TIDMSLI
RNS Number : 8036M
Standard Life Invs Property Inc Tst
30 August 2013
30 August 2013
STANDARD LIFE INVESTMENTS PROPERTY INCOME TRUST
RESULTS IN RESPECT OF THE PERIOD ENDED 30 June 2013
Financial Highlights
* Dividend of 2.266p paid in respect of the six months
to 30 June 2013
* Dividend yield of 7.5% based on 30 June 2013 share
price of 60.5p
* One property purchased during the period for GBP9.9m
* One property sold during the period for GBP0.9m
Financial Summary
30 June 2013 31 Dec 2012 % Change
Net Asset Value per share (1) 58.3p 57.7p +1.1%
Share Price 60.5p 58.25p +3.9%
Premium / (Discount) 3.8% 1.0% +2.8%
Value of total assets GBP179.5m GBP176.0m +2.0%
Loan to value (2) 44.8% 43.9% +0.9%
Cash balance GBP8.6m GBP13.5m -36.3%
EPRA Net Asset Value(3) 60.3p 62.7p -3.8%
30 June 2013 30 June 2012 % Change
Dividends per share (4) 2.266p 2.266p -
12 months
6 months to to 31 Dec
30 June 2013 2012
Property income return 3.4% 9.7%
IPD property income (5) 3.4% 6.2%
Property total return (property
only) 2.1% 4.1%
Property total return (property
and cash only) 1.9% 3.7%
IPD property total return (5) 2.9% 1.6%
1. Calculated under International Financial Reporting Standards,
before the deduction of the dividend of 1.133p per share in respect
of the quarter ending 30 June 2013.
2. Calculated as bank borrowings less full cash balance as a
percentage of the open market value of the property portfolio as at
30 June 2013.
3. EPRA NAV represents the fair value of an entity's equity on a
long-term basis, such as fair value of derivatives, are therefore
excluded.
4. Dividends paid during the 6 months to 30 June 2013.
5. source: IPD quarterly version of monthly index funds (excluding cash).
The Chairman, Paul Orchard-Lisle, stated:
'Media commentary on the property market in the last few weeks
has been generally upbeat. Against a background of a strengthening
economy and rising employment in the UK, there are reports of
increasing demand from occupiers. The major concerns that remain
appear to relate to the future of the High Streets (in which your
fund is barely represented) and particularly to the ability of a
handful of debt laden retailers to survive. I expect to see the
positive sentiments relating to industrial and office property
finding their way into valuers' calculations of investments in real
estate over the next twelve months.
Your Company's income return has been maintained. We were able
to collect 99.5% of the rents due to us within 14 days of the end
of the last quarter and as a result maintained our dividend at
2.266p per share for the six month period showing a 7.5% yield on
our share pricing at the end of the six month period. The Company's
NAV rose by 4.8% in the second quarter largely due to reduced
finance costs (swap liability) and a strong performance from the
London office properties. The certified value of our properties
rose by 2.0% in the same period. Over the six month period, the NAV
rose by 1.1% and the value of the fund's assets rose by 2.0%.
As I wrote in our last Annual Report, our property investment
strategy is to buy into assets where astute asset management can
enhance rental and capital values. With that in mind, we have
bought a substantial office investment in Rickmansworth. While it
shows an attractive initial income return of 11%, we believe that
over time, we will be able to improve and possibly extend the
building.
On the other hand, we have a policy of taking profits from
investments that we consider have served their purpose and, if
necessary, in cutting losses where the performance has been below
our expectations and the potential for gain looks uncertain.
Accordingly we have sold a small warehouse in Manchester and more
recently we have taken profits from the office development that we
forward funded in Aberdeen. Details of the transaction and of other
changes to the property portfolio are set out in the Investment
Manager's report.
We have made a small reduction in the voids in the portfolio
(10.9% to 10.3%). The elimination of all voids is a priority
target. Other portfolio matters are covered in the Investment
Manager's report. Since the period end your Company has completed
the letting of the retail warehouse in Wymondham, Norwich to
Poundstretcher. This letting along with the letting at Aberdeen
Ocean Trade takes the void rate to 6.7% and reduces void property
costs by circa GBP175,000 pa.
In the last Annual Report, I highlighted the benefits of the
maturity of one of our three interest rate swaps in December 2013
and of the new banking facility with RBS. The revised terms of our
bank facility will improve our earnings by GBP1.8m per annum, and
enhance our dividend cover next year.
I am pleased to report that the Company's equity base was
increased by 9.2% in the financial year to date through the issue
of 12.9m new ordinary shares at a premium to NAV. At 30 June, the
Company's shares were priced at 60.5p in contrast to 58.25p at the
start of the reporting year. The Directors' ability to issue more
shares is constrained for the time being due to the pre-emption
right restrictions.
While forecasting share price movement is beyond logic, I am
confident that at portfolio level we are headed in the right
direction. I expect our income levels to improve over the year,
while we are controlling our outgoings satisfactorily. As stated
above, I am looking for a general increase in capital values in the
next twelve months.
Considerable time will need to be allocated in the immediate
future to comply with the AIFM Directive. It is inevitable that
there will be some costs but sadly little obvious benefit to the
fund. Also, in common with Boards of many Guernsey-based investment
vehicles, we have to consider whether the current tax structure
will be the best for shareholders going forward. I expect to report
in some detail on both matters over the next few months.'
Fund Manager, Jason Baggaley, stated:
'UK Commercial Real Estate Market
The UK real estate market has made steady progress over the six
month reporting period. Total returns improved to 2.9% in the first
half of this year compared to a 1.1% total return in the second
half of last year. With the income component remaining relatively
stable, the most significant influence on the upward movement in
returns was capital values falling at a slower rate. Values fell by
0.4% in the six months to end June against a decline of 2.2% in the
six months to end December 2012. Rents have stabilised over the
last six months recording a flat return over this period. This is a
modest improvement on the 0.3% decline in the last six months of
2012.
The uncertainty caused by the market's changing perception that
interest rates may rise sooner than expected impacted the listed
real estate sector returns in the latter part of the last six
months. Listed real estate equities rose by 7.4% over the period 1
January 2013 to 30 June 2013. The positive performance of the
sector reduced towards the end of this period as sharper interest
rate movements were priced in by investors. The sector outperformed
the FTSE All Share which rose by 6.4% over this timeframe.
Within sectors, the highest total returns over the last six
months were in the industrial sector and the lowest in the retail
sector. Industrial total returns strengthened in this reporting
period and rose above those in the office sector. Total returns in
the industrial sector firmed to 3.9% over the six months to end
June against a 1.5% increase in the final six months of last year.
Office total returns were modestly higher in the first half of this
year compared to the last six months of 2012 at 3.7% versus 2.2%.
Retail continues to be the laggard with total returns of 2.2% in
the first half of the year, an improvement on the 0.2% decline in
the last half of 2012.
In contrast to the final six months of last year where values
fell by 1%, office capital values rose by 0.5% in the first half of
this year. Values were unchanged for industrials over the past six
months and they fell by 1.1% for retail over this period. This is
an improvement on the 2.3% and 3% declines respectively for each of
these sectors in the last six months of 2012.
Investment Outlook
Our view is that prices are likely to increase slightly over the
next few months. We continue to expect reasonable positive total
returns for investors on a three year hold period with income
return being the main component of total return over the period.
The sector remains attractive from a fundamental point of view,
i.e. reasonable economic drivers and a constrained pipeline of
future new developments. Rising interest rates are an emerging risk
although there is a reasonable buffer in pricing to compensate if
the market prices in a further acceleration of rate rises.
Poorer quality secondary and tertiary assets price declines have
generally been more pronounced than for good quality assets, and we
expect that to continue. Ensuring the quality and sustainability of
income remains a key investment decision making criterion given
that despite recent signs of modest strengthening, the economic
backdrop continues to be relatively weak. Investors remain cautious
towards poorer quality secondary and tertiary stock and it is these
types of assets that continue to be 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, 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. 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.
Opportunities are, however, arising in the transactions market
for reasonable quality secondary buildings where these assets can
be repositioned as prime. We continue to expect asset management
initiatives and locational choices to be the defining
characteristics contributing to income returns in the latter part
of 2013. We also expect income to be the main component of returns
over this period with only minor capital value growth. Prime/good
quality secondary assets in stronger locations are likely to be
most resilient in the weak economic environment we anticipate
across the remainder of 2013.
Performance
The Company aims to provide an attractive income return to
investors. It has a policy of a covered dividend, and so the
underlying portfolio income return is important. As the table below
shows the Company has consistently provided an above market income
return.
Property Income Return
Fund (ex Cash) IPD*
12 months to 30 June 2013 9.1 6.9
3 years to 30 June 2013 8.1 6.8
5 years to 30 June 2013 8.7 7.1
Although providing an attractive income return is our main
driver, we also want to provide an attractive total return to
investors. At a property level the Company has also maintained a
strong total return performance relative to IPD Index.
Property Total Return
Fund (ex Cash) IPD*
12 months to 30 June 2013 3.2 4.1
3 years to 30 June 2013 6.1 6.0
5 years to 30 June 2013 2.7 1.9
*Source IPD Quarterly version of Monthly Index funds
Investment Strategy
The Investment Manager and the Board remain focused on providing
an attractive level of income to investors, with the prospect of
income and capital growth. We believe that by having good quality
buildings in good locations let to good tenants we can meet the
Company's objective, and so take an active approach to asset
management and investment activity, to provide a sustainable income
stream from investments tenants will want to occupy. The Board
continues to maintain a policy of achieving a covered dividend,
which the Company had in 2011 and 2012. For the 6 months to end
June 2013 the cover was 71.7%, the dip mainly the result of a lease
surrender taken in December 2012, where the outgoing tenant paid
all the rent due up to its lease expiry in 2016, which under
accounting practice was all booked at the time of receipt, adding
to the Company's revenue reserves of GBP6.8m. Based on forecast
revenues and expenses, the Board believes that the Company will
return to a covered dividend position by the first quarter of
2014.
Portfolio Valuation
The investment portfolio continues to be valued on a quarterly
basis by Jones Lang La Salle. As at 30 June 2013 the real estate
portfolio was valued at GBP169.2m with cash of GBP8.6m, which
compares to GBP161.6m and GBP13.5m respectively in December
2012.
Investment Activity
Purchases
The Company completed on one purchase during the reporting
period, an office building in Maple Cross, Rickmansworth
(Hertfordshire) that is let to Trebor Basset for a further 9 years.
The property was purchased for GBP9.85m, reflecting a yield of
11.1%, with an annual rent of GBP1.15m pa.
Sales
The Company completed one sale during the period, and a larger
one just after the reporting period.
A vacant warehouse unit in Greater Manchester was sold (at
valuation) for GBP900,000 to an owner occupier, and then in July
the Company completed on the sale of an investment in Aberdeen for
GBP14.8m. This was the largest asset the Company had held, having
originally funded the development of the mixed office and
industrial complex in 2010 for GBP11.5m. The property produced a
rent of GBP1.0m pa, however we believed that it was a good time to
secure the profit generated as investments in Aberdeen are
currently keenly priced, with no yield discount for mixed use
facilities. It also enabled the Company to reduce exposure to
Scottish assets in the period of uncertainty over independence.
Asset Management
Voids
At the period end the Company's voids represented 10.3% of
rental value. This is an increase from the same time last year of
6.3%. The table below details the voids, however it should be noted
that the largest void, Bourne House Staines, is subject to a
refurbishment, and the Company has already received all the rent
due on it to March 2016 from the previous tenant. We have already
received an offer on the building, subject to completing the
refurbishment, which is currently under negotiation.
After the reporting period we completed the letting of the
vacant retail warehouse in Wymondham, Norwich to Poundstretcher.
The letting contains several break clauses that will permit vacant
possession to be gained if we do finally manage to get a food
consent, but protects the Company on the downside if the planning
does not come through. The new lease is at a rent of GBP250,000 pa
(subject to a market rent free period) and the Company saves
GBP175,000 pa of vacant costs.
Since the period end the void rate has been reduced to 6.7%.
Property ERV % ERV Comment
Refurbishment, under negotiation
Bourne House, Staines GBP666,604 4.5% for new lease
Ex-Focus, Wymondham, Norwich GBP555,000 3.7% New lease completed Aug 2013
Clough Road Retail Park,
Hull GBP230,000 1.5% Interest received from 2 retailers
St James House, Cheltenham GBP130,494 0.9%
Ocean Trade Centre, Aberdeen GBP36,000 0.2% New lease completed Aug 2013
Monck Street, London GBP11,322 0.1% Solicitors instructed on new lease
Total voids - as a % of
rent GBP1,629,420 10.3%
Total rent GBP14,126,041
ERV GBP14,927,086
Lettings
During the reporting period the Company completed two new
lettings with a total rental value of GBP77,300pa.
Lease Regears
We seek to regear leases before lease end or tenant break to
retain tenants wherever we can. During the reporting period we
regeared a lease on an industrial unit in Witham due to expire in
2016 and granted a new ten year term. Although the rent was reduced
by GBP130,000pa the new lease is guaranteed by a much stronger
tenant, giving security of income.
We also took a surrender of a unit where the lease was due to
expire in 2014, and granted a new 7 year lease direct with the sub
tenant at the same rent.
Refurbishments
At the beginning of the reporting period we completed the
refurbishment of the 4th floor office at Cheltenham, and created
the best space available in the town. We have received two offers,
but they were not acceptable, and so we are talking to other
parties who have expressed interest.
During the reporting period we applied for planning consent for
the comprehensive refurbishment of our office in Staines. The
planning is not contentious, and we are expecting to start on site
shortly. We already have good interest in the building.
Debt
The Company has a debt facility with RBS due to expire in
December 2018. The Company is comfortably within its main
covenants, with a LTV as at 30 June 2013 of 44.8% and interest
cover of 225% against a covenant of 65% and 150% respectively.
The Company has three interest rate swaps in place to hedge its
interest rates under the loan, with a current liability of GBP3.1m
on the balance sheet.
The original swap matures in December 2013. When it matures the
all-in cost to the Company will fall from 6.3% to 3.8%.'
End of Investment Manager Report
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 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 2012 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 2012 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 IAS34; and
The Interim Management Report includes a fair review of the
information required by 4.2.7R and 4.2.8R of the Financial Conduct
Authority's Disclosure and Transparency Rules.
In accordance with 4.2.9R of the Financial Conduct 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 2013,
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
profit or loss 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
29 August 2013
UNAUDITED FINANCIAL STATEMENTS
Unaudited Consolidated Statement of Comprehensive Income
for the period ended 30 June 2013
1 Jan 13 1 Jan 12
to to 30 Jun
30 Jun 2013 2012
GBP GBP
Rental income 6,520,056 6,625,144
Valuation loss from investment
properties (2,016,259) (1,860,439)
Profit on disposal of investment
properties 7,232 21,865
Investment management fees (649,986) (657,861)
Other direct property operating
expenses (588,174) (459,408)
Directors' fees and expenses (69,030) (67,592)
Valuer's fee (13,771) (13,649)
Auditor's fee (19,500) (19,500)
Other administration expenses (109,111) (130,435)
Operating profit 3,061,457 3,438,125
Finance income 30,118 18,905
Finance costs (2,685,413) (2,964,396)
Profit for the period 406,162 492,634
Other comprehensive income
Valuation gain / (loss) on cash
flow hedges 3,752,184 (760,634)
Total comprehensive income / (loss)
for the period, net of tax 4,158,346 (268,000)
Earnings per share: Pence Pence
Basic and diluted earnings per
share 0.28 0.36
Adjusted (EPRA) earnings per share 1.68 1.70
All items in the above Unaudited Consolidated Statement of
Comprehensive Income derive from continuing operations.
Unaudited Consolidated Balance Sheet
as at 30 June 2013
31 Dec
30 Jun 2013 2012
GBP GBP
ASSETS
Non-current assets
Investment properties 151,169,219 158,073,412
Lease incentives 3,258,605 3,246,707
154,427,824 161,320,119
Investment property held for sale 14,630,000 -
Current assets
Trade and other receivables 1,841,921 1,171,842
Cash and cash equivalents 8,600,870 13,527,186
10,442,791 14,699,028
Total assets 179,500,615 176,019,147
EQUITY
Capital and reserves attributable
to Company's equity holders
Share capital 28,989,849 22,280,186
Retained earnings 6,862,191 7,711,894
Capital reserves (45,456,464) (47,199,621)
Other distributable reserves 97,838,372 97,838,372
Total equity 88,233,948 80,630,831
LIABILITIES
Non-current liabilities
Bank borrowings 83,809,290 83,752,959
Interest rate swaps 747,608 2,757,732
Other liabilities 6,094 6,094
Rental deposits due to tenants 350,574 353,535
84,913,566 86,870,320
Current liabilities
Trade and other payables 3,992,285 4,415,120
Interest rate swaps 2,360,316 4,102,376
Other liabilities 500 500
6,353,101 8,517,996
Total liabilities 91,266,667 95,388,316
Total equity and liabilities 179,500,615 176,019,147
Net Asset Value (NAV) per share
Basic and diluted NAV 58.3 pence 57.7 pence
EPRA NAV 60.3 pence 62.7 pence
Approved by the Board of Directors on 29 August 2013 and signed
on its behalf by:
Sally-Ann Farnon
Director
Unaudited Consolidated Statement of Changes in Equity
for the period ended 30 June 2013
Other
Share Retained Capital distributable Total
Capital earnings reserves reserves equity
GBP GBP GBP GBP GBP
Opening balance
1 January 2013 22,280,186 7,711,894 (47,199,621) 97,838,372 80,630,831
Profit for
the period - 406,162 - - 406,162
Valuation gain
on cash flow
hedges - - 3,752,184 - 3,752,184
Total comprehensive
income for
the period - 406,162 3,752,184 - 4,158,346
Ordinary shares
issued* 6,709,663 - - - 6,709,663
Dividends paid - (3,264,892) - - (3,264,892)
Valuation loss
from investment
properties - 2,016,259 (2,016,259) - -
Profit on disposal
of investment
properties - (7,232) 7,232 - -
Balance as
at 30 June
2013 28,989,849 6,862,191 (45,456,464) 97,838,372 88,233,948
*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 2012
Other
Share Retained Capital distributable Total
capital earnings reserves reserves 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)
Ordinary shares
issued 472,678 - - - 472,678
Dividends paid - (3,104,573) - - (3,104,573)
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 Cash Flow Statement
for the period ended 30 June 2013
1 Jan 13 1 Jan 12
to 30 Jun to 30 Jun
13 12
GBP GBP
Cash generated from operating activities 3,962,710 5,764,744
Cash flows from investing activities
Finance income 30,118 18,905
Purchase of investment properties (10,354,650) (13,079,607)
Capital expenditure on investment properties (287,416) (162,596)
Proceeds from disposal of investment
properties 907,232 1,019,865
Net cash used in investing activities (9,704,716) (12,203,433)
Cash flows from financing activities
Ordinary shares issued net of issue costs 6,709,663 472,678
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 (885,749) (1,126,928)
Payment on interest rate swaps (1,743,332) (1,592,522)
Dividends paid to the Company's shareholders (3,264,892) (3,104,573)
Net cash used in financing activities 815,690 (5,463,504)
Net decrease in cash and cash equivalents
in the period (4,926,316) (11,902,193)
Cash and cash equivalents at beginning
of the period 13,527,186 17,825,381
Cash and cash equivalents at end of period 8,600,870 5,923,188
Standard Life Investments Property Income Trust Limited
Notes to the Unaudited Consolidated Financial Statements
for the period ended 30 June 2013
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 listing on the
London 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 29 August 2013
The Audited Consolidated Financial Statements of the company for
the year ended 31 December 2012 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 2012. The accounting policies adopted in
the preparation of the interim condensed consolidated financial
statements are consistent with those followed in the preparation of
the Group's annual consolidated financial statements for the year
ended 31 December 2012, except for the adoption of new standards
and interpretations effective as of 1 January 2013.
The Group applies, for the first time, certain standards and
amendments that require restatement of previous financial
statements. These include IFRS 10 Consolidated Financial
Statements, IFRS 13 Fair Value Measurement and amendments to IAS 1
Presentation of Financial Statements. As required by IAS 34, the
nature and the effect of these changes are disclosed below.
Several other new standards and amendments apply for the first
time in 2013. However, they do not impact the annual consolidated
financial statements of the Group or the interim condensed
consolidated financial statements of the Group.
The nature and the impact of each new standard/amendment are
described below:
IAS 1 Presentation of Items of Other Comprehensive Income -
Amendments to IAS 1
The amendments to IAS 1 introduce a grouping of items presented
in other comprehensive income (OCI). Items that could be
reclassified (or recycled) to profit or loss at a future point in
time (e.g., net gain on hedge of net investment, net movement on
cash flow hedges and net loss or gain on available-for-sale
financial assets) now have to be presented separately from items
that will never be reclassified (e.g., actuarial gains and losses
on defined benefit plans and revaluation of land and buildings).
The amendment affected presentation only and had no impact on the
Group's financial position or performance.
IFRS 10 Consolidated Financial Statements and IAS 27 Separate
Financial Statements
IFRS 10 establishes a single control model that applies to all
entities including special purpose entities. IFRS 10 replaces the
parts of previously existing IAS 27 Consolidated and Separate
Financial Statements that dealt with consolidated financial
statements and SIC-12 Consolidation - Special Purpose Entities.
IFRS 10 changes the definition of control such that an investor
controls an investee when it is exposed, or has rights, to variable
returns from its involvement with the investee and has the ability
to affect those returns through its power over the investee. To
meet the definition of control in IFRS 10, all three criteria must
be met, including: (a) an investor has power over an investee; (b)
the investor has exposure, or rights, to variable returns from its
involvement with the investee; and (c) the investor has the ability
to use its power over the investee to affect the amount of the
investor's returns. IFRS 10 had no impact on the consolidation of
investments held by the Group.
IFRS 13 Fair Value Measurement
IFRS 13 establishes a single source of guidance under IFRS for
all fair value measurements. IFRS 13 does not change when an entity
is required to use fair value, but rather provides guidance on how
to measure fair value under IFRS when fair value is required or
permitted. The application of IFRS 13 has not materially impacted
the fair value measurements carried out by the Group. IFRS 13 also
requires specific disclosures on fair values, some of which replace
existing disclosure requirements in other standards, including IFRS
7 Financial Instruments: Disclosures. Some of these disclosures are
specifically required for financial instruments by IAS 34.16A(j),
thereby affecting the interim condensed consolidated financial
statements period.
The Group has not early adopted any other standard,
interpretation or amendment that has been issued but is not yet
effective.
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.
Ordinary share capital
Standard Life Assurance Limited held 29,707,081 of the issued
ordinary shares at the balance sheet date (31 December 2012:
29,707,081). This equates to 19.6% (31 December 2012: 21.2%) 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 except where cash balances
exceed 10% of the 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 2013 amounted to GBP649,986
(period ended 30 June 2012: GBP657,861). The amount due and payable
at the period end amounted to GBP329,025 excluding VAT (period
ended 30 June 2012: GBP328,526 excluding VAT).
4. Taxation
Current income tax
A reconciliation of the income tax charge applicable to the
profit from ordinary activities at the UK statutory income tax rate
to the income tax rate charged in the unaudited Consolidated
Statement of Comprehensive Income for the period is as follows:
30 Jun 30 June
13 12
GBP GBP
Profit before income tax 406,162 492,634
Tax calculated at UK statutory income
tax rate of 20% (30 June 2012:20%) 81,232 98,527
Losses arising on investment property
not subject to tax 401,806 367,715
Holding company profits not subject to
tax (65,497) (558,493)
Income not subject to tax (10,042) (7,850)
Expenditure not allowed for income tax
purposes 34,481 23,817
Capital and other allowances - (59,394)
Tax loss (utilised) / created (441,980) 135,678
Current income tax charge - -
The Group has not recognised a deferred tax asset of
GBP2,606,977 (30 June 2012 GBP3,838,501) arising as a result of the
tax loss carried forward. This will only be utilised if the Group
has profits chargeable to income tax in the future.
The Company and its subsidiary have obtained exempt company
status in Guernsey so that they are exempt from Guernsey taxation
on income arising outside Guernsey and bank interest receivable in
Guernsey. The Board intend to conduct the Group's affairs such that
the Company and its subsidiary continue to remain eligible for
exemption.
5. Investment Properties
30 Jun 31 Dec
13 12
GBP GBP
Market value as at 1 January 161,600,000 161,075,000
Purchase of investment property 10,354,650 13,165,401
Capital expenditure on investment properties 287,416 306,514
Carrying value of disposed investment
properties (900,000) (3,700,000)
Valuation loss from investment properties (2,016,259) (9,216,816)
Movement in lease incentives receivable 24,193 (30,099)
Investment property recategorised as
held for sale (note 6) (14,630,000) -
Market value at 30 Jun / 31 Dec 154,720,000 161,600,000
Adjustment for lease incentives (3,557,375) (3,533,182)
Adjustment for finance lease obligations 6,594 6,594
Fair value at 30 June / 31 Dec 151,169,219 158,073,412
Investment properties were revalued at the period end by Jones
Lang LaSalle, independent international real estate consultants, on
the basis of the market value. In order to arrive at fair value the
market values of leasehold properties have been adjusted to reflect
the value of finance lease obligations. The market value provided
by Jones Lang LaSalle at the period end was **GBP169,220,000 (31
December 2012 GBP161,600,000). An adjustment has been made for
lease incentives of GBP3,557,375* (31 December 2012: GBP3,533,182)
that are already accounted for as an asset.
*Lease incentives are split between non-current of GBP3,258,605
and current of GBP298,770.
The valuations have been prepared in accordance with the RICS
Valuation - Professional Standards, March 2012 published by the
Royal Institution of Chartered Surveyors.
** The Market value at 30 June 2013 was GBP169,220,000 and
includes GBP14,500,000 in relation to Aberdeen Gateway Business
Park, an investment property held for sale (see note 6).
30 Jun 31 Dec
2013 Number 2012 Number 30 Jun 31 Dec
of properties of properties 2013 2012
GBP GBP
Freehold 26 26 149,850,000 142,425,000
Leasehold 5 5 19,500,000 19,175,000
Market value at 30 Jun /
31 Dec 31 31 169,350,000 161,600,000
The significant judgements, estimates and assumptions made
relating to valuations are set out below:
30 Jun 31 Dec
2013 2012
ERV p.a. GBP14,927,086 GBP14,274,892
Area sq. ft. 1,764,274 1,721,366
Average ERV per sq. ft. GBP8.46 GBP8.29
Initial Yield 7.87% 7.47%
Reversionary Yield 7.35% 7.31%
Sensitivity analysis
The table below presents the sensitivity of the valuation to
changes in the most significant assumptions underlying the
valuation of completed investment property.
30 Jun 31 Dec
2013 2012
GBP GBP
Increase in yield of 25 bps (6,090,000) (5,700,000)
Decrease in rental rates of 5% (6,420,000) (5,900,000)
6. Investment property held for sale
As at 30 June 2013 the Group was actively making Aberdeen
Gateway Business Park available for sale and exchanged contracts
with a third party for a price of GBP14,766,000 on the 16 July 2013
(see note 10). The independently assessed market value of this
property as at 30 June 2013 was GBP14,500,000. As at 30 June 2013
the carrying value of the investment property held for sale was
GBP14,630,000 (net of transaction costs of GBP136,000). No
investment property was held for sale at 31 December 2012.
7. Dividends
30 June 30 Jun
13 12
GBP GBP
1.133p per ordinary share paid in February
relating to the quarter ending 31 December
2012 (30 June 2012:1.133p) 1,599,022 1,548,038
1.133p per ordinary share paid in May
relating to the quarter ending 31 March
2013 (30 June 2012: 1.133p) 1,665,870 1,556,535
3,264,892 3,104,573
On 23 August 2013 a dividend of GBP1,728,043, 1.133p per
ordinary share (30 June 2012: GBP1,567,865.18, 1.133p per ordinary
share) in respect of the quarter to 30 June 2013 was paid.
8. Cash generated from operations
1 Jan
1 Jan 13 12 to
to 30 Jun 30 Jun
13 12
GBP GBP
Profit for the period 406,162 492,634
Movement in lease incentives (11,898) 56,763
Movement in trade and other receivables (670,077) (233,262)
Movement in trade and other payables (425,799) 664,544
Finance costs 2,685,413 2,964,396
Finance income (30,118) (18,905)
Valuation loss from investment properties 2,016,259 1,860,439
Profit on disposal of investment properties (7,232) (21,865)
Cash generated from operations 3,962,710 5,764,744
In the Unaudited Consolidated Cash Flow Statement, proceeds from
disposal of investment properties comprise:
1 Jan
1 Jan 13 12 to
to 30 Jun 30 Jun
13 12
GBP GBP
Carrying value of disposed investment
properties (note 5) 900,000 998,000
Profit on disposal of investment properties 7,232 21,865
Proceeds from disposal of investment
properties 907,232 1,019,865
9. Segmental information
The board has considered the requirements of IFRS 8 'operating
segments'. The board is of the view that the Group is engaged in a
single segment of business, being property investment and in one
geographical area, the United Kingdom.
10. Events after the balance sheet date
Property Sales and Purchases
On 16 July 2013 the Group completed the sale of Aberdeen Gateway
Business Park, an office investment in Aberdeen for GBP14,766,000
(see note 6).
Shares and Dividends
On 29 July 2013 the Group allotted 1,144,318 ordinary shares of
1p each, which rank parri passu with the existing shares in issue,
at a price of 62.0p per share
On 23 August 2013 a dividend of GBP1,728,043 in respect of the
quarter to 30 June 2013 was paid.
End of Notes to the Unaudited Consolidated Financial
Statements
for the period ended 30 June 2013
Directors and Company Information
Directors Paul David Orchard-Lisle CBE (Chairman) (1)
Richard Arthur Barfield (2)
Huw Griffith Evans (Appointed 11 April 2013)
Sally-Ann Farnon (3)
Shelagh Yvonne Mason (4)
David Christopher Moore (Resigned 14 May 2013)
Registered Office Trafalgar Court
Les Banques
St. Peter Port
Guernsey GY1 3QL
Registered Number 41352
Administrator & Secretary Northern Trust International Administration
Services (Guernsey) Limited
Trafalgar Court
Les Banques
St. Peter Port
Guernsey GY1 3QL
Registrar Computershare Investor Services (Guernsey) Limited
Le Truchot
St. Peter Port
Guernsey GY1 1WD
Investment Manager Standard Life Investments (Corporate Funds) Limited
1 George Street
Edinburgh EH2 2LL
Telephone: 0845 60 60 062
Independent Auditors Ernst & Young LLP
Royal Chambers
St Julian's Avenue
St Peter Port
Guernsey GY1 4AF
Solicitors Dickson Minto W.S. Mourant Ozannes
16 Charlotte Square 1 Le Marchant Street
Edinburgh EH2 4DF St Peter Port
Guernsey GY1 4HP
Broker Winterflood Securities Limited
The Atrium Building
Cannon Bridge
25 Dowgate Hill
London EC4R 2GA
Principal Bankers The Royal Bank of Scotland plc
135 Bishopsgate
London EC2M 3UR
Property Valuers Jones Lang LaSalle Limited
22 Hanover Square
London W1A 2BN
(1) Chairman of the Property Valuation Committee.
(2) Chairman of the Nomination Committee and Remuneration
Committee. Designated as Senior Independent Director.
(3) Chairman of the Audit Committee.
(4) Chairman of the Management Engagement Committee.
Additional Notes to the Interim Financial Report
The Interim Report and Condensed Financial Statements 1 January
2013 to 30 June 2013 will shortly 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.
All enquiries to:
The Company Secretary
Northern Trust International Fund Administration Services
(Guernsey) Limited
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 3QL
Tel: 01481 745001
Fax: 01481 745051
Gordon Humphries
Standard Life Investments Limited
Tel: 0131 245 2735
Jason Baggaley
Standard Life Investments Limited
Tel: 0131 245 2833
END
This information is provided by RNS
The company news service from the London Stock Exchange
END
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