirements. The accounting policies used in the preparation of the condensed
consolidated financial statements are consistent with those of the consolidated
financial statements of the Group for the year ended 31 December 2016. These
condensed interim financial statements have been reviewed, not audited.
In the previously issued interim financial statements of the
Company for the period ended 30 June 2016, lease incentives of £16,059,000 and
cash deposits held for tenants of £2,478,000 were classified as current assets.
In the comparative figures of the current year financial statements, £
15,499,000 for lease incentives and £1,951,000 for tenant deposits have been
reclassified to non-current. The Directors have considered the impact on the
previously issued financial statements of the Company and have noted that no
adjustment is required to the previously reported total assets, liabilities or
equity of the Company. On this basis, the Directors do not consider the above
reclassification between current and non-current assets to be material to the
users of the financial statements.
After making enquiries, and bearing in mind the nature of the
Company's business and assets, the Directors consider that the Company has
adequate resources to continue in operational existence for the next twelve
months. In assessing the going concern basis of accounting the Directors have
had regard to the guidance issued by the Financial Reporting Council. They have
considered the current cash position of the Group, forecast rental income and
other forecast cash flows. The Group has agreements relating to its borrowing
facilities with which it has complied during the period. Based on the
information the Directors believe that the Group has the ability to meet its
financial obligations as they fall due for a period of at least twelve months
from the date of approval of the financial statements. For this reason they
continue to adopt the going concern basis in preparing the accounts.
These condensed interim financial statements were
approved for issue on 29 August 2017.
2. Dividends
Six months to Six months to Year to 31
30 June 2017 30 June 2016 December 2016
£'000 £'000 £'000
In respect of the previous
period:
Ninth interim (0.5p per share) 3,997 3,997 3,997
Tenth interim (0.5p per share) 3,997 3,997 3,997
Eleventh interim (0.5p per share) 3,996 3,996 3,996
Twelfth interim (0.5p per share) 3,997 3,997 3,997
In respect of the period
under review:
First interim (0.5p per share) 3,997 3,997 3,997
Second interim (0.5p per share) 3,997 3,997 3,997
Third interim (0.5p per share) - - 3,996
Fourth interim (0.5p per share) - - 3,997
Fifth interim (0.5p per share) - - 3,997
Sixth interim (0.5p per share) - - 3,997
Seventh interim (0.5p per share) - - 3,997
Eighth interim (0.5p per share) - - 3,997
23,981 23,981 47,962
A third interim dividend for the year to 31 December 2017, of 0.5 pence per
share totalling £3,997,000 was paid on 31 July 2017. A fourth interim dividend
of 0.5 pence per share will be paid on 31 August 2017 to shareholders on the
register on 11 August 2017. A fifth interim dividend of 0.5 pence per share
will be paid on 29 September 2017 to shareholders on the register on 8
September 2017. Although these payments relate to the period ended 30 June
2017, under IFRS they will be accounted for in the period during which they are
paid.
It is the Directors' intention that the Company will continue to pay dividends
monthly.
3. Other expenses
Six months Six months Year to 31
to 30 June to 30 June December 2016
2017 2016
£'000 £'000 £'000
Direct operating expenses of UK rental 1,973 1,798 3,607
property
Valuation and other professional fees 213 193 393
Directors' fees 157 147 277
Administration fee 73 75 148
Depositary fee 82 80 168
Other 201 206 463
2,699 2,499 5,056
The basis of payment for the Directors' and investment management fees are
detailed within the consolidated financial statements of the Group for the year
ended 31 December 2016.
4. Earnings per share
The Group's basic and diluted earnings per Ordinary Share are based on the
profit for the period of £54,835,000 (period to 30 June 2016: £15,675,000; 31
December 2016: £50,154,000) and on 799,366,108 (period to 30 June 2016:
799,366,108; 31 December 2016: 799,366,108) Ordinary Shares, being the weighted
average number of shares in issue during the period. Earnings for the six
months to 30 June 2017 should not be taken as guide to the results for the year
to 31 December 2017.
5. Investment properties
Six months Six months Year to 31
to 30 June to 30 June December
2017 2016 2016
£'000 £'000 £'000
Freehold and leasehold properties
Opening book cost 950,416 965,721 965,721
Opening unrealised appreciation 355,586 374,340 374,340
Opening fair value 1,306,002 1,340,061 1,340,061
Purchases/developments 1,640 1,527 4,099
Sales - proceeds - - (54,291)
- gain on sales - - 28,476
Capital expenditure 1,380 2,427 6,411
Unrealised losses realised during the period (5) - (28,261)
Unrealised gains on investment properties 45,667 17,573 48,079
Unrealised losses on investment properties (10,165) (21,897) (38,572)
1,344,519 1,339,691 1,306,002
Closing book cost 953,431 969,675 950,416
Closing unrealised appreciation 391,088 370,016 355,586
Closing fair value 1,344,519 1,339,691 1,306,002
There were no properties held for sale at 30 June 2017 (2016: none).
All the Group's investment properties were valued as at 30 June 2017 by RICS
Registered Valuers working for the company of CBRE Limited ('CBRE'), commercial
real estate advisors, acting in the capacity of a valuation adviser to the
AIFM. All such valuers are Chartered Surveyors, being members of the Royal
Institution of Chartered Surveyors ('RICS').
CBRE completed the valuation of the Group's investment properties at 30 June
2017 on a fair value basis and in accordance with The RICS Valuation -
Professional Standards (December 2014). The fair value of these investment
properties per the Valuation Report amounted to £1,363,335,000 (30 June 2016: £
1,355,750,000; 31 December 2016: £1,322,455,000). The difference between the
Valuation Report and the closing fair value of investment properties disclosed
above of £1,344,519,000 (30 June 2016: £1,339,691,000; 31 December 2016: £
1,306,002,000) consists of capital incentives paid to tenants totalling £
4,373,000 and accrued income relating to the pre-payment for rent free periods
recognised over the life of the lease totalling £14,443,000, which are both
separately recorded in the accounts within 'trade and other receivables'.
There were no significant changes to the valuation process, assumptions and
techniques used during the period, further details on which were included in
note 9 of the consolidated financial statements of the Group for the year ended
31 December 2016.
As at 30 June 2017, all of the Group's properties are Level 3 in the fair value
hierarchy as it involves the use of significant inputs and there were no
transfers between levels during the period. Level 3 inputs used in valuing the
properties are those which are unobservable, as opposed to Level 1 (inputs from
quoted prices) and Level 2 (observable inputs either directly i.e. as priced,
or indirectly, i.e. derived from prices).
6. Share capital
£'000
Allocated, called-up and fully paid
799,366,108 Ordinary Shares of 1p each in issue at 7,994
30 June 2017
Under the Company's Articles of Incorporation, the Company may issue an
unlimited number of Ordinary Shares. The Company issued nil Ordinary Shares
during the period (2016: nil) raising net proceeds of £nil (2016: £nil).
The Company did not repurchase any Ordinary Shares during the period.
7. Net asset value per share
The Group's net asset value per Ordinary Share of 139.4p (30 June 2016: 134.1p;
31 December 2016: 135.5p) is based on equity shareholders' funds of £
1,114,584,000 (30 June 2016: £1,072,290,000; 31 December 2016: £1,083,445,000)
and on 799,366,108 (30 June 2016: 799,366,108; 31 December 2016: 799,366,108)
Ordinary Shares, being the number of shares in issue at the period
end.
8. Capital commitments
The Group had capital commitments totalling £1,625,000 as at 30 June 2017 (30
June 2016: £6,857,000; 31 December 2016: £4,271,000). These commitments related
mainly to contracted development works at the Group's properties at St.
Christopher's Place Estate, London W1.
9. List of Subsidiaries
The Group results consolidate the results of the following
companies:
- FCPT Holdings Limited (the parent company of F&C Commercial
Property Holdings Limited and Winchester Burma Limited)
- F&C Commercial Property Holdings Limited (a company which invests
in properties)
- SCP Estate Holdings Limited (the parent company of SCP Estate
Limited and Prime Four Limited)
- SCP Estate Limited (a company which invests in properties)
- Prime Four Limited (a company which invests in properties)
- Winchester Burma Limited (a company which invests in properties)
- Leonardo Crawley Limited (a company which invests in properties)
All of the above named companies are registered in Guernsey.
The Group's ultimate parent company is F&C Commercial Property Trust Limited.
10. Subsequent events
There are no material subsequent events that need to be disclosed.
11. Forward looking statements
Certain statements in this report are forward looking statements. By their
nature, forward looking statements involve a number of risks, uncertainties or
assumptions that could cause actual results or events to differ materially from
those expressed or implied by those statements. Forward looking statements
regarding past trends or activities should not be taken as representation that
such trends or activities will continue in the future. Accordingly, undue
reliance should not be placed on forward looking statements.
Statement of Principal Risks and Uncertainties
The Company's assets comprise mainly direct investments in UK commercial
property. Its principal risks are therefore related to the commercial property
market in general. Other risks faced by the Company include investment and
strategic, regulatory, environmental, management and control, operational, and
financial risks. The Company is also exposed to risks in relation to its
financial instruments. These risks, and the way in which they are managed, are
described in more detail under the heading 'Principal Risks and Risk
Management' within the Business Model and Strategy in the Company's Annual
Report for the year ended 31 December 2016. On 23 June 2016 the UK electorate
voted to leave the European Union, and Article 50 was triggered by the Prime
Minister on 29 March 2017. This commences a process that is likely to take a
minimum of 2 years to complete, and during this time the UK remains a member of
the European Union. There will be a resulting period of uncertainty for the UK
economy and real estate markets, with increased volatility expected in
financial markets. 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 remainder of the Company's financial year.
Statement of Directors' Responsibilities in Respect of the Interim Report
We confirm that to the best of our knowledge:
• the condensed set of consolidated financial statements has been
prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by
the European Union;
• the Chairman's Statement and Managers' Review (together
constituting the Interim Management Report) together with the Statement of
Principal Risks and Uncertainties above 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 a description of the principal risks and
uncertainties for the remaining six months of the financial year; and
• the Chairman's Statement together with the condensed set of
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
Chris Russell
Director
F&C Commercial Property Trust Limited
Independent Review Report to the Directors of F&C Commercial Property Trust
Limited
Introduction
We have been engaged by F&C Commercial Property Trust Limited ("the Company")
to review the condensed unaudited set of financial statements in the
half-yearly financial report for the six months ended 30 June 2017, which
comprises the unaudited condensed consolidated statement of comprehensive
income, the unaudited condensed consolidated balance sheet, the unaudited
condensed consolidated statement of changes in equity, the unaudited condensed
consolidated statement of cash flows, and related notes. We have read the other
information contained in the half-yearly financial report and considered
whether it contains any apparent misstatements or material inconsistencies with
the information in the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the Disclosure and Transparency
Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the Company are
prepared in accordance with International Financial Reporting Standards as
adopted by the European Union. The condensed set of financial statements
included in this half-yearly financial report has been prepared in accordance
with International Accounting Standard 34, "Interim Financial Reporting" as
adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review. This report, including the conclusion, has been prepared for and only
for the Company for the purpose of the Disclosure and Transparency Rules of the
Financial Conduct Authority and for no other purpose. We do not, in producing
this report, accept or assume responsibility for any other purpose or to any
other person to whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements 2410, 'Review of Interim Financial Information Performed by the
Independent Auditor of the Entity' issued by the International Auditing and
Assurance Standards Board. A review of interim financial information consists
of making enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing and consequently does not enable us to
obtain assurance that we would become aware of all significant matters that
might be identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2017 are not prepared, in all
material respects, in accordance with International Accounting Standard 34 as
adopted by the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
PricewaterhouseCoopers CI LLP
Chartered Accountants
Guernsey, Channel Islands
Alternative Performance Measures
The Company uses the following Alternative Performance Measures ('APMs'). APMs
do not have a standard meaning prescribed by GAAP and therefore may not be
comparable to similar measures presented by other entities.
Discount or Premium - the share price of an Investment Company is derived from
buyers and sellers trading their shares on the stock market. If the share price
is lower than the NAV per share, the shares are trading at a discount. This
usually indicates that there are more sellers than buyers. Shares trading at a
price above the NAV per share, are said to be at a premium.
Dividend Cover - The percentage by which Profits for the period (less Gains/
losses on investment properties and loss on redemption on interest rate swaps)
cover the dividend paid.
A reconciliation of dividend cover is shown below:
30 June 30 June
2017 2016
£'000 £'000
Profit for the 54,835 15,675
period
Add back: Unrealised (gains) / losses (35,502) 4,324
Realised losses 5 -
Loss on redemption of swap - 1,283
Profit before investment gains and losses 19,338 21,282
Dividends 23,981 23,981
Dividend Cover percentage 80.6 88.7
Dividend Yield - The annualised dividend divided by the share price at the year
end. An analysis of dividends is contained in note 2 to the accounts.
Net Gearing - Borrowings less cash divided by total assets (less current
liabilities and cash)
Portfolio (Property) Capital Return - The change in property value during the
period after taking account of property purchases and sales and capital
expenditure, calculated on a quarterly time-weighted basis.
Portfolio (Property) Income Return - The income derived from a property during
the period as a percentage of the property value, taking account of direct
property expenditure, calculated on a quarterly time-weighted basis.
Portfolio (Property) Total Return - Combining the Portfolio Capital Return and
Portfolio Income Return over the period, calculated on a quarterly
time-weighted basis.
Total Return - The return to shareholders calculated on a per share basis by
adding dividends paid in the period to the increase or decrease in the Share
Price or NAV. The dividends are assumed to have been reinvested in the form of
Ordinary Shares or Net Assets, respectively, on the date on which they were
quoted ex-dividend.
All 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 745324
Fax: 01481 745051
Richard Kirby
BMO REP Asset Management plc
Tel: 0207 499 2244
Graeme Caton
Winterflood Securities Limited
Tel: 0203 100 0268
The full interim report for the period to 30 June 2017 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
F&C Commercial Property Trust : Half Yearly Financial Report
August 30, 2017 at 02:01 am EDT
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