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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Industr. Multi | LSE:IMPT | London | Ordinary Share | IM00B4N9KC32 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 317.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMIMPT
RNS Number : 1802I
Industrial Multi Property Trust PLC
26 August 2016
Highlights
-- Adjusted net asset value ("NAV") per ordinary share - 296 pence as at 30 June 2016 (261 pence at 31 December 2015).
-- Adjusted earnings per ordinary share ("EPS") - loss of 6.1 pence for the six months to 30 June 2016 (loss of 7.9 pence for the six months to 30 June 2015).
-- New lettings - 27 new lettings and 11 lease renewals achieved during the six months to 30 June 2016 (represents 10.2% of the estimated rental value ("ERV") of the total portfolio based on the final achievable annual rent including stepped rent).
-- Additional contracted rent - GBP0.3 million per annum of additional passing rent is contracted to start during the twelve months to 30 June 2017, benefitting cash flow.
-- Occupancy improved - the occupancy level by estimated rental value stood at 90.2% as at 31 July 2016 (compared with 89.9% as at 30 June 2016 and 89.3% as at 31 December 2015).
-- Portfolio valuation increased - the Group's property portfolio was valued at GBP85.1 million as at 30 June 2016 (GBP81.6 million as at 31 December 2015), an increase of GBP3.5 million (+4.3%) during the six month period.
13.4%
Adjusted NAV increased by 13.4%
27+11
27 new lettings completed
11 lease renewals
90.2%
Occupancy rate increased to 90.2%
296p
Adjusted NAV of 296 pence per share
GBP85.1 million
Portfolio valuation increase to GBP85.1 million.
Company summary and objectives
Objectives
Industrial Multi Property Trust plc (the "Company" or together with its subsidiaries the "Group") was incorporated in the Isle of Man on 10 June 2002 as a closed-ended investment company. The Company and its subsidiaries invest in higher yielding UK commercial property.
The key objectives of the Company are:
-- Increase earnings and cash flow - increase occupancy in the portfolio and reduce expenses. -- Protect and enhance asset values - prudent investment in selected portfolio properties.
-- Strengthen the balance sheet - reduce bank borrowings progressively, through rental surplus consistent with the investment programme for the property portfolio
Dividends
The Company paid no dividends during the period and no dividends are currently proposed (2015: GBPnil).
Listing
The Company is a closed-ended Isle of Man registered investment company which has been declared under the relevant legislation to be a closed-ended Collective Investment Scheme. Since 27 October 2014, its shares have been traded on the Specialist Fund Market of the London Stock Exchange, an EU regulated market following a transfer of the shares from a listing on the Official List of the UK Listing Authority. The shares have been traded on the London Stock Exchange since 4 April 2003. Following shareholders' approval at the Extraordinary General Meeting, on 26 September 2014 of the new Articles, the Company's continuation vote has been removed.
Management
The Company's Investment Adviser and Manager is Alpha Real Capital LLP ("Alpha"). Control of the Company rests with the non-executive Isle of Man based Board of Directors.
ISA/SIPP status
The Company's shares are eligible for Individual Savings Accounts (ISAs) and Self Invested Personal Pensions (SIPPs).
Website
www.industrialmultipropertytrust.com
Financial highlights
Hot Features
Premium
Half year Year Half
ended ended year
30 June 31 December ended
30 June
2016 2015 2015
NAV (GBP'000) 23,883 21,291 19,352
Adjusted NAV (GBP'000)(1) 24,909 21,916 19,931
NAV per ordinary share 284.0p 253.2p 230.1p
Adjusted NAV per ordinary
share(1) 296.2p 260.6p 237.0p
Earnings per ordinary share
(pence) (basic and diluted) 30.8p 42.8p 19.8p
Adjusted earnings per ordinary
share (2) (6.1p) (18.1p) (7.9p)
(1.) The adjusted net assets are presented to provide what the Board believes is a more relevant assessment of the Group's net asset position. The Board has determined that certain fair value and accounting adjustments may not be realisable in the longer term (see note 14).
(2.) The adjusted earnings are presented to provide what the Board believes is a more appropriate assessment of the operational income accruing to the Group's activities. Hence the Board adjusts basic earnings for income and costs which are not of a recurrent nature or which may be more of a capital nature (see note 13).
Chairman's statement
I am pleased to present the half year report and the condensed consolidated financial statements of Industrial Multi Property Trust plc for the six months ended 30 June 2016.
Property performance
The active asset management initiatives within the portfolio have continued to assist in the retention of tenants and the letting of vacant units. The Group has achieved 27 new lettings and 11 lease renewals increasing the occupancy level across the Group to 90.2% (by ERV) as at 31 July 2016 compared with 89.9% as at 30 June 2016 and 89.3% as at 31 December 2015, enhancing the Group's income. Further detail on asset management progress appears in the Investment Adviser and Manager's report.
On a like-for-like basis, as no properties were bought or sold in the period, the portfolio valuation increased by GBP3.5 million during the six month period to GBP85.1 million at 30 June 2016, a 4.3% increase. An evaluation of the Group's property portfolio performance can be found in the Investment Adviser and Manager's report.
Financial performance
The adjusted NAV per ordinary share at 30 June 2016 is 296.2 pence (31 December 2015: 260.6 pence). This increase is mainly due to an increase in the fair value of investment properties which is partly offset by an operating loss due to finance costs. The results for the period show an adjusted EPS loss of 6.1 pence (30 June 2015 loss of 7.9 pence). The continuing losses are due to the Group's high level of finance costs.
Bank borrowings and financing
As previously reported, the Group entered into financing agreements on 5 December 2013. These loan facilities are for a period of five years expiring in December 2018. A hedging arrangement was entered into on 27 January 2014, which has the effect of fixing the Group's interest rate exposure on GBP25.1 million of debt until 4 December 2018. Further details can be found in notes 18 and 21. During the period the Group was compliant with the lenders' covenants.
Going concern
The Board has concluded that the Company and the Group is considered to be a going concern and as a result of this the condensed consolidated financial statements for the six month period ended 30 June 2016 have been prepared on a going concern basis. Further detail on the basis of preparation is provided in note 2 to the financial statements.
Outlook
Industrial Multi Property Trust plc continues to focus on making further progress in preserving and improving the income generated by its property portfolio and enhancing its asset value. Anecdotally we understand that regionally multi-let light industrial properties typically owned by the Fund have been less affected by the Brexit impact on the commercial property market in general.
With the current long term financing arrangements in place the Board believes that the Group's strategy provides a strong platform from which to rebuild shareholder value over the medium to long term, recognising that the current financing arrangements have resulted in increased finance costs. The Board is confident that the Group will be able to service its debt, and with an improving secondary commercial property market, the Group and therefore the shareholders may see an improvement in the net asset value in the medium to long term.
The Board reiterates its previously announced intention to target a refinancing of the portfolio in the last quarter of 2016 and if a refinancing is not possible it will continue to review alternative ways to improve shareholder value.
Jonathan Clague
Chairman
Date: 25 August 2016
Investment Adviser and Manager's report
The Investment Adviser and Manager's strategy to deliver shareholder value will continue to focus on the following objectives:
-- To enhance net rental income - the marketing strategy for vacant units will aim to meet tenant requirements for good quality, affordable accommodation on flexible lease terms.
-- To selectively deploy capital expenditure when 'value add' opportunities are identified - a rolling programme of maintenance will continue to be undertaken, however priority will be given to refurbishments where a property can be significantly enhanced to attract additional tenant demand. The Investment Adviser and Manager is also looking to identify opportunities to extend leases and or remove tenant breaks where appropriate value can be unlocked.
-- To reduce borrowings through rental surplus and to reduce the loan-to-value ("LTV") ratio. Limited strategic sales or disposals will be considered where it is believed that the net sale proceeds will benefit shareholder returns.
-- To actively review the potential refinancing options, at an optimum time to mitigate the effects of the loan facilities' early repayment penalties (see note 21 for further details).
-- To actively review the potential to resume payment of dividends.
The strategy to concentrate on active asset management initiatives within the portfolio offers tangible opportunities to generate strong positive cash flows in the future.
Property Portfolio overview
Property Portfolio by region Total as a Total as a
percentage percentage
of Market of Market
Value Value
June December
2016 2015
% %
Midlands 30 30
East of England 20 20
North East 2 2
North West 7 7
South East 11 11
South West 20 20
Wales 1 1
Yorkshire & Humberside 9 9
Total 100 100
Portfolio by sector Total as a Total as a
percentage percentage
of Market of Market
Value Value
June December
2016 2015
% %
Light industrial properties 86 86
Office properties 14 14
Total 100 100
Investment Adviser and Manager's report (continued)
Property Portfolio overview (continued)
The portfolio comprises a well-diversified portfolio of 52 multi-let properties offering 488 leasable units with a total floor area of approximately 156,100 square metres (approximately 1.7 million square feet) all of which are located in the UK. The properties offer attractively priced accommodation for local and regional occupiers.
Of the total portfolio (by area), approximately 92% is invested in light industrial property and 8% in offices.
Tenants have continued to favour shorter term flexible leases and against this background the weighted average lease length is 4.1 years to expiry and 2.4 years to the next tenant break.
Asset management review
The occupational market is continuing to improve, and the Group's flexible approach to meeting tenant demand has been successful in reducing the number of vacant units: 27 new lettings and 11 lease renewals were completed during the period, with a further 10 units under offer for new leases as at 30 June 2016. Many of the leases incorporate stepped increases in rents and there is an additional GBP0.3 million per annum of contracted rent due to start during the next twelve months which will benefit the Group's cash flow.
The numbers of new lettings and tenant retentions are encouraging, and accordingly notable progress has been made in increasing occupancy. Based on ERV, the occupancy level stood at 90.2% as at 31 July 2016 (compared with 89.9% on 30 June 2016 and 89.3% as at 31 December 2015).
Tenant insolvency has increased marginally with 4 tenants, accounting for 0.6% of ERV, becoming insolvent compared with 2 tenants (0.4% of ERV) in the same period last year.
Activity during Number Rent GBP'000 As % of Estimated the period of Tenants pa Rental Value Tenant lease breaks exercised 1 55 0.6 Tenant vacated at lease end 18 209 2.3 Tenant insolvency 4 54 0.6 New lettings completed 27 398* 4.4 Tenant leases renewed 11 529* 5.8
*Final achievable annual rent including stepped rents.
Based on the current total portfolio ERV, there is also the potential for additional rent of GBP1.5 million per annum assuming the portfolio were to become fully let and income producing.
Property Sales
In keeping with the Board's strategy to undertake limited strategic sales, the portfolio continues to be reviewed to identify potential disposals where it is believed that the net sales proceeds will benefit shareholder returns.
Valuation
The Group's property portfolio was valued as at 30 June 2016 by Cushman & Wakefield (formerly DTZ Debenham Tie Leung Limited) at GBP85.1 million (GBP81.6 million as at 31 December 2015) an increase of GBP3.5 million (4.3%) during the six month period. The average capital value of the portfolio is GBP543 per square metre (GBP51 per square foot).
Valuation uncertainty following the EU Referendum
At the Referendum held on 23 June 2016 concerning the UK's membership of the EU, a decision was taken to exit.
We are now in a period of uncertainty in relation to many factors that impact the property investment and letting markets. Most economists have reduced UK growth forecasts for the next 2 or 3 years. Government
Investment Adviser and Manager's report (continued)
stimulatory action can be expected, whether through official rate cuts, a resumption of quantitative easing, increased spending, or other business friendly measures.
Given the Referendum date, it is still too early to gauge the full effect of this decision on the Fund's property valuation by reference to relevant transactions in the market place.
Financing
As previously reported the Group entered into new financing agreements on 5 December 2013 as follows:
-- A GBP33.5 million (loan balance GBP32.5 million as at 30 June 2016) senior facility with a five-year term expiring in December 2018 and an initial margin of 3% per annum over 3 month LIBOR, with Royal Bank of Scotland ("RBS").
-- A GBP20.0 million (loan balance GBP19.9 million as at 30 June 2016) mezzanine loan facility with a five-year term expiring in December 2018 and a coupon of 11% per annum, with Europa Mezzanine Finance Sarl ("Europa").
-- A GBP11.5 million (loan balance GBP10 million as at 30 June 2016) unsecured subordinated loan facility with a five-year term expiring in December 2018 and a coupon of 15% per annum with Alpha Real Trust Limited ("ART").
On 27 January 2014, the Group entered into an interest rate swap for the amount of GBP25.1 million with RBS. The interest rate swap has the effect of fixing the Group's interest rate exposure on GBP25.1 million of these borrowings from 27 January 2014 until 4 December 2018 at 2.0225% per annum, before the margin of 3% per annum.
The overall LTV ratio on total borrowings was 73.3% as at 30 June 2016 (76.3% on total borrowings as at 31 December 2015).
UK economy
Economic commentary
According to the Office for National Statistics (ONS), the gross domestic product (GDP) of the UK was estimated to have increased by 0.6% in the second quarter of 2016 (April to June) compared with growth of 0.4% in the first quarter of 2016 (January to March).
The UK's GDP was 2.2% higher in the second quarter of 2016 compared with the same quarter a year ago.
The ONS also reported that the UK's Consumer Prices Index (CPI) rose by 0.5% in the year to June 2016, compared with a 0.3% rise in the year to May. The June rate is slightly higher than the rates seen for most of 2016, though it is still relatively low historically.
As at the end of May, the unemployment rate was 4.9%, down from 5.6% for a year earlier. The last time it was lower was in September 2005.
On 4 August 2016, UK interest rates were cut from 0.5% to 0.25% - a record low and the first cut since 2009. The Bank of England has also signalled that rates could go lower if the economy worsens.
The effects on the economy of the Referendum result remain unclear.
Property commentary
Investment volumes in the UK reached over GBP20 billion in the first six months of 2016. However, since the Referendum date, market sentiment has been impacted by the closure of redemptions in several UK retail funds and falls in the share prices of UK REITs despite the fact that the underlying fundamentals of the market are healthier than when the global financial crisis occurred in 2007.
Following strong investor appetite for UK industrial assets in the first quarter of 2016, total investment volumes fell for a third straight quarter. Second-tier and the best secondary markets attracted more interest
Investment Adviser and Manager's report (continued)
as the supply of Grade A stock remains low. Capital value growth has slowed over the year hitting 7% per annum in June 2016 (June 2015 was 16% per annum).
The Brexit vote has increased economic uncertainty. However, it has been reported that industrial and logistics occupier markets remain robust and resilient as is the Group's experience in the limited period.
Anecdotally we understand that regionally multi-let light industrial properties typically owned by the Fund have been less affected by the Brexit impact on the commercial property market in general.
Conclusion
The 13.4% increase in adjusted net asset value for the six months to 30 June 2016 is encouraging. This increase has been achieved through a combination of improved valuations, increased occupancy and reducing void costs. Following the refinancing in December 2013 the mezzanine and sub-ordinated loan facilities carry a comparatively high interest charge which continues to have a negative impact on current earnings. The Investment Adviser and Manager and the Board will target a refinancing of the portfolio in the last quarter of 2016. For the property portfolio the goal continues to be to increase the level of rent and occupancy throughout the portfolio and to build on the asset management success delivered during the previous six months.
Tom Pissarro
Alpha Real Capital LLP
Investment Adviser and Manager
Date: 25 August 2016
Statement of Directors' Responsibilities in respect of the Directors' Report and the condensed consolidated financial statements
The Directors are responsible for preparing the Directors' Report and the condensed consolidated financial statements in accordance with applicable law and regulations. In addition, the Directors have elected to prepare the condensed consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the EU.
The condensed consolidated financial statements are required to give a true and fair view of the state of affairs and of the comprehensive income of the Group for that period.
In preparing these condensed consolidated financial statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently; -- make judgements and estimates that are reasonable and prudent;
-- state whether they have been prepared in accordance with International Financial Reporting Standards as adopted by the EU; and
-- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.
The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Group's transactions and disclose with reasonable accuracy at any time its financial position. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.
Each of the Directors confirms that to the best of each person's knowledge and belief:
(a) the condensed consolidated financial statements comprising the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity, the condensed consolidated statement of cash flows and related notes which have been prepared in accordance with IAS 34 Interim Financial Reporting, give a true and fair view of the assets, liabilities, financial position and profit and loss of the Group.
(b) the interim management commentary includes a fair review of the information required by:
(i) DTR 4.2.7R the Disclosure & Transparency Rules, 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 financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year;
(ii) DTR 4.2.8R of the Disclosure & Transparency Rules, 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 entity during the period; and any changes in the related party transactions described in the last annual report that could do so.
On behalf of the Board,
Donald Lake Philip Scales
Director Director
Date: 25 August 2016 Date: 25 August 2016
Independent review report to Industrial Multi Property Trust plc
Introduction
We have been engaged by Industrial Multi Property Trust Plc ("the Company") and its subsidiaries ("the Group") to review the condensed consolidated financial statements in the half-yearly financial report for the six months ended 30 June 2016, which comprises the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity, the 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 consolidated set of financial statements.
This report is made solely to the Group in accordance with the International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board and the Disclosure and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA"). Our review has been undertaken so that we might state to the Group those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Group, for our review work, for this report, or for the conclusions we have formed.
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 DTR of the UK FCA.
As disclosed in note 2, the condensed consolidated set of financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed consolidated set of financial statements included in this half-yearly financial report have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting as adopted by the European Union.
Auditors' responsibility
Our responsibility is to express to the Group a conclusion on the condensed consolidated set of financial statements in the half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with the International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the United Kingdom. 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 (UK and Ireland) 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 consolidated set of financial statements in the half-yearly financial report for the six months ended 30 June 2016 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the DTR of the UK FCA.
KPMG Audit LLC
Chartered Accountants
Douglas, Isle of Man
25 August 2016
Condensed consolidated statement of comprehensive income
For the six For the six
months ended months ended
30 June 2016 30 June 2015
unaudited unaudited
Notes GBP'000 GBP'000
Income
Rental income from investment
properties 3 3,779 3,810
Other income 17 109
3,796 3,919
Expenditure
Investment Adviser and Manager's
fee 5 (547) (535)
Property expenses 5 (718) (921)
Other expenses 5 (206) (170)
(1,471) (1,626)
Gains/(losses) from investments
Unrealised gain on revaluation
of investment properties 15 3,509 1,630
Realised gain on sale of
investment property - 476
Net operating profit for
the period before finance
costs 5,834 4,399
Finance income 6 1 3
Finance costs 9,10 (2,842) (2,962)
(Loss)/gain on derivative
instrument 8,9 (401) 224
Net profit from ordinary
activities before taxation 2,592 1,664
Taxation on ordinary activities 11 - -
Net profit from ordinary
activities after taxation 2,592 1,664
Total comprehensive profit
for the period attributable
to members 2,592 1,664
Earnings per share (pence)
Profit for the period attributable
to ordinary equity holders
of the parent (pence per
share) (basic and diluted) 13 30.8 19.8
Adjusted loss per share (pence)
(basic and diluted) 13 (6.1) (7.9)
There are no other items that require disclosure in the condensed consolidated statement of comprehensive income.
The Directors consider all activities to be continuing.
The accompanying notes on pages 14 to 33 are an integral part of this statement.
Condensed consolidated balance sheet
As at As at
30 June 2016 31 December
2015
unaudited audited
Notes GBP'000 GBP'000
Assets
Non-current assets
Investment properties 15 85,130 81,630
85,130 81,630
Current assets
Trade and other receivables 16,21 1,657 1,666
Cash and cash equivalents 17 2,187 2,165
Restricted cash 17 1,255 1,608
5,099 5,439
Total assets 90,229 87,069
Current liabilities
Interest rate derivative
instruments 18 1,026 625
Trade and other payables 19 3,930 4,074
4,956 4,699
Non-current liabilities
Long term borrowings 21 61,390 61,079
Total liabilities 66,346 65,778
Net assets 23,883 21,291
Equity
Share capital 22 841 841
Distributable capital
reserve 22 93,623 93,623
Capital redemption
reserve 22 254 254
Revenue reserves (70,835) (73,427)
Total equity 23,883 21,291
Net asset value per
ordinary share (pence) 14 284.0 253.2
Adjusted net asset
value per ordinary
share (pence) 14 296.2 260.6
The accompanying notes on pages 14 to 33 are an integral part of this statement
These financial statements were approved by the Board of Directors on 25 August 2016 and signed on its behalf by:
Donald Lake Philip Scales Director Director
Condensed consolidated statement of changes in equity
Share Distributable Capital Retained Total
Capital Capital Redemption losses
Reserve Reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
For the six months
ended 30 June 2015
(unaudited)
1 January 2015 841 93,623 254 (77,030) 17,688
Total comprehensive
profit for the
period - - - 1,664 1,664
At 30 June 2015 841 93,623 254 (75,366) 19,352
For the six months
ended 31 December
2015 (unaudited)
At 1 July 2015 841 93,623 254 (75,366) 19,352
Total comprehensive
profit for the
period - - - 1,939 1,939
At 31 December
2015 841 93,623 254 (73,427) 21,291
For the six months
ended 30 June 2016
(unaudited)
At 1 January 2016 841 93,623 254 (73,427) 21,291
Total comprehensive
profit for the
period - - - 2,592 2,592
At 30 June 2016 841 93,623 254 (70,835) 23,883
The accompanying notes on pages 14 to 33 are an integral part of this statement.
Condensed consolidated statement of cash flows
For the For the
six months six months
ended ended
30 June 30 June
2016 2015
unaudited unaudited
GBP'000 GBP'000
Operating activities
Profit before tax 2,592 1,664
Adjustment to reconcile profit
before tax to net cash flows
Unrealised gain in revaluation
of investment properties (3,509) (1,630)
Realised gain on disposal of
investment properties - (476)
Other income - (109)
Finance income (1) (3)
Finance costs 2,842 2,962
Unrealised loss/(gain) on derivative
instrument 401 (224)
Operating cash flows before
movements in working capital 2,325 2,184
Movements in working capital:
Decrease/(increase) in trade
and other receivables 18 (263)
Decrease in trade and other
payables (142) (37)
Net cash flows from operating
activities 2,201 1,884
Investing activities
Interest received 1 3
Net proceeds on sale of investment
properties - 1,526
Net cash flows from investing
activities 1 1,529
Financing activities
Interest paid (2,533) (2,583)
Bank borrowings repaid - (1,050)
Third party arrangement fee - -
paid
Net cash flows used in financing
activities (2,533) (3,633)
Net decrease in cash and cash
equivalents (331) (220)
Cash and cash equivalents at
beginning of period 3,773 3,918
Cash and cash equivalents at
end of period 3,442 3,698
Which is disclosed on the consolidated
balance sheet as:
Cash and cash equivalents 2,187 2,443
Restricted cash 1,255 1,255
The accompanying notes on pages 14 to 33 are an integral part of this statement.
Notes to the condensed consolidated financial statements
For the six months ended 30 June 2016
1 General information
The Company
The Company was incorporated in the Isle of Man on 10 June 2002. It is a closed-ended investment company and was formed primarily for investment in UK commercial property. The registered office of the Company is IOMA House, Hope Street, Douglas, Isle of Man, IM1 1AP. The aim of the Company and its subsidiaries (together "the Group") is to seek to improve income, reduce debt and provide the prospect of long-term capital growth. The Group has no employees.
Balance Sheet presentation
The format of the condensed consolidated balance sheet has continued to be presented on the same basis as the last annual consolidated financial statements.
Adjusted earnings per share and adjusted net asset value
The adjusted earnings per share and adjusted net assets are presented in the half year financial statements to provide what the Board believes is a more relevant assessment of the Group's earnings and net asset position.
2 Summary of significant accounting policies
Basis of preparation
The unaudited condensed consolidated financial statements included in the half year report for the six months ended 30 June 2016, have been prepared in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority and International Accounting Standard (IAS) 34, 'Interim Financial Reporting'. The half year report should be read in conjunction with the Group's annual report and consolidated financial statements for the year ended 31 December 2015, which have been prepared in accordance with International Financial Reporting Standards (IFRS) and Isle of Man law.
The same accounting policies and methods of computation are followed in these condensed consolidated financial statements as were applied in the preparation of the Group's consolidated financial statements for the year ended 31 December 2015, which are available on the Company's website (www.industrialmultipropertytrust.com). The Group's financial performance does not suffer materially from seasonal fluctuations.
The condensed consolidated financial statements are made up from 1 January 2016 to 30 June 2016, and have been prepared under the historical cost convention except for investment property and derivative instruments that have been measured at fair value.
The condensed consolidated financial statements are presented in pounds sterling and rounded to the nearest thousand unless otherwise stated. The functional and presentation currency of the Company is pounds sterling and there are no foreign exchange transactions.
The Directors considered all relevant new standards, amendments and interpretations to existing standards effective for the half year report for the six months ended 30 June 2016.
The Directors have assessed the impact of IFRS 15 Revenue from Contracts with Customers and IFRS 16 Leases, effective 1 January 2018 and 1 January 2019, respectively, and have determined that they will not have a material impact on the recognition or measurement of the financial information.
The adoption of the amendments and improvements to the standards and interpretations has had no effect on the accounting policies, financial position or performance of the Group.
The preparation of the condensed consolidated financial statements requires directors to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the date of the condensed consolidated financial statements. If
Notes to the condensed consolidated financial statements (continued)
For the six months ended 30 June 2016
2 Summary of significant accounting policies (continued)
in future such estimates and assumptions, which were based on the Directors' best judgement at the date of
the condensed consolidated financial statements, deviate from actual circumstances, the original estimates and assumptions will be modified as appropriate in the period in which the circumstances change.
Going concern
The Group's borrowing facilities with Royal Bank of Scotland, Europa Mezzanine Finance Sàrl and Alpha Real Trust Limited terminate on 4 December 2018. Based on the business plan and budget assumptions, current occupancy and the removal of shareholders' continuation vote, the Board is confident that the loan covenants will be met up to the maturity of the existing long term borrowings.
These long-term borrowings have given the Group time to continue the asset management initiatives which improve shareholder value of the Company.
The Board therefore considers it is appropriate to prepare the condensed consolidated financial statements on a going concern basis.
Basis of consolidation
The condensed consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 30 June each period. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date when such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.
All intra-group balances, transactions and unrealised gains and losses resulting from intra-group transactions are eliminated in full.
Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured as the fair value of the consideration received, excluding discounts, rebates and sales taxes and duty. Specific income is recognised as follows:
-- Rental income receivable under operating leases is recognised on a straight-line basis over the term of the lease.
-- Lease incentives granted are recognised as an integral part of the net consideration for the use of the property and are therefore also recognised on the same straight line basis.
-- Interest income is recognised as it accrues using the effective interest rate method.
-- Income arising from expenses recharged to tenants is recognised in the period in which the expense can be contractually recovered. Service charges and other such receipts are included gross of the related costs in revenue as the directors consider that the Group acts as principal in this respect.
-- A property is regarded as sold when the significant risks and returns have been transferred to the buyer, which is normally on unconditional exchange of contracts. For conditional exchanges, sales are recognised only when all the significant conditions are satisfied.
Notes to the condensed consolidated financial statements (continued)
For the six months ended 30 June 2016
2 Summary of significant accounting policies (continued)
Investment properties
Investment properties are measured initially at cost including transaction costs. Transaction costs include stamp duty, professional fees and legal services incurred to bring the property to the condition necessary for it to be capable of operating. Lease incentive receivables are treated as a component of the investment property carrying value.
Subsequent to initial recognition, investment properties are stated at fair value. Gains or losses arising from changes in fair values are included in the consolidated statement of comprehensive income in the year in which they arise.
Investment properties are derecognised when they have been disposed of or permanently withdrawn from use and no future economic benefit is expected from their disposal. Any gains or losses on the retirement or disposal of investment properties are recognised in the consolidated statement of comprehensive income in the year of retirement or disposal.
Gains or losses on the disposal of investment properties are determined as the difference between net disposal proceeds received and the latest valuation of the investment properties.
Cash and cash equivalents
Cash and short-term deposits in the condensed consolidated balance sheet comprises cash at bank and short term deposits with an original maturity of three months or less. For the purposes of the condensed consolidated statement of cash flows, cash and cash equivalents consist of cash and short term deposits as defined above.
Restricted Cash
Where cash is in the Group's bank accounts, but not under the Group's sole control at the balance sheet date, these amounts are disclosed as restricted cash.
Notes to the condensed consolidated financial statements (continued)
For the six months ended 30 June 2016
3 Segmental analysis
Rental income - segmental analysis*
Sector 30 June 30 June
2016 2015
GBP'000 GBP'000
Industrial properties 3,233 3,151
Office properties 569 613
Total as presented to the Board 3,802 3,764
Adjustments (*) (23) 46
Total rental income 3,779 3,810
Region 30 June 30 June
2016 2015
GBP'000 GBP'000
Midlands 1,144 1,124
East of England 823 707
North East 74 66
North West 284 244
South East 446 413
South West 611 786
Wales 45 28
Yorkshire & Humberside 375 396
Total as presented to the Board 3,802 3,764
Adjustments (*) (23) 46
Total 3,779 3,810
(*) The rental information presented by the Investment Adviser and Manager to the Board is in the form of the annual rent passing at the period end rather than being the rent spread on a straight line basis over the term of the lease in the way prescribed by IAS 17. Consequently the rent passing information presented by the Investment Adviser and Manager to the Board is adjusted here to agree with the rental income in the condensed consolidated statement of comprehensive income.
Notes to the condensed consolidated financial statements (continued)
For the six months ended 30 June 2016
3 Segmental analysis (continued)
Property valuation - segmental analysis
Sector 30 June 31 December
2016 2015
GBP'000 GBP'000
Light industrial properties 73,470 70,425
Office properties 11,660 11,205
Total property valuation 85,130 81,630
Region 30 June 31 December
2016 2015
GBP'000 GBP'000
Midlands 25,460 24,735
East of England 17,380 16,145
North East 1,700 1,620
North West 5,470 5,365
South East 9,490 9,040
South West 17,245 16,580
Wales 825 770
Yorkshire & Humberside 7,560 7,375
Total property valuation 85,130 81,630
The Board considers the sector and region analysis above to be the significant segmental basis for the Group. The Board believes that the information is presented more clearly to investors in respect of key segmental information.
Expenses are reviewed on a total basis split between property expenses and other expenses. The Board of Directors do not believe it is cost beneficial for the Group to consider the allocation of these costs between the operating segments mentioned above.
Trade and other receivables and trade and other payables are reviewed on a total basis. Long term borrowings are reviewed on a facility basis as per note 21. The Board of Directors do not believe it is cost effective for the Group to consider the allocation of these assets and liabilities between the operating segments mentioned above.
4 Income
The Group leases out all of its investment property under operating leases. Leases are typically for terms of 3 to 5 years.
5 Expenditure
1 January 1 January
2016 to 2015 to
30 June 30 June
2016 2015
GBP'000 GBP'000
Investment Adviser and Manager's
fee 547 535
The Group pays a quarterly fee of 1.25% per annum
of gross asset value to the Investment Adviser
and Manager.
Notes to the condensed consolidated financial statements (continued)
For the six months ended 30 June 2016
5 Expenditure (continued)
Property expenses
1 January 1 January
2016 to 2015 to
30 June 30 June
2016 2015
GBP'000 GBP'000
Void rates and void service charges 304 148
Repairs, maintenance and utilities 270 321
Property insurance costs 16 22
Bad debt (recovery)/expense (36) 70
Lease renewal costs & other 164 360
Total property expenses 718 921
Other expenses
1 January 1 January
2016 to 2015 to
30 June 30 June
2016 2015
GBP'000 GBP'000
Administration fees 43 42
Audit fees 37 35
Directors' fees 40 40
Other 86 53
Total other expenses 206 170
6 Finance Income
1 January 1 January
2016 to 2015 to
30 June 30 June
2016 2015
GBP'000 GBP'000
Bank interest income (note 7
& note 10) 1 3
Total 1 3
The above interest income arises from cash and cash equivalents.
7 Net gains and losses on loans and receivables
1 January 1 January
2015 to 2015 to
30 June 30 June
2016 2015
GBP'000 GBP'000
Bank interest income (note 6) 1 3
Bad debt reversal/(expense) (note
5) 36 (70)
Total 37 (67)
Notes to the condensed consolidated financial statements (continued)
For the six months ended 30 June 2016
8 Net gains and losses on financial assets and liabilities at fair value through profit and loss
1 January 1 January
2016 to 2015 to
30 June 30 June
2016 2015
GBP'000 GBP'000
Net change in unrealised gains
and losses on financial assets
and liabilities held at fair value
through profit or loss
Interest rate swap (401) 224
Net realised gains and losses on
financial assets and liabilities
held at fair value through profit
or loss
Interest rate swap - interest receivable 72 71
Interest rate swap - interest payable (253) (252)
Net expense of interest rate swap
(notes 9 & 10) (181) (181)
Net (loss)/gain on financial assets
and liabilities held at fair value
through profit or loss (582) 43
Disclosed as:
Finance costs (note 9) (181) (181)
Unrealised (loss)/gain on derivative
instrument (note 9) (401) 224
Net (loss)/gain on financial assets
and liabilities held at fair value
through profit or loss (582) 43
9 Finance costs
1 January 1 January
2016 to 2015 to
30 June 30 June
2016 2015
GBP'000 GBP'000
Interest on bank borrowings (note
10) (2,430) (2,548)
Loan fee amortisation (note 10) (211) (210)
Net losses/gains on financial liabilities
held at fair value through profit
or loss (note 8) (401) 224
Interest rate swaps (notes 8 &
10) (181) (181)
Alpha Real Trust Limited loan exit
fee accrual (note 10) (20) (23)
Total (3,243) (2,738)
The above interest costs arise on financial liabilities measured at amortised cost using the effective interest rate method. No other losses have been recognised in respect of financial liabilities at amortised cost other than those disclosed above.
Notes to the condensed consolidated financial statements (continued)
For the six months ended 30 June 2016
10 Total interest income and total interest expense on financial assets and financial liabilities not at fair
value through profit and loss
1 January 1 January
2016 to 2015 to
30 June 30 June
2016 2015
GBP'000 GBP'000
Bank interest income (note 6) 1 3
Interest on bank borrowings (note
9) (2,430) (2,548)
Interest rate swap (notes 8 & 9) (181) (181)
Loan fee amortisation (note 9) (211) (210)
Alpha Real Trust Limited loan exit
fee accrual (note 9) (20) (23)
Total net interest expense (2,841) (2,959)
11 Taxation
The Group's tax expense for the year comprises:
June 2016 June 2015
Current taxation GBP'000 GBP'000
Isle of Man tax at standard rate - -
of 0%
UK non resident landlord tax for - -
the period at 20%
Tax charge - -
The Group is resident in the Isle of Man for income tax purposes. The standard rate of tax on company profits in the Isle of Man is 0% except where profits are derived from Isle of Man land and property or banking business, where the standard rate is 10%. The Group is subject to Isle of Man income tax at a rate of 0% on its profits.
The Group's subsidiary companies are subject to UK non-resident landlord tax at a rate of 20% on their rental profits from UK property. The Group calculates its tax in respect of UK non-resident landlord tax on a subsidiary by subsidiary basis; no group reliefs are available for non-resident landlords.
Deferred taxation
The Company has not recognised a deferred tax asset in relation to the losses carried forward due to the uncertain nature of future taxable profits.
As at 30 June 2016 the Group had unused tax losses and capital allowances of GBP11.0 million (31 December 2015: GBP11.1 million).
12 Dividends
The Company paid no dividends during the six month period (2015: GBPnil).
Notes to the condensed consolidated financial statements (continued)
For the six months ended 30 June 2016
13 Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
1 January 1 January 1 January
2016 2015 to 2015 to
to 30 31 December 30 June
June 2015 2015
2016
GBP'000 GBP'000 GBP'000
Profit after tax 2,592 3,603 1,664
Profit per share (pence)
(basic and diluted) 30.8 42.8 19.8
Adjusted earnings/(loss)
Profit after tax 2,592 3,603 1,664
Unrealised gain on revaluation
of investment properties (3,509) (3,910) (1,630)
Realised gain on sale of
investment properties - (1,037) (476)
Net loss/(gain) on interest
rate derivative instrument
(note 8) 401 (178) (224)
Total adjusted loss (516) (1,522) (666)
Total adjusted loss per share
(pence) (basic and diluted) (6.1) (18.1) (7.9)
Weighted average number of
ordinary shares ('000) 8,410 8,410 8,410
The adjusted earnings are presented to provide what the Board believes is a more appropriate assessment of the operational income accruing to the Group's activities. Hence, the Board adjusts basic earnings for income and costs which are not of a recurrent nature or which may be more of a capital nature.
The mark-to-market movement of the interest rate derivative instruments are adjusted where the hedged facilities are currently in compliance with their banking covenants and are therefore unlikely to break prior to the expiry of the instruments.
Notes to the condensed consolidated financial statements (continued)
For the six months ended 30 June 2016
14 Net asset value per share
30 June 31 December
2016 2015
GBP'000 GBP'000
Net asset value 23,883 21,291
Net asset value per share (pence) 284.0 253.2
Net asset value 23,883 21,291
Fair value of interest rate
swaps liability (note 18) 1,026 625
Adjusted net asset value 24,909 21,916
Net asset value per share (adjusted)
(in pence) 296.2 260.6
Number of ordinary shares ('000) 8,410 8,410
The adjusted net assets are presented to provide what the Board believes is a more relevant assessment of the Group's net asset position. The Board has determined that certain fair value and accounting adjustments may not be realisable in the longer term.
15 Investment properties
30 June 31 December
2016 2015
GBP'000 GBP'000
Fair value of properties at
1 January 81,630 79,925
Disposal of properties - (2,224)
Movement in lease incentives (9) 19
Unrealised gains on revaluation
of investment properties 3,509 3,910
Fair value of properties at
30 June 2016/31 December 2015 85,130 81,630
IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The fair value of the Group's investment properties at 30 June 2016 and 31 December 2015 have been arrived at on the basis of the valuation carried out at that date by Cushman & Wakefield (formerly DTZ Debenham Tie Leung Limited), independent valuers not connected with the Group. The valuation, which was carried out in accordance with the Royal Institution of Chartered Surveyors ("The Red Book") Appraisal and Valuation Standards (9th Edition 31 January 2014), was arrived at by reference to market evidence of transaction prices for similar properties, together with valuation techniques consistent with those used in the 31 December 2015 valuation. The valuation model is based on comparable market evidence derived from observable market data, derived from an active and transparent market adjusted with certain unobservable inputs as disclosed below. The properties were valued individually. These valuation methods are consistent with the principles in IFRS 13.
Valuations are based on what is determined to be the highest and best use. When considering the highest and best use a valuer will consider, on a property by property basis, the highest value which will include its actual and potential uses given current market conditions. Where the highest and best use differs from the existing use, the valuer will consider the cost and the likelihood of achieving and implementing this change in arriving at its valuation.
Notes to the condensed consolidated financial statements (continued)
For the six months ended 30 June 2016
15 Investment properties (continued)
Property pledged as security
The Group has pledged investment properties valued at GBP85.1 million as at 30 June 2016 (31 December 2015: GBP81.6 million) to secure borrowings (note 21).
The table below presents the sensitivity of the valuation to changes in the most significant assumptions underlying the valuation of investment properties:
30 June 31 December
2016 2015
GBP'000 GBP'000
Increase in underlying property
yield of 0.25% (2,326) (2,151)
Decrease in rental rates of 5% (4,257) (4,082)
Market value is based on active market information, adjusted for any difference related to the nature, location and condition of the specific asset. Where information is not available, alternative valuation methods are used, such as recent prices of similar properties in less active markets, with adjustments to reflect any changes in economic conditions since the date of the transactions that occurred at those prices, or discounted cash flow projections. The principal assumptions underlying the estimation of market value are those related to the receipt of contracted rental income, expected future market rental income, void periods, lease incentives, maintenance requirements and appropriate yields/discount rates of previous quarters. These valuations are regularly compared to actual market yield data and actual transactions by the Group and those reported by the market. The valuer looks at each property on its merits. The valuation reports produced by the valuers are based on information provided by the Group such as current rents, terms and conditions of lease agreements, service charges and capital expenditure. In addition, the valuation reports are based on assumptions and valuation methods used by the valuers. The assumptions are typically market related, such as yields and discount rates, and are based on their professional judgement and market observation.
Valuation process
The Investment Adviser and Manager verifies all major inputs to the valuation reports, assesses the individual property valuation changes from the prior valuation report and holds discussions with the valuers.
When this process is complete, the valuation report is communicated to the Board, which considers it as part of its overall responsibilities.
The valuers hold meetings with the Audit Committee to discuss the valuation processes and outcome at each year end and half year end.
In categorising which level of the fair value hierarchy applies to the Group's investment properties, consideration is given to the inputs used by the Group's valuer in determining the fair value. As mentioned above observable market data such as transactions involving similar properties and the information provided by the Group is used in determining the fair value. In addition there are also a number of unobservable inputs including the estimated rental value, net initial yield, net reversionary yield, state and condition, void periods and the related void rate charges, letting incentives and related letting charges such as marketing and legal costs which are considered by the valuer.
Notes to the condensed consolidated financial statements (continued)
For the six months ended 30 June 2016
15 Investment properties (continued)
Impact on fair value to changes in significant unobservable inputs
The significant unobservable inputs used in the fair value measurement categorised within Level 3 of the fair value hierarchy of the Group's property portfolio, together with the impact of significant movements in these inputs on the fair value measurement, are shown below:
Unobservable input Impact on fair value
of increase in input
Estimated rental value Increase
Net initial yield Decrease
Net reversionary yield Decrease
The table below shows the observable inputs of weighted average passing rent per square foot and weighted average lease length plus the quantifiable unobservable inputs of weighted average estimated rental value per square foot, weighted average net initial yield and weighted average reversionary yield which have been split based on the appropriate sector and region:
30 June Weighted Weighted Weighted Weighted Weighted
2016 average average average average average
passing estimated net initial net reversionary lease
rent per rental yield yield length
sq ft value (%) (%)
(GBP) market
rent per
sq ft
(GBP)
(by sector) (years)
Light
industrial 4.2 5.0 8.3 10.5 4.1
Office 8.5 10.3 9.2 11.8 4.2
31 December Weighted Weighted Weighted Weighted Weighted
2015 average average average average average
passing estimated net initial net reversionary lease
rent per rental yield yield length
sq ft value (%) (%)
(GBP) market
rent per
sq ft
(GBP)
(by sector) (years)
Light
industrial 4.1 4.9 8.5 11.7 3.4
Office 8.4 10.1 9.7 11.4 3.9
Notes to the condensed consolidated financial statements (continued)
For the six months ended 30 June 2016
15 Investment properties (continued)
30 June Weighted Weighted Weighted Weighted Weighted
2016 average average average average average
passing estimated net initial net reversionary lease
rent per rental yield yield length
sq ft value (%) (%)
(GBP) market
rent per
sq ft
(GBP)
(by region) (years)
Midlands 4.9 5.7 8.5 10.3 4.5
East of
England 4.5 4.8 9.0 10.2 4.7
North
East 3.7 4.7 8.3 11.0 3.5
North
West 4.2 5.6 9.8 13.8 3.0
South
East 6.5 6.8 8.9 9.8 3.7
South
West 3.2 5.5 6.7 11.0 4.5
Wales 4.0 4.3 10.4 11.6 4.0
Yorkshire
& Humberside 4.4 4.9 9.4 11.0 2.8
31 December Weighted Weighted Weighted Weighted Weighted
2015 average average average average average
passing estimated net initial net reversionary lease
rent per rental yield yield length
sq ft value (%) (%)
(GBP) market
rent per
sq ft
(GBP)
(by region) (years)
Midlands 4.9 5.7 8.7 10.6 4.5
East of
England 3.3 4.2 7.9 10.7 4.2
North
East 3.6 4.3 8.4 10.7 3.9
North
West 3.9 5.6 9.2 13.8 3.3
South
East 7.5 7.0 9.1 10.5 3.8
South
West 4.2 5.4 8.2 11.1 2.9
Wales 4.3 4.0 11.8 11.6 4.4
Yorkshire
& Humberside 4.5 4.8 9.9 11.2 3.1
16 Trade and other receivables
Group 30 June 31 December
2016 2015
GBP'000 GBP'000
Rental income receivable 816 657
Other debtors receivable 841 1,009
Total 1,657 1,666
Payment terms for rental debtors are typically quarterly in advance.
As at 30 June 2016, receivables with a value of GBP0.03 million (31 December 2015: GBP0.1 million) were impaired and fully provided. During 2016, GBPnil was written off in the period (31 December 2015: GBPnil)
Other debtors receivable includes GBP0.5million (2015: GBP0.5million) in a covenant cure account over which Europa has sole signing rights
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
Notes to the condensed consolidated financial statements (continued)
For the six months ended 30 June 2016
17 Cash and cash equivalents and restricted cash
30 June 31 December
2016 2015
GBP'000 GBP'000
Cash and cash equivalents 2,187 2,165
Restricted cash 1,255 1,608
Cash at bank in the condensed
consolidated balance sheet 3,442 3,773
The cash paid into the rent accounts is restricted until the periodic interest payment date.
18 Interest rate derivative instruments
The Group uses interest rate hedging arrangements to mitigate its exposure to interest rate changes.
The Directors have elected not to apply hedge accounting rules under IAS 39 on the hedging arrangements. Any gains or losses in the fair value of these derivatives are recognised immediately in the condensed consolidated statement of comprehensive income.
Interest rate swap agreements 30 June 2016 31 December
2015
GBP'000 GBP'000
Fair value at 1 January (625) (803)
Unrealised (loss)/gain on
interest rate swaps (401) 178
Fair value at 30 June 2016
/31 December 2015 (1,026) (625)
The exposure of the Group to movements in interest rates was mitigated by the Group's subsidiaries entering into an interest rate swap as detailed below.
The Royal Bank of Scotland
On 27 January 2014, CHIP (One) Limited (on behalf of CHIP (Two) Limited, CHIP (Three) Limited and its subsidiaries, CHIP (Four) Limited and CHIP (Five) Limited) entered into an interest rate swap for the amount of GBP25.1 million with the Royal Bank of Scotland. The interest rate swap has the effect of fixing the Group's exposure on these borrowings from 27 January 2014 until 5 December 2018 at 2.0225%, per annum, before the margin of 3.0% per annum.
19 Trade and other payables
Group 30 June 2016 31 December
2015
GBP'000 GBP'000
Rental income in advance 1,740 1,613
Creditors and accruals 2,190 2,461
Total 3,930 4,074
Trade payables are non-interest bearing and are settled within normal business terms.
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
20 Investment Adviser and Manager's incentive fee
No incentive arrangement is currently in place and therefore no incentive fee is provided for at 30 June 2016 (31 December 2015: GBPnil).
Notes to the condensed consolidated financial statements (continued)
For the six months ended 30 June 2016
21 Long term borrowings
30 June 31 December
2016 2015
GBP'000 GBP'000
Borrowings at 1 January 61,079 63,006
Amortisation of fees during
the period/year 211 423
Europa PIK interest 100 199
Repayment of long term borrowing - (2,549)
Long term borrowings at 30 June/31
December 61,390 61,079
Long term borrowings 62,419 62,319
Unamortised arrangement fees (1,029) (1,240)
Long term borrowings at 30 June/31
December 61,390 61,079
Current - -
Non-current 61,390 61,079
Long-term borrowings at 30 June/31
December 61,390 61,079
Royal Europa Alpha Total
Bank of Mezzanine Real
Scotland Finance Trust
Sàrl Limited
GBP'000 GBP'000 GBP'000 GBP'000
Long term borrowings
at 1 January 2016 32,002 19,404 9,673 61,079
Component of Europa
interest payment capitalised - 100 - 100
Amortisation of financing
fees during the period 67 66 78 211
Long term borrowings
at 30 June 2016 32,069 19,570 9,751 61,390
The Directors consider that the carrying amount of long term borrowings approximates to their fair value.
Notes to the condensed consolidated financial statements (continued)
For the six months ended 30 June 2016
21 Long term borrowings (continued)
Royal Europa Alpha Total
Bank of Mezzanine Real
Scotland Finance Trust
Sàrl Limited
GBP'000 GBP'000 GBP'000 GBP'000
Long term borrowings
at 1 January 2015 32,550 19,440 11,016 63,006
Component of Europa
interest payment capitalised - 199 - 199
Repayment of long-term
borrowings (682) (367) (1,500) (2,549)
Transfer of exit fees - - - -
Amortisation of financing
fees during the year 134 132 157 423
Long term borrowings
at 31 December 2015 32,002 19,404 9,673 61,079
(a) Royal Bank of Scotland loan
This facility is between the bank and subsidiaries, CHIP (One) Limited, CHIP (Two) Limited, CHIP (Three) Limited (and its subsidiaries), CHIP (Four) Limited and CHIP (Five) Limited for an amount of GBP33.5 million.
Interest is payable at a rate equal to 3 month LIBOR plus a margin of 3.00% per annum. The facility is repayable on 4 December 2018. An event of default (as defined in the facility agreement) is triggered, if, inter alia, the amount of the loan facility exceeds 65% before 4 December 2016 and 60% thereafter of the value of the properties over which RBS has security by reference to the bank's own valuation, performed at the time of financing. For the purpose of the test the valuation, which at the bank's discretion can be requested annually at the Group's cost or at any time at the bank's expense and will explicitly exclude the Wareham property and any properties subsequently sold.
Additional covenants dictate that: the minimum net rent should not be less than GBP4.5 million per annum and the net rental income of the secured properties shall not be lower than 225% of the interest for any test period, net rental income from any single tenant shall not exceed 12.5% of the total net rental income of all properties and at no time shall a single property constitute more than 20% of the aggregate market value of the properties.
Should any of the covenants be breached then the default margin would increase by a further 2.0% per annum and will remain at this rate until such time that the breach is remedied.
During the period the Group was compliant with these covenants.
An early repayment, greater than GBP5 million on the RBS facility, would incur for the Group a variable penalty depending on when the repayment is made. The penalty rates are as follows: if a repayment is made 12-24 months after facility agreement date (December 2013), 1.0%; 24-36 months, 0.75%; 36-48 months, 0.5%. At 30 June 2016 the penalty would have been GBP206,000 (31 December 2015: GBP213,750). There is no current intention to incur this penalty.
The facility is secured by a debenture over all the assets and legal charge over the property assets of CHIP (One) Limited, CHIP (Two) Limited, CHIP (Three) Limited (and its subsidiaries), CHIP (Four) Limited and CHIP (Five) Limited. In addition CHIP (One) Limited, CHIP (Two) Limited, CHIP (Three) Limited (and its subsidiaries), CHIP (Four) Limited and CHIP (Five) Limited were required to open a rent account with The Royal Bank of Scotland. The cash paid into the rent accounts is restricted until the periodic interest payment date. At 30 June 2016 GBP1.3 million was held within the rent account, which was released at the subsequent interest payment date (31 December 2015: GBP1.6 million).
Notes to the condensed consolidated financial statements (continued)
For the six months ended 30 June 2016
21 Long term borrowings (continued)
(b) Europa Mezzanine Finance Sàrl loan
This facility is between Europa and subsidiaries, CHIP (One) Limited, CHIP (Two) Limited, CHIP (Three) Limited (and its subsidiaries), CHIP (Four) Limited and CHIP (Five) Limited for an amount of GBP20 million. Interest is payable at a rate equal to 10.0% interest plus 1.0% that may be cash paid or accrued. The facility is repayable on 4 December 2018. An event of default (as defined in the facility agreement) is triggered, if, inter alia, the amount of RBS and Europa loan facilities exceeds 85% of the value of the properties (based currently on the same valuation used by RBS in the covenant referred to previously). For the purpose of the test Europa, at their discretion, can request a valuation annually at the Group's cost or at any time at Europa's expense. At the time of finance Europa and RBS used the same valuer and valuations.
Other financial covenants require that the net rental income of the secured properties shall not be lower than 110% of the interest (being the total interest charged by RBS and Europa) for any test period. In addition, net rental income from any single tenant shall not exceed 12.5% of the total net rental income of all properties and at no time shall a single property constitute more than 20% of the aggregate market value of the properties.
In addition, Europa required the Group to deposit GBP0.5 million in a covenant cure account over which Europa has sole signing rights. The funds placed in this account have been included under "trade and other receivables" in the condensed consolidated balance sheet.
During the period the Group was compliant with these covenants.
Any early loan repayments by the Group greater than GBP2 million, within the first three years of the facility will incur a break penalty equal to the interest which would have been earned on the principal from that early repayment date to the third year anniversary of the facility. If all of the aggregate of the outstanding Europa principal loan amount and accrued PIK interest had been repaid at 30 June 2016, this would have incurred a break penalty for the Group of GBP850,000 (31 December 2015: GBP1,844,000). This liability has not been included in the condensed consolidated balance sheet, as under IFRS this can only be accrued if there is an intention to incur this penalty. There is no current intention to incur this penalty.
(c) Alpha Real Trust Limited loan
On 5 December 2013, the Company entered into a new loan agreement in which Alpha Real Trust Limited provided an unsecured loan to the Company for GBP11.5 million for a period of five years to 4 December 2018. The coupon of the loan agreement is 15% per annum, compounded quarterly. No covenant tests apply and Alpha Real Trust Limited has no security over the assets of the Company or the Group.
An exit fee of 2% is payable on repayment of the entire loan amount, this amount is being accrued over the five year life of the loan.
Additionally any early loan repayments by the Group greater than GBP2 million, within the first three years of the facility will incur a break penalty equal to the interest which would have been earned on the principal from that early repayment date to the third year anniversary of the facility. If the entire outstanding Alpha Real Trust Limited principal loan amount had been repaid at 30 June 2016, this would have incurred a break penalty of GBP516,000 (31 December 2015: GBP1,327,000). There is no current intention to incur this penalty.
Notes to the condensed consolidated financial statements (continued)
For the six months ended 30 June 2016
22 Share capital and related reserves
Authorised share capital: 30 June 31 December
2016 2015
GBP'000 GBP'000
13,400,000 Ordinary Shares of
GBP0.10 each 1,340 1,340
66,000,000,000 Deferred Shares
of GBP0.00001 each 660 660
2,000 2,000
Issued share capital:
GBP'000 GBP'000
8,409,520 Ordinary Shares of GBP0.10
each fully paid 841 841
841 841
Ordinary Deferred Total
shares shares
of GBP0.10 of GBP0.00001
each each
Number Number Number
of shares of shares of shares
'000 '000 '000
As at 1 January
2016 8,410 - 8,410
As at 30 June
2016 8,410 - 8,410
As at 1 January
2015 8,410 - 8,410
As at 31 December
2015 8,410 - 8,410
Voting and other rights
Holders of Ordinary shares are entitled to one vote for each share held.
Dividends
Holders of Ordinary shares are entitled to receive dividends as and when declared by the Company.
Winding up
On a winding-up, the surplus assets remaining after payment of all creditors, including payment of bank borrowings shall be divided pari passu among the holders of Ordinary shares in proportion to the capital paid up on the shares held at the commencement of the winding-up.
Notes to the condensed consolidated financial statements (continued)
For the six months ended 30 June 2016
22 Share capital and related reserves (continued)
Distributable capital reserve
This is a distributable reserve out of which distributions can be made to the shareholders and arose on the cancellation of the share premium account.
Capital redemption reserve
This is a non-distributable reserve that is required under the Isle of Man Companies Act 1931 and arises on cancellation of issued share capital.
23 Related party transactions
Mr Philip Scales, a director of the Company, is also a director and an employee of FIM Capital Limited (formerly IOMA Fund and Investment Management Limited) - the Administrator and Registrar. During the period net fees of GBP0.04 million (30 June 2015: GBP0.04 million) were payable to FIM Capital Limited. As at 30 June 2016 a total amount of GBP0.02 million (31 December 2015: GBP0.02 million) was outstanding
Mr Mark Rattigan, a director of the Company, is also Chief Operating Officer and a Member of Alpha Real Capital LLP (the Investment Adviser and Manager). During the period net fees of GBP0.5 million (30 June 2015: GBP0.5 million) were payable to Alpha Real Capital LLP. As at 30 June 2016 a total amount of GBP0.3 million, (31 December 2015: GBP0.3 million) was outstanding.
Under IAS 24, Alpha Real Trust Limited is considered a related party. Alpha Real Capital LLP (the Investment Adviser and Manager of the Group) is also the Investment Adviser and Manager of Alpha Real Trust Limited. On 5 December 2013, the Group entered into a new related party loan facility agreement in which Alpha Real Trust Limited provided an unsecured loan to the Company for GBP11.5 million. During the period, interest costs of GBP0.7 million were charged (31 December 2015: GBP1.7 million). As at 30 June 2016, a total amount of GBP0.3 million (31 December 2015: GBP0.2 million) was outstanding.
Antler Investment Holdings Limited ("AIH") is considered a related party. AIH is a sister company to Rockmount Ventures Limited and ARRCO Limited both of which are members of Alpha Real Capital LLP (the Investment Adviser and Manager). At 30 June 2016 AIH held 531,568 shares (31 December 2015: 531,568). At the report date AIH held 531,568 shares.
The Directors of the Company received total fees as follows:
Six months ended Six months ended
30 June 2016 30 June 2015
Jonathan David Clague GBP10,000 GBP10,000
Geoffrey Paul Raineri Black GBP7,500 GBP7,500
Donald Lake* GBP9,000 GBP9,000
Peter Philip Scales GBP7,500 GBP7,500
Mark Rattigan GBP7,500 GBP7,500
*fees are inclusive of VAT
Notes to the condensed consolidated financial statements (continued)
For the six months ended 30 June 2016
23 Related party transactions (continued)
The Directors' interests in the shares of the Company are detailed below:
30 June 2016 31 Dec 2015
shares held shares held
Jonathan David Clague 15,500 15,500
Geoffrey Paul Raineri Black 7,000 7,000
Donald Lake 47,900 47,900
Philip Peter Scales - -
Mark Rattigan - -
24 Events after the balance sheet date
There were no significant events after the balance sheet date.
Directors and Advisers
Directors
Registered office
Jonathan David Clague (Chairman) IOMA House
Geoffrey Paul Raineri Black Hope Street
Donald Lake Douglas
Philip Peter Scales Isle of Man
Mark Rattigan IM1 1AP
Company secretary Independent auditor
Martin Katz KPMG Audit LLC
Middleton Katz Chartered Heritage Court
Secretaries LLC 41 Athol Street
12 Hope Street Douglas
Douglas Isle of Man
Isle of Man IM1 1LA
IM1 1AQ
Investment Adviser and Taxation adviser
Manager
Alpha Real Capital LLP Mazars LLP
338 Euston Road The Pinnacle
London 160 Midsummer Boulevard
NW1 3BG Milton Keynes
MK9 1FF
Financial adviser and broker Property solicitor to the
Company
Stockdale Securities Limited Pinsent Masons
Beaufort House 1 Park Row
15 St. Botolph Street Leeds
London LS1 5AB
EC3A 7BB
UK Transfer and paying Legal adviser as to Isle
agent of Man Law
Capita Registrars Limited Cains Advocates Limited
Northern House Fort Anne
Woodsome Park Douglas
Fenay Bridge Isle of Man
Huddersfield IM1 5PD
HD8 0LA
Administrator and registrar Legal adviser as to UK
Law
FIM Capital Limited Osborne Clarke LLP
IOMA House 1 London Wall
Hope Street London
Douglas EC2Y 5EB
Isle of Man
IM1 1AP Fladgate LLP
16 Great Queen Street
Principal bankers London
Royal Bank of Scotland WC2B 5DG
3rd floor
5-10 Great Tower Street
London Independent property valuer
EC3P 3HX Cushman & Wakefield
1 Colmore Square
Europa Capital Mezzanine Birmingham
Limited B4 6AJ
67/68 Grosvenor Street
London
W1K 3JN
Shareholder information
Financial calendar
Financial reporting Reporting dates Trading statement (Third quarter 18 November 2016) 2016 Annual Financial Report 2016 24 February announcement 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
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