TIDMSLI
RNS Number : 0077A
Standard Life Invs Property Inc Tst
26 March 2012
STANDARD LIFE INVESTMENTS PROPERTY INCOME TRUST
RESULTS IN RESPECT OF THE YEAR ENDED 31 DECEMBER 2011
Financial Highlights
- GBP84m debt facility extended
to 2018 on attractive terms
- Dividend of 4.433p paid in respect of the 12
months to 31 December 2011
- Quarterly dividend increased by 3% from quarter ended
30 September 2011
- Dividend yield of 8.8% based on year end
share price of 51.75p
- Net Asset Value per share decreased by
0.5% to 62.7p
Financial Summary
31 December 31 December
2011 2010 % Change
Net Asset Value per share 1 63.9p 64.1p -0.3%
Published adjusted Net Asset
Value per share 2 62.7p 63.0p -0.5%
Share Price 51.75p 64.75p -20.1%
Value of total assets GBP181.9m GBP177.4m +2.5%
Loan to value 3 41.1% 40.8%
Cash balance GBP17.8m GBP21.2m
Dividends per share 4 4.433p 4.30p* +3.1%
Property Performance
Year ended Year ended
31 December 31 December
2011 2010
Property income return 7.6% 7.1%
IPD property income monthly index
5 6.2% 6.4%
Property total return (property
only) 6.5% 16.4%
Property total return (property
and cash only) 5.9% 13.7%
IPD property total return monthly
index 5 7.4% 13.3%
1 Calculated under International Financial
Reporting Standards.
2 Calculated under International Financial Reporting Standards,
adjusted to deduct the dividend of 1.133p per share
in respect of the quarter ending
31 December 2011.
3 Calculated as bank borrowings less full cash balance as a percentage
of the open market value of the property
portfolio as at 31 December 2011.
4 Dividends paid during the 12 months to 31 December 2011. *2010
excludes a special dividend of 0.25p per ordinary share paid in
February 2010 relating to the year 31 December 2009.
5 Source: IPD quarterly version of monthly index
funds (excludes cash).
The Chairman, Paul Orchard-Lisle, stated:
'Overview of 2011 for the Company
As anticipated in my predecessor's statement last year,
performance in the property sector during 2011 was driven by
income. Standard Life Investments Property Income Trust has been
successful in this regard, resulting in an uplift of 3.1% in the
fully covered dividend paid to investors in the year.
A number of initiatives have combined to make this possible; we
have worked with tenants to help them meet their rental
obligations, we have sought to regear leases with short term
expiries and breaks, and we have improved the quality of the
property portfolio by some sales and purchases.
While this is good progress, the Company was not immune from the
general fluctuations in the market, and its impact on our financial
performance is set out below.
STRATEGY
Our focus is to provide investors with a rewarding income return
that produces a fully covered dividend.
In 2011, our investment strategy was to protect and where
possible to enhance income. To do so, we disposed of a small number
of assets that seemed unlikely to contribute positively in the
short to medium term and we acquired others that offer immediate
security of income and the prospect of growth in years to come.
This repositioning of elements of the portfolio inevitably meant
that disposals completed ahead of purchases at times left us with
more cash than is desirable, and indeed that was the position at
year end.
As is set out both below and in the Investment Manager's report,
we have also sought certainty and flexibility by rearranging the
Company's principal debt, and I believe that the terms agreed with
RBS for so doing are greatly to shareholders' advantage. We also
simplified the capital structure by converting the zero dividend
preference shares into ordinary shares.
KEY ACTIVITY IN 2011
Two properties were sold during the year, for a total of
GBP14.4m, and a further property was sold after the year end for
GBP1.0m. Funds were invested in three new properties during the
course of the year at a total cost of GBP22.2m and I am pleased to
say that all are showing signs that they will perform at least in
line with our expectations.
On the occupational side, we, alongside many other funds,
suffered from the unexpected failure of Focus (DIY) Ltd. Of the two
properties let to the company, one was relet immediately, whilst
the other is still vacant, but we have achieved an improved
planning consent.
At year end, our void rate was 5.1% versus the IPD Monthly index
rate of 10%. Much progress has been made with agreements with
tenants whose leases will expire or have break clauses during 2012
and 2013, and I am pleased to report that we have secured 78% of
the rent at risk over this period already, giving greater certainty
of future income to the Company. Preliminary discussions with other
tenants suggest that we should be able to reach satisfactory
settlements on some of the major lease expiries and breaks in 2014
during the course of this year.
BORROWINGS
Since inception, the Company has had use of a debt package of
GBP84m, with GBP72m fixed with an interest rate swap plus a margin
until December 2013 and GBP12m at LIBOR plus a margin. The Board
and Investment Managers have for some time held the view that given
current market sentiment, it was important to the future management
and growth of the portfolio to secure longer term certainty. After
securing competitive bids, the Board accepted an offer from RBS,
more details of which are contained in the Investment Manager's
report. The legal documentation was completed early in the New
Year, and I believe the result is to achieve the level of certainty
and flexibility needed to assist the fund's performance even though
in the short term we will need to work hard to cover the
anticipated dividend fully.
FINANCIAL PERFORMANCE
Net Asset Value
At the end of the year, the NAV per share was 62.7p,
approximately 0.5% below that recorded at 31 December 2010. The
movement compares favourably with our peer group's performance but
falls short of our ambitions. It is however worth noting that a
number of our properties are subject to short term leases and while
these can generate opportunities for enhancement, valuers tend to
take a conservative approach to their assessment.
Set out below is an analysis of the movement in the NAV per
share over the year.
Pence per % of opening
share NAV
Published NAV as at 31 December
2010 63.0 100.0
Decrease in valuation of property
portfolio (1.6) (2.5)
Increase in interest rate SWAP
valuation 1.0 1.6
Other reserve movements 0.3 0.4
Published NAV as at 31 December
2011 62.7 99.5
The net asset value is calculated under International Financial
Reporting Standards and includes a provision for the payment of the
fourth interim dividend of 1.133p per share for the quarter to 31
December 2011.
Earnings and Dividend
During 2011, the Company paid total dividends of 4.433p per
share. This represents a 3.1% increase on dividends paid in 2010,
excluding the special dividend paid in February 2010 relating to
2009.
The Board increased the quarterly dividend by 3% to 1.133p per
share with effect from the quarter ended 30 September 2011.
Dividends payable in respect of the Company's financial year are
shown in the table below.
2011 2010
Pence per Pence per
share share
Interim dividend paid in May relating to
quarter ending 31 March 1.100 1.100
Interim dividend paid in August relating
to quarter ending 30 June 1.100 1.100
Interim dividend paid in November relating
to quarter ending 30 September 1.133 1.100
Interim dividend paid in February relating
to quarter ending 31 December 1.133 1.100
4.466 4.400
The Board has always targeted a high level of dividend cover and
continues to believe that this is an appropriate discipline for the
Company to follow.
Loan to value ratio
At 31 December 2011 the LTV ratio (assuming all cash placed with
RBS as an offset to the loan balance) was 41.1%. The Board is
targeting the LTV to remain in the range of 35% to 45%. Under the
terms of the new loan facility, the maximum LTV covenant level is
65% for the first five years of the facility, reducing to 60% for
the last two years.
Share Price
At 31 December 2011 our share price was 51.75p, showing a
discount of 17.5% to NAV, and a fall of 20.1% on the price at the
end of 2010.
While disappointing is absolute terms, I consider the price
reflected market conditions at that time.
At the time of our Board meeting on 13 March 2012, the share
price had recovered ground and stood at 63.00p, an increase of
21.7% since the year end.
Dividend Yield
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