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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Tr Property Investment Trust Plc | LSE:TRY | London | Ordinary Share | GB0009064097 | ORD 25P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -4.50 | -1.38% | 322.00 | 323.50 | 326.00 | 322.00 | 322.00 | 322.00 | 32,260 | 08:41:32 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Real Estate Investment Trust | -490.61M | -547.27M | -1.7245 | -1.89 | 1.04B |
From May 2019 to May 2024
TIDMTRY
RNS Number : 1652G
TR Property Investment Trust PLC
25 May 2017
This announcement and the information contained herein is not for publication, distribution or release in, or into, directly or indirectly, the United States, Canada, Australia or Japan.
TR PROPERTY INVESTMENT TRUST PLC
Unaudited preliminary results for the year ended 31 March 2017
25 May 2017
TR Property Investment Trust plc, announces its full year results for the year ended 31 March 2017.
Hugh Seaborn, Chairman, commented:
"I'm pleased to report another solid year of performance from the Trust. The Board are particularly pleased to announce a final dividend of 6.4p which brings the full year dividend to 10.5p, a 25.7% increase on the previous year. This also brings the 10 year compound annual dividend growth rate to an impressive 9.9 %."
Hot Features
Premium
Financial Highlights and Performance Year ended Year
31 March ended %
2017 31 March Change
2016
--------------------------------------------- ------------- ------------- ----------
Balance Sheet
Net asset value per share 352.42p 335.56p +5.0%
Shareholders' funds (GBP'000) 1,118,424 1,065,419 +5.0%
Shares in issue at the end of the period (m) 317.4 317.5 -0.0%
Net debt 13.3% 11.9%
Share Price
Share price 314.50 297.50p +5.7%
Market capitalisation GBP998m GBP945m +5.7%
Year ended Year ended %
31 March 31 March Change
2017 2016
---------------------------------------------- ---------- ---------- -------
Revenue
Revenue earnings per share 11.38p 8.36p +36.1%
Dividends
Net Interim dividend per share 4.10p 3.15p +30.2%
Net Final dividend per share 6.40p 5.20p +23.1%
Net Total dividend per share 10.50p 8.35p +25.7%
Total Return Assets and Benchmark
Net Asset Value total return 8.0% 8.2%
Benchmark performance (total return) 6.5% 5.4%
Share price total return 9.1% -1.6%
Ongoing Charges
Excluding performance fee 0.69% 0.72%
Including performance fee 0.80% 1.06%
Excluding performance fee and direct property
costs 0.64% 0.67%
Net dividends per share are the dividends in respect of the financial year ended 31 March 2017. An interim dividend of 4.10p was paid in January 2017. A final dividend of 6.40p (2016: 5.20p) will be paid on 1 August 2017 to shareholders on the register on 23 June 2017. The shares will be quoted ex-dividend on 22 June 2017.
Chairman's Statement
Introduction
The Trust's net asset value total return for the year of 8.0% is pleasingly ahead of the benchmark as you will see below, and similar to that of the previous 12 months at 8.2%. The other similarity with the previous year is the positive impact of currency movements on the Fund's total return. When viewed in local currency terms, the total returns from pan European property equities were broadly flat over the year. The weakening of Sterling really began in June 2015, a year ahead of the Referendum last June. By our year end on 31 March, the Euro had appreciated 18% over the preceding nineteen months and this resulted in a significant appreciation of our European assets when measured in Sterling.
The last 12 months have been quite clearly dominated by geopolitical risks and their unpredicted outcomes have left markets off balance. However there has been a positive response to the most recent results in the Dutch and French elections where centrist politics have prevailed resulting in a collective reduction in the risk premium.
Physical property pricing remained remarkably robust over the period across all regions. Given the uncertainties resulting from the Brexit Referendum result, the stability in UK commercial property pricing, after an initial modest correction, has been encouraging. Indeed the MSCI/IPD Monthly index has produced a positive capital return in each of the last six months. Our own physical portfolio which is heavily exposed to London retail and distribution in London and the South, fell just 0.7% over the year due primarily to a pending planning appeal affecting values at our largest asset, the Colonnades in Bayswater.
Income remains the dominant requirement from investors seeking exposure to this asset class and it is encouraging that the vast majority of the businesses that the Manager has invested in have continued to grow their earnings. Some sectors, notably German residential companies, have been seen as 'bond proxies' and have therefore suffered from concerns that rising yields would curtail capital growth. Our Manager has remained resolutely of the view that businesses with solid cash flows and the opportunity for earnings growth, even where modest, are appealing. At the time of writing the 10 year Bund yield to redemption was 0.4% per annum, even though this figure is higher than the 0.06% available a year earlier it remains paltry and investors continue to seek income outside of traditional bond markets.
The aim of reducing the fund's exposure to Central London, which commenced in mid-2015 and increased ahead of the Referendum, remains in place. However exposure to the rest of the UK particularly industrial and distribution has materially increased and the overweight to this asset class across Europe has been a significant contributor to performance. In general, retail property in the UK remains a challenging environment and the Manager has continued with his longstanding under exposure to the pure prime shopping centre landlords. A surprise performer was the Swiss property companies, particularly the residential development businesses which prior to 2016 had offered investors modest returns over many years. These stocks were outperformers and their absence from the portfolio negatively impacted relative performance.
NAV and Share Price Performance
As mentioned earlier, the NAV total return was 8.0% which was ahead of the benchmark at 6.5%. Encouragingly the share price total return was 9.1% as the discount between the share price and the asset value narrowed over the year. The discount at the year-end at 10.8% was ahead of the 10 year year end average of 11.6%.
More detail and commentary on performance is set out in the Manager's Report.
Revenue Results and Dividend
Revenue for the year increased by over 36%. By far the most influential factor in this growth has been the impact of weakening Sterling on our income from Continental European stocks. This together with solid income growth from many of our investments has driven the income account to much higher levels than anticipated. Timing changes of dividends paid around our year end have also benefited the revenue account.
A final dividend of 6.40p per share results in a total dividend for the year of 10.50p, some 26% ahead of the 2016 full year dividend of 8.35p per share.
The Board has taken a cautious position on the final dividend in that whilst the increase for the full year is material, it is not fully reflective of the increase in earnings. The Board is mindful of the potential negative impact of a reversal of the sterling weakness experienced in the last financial year.
Revenue Outlook
The results announced by some of our investee companies in the first few months of the financial year have largely been positive with growth in most, but not all, the dividends paid early in the year. As in the prior year, the most significant influence will be currency changes, any strengthening in Sterling from its current position will have a negative impact on the revenue account. Whilst the timing of dividend payments around our year end had a modest positive effect in the period just reported, it is possible that the reverse may occur in the current period.
Debt
Gearing has increased from 11.9% to 13.3% over the year, although the amounts drawn on our loan facilities are marginally lower, a higher level of gearing has been accessed through the use of CFDs, still a very cost effective means of gearing.
Currencies
As reported earlier, currency movements have been significant over the period. We continue to use FX forward contracts to maintain the currency exposure of our Balance Sheet broadly in line with that of the benchmark. The resulting exposures are set out in Note 11 to the Financial Statements.
Discount and Share Repurchases
As commented above, the discount narrowed during the year to a level slightly ahead of the 10 year average although wider than that seen through 2014/15. This is a trend which has been seen across the Investment Trust sector in many specialist and generalist funds.
A small number of shares (150,000) were repurchased during the year at an average discount to net asset value of 15.8%.
Awards
The Trust was a joint winner in the Property category in the Investment Week Investment Company of the Year Awards.
Board Changes
John Glen is not standing for re-election at the forthcoming AGM. I would like to thank John for his considerable contribution to the board over the past 3 years and wish him well for the future.
Outlook
The UK has performed better than many commentators expected but there are clear risks due to the uncertainty of the outcome of negotiations for the UK's exit from the European Union. Our concern is that businesses will be potentially less able to commit to longer term investment (such as new leases) without clarity on key aspects such as potential trade barriers and cross border supply chains. For similar reasons it is possible that there will be a deferral of the development cycle resulting in reduced speculative construction starts.
Expectations of global growth continue to improve. Although bond yields have risen as a result and there have been some inflationary response, they remain at historically low levels. In this context the income characteristics of real estate coupled to the emergence of economic growth which provides an environment for rental growth, will remain attractive to investors. The Manager continues to seek to invest in businesses with strong cash flows and the potential for earnings growth and this combined with the mitigation of risk through a diverse portfolio invested across numerous submarkets and geographies, is reflected in their decision to maintain gearing levels.
Hugh Seaborn
Chairman
25 May 2017
Manager's Report
Performance
The Net Asset Value total return for the year of 8.0% was ahead of the benchmark total return of 6.5%. The share price total return (assuming dividend reinvestment) was 9.1% and reflects a slight reduction in the discount relative to the net asset value.
The year under review was one in which geopolitical risk and unexpected outcomes abounded. In local currencies, the collective performance of pan European property stocks over the period was virtually flat. The first half, which included the UK Referendum, saw European stocks (in Euros) rise 3.8% whilst the UK companies (in Sterling) fell -4.1% and all of this weakness was in the aftermath of the Referendum. The second half saw this reverse with Europe falling -3.8% and the UK rising 2.3% as investors began to sense that the UK economy was not about to enter a marked slowdown. Part of this optimism was caused by the positive economic effect of weakened Sterling (which was a boost to exports). Sterling fell by 7.1% against the Euro over the twelve months with all of that movement was post 24 June 2016. This currency movement was a key driver behind the growth of the Trust's Sterling denominated asset value.
We remind shareholders of the Trust's longstanding currency positioning strategy which is to maintain exposure in line with that of the benchmark. The Manager's underlying geographical exposure may of course be (and invariably is) very different and therefore we use currency forward contracts to maintain exposure broadly in line with that of the benchmark. The relative performance of the Manager versus the benchmark is, therefore, neither aided nor diluted by such currency movements.
As always, blanket annual statistics hide a wide range of performance both intra period and at the individual stock level. The large number of national elections across Continental Europe in 2017 led to increased volatility given the collective difficulty in predicting results with any certainty. Dutch and French property companies were amongst the worst performers in the second half of the financial year as investors fretted about their respective elections and the risk of political gains by nationalistic parties. At the same time the traditional safe haven of domestic Swiss stocks performed well, particularly the residential businesses of Allreal and Mobimo both returning over 20% in the year.
German property companies have again proved robust; collectively delivering over 5% total return over the period but the valuation movements were not smooth. The Trust has considerable exposure to both residential and commercial property in Germany and performance suffered last Autumn as investors moved aggressively away from defensives and into cyclicals as the 'reflation' tidal wave of the Trump election washed through European as well as US markets. German residential businesses with partially regulated rents and little exposure to the development cycle were viewed as 'bond proxies' and sold off heavily between June and December as the 10 year Bund redemption yield moved from -0.1% to +0.3%. Even after this rise in yields (which was painful for existing holders), the yield on offer still guarantees a negative real return to maturity if there is inflation over the decade. Such small returns remind us of the ongoing distortions created by the central banks' determination to assist in keeping borrowing costs at a minimum. We remain firmly committed to the view that these large, liquid listed German residential businesses offering both earnings growth and income stability with dividend yields over 3.5% are attractive.
Income remains a crucial consideration and as investors' appetite for risk has waned so has the appetite for stocks or sectors which are seen as being ex growth or where the cycle has peaked. Having reduced our exposure to Central London offices and prime UK retail during 2015 and early 2016 we maintained that underweight position throughout the year generating positive performance. Likewise our overweight to industrial/logistics across Europe has continued to expand and exposure to this asset class was the largest driver of performance. As both Continental Europe and the UK experienced improving economic conditions we continued to add to our most cyclical sectors, hotels and self storage. Hispania which owns a EUR1.3bn portfolio of hotels situated on mainland Spain, the Balearics and Canaries returned 17% over the year whilst Safestore, the UK and French self storage operator, returned 16.3%.
Alongside the reduced exposure to London offices there has been an increased exposure to a small number of Continental cities, Paris, Stockholm, Madrid and Berlin. The positioning in Paris is a useful illustration of the divergence of returns across stocks even when they are focused on (broadly) similar markets. Terreis, our favoured Paris small cap focuses entirely on prime Central Paris locations, the stock returned 28.1% whilst the much larger competitors, Gecina and Icade who both own more diverse office portfolios rose 9.3% and 7.5% respectively.
Property Investment Markets
UK commercial property transaction volumes were, unsurprisingly, considerably lower in 2016 at GBP46.5bn than the record year of 2015 (GBP66.3bn). What was encouraging was the pace of recovery post the summer. In fact Q4 2016 volumes were 31% ahead of Q3 and the highest quarterly figure of 2016. Investors had clearly been reluctant to engage prior to June but even with the uncertainty created by the outcome they have subsequently committed. The weakness of Sterling has played its part, particularly in Central London where transaction volumes doubled between Q3 and Q4 and international investors accounted for more than 80% of volume. However the slowdown ahead of June did drag overall London transaction volumes down to 16% below the five year average.
UK institutions have been net sellers, particularly the open-ended funds whose combined portfolios are significant at c.GBP35bn (this compares to the entire UK listed sector's value of cGBP65bn). The post Referendum redemption 'debacle' resulted in forced sales in the immediate aftermath. Collectively these funds have continued to be net sellers, building substantial cash positions to cope with their structural liquidity concerns. Such high cash positions are a drag on performance but it is encouraging that the FCA have recently published a paper with recommendations on potential investor safeguards within these structures.
Regional markets were encouragingly busy with volumes ahead of the five year average. We also saw international investment in regional markets at an all time high with GBP5.3bn of single asset deals. Another significant cohort of buyers has been the UK local authorities. Fuelled by access to cheap finance from HM Treasury through the Public Works Loan Board they have been attracted by the high margins providing them with a valuable income stream. Investment by English public sector bodies reached GBP1.2bn in 2016 alone.
The capital movement of the IPD All Property Monthly Index saw a fall of -3.7% in the six months to the end of September. However this correction reversed with a gain of +2% in the six months to March 2017. The initial yield has moved modestly from 4.9% in March 2016 to 5.3% in March 2017 and this reflects the ongoing demand for the asset class. Although transaction volumes are lower overall than last year, the pick up post the Referendum is crucial evidence as to the health of the market.
Although we don't have the same depth of transaction data for much of Europe, we do see clear evidence of yields tightening in core city centre office markets, prime shopping centres and logistics. Funding remains liquid and at attractive rates ensuring that acquisitions are highly cash flow generative. With rents recovering in so many of these markets the ability to buy rental growth coupled with a cushion of initial income is an attractive proposition. Bond yields are rising but from extremely low levels and remain historically subdued. The ECB has reduced its bond buying programme and will undoubtedly reduce it further in the coming months but stable bank margins and bond spreads illustrate the appetite to lend to high quality real estate even in these politically charged times.
Offices
Take up of space in Central London was, as expected, lower than in 2015. The City saw total take up of 5.8m sq ft which was 21% below the previous year but still 6% ahead of the ten year average. The West End was more positive at 4.0m sq ft, just 9% below 2015 but 7% ahead of the ten year average. Tech and Media firms continue to dominate and this is set to continue as the financial services sector grapples with its post Brexit location requirements. Our concerns remain focused on the City as opposed to the West End or Midtown. It should be noted that the largest single acquirer of space in the City in both 2015 and 2016 was WeWork, a new entrant to the UK serviced office market with a successful track record in the US. In 2016, they acquired 345,000 sq ft (6% of all take up) on top of 550,000 sq ft in 2015. Serviced office occupiers have always been a key part of any core office market providing flexibility but when they are the single largest driver of demand we see that as a risk. The better news remains the lack of supply and the pre-let status of the development pipeline. This theme of benign supply runs through most markets and the City is no exception. The good news is that over 30% of the 2017-2020 pipeline is already pre-let with new build completions of c2.5m sq ft for the next three years. We maintain our position of reduced exposure to the City market because of risk to demand rather than over expansion of supply.
The dynamics in the West End remain stronger, both in the context of a broader tenant base which is less exposed to the regulatory difficulties of doing business outside of the European Union but also from a net supply perspective. Although supply rose in Q4 2016 with some high profile completions and vacancy reaching 3.9%, (its highest since 2013) over 50% of all completions set for 2017/18 are pre-let. The recent commitments by global tech giants, such as Facebook and Apple as well as newly listed Snapchat, continues to reinforce London's dominance for Tech and Media who accounted for 35% of all take up.
Most commentary on UK office markets is directed towards Central London but the health of both London's hinterland and the big 6 key regional cities are crucial national indicators. For the fourth year in a row office take up, ex Central London, has surpassed the long term average. An impressive statistic given the political uncertainties. Importantly, supply levels have continued to fall with speculative development unable to match take up particularly when combined with the impact of Permitted Development Rights (PDR). PDR allows owners of commercial property (principally offices) to convert their buildings into residential regardless of the local planning authority's stance. The continuing demand for new, state of the art office space has driven pre-lets to an all time high across the regions, 44% of the 3.6m sq ft is pre-let and rents are responding with Cardiff now over GBP25 per sq ft and Birmingham exceeding GBP32 per sq ft.
Investors have also taken note and 28% of the UK's total office investment turnover was regional, well ahead of the 10 year average of 23%. International investors are not confining their interest to London and high profile purchases such as Green Park in Reading acquired by Mapletree (Singaporean based) for GBP560m and HSBC buying parts of Brindley Place, Birmingham's premier city centre office location for GBP260m are testament to this.
It is fair to point out that access to regional office markets through the listed sector is difficult as so few companies have exposure. Where we do get exposure is the western quadrants of the M25 and the London suburban markets through Mckay Securities and CLS Holdings. Take up has remained in line with the ten year average and encouragingly Q1 2017 has seen an upturn when compared with a year earlier. Vacancy has risen slightly to 6.1% (M25) and supply is up 8% on the previous year but crucially still well below long run averages. Both these companies have reported new lettings and renewals comfortably ahead of ERV which reinforces our commitment to these markets.
Paris continues to see robust activity with the 2016 Ile-de-France lettings reaching 25m sq ft, 7% ahead of 2015. Within such a large geographical area as Paris there are always huge variations in performance and 2016 was no exception. The core central market (Paris Centre West) where we are invested through Terreis (total return 28.1% year to March 2017) performed very well with vacancy now at record low levels (3.1%). The most encouraging statistics were from Southern Paris and La Defense where a number of large transactions (defined as over 50,000 sq ft) were crucial. Although vacancy remains over 9% in La Defense the amount of new build space is much smaller and we are confident that this will support rents near term. Madrid is a good example of a recovering market. Take up was slightly lower in 2016 than 2015 but the political environment must shoulder at least partial responsibility and therefore we are positive that 2017 will see an improvement given greater political stability. Whilst we are confident about the improving Spanish economic outlook which will directly impact the Madrid office market, our concern is supply. The city has an overall vacancy rate of 12.5%, there is over 10m sq ft of space available for immediate occupation. A significant amount is in tertiary locations but even in the core we need to see strong take up to reduce availability. The worry is growth in supply with five high quality refurbished buildings amounting to another 330,000 sq ft. coming onto the market in Q4 2016 alone.
Stockholm continues to astonish with MSCI data showing capital growth of over 13% for the central markets driven by both rental growth and yield compression. Vacancy remains below 7% with new build a tiny proportion of that, hence our ongoing overweight to this market through Fabege and Kungsladen.
Retail
The retail sector continues to be buffeted by the structural headwinds of multi channel retailing, a subject which has been aired many times in previous reports and will, no doubt, continue to feature for many years to come. Quite simply the way we all shop is now constantly evolving as technology and fulfilment offers increasing ways of satisfying our retail demand without venturing to a shop - unless we want to. Increasing those visits is the sole aim of shopping centre landlords as they seek to persuade retailers that a physical presence in multiple locations is an economically sound strategy.
The UK continues to have the highest penetration of online sales as a percentage of total sales (ex food and fuel) at 15%, it is also growing at 15% per annum when total sales are growing at 2%. Online is, therefore, continuing to take overall market share from physical stores. As identified in the interim report the rest of Europe's online market share is much lower than the UK. That is not to say they won't catch up, we think that is inevitable but that landlords appear to have more time to develop strategies with tenants. The other safety net for European landlords is that overall costs for tenants (the occupancy cost ratio) is lower across much of Europe than the UK.
Another rapidly pressing issue which is impacting UK retailers (and therefore shopping centre landlords) is the burden of consumer credit which has been growing at over 10% over the last year (BoE) and stands at a record GBP196bn. With interest rates at historically low levels and the resumption of real wage growth such amounts, whilst huge, are sustainable. However, inflation caused by rising food prices and the rising costs of imports due to weakened Sterling will mean that real as opposed to nominal wage growth will be negative over the near term. In addition, house prices (ex Central London) have risen consistently since 2011 and the UK house price to income ratio is almost back to the 2007 peak of 4.5x. None of this is good news for retailing.
Across Continental Europe the average level of personal indebtness is much lower and whilst real wages are not rising fast, we have seen dramatic reductions (albeit from a poor starting point) in levels of unemployment particularly in Southern Europe which is clearly helping consumption. Germany and Sweden have both experienced consistent real wage inflation as their economies continue to improve.
The focus has not changed from that reported at the interim, our UK exposure remains concentrated on higher yielding local shopping where, crucially, rents are affordable for tenants and where incremental asset management improvements add value. We continue to hold Capital & Regional (12 month total return -9.3%) and New River Retail (12 month total return 8.2%). We remain concerned that whilst the larger UK companies own the best and dominant centres, the affordability for retailers is an ongoing issue and the lack of overall deal transparency is also an issue. We therefore view Hammerson (12 month return 2.8%) expanding their outlet centres and Intu's (12 month return -6.7%) buying Spanish centres as positive initiatives. However we think that this diversification is recognition that further large scale investment in their existing core portfolios has become increasingly unattractive.
The exception in the UK has been Central London where the mix of leisure, retailing and dining has proved highly resilient. The weakness of Sterling has turbocharged tourism. London hotels, retailers and restaurants have all been beneficiaries.
One strong positive for retail landlords has been the dramatic reduction in supply of additional shopping centre space. The market is always eventually self correcting and speculative development dries up in response to weak demand. This year the only two new centres to open are Oxford and Bracknell. Both have large wealthy catchments in need of good quality in town retail offerings. Land Securities is developing Oxford and we are confident it will let up quickly, even so their estimated yield on cost of 5.9% reflects the low returns even when there is demand from retailers to open new stores.
Distribution and Industrial
MSCI's UK Monthly index recorded capital growth of 3.3% in the Industrial/Logistics sector for 2016 compared to -3.2% for offices. We fully expect this performance gap to continue as rental growth accelerates for distribution assets. Investors are chasing the asset class and yields are falling particularly where there is perceived shortage of sites as well as snapping up large sheds on the principal distribution networks/hubs. Drilling into the data in more detail reveals that capital growth for London industrial/distribution rose 8% and for the South East was 6.2%.
As I wrote last year, the growth in online retailing continues to drive a reorganisation of the distribution landscape. Amazon alone has been responsible for 23% of the entire take up in UK distribution space in 2016 helping to drive a surge which reached 34.6m sq ft. Online retailers directly accounted for 29% of this as we witness the transformation of retailing from 'shops to sheds'. Supply continues to struggle with the pace of demand and it reached its lowest ever level of 22.7m sq ft in Q4 2016. Although new speculative supply has pushed this figure back up to 27.6m sq ft in Q1 2017 we still see a market where rents continue to rise particularly for units offering proximity to larger conurbations. Segro was the outstanding performer amongst the Big Five UK property companies, returning 20.5% in the year to March 2017. In hindsight no real surprise given its portfolio of 22.3m sq ft in the UK and 27.3m sq ft in Europe of high quality logistics and industrial space.
The picture across Continental Europe is much the same. Our preferred French logistics developer Argan, returned 32.7% on the back of their portfolio of 25m sq ft of Class A logistics property. Elsewhere, our exposure to Southern German logistics and industrial space is through VIB Vermogen which returned 26.9% again on the back of strong rental and capital growth.
Residential
The performance of the residential sector in the UK needs to be separated into Central London and remainder. The change in stamp duty thresholds combined with Osborne's efforts to remove the tax shield for higher rate payers owning 'buy to lets' has impacted growth particularly in higher value markets. The Referendum result compounded concerns about demand from EU nationals employed in financial services just as the new build Central London market experiences a spike in supply. Whilst we continue to have no exposure to luxury apartments (GBP1,000 per sq ft and above) we do remain confident about the ability of house builders to sell in more affordable locations. Our investment in Telford Homes, a South East London focused developer who's average lot size is less than GBP600,000 has been profitable with a 12 month total return of 12.5%. Through our holdings in St Modwen and CLS we did retain exposure to the regeneration of Nine Elms. However, CLS announced (just post our year end) the sale of their entire Nine Elms site for GBP148m, 40% premium to the December 2016 valuation. The purchaser was a Hong Kong listed developer and the deal provides a useful reminder that, particularly when viewed from afar, the break from Europe may not be viewed quite so negatively.
Outside of London residential markets continue to be robust but with real wages stagnating and the elevated level of consumer indebtness we remain cautious and have very little exposure. The private rented sector (PRS) remains a market which will grow but we prefer to own those firms creating the product such as Telford Homes (who recently sold two blocks to an institutional PRS operator) rather than the underlying asset which by its nature is very low yielding.
German residential has been a firm favourite for many years and at the underlying asset level performance remains robust with occupational demand remaining firm, continuing to be buoyed by both domestic household growth and net migration (1.2 million people in 2015). Investor demand has also remained strong and prime Berlin has set a new record price level of 30x the gross rent (a year ago the level was closer to 26x). The average capital value per sq ft has risen 35% in the last year but it still remains relatively affordable when compared with other major European cities.
Elsewhere in Europe we see continuing growth in residential values. Sweden has shown impressive capital growth, particularly in the metropolitan areas in spite of the introduction of macro-prudential tools by the central bank (aiming to restrict borrowing availability).
Hotels and Self Storage
With the ongoing recovery in many European economies we have focused our attention on the more cyclical sectors particularly hotels and self-storage. In the hotel sector we are not seeking exposure to pure operators but businesses which blend ownership and management. Focusing on where they have the ability to manage and improve a hotel but also where the bulk of the income is from leased assets. Our largest exposure is Hispania, which has 65% of its assets in hotels and we expect that to increase further following non core disposals and further acquisitions. This business is focused on tourist destinations in both mainland coastal markets and the islands. A consequence of the rise in terrorist atrocities has been the collapse of tourism in North Africa and Turkey. Foreign visitors to Turkey are down 30% in the twelve months to February and the statistics for Egypt are even worse. Northern Europeans are not abandoning their summer sun but instead 'safecationing' with bookings massively ahead of last year in Greece, France, and Spain. Hispania's 12 month total return was 18.4%.
Our self storage focus remains very UK centric due to a lack of opportunity in Continental Europe. Our preferred stock, Safestore have comfortably beaten the broader benchmark this year with total return of 16.6% and its mix of UK and Paris assets remains attractive. Our positive view is driven by an expectation of a steady increase in business usage of short term storage space for 'last mile' distribution purposes. The irreplaceable network of urban and suburban locations for both Safestore and Big Yellow bodes well for demand as online fulfilment delivery times shorten further.
Debt and Equity Capital Markets
The era of unorthodox stimulus by all European central banks continued throughout the period. Whilst markets have anticipated a continuing reduction in the amount of asset purchases by the ECB through 2017 the current level of support has allowed many companies to continue to issue debt at record low cost. Not surprisingly the period saw record debt issuance in our sector. However much of this was debt restructuring as companies, particularly European ones, took the opportunity to retire existing bonds and fix for longer periods at these historic low levels. A strategy we applaud wholeheartedly and one which some of the larger UK companies should heed before it becomes more expensive. In total pan European property companies raised EUR19.3bn in the twelve months to March 2017 compared to EUR13.7bn in the previous period. The average LTV, as calculated by EPRA, the industry trade body, has continued to fall over the period which is reassuring.
In previous reports we have sought to provide one clear example of how the cost of debt was still falling in the period. In November last year, Unibail Rodamco, the largest property company in Europe announced a EUR500m 8 year bond with a fixed coupon of 0.85%, the lowest ever achieved by a listed property company. Convertibles have also proved popular particularly amongst the residential businesses. Buwog issued a EUR300m 5 year convertible bond with a zero coupon whilst Deutsche Wohnen placed convertible bonds totalling EUR800m with an aggregate coupon of 0.325%.
Unsurprisingly given the geopolitical risks of multiple elections across Europe and the Referendum in the UK, equity capital markets were more subdued with GBP5.7bn raised through rights issues and placings but without a single new IPO into the benchmark index. Germany dominated with raisings from ADO and Deutsche Wohnen in the residential space. We also saw issuance from Deutsche Euroshop, Hamborner and TLG. In the UK the raisings were dominated by companies focused on either industrial/logistics, student housing or healthcare. Tritax Bigbox were once again on the roster raising GBP250m in October bringing their total raised since IPO to GBP1.3bn. Post the year end they have announced a further raising of up to GBP350m.
Property Shares
As highlighted in the Interim, the first half of the year saw a very sharp divergence in the performance of the UK and Continental Europe. The 6.5% return from UK property companies between the beginning of the financial year and 23 June sums up the optimism and expectation of a Remain vote. Over that period, Continental Europe returned just 2.2% in EUR terms. From 23rd June to the end of the first half, 30 September, UK stocks fell -8.2% whilst the Continental names rose 3.9% in EUR terms. These summary figures mask a period of extraordinary volatility in the aftermath of the Referendum result.
The second half of the year saw property shares experiencing an autumnal sell off as investors rotated from defensives and companies seen as 'bond proxies' into cyclicals offering greater exposure to an improving global recovery. This rotation gathered pace post the US presidential election as markets priced in a tailwind of fiscal support. Bond yields across all developed markets rose and sub sectors such as German residential which are perceived as stable income streams with restricted growth due to regulated rents fared very poorly in the last quarter of the year. The German element of the benchmark fell over 15% between September and November.
The last quarter of the financial year saw a stabilising of share prices after a strong recovery in December. Investors began to realise that the US had not only embarked on an interest rate normalisation phase but may well now receive an injection of fiscal largesse with the potential lowering of tax rates. However, Europe is not travelling at the same speed and there is no expectation that the ECB is going to lift the base rate soon. Longer dated bond yields have continued to rise modestly, the 10 year Bund rose from -10 bps to +34 bps in the second half of the financial year, but they remain at historic low levels. Investors continue to seek alternative sources of (higher) income than the miserable returns from fixed income. The last quarter of the financial year coincides with the reporting season for companies with a December year end and share prices responded to a steady stream of results which matched or exceeded earnings expectations. The message from companies was one of continued focus on revenue and a broad expectation that the improvements in the underlying economic environment would translate into tenant demand and rental growth. One important distinction between the UK and Continental Europe was the direction of capitalisation rates. The UK listed sector, dominated by exposure to London and large shopping centres is now experiencing rising capitalisation rates as rental growth prospects recede, whilst much of the Continent is still reporting yield compression particularly in prime office markets reflecting the prospect of rental growth.
Investment Activity
Investment turnover (purchases and sales divided by two) equated to 31.6% of the average assets over the period. Whilst investment activity reflected a heightened level of tactical repositioning due to a range of macro factors, the strategic positioning particularly at the asset and sub-sector level saw a continuation of a number of themes which have been running for a while. Our approach to retail exposure is a case in point. We no longer hold either of the UK's largest pure retail landlords, Intu and Hammerson. Our exposure is through Capital & Regional and New River Retail, where we increased the former but decreased the latter. We continue to focus on stocks where rents have rebased to affordable levels and where investors are being rewarded through higher income returns in an area of the market which is suffering huge structural headwinds. Asset management gains are a key part of the overall returns from these businesses and a small number of initiatives can make a large difference in these smaller companies. In the case of the larger stocks, they both have large development and repositioning pipelines but we don't believe the returns offered justify the risk on such large schemes.
We remain more confident about retail in Europe and our exposure has consolidated into four names, Unibail and Klepierre focused on prime and Mercialys and Eurocommercial in the sub-regional space. We have therefore exited (or are close to completing our exit) from Citycon (Finland), Wereldhave (Netherlands, Finland and France), Vastned Retail (Netherlands, France and Spain) and Deutsche Euroshop (Germany and Central Eastern Europe).
As discussed earlier in the report, the winners in the game of omni channel retailing are the warehouse landlords and developers. We have been increasing our exposure to this sector for several years (as the other side of the reduction in retail) and this accelerated both in the UK and Continental Europe. Segro is now the second largest UK position and the capital raises in September 2016 and March 2017 enabled significant expansion in our position. The stock was the top performing UK large cap in the period, returning 20.5%. Hansteen has been a stock we have traded in over many years and undue share price weakness early last year enabled us to rebuild the position. We were pleased with the announcement of the sale of the entire European portfolio allowing management to concentrate on the UK. London Metric announced their intention to exit over time from retail warehousing and focus on distribution and the company is now 2% of our assets. Tritax Bigbox gives us exposure to this sector but their addiction to raising equity will result in a cash drag and sub par earnings growth hence our modest position. This is not the issue at Argan, our preferred logistics play in France, where the CEO and his family own half the business and are focused on organic growth. The stock returned 32.7% in the period.
In last year's report I commented on the reduced London exposure and that strategic move continued up to the Referendum. However we were still exposed into June and that resulted in some weak relative performance in the aftermath. The London office specialists, Derwent London, Great Portland Estates and Workspace are well run businesses with solid balance sheets and low leverage. As a group we did not reduce exposure further post the result. The surprising weakness was in both St Modwen and CLS Holdings, two large holdings. We reduced exposure in the former but the subsequent resilience of the UK regional markets and the appointment of a well regarded new CEO led to a strong recovery in the share price. On a happier note, we held the CLS position and then added to it. Alongside the Vauxhall site (now sold), the business had one of the highest cashflows per share in the sector with a portfolio of edge of city centre and suburban offices in the UK, France and Germany. The total return for the year was 18.4%.
With bond yields across Europe set to rise further as the Eurozone economies improve we have rotated our residential focus to the higher yielding businesses, (Vonovia and LEG) and those with development pipelines (Buwog).
Our renewed interest in Spain evolved further with additional investment in Hispania. The business will be wound up by 2020 and importantly management's carried interest is paid only on the exit.
Revenue and Revenue Outlook
As highlighted in the Chairman's Statement revenue for the year is up by over 36% with currency being a significant factor as our European earnings became worth more in Sterling terms. Other factors did play a part, with some ex-dividend date changes around the year end being brought forward and some companies moving from annual to more regular dividends in the period. We expect most of these dates to be maintained for the current year but companies will not commit to ex-dividend dates until they make their individual announcements, so these can always change again.
This step change in the level of earnings can be expected to be maintained whilst Sterling remains at current levels. Results announced year to date have been positive in the main with dividend growth in many of the stocks in which we invest. As expressed earlier, strength of income is an important part of our investment decision process and we remain upbeat about the income account. The big caveat is currencies, if Sterling begins to strengthen from current levels this could have a significant negative impact depending on timing and quantum.
Gearing and Debt
Gearing increased from 11.9% to 13.3% over the year. With our private placement long-term debt in place and funding levels through CFDs still providing very competitively priced gearing, we reduced the amount available under one of our revolving credit facilities which renewed in January, from GBP50m to GBP40m. This is a modest reduction but undrawn debt under these facilities does carry a non-utilisation fee, as we have sufficient capacity to gear with this reduced facility level we opted to make the small saving.
Under new legislation effective from the beginning of April 2017, the amount of interest deductible when calculating tax payable has been restricted. Even at low levels of gearing, we will be caught by this to a small extent and the result will be a modest increase in the tax charge. This will be evaluated as a cost of debt when considering gearing levels but is not likely to influence gearing decisions when interest rates remain at current low levels. There are exemptions to these restrictions for some categories of business and Real Estate Investment Trusts are one example, so most of our investee companies will not suffer the restriction, however some non-REIT businesses may and they are engaging with their advisers. The Investment Trust industry lobbied HMRC through the AIC to extend the exemptions to regular Investment Trusts, but this was rejected.
Direct Physical Portfolio
The physical property portfolio produced a total return of 2.6% for the twelve months to March 2017 with an income return of 3.4% and a capital return of -0.7%.
At our industrial estate in Wandsworth, London we have completed our programme of lease renewals, extending the expiry profile for the estate so all leases now expire in 2019. This facilitates a redevelopment of the estate at that time. Overall 11 leases were extended and 1 new letting was concluded with the rents received on those units increasing by 25%. Only 2 units are vacant and one of those is under offer. Our other industrial assets in Gloucester, Bristol and Plymouth have performed well over the year with the new lettings in Gloucester delivering further rental growth with a void period of only 2 months.
At the Colonnades in Bayswater, we have experienced a delay in the letting of the ground floor retail units. Our planning application merging two units to facilitate the letting to Babaji, the restaurant operator, was turned down by the City of Westminster planning committee. We believe that Babaji would be an excellent restaurant operator and we have therefore made an appeal to the Planning Inspectorate with a decision expected in late September. At the time of writing we have strong interest in the two remaining units from a range of occupiers. We are keen to ensure that the tenant mix is complementary as this will be essential to the success of the overall development and therefore we are not rushing to secure the first possible party. The number of residential lease extensions was modest with only 5 flats extending their tenure. This is not a surprise and reflects the uncertainty generated by the Referendum result. We are in no rush to complete lease extensions as the effluxion of time towards each lease expiry merely increases the landlord's residual value and the ultimate extension premium which must be paid.
Outlook
Property is a pro-cyclical asset class, without economic growth market rents can't rise. Whilst that is an obvious point it is worth reiterating as investors have become overly (in our view) concerned about the threat of rising bond yields. Given the improving economic backdrop across Europe, bond yields need to begin the slow path to normalisation following the almost decade long effort by central banks to reduce the cost of debt through ultra loose monetary policy. The economic survey data amongst the major euro-zone economies has converged, they are all benefiting from low borrowing costs, good debt availability, a competitive Euro/Dollar rate, a pick up in global demand and improving labour markets. Headline inflation has ticked up but core consumer prices and broad money growth remain muted. If core inflation remains below 2% then the ECB have the latitude to elongate the 'glide path' of reducing their bond buying programme. Few are predicting an increase in the base rate before late 2018 or even into 2019. Meanwhile the gap between property yields and real interest rates remains at an all time high. The combination of the improving economic outlook within Continental Europe, the reduction in short term political risk and the modest performance of property equities (they are not overvalued) reinforces our positive outlook.
The UK has performed much better than many observers expected since the Referendum. Values of commercial property as measured by the MSCI/IPD data remain robust. The very high proportion of international buyers in the Central London office investment market is both a positive (they see an opportunity) and a negative (how far is currency weakness the driver). We are concerned that demand, particularly from financial services, will weaken further as negotiations with Brussels drag on. The good news is that equity prices have quickly adjusted and now represent fair value. The outperformance of the UK economy versus most European economies over the last nine months has been strong but that gap will narrow. The UK has experienced a credit boom and the UK consumers remain far more indebted than their Continental counterpart. We think stagnating real wage growth will be an additional headwind for retail sales growth.
Property will continue to be a valuable source of income for so many investors and whilst we see risks to some sub-sectors capital growth prospects, there are many parts of the market both in the UK and Continental Europe which we view as attractive opportunities for growth. Underpinning the vast majority of markets is the benign backdrop of low levels of speculative construction in commercial property markets and coupled with the strong financial position of most listed property companies leads us to feel confident that the asset class will remain a relative outperformer.
Marcus Phayre-Mudge
Fund Manager
25 May 2017
Overview of strategy, performance measurement and risk management
Investment Objective and Benchmark
The Company's Objective is to maximise shareholders' total return by investing in the shares and securities of property companies and property related businesses internationally and also in investment property located in the UK.
The benchmark is the FTSE EPRA/NAREIT Developed Europe Capped Net Total Return Index in Sterling. The index, calculated by FTSE, is free-float based and currently has 103 constituent companies. The index limits exposure to any one company to 10% and reweights the other constituents pro-rata. The benchmark website www.epra.com contains further details about the index and performance.
Business Model
The Company's business model follows that of an externally managed investment trust.
The Company has no employees. Its wholly non-executive Board of five Directors retains responsibility for corporate strategy; corporate governance; risk and control assessment; the overall investment and dividend policies; setting limits on gearing and asset allocation and monitoring investment performance.
The Board has appointed F&C Investment Business Limited as the Alternative Investment Fund Manager with portfolio management delegated to Thames River Capital LLP. Marcus Phayre-Mudge acts as Fund Manager to the Company on behalf of Thames River Capital LLP and Alban Lhonneur is Deputy Fund Manager. George Gay is the Direct Property Manager and Joanne Elliott the Finance Manager. They are supported by a team of equity and portfolio analysts.
Further information in relation to the Board and the arrangements under the Investment Management Agreement can be found in the Report of the Directors below.
In accordance with the AIFMD, BNP Paribas has been appointed as Depository to the Company. BNP Paribas also provide custodial and administration services to the Company. Company secretarial services are provided by Capita Company Secretarial Services.
The specific terms of the Investment Management Agreement are set out in the Directors' Report.
Strategy and Investment Policies
The investment selection process seeks to identify well managed companies of all sizes. The Manager generally regards future growth and capital appreciation potential more highly than immediate yield or discount to asset value.
Although the investment objective allows for investment on an international basis, the benchmark is a Pan-European Index and the majority of the investments will be located in that geographical area. Direct property investments are located in the UK only.
As a dedicated investor in the property sector the Company cannot offer diversification outside that sector, however, within the portfolio there are limitations, as set out below, on the size of individual investments held to ensure diversification within the portfolio.
Asset allocation guidelines
The maximum holding in the stock of any one issuer or of a single asset is limited to 15% of the portfolio at the point of acquisition. In addition, any holdings in excess of 5% of the portfolio must not in aggregate exceed 40% of the portfolio.
The Manager currently applies the following guidelines for asset allocation;
UK listed equities 25 - 50%
Continental European listed equities 45 - 75%
Direct Property - UK 5 - 20%
Other listed equities 0 - 5%
Listed bonds 0 - 5%
Unquoted investments 0 - 5%
Gearing
The Company may employ levels of gearing from time to time with the aim of enhancing returns, subject to an overall maximum of 25% of the portfolio value.
In certain market conditions the Manager may consider it prudent not to employ gearing on the balance sheet at all, and to hold part of the portfolio in cash.
The current asset allocation guideline is 10% net cash to 25% net gearing (as a percentage of portfolio value).
Property Valuation
Investment properties are valued every six months by an external independent valuer. If a material event occurs in the intervening period, then an interim valuation will be instructed on the property in question. Valuations of all the Group's properties as at 31 March 2017 have been carried out on a "Red Book" basis and these valuations have been adopted in the accounts.
Allocation of costs between Revenue & Capital
On the basis of the Board's expected long-term split of returns in the form of capital gains and income, the Group charges 75% of annual base management fees and finance costs to capital. All performance fees are charged to capital.
Key Performance Indicators
The Board assesses the performance of the Manager in meeting the Trust's objective against the following Key Performance Indicators ("KPIs"):
KPI Board monitoring and outcome
-------------------------------- ----------------------------------------------------------------
Net Asset Value Total
Return Relative to the * The Board reviews the performance in detail at each
benchmark. meeting and discusses the results and outlook with
The Directors regard the Manager
the Company's net asset
value total return performance Outcome
in comparison with the ------------------ -----------------
benchmark as being an 1 year 5 years
overall measure of value ------------------ ------- --------
delivered to the shareholders' 8.0 122.7
over the longer term NAV Total Return % %
------------------ ------- --------
Benchmark Total 6.5 87.3
Return % %
------------------ ------- --------
-------------------------------- ----------------------------------------------------------------
Delivering a reliable
dividend which is growing * The Board reviews statements on income received to
over the longer term date and income forecasts at each meeting.
The principal objective
of the Company is a Outcome
total return objective, ------------------- -----------------
however, the Manager 1 year 5 years
aims to deliver a reliable ------------------- ------- --------
dividend with growth Compound Dividend
over the longer term. Growth 25.7% 9.7%
------------------- ------- --------
3.1 11.8
RPI % %
------------------- ------- --------
-------------------------------- ----------------------------------------------------------------
The Discount or Premium
at which the Company's * The Board takes powers at each AGM to buy-back and
shares trade compared issue shares. When considering the merits of share
with Net Asset Value buy-back or issuance, the Board looks at a number of
Whilst investment performance factors in addition to the short and longer-term
is expected to be a discount or premium to NAV to assess whether action
key driver of the share would be beneficial to the shareholders overall.
price discount or premium Particular attention is paid to the potential impact
to the net asset value of any share buy-back activity on the liquidity if
of an investment trust the shares and on ongoing charges over the longer
over the longer-term, term.
there are periods of
volatility when the Outcome
discount can widen. ------------------------ ------------------
The Board is aware of 1 year 5 years
the vulnerability of ------------------------ -------- --------
a sector-specialist Average discount 11.9% 6.8%
trust to a change of ------------------------ -------- --------
investor sentiment towards Total number
that sector. of shares repurchased 150,000 525,000
------------------------ -------- --------
-------------------------------- ----------------------------------------------------------------
Level of Ongoing Charges
The Board is conscious * Expenses are budgeted for each financial year and the
of expenses and aims Board reviews regular reports on actual and forecast
to deliver a balance expenses throughout the year.
between strong service
and costs. Outcome
The AIC definition of ------------------------ ------------------
Ongoing Charges includes 1 year 4 years*
any direct property ------------------------ ------- ---------
costs in addition to Ongoing Charges
the management fees excluding Performance
and all other expenses Fees and Property
incurred in running Costs 0.64% 0.69%
a publicly listed company. ------------------------ ------- ---------
As no other investment
trusts hold part of
their portfolio in direct *Ongoing Charges calculation
property (they either introduced in 2013 therefore
hold 100% of their portfolio this statistic has only been
as property securities produced for four years.
or as direct property),
this statistic is shown
without direct property
costs to allow a clearer
comparison of overall
administration costs
with other funds investing
in securities.
-------------------------------- ----------------------------------------------------------------
Investment Trust Status
The Company must continue * The Board reviews financial information and forecasts
to operate in order at each meeting which set out the requirements.
to meet the requirements
for Section 1158 of
the Corporation Tax * The Directors believe that the conditions and ongoing
Act 2010. requirements have been met in respect of the year to
31 March 2017 and that the Company will continue to
meet the requirements.
-------------------------------- ----------------------------------------------------------------
Principal Risks and Uncertainties
In delivering long-term returns to shareholders, the Board must also identify and monitor the risks that have been taken in order to achieve that return. The Board has included below details of the principal risks and uncertainties facing the Company and the appropriate measures taken in order to mitigate these risks as far as practicable.
Risk Identified Board monitoring and mitigation
----------------------------------------------------------------- -----------------------------------------------------------------
Share price performs
poorly in comparison * The Board monitors the level of discount or premium
to the underlying NAV at which the shares are trading over the short and
The shares of the Company longer-term
are listed on the London
Stock Exchange and the
share price is determined * The board encourages engagement with the
by supply and demand. shareholders. The Board receives reports at each
The shares may trade meeting on the activity of the company's broker, PR
at a discount or premium agent and meetings and events attended by the Fund
to the Company's underlying Manager.
NAV and this discount
or premium may fluctuate
over time. * The Company's shares are available through the F&C
share schemes and the company participates in the
active marketing of these schemes. The shares are
also widely available on open architecture platforms
and can be held directly through the Company's
registrar.
* The Board takes the powers to buy-back and issue
shares at each AGM.
----------------------------------------------------------------- -----------------------------------------------------------------
Poor investment performance
of the portfolio relative * The Manager's objective is to outperform the
to the benchmark. benchmark. The Board regularly reviews the Company's
The Company's portfolio long term strategy and investment guidelines and the
is actively managed. manager's relative positions against these
In addition to investment
securities the Company
also invests in commercial
property and accordingly, * The Management Engagement Committee reviews the
the portfolio may not Managers performance annually. The Board has the
follow or outperform powers to change the Manager if deemed appropriate.
the return of the benchmark
----------------------------------------------------------------- -----------------------------------------------------------------
Market risk
Both share prices and * The Board receives and considers a regular report
exchange rates may move from the Manager detailing asset allocation,
rapidly and adversely investment decisions, currency exposures, gearing
impact the value of levels and rationale in relation to the prevailing
the Company's portfolio. market conditions
Although the portfolio
is diversified across
a number of geographical
regions, the investment
mandate is focused on
a single sector and
therefore the portfolio
will be sensitive towards
the property sector,
as well as global equity
markets more generally.
Property companies are
subject to many factors
which can adversely
affect their investment
performance, these include
the general economic
and financial environment
in which their tenants
operate, interest rates,
availability of investment
and development finance
and regulations issued
by governments and authorities
The UK property market
may be adversely affected
by Brexit. The market
will respond as the
negotiations unfold
and the impact on occupation
across each sector and
geographical location
becomes clear.
----------------------------------------------------------------- -----------------------------------------------------------------
The Company is unable
to maintain its progressive * The Board receives and considers regular income
policy on dividends forecasts.
progressive policy on
dividends
Lower earnings in the
underlying portfolio * Income forecast sensitivity to changes in FX rates is
may put pressure on also monitored.
the Company's ability
to maintain a progressive
dividend could result
from a number of factors;
l lower earnings and * The Company has revenue reserves which can be drawn
distributions in investee upon when required.
companies
* prolonged vacancies in the direct property portfolio
* strengthening sterling reducing the value of overseas
dividend receipts in sterling terms
* adverse changes in the tax treatment of dividends or
other income received by the company
* changes in the timing of dividend receipts from
investee companies.
The Company has seen
a material increase
in the level of earnings
in the current year
and a significant factor
in this has been the
weakening of sterling
following the Brexit
decision. This may reverse
in the near or medium
term as the negotiations
progress, leading to
a fall in earnings.
----------------------------------------------------------------- -----------------------------------------------------------------
Accounting and operational
risks * Third party service providers produce periodic
Disruption or failure reports to the Board on their control environments
of systems and processes and business continuation provisions on a regular
underpinning the services basis.
provided by third parties
and the risk that these
suppliers provide a * The Management Engagement Committee considers the
sub-standard service. performance of each of the service providers on a
regular basis and considers their ongoing
appointment.
* The Custodian and Depository are responsible for the
safeguarding of assets. In the event of a loss of
assets the Depository must return assets of an
identical type or corresponding amount unless able to
demonstrate that the loss was the result of an event
beyond their reasonable control.
----------------------------------------------------------------- -----------------------------------------------------------------
Financial risks
The Company's investment * Details of these risks together with the policies for
activities expose it managing these risks are found in the Notes to the
to a variety of financial Financial Statements.
risks which include,
counterparty credit
risk, liquidity risk
and the valuation of
financial instruments.
----------------------------------------------------------------- -----------------------------------------------------------------
Loss of Investment Trust
Status * The Investment Manager monitors the investment
The Company has been portfolio, income and proposed dividend levels to
accepted by HM Revenue ensure that the provisions of CTA 2010 are not
& Customs as an investment breached. The results are reported to the Board at
trust, subject to continuing each meeting.
to meet the relevant
eligibility conditions.
As such the Company * The income forecasts are reviewed by the Company's
is exempt from capital tax advisor through the year who also reports to the
gains tax on the profits Board on the year-end tax position and reports on CTA
realised from the sale 2010 compliance.
of investments.
Any breach of the relevant
eligibility conditions
could lead to the Company
losing investment trust
status and being subject
to corporation tax on
capital gains realised
within the company's
portfolio.
----------------------------------------------------------------- -----------------------------------------------------------------
Legal, regulatory and
reporting risks * The Board receives regular regulatory updates from
Failure to comply with the Manager, Company Secretary, legal advisors and
the London Stock Exchange Auditors. The Board considers these reports and
Listing Rules and Transparency recommendations and takes action accordingly.
and Disclosure rules;
failing to meet the
requirements under the * The Board receives an annual report and update from
Alternative Investment the Depository.
Funds Directive, the
provisions of the Companies
Act 2006 and other UK, * Internal checklists and review procedures are in
European and overseas place at service providers.
legislation affecting
UK companies. Failure
to meet the required * External auditors review Interim & Annual Reports and
accounting standards audit year end Financial Statements.
or make appropriate
disclosures in the Interim
and Annual Reports.
----------------------------------------------------------------- -----------------------------------------------------------------
Inappropriate use of
gearing * The Board receives regular reports from the Manager
Gearing, either through on the levels of gearing in the portfolio. These are
the use of bank debt considered against the gearing limits set in the
or through the use of Investment Guidelines and also in the context of
derivatives may be utilised current market conditions and sentiment.
from time to time. Whilst
the use of gearing is
intended to enhance
the NAV total return,
it will have the opposite
effect when the return
of the Company's investment
portfolio is negative.
----------------------------------------------------------------- -----------------------------------------------------------------
Personnel changes at
Investment Manager * The Chairman conducts regular meetings with the Fund
Loss of portfolio manager Management team.
of other key staff.
* The fee basis protects the core infrastructure and
depth and quality resources. The fee structure
incentivises good performance and is fundamental in
the ability to retain staff.
----------------------------------------------------------------- -----------------------------------------------------------------
Exercise of voting power
The Board has approved a corporate governance voting policy which, in its opinion, accords with current best practice whilst maintaining a primary focus on financial returns.
The exercise of voting rights attached to the Company's portfolio has been delegated to the Manager who take a global approach to engagement with issuers and their management in all of the jurisdictions in which it invests. The Manager is required to include disclosure about the nature of their commitment to the Financial Reporting Committee's Stewardship Code and details may be found at www.fandc.com
Environmental policy & Socially Responsible Investment
The Company considers that good corporate governance extends to policies on the environment, employment, human rights and community relationships. Corporates are playing an increasingly important role in global economic activity and the adoption of good corporate governance enhances a company's economic prospects by reducing the risk of government and regulatory intervention and any ensuing damage to its business or reputation.
The Company has adopted an environmental policy in respect of its investments in both physical property and listed property companies. Within the context of the overall aim of the Company to maximise shareholders' returns the Directors will seek to limit the Company's and its investee companies' impact on the environment and will comply with all relevant legislation relating to its operations and activities.
The environmental policies and behaviour of all the companies in which the Company invests are taken into account in decision making.
Good environmental management can play a role in overall risk management and also have a financial impact in terms of savings through energy and water efficiency. Where appropriate the Manager will engage with investee companies to raise concerns about environmental matters.
So far as direct property investments are concerned, the Company conducts environmental audits prior to purchase to identify contamination or materials considered environmentally harmful. The Company will take remedial action or enforce tenant obligations to do so wherever appropriate. The Company's advisers assess the environmental impact of its properties on an ongoing basis and will take all necessary action to comply with environmental responsibilities.
The Company has no greenhouse gas emissions to report from the operations of the Company, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013, including those within its underlying investment portfolio.
Diversity, Gender Reporting and Human Rights Policy
The Board recognises the requirement under Section 414 of the Companies Act 2006 to detail information about employee and human rights; including information about any policies it has in relation to these matters and effectiveness of these policies. As the Trust has no employees, this requirement does not apply. The Directors are also satisfied that, to the best of their knowledge, the Company's principal suppliers, comply with the provisions of the UK Modern Slavery Act 2015.
The Board currently comprises four male and one female Directors. The Board's diversity policy is outlined in more detail in the Corporate Governance Report. The Manager has an equal opportunity policy which is set out on its website www.fandc.com.
Statement of directors' responsibilities in relation to the Group financial statements
The directors are responsible for preparing the Report and Accounts in accordance with applicable United Kingdom law and those International Financial Reporting Standards as adopted by the European Union.
Under Company Law the directors must not approve the Group and Company financial statements unless they are satisfied that they present fairly the financial position, financial performance and cash flows of the Group and Company for that period.
In preparing the Group financial statements the directors are required to:
o select suitable accounting policies in accordance with IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors and then apply them consistently;
o present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
o provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group and Company's financial position and financial performance;
o state that the Group and Company has complied with IFRSs, subject to any material departures disclosed and explained in the financial statements; and
o make judgements and estimates that are reasonable and prudent.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the Group and Company financial statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Group Consolidated Statement of Comprehensive Income
For the year ended 31 March 2017
Year ended 31 March Year ended 31 March
2017 2016
Capital Revenue
Revenue Return Return Total Return Capital Return Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- -------------- --------- --------- --------- -------------- ----------
Income
Investment income 35,574 - 35,574 27,358 - 27,358
Other operating income 62 - 62 74 - 74
Gross rental income 3,781 - 3,781 3,330 - 3,330
Service charge income 1,549 - 1,549 1,023 - 1,023
Gains on investments
held at fair value - 52,693 52,693 - 64,087 64,087
Net movement on foreign
exchange; investments
and loan notes
Net movement on foreign
exchange; cash and
cash equivalents - (1,130) (1,130) - 1,768 1,768
Net returns on contracts
for difference
- 2,450 2,450 - 709 709
4,457 (1,487) 2,970 2,905 (4,166) (1,261)
---------------------------- -------------- --------- --------- --------- -------------- ----------
Total Income 45,423 52,526 97,949 34,690 62,398 97,088
---------------------------- -------------- --------- --------- --------- -------------- ----------
Expenses
Management and performance
fees (1,314) (5,092) (6,406) (1,229) (7,042) (8,271)
Direct property expenses,
rent payable and
service charge costs
Other administrative
expenses (2,078) - (2,078) (1,533) - (1,533)
(1,213) (546) (1,759) (1,269) (481) (1,750)
---------------------------- -------------- --------- --------- --------- -------------- ----------
Total operating expenses (4,605) (5,638) (10,243) (4,031) (7,523) (11,554)
---------------------------- -------------- --------- --------- --------- -------------- ----------
Operating profit 40,818 46,888 87,706 30,659 54,875 85,534
Finance costs (621) (1,842) (2,463) (894) (2,682) (3,576)
---------------------------- -------------- --------- --------- --------- -------------- ----------
Profit from operations
before tax 40,197 45,046 85,243 29,765 52,193 81,958
---------------------------- -------------- --------- --------- --------- -------------- ----------
Taxation (4,080) 1,822 (2,258) (3,221) 1,720 (1,501)
---------------------------- -------------- --------- --------- --------- -------------- ----------
Total comprehensive
income 36,117 46,868 82,985 26,544 53,913 80,457
---------------------------- -------------- --------- --------- --------- -------------- ----------
Earnings per Ordinary
share 11.38p 14.76p 26.14p 8.36p 16.98p 25.34p
---------------------------- -------------- --------- --------- --------- -------------- ----------
The Total column of this statement represents the Group's Statement of Comprehensive Income, prepared in accordance with IFRS.
The Revenue Return and Capital Return columns are supplementary to this and are prepared under guidance published by the
Association of Investment Companies. All items in the above statement derive from continuing operations.
All income is attributable to the shareholders of the parent company. There are no minority interests.
Group and Company Statement of Changes in Equity
Group
Capital Retained
For the year ended Share Capital Share Premium Redemption Earnings
31 March 2017 Ordinary Account Reserve Ordinary Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ------------- ------------- ----------- --------- ---------
At 31 March 2016 79,375 43,162 43,934 898,948 1,065,419
Net profit for the
year - - - 82,985 82,985
Shares repurchased (37) - 37 (459) (459)
Dividends paid - - - (29,521) (29,521)
--------------------- ------------- ------------- ----------- --------- ---------
At 31 March 2017 79,338 43,162 43,971 951,953 1,118,424
--------------------- ------------- ------------- ----------- --------- ---------
Company
Capital Retained
For the year ended Share Capital Share Premium Redemption Earnings
31 March 2017 Ordinary Account Reserve Ordinary Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ------------- ------------- ----------- --------- ---------
At 31 March 2016 79,375 43,162 43,934 898,948 1,065,419
Net profit for the
year - - - 82,985 82,985
Shares repurchased (37) - 37 (459) (459)
Dividends paid - - - (29,521) (29,521)
--------------------- ------------- ------------- ----------- --------- ---------
At 31 March 2017 79,338 43,162 43,971 951,953 1,118,424
--------------------- ------------- ------------- ----------- --------- ---------
Group
For the year ended 31 March Capital Retained
2016 Share Capital Share Premium Redemption Earnings
Ordinary Account Reserve Ordinary Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 March 2015 79,375 43,162 43,934 843,574 1,010,045
Net profit for the period -- -- -- 80,457 80,457
Dividends paid -- -- -- (25,083) (25,083)
At 31 March 2016 79,375 43,162 43,934 898,948 1,065,419
----------------------------- ------------- ------------- ----------- --------- ----------
Company
For the year ended 31 March Share Capital Retained
2016 Share Capital Premium Redemption Earnings
Ordinary Account Reserve Ordinary Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 March 2015 79,375 43,162 43,934 843,574 1,010,045
Net profit for the period -- -- -- 80,457 80,457
Dividends paid -- -- -- (25,083) (25,083)
At 31 March 2016 79,375 43,162 43,934 898,948 1,065,419
============================= ============= ======== =========== ========= ==========
Group and Company Balance Sheets
as at 31 March 2017
Group Company Group Company
2017 2017 2016 2016
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- ----------- ----------- ----------- -----------
Non-current assets
Investments held at
fair value 1,144,776 1,144,776 1,098,560 1,098,560
Investments in subsidiaries - 50,531 - 53,052
----------------------------------- ----------- ----------- ----------- -----------
1,144,776 1,195,307 1,098,560 1,151,612
-----------------------------------
Deferred taxation
asset 243 243 243 243
----------------------------------- ----------- ----------- ----------- -----------
1,145,019 1,195,550 1,098,803 1,151,855
----------------------------------- ----------- ----------- ----------- -----------
Current assets
Debtors 38,809 38,687 28,978 28,579
Cash and cash equivalents 6,445 6,420 22,754 22,741
----------------------------------- ----------- ----------- ----------- -----------
45,254 45,107 51,732 51,320
Current liabilities (14,081) (64,465) (30,473) (83,113)
----------------------------------- ----------- ----------- ----------- -----------
Net current assets/(liabilities) 31,173 (19,358) 21,259 (31,793)
Total assets less
current liabilities 1,176,192 (1,176,192) 1,120,062 1,120,062
Non-current liabilities (57,768) (57,768) (54,643) (54,643)
----------------------------------- ----------- ----------- ----------- -----------
Net assets 1,118,424 1,118,424 1,065,419 1,065,419
----------------------------------- ----------- ----------- ----------- -----------
Capital and reserves
Called up share capital 79,338 79,338 79,375 79,375
Share premium account 43,162 43,162 43,162 43,162
Capital redemption
reserve 43,971 43,971 43,934 43,934
Retained earnings 951,953 951,953 898,948 898,948
----------------------------------- ----------- ----------- ----------- -----------
Equity shareholders'
funds 1,118,424 1,118,424 1,065,419 1,065,419
----------------------------------- ----------- ----------- ----------- -----------
Net Asset Value per:
----------------------------------- ----------- ----------- ----------- -----------
Ordinary share 352.42p 352.42p 335.56p 335.56p
----------------------------------- ----------- ----------- ----------- -----------
Group and Company Cash Flow Statements
as at 31 March 2017
Group Company Group Company
2017 2017 2016 2016
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- ----------- ----------- ----------- -----------
Reconciliation of profit from
operations before tax to net
cash inflow from operating
activities
Profit from operations before
tax 85,243 85,050 81,958 81,958
Financing costs 2,463 3,455 3,752 3,140
Gains on investments and derivatives
held at fair value through
profit or loss (51,206) (48,671) (59,921) (59,456)
Net movement on foreign exchange;
cash and cash equivalents
and loan notes 669 669 223 223
(Increase) / decrease in accrued
income (624) (1,016) 645 646
Net sales of investments 4,606 4,606 28,848 28,848
Increase in sales settlement
debtor (5,591) (5,591) (415) (415)
(Decrease) / increase in purchase
settlement creditor (3,216) (3,216) 523 523
Increase in other debtors (1,595) (1,602) (18,631) (18,631)
Decrease in other creditors (1,575) (4,237) (5,634) (21,097)
Scrip dividends included in
investment income and net
returns on contracts for difference (1,450) (1,450) (1,223) (1,223)
-------------------------------------- ----------- ----------- ----------- -----------
Net cash inflow from operating
activities before interest
and taxation 27,724 27,997 30,125 14,516
Interest paid (2,437) (3,042) (3,752) (3,140)
Taxation paid (4,066) (3,746) (1,383) (1,383)
-------------------------------------- ----------- ----------- ----------- -----------
Net cash inflow from operating
activities 21,221 21,209 24,990 9,993
Financing activities
Equity dividends paid (29,521) (29,521) (25,083) (25,083)
Repayment of loans (10,000) (10,000) (38,000) (38,000)
Repayment of debenture stock - - (15,000) -
Repurchase of shares (459) (459) - -
Issue of loan notes - - 53,711 53,711
Net cash used in financing
activities (39,980) (39,980) (24,372) (9,372) -------------------------------------- ----------- ----------- ----------- ----------- (Decrease) / Increase in cash (18,759) (18,771) 618 621 Cash and cash equivalents at start of year 22,754 22,741 21,427 21,411 Net movement in foreign exchange; cash and cash equivalents 2,450 2,450 709 709 -------------------------------------- ----------- ----------- ----------- ----------- Cash and cash equivalents at end of year 6,445 6,420 22,754 22,741 -------------------------------------- ----------- ----------- ----------- ----------- Note Dividends received 35,834 35,820 30,199 30,199 Interest received 41 41 194 194
Notes to the Preliminary Announcement
1 Accounting Policies
The financial statements for the year ended 31 March 2017 have been
prepared on a going concern basis, in accordance with International
Financial Reporting Standards (IFRS), which comprise standards and
interpretations approved by the International Accounting Standards
Board (IASB), together with interpretations of the International
Accounting Standards and Standing Interpretations Committee approved
by the International Accounting Standards Committee (IASC) that remain
in effect, to the extent that they have been adopted by the European
Union and as regards the Company financial statements, as applied
in accordance with the provisions of the Companies Act 2006. The
financial statements have also been prepared in accordance with the
Statement of Recommended Practice (SORP), "Financial Statements of
Investment Trust Companies and Venture Capital Trusts," to the extent
that it is consistent with IFRS.
The Group and Company financial statements are expressed in Sterling,
which is their functional and presentational currency. Sterling is
the functional currency because it is the currency of the primary
economic environment in which the Group operates. Values are rounded
to the nearest thousand pounds (GBP'000) except where otherwise indicated.
2 Investment income
2017 2016
GBP'000 GBP'000
---------------------------------- -------- --------
Dividends from UK listed
investments 2,660 2,025
Dividends from overseas
listed investments 26,018 18,063
Scrip dividends from listed
investments 935 1,223
Interest from listed investments 21 109
Property income distributions 5,940 5,938
-------------------------------------- -------- --------
35,574 27,358
-------------------------------------- -------- --------
3 Earnings per share
Earnings per Ordinary share
The earnings per Ordinary share can be analysed between revenue
and capital, as below.
Year Year
ended ended
31 March 31 March
2017 2016
GBP'000 GBP'000
---------------------------------------------------- ----------------------------- -------------------------------
Net revenue profit 36,117 26,544
Net capital profit 46,868 53,913
_________ _________
Net total profit 82,985 80,457
_________ _________
Weighted average number
of Ordinary shares in
issue during the year 317,435,090 317,500,980
_________ _________
pence pence
Revenue earnings per
share 11.38 8.36
Capital earnings per
share 14.76 16.98
_________ _________
Earnings per Ordinary
share 26.14 25.34
_________ _________
4 Net asset value per Ordinary share
Net asset value per Ordinary share is based on the net assets
attributable to Ordinary shares of GBP1,118,424,000 (2016: GBP1,065,419,000)
and on 317,350,980 (2016: 317,500,980) Ordinary shares in issue
at the year end.
5 Share capital changes
During the year, the Company made market purchases for cancellation
of 150,000 Ordinary shares of 25p each, representing 0.05% of
the number of shares in issue at 31 March 2016. The aggregate
consideration paid by the Company for the shares was GBP459,000.
Since 31 March 2017 no Ordinary shares have been purchased and
cancelled.
6 Status of preliminary announcement
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 31 March 2017
or 2016. The financial information for 2016 is derived from the
statutory accounts for 2016 which have been delivered to the registrar
of companies. The auditor has reported on the 2016 accounts; their
report was (i) unqualified, (ii) did not include a reference to
any matters to which the auditor drew attention by way of emphasis
without qualifying their report and (iii) did not contain a statement
under section 498 (2) or (3) of the Companies Act 2006. The statutory
accounts for 2017 will be finalised on the basis of the financial
information presented by the directors in this preliminary announcement
and will be delivered to the registrar of companies in due course.
7 Fair value of financial assets and financial liabilities
Financial assets and financial liabilities are carried in the
Balance Sheet either at their fair value (investments) or the
balance sheet amount is a reasonable approximation of fair value
(due from brokers, dividends and interest receivable, due to brokers,
accruals and cash at bank).
Fair value hierarchy disclosures
The table below sets out fair value measurements using IFRS 13
fair value hierarchy.
Financial assets at fair value through profit or loss
At 31 March Level 1 Level Level Total
2017 GBP'000 2 3 GBP'000
GBP'000 GBP'000
---------------------- -------------- ------------ ----------- -------------
Equity investments 1,047,470 - 2 1,047,472
Investment Properties - - 97,304 97,304
Contracts for
difference - 2,146 - 2,146
---------------------- -------------- ------------ ----------- -------------
1,047,470 2,146 97,306 1,146,922
Level 1 Level Level Total
At 31 March GBP'000 2 3 GBP'000
2016 GBP'000 GBP'000
============ =============================== =========== =========== ================
Equity
investments 999,843 - 2 999,845
Investment
Properties - - 97,764 97,764
Fixed
interest
investments 951 - - 951
Contracts
for
difference - 329 - 329
Foreign
exchange
forward
contracts - 809 - 809
============ =============================== =========== =========== ================
1,000,794 1,138 97,766 1,099,698
============ =============================== =========== =========== ================
The table above represents the Group's fair value hierarchy. The
Company's fair value hierarchy is identical except for the inclusion
of the fair value of the investment in Subsidiaries which at 31
March 2017 was GBP50,531,000 (2016: GBP53,052,000) these have
been categorised as level 3 in both years. The total financial
assets at fair value for the Company at 31 March 2017 was GBP1,197,453,000
(2016: GBP1,151,941,000).
The movement from 31 March 2016 of GBP2,521,000 represents a reclassification
of GBP2,100,000 to a subsidiary intercompany account together
with depreciation of GBP421,000 (2016: GBP465,000 depreciation)
in the period.
Categorisation within the hierarchy has been determined on the
basis of the lowest level input that is significant to the fair
value measurement of the relevant asset as follows:
Level 1 - valued using quoted prices in an active market for identical
assets.
Level 2 - valued by reference to valuation techniques using observable
inputs other than quoted prices within Level 1.
Level 3 - valued by reference to valuation techniques using inputs
that are not based on observable market data.
The valuation techniques used by the Group are explained in the
accounting policies in the full Annual Report and Accounts.
Reconciliation of movements in financial assets categorised as
level 3
31 Appreciation
March / 31 March
2016 Purchases Sales (Depreciation) 2017
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============ ========================= ============ =========== ================ ===========
Unlisted
equity
investments 2 - - - 2
------------ ------------------------- ------------ ----------- ---------------- -----------
Investment
Properties
- Mixed use 54,152 773 (755) (1,083) 53,087
- Industrial 30,290 15 - 964 31,269
- Offices 13,322 328 - (702) 12,948
------------ ------------------------- ------------ ----------- ---------------- -----------
97,764 1,116 (755) (821) 97,304
============ ========================= ============ =========== ================ ===========
97,766 1,116 (755) (821) 97,306
============ ========================= ============ =========== ================ ===========
All appreciation/(depreciation) as stated above relates to unlisted
equity investments and investment properties held at 31 March
2017.
Transfers between hierarchy levels
There were no transfers during the year between level 1 and level
2 nor between levels 1 or 2 and level 3.
Key assumptions used in value in use calculations are explained
in the accounting policies in the full Annual Report and Accounts.
Sensitivity information
The significant unobservable inputs used in the fair value measurement
categorised within Level 3 of the fair value hierarchy of investment
properties are:
* Estimated rental value: GBP4-GBP50 per sq ft (2016:
same)
* Capitalisation rates: 3.5%-9.75% (2016: 4.0%-9.0%)
Significant increases (decreases) in estimated rental value in
isolation would result in a significantly higher (lower) fair
value measurement. A significant increase (decrease) in Capitalisation
Rates in isolation would result in a significantly lower (higher)
fair value measurement.
8 Business segment reporting
Gross Gross
Valuation Net Net Valuation revenue revenue
31 March additions/ appreciation/ 31 March 31 March 31 March
2016 (disposals) (depreciation) 2017 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------ ==================== ============= ============== ============= ============ ============
Listed
investments 1,000,796 (7,555) 54,231 1,047,472 35,574 27,358
Direct
property 97,764 361 (821) 97,304 5,330 4,353
------------ ==================== ============= ============== ============= ============ ============
1,098,560 (7,194) 53,410 1,144,776 40,904 31,711
Contracts
for
difference 329 3,304 (1,487) 2,146 4,457 2,905
------------ ==================== ============= ============== ============= ============ ============
1,098,889 (3,890) 51,923 1,146,922 45,361 34,616
------------ ==================== ============= ============== ============= ============ ============
In seeking to achieve its investment objective, the Company invests
in the shares and securities of property companies and property
related businesses internationally and also in investment property
located in the UK. The Company therefore considers that there
are two distinct reporting segments, listed investments and direct
property, which are used for evaluating performance and allocation
of resources. The Board, which is the principal decision maker,
receives information on the two segments on a regular basis. Whilst
revenue streams and direct property costs can be attributed to
the reporting segments, general administrative expenses cannot
be split to allow a profit for each segment to be determined.
The assets and gross revenues for each segment are shown above.
The property costs included within note 3 to the Financial Statements
are GBP2,078 (2016: GBP1,533) and deducting these costs from the
direct property gross revenue above would result in net income
of GBP3,252 (2016: GBP2,820) for the direct property reporting
segment.
9 Dividends
An interim dividend of 4.10p was paid in January 2017. A final
dividend of 6.40p (2016: 5.20p) will be paid on 1 August 2017 to
shareholders on the register on 23 June 2017. The shares will be
quoted ex-dividend on 22 June 2017.
10 Annual Report and AGM
The Annual Report will be posted to shareholders in June 2017 and
will be available thereafter from the Company Secretary at the
Registered Office, 11 Hanover Street, London, W1S 1QY. The Annual
General Meeting of the Company will be held at Grosvenor House,
Park Lane, London W1K 7TN on 25 July 2017 at 2pm.
This announcement and the information contained herein is not for publication, distribution or release in, or into, directly or indirectly, the United States, Canada, Australia or Japan and does not constitute, or form part of, an offer of securities for sale in or into the United States, Canada, Australia or Japan.
The securities referred to in this announcement have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act") and may not be offered or sold in the United States unless they are registered under the Securities Act or pursuant to an available exemption therefrom. The Company does not intend to register any portion of securities in the United States or to conduct a public offering of the securities in the United States. The Company will not be registered under the U.S. Investment Company Act of 1940, as amended, and investors will not be entitled to the benefits of that Act.
This announcement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the securities referred to herein in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration, exemption from registration or qualification under the securities law of any such jurisdiction.
The contents of this announcement include statements that are, or may be deemed to be "forward looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "expects", "intends", "may", "will" or "should". They include the statements regarding the target aggregate dividend. By their nature, forward looking statements involve risks and uncertainties and readers are cautioned that any such forward-looking statements are not guarantees of future performance. The Company's actual results and performance may differ materially from the impression created by the forward-looking statements. The Company undertakes no obligation to publicly update or revise forward-looking statements, except as may be required by applicable law and regulation (including the Listing Rules). No statement in this announcement is intended to be a profit forecast.
For further information please contact:
Marcus Phayre-Mudge
Fund Manager
TR Property Investment Trust plc
Telephone: 020 7011 4711
This information is provided by RNS
The company news service from the London Stock Exchange
END
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