Performance:
The Company measures performance under a variety of metrics.
During the year its direct real estate investments provided an
income return of 7.6% (IPD quarterly version of monthly index
6.2%), thus continuing to meet its prime requirement of delivering
a high income return to investors through a covered dividend. The
Company suffered on a capital return basis against its benchmark
due to a combination of purchase transaction costs, shortening
lease lengths, and the failure of Focus as a tenant.
The NAV performance was relatively robust compared to peers, but
lagged the larger F&C Commercial Property Trust in
particular.
NAV Performance - 12 months %
F&C Commercial Property Trust 4.3
Picton Property Income 0.0
Standard Life Investments Property
Income Trust -0.5
UK Commercial Property Trust -1.9
ISIS Property Trust -4.5
Invista Foundation Property Trust -4.8
IRP Property Investments -7.9
Source: Datastream
A final measure is share price total return to our investors.
Over the course of 2011 the Company traded on a large premium of up
to 10%, through to a large discount of 17%.
Price Performance - 12 months %
F&C Commercial Property Trust -2.8
ISIS Property Trust -14.1
UK Commercial Property Trust -16.7
Invista Foundation Property Trust -14.7
IRP Property Investments -18.1
Standard Life Investments Property
Income Trust -20.1
Picton Property Income -30.4
SECTOR AVERAGE -16.7
FTSE ALL SHARE -4.5
FTSE EPRA/NAREIT UK -8.1
Source: Datastream
Since the year end the Company's ordinary shares have been
re-rated with the ordinary share price increasing to 63p per share,
an increase of 21.7% since the year end.
Capital Structure:
In July 2011 shareholders approved the simplification of the
capital structure with the conversion of the Zero Dividend
Preference Shares into Ordinary shares. The ZDPs were due to mature
in December 2013, and the conversion of the short term debt
instrument into long term equity was part of our strategy to manage
down the Company's gearing. At the same time as the conversion,
GBP4.5m of new equity was also raised. As a result, the ordinary
share capital was increased by 19%.
Bank Debt:
During the period the Company had a bank debt facility of GBP84m
with RBS, due to expire in December 2013. The debt was at a margin
of 150bps, and the Company had a hedge in place over GBP72m of the
debt giving an all in cost of debt of circa 6%. In order to have
certainty over the future debt provision the Company signed a new
debt facility in December 2011 that was completed in January
2012.
The new facility is for a term of 7 years and is for the full
GBP84m (the new facility has been used to repay the old one, not to
increase borrowings). The new facility is on broadly similar terms,
with a maximum Loan to Value (LTV) of 65% for the first 5 years
(reducing to 60% for the last two) - the current LTV is 41%. The
new margin is set on a ratchet basis depending on the prevailing
LTV, but is currently 175bps. The Company has entered into a new
forward swap on the GBP72m currently hedged, and a new 7 year hedge
on the remaining GBP12m. As a result of the new facility / hedges
the cost of debt is fixed at 6.38% until December 2013, and then
falls to 3.76% from January 2014 to maturity in December 2018
(excluding amortisation of costs and facility fees).
The original hedge maturing in December 2013 was held in the
2011 year end accounts as having a liability of GBP6.1m, equating
to 4.5 pence per share. That hedge liability will unwind (although
not on a straight line basis) to GBP0 by Dec 2013.
Outlook
Although there is a challenging year ahead for real estate given
the projections of a weak economic backdrop, we continue to expect
reasonable positive total returns for investors on a three year
holding period as income yields compensate for any modest capital
declines. The sector remains attractive from a fundamental point of
view, i.e. strengthening underlying economic drivers and a
constrained pipeline of future new developments. The retail sector
continues to face a series of headwinds that may hold back recovery
in weaker locations but the prospects for retail towards the south
east and Central London are expected to improve as economic
recovery gains more traction. It remains our view that asset
management initiatives and locational choices will remain the
defining characteristics contributing to income returns in the year
ahead. We also expect income to be the main component of returns
over 2012 as capital values moderate. Prime/good quality secondary
assets in stronger locations are likely to be most resilient in the
weak economic environment we anticipate across 2012. The Company
had circa GBP14m available for investment as at the year end, and
will seek to acquire good quality investments that will contribute
to the portfolios' returns. We anticipate investing the cash in the
first half of the year to benefit from the income return, and will
seek to exploit mispricing from motivated sellers.'
All enquires to:
The Company Secretary
Northern Trust International Fund Administration Services
(Guernsey) Limited
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 3Ql
Tel: 01481 745001
Fax: 01481 745051
Gordon Humphries
Standard Life Investments Limited
Tel: 0131 245 2735
Jason Baggaely
Standard Life Investments Limited
Tel : 0131 245 2833
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
the applicable Guernsey law and International Financial Reporting
Standards as adopted by the European Union, 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 and estimates 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 considerations 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 the financial
statements may differ from legislation in other jurisdictions.
Responsibility Statement of the Directors' in respect of the
Consolidated Annual Report
The Directors each confirm to the best of their knowledge
that:
(a) the Consolidated Financial Statements, prepared in
accordance with IFRSs as adopted by the European Union, 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.
Approved by the Board on 23 March 2012.
Paul Orchard-Lisle Sally-Ann Farnon
Chairman Director
AUDITED FINANCIAL STATEMENTS
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2011
2011 2010
GBP GBP
Rental income 14,165,830 11,450,575
Valuation (loss)/gain from investment
properties (2,668,104) 6,909,885
Profit on disposal of investment
properties 612,645 3,795,227
Investment management fees (1,319,497) (1,263,779)
Other direct property operating
expenses (930,112) (1,183,064)
Directors' fees and expenses (122,127) (112,091)
Valuer's fee (33,947) (37,936)
Auditor's fee (38,764) (33,500)
Other administration expenses (217,447) (181,521)
Operating profit 9,448,477 19,343,796
Finance income 51,732 91,338
Finance costs (5,320,093) (5,539,955)
Profit for the year 4,180,116 13,895,179
Other comprehensive income
Valuation gain/(loss) on cash flow
hedges 1,320,954 (1,287,454)
Total comprehensive income for
the year, net of tax 5,501,070 12,607,725
Earnings per share:
Basic and diluted earnings per
share 3.35 12.15
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