TIDMSLI
RNS Number : 8350I
Standard Life Invs Property Inc Tst
19 March 2010
STANDARD LIFE INVESTMENTS PROPERTY INCOME TRUST
RESULTS ANNOUNCEMENT (UNAUDITED) IN RESPECT OF THE YEAR ENDED 31 DECEMBER 2009
Financial Highlights
- Dividend of 4.00p paid in respect of the 12 months to 31 December 2009
- Special dividend of 0.25p paid in respect of the 12 months to 31 December 2009
- Dividend yield of 6.5% based on year end share price (including special
dividend)
- Net Asset Value per share decreased by 8.3% to 56.6p
- Open market value of property portfolio as at 31 December 2009: GBP136.8m*
- Two properties purchased during the year for GBP21m (excluding purchase costs)
+---------------------------------+------------+------------+--------+
| Financial Summary | | | |
+---------------------------------+------------+------------+--------+
| | 31 | 31 | % |
| | December | December | Change |
| | 2009 | 2008 | |
+---------------------------------+------------+------------+--------+
| | | | |
+---------------------------------+------------+------------+--------+
| IFRS Net Asset Value per | 57.6p | 62.7p | -8.1% |
| share** | | | |
+---------------------------------+------------+------------+--------+
| Published adjusted IFRS Net | 56.6p | 61.7p | -8.3% |
| Asset Value per share*** | | | |
+---------------------------------+------------+------------+--------+
| Share price | 64.5p | 49.7p | 29.8% |
+---------------------------------+------------+------------+--------+
| | | | |
+---------------------------------+------------+------------+--------+
| Value of total assets | GBP169.1m | GBP169.0m | 0.1% |
+---------------------------------+------------+------------+--------+
| Loan to value**** | 39.2% | 32.4% | - |
+---------------------------------+------------+------------+--------+
| Cash balance | GBP30.8m | GBP44.5m | - |
+---------------------------------+------------+------------+--------+
| | | | |
+---------------------------------+------------+------------+--------+
| Dividends per share***** | 4.00p | 6.76p | -40.8% |
+---------------------------------+------------+------------+--------+
| | | | |
+---------------------------------+------------+------------+--------+
| Special dividend | 0.25p | - | n/a |
+---------------------------------+------------+------------+--------+
* As valued by the Group's independent property valuer, Jones Lang LaSalle
Limited.
** Calculated under International Financial Reporting Standards.
*** Calculated under International Financial Reporting Standards, adjusted to
include a dividend of 1p per share in respect of the quarter ending 31 December
2009.
**** Calculated as bank borrowings less full cash balance as a percentage of the
open market value of the property portfolio as at 31 December 2009.
***** Dividends paid during the 12 months to 31 December 2009.
Extracts from Chairman's Statement
"What a difference a year makes! Last year I reported that the share price was
at a low point of 26.75p per share in March 2009 with the shares trading at a
discount of close to 50%. The market expected a number of property owners to
suffer liquidity issues resulting in some distressed sales. During this period
of uncertainty your Company was able to take advantage of buying opportunities
by investing some of the cash that had been built up in 2007 and 2008 before the
worst of the falls in the property market.
By the summer most of the listed property holdings companies such as British
Land and Land Securities had raised substantial amounts of capital through
deeply discounted rights issues and no longer needed to sell assets at the
bottom of the property cycle. In addition the banks did not dump material
numbers of properties on the market where owners had breached covenants.
Property values also recovered in the second half as institutional cash flows
turned positive with the sector offering attractive yield premiums to UK gilts.
At the year end the Company's share price had improved to 64.5p representing a
premium of 14% to net asset value. The shares still offer a dividend yield of
6.7%, based on the share price as at 17 March 2010, compared with a yield on the
FTSE All-Share Index of 3.2%
Performance: Property Income and Total Return
The Company generated a property income return of 12.3% on its properties which
was considerably ahead of the IPD Monthly Index of 8.2% in respect of the year
ended 31 December 2009. The total return numbers were reduced by the falls in
commercial property values experienced during 2009. The Company's property total
return was 4.5% (property only) compared with the IPD Monthly Index of 2.2%.
The total return (including cash) was 4.3%.
Performance: Net Asset Value
The Company's published net asset value fell over the reporting period from
61.7p per share to 56.6p. As can be seen from the table below, the vast majority
of the decline in published net asset value related to the fall in the valuation
of the Company's commercial property, including the impact of gearing, which
accounted for 10.7p of the fall in net asset value over the year. The impact of
the movement in the valuation of the interest rate swap which the Company put in
place to fix the borrowing rate at launch added 1.4p to the net asset value.
Other reserve movements contributed 4.2p the majority of which related to
surrender premiums received from tenants during the year.
Pence per share % of opening NAV
Published NAV as at 31 December 2008 61.7
100.0
Decrease in valuation of property portfolio
(10.7) (17.3)
Increase in interest rate swap valuation
1.4 2.3
Other reserve movements
4.2 6.8
Published NAV as at 31 December 2009 56.6
91.8
The published net asset value is calculated under International Financial
Reporting Standards ("IFRS") and includes a provision for the payment of the
fourth interim dividend of 1.00p per ordinary share for the quarter to 31
December 2009.
Earnings and Dividends
Total dividends of 4.00p per share have been declared and paid in respect of the
year ended 31 December 2009. In addition a special dividend of 0.25p was paid in
February 2010 in respect of the last financial year. Consistent with the Board's
commitment made in November 2008 the special dividend represents the surplus
normalised earnings above the rebased annual dividend of 4.00p per share.
The Board has historically targeted a high level of dividend cover and continues
to believe that this is an appropriate long term discipline for the Company to
follow. Given that the required accounting treatment to recognise the level of
surrender premiums received during 2009 of GBP4.2m (3.67p per share) as current
year income the Board may utilise this exceptional income, if required, to help
finance future dividends.
The Board is pleased to announce a 10% increase in the level of quarterly
dividends for the year ended 31 December 2010. The first interim dividend will
therefore be 1.10p per share payable in May 2010 and the following three interim
dividends will also be paid at this level. This reflects the Board's confidence
in future earnings resulting from recent purchase activity together with the
strong revenue reserve position.
Management Fees and Other Expenses
Throughout 2009 the Company benefited from lower management fees having been
reduced from quarter four in 2008 from 85 bps to 75 bps. All other expenses
have been kept under review. Over the last two years the Board has reviewed its
main service providers and this has resulted in a change in valuer and auditor.
Total expenses fell by approximately GBP150,000 over the year benefiting from
lower management fees (GBP399,000) and a reduction in non-recoverable property
costs (GBP100,000). However expenses did include increases for bad debts
(GBP146,000), insurance premiums (GBP78,000) and energy performance certificate
costs (GBP53,000).
Borrowings and Cash Position
As at 31 December 2009 the Company had bank borrowings of GBP84.4m and a cash
position of GBP30.8m (excluding rent deposits) therefore cash as a percentage of
debt was 36.5%. As a reminder to shareholders GBP72m of the Company's
borrowings are effectively at a fixed rate of interest until 2013 and the rate
on the remaining GBP12.4m varies with LIBOR plus a margin. Currently the rate
payable on the GBP12.4m is 2.0% and this is being rolled over monthly.
Loan to Value Ratio
As at 31 December 2009 the loan to value ratio (assuming all cash is placed with
RBS as an offset to the loan balance) was 39.2%. The covenant level is 65%. I
communicated in my interim statement that the LTV covenant had been increased to
65% to allow the Company to invest its cash balances to take advantage of
attractively valued properties and also to enhance the revenue account.
Activity
The Company purchased two properties for GBP21m (excluding purchase costs) at
yields of 8.6% and 9.9% during the year. The largest purchase was an office
building in Uxbridge for GBP11m. Following active management initiatives the
leases on this property were re-geared to extend the unexpired lease term and
the vacant suite was let helping to increase the year end valuation to GBP17m.
Although this purchase was made as a long term investment the Company accepted a
bid considerably in excess of the year end valuation and intends to utilise the
proceeds to invest in other properties at a higher yield to enhance the
Company's revenue account.
Following the year end the Company purchased a retail warehouse in Bolton for
GBP14m at a yield of 8% and agreed the funding of a pre-let office and
industrial development in Aberdeen, further details of which can be found in the
Investment Manager's Report.
Discount and Share Price
The year end share price of 64.5p represented a premium of 14% to the net asset
value of 56.6p. The increase in the share price during the year of 29.6%
reflects the recovery of UK commercial property values and improved investor
sentiment for the sector once again highlighting the attractions of the dividend
yield. As at 17 March 2010, the share price is 60.0p equivalent to a premium to
the 31 December 2009 NAV of 6%.
Dividend Yield
The current share price represents a dividend yield of 6.7%. This dividend yield
compares with bank deposit rates of around 0.5% redemption yields on UK gilts of
just over 4% and a yield on the FTSE All-Share Index of 3.2%.
Fund Raising
During the year the Company allotted 10,399,999 ordinary shares of 1p each,
representing, in aggregate, 10% of the Company's issued share capital.
Investment Outlook
The recent strong recovery in property prices has led to some nervousness over
its sustainability. The shape of the property market recovery will depend on the
strength of the recovery in the UK economy as well as the high levels of
liquidity targeting the UK commercial sector.
Asset management initiatives will remain critical to preserving property values
and rents. With the Company's current cash position of GBP25m the Company is
well placed to take advantage of suitable buying opportunities. The Board
remains confident that the Company is in a strong position to enhance income
returns for the benefit of shareholders by continuing to purchase attractively
valued properties utilising the skills of its Investment Manager, Standard Life
Investments.
Should economic growth strengthen and confidence improve longer term, it is
likely that the UK commercial property market will provide double digit returns
over the next few years."
David Moore
Chairman
Extracts from Investment Manager's Report
"UK Commercial Property Market
2009 was truly a year of two halves. It started much as 2008 ended with
continued monthly falls in capital values and a negative outlook, but ended with
a positive total return, rapid increases in capital values, and signs that
commercial property was back in vogue. This turnaround is perhaps best
illustrated by looking at the derivative pricing for calendar year 2009, which
was negative 25% in January, but ended the year in positive territory.
So why did the market change so rapidly? The point of inflection in the direct
market was July 2009, about 4 months after the listed sector, which is normally
a lead indicator for the direct market. By the summer most of the major property
players had secured their capital base through deeply discounted rights issues,
and so no longer needed to sell assets at bottom of cycle levels, and the banks
had not flooded the market with distressed assets as many had feared. The other
source of distressed sellers was the open ended funds, who had to sell to meet
redemptions, however by the summer most of these had closed, and had sold what
they needed to. There was therefore a lack of stock available, and at the same
time institutions began to get net inflows again as many investors felt the
margin over gilts made the sector look attractive again. In a matter of weeks
the pressure to sell was replaced by a pressure to buy as cash levels in funds
rose. All of a sudden the overseas buyers were not the only show in town, and
competition for secure, well let prime stock forced up prices. In December 2009
the IPD monthly index recorded its largest 1 month rise in capital values at 3%.
Although positive, one has to be concerned with the sustainability of such a
turn around, especially as the fundamentals of the market remain weak with
negative rental growth, and general economic uncertainty. The recovery to date
is also put into context to the falls experienced since the market peak in June
2007. If the rise in direct property values seems large, then the listed
property sectors 82% rise since its low in March 2009 to year end is truly
impressive, especially compared to the 47.5% of the wider FTSE All-Share Index.
Indeed, commercial property pricing looks fair value compared to bonds, and the
rationale of buying property for a sustainable, and predictable income return,
remains intact. In an environment of very low interest rates, and uncertainty
over the economic outlook including the possibility of inflation returning,
property looks like an attractive asset class.
Outlook
The recovery in capital values is likely to continue through the first half of
2010, but is likely to retreat slightly in the second half of the year. The
continued recovery is not going to be a straight line, but will be a bumpy ride,
its outcome driven by the general economic recovery, and continued weight of
money into the sector. A shortage of prime investment stock and hardening yields
is likely to move investors up the risk curve despite the weak occupational
market, with subsequent benefit to the secondary market. It is likely that the
direct UK commercial property market will return low double digit returns per
annum over the next 3 to 5 years.
Portfolio Valuation:
The investment properties were valued at GBP136.8m at the end of the year and
the Company held cash holdings of GBP30.8m (excluding rental deposits).
The valuations were undertaken by Jones Lang La Salle over the course of 2009.
With increased turnover in the second half the valuers had access to greater
levels of comparable evidence, which enabled them to have greater confidence in
the accuracy of the valuations compared to the end of December 2008, at which
time many valuers were compelled to qualify their valuations.
As at 31 December 2009 the property portfolio had an initial yield of 7.7% and
equivalent yield of 8.1%, compared to 8.0% and 8.4% respectively at December
2008. The void level stood at 6.5%, which showed a small increase since last
year whilst still being well below the IPD monthly index level of 11.5%. IPD in
fact reports the Company's void level as 1%, but we include properties where the
tenant went into administration as void even although the lease remains vested
with the administrator to avoid empty rates. We also include a logistics unit in
Skelmersdale where a surrender of the guarantor's interest was accepted in
return for the payment of three year's rent up front.
Purchases:
The Company made two purchases over the period, and three after the reporting
period.
Capital Court, Uxbridge: The Company acquired the investment in April 2009 for
GBP10.98m, reflecting a yield of 9.95%. The 55,000sqft office was built in 2003
and let to two tenants, Manpower and IBB solicitors. During the year the Company
spent GBP1.95m regearing the leases, and at the end of December the property was
valued at GBP17m. After the reporting period this property was sold for GBP19m,
as detailed below.
Northern & Shell Tower, Docklands, London: The second purchase, made in November
2009, was a 53,000sqft office for GBP10m, reflecting a yield of 8.6%. The
property is let for a further 13 years to Northern & Shell plc at GBP16.90psqft.
At the year end the property was valued at GBP10.95m.
Focus Unit, Wymondham, Norwich: The Company completed the purchase of a retail
warehouse built in 2009 and let to Focus DIY for 24 years for GBP5m, reflecting
a yield of 8% in January 2010.
Hydrasun, Aberdeen: In February 2010 the Company agreed the funding of a pre let
office and industrial development in Aberdeen. The site purchase price was
GBP2.17m, and the fund will pay the construction costs, giving a total
expenditure of GBP11.7m. The property will be let on completion for 20 years
with five yearly upward only rent reviews to 3%pa compound. The yield on the
commencing rent will be 8%.
Tesco Distribution Unit, Wingate, Bolton: In February 2010 the Company completed
the purchase of a 272,000 sqft logistics unit. The building was built in 2006
to a very high standard and is let to Tesco stores for a further 6 years at an
annual rent of GBP1.19m p.a. The GBP14.06m purchase price reflects an 8% initial
yield.
Sales:
The Company undertook two sales after the reporting period.
Capital Court Uxbridge: Although purchased as a long term investment in April
2009 the Company sold the property in January 2010 for GBP19m. The sale price
was GBP2m ahead of the end December valuation, and it was decided to take the
profit and reinvest the sale proceeds into higher yielding stock. The property
showed a 47% total return from purchase to sale in nine months.
Century Plaza Edgeware: The Company sold the mixed use investment in February
2010 for GBP6.4m, giving an initial yield of 7%. The property comprises a mix
of residential, leisure and retail tenants.
Asset Management:
The Company undertook a number of initiatives to protect or enhance income over
the period. Six new leases were granted, two tenant only break clauses removed,
and two lease surrenders accepted. The first surrender was from Hoyts cinema.
The property was simultaneously relet to Vue cinemas for a term of twenty years
with fixed increases, which improved the security and duration of the income. As
the Hoyts lease was very over-rented the income to the Company fell by
GBP400,000pa, but a premium of GBP3.3m was received from Hoyts to compensate.
The Company also took a surrender of a guarantor's obligation on a logistics
unit in Skelmersdale in return for three years rent paid in advance. This gives
the Company an opportunity to market the premises.
Bank Debt:
The Company currently has GBP84m of debt from RBS from a facility maturing in
December 2013. The Company has an interest rate hedge in place for GBP72m giving
a fixed rate of 5.115% plus margin. The swap was held in the accounts at a
liability of GBP6.1m at the year end. Assuming the contract is held for its
duration, its value will be GBP0 on maturity, thus adding 5.4p per share to the
NAV over the next 4 years.
In June 2009 the facility with RBS was amended so that cash held by the Company
could be offset against the loan amount when calculating the loan to value
("LTV"). Without the amendment the Company would have had to utilise some of its
cash to repay debt at a time in the cycle when the Investment Manager strongly
believed that property should be bought to enhance future returns. The margin on
the loan was increased from 60bps to 150bps for the facility change, and at the
same time the LTV covenant was increased to 65%. At the period end the LTV
stood at 39.2% (if all Group cash was deposited with RBS).
Company Strategy:
The Company is focused on providing an attractive level of income, with the
prospect of capital and income growth. The Investment Manager will seek to
invest the cash into properties with a strong income flow at a yield that is
accretive to the revenue account, and also take advantage of the stronger
investment market to exit some investments and reinvest the cash. The Company
has followed a covered dividend policy, and by investing the cash it can
maintain this. "
Standard Life Investments
Statement of Directors' Responsibilities
The Directors are responsible for preparing Financial Statements for each year
which give a true and fair view, in accordance with applicable Guernsey law and
International Financial Reporting Standards, as adopted by the EU, of the state
of affairs of the Group and of the profit or loss of the Group for that year.
In preparing those Financial Statements, the Directors are required to:
- Select suitable accounting policies and then apply them consistently;
- Make judgements that are reasonable and prudent;
- State whether applicable accounting standards have been followed, subject to
any material departures disclosed and explained in the Financial Statements; and
- Prepare the Financial Statements on a going concern basis unless it is
inappropriate to presume that the Group will continue in business.
The Directors confirm that they have complied with the above requirements in
preparing the Financial Statements.
The Directors are responsible for keeping proper accounting records, which
disclose with reasonable accuracy at any time, the financial position of the
Group and to enable them to ensure that the Financial Statements comply with The
Companies (Guernsey) Law, 2008. They are also responsible for safeguarding the
assets of the Group and hence for taking reasonable steps for the prevention and
detection of fraud, error and non compliance with law and regulations.
The maintenance and integrity of the Company's website is the responsibility of
the Directors; the work carried out by the auditors does not involve
consideration of these matters and, accordingly, the auditors accept no
responsibility for any change that may have occurred to the Financial Statements
since they were initially presented on the website. Legislation in Guernsey
governing the preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
Statement under the Disclosure and Transparency Rules 4.1.12
The Directors each confirm to the best of their knowledge that:
(a) the Consolidated Financial Statements, prepared in accordance with
applicable accounting standards, give a true and fair view of the assets,
liabilities, financial position and net return of the Group; and
(b) the Annual Report includes a fair review of the development and performance
of the business and the position of the Group, together with a description of
the principal risks and uncertainties faced.
David Moore
Chairman
UNAUDITED FINANCIAL STATEMENTS
Consolidated Statement of Comprehensive Income (Unaudited)
for the year ended 31 December 2009
+----------------------------------+-----+--------------+--------------+
| | | 2009 | 2008 |
+----------------------------------+-----+--------------+--------------+
| | | GBP | GBP |
+----------------------------------+-----+--------------+--------------+
| Rental income | | 11,428,246 | 11,517,044 |
+----------------------------------+-----+--------------+--------------+
| Surrender premium income | | 4,248,793 | 9,219 |
+----------------------------------+-----+--------------+--------------+
| Valuation loss on investment | | (10,834,835) | (39,982,011) |
| properties | | | |
+----------------------------------+-----+--------------+--------------+
| Realised loss on disposal of | | (27,391) | (4,002,729) |
| investment properties | | | |
+----------------------------------+-----+--------------+--------------+
| Investment management fee | | (1,086,828) | (1,485,501) |
+----------------------------------+-----+--------------+--------------+
| Head lease payments | | (500) | (33,537) |
+----------------------------------+-----+--------------+--------------+
| Surrender premium expense | | (100,000) | - |
+----------------------------------+-----+--------------+--------------+
| Other direct property operating | | (878,096) | (740,196) |
| expenses | | | |
+----------------------------------+-----+--------------+--------------+
| Directors' fees and subsistence | | (104,053) | (103,786) |
+----------------------------------+-----+--------------+--------------+
| Valuer's fee | | (23,520) | (31,006) |
+----------------------------------+-----+--------------+--------------+
| Auditor's fee | | (44,700) | (41,125) |
+----------------------------------+-----+--------------+--------------+
| Other administration expenses | | (287,808) | (238,666) |
+----------------------------------+-----+--------------+--------------+
| Operating profit / (loss) | | 2,289,308 | (35,132,294) |
+----------------------------------+-----+--------------+--------------+
| | | | |
+----------------------------------+-----+--------------+--------------+
| Finance income | | 454,917 | 2,314,517 |
+----------------------------------+-----+--------------+--------------+
| Finance cost | | (4,924,425) | (5,451,343) |
+----------------------------------+-----+--------------+--------------+
| Loss for the year | | (2,180,200) | (38,269,120) |
+----------------------------------+-----+--------------+--------------+
| | | | |
+----------------------------------+-----+--------------+--------------+
| Other comprehensive income | | | |
+----------------------------------+-----+--------------+--------------+
| Valuation gain / (loss) on cash | | 1,468,003 | (7,312,566) |
| flow hedges | | | |
+----------------------------------+-----+--------------+--------------+
| | | | |
+----------------------------------+-----+--------------+--------------+
| Total comprehensive loss for the | | (712,197) | (45,581,686) |
| year, net of tax | | | |
+----------------------------------+-----+--------------+--------------+
| | | | |
+----------------------------------+-----+--------------+--------------+
| Loss per share for the period | | | |
| attributable | | | |
+----------------------------------+-----+--------------+--------------+
| to the equity holders of the | | | |
| Company | | | |
+----------------------------------+-----+--------------+--------------+
| Basic and diluted (pence) | | (2.06) | (36.80) |
+----------------------------------+-----+--------------+--------------+
| | | | |
+----------------------------------+-----+--------------+--------------+
All items in the above Consolidated Statement of Comprehensive Income derive
from continuing operations.
Consolidated Balance Sheet (Unaudited)
as at 31 December 2009
+----------------------------------+-----+--------------+--------------+
| | | 2009 | 2008 |
+----------------------------------+-----+--------------+--------------+
| | | GBP | GBP |
+----------------------------------+-----+--------------+--------------+
| ASSETS | | | |
+----------------------------------+-----+--------------+--------------+
| Non-current assets | | | |
+----------------------------------+-----+--------------+--------------+
| Freehold investment properties | | 108,475,658 | 107,006,879 |
+----------------------------------+-----+--------------+--------------+
| Leasehold investment properties | | 24,316,594 | 14,403,182 |
+----------------------------------+-----+--------------+--------------+
| Lease incentives | | 3,878,541 | 1,498,525 |
+----------------------------------+-----+--------------+--------------+
| | | 136,670,793 | 122,908,586 |
+----------------------------------+-----+--------------+--------------+
| Current assets | | | |
+----------------------------------+-----+--------------+--------------+
| Trade and other receivables | | 1,608,329 | 1,656,747 |
+----------------------------------+-----+--------------+--------------+
| Cash and cash equivalents | | 30,796,998 | 44,469,002 |
+----------------------------------+-----+--------------+--------------+
| | | 32,405,327 | 46,125,749 |
+----------------------------------+-----+--------------+--------------+
| | | | |
+----------------------------------+-----+--------------+--------------+
| Total assets | | 169,076,120 | 169,034,335 |
+----------------------------------+-----+--------------+--------------+
| | | | |
+----------------------------------+-----+--------------+--------------+
| EQUITY | | | |
+----------------------------------+-----+--------------+--------------+
| Capital and reserves | | | |
| attributable | | | |
+----------------------------------+-----+--------------+--------------+
| to Company's equity holders | | | |
+----------------------------------+-----+--------------+--------------+
| Share capital | | 6,671,438 | 1,040,000 |
+----------------------------------+-----+--------------+--------------+
| Share premium | | 5,217,022 | 5,217,022 |
+----------------------------------+-----+--------------+--------------+
| Retained earnings | | 6,662,276 | 1,717,458 |
+----------------------------------+-----+--------------+--------------+
| Capital reserves | | (46,055,762) | (36,661,539) |
+----------------------------------+-----+--------------+--------------+
| Other distributable reserves | | 93,433,322 | 93,916,114 |
+----------------------------------+-----+--------------+--------------+
| Total equity | | 65,928,296 | 65,229,055 |
+----------------------------------+-----+--------------+--------------+
| | | | |
+----------------------------------+-----+--------------+--------------+
| LIABILITIES | | | |
+----------------------------------+-----+--------------+--------------+
| Non-current liabilities | | | |
+----------------------------------+-----+--------------+--------------+
| Bank borrowings | | 84,043,766 | 84,432,692 |
+----------------------------------+-----+--------------+--------------+
| Interest rate swap | | 3,032,234 | 3,814,101 |
+----------------------------------+-----+--------------+--------------+
| Redeemable preference shares | | 8,529,302 | 8,046,510 |
+----------------------------------+-----+--------------+--------------+
| Leasehold obligations | | 6,094 | 17,682 |
+----------------------------------+-----+--------------+--------------+
| | | 95,611,396 | 93,310,985 |
+----------------------------------+-----+--------------+--------------+
| Current liabilities | | | |
+----------------------------------+-----+--------------+--------------+
| Trade and other payables | | 4,460,964 | 3,732,695 |
+----------------------------------+-----+--------------+--------------+
| Interest rate swap | | 3,074,964 | 3,761,100 |
+----------------------------------+-----+--------------+--------------+
| Leasehold obligations | | 500 | 500 |
+----------------------------------+-----+--------------+--------------+
| | | 7,536,428 | 7,494,295 |
+----------------------------------+-----+--------------+--------------+
| Total liabilities | | 103,147,824 | 103,805,280 |
+----------------------------------+-----+--------------+--------------+
| | | | |
+----------------------------------+-----+--------------+--------------+
| Total equity and liabilities | | 169,076,120 | 169,034,335 |
+----------------------------------+-----+--------------+--------------+
Consolidated Statement of Changes in Equity
for the year ended 31 December 2008
+---------------+-----------+-----------+--------------+--------------+---------------+--------------+
| | | | | | Other | |
+---------------+-----------+-----------+--------------+--------------+---------------+--------------+
| | Share | Share | Retained | Capital | distributable | |
| | | | | | | |
+---------------+-----------+-----------+--------------+--------------+---------------+--------------+
| | capital | premium | earnings | reserves | reserves | Total |
| | | | | | | equity |
+---------------+-----------+-----------+--------------+--------------+---------------+--------------+
| | GBP | GBP | GBP | GBP | GBP | GBP |
+---------------+-----------+-----------+--------------+--------------+---------------+--------------+
| Opening | 1,040,000 | 5,217,022 | 2,576,775 | 14,635,767 | 94,371,577 | 117,841,141 |
| balance 1 | | | | | | |
| January | | | | | | |
| 2008 | | | | | | |
+---------------+-----------+-----------+--------------+--------------+---------------+--------------+
| | | | | | | |
+---------------+-----------+-----------+--------------+--------------+---------------+--------------+
| Loss for | - | - | (38,269,120) | - | - | (38,269,120) |
| the year | | | | | | |
+---------------+-----------+-----------+--------------+--------------+---------------+--------------+
| Valuation | - | - | - | (7,312,566) | - | (7,312,566) |
| loss on | | | | | | |
| cash flow | | | | | | |
| hedges | | | | | | |
+---------------+-----------+-----------+--------------+--------------+---------------+--------------+
| Total | - | - | (38,269,120) | (7,312,566) | - | (45,581,686) |
| comprehensive | | | | | | |
| income for | | | | | | |
| the year | | | | | | |
+---------------+-----------+-----------+--------------+--------------+---------------+--------------+
| | | | | | | |
+---------------+-----------+-----------+--------------+--------------+---------------+--------------+
| Valuation | - | - | 39,982,011 | (39,982,011) | - | - |
| loss on | | | | | | |
| investment | | | | | | |
| properties | | | | | | |
+---------------+-----------+-----------+--------------+--------------+---------------+--------------+
| Realised | - | - | 4,002,729 | (4,002,729) | - | - |
| loss on | | | | | | |
| disposal of | | | | | | |
| investment | | | | | | |
| properties | | | | | | |
+---------------+-----------+-----------+--------------+--------------+---------------+--------------+
| Transfer | - | - | 455,463 | - | (455,463) | - |
| between | | | | | | |
| reserves* | | | | | | |
+---------------+-----------+-----------+--------------+--------------+---------------+--------------+
| Dividends | - | - | (7,030,400) | - | - | (7,030,400) |
+---------------+-----------+-----------+--------------+--------------+---------------+--------------+
| Balance as | 1,040,000 | 5,217,022 | 1,717,458 | (36,661,539) | 93,916,114 | 65,229,055 |
| at 31 | | | | | | |
| December | | | | | | |
| 2008 | | | | | | |
+---------------+-----------+-----------+--------------+--------------+---------------+--------------+
* this is a transfer to move redeemable preference share finance costs from the
retained earnings reserve to the other distributable reserves
Consolidated Statement of Changes in Equity (Unaudited)
for the year ended 31 December 2009
+---------------+------------+-----------+-------------+--------------+---------------+-------------+
| | | | | | Other | |
+---------------+------------+-----------+-------------+--------------+---------------+-------------+
| | Share | Share | Retained | Capital | distributable | |
| | | | | | | |
+---------------+------------+-----------+-------------+--------------+---------------+-------------+
| | capital | premium | earnings | reserves | reserves | Total |
| | | | | | | equity |
+---------------+------------+-----------+-------------+--------------+---------------+-------------+
| | GBP | GBP | GBP | GBP | GBP | GBP |
+---------------+------------+-----------+-------------+--------------+---------------+-------------+
| Opening | 1,040,000 | 5,217,022 | 1,717,458 | (36,661,539) | 93,916,114 | 65,229,055 |
| balance 1 | | | | | | |
| January | | | | | | |
| 2009 | | | | | | |
+---------------+------------+-----------+-------------+--------------+---------------+-------------+
| | | | | | | |
+---------------+------------+-----------+-------------+--------------+---------------+-------------+
| Loss for | - | - | (2,180,200) | - | - | (2,180,200) |
| the year | | | | | | |
+---------------+------------+-----------+-------------+--------------+---------------+-------------+
| Valuation | - | - | - | 1,468,003 | - | 1,468,003 |
| gain on | | | | | | |
| cash flow | | | | | | |
| hedges | | | | | | |
+---------------+------------+-----------+-------------+--------------+---------------+-------------+
| Total | - | - | (2,180,200) | 1,468,003 | - | (712,197) |
| comprehensive | | | | | | |
| income for | | | | | | |
| the year | | | | | | |
+---------------+------------+-----------+-------------+--------------+---------------+-------------+
| | | | | | | |
+---------------+------------+-----------+-------------+--------------+---------------+-------------+
| Ordinary | 5,631,438+ | - | - | - | - | 5,631,438 |
| shares | | | | | | |
| issued | | | | | | |
+---------------+------------+-----------+-------------+--------------+---------------+-------------+
| Valuation | - | - | 10,834,835 | (10,834,835) | - | - |
| loss on | | | | | | |
| investment | | | | | | |
| properties | | | | | | |
+---------------+------------+-----------+-------------+--------------+---------------+-------------+
| Realised | - | - | 27,391 | (27,391) | - | - |
| loss on | | | | | | |
| disposal of | | | | | | |
| investment | | | | | | |
| properties | | | | | | |
+---------------+------------+-----------+-------------+--------------+---------------+-------------+
| Transfer | - | - | 482,792 | - | (482,792) | - |
| between | | | | | | |
| reserves* | | | | | | |
+---------------+------------+-----------+-------------+--------------+---------------+-------------+
| Dividends | - | - | (4,220,000) | - | - | (4,220,000) |
+---------------+------------+-----------+-------------+--------------+---------------+-------------+
| Balance as | 6,671,438 | 5,217,022 | 6,662,276 | (46,055,762) | 93,433,322 | 65,928,296 |
| at 31 | | | | | | |
| December | | | | | | |
| 2009 | | | | | | |
+---------------+------------+-----------+-------------+--------------+---------------+-------------+
* this is a transfer to move redeemable preference share finance costs from the
retained earnings reserve to the other distributable reserves
+ this value represents both the nominal amount and the premium raised on
issuing the ordinary shares.
Consolidated Cash Flow Statement (Unaudited)
for the year ended 31 December 2009
+-----------------------------------------+----+--------------+-------------+
| | | 2009 | 2008 |
+-----------------------------------------+----+--------------+-------------+
| | | GBP | GBP |
+-----------------------------------------+----+--------------+-------------+
| | | | |
+-----------------------------------------+----+--------------+-------------+
| Cash generated from operating | | 11,548,205 | 7,441,384 |
| activities | | | |
+-----------------------------------------+----+--------------+-------------+
| | | | |
+-----------------------------------------+----+--------------+-------------+
| Cash flows from investing activities | | | |
+-----------------------------------------+----+--------------+-------------+
| Interest received | | 454,917 | 2,314,517 |
+-----------------------------------------+----+--------------+-------------+
| Purchase of investment property | | (22,092,080) | (7,825,782) |
+-----------------------------------------+----+--------------+-------------+
| Capital expenditure on investment | | (136,534) | (84,982) |
| properties | | | |
+-----------------------------------------+----+--------------+-------------+
| Retentions received relating to | | - | 110,000 |
| property purchase | | | |
+-----------------------------------------+----+--------------+-------------+
| (Costs of) / proceeds from disposal of | | (27,391) | 19,993,294 |
| investment properties | | | |
+-----------------------------------------+----+--------------+-------------+
| Net cash (used in) / generated in | | (21,801,088) | 14,507,047 |
| investing activities | | | |
+-----------------------------------------+----+--------------+-------------+
| | | | |
+-----------------------------------------+----+--------------+-------------+
| Cash flows from financing activities | | | |
+-----------------------------------------+----+--------------+-------------+
| Proceeds from issue of shares | | 5,631,438 | - |
+-----------------------------------------+----+--------------+-------------+
| Arrangement costs of amended bank | | (422,164) | - |
| borrowing facility | | | |
+-----------------------------------------+----+--------------+-------------+
| Interest paid on bank borrowings | | (1,460,332) | (4,324,336) |
+-----------------------------------------+----+--------------+-------------+
| Interest rate swap cost | | (2,948,063) | (673,039) |
+-----------------------------------------+----+--------------+-------------+
| Dividends paid to the Company's | | (4,220,000) | (7,030,400) |
| shareholders | | | |
+-----------------------------------------+----+--------------+-------------+
| Net cash used in financing activities | | (2,509,287) | 12,027,775 |
+-----------------------------------------+----+--------------+-------------+
| | | | |
+-----------------------------------------+----+--------------+-------------+
| Net (decrease) / increase in cash and | | (13,672,004) | 9,920,656 |
| cash equivalents in the year | | | |
+-----------------------------------------+----+--------------+-------------+
| | | | |
+-----------------------------------------+----+--------------+-------------+
| Cash and cash equivalents at beginning | | 44,469,002 | 34,548,346 |
| of the year | | | |
+-----------------------------------------+----+--------------+-------------+
| Cash and cash equivalents at end of | | 30,796,998 | 44,469,002 |
| year | | | |
+-----------------------------------------+----+--------------+-------------+
| | | | |
+-----------------------------------------+----+--------------+-------------+
Notes Unaudited
1. Accounting Policies
The accounting policies adopted are consistent with those of the previous
financial year, except that the group has adopted the following new and amended
IFRS interpretations as of 1 January 2009:
- IAS 1 (revised 2007), 'Presentation of financial statements'
- IFRS 8 'Operating segments'
- Amendment to IFRS 7 Financial Instruments: Disclosures
2. Significant accounting judgements, estimates and assumptions
The preparation of the Group's financial statements requires management to make
judgements, estimates and assumptions that affect the amounts recognized in the
financial statements. However, uncertainty about these assumptions and
estimates could result in outcomes that could require a material adjustment to
the carrying amount of the asset or liability affected in the future.
Going Concern
The Group's management has made an assessment of the Group's ability to continue
as a going concern and is satisfied that the Group has the resources to continue
in business for the foreseeable future. Furthermore, the management is not aware
of any material uncertainties that may cast significant doubt upon the Group's
ability to continue as a going concern. Therefore, the financial statements
continue to be prepared on the going concern basis.
Fair value of investment properties
Investment property is stated at fair value as at the balance sheet date. Gains
or losses arising from changes in the fair values are includes in the
Consolidated Statement of Comprehensive Income in the year in which they arise.
The fair value of investment properties is determined by independent real estate
valuation experts using recognised valuation techniques. The fair values are
determined based on recent real estate transactions with similar characteristics
and locations to those of the Group's assets. The determination of the fair
value of investments properties requires the use of estimates such as future
cash flows from the assets. The estimate of the future cash flows will consider
the repair and conditions of the property, lease terms, future lease events, as
well as other relevant factors for the particular investment. These estimates
are based on local market conditions existing at balance sheet date.
Fair value of financial instruments
When the fair value of financial assets and financial liabilities recorded in
the Statement of financial position cannot be derived from active markets, they
are determined using a variety of valuation techniques that include the use of
mathematical models. The input to these models are taken from the observable
markets where possible, but where this is not feasible, a degree of judgement is
required in establishing fair value. The judgements include considerations of
liquidity and model inputs such as credit risk (both own and counterparty's),
correlation and volatility. Changes in assumptions about these factors could
affect the reported fair value of financial instruments. The models are
calibrated regularly and tested for validity using prices from any observable
current market transactions in the same instrument (without modification or
repackaging) or based on any available observable market data.
3. Related party disclosures
Parties are considered to be related if one party has the ability to control the
other party or exercise significant influence over the other party in making
financial or operational decisions.
Redeemable preference shares
On 19 December 2003 the Company issued 6,000,000 25p redeemable zero dividend
preference shares for GBP6,000,000 to The Standard Life Assurance Company. On
10 July 2006 these shares were transferred to Standard Life Assurance Limited.
These shares have a nominal value of GBP1,500,000 and are redeemable by the
Company at a price of GBP1.7908. These shares do not carry any voting rights.
Ordinary share capital
Standard Life Investment Funds Limited held 21,769,609 of the issued ordinary
shares throughout the year on behalf of its Unit Linked Property Funds (2008:
21,769,609). This equates to 19.0% (2008: 20.9%) of the ordinary share capital
in issue at the balance sheet date. However, Standard Life Investments Funds
Limited is not considered to exercise control of the Group. Those parties
related to the Investment Manager waived their rights to commission on the
initial purchase of these shares in order to maintain the fairness of the
transaction to all parties.
Cash held on deposit with related parties
As at 31 December 2009, GBPnil (2008: GBP9,800,976) was invested in Standard
Life Investments (Global Liquidity Funds) plc, a liquidity fund that is rated
Aaa by Moody's. The interest earned on this investment during the year was
GBP68,376 (2008: GBP847,126) representing an average rate of 1.16% (2008:
5.44%). Standard Life plc is the ultimate controlling party of the Investment
Manager, Standard Life Investments (Corporate Funds) Limited. Standard Life
Investments (Global Liquidity Funds) plc is an entity that is also managed
within the Standard Life plc group.
Directors
The Directors each hold the following number of Ordinary Shares in the Company:
2009
2008
David Moore 15,000
15,000
Richard Barfield 30,000
30,000
John Hallam 15,000
15,000
Shelagh Mason 15,000 15,000
Paul Orchard-Lisle 25,000 25,000
No Director has any interest in any transactions which are or were unusual in
their nature or conditions or significant to the business of the Group and which
were effected by any member of the Group since its date of incorporation. Total
fees relating to the Directors in the year under review were GBP104,053 (2008:
GBP103,786), being GBP100,000 (2008: GBP100,000) in respect of fees and GBP4,053
(2008: GBP3,786) in respect of travel and subsistence.
David Moore is a partner of Ozannes Adocates and Notaries Public (Guernsey) who
are the Group's solictors. As at 31 December 2009, the fees paid during the year
to Ozannes Adocates and Notaries Public (Guernsey) were GBP5,446 (2008:
GBP2,510).
Investment Manager
Standard Life Investments (Corporate Funds) Limited is the Investment Manager.
4. Events after the balance sheet date
Property Sales and Purchases
On 25 January 2010 the Group completed the sale of Capital Court, Uxbridge for a
price of GBP19.2m. The property is a freehold office in the town centre of
Uxbridge. The sale price represents a net initial yield of 6.0%.
On 29 January 2010 the Group completed the purchase of retail warehouse in
Wymondham, Norwich for a price of GBP5.0m. The property is let to Focus (DIY)
Ltd for 25 years from 29 September 2008. This purchase price represents a net
initial yield of 8.0%.
On 15 February 2010 the Group completed the sale of Century Plaza, Edgeware for
a price of GBP6.4m. The property is a freehold mixed use development located in
the London suburb of Barnet. The sale price represents a net initial yield of
6.9%.
On 16 February 2010 the Group completed the purchase of land at Aberdeen
Business Gateway Park for a price of GBP2.2m. The Group also entered into
further capital commitments of GBP9.5m to provide funding to the developer,
Stockland Muir, and to make final payment to acquire the completed development
on grant of lease due January 2011. The property, once constructed, will be let
to Hydrasun Ltd for a term of 20 years. The completed development including
letting represents a net intial yield of 8.1%.
On 26 February 2010 the group completed the purchase of a distribution unit at
Wingates, Bolton for a price of GBP14.0m. The property is let to Tesco Stores
Ltd for 10 years from 27 September 2006. This purchase price represents a net
initial yield of 8.0%.
Dividends
On 26 February 2010 a dividend of GBP1,430,000 (2008: GBP1,040,000) in respect
of the quarter to 31 December 2009 was paid. This included a special dividend
of 0.25p per share in additional to the 1.00p per share paid to give a covered
dividend for 2009 on normalised earnings.
Additional Notes (Unaudited)
This Annual Results Announcement is not the Company's statutory accounts for the
year ended 31 December 2009. The statutory accounts for the year ended 31
December 2008 received an audit report which was unqualified and did not include
a reference to any matters to which the auditors drew attention by way of
emphasis without qualifying their report.
The statutory accounts for the financial year ended 31 December 2009 will be
approved by the Directors in due course, and issued to shareholders. The audit
report on the statutory accounts for the year ended 31 December 2009 has not
been signed. The Company's AGM is to be held on the 26 May 2010. The Annual
Report and the Notice of AGM will be sent to shareholders in April 2010 and will
be available to download from the Company's website hosted by the Investment
Manager (www.standardlifeinvestments.co.uk/its).
Please note that past performance is not necessarily a guide to the future and
that the value of investments and the income from them may fall as well as rise.
Investors may not get back the amount they originally invested.
END
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SFAFAAFSSEID
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