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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| F&c Commercial Property Trust Limited | LSE:FCPT | London | Ordinary Share | GG00B4ZPCJ00 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 121.20 | 121.40 | 121.60 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
Hot Features
Premium
TIDMFCPT
To: RNS
Date: 24 August 2016
From: F&C Commercial Property Trust Limited
Half Yearly Financial Report for the Period ended 30 June 2016
Highlights
* Continued improvement in dividend cover increasing to 88.7% from 80.6% as
at 2015 year end.
* 1.4% Net asset value total return
* 5.3% dividend yield on period end share price
Chairman's Statement
Performance for the period
The Company's net asset value ('NAV') total return for the six month period
ended 30 June 2016 was 1.4 per cent and the ungeared total return from the
property portfolio was 2.0 per cent. This compares with a total return of 2.6
per cent from the Investment Property Databank ('IPD') All Quarterly and
Monthly Valued Funds.
The changes to Stamp Duty announced in March 2016 reduced the value of the
portfolio by 0.8 per cent and the period saw income becoming the main driver of
total return. Although overseas buyers remained active, institutions became net
sellers as the period progressed. The yield compression that had previously
driven the market became less pronounced and restricted to a smaller part of
the market.
The share price total return for the period was -13.3 per cent. The share price
had been trading at a premium to NAV for more than two years until the final
quarter of 2015 when it fell to a discount of 0.6 per cent by the end of
December. As at 30 June 2016, the share price was 113.8p, a discount of 17.8
per cent on the June NAV, but it subsequently recovered, closing the discount
to 8.1% by 22 August 2016.
The initial share price fall was primarily due to lower expectations for
capital growth in UK commercial property values. Subsequent weakness followed
the announcement of the referendum in February and Stamp Duty changes in March,
with sharp falls across the sector in the immediate aftermath of the Brexit
vote in the last week of June. This was followed by recovery in July and August
when a number of open-ended funds re-opened for business after temporary
closure and several property market transactions took place on lower discounts
to pre-Brexit prices than expected.
With the referendum vote occurring so near to the quarter end, valuers
struggled to determine the impact of the outcome on both the property
investment and lettings markets. Our valuer has explicitly stated that the
uncertainty following the UK's decision to exit the EU has reduced the
probability of valuations coinciding with prices received were the properties
to be sold.
The period saw a moderating level of investment activity in the property
market. While the market continued to deliver a positive total return, Central
London retail and the industrials sectors out-performed alongside South East
and West End offices. The retail market outside London continued to
under-perform.
The Company's underperformance of the IPD benchmark came primarily from the
office sector of the portfolio where there were significant voids at Thames
Valley Park One, Reading and Watchmoor Park, Camberley. There was also a mark
down in the valuation of the Aberdeen properties. On the upside, all the other
sectors in the portfolio produced positive total returns and were ahead of the
benchmark.
There were no purchases or sales during the period and the focus has continued
to be on driving income and value-creating asset management within the existing
portfolio. Further detail on the various property and asset management
activities undertaken during the period and a breakdown of the performance are
shown in the Managers' Review.
The Directors have also considered it appropriate to prepare the financial
statements on the going concern basis, as explained in note 1 to the condensed
financial statements.
The following table provides an analysis of the movement in the NAV per share
for the period:
Pence
NAV per share as at 31 December 2015 135.2
Unrealised decrease in valuation of direct property (0.6)
portfolio
Movement in interest rate swap valuation (0.2)
Other revenue 2.7
Dividends paid (3.0)
---------
NAV per share as at 30 June 2016 134.1
---------
Dividends
Monthly dividends of 0.5p per share were paid during the period, maintaining
the annual dividend rate of 6.0p per share. The annualised dividend yield at
the end of the period was 5.3 per cent on a closing share price of 113.8p per
share.
Barring unforeseen circumstances, it is the Board's intention that the dividend
will continue to be paid monthly at the same rate. Dividend cover for the
period (excluding capital gains on properties and the loss on redemption of the
interest rate swap) was 88.7 per cent, an improvement on the cover achieved for
the last financial year which was 80.6 per cent.
Borrowings
As announced in June 2016, the Group agreed amended financing arrangements with
Barclays Bank PLC in respect of the existing GBP50 million term loan facility
repayable in June 2017. This included extending the repayment date to June
2021. The Board also agreed an additional revolving credit facility of GBP50
million over the same period for ongoing working capital purposes and to
provide the Group with the flexibility to acquire further property should the
opportunity arise.
Following this refinancing, the Group's available borrowings comprise a GBP260
million term loan with Legal & General Pensions Limited, maturing on 31
December 2024, and both a GBP50 million term loan facility and an undrawn GBP50
million revolving credit facility with Barclays. The Group's drawn down
borrowings currently total GBP310 million. The Group's total loan to value, net
of cash, was 19.9 per cent at the end of the period.
The Group terminated, at a cost of GBP1.3 million, the interest rate hedging
arrangements linked to the previous Barclays facility. This had been accounted
for as a liability, net of accrued interest, of GBP1.5 million as at 31 December
2015. The Group has entered into a new GBP50 million interest rate swap to cover
the extended Barclays term facility. This has a fixed interest payable at 2.5
per cent. per annum, a substantial reduction on the previous 4.9 per cent per
annum. The weighted average interest rate on the Group's total current
borrowings is 3.3 per cent which is 0.3 per cent lower than before the
refinancing.
Board Composition
Brian Sweetland, who has been a Director of the Company from the beginning in
2005, retired from the Board at the Annual General Meeting on 2 June 2016. I
recorded in the annual report, published in April this year, our appreciation
for the time, experience and effort he has given to the Company over the years.
The Board continues the programme of refreshment of the Board which was
outlined in the 2014 annual report. As a consequence of this, Peter Niven, who
has served the Company since inception, both as a Director and Chairman, will
retire at the 2017 AGM. The board has engaged a recruitment agent to begin the
process of seeking a replacement.
Outlook
Following the EU referendum vote at the end of June there are unresolved
political and economic issues which will continue to contribute to a climate of
uncertainty in the property market. While the next few months should begin to
see greater clarity on economic policy and Brexit strategy, a prolonged period
of negotiation is likely before the final outcome is known.
This uncertain state of affairs will have some effect on both occupier and
investor demand over both the short and medium-term, especially concerning City
offices, secondary stock and development activity all of which the Company has
a limited exposure to. Prime property in core locations may prove more
resilient. Investors seeking an income stream should be attracted to an asset
class with long-term contractual income yielding at least 4 per cent per annum,
particularly if low interest rates limit profitable investment opportunities in
other asset classes.
Brexit is important but is only one element in the outlook for property. There
are wider global economic and political factors which will come into play and
the UK remains a large, mature and relatively transparent market for UK and
overseas investors. Following the fall in both sterling and gilt yields, and
given the prospect of a prolonged period of low interest rates, well located
and let property remains attractively priced against the current risk free rate
of interest.
Chris Russell
Chairman
Performance Summary
Half year
ended 30 June
2016
Total Returns for the period #
Net asset value per share* 1.4%
Ordinary Share price (13.3)%
Investment Property Databank ('IPD') Portfolio 2.0%
ungeared return
Investment Property Databank ('IPD') All
Quarterly and Monthly Valued Funds Benchmark 2.6%
FTSE All-Share Index 4.3%
Half year Year ended 31
ended 30 June December
2016 2015 % change
Capital Values
Total assets less current liabilities (GBP'000)* 1,380,825 1,389,389 (0.6)
Net asset value per share* 134.1p 135.2p (0.8)
Ordinary Share price 113.8p 134.4p (15.3)
FTSE All-Share Index 3,515.45 3,444.26 2.1
(Discount)/Premium to net asset value per share (17.8)% (0.6)%
Net Gearing ** 19.9% 19.0%
Half year Half year
ended 30 June ended 30 June
2016 2015
Earnings and Dividends
Earnings per Ordinary Share 2.0p 9.9p
Dividends per Ordinary Share 3.0p 3.0p
Dividend yield *** 5.3% 4.2%
# Includes dividends re-invested.
* Based on net assets calculated under International Financial Reporting
Standards. Net asset value total return is calculated assuming dividends are
re-invested.
** Net Gearing: (Borrowing - cash) / total assets (less current liabilities and
cash)
*** Calculated on annualised dividends of 6.0p per share. An analysis of
dividend payments is contained in note 2 to the accounts.
Sources: F&C Investment Business, MSCI Investment Property Databank ('IPD') and
Datastream.
Managers' Review
Property Market Review
The market total return for the six months to 30 June 2016, as measured by the
Investment Property Databank ('IPD') All Quarterly and Monthly Valued Funds
('the benchmark') was 2.6 per cent.
The early part of the review period was characterised by extreme volatility in
the global financial markets reflecting concerns about growth prospects
internationally. In February 2016, it was declared that the referendum
regarding EU membership would be held on 23 June 2016 and this added a further
element of uncertainty for investors. In the March Budget, the Chancellor
announced changes to stamp duty on commercial property, which adversely
affected capital values.
The economy continued to deliver positive growth but there were indications
that the pace was slowing. The Bank of England kept interest rates and monetary
policy unchanged during this period but there was a growing feeling that rates
would stay "lower for longer". Gilt yields moved lower during the half-year to
touch 1 per cent by 30 June 2016.
The EU referendum vote took place on 23 June 2016. The decision in favour of
leaving the EU was unexpected. There was a sharp fall in sterling and in gilt
yields in the final week of the reporting period. The equity market (FTSE 100)
also registered a steep drop in the immediate aftermath of the vote although
this had reversed by 30 June. This volatility also affected the market for
listed real estate securities.
Benchmark capital values rose by 0.3 per cent in the six month period. However,
the timing of the Brexit vote so close to the quarterly valuation date, the
unexpected outcome and the lack of timely market evidence as guidance for
valuers all need to be borne in mind when assessing this return. Performance
was supported by the income return, which was 2.3 per cent for the half- year,
in line with the market level.
The period saw the level of investment activity moderate. Investment in
January-June 2016 totalled GBP25.6 billion compared with GBP38.8 billion in the
equivalent period of 2015. Overseas investors were the main drivers of the
market. UK institutions were net sellers of property predominantly in the
latter part of the review period. Retail investors were also making net
withdrawals from property funds ahead of the Brexit vote. Most segments
recorded reduced levels of investment activity with regional offices and retail
warehousing the most resilient but non-traditional assets moving out of favour.
The banks continued to work through their problem loans and appeared willing to
consider new lending on well-secured standing investments. However, margins
were increasing in the latter part of the period. Although property remained
attractively priced against the risk free rate, this was in part due to the
fall in gilt yields and investors were becoming increasingly concerned about
pricing especially in London. IPD data shows initial yields holding steady at
4.8 per cent during the review period following a prolonged period of
compression. At the segment level, yield shift was modest, moving in a 0-10
basis point range. Yields levels varied from 3.3 per cent for offices in the
West End to 6.0 per cent for regional industrials.
IPD data for standing investments shows rental growth of 1.2 per cent over the
review period. This represents a deceleration from the pace seen in the like
period of 2015. Central London offices remains a major driver behind rental
growth, although at a slower pace than last year. There are still segments of
the market such as standard regional retail and supermarkets where rental
growth has been negative. Net income grew by 1.0 per cent, representing a
slight improvement on the same period in 2015.
At the segment level, industrials delivered a relatively strong benchmark
performance, with an aggregate total return of 3.6 per cent. Central London
retail continued to perform strongly. Offices in the West End and the South
East also out-performed. The retail market outside London remains subdued,
especially in town centres.
The market lost momentum in the January-June 2016 period. The approach of the
EU referendum was a factor but other elements were also affecting sentiment and
performance. Total returns are now being driven by the income component.
However, in an era of low interest rates and market uncertainty, the ability to
obtain a higher income return secured on assets often let on long leases may
act to support property.
Property Portfolio
The Company invests in a diversified UK commercial real estate portfolio of 36
properties.
The property portfolio was externally valued at GBP1,355.75 million as at 30 June
2016.
The total return from the portfolio over the period was 2.0 per cent (75th
percentile) underperforming the 2.6 per cent return recorded by the benchmark.
The portfolio continues to deliver strong performance over three, five and ten
years.
Following the referendum result, the valuer CBRE has explicitly stated that we
are now in a period of uncertainty in relation to many factors that impact the
property investment and letting markets. Since the referendum date it has not
been possible to gauge the effect of this decision by reference to transactions
in the market place and the probability of the valuations exactly coinciding
with prices received were the properties to be sold has reduced.
Headline Returns by Sector
(Six months to 30 June 2016)
Total Return
Portfolio Benchmark
(%) (%)
All Retails 2.5 1.7
All Offices -0.6 3.1
All Industrials 7.1 3.6
Other Commercial 6.0 3.2
All Sectors 2.0 2.6
Headline Returns by Segment
(Six months to 30 June 2016)
Total Return
Portfolio Benchmark
(%) (%)
St Retails - South 2.9 3.1
East*
St Retails - Rest of -3.2 1.2
UK#
Retail Warehouses 2.8 1.7
Offices - City 4.6 2.8
Offices - West End -1.1 3.6
Offices - South East -1.0 3.0
Offices - Rest of UK -0.1 2.4
Industrials - South 14.6 3.7
East
Industrials - Rest of 5.0 3.5
UK
Other Commercial 6.0 3.2
All Sectors 2.0 2.6
* Includes West End Retail
# Asda Supermarket, Rochdale
Source: MSCI Investment Property Databank
Retail
The overall total return from the Company's retail properties during the period
was 2.5 per cent compared with the benchmark return of 1.7 per cent.
St. Christopher's Place Estate, London W1 continues to perform strongly, with a
1.6 per cent increase in its capital value over the period. This was driven
mainly by increasing rental values across the Estate.
The redevelopment of 71-77 Wigmore Street commenced in January 2015 and
construction works are progressing on programme and budget. The marketing of
the retail and restaurant units is prompting a good level of interest and it is
hoped the retail unit will shortly go under offer. Elsewhere on the Estate
there are a number of asset management initiatives which are being progressed
to enhance the tenant mix and the attractiveness of the food and beverage
offer.
At 16 Conduit Street the surrender of the lease held by Christian Dior and the
re-letting of the unit to luxury retailer MCM completed in the period. This
resulted in a new rent of GBP470,000 per annum which is an increase of GBP161,500
per annum over the previous rent passing.
Offices
The Company's office portfolio produced a total return of -0.6 per cent
compared with the benchmark return of
3.1 per cent.
The Company's office properties located in the West End and South East
underperformed the benchmark, the performance of the latter being held back by
voids at Thames Valley Park One, Reading and Watchmoor Park, Camberley. With
regard to the West End offices, the valuers have adopted longer leasing voids
and rent free periods in those properties which are subject to shorter leases.
The Rest of the UK Offices were affected by the valuation of the Aberdeen
properties which fell by c. 3.7 per cent due to capitalisation rates moving out
by approximately 30 bps.
Given the post Brexit concerns and sentiment towards Central London Offices and
the City of London in particular, it is important to note that Company's
exposure to the City of London is only one property. 7 Birchin Lane, London EC2
is valued at less than GBP20 million and is less than 1.4 per cent of the value
of the entire portfolio. The Company's West End Office exposure, excluding St.
Christopher's Place which has an office element, equates to four properties
(13.8 per cent) of the portfolio, the largest asset is Cassini House, St
James's Street. This is a prime asset, albeit let on shorter leases, but with
significant asset management upside.
7 Birchin Lane has recently been subject to a refurbishment of a number of the
floors and an upgrading of the common areas. New lettings of the seventh and
eighth floors have completed at GBP70 and GBP75 per square foot respectively, a
significant uplift from the previous rent passing of GBP35 per square foot. The
first, second and third floors are available to let; these are small floors of
under 3,000 square feet each. Current occupational demand seems to be resilient
for this type of space. In the West End the fourth floor of 25 Great Pulteney
Street has let at a new headline rent in the building at GBP96.50 per square
foot.
During the period Fujitsu, the tenant of Thames Valley Park One, Reading,
served notice not to renew the lease of the property in September 2016. An
early exit was negotiated in settlement for all rent due and a dilapidations
payment. This building comprises 74,000 square feet and refurbishment proposals
for the scheme are being worked up. This lease event is attributable to the
overall void level in the Group increasing over the period.
Elsewhere in the portfolio we have let the second floor of Building A,
Watchmoor Park, Camberley, and the 10th floor at 82 King Street, Manchester,
both of which have been long standing voids.
Industrial and Logistics
The Company's industrial and logistics portfolio delivered a total return of
7.1 per cent compared with a benchmark return of 3.6 per cent.
The Company's South East properties performed strongly over the period with the
most notable contribution coming from the Cowdray Centre, Colchester, where
last year an outline planning application was submitted to develop the site for
154 residential units. During the period the outline planning application was
determined by the local planning authority, which approved a resolution to
grant consent, subject to completing a Section 106 Agreement. The Section 106
Agreement has subsequently been agreed and is close to completing. Securing the
consent will enable marketing of the site to volume housebuilders.
Good progress has been made in securing longer leases on the logistics
portfolio. At Unit 8, Hams Hall, Birmingham, the removal of a tenant's only
break in 2020 has been negotiated, securing the income until 2025. At Unit 10a
a lease renewal has been agreed from 20 June 2016 for a 15 year term with a
break option at year 10 and at a rent of GBP1,354,000 per annum. This reflects an
uplift of GBP223,000 per annum over the previous rent passing; a four and a half
month rent free period was granted. A number of other material deals are in
negotiation with tenants.
The Alternative Property Sector
The student accommodation block, let in its entirety to the University of
Winchester on a long lease, remains the Company's only exposure to this sector.
Purchases and Disposals
There were no sales or acquisitions over the period.
Property Management
The management of income remains a key activity. The void rate increased over
the period from 4.5 per cent to 7.0 per cent because of the availability of
three floors at Birchin Lane and Thames Valley Park office property as
described above.
The provision for overdue debt (90 days) is 0.4 per cent of gross annualised
rents, the majority of which is represented by service charges queried by
tenants.
Geographical Analysis
(as at 30 June 2016, % of total property portfolio)
South East 26.2
London - West End 35.7
Eastern 1.9
Midlands 11.7
Scotland 12.6
North West 10.5
Rest of London 1.4
Sector Analysis
(as at 30 June 2016, % of total property portfolio)
Offices 38.9
Retail 26.9
Retail Warehouses 16.8
Industrial 14.8
Other 2.6
Outlook
The outlook for property will be strongly influenced by the Brexit negotiations
and we are now in a very uncertain phase as the implications of the vote are
evaluated. We would expect investors to remain cautious and risk averse and for
this to favour prime property in established locations.
Low interest rates may further support the prime end of the market while a
lower sterling rate could potentially attract overseas buyers. The economic
outlook is for lower but positive growth over the medium-term and for some
increase in inflation. Monetary policy was eased in August 2016 and the Autumn
Statement may provide greater clarity of the fiscal side.
Whilst not affecting the Company's portfolio directly, which is positioned
quite strongly, there are concerns about the prospects for secondary stock and
for development in a lower growth environment. The City and Docklands markets
may see some fall from favour until finance firms' location plans are
determined. We expect to see a more subdued performance from property and some
uncertainty in the occupational markets but also opportunity as the initial
shock dissipates and the path forward for the UK economy becomes clearer.
Richard Kirby
Fund Manager
BMO REP Asset Management plc
F&C Commercial Property Trust Limited
Condensed Consolidated Statement of Comprehensive Income (unaudited)
for the six months to 30 June 2016
Notes Six months Six months Year to
to 30 June to 30 June 31 December
2016 2015 2015*
GBP'000 GBP'000 GBP'000
Revenue
Rental income 32,242 30,770 62,613
(Losses) / gains on investments properties
Unrealised (losses)/gains on revaluation of 5 (4,324) 57,446 110,314
investment properties
Gains on sale of investment properties realised 5 - 2,577 2,530
Total income 27,918 90,793 175,457
Expenditure
Investment management fee (2,594) (3,967) (8,100)
Other expenses 3 (2,499) (2,352) (4,204)
Total expenditure (5,093) (6,319) (12,304)
Operating profit before finance costs and taxation 22,825 84,474 163,153
Net finance costs
Interest receivable 63 108 194
Finance costs (5,801) (5,755) (11,708)
Loss on redemption of interest rate swap 6 (1,283) - -
(7,021) (5,647) (11,514)
Profit before taxation 15,804 78,827 151,639
Taxation (129) (83) (142)
Profit for the period 15,675 78,744 151,497
Other comprehensive income
Items that are or may be reclassified subsequently
to profit or loss
Net change in fair value of swaps reclassified to 1,546 - -
profit and loss
Movement in fair value of effective interest rate (1,374) 543 909
swaps
Total comprehensive income for the period 15,847 79,287 152,406
Basic and diluted earnings per share 4 2.0p 9.9p 19.0p
All of the profit and total comprehensive income for the period is attributable
to the owners of the Group.
All items in the above statement derive from continuing operations.
* These figures are audited.
F&C Commercial Property Trust Limited
Condensed Consolidated Balance Sheet (unaudited)
as at 30 June 2016
Notes 30 June 30 June 31 Dec
2016 2015 2015*
GBP'000 GBP'000 GBP'000
Non-current assets
Investment properties 5 1,339,691 1,241,844 1,340,061
1,339,691 1,241,844 1,340,061
Current assets
Trade and other receivables 20,506 19,637 19,575
Cash and cash equivalents 43,506 99,208 55,755
64,012 118,845 75,330
Total assets 1,403,703 1,360,689 1,415,391
Current liabilities
Trade and other payables (22,878) (20,209) (26,002)
Non-current liabilities
Interest-bearing loans 6 (307,161) (307,282) (307,419)
Interest rate swaps 6 (1,374) (1,912) (1,546)
(308,535) (309,194) (308,965)
Total liabilities (331,413) (329,403) (334,967)
Net assets 1,072,290 1,031,286 1,080,424
Represented by:
Share capital 7 7,994 7,994 7,994
Share premium 127,612 127,612 127,612
Other reserves 469,323 500,847 475,360
Capital reserves 348,608 300,111 352,932
Hedging reserve (1,374) (1,912) (1,546)
Revenue reserve 120,127 96,634 118,072
Equity shareholders' funds 1,072,290 1,031,286 1,080,424
Net asset value per share 134.1p 129.0p 135.2p
* These figures are audited.
F&C Commercial Property Trust Limited
Condensed Consolidated Statement of Changes in Equity (unaudited)
for the six months to 30 June 2016
Share Share Other Capital Hedging Revenue
Capital Premium Reserves Reserves Reserve Reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Notes
At 1 January 7,994 127,612 475,360 352,932 (1,546) 118,072 1,080,424
2016
Total
comprehensive
income for the
period
Profit for the - - - - - 15,675 15,675
period
Movement in
fair value of
interest rate - - - - 172 - 172
swap
Transfer in 5
respect of
unrealised
losses on - - - (4,324) - 4,324 -
investment
properties
Transfer from
other reserve - - (6,037) - - 6,037 -
Total
comprehensive
income for the
period - - (6,037) (4,324) 172 26,036 15,847
Transactions
with owners of
the Company
recognised
directly in
equity
Dividends paid 2 - - - - - (23,981) (23,981)
At 30 June 2016 7,994 127,612 469,323 348,608 (1,374) 120,127 1,072,290
F&C Commercial Property Trust Limited
Condensed Consolidated Statement of Changes in Equity (unaudited)
for the six months to 30 June 2015
Share Share Other Capital Hedging Revenue
Capital Premium Reserves Reserves Reserve Reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Notes
At 1 January 7,994 127,612 512,764 240,088 (2,455) 89,977 975,980
2015
Total
comprehensive
income for the
period
Profit for the - - - - - 78,744 78,744
period
Movement in
fair value of
interest rate - - - - 543 - 543
swaps
Transfer in 5
respect of
unrealised
gains on - - - 57,446 - (57,446) -
investment
properties
Gains on sale 5
of investment - - - 2,577 - (2,577) -
properties
realised
Transfer from
other reserve - - (11,917) - - 11,917 -
Total
comprehensive
income for the
period - - (11,917) 60,023 543 30,638 79,287
Transactions
with owners of
the Company
recognised
directly in
equity
Dividends paid 2 - - - - - (23,981) (23,981)
At 30 June 2015 7,994 127,612 500,847 300,111 (1,912) 96,634 1,031,286
F&C Commercial Property Trust Limited
Condensed Consolidated Statement of Changes in Equity
for the year to 31 December 2015*
Share Share Other Capital Hedging Revenue
Capital Premium Reserves Reserves Reserve Reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Notes
At 1 January 2015 7,994 127,612 512,764 240,088 (2,455) 89,977 975,980
Total
comprehensive
income for the
year
Profit for the - - - - - 151,497 151,497
year
Movement in fair
value of interest
rate swaps - - - - 909 - 909
Transfer in 5
respect of
unrealised gain
on investment - - - 110,314 - (110,314) -
properties
Gains on sale of 5
investment - - - 2,530 - (2,530) -
properties
realised
Transfer from
other reserve - - (37,404) - - 37,404 -
Total
comprehensive - - (37,404) 112,844 909 76,057 152,406
income for the
year
Transactions with
owners of the
Company
recognised
directly in
equity
Dividends paid 2 - - - - - (47,962) (47,962)
At 31 December 7,994 127,612 475,360 352,932 (1,546) 118,072 1,080,424
2015
* These figures are audited.
F&C Commercial Property Trust Limited
Condensed Consolidated Statement of Cash Flows (unaudited)
for the six months to 30 June 2016
Six months Six months Year to
to 30 June to 30 June 31 December
Notes 2016 2015 2015*
GBP'000 GBP'000 GBP'000
Cash flows from operating activities
Profit for the period before taxation 15,804 78,827 151,639
Adjustments for:
Finance costs 5,801 5,755 11,708
Interest receivable (63) (108) (194)
Unrealised losses/(gains) on revaluation of 5 4,324 (57,446) (110,314)
investment properties
Gain on sale of investment properties realised - (2,577) (2,530)
Loss on redemption of interest rate swap 6 1,283 - -
(Increase)/decrease in operating trade and other (445) 1,944 2,006
receivables
(Decrease)/increase in operating trade and other (3,146) (1,377) 3,877
payables
23,558 25,018 56,192
Interest received 63 108 194
Interest paid (5,549) (5,798) (11,395)
Tax paid (130) (46) (147)
(5,616) (5,736) (11,348)
Net cash inflow from operating activities 17,942 19,282 44,844
Cash flows from investing activities
Purchase/development of investment properties 5 (1,527) (3,001) (44,914)
Capital expenditure 5 (2,427) (963) (4,717)
Sale of investment properties 5 - 17,736 18,007
Net cash (outflow)/inflow from investing (3,954) 13,772 (31,624)
activities
Cash flows from financing activities
Dividends paid 2 (23,981) (23,981) (47,962)
Drawdown of Bank Loan, net of costs 6 49,513 - -
Revolving credit facility arrangement costs 6 (486) - -
Repayment of Bank Loan 6 (50,000) - -
Drawdown of L&G loan, net of costs 6 - (362) -
Swap breakage costs 6 (1,283) - -
Net cash outflow from financing activities (26,237) (24,343) (47,962)
Net (decrease)/increase in cash and cash (12,249) 8,711 (34,742)
equivalents
Opening cash and cash equivalents 55,755 90,497 90,497
Closing cash and cash equivalents 43,506 99,208 55,755
* These figures are audited
F&C Commercial Property Trust Limited
Notes to the Consolidated Financial Statements
for the six months to 30 June 2016
1. General information and basis of preparation
The condensed consolidated financial statements have been prepared in
accordance with the Disclosure and Transparency Rules of the United Kingdom
Financial Conduct Authority and IAS 34 'Interim Financial Reporting'. The
condensed consolidated financial statements do not include all of the
information required for a complete set of IFRS financial statements and should
be read in conjunction with the consolidated financial statements of the Group
for the year ended 31 December 2015, which were prepared under full IFRS
requirements. The accounting policies used in the preparation of the condensed
consolidated financial statements are consistent with those of the consolidated
financial statements of the Group for the year ended 31 December 2015. These
condensed interim financial statements have been reviewed, not audited.
After making enquiries, and bearing in mind the nature of the
Company's business and assets, the Directors consider that the Company has
adequate resources to continue in operational existence for the foreseeable
future. In assessing the going concern basis of accounting the Directors have
had regard to the guidance issued by the Financial Reporting Council. They have
considered the current cash position of the Group, forecast rental income and
other forecast cash flows. The Group has agreements relating to its borrowing
facilities with which it has complied during the period. As such the Directors
believe that the Group has the ability to meet its financial obligations as
they fall due for a period of at least twelve months from the date of approval
of the financial statements. For this reason they continue to adopt the going
concern basis in preparing the financial statements.
These condensed interim financial statements were approved for
issue on 23 August 2016.
2. Dividends
Six months to Six months to Year to 31
30 June 2016 30 June 2015 December 2015
GBP'000 GBP'000 GBP'000
In respect of the previous
period:
Ninth interim (0.5p per share) 3,997 3,997 3,997
Tenth interim (0.5p per share) 3,997 3,997 3,997
Eleventh interim (0.5p per share) 3,996 3,996 3,996
Twelfth interim (0.5p per share) 3,997 3,997 3,997
In respect of the period
under review:
First interim (0.5p per share) 3,997 3,997 3,997
Second interim (0.5p per share) 3,997 3,997 3,997
Third interim (0.5p per share) - - 3,996
Fourth interim (0.5p per share) - - 3,997
Fifth interim (0.5p per share) - - 3,997
Sixth interim (0.5p per share) - - 3,997
Seventh interim (0.5p per share) - - 3,997
Eighth interim (0.5p per share) - - 3,997
23,981 23,981 47,962
A third interim dividend for the year to 31 December 2016, of 0.5 pence per
share totalling GBP3,997,000 was paid on 29 July 2016. A fourth interim dividend
of 0.5 pence per share will be paid on 31 August 2016 to shareholders on the
register on 11 August 2016. Although these payments relate to the period ended
30 June 2016, under IFRS they will be accounted for in the period during which
they are paid.
It is the Directors' intention that the Company will continue to pay dividends
monthly.
3. Other expenses
Six months Six months Year to 31
to 30 June to 30 June December 2015
2016 2015
GBP'000 GBP'000 GBP'000
Direct operating expenses of UK rental 1,798 1,554 2,826
property
Valuation and other professional fees 193 339 351
Directors' fees 147 135 286
Administration fee 75 72 145
Depositary fee 80 67 143
Other 206 185 453
2,499 2,352 4,204
The basis of payment for the Directors' and investment management fees are
detailed within the consolidated financial statements of the Group for the year
ended 31 December 2015.
4. Earnings per share
The Group's basic and diluted earnings per Ordinary Share are based on the
profit for the period of GBP15,675,000 (period to 30 June 2015: GBP78,744,000; 31
December 2015: GBP151,497,000) and on 799,366,108 (period to 30 June 2015:
799,366,108; 31 December 2015: 799,366,108) Ordinary Shares, being the weighted
average number of shares in issue during the period. Earnings for the six
months to 30 June 2016 should not be taken as guide to the results for the year
to 31 December 2016.
5. Investment properties
Six months Six months Year to 31
to 30 June to 30 June December
2016 2015 2015
GBP'000 GBP'000 GBP'000
Freehold and leasehold properties
Opening book cost 965,721 936,649 936,649
Opening unrealised appreciation 374,340 258,944 258,944
Opening fair value 1,340,061 1,195,593 1,195,593
Purchases/developments 1,527 3,001 3,344
Acquisition through subsidiary other than
through business combination - - 41,570
Sales - proceeds - (17,736) (18,007)
- gain on sales - (2,505) (2,552)
Capital expenditure 2,427 963 4,717
Unrealised losses realised during the period - 5,082 5,082
Unrealised gains on investment properties 17,573 61,468 114,689
Unrealised losses on investment properties (21,897) (4,022) (4,375)
1,339,691 1,241,844 1,340,061
Closing book cost 969,675 920,372 965,721
Closing unrealised appreciation 370,016 321,472 374,340
Closing fair value 1,339,691 1,241,844 1,340,061
There were no properties held for sale at 30 June 2016 (2015: none).
All the Group's investment properties were valued as at 30 June 2016 by RICS
Registered Valuers working for the company of CBRE Limited ('CBRE'), commercial
real estate advisors, acting in the capacity of a valuation adviser to the
AIFM. All such valuers are Chartered Surveyors, being members of the Royal
Institution of Chartered Surveyors ('RICS').
CBRE completed the valuation of the Group's investment properties at 30 June
2016 on a fair value basis and in accordance with The RICS Valuation -
Professional Standards (December 2014). The fair value of these investment
properties per the Valuation Report amounted to GBP1,355,750,000 (30 June 2015: GBP
1,257,505,000; 31 December 2015: GBP1,355,915,000). The difference between the
Valuation Report and the closing fair value of investment properties disclosed
above of GBP1,339,691,000 (30 June 2015: GBP1,241,844,000; 31 December 2015: GBP
1,340,061,000) consists of capital incentives paid to tenants totalling GBP
4,172,000 and accrued income relating to the pre-payment for rent free periods
recognised over the life of the lease totalling GBP11,887,000, which are both
separately recorded in the accounts as current assets within 'trade and other
receivables'.
There were no significant changes to the valuation process, assumptions and
techniques used during the period, further details on which were included in
note 9 of the consolidated financial statements of the Group for the year ended
31 December 2015.
Following the Referendum held on 23 June 2016 concerning the UK's membership of
the EU, a decision was taken to exit. CBRE has explicitly stated that we are
now in a period of uncertainty in relation to many factors that impact the
property investment and letting markets. Since the Referendum date it has not
been possible to gauge the effect of this decision by reference to transactions
in the market place and the probability of the valuations exactly coinciding
with prices received were the properties to be sold has reduced.
As at 30 June 2016, all of the Group's properties are Level 3 in the fair value
hierarchy as it involves the use of significant inputs and there were no
transfers between levels during the period. Level 3 inputs used in valuing the
properties are those which are unobservable, as opposed to Level 1 (inputs from
quoted prices) and Level 2 (observable inputs either directly i.e. as priced,
or indirectly, i.e. derived from prices).
The Group's borrowings (note 6) are secured by a fixed charge over the majority
of investment properties held.
6. Interest-bearing loans and interest rate swap liabilities
Six months Six months Year to 31
to 30 June to 30 June December
2016 2015 2015
GBP'000 GBP'000 GBP'000
L&G Loan
Principal amount outstanding 260,000 260,000 260,000
Set-up costs (2,683) (2,683) (2,683)
Amortisation of set-up costs 348 134 229
257,665 257,451 257,546
Barclays Loan
Principal amount outstanding 50,000 50,000 50,000
Set-up costs (508) (727) (727)
Amortisation of set-up costs 4 558 600
49,496 49,831 49,873
307,161 307,282 307,419
GBP260 million L&G Loan 2024
On 31 December 2014, the Group entered into a GBP260 million ten year term loan
facility agreement with Legal & General Pensions Limited ("L&G"). The
transaction was conducted by L&G's lending arm, LGIM Commercial Lending
Limited. The loan has a maturity date of 31 December 2024.
Interest is payable on this loan, quarterly in arrears, at a fixed rate of 3.32
per cent per annum for the duration of the loan. The loan is secured by means
of a fixed and floating charge over the whole of the assets of the Secured
Group (which, at 30 June 2016, comprised FCPT Holdings Limited, F&C Commercial
Property Holdings Limited and Winchester Burma Limited).
The Secured Group has complied with all the applicable L&G loan covenants
during the period.
GBP100 million Barclays Loan 2021
On 21 June 2016, the Group amended the financing arrangements with Barclays
Bank PLC ('Barclays') to the existing GBP50 million term loan facility which was
repayable 28 June 2017. The amended arrangements extend the repayment date of
the GBP50 million term loan facility to 21 June 2021 and changed the maximum loan
to value percentage to 50 per cent which was previously 60 per cent. The Group
has agreed an additional revolving credit facility of GBP50 million with Barclays
over the same period, which has not been drawn down as at 30 June 2016. The
loan arrangement costs for both the term and revolving loan facility was GBP
1,017,000.
Interest accrues on the new bank loan at a variable rate, based on 3 month
LIBOR plus margin and is payable quarterly. The margin is 1.50 per cent per
annum for the duration of the loan. The revolving credit facility pays an
undrawn commitment fee of 0.60 per cent per annum.
The bank loan is secured by the way of a fixed and floating charge over the
whole of the assets of SCP Estate Holdings Limited and SCP Estate Limited
('the SCP Group'), whose assets consist mainly of the properties held at St.
Christopher's Place Estate, London W1. The SCP Group has complied with all the
applicable Barclays loan covenants during the period.
On 21 June 2016, the Group terminated its existing interest rate hedging
arrangements with Barclays at a cost of GBP1,283,000. On the same day, the Group
entered into a new GBP50 million interest rate swap in connection with the
extended Barclays term facility. The hedge has been achieved by matching the
notional amount of the swap with the loan principal and matching the swap term
to the loan term.
Interest on the swap is receivable at a variable rate calculated on the same
LIBOR basis as for the bank loan (as detailed above but excluding the margin)
and payable quarterly at a fixed rate of 1.022 per cent per annum. The interest
rate swap is due to expire on 21 June 2021.
The fair value of the liability in respect of the new interest rate swap
contract at 30 June 2016 was GBP1,374,000, which is based on the marked to market
value. The interest rate swap is classified as Level 2 under the hierarchy of
fair value measurements.
7. Share capital
GBP'000
Allocated, called-up and fully paid
799,366,108 Ordinary Shares of 1p each in issue at 7,994
30 June 2016
Under the Company's Articles of Incorporation, the Company may issue an
unlimited number of Ordinary Shares. The Company issued nil Ordinary Shares
during the period (2015: nil) raising net proceeds of GBPnil (2015: GBPnil).
The Company did not repurchase any Ordinary Shares during the period.
8. Net asset value per share
The Group's net asset value per Ordinary Share of 134.1p (30 June 2015: 129.0p;
31 December 2015: 135.2p) is based on equity shareholders' funds of GBP
1,072,290,000 (30 June 2015: GBP1,031,286,000; 31 Decermber 2015: GBP1,080,924,000)
and on 799,366,108 (30 June 2015: 799,366,108; 31 December 2015: 799,366,108)
Ordinary Shares, being the number of shares in issue at the period
end.
9. Capital commitments
The Group had capital commitments totalling GBP6,857,000 as at 30 June 2016 (30
June 2015: GBP11,596,000; 31 December 2015: GBP8,852,000). These commitments
related mainly to contracted development works at the Group's properties at St.
Christopher's Place Estate, London W1.
10. List of Subsidiaries
The Group results consolidate the results of the following
companies:
- FCPT Holdings Limited (the parent company of F&C Commercial
Property Holdings Limited and Winchester Burma Limited)
- F&C Commercial Property Holdings Limited (a company which invests
in properties)
- SCP Estate Holdings Limited (the parent company of SCP Estate
Limited and Prime Four Limited)
- SCP Estate Limited (a company which invests in properties)
- Prime Four Limited (a company which invests in properties)
- Winchester Burma Limited (a company which invests in properties)
- Leonardo Crawley Limited (a company which invests in properties)
- Crawley Holdings Limited (a dormant company)
All of the above named companies are registered in Guernsey except Crawley
Holdings Limited which is registered in England and Wales.
The Group's ultimate parent company is F&C Commercial Property Trust Limited.
11. Operating segments
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, and that therefore the Group has only a single operating
segment. The Board of Directors, as a whole, has been identified as
constituting the chief operating decision maker of the Group. The key measure
of performance used by the Board to assess the Group's performance is the total
return on the Group's net asset value. As the total return on the Group's net
asset value is calculated based on the net asset value per share calculated
under IFRS as shown at the foot of the Balance Sheet, assuming dividends are
re-invested, the key performance measure is that prepared under IFRS. Therefore
no reconciliation is required between the measure of profit or loss used by the
Board and that contained in the financial statements.
12. Subsequent events
There are no material subsequent events that need to be disclosed.
13. Forward looking statements
Certain statements in this report are forward looking statements. By their
nature, forward looking statements involve a number of risks, uncertainties or
assumptions that could cause actual results or events to differ materially from
those expressed or implied by those statements. Forward looking statements
regarding past trends or activities should not be taken as representation that
such trends or activities will continue in the future. Accordingly, undue
reliance should not be placed on forward looking statements.
Statement of Principal Risks and Uncertainties
The Company's assets comprise mainly direct investments in UK commercial
property. Its principal risks are therefore related to the commercial property
market in general. Other risks faced by the Company include investment and
strategic, regulatory, management and control, operational, and financial
risks. The Company is also exposed to risks in relation to its financial
instruments. These risks, and the way in which they are managed, are described
in more detail under the heading 'Principal Risks and Risk Management' within
the Business Model and Strategy in the Company's Annual Report for the year
ended 31 December 2015. The result of the Referendum on 23 June was that the UK
should leave the EU. While the full impact of this result is uncertain, the
Directors are considering the implications for the Company. The Company's
principal risks and uncertainties have not changed materially since the date of
that report and are not expected to change materially for the remainder of the
Company's financial year.
Statement of Directors' Responsibilities in Respect of the Interim Report
We confirm that to the best of our knowledge:
* the condensed set of consolidated financial statements has been
prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by
the European Union;
* the Chairman's Statement and Managers' Review (together
constituting the Interim Management Report) together with the Statement of
Principal Risks and Uncertainties above include a fair review of the
information required by the Disclosure and Transparency Rules ('DTR') 4.2.7R,
being an indication of important events that have occurred during the first six
months of the financial year and their impact on the condensed set of
consolidated financial statements and a description of the principal risks and
uncertainties for the remaining six months of the financial year; and
* the Chairman's Statement together with the condensed set of
consolidated financial statements include a fair review of the information
required by DTR 4.2.8R, being related party transactions that have taken place
in the first six months of the current financial year and that have materially
affected the financial position or performance of the Company during that
period, and any changes in the related party transactions described in the last
Annual Report that could do so.
On behalf of the Board
Chris Russell
Director
F&C Commercial Property Trust Limited
Independent Review Report to the Directors of F&C Commercial Property Trust
Limited
Introduction
We have been engaged by F&C Commercial Property Trust Limited ("the Company")
to review the condensed unaudited set of financial statements in the
half-yearly financial report for the six months ended 30 June 2016, which
comprises the unaudited condensed consolidated statement of comprehensive
income, the unaudited condensed consolidated balance sheet, the unaudited
condensed consolidated statement of changes in equity, the unaudited condensed
consolidated statement of cash flows, and related notes. We have read the other
information contained in the half-yearly financial report and considered
whether it contains any apparent misstatements or material inconsistencies with
the information in the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the Disclosure and Transparency
Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the Company are
prepared in accordance with International Financial Reporting Standards as
adopted by the European Union. The condensed set of financial statements
included in this half-yearly financial report has been prepared in accordance
with International Accounting Standard 34, "Interim Financial Reporting" as
adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review. This report, including the conclusion, has been prepared for and only
for the Company for the purpose of the Disclosure and Transparency Rules of the
Financial Conduct Authority and for no other purpose. We do not, in producing
this report, accept or assume responsibility for any other purpose or to any
other person to whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements 2410, 'Review of Interim Financial Information Performed by the
Independent Auditor of the Entity' issued by the International Auditing and
Assurance Standards Board. A review of interim financial information consists
of making enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing and consequently does not enable us to
obtain assurance that we would become aware of all significant matters that
might be identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2016 are not prepared, in all
material respects, in accordance with International Accounting Standard 34 as
adopted by the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
PricewaterhouseCoopers CI LLP
Chartered Accountants
Guernsey, Channel Islands
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 745324
Fax: 01481 745051
Richard Kirby
BMO REP Asset Management plc
Tel: 0207 499 2244
Graeme Caton
Winterflood Securities Limited
Tel: 0203 100 0268
The full interim report for the period to 30 June 2016 will be sent to
shareholders and will be available for inspection at Trafalgar Court, Les
Banques, St Peter Port, Guernsey GY1 3QL, the registered office of the Company,
and from the Company's website: www.fccpt.co.uk
END
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