TIDMSLI
RNS Number : 1523L
Standard Life Invs Property Inc Tst
31 August 2012
STANDARD LIFE INVESTMENTS PROPERTY INCOME TRUST LIMITED
INTERIM REPORT AND CONDENSED FINANCIAL STATEMENTS
1 JANUARY 2012 TO 30 JUNE 2012
Financial Highlights
- New seven year GBP84.4m loan facility, maturing 16 December 2018,
drawn down in January 2012 on attractive terms.
- Dividend of 2.266p paid in respect of the six months to 30 June
2012
- Dividend yield of 7.2% based on 30 June 2012 share price of 63.25p
- Total return of 3.0% (excluding cash) for six months to 30 June
2012, compared to IPD benchmark return of 0.9%*.
- Two properties purchased during the period for GBP12.4m
*Source: quarterly version of IPD monthly index funds.
Financial Summary
30 June 2012 31 Dec 2011 % Change
Net Asset Value per share 1 61.4p 63.9p -3.9%
Published adjusted Net Asset Value
per share 2 60.3p 62.7p -3.8%
Share Price 63.25p 51.75p 22.2%
Value of total assets GBP179.9m GBP181.9m -1.1%
Loan to value 3 45.5% 41.1% -
Cash balance GBP5.9m GBP17.8m -
30 June 2012 30 June 2011
Dividends per share 4 2.266p 2.200p 3.0%
Property Performance
6 months to 12 months to
30 June 2012 31 Dec 2011
Property income return 4.0% 7.6%
IPD property income monthly index
4 3.3% 6.2%
Property total return (property
only) 3.0% 6.5%
Property total return (property
and cash only) 2.7% 5.9%
IPD property total return monthly
index 4 0.9% 7.4%
1 Calculated under International Financial Reporting Standards.
2 Calculated under International Financial Reporting Standards, adjusted
to include the dividend of 1.133p per share in respect of the quarter
ending 30 June 2012.
3 Calculated as bank borrowings less full cash balance as a percentage
of the open market value of the property portfolio as at 30 June 2012.
4 Source: IPD quarterly version of monthly index funds (excluding cash).
The Chairman, Paul Orchard-Lisle, stated:
"In the last six months, the Board and the Trust's managers have
continued to make enhancement and collection of rents due the first
priority. At the same time, work has continued to reshape the
portfolio so that it is able to deliver growth as the market
improves.
Income
Our income streams depend on the financial well being of our
tenants and if tenants leave, on our ability to achieve new
lettings. As has been reported extensively in the media, many
occupiers are experiencing tough trading conditions and as a result
are inclined to manage what they have rather than expand. I cannot
see grounds for a material improvement in business sentiment in
2012, but overall, the Trust's letting profile is encouraging -
typically we collect 95% of the rents due within 14 days of each
quarter end and our voids are currently 6.3% (versus the industry
average of 10%).
Portfolio activity
The Investment Manager's report sets out purchases, sales and
asset management activity during the six months. The highlights
were purchases in Cheltenham and Glasgow, at a total cost of
GBP12.4m, and a sale in Leeds for GBP1.0m. As a result, as at 30
June, our cash balance was GBP5.9m.
Performance
In the six months to 30 June 2012, the income from lettings
generated a return of 4.0% compared with the IPD monthly index of
3.3%. The published valuation of the property assets was GBP172.4m,
with capital values falling 1.0% over the period. This compares
favourably with a decline of 2.4% in the IPD monthly index (capital
return).
My observation is that it is particularly hard for valuers to
ascribe an accurate capital value to properties where the
occupational leases have only a short time to run. While the IPD
states that about 34% of all tenants renew their leases, the
Company's experience has been rather better with over 75% retention
in 2011, 2012 and 2013 already secured. There is a tendency for
valuers to err on the side of caution which can sometimes pave the
way for a leap in values if leases are renewed on favourable
terms.
Over the six month period, the NAV per share decreased from
62.7p to 60.3p. As well as the fall in property values, the NAV was
impacted by the purchase costs of the new properties, an increase
in the value of the swap liability and one-off costs of the new
debt facility.
Bank funding
In January 2012 the Company renegotiated its GBP84.4m bank
facility with RBS on very favourable terms. In summary, post
December 2013 the all-in interest rate will fall from 6.3% to 3.8%
p.a. providing a significant interest cost saving and improving the
level of our dividend cover. To lock in this attractive low
interest rate and provide certainty on future interest cost post
December 2013 the Company entered into new swap arrangements that
fix the interest rate payable on the total borrowings.
Dividends
On 25 May 2012 a dividend of 1.133p per share was paid to
shareholders, and a further dividend of 1.133p per share was paid
on 24 August 2012 to shareholders on the register on 10 August
2012.
The current share price of 60.50p offers an attractive dividend
yield of 7.5%.
Share Issues
On 10 May 2012, the Company allotted 750,000 new ordinary shares
at 63.50p per share. After the reporting period end, a further
1,000,000 new ordinary shares were issued at prices of 62.50p per
share and 63.00p per share. The total number of ordinary shares in
issue now stands at 138,381,746."
Jason Baggaley, on behalf of Investment Manager, stated:
"UK Commercial Real Estate Market
At a market level, the UK commercial real estate market
annualised total returns continued to decline in the first half of
2012, with the IPD Quarterly version of monthly valued funds
returning 4.1% in the 12 months to end June 2012. This return
comprised an income return of 6.1%, with capital values declining
by 1.9%. Capital values have declined each month during the period,
but the strong income characteristics that UK Commercial real
estate is associated with, has meant total returns have remained
positive. For the six months to 30 June 2012, the total return on
the quarterly version of IPD monthly index was 0.9%, comprising an
income return of 3.3% and a capital decline of 2.4%.
Despite the heightened volatility, listed real estate equities
recorded a credible performance over the six months to 30 June. The
FTSE EPRA / NAREIT UK return was 14.4% over this time frame
compared to 3.3% for the FTSE All Share. The listed operators that
have exposure to the outperforming Central London market generally
remain on a slight premium to NAV. The rest of the sector, however,
continues to be priced on a reasonable discount to NAV reflecting
the anticipation of further declines in capital values amongst
other factors. UK real estate remains fairly priced compared to
Gilts, with a continued high margin of circa 400bps, driven in part
with the continued decline in 10 year gilt yields.
Offices continue to provide the highest returns, with a total
return of 6.4% p.a. in the twelve months to end of June compared to
5.9% p.a. for industrials and 3% p.a. for retail over the same time
frame. Rents in the office sector grew strongly by 1.6% p.a. in the
twelve months up to the end of June whilst they fell by 0.8% p.a.
and 1% p.a. in the industrial and retail sectors respectively.
Investment Outlook
UK real estate returns reduced further over the period but
remain firmly in positive territory on an annual basis. Our view
remains that we are likely to see some further modest decline in
capital values over the next few months. The decline is likely to
be more accentuated for poor quality and less well located
secondary and tertiary assets because of the weaker fundamentals,
i.e. elevated supply and subdued demand. Despite the anticipated
near term weakness in values for the wider market, we continue to
expect reasonable positive total returns for investors on a three
year hold period as yields compensate for any modest capital
declines. The sector remains attractive from a fundamental point of
view, i.e. reasonable 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.
Ensuring the quality and sustainability of income remains a key
investment decision making criterion given the relatively weak
economic backdrop. Investors remain cautious towards poorer quality
secondary and tertiary stock and it is these type of assets that
are most vulnerable to a further decline in pricing because of the
relatively high levels of availability, the weaker prospects for
economic growth in most secondary centres and the increasing supply
of these assets from banks as they work through their problem loan
books and also less demand from investors for this kind of stock.
We continue to expect asset management initiatives and locational
choices to be the defining characteristics contributing to income
returns in the remainder of 2012 and into 2013. We also expect
income to be the main component of returns over this period 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 and into 2013.
Performance
The Company measures its performance on two levels, firstly on a
share price return (dividends reinvested), and secondly at a
portfolio level compared to the direct property market, as measured
by the IPD quarterly index of monthly valued funds. The Company's
focus on providing an attractive income return can be clearly seen
against IPD, however this has not been at the expense of total
returns, where its active approach has assisted in strong medium
term returns at a time where high yielding real estate has under
performed at a market level.
The Company subscribes to a benchmarking service, the Investment
Property Databank (IPD) to measure the performance of its
investment portfolio. The Board focuses on both total return and
income return performance.
The Company's Real Estate investment portfolio has produced a
total return of 3.0% in the reporting period, which compares
favourably to the benchmark return of 0.9% for the quarterly
version of IPD Monthly Index Funds. The portfolio has outperformed
the benchmark on a total return basis over 3, 6 and 12 months, as
well as over 3 and 5 years. The income return of 4.0% over the
period also exceeds the monthly index return of 3.3%.
Share Price Performance
-6 months
Standard Life Investments
Property Income Trust 22.2
Picton Property Income 7.4
F&C Commercial Property
Trust 2.6
UK Commercial Property
Trust 2.1
Schroder Real Estate Investment
Trust -2.3
IRP Property Investments -4.4
ISIS Property Trust -6.8
SECTOR AVERAGE 3.0
FTSE ALL SHARE 3.3
FTSE EPRA/NAREIT UK 14.2
Share Price Performance 3 year
-3 years Total Annualised
F&C Commercial Property
Trust 38.5 11.5
Standard Life Investments
Property Income Trust 36.0 10.8
Picton Property Income 35.6 10.7
IRP Property Investments 14.8 4.7
Schroder Real Estate Investment
Trust 10.2 3.3
ISIS Property Trust 7.0 2.3
UK Commercial Property
Trust 5.0 1.6
SECTOR AVERAGE 21.0 6.6
FTSE ALL SHARE 47.4 13.8
FTSE EPRA/NAREIT UK 51.4 14.8
Source : Datastream
Investment Strategy
The Company remains focused on providing an attractive income
return to investors, with prospects for both income and capital
growth. As such, the active approach to working our assets and
minimising voids continues, along with purchases of good quality
buildings that meet tenants needs. The Board continues to plan for
a covered dividend, however, the short term increase in costs
following the refinancing (referred to below) and the timing in
reinvesting the proceeds of sales make it likely that full cover
will not be achieved in 2012. The Company has revenue reserves of
over 1 year's dividend.
Portfolio valuation
The portfolio is valued by Jones Lang La Salle every quarter. As
at the 30 June 2012 the property portfolio was valued at GBP172.4m
with cash of GBP5.9m (excluding rent deposits). This compares to
GBP162.1m and GBP17.8m of cash at the 31 December 2011. During the
6 months to end June two properties were bought for GBP8.4m and
GBP4.0m respectively. One sale, for GBP1.0m was completed in
January, as reported in the year end accounts.
Portfolio Characteristics
SLIPIT Sector Weights
IPD Sectors Value %
Retail GBP39,550,000 22
Office GBP83,025,000 47
Industrial GBP46,075,000 26
Other GBP3,750,000 2
Cash GBP5,923,188 3
Total GBP178,323,188 100
SLIPIT Relative Sector Weights v IPD Monthly
IPD Sector Value % IPD% Relative
Rest of UK Offices GBP39,450,000 22.88 5.90 16.98
Rest of UK Industrial GBP38,475,000 22.32 7.80 14.52
South East Offices GBP27,725,000 16.08 10.10 5.98
South East Standard Retail GBP9,950,000 5.77 7.10 -1.33
Other GBP3,750,000 2.18 5.00 -2.82
South East Industrial GBP7,600,000 4.41 9.30 -4.89
Rest of UK Standard Retail GBP0 0.00 9.00 -9.00
Central London Offices GBP15,850,000 9.19 14.80 -5.61
Shopping Centres GBP0 0.00 6.70 -6.70
Retail Warehouses GBP29,600,000 17.17 24.30 -7.13
Total GBP172,400,000 100.00 100.00 0.00
The Company invests in assets that it believes will provide an
attractive income yield, reasonable capital growth, and that
provide a diversified portfolio for risk management. We have
deliberately taken an over weight position to markets and sectors
that provide an attractive income return, in particular, offices
outside Central London and industrial. Rest of UK offices are
currently offering very attractive yields, and with careful stock
picking are likely to see relatively good performance with tenant
retention and some prospects for rental growth in the future. We
particularly seek good quality buildings in good locations where
supply is limited. We do not believe in buying secondary retail as
we are concerned about its performance outlook or very low yielding
stock as the prospects for rental growth are not sufficiently
attractive currently to grow the income to an acceptable level. We
continue to believe that income will be the key component of total
returns over the next three years, and will continue to focus on
providing an attractive income return from our portfolio.
Investment Activity
Purchases: The Company completed two purchases in the first
half:
St James House Cheltenham: This multi let office in the centre
of Cheltenham was bought in Q2 for GBP8.4m, reflecting an initial
yield of 7.4% at purchase, rising to 9% by year end, and over 10%
once the fourth floor is relet. The property was built in 1982 but
has undergone major refurbishment in 2000 and again in 2010
including the provision of a new air conditioning system. The
building is located close to the town centre giving easy access to
shops and transport hubs. The building provides some of the best
office accommodation in Cheltenham, and let through the downturn at
an average rent of GBP12psf, giving scope for future growth. The
property is let to 9 tenants, including Brewin Dolphin, Liberty
Mutual, BPE Solicitors, Barnett Waddingham, Gloucestershire Media,
Bank of Ireland and the Health and Safety Executive, with an
average unexpired lease term of 8 years (6.3 years to lease
break).
140 West George St Glasgow: The office investment was bought in
Q2 for GBP4.0m, and the purchase price reflects a capital value of
GBP170psf, and an income yield of 9.5%.The multi let office
building extends to c23,000 sqft over 7 floors and was
comprehensively refurbished in 2009 to a Grade A specification. The
building is let to 6 tenants including Cyril Sweet, Anderson Fyfe
LLP, Gerald Eve LLP, AWD Group plc and Central Insurance Services
Ltd, with one vacant floor, the purchase price assumed 2 years
rental cover on this space. The building is let off low rents of
GBP17psf, with lease breaks / expiries in 2015 to 2020.
Sales: The Company completed the sale of a small multi office in
Leeds for GBP1.0m in early Q1 as reported in the year end
accounts.
Asset management: Over the first six months of 2012 the manager
has continued to work with tenants to regear leases, and to let
vacant space. It has completed the letting of a retail warehouse
unit in Hull, several small industrial units in Aberdeen, and made
good progress on letting the two largest voids in the fund. At the
same time it has worked with tenants to understand their occupation
needs, and has secured income of GBP1.1m which had been at risk
through lease expiries or tenant breaks in 2012 and 81% (GBP0.8m)
of income at risk in 2013.
Tenant default: During the last 6 months the media has continued
to portray an environment of business failure and restructuring
through CVA's, however the Company's portfolio benefits from strong
covenants, with a ranking of weighted risk score by IPD's IRIS
report showing the portfolio on the 10.6(th) percentile rank (low
risk), and the Company's top 10 tenants all have a Negligible or
Low risk band weighting by IPD.
Vacancies: During the reporting period vacancies within the
portfolio were maintained below the IPD benchmark. As at 30 June
the fund void level stood at 6.3%, but this includes vacant units
in the two multi let properties bought in Q2, where the vendor
provided two years of void cover (and one of the floors has already
been let). The Company has instructed solicitors on the two largest
voids in the portfolio, and remains committed to reducing void
levels over the remainder of the year.
Lease expiries / breaks: All income at risk from a lease expiry
or break in 2012 has been secured, as has 81% of income at risk in
2013. The experience to date demonstrates that tenants are happy to
stay in their existing accommodation where it is well suited to
their needs, and we will continue to actively engage with our
tenants with lease events over the next three years to secure
future income.
Bank Loan Facility
In January 2012 the Company entered into a new banking facility,
as detailed in the annual report and accounts.
The Company has entered into three interest hedges to fix all of
its debt to maturity. The first hedge, for GBP72.0m pre dated the
new debt facility, and expires in December 2013. This swap had a
fair value liability of GBP4.8m as at 30 June 2012, which will
reduce to GBP0 (although not on a straight line basis) by maturity.
The Company has two other swaps (one a forward swap of GBP72.0m
from January 2014 and the other swap of GBP12.4m from January 2012)
expiring in December 2018. Although these were entered into in
January 2012 at attractive levels, they showed a fair value
liability of GBP2.0m in the accounts as at June 2012.
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 Baggaley
Standard Life Investments Limited
Tel : 0131 245 2833
Principal Risks and Risk Uncertainties
The Company's assets consist of direct investments in UK
commercial property. Its principal risks are therefore related to
the commercial property market in general, but also the particular
circumstances of the properties in which it is invested and their
tenants. The Directors, along with the Investment Manager also seek
to mitigate these risks through continual review of the portfolio,
active asset management initiatives, and carrying out due diligence
work on potential tenants before entering into new lease
agreements. All of the properties in the portfolio are insured.
Other risks faced by the Company include economic, strategic,
regulatory, financial and operational.
The Board seeks to mitigate and manage these risks through
continual review, policy setting and enforcement of contractual
obligations. It also regularly monitors the investment environment
and the management of the Company's property portfolio. More
detailed explanations of these risks and the way in which they are
managed are provided in the 2011 Annual Report.
The Board and the Investment Manager recognise the importance of
the share price relative to net asset value in maintaining
shareholder value. The Investment Manager meets with current and
potential shareholders on a regular basis, as well as with
investment company analysts.
These principal risks and uncertainties have not changed from
those disclosed in the 2011 Annual Report.
Directors' Responsibility Statement
The Directors are responsible for preparing the Interim
Management Report in accordance with applicable law and
regulations. The Directors confirm that to the best of their
knowledge:
- The condensed set of Financial Statements have been prepared in accordance with IAS 34; and
- The Interim Management Report includes a fair review of the
information required by 4.2.7R and 4.2.8R of the Financial Services
Authority's Disclosure and Transparency Rules.
- In accordance with 4.2.9R of the Financial Services
Authority's Disclosure and Transparency Rules, it is confirmed that
this publication has not been audited, or reviewed by the Company's
auditors.
The Interim Report, for the six months ended 30 June 2012,
comprises an Interim Management Report in the form of the
Chairman's Statement, the Investment Manager's Report, the
Directors' Responsibility Statement and a condensed set of
Unaudited Consolidated Financial Statements.
The Directors each confirm to the best of their knowledge
that:
a) the Unaudited 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 Interim 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.
For and on behalf of the Directors of Standard Life Investments
Property Income Trust Limited
Paul Orchard-Lisle CBE
Chairman
30 August 2012
UNAUDITED FINANCIAL STATEMENTS
Unaudited Consolidated Statement of Comprehensive Income
for the period ended 30 June 2012
1 Jan 11
1 Jan 12 to
to 30 Jun
30 Jun 12 11
GBP GBP
Rental income 6,625,144 6,889,256
Valuation loss on investment properties (1,860,439) (1,663,851)
Profit / (loss) on disposal of
investment properties 21,865 (30,877)
Investment management fee (657,861) (653,902)
Other direct property operating
expenses (459,408) (586,721)
Directors' fees and expenses (67,592) (60,927)
Valuer's fee (13,649) (15,792)
Auditor's fee (19,500) (17,500)
Other administration expenses (130,435) (92,304)
Operating profit 3,438,125 3,767,382
Finance income 18,905 15,076
Finance cost (2,964,396) (2,770,566)
Profit for the period 492,634 1,011,892
Other comprehensive income
Valuation (loss) / gain on cash
flow hedges (760,634) 613,936
Total comprehensive (loss) / income
for the period, net of tax (268,000) 1,625,828
Earnings per share:
Basic and diluted earnings / (losses)
per share 0.36 0.88
pence pence
All items in the above Unaudited Consolidated Statement of
Comprehensive Income derive from continuing operations.
Unaudited Consolidated Balance Sheet
as at 30 June 2012
31 Dec
30 Jun 2012 2011
GBP GBP
ASSETS
Non-current assets
Freehold investment properties 149,187,830 137,181,065
Leasehold investment properties 19,406,594 20,031,594
Lease incentives 3,238,305 3,516,748
171,832,729 160,729,407
Investment property held for sale - 998,000
Current assets
Trade and other receivables 2,097,543 1,642,602
Prepaid expenses - 675,462
Cash and cash equivalents 5,923,188 17,825,381
Total assets 179,853,460 181,870,852
EQUITY
Capital and reserves attributable
to Company's equity holders
Share capital 20,912,689 20,440,011
Retained earnings 5,576,088 6,349,453
Capital reserves (39,971,818) (37,372,610)
Other distributable reserves 97,838,372 97,838,372
Total equity 84,355,331 87,255,226
LIABILITIES
Non-current liabilities
Bank borrowings 83,695,733 84,238,408
Interest rate swap 4,018,667 3,007,460
Other liabilities 6,094 6,094
Rental deposits due to tenants 359,133 341,660
88,079,627 87,593,622
Current liabilities
Trade and other payables 4,602,337 3,955,266
Interest rate swap 2,815,665 3,066,238
Leasehold obligations 500 500
7,418,502 7,022,004
Total liabilities 95,498,129 94,615,626
Total equity and liabilities 179,853,460 181,870,852
Net Asset Value per share 61.4p 63.9p
Approved by the Board of Directors on 30 August 2012
Unaudited Consolidated Statement of Changes in Equity
for the period ended 30 June 2012
Other
Share Retained Capital distributable
capital earnings reserves reserves Total equity
GBP GBP GBP GBP GBP
Opening balance
1 January 2012 20,440,011 6,349,453 (37,372,610) 97,838,372 87,255,226
Profit for the
period - 492,634 - - 492,634
Valuation loss
on cash flow hedges - - (760,634) - (760,634)
Total comprehensive
income for the
period - 492,634 (760,634) - (268,000)
Dividends - (3,104,573) - - (3,104,573)
Ordinary shares
issued* 472,678 - - - 472,678
Valuation loss
from investment
properties - 1,860,439 (1,860,439) - -
Profit on disposal
of investment
properties - (21,865) 21,865 - -
Balance as at
30 June 2012 20,912,689 5,576,088 (39,971,818) 97,838,372 84,355,331
* this value represents both the nominal and the premium raised
on issuing the ordinary shares.
Unaudited Consolidated Statement of Changes in Equity
for the period ended 30 June 2011
Other
Share Retained Capital distributable
capital earnings reserves reserves Total equity
GBP GBP GBP GBP GBP
Opening balance
1 January 2011 6,671,438 5,158,901 (36,638,104) 98,138,586 73,330,821
Profit for the
period - 1,011,892 - - 1,011,892
Valuation gain
on cash flow hedges - - 613,936 - 613,936
Total comprehensive
income for the
period - 1,011,892 613,936 - 1,625,828
Dividends - (2,527,800) - - (2,527,800)
Ordinary shares
issued* 637,505 - - - 637,505
Valuation loss
from investment
properties - 1,663,851 (1,663,851) - -
Loss on disposal
of investment
properties - 30,877 (30,877) - -
Transfer between
reserves** - 271,232 - (271,232) -
Balance as at
30 June 2011 7,308,943 5,608,953 (37,718,896) 97,867,354 73,066,354
*this value represents both the nominal and the premium raised
on issuing the ordinary shares.
** this is a transfer to move redeemable preference share
finance costs from the retained earnings reserve to the other
distributable reserves.
Unaudited Consolidated Cash Flow Statement
for the period ended 30 June 2012
1 Jan 12 1 Jan 11
to to
30 Jun 30 Jun
12 11
GBP GBP
Cash generated from operating activities 5,764,744 6,314,906
Cash flows from investing activities
Finance income 18,905 15,076
Purchase of investment properties (13,079,607) (8,827,916)
Capital expenditure on investment properties (162,596) (725,298)
Proceeds from disposal of investment
properties 1,019,865 2,107,234
Net cash used in investing activities (12,203,433) (7,430,904)
Cash flows from financing activities
Ordinary shares issued net of issue costs 472,678 637,505
Bank borrowing arrangement costs (112,159) -
Repayment of bank borrowings (84,432,692) -
Drawdown of bank borrowings 84,432,692 -
Interest paid on bank borrowings (1,126,928) (772,617)
Payment on Interest rate swaps (1,592,522) (1,581,127)
Dividends paid to the Company's shareholders (3,104,573) (2,527,800)
Net cash used in financing activities (5,463,504) (4,244,039)
Net decrease in cash and cash equivalents
in the period (11,902,193) (5,360,037)
Cash and cash equivalents at beginning
of the period 17,825,381 21,170,716
Cash and cash equivalents at end of period 5,923,188 15,810,679
Standard Life Investments Property Income Trust Limited
Notes to the Unaudited Consolidated Financial Statements for the
period ended 30 June 2012
1. General Information
Standard Life Investments Property Income Trust Limited ("the
Company") and its subsidiary (together the "Group") carries on the
business of property investment through a portfolio of freehold and
leasehold investment properties located in the United Kingdom. The
Company is a limited liability company incorporated and domiciled
in Guernsey, Channel Islands. The Company has its primary listing
on the London Stock Exchange with a secondary listing on the
Channel Islands Stock Exchange.
The address of the registered office is Trafalgar Court, Les
Banques, St Peter Port, Guernsey.
These Unaudited Consolidated Financial Statements were approved
for issue by the Board of Directors on 30 August 2012.
The Audited Consolidated Financial Statements of the company for
the year ended 31 December 2011 are available on request from the
registered office.
2. Accounting Policies
Basis of preparation
The Unaudited Consolidated Financial Statements of the Group
have been prepared in accordance with and comply with International
Financial Reporting Standards as adopted by the European Union
("IFRS"), and all applicable requirements of The Companies
(Guernsey) Law, 2008. The Unaudited Consolidated Financial
Statements have been prepared under the historical cost convention
as modified by the measurement of investment property and
derivative financial instruments at fair value. The consolidated
financial statements are presented in pound sterling and all values
are not rounded except when otherwise indicated.
These statements do not contain all of the information required
for full annual statements and should be read in conjunction with
the Audited Consolidated Financial Statements of the Company for
the year ended 31 December 2011. The same accounting policies and
methods of computation are followed in these interim financial
statements as compared with the Audited Consolidated Financial
Statements prepared for the year ended 31 December 2011.
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
had nominal value of GBP1,500,000 and were redeemable by the
Company on the tenth anniversary of admission at a redemption price
of GBP1.7908. These shares did not carry any voting rights. On 29
June 2011, an extraordinary general meeting was held which approved
the conversion of the preference shares into ordinary shares in
accordance with the terms of the Circular of Shareholders. On 21
July 2011, the redeemable preference shares were converted to
ordinary shares.
Ordinary share capital
Standard Life Assurance Limited held 29,707,081 of the issued
ordinary shares at the balance sheet date (31 December 2011:
29,707,081). This equates to 21.6% (31 December 2011: 21.8%) of the
ordinary share capital in issue at the balance sheet date, however,
Standard Life Assurance 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.
Investment Manager
On 19 December 2003 Standard Life Investments (Corporate Funds)
Limited ("the Investment Manager") was appointed as Investment
Manager to manage the property assets of the Group.
Under the terms of the Investment Management Agreement the
Investment Manager is entitled to receive a fee at the annual rate
of 0.85% of the total assets, payable quarterly in arrears. On 1
July 2008 a supplemental agreement to the Investment Management
Agreement was put in place to amend the fee basis to be 0.85% per
annum of the total assets except where cash balances exceed 10% of
total assets. The fee applicable to the amount of cash exceeding
10% of total assets is altered to be 0.20% per annum, payable
quarterly in arrears. The Investment Manager has also agreed to
reduce its charge to 0.75% of the total assets of the Group until
such time as the net asset value per share returns to the launch
level of 97p. This is applicable from the quarter ending 31
December 2008 onwards and does not affect the reduced fee of 0.20%
on cash holdings above 10% of total assets. The total fees charged
for the period ended 30 June 2012 amounted to GBP657,861 (period
ended 30 June 2011: GBP653,902). The amount due and payable at the
period end amounted to GBP328,526 excluding VAT (period ended 30
June 2011: GBP325,651 excluding VAT).
4. Investment Properties
Investment properties were revalued at the year end by Jones
Lang LaSalle Limited, independent international real estate
consultants, on the basis of the market value. In order to arrive
at fair value the market values of leasehold investment properties
have been adjusted to reflect the value of finance lease
obligations. The market value provided by Jones Lang LaSalle
Limited at the period end was GBP172,400,000 (31 December 2011:
GBP162,100,000) however an adjustment has been made for lease
incentives of GBP3,812,170 (31 December 2011: GBP3,868,935) that
are already accounted for as an asset.
The valuations have been prepared in accordance with the Royal
Institution of Chartered Surveyors Valuation Standards (7th
Edition).
5. Bank Loans
On 20 January 2012 the Company completed the drawdown of
GBP84,432,692 loan with The Royal Bank of Scotland plc ("RBS") and
simultaneously repaid the old loan facility. The new facility is
repayable on 16 December 2018. Interest is payable at a rate equal
to the aggregate of 1 month Libor, a margin of 1.65% (below 40%
LTV) or 1.75% (40% to 60% LTV inclusive) or 1.95% (above 60%
LTV).
Under the terms of the loan facility there are certain events
which would entitle RBS to terminate the loan facility and demand
repayment of all sums due. Included in these events of default is
the financial undertaking relating to the loan to value percentage.
The loan agreement notes that the loan to value percentage is
calculated as the loan amount less the amount of any sterling cash
deposited within the security of RBS divided by the gross secured
property value, and that this percentage should not exceed 65% for
the first five years and then 60% from the five anniversary to
maturity. The arrangement fees for the new facility are GBP675,462
and were paid to RBS on execution of the new loan facility
agreement on 22 December 2011. Further arrangement fee costs of
GBP112,159 have been incurred as at the balance sheet date.
During the period the Group did not breach any of its loan
covenants, nor did it default on any other of its obligations under
its loan agreement.
6. Interest rate swaps
The Company has four interest rate swap agreements with RBS.
The first swap agreement was entered into on 29 December 2004
and has an end date of 29 December 2013. Under this first swap the
Company has agreed to receive a floating interest rate linked to 3
month Libor and pay a fixed interest rate of 5.115%. The second
swap agreement was entered into on 19 December 2008 and has an end
date of 29 December 2013. Under this second swap the Company has
agreed to pay a floating interest rate linked to 3 month Libor and
receive a floating interest rate linked to 1 month Libor plus a
margin of 0.1%. Both agreements are for a notional principal amount
of GBP72,000,000.
The third swap agreement was entered into on 20 January 2012 for
a notional amount of GBP12,432,692. This interest rate swap has a
maturity of 16 December 2018. Under the swap the Company has agreed
to receive a floating interest rate linked to 3 month Libor and pay
a fixed interest rate of 1.77125%.
The fourth swap agreement was entered into on 20 January 2012
for a notional amount of GBP72,000,000. This interest rate swap
effective date is 30 December 2013 and has a maturity date of 16
December 2018. Under the swap the Company has agreed to receive a
floating interest rate linked to 3 month Libor and pay a fixed
interest rate of 2.0515%.
These swap agreements together qualify as a fully effective cash
flow hedge and fair value changes are shown in the other
comprehensive income in the Consolidated Statement of Comprehensive
Income. The GBP84,432,692 loan and the interest rate swaps have the
same critical terms and so the hedge is fully effective.
7. Dividends
The interim dividends paid to date in 2012 are as follows (30
June 2011: GBP2,527,800):
GBP1,548,038 (1.133p per ordinary share) paid in February
relating to the quarter ending 31 December 2011
GBP1,556,535 (1.133p per ordinary share) paid in May relating to
the quarter ending 31 March 2012
GBP3,104,573
8. Reconciliation of consolidated net asset value to published net asset value
The net asset value attributable to ordinary shares is published
quarterly and is based on the most recent valuation of the
investment properties and calculated on a basis which adjusts the
underlying reported IFRS numbers. The adjustment made is to include
a provision for payment of a dividend in respect of the quarter
then ended.
30 Jun 12 31 Dec 11
Number of Number of shares
shares
Number of ordinary shares at the
reporting date 137,381,746 136,631,746
30 Jun 12 31 Dec 11
GBP GBP
Total equity per consolidated financial
statements 84,355,331 87,255,226
Net asset value per share 61.4p 63.9p
Adjustments:
Provision for dividend in respect
of the quarter
ending on the reporting date (1,556,535) (1,548,038)
Published adjusted net asset value 82,798,796 85,707,188
Published adjusted net asset value
per share 60.3p 62.7p
9. Events after the balance sheet date
Dividends and shares
On 24 August 2012 a dividend of GBP1,556,535 in respect of the
quarter to 30 June 2012 was paid.
On 3 August 2012 the Company approved the allotment of 700,000
ordinary shares from the block listing facility to Winterflood
Securities Limited at an issue price of 62.50p per share.
On 7 August 2012 the Company approved the allotment of 300,000
ordinary shares from the block listing facility to Winterflood
Securities Limited at an issue price of 63.00p per share.
Additional Notes to the Interim Financial Report
The interim report for the financial period ended 30 June 2012
was approved by the Directors on 30 August 2012 and will be
available for 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
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