Final Results
To: RNS
Date: 22 March 2011
From: F&C Commercial Property Trust Limited
Results in respect of the Year Ended 31 December 2010 (audited)
Highlights
· Investment Week award for best property investment trust of 2010
· Net asset value total return of 18.4 per cent for the year
· Share price total return of 25.1 per cent for the year
· Dividend level maintained at 6.0p per Ordinary Share, providing a yield of 5.7 per cent at the year end
· Portfolio total return of 17.7 per cent for the year, compared with a return of 15.1 per cent from the IPD benchmark
· Top quartile performance of the portfolio over 1, 3 and 5 years within the IPD benchmark
· Continuing low levels of voids and bad debts
· Reduction in expenses through a revision of management fee terms
· Increased investment resources following drawdown of new £50 million bank loan
Chairman's Statement
I am delighted to be presenting to shareholders a very positive and robust set of figures for a year in which your Company has been set a number of challenges within both the prevailing market conditions and the management of the Company.
During the year ended 31 December 2010 the Company's net asset value ('NAV') per share increased by 11.2 per cent to 96.3p per share. The NAV total return for the year was 18.4 per cent, comparing favourably with a market portfolio return of 15.1 per cent as measured by the benchmark Investment Property Databank ('IPD') All Quarterly and Monthly Valued Funds. The share price total return was 25.1 per cent and the share price at the year end was 105.6p, representing a premium of 9.7 per cent to the NAV per share.
The ungeared total return from the property portfolio during the year was 17.7 per cent, reflecting strong absolute and relative performance against the IPD benchmark. The portfolio has a strong performance record, being measured top quartile over one, three and five years by IPD.
Over the year, UK commercial property values continued the recovery which began during 2009. The pace slowed as the year progressed and total returns for the second half of the year were virtually all attributable to income, with only a small amount of capital growth. For the year as a whole, prime property and London in particular outperformed. This was an attractive backdrop for the Company's portfolio, with its strategic overweight position to Central London properties.
In the occupational market, although there were signs of improvement in some areas, rent levels across the market as a whole contracted for the third consecutive year. The Managers have continued to be pro-active in renegotiating leases where appropriate and in keeping voids and bad debts to a minimum and well below market levels. The preservation of rental income continues to be particularly important in the current economic environment.
As explained in the Managers' Review, despite a strongly competitive investment market, two properties were purchased during the year for an aggregate consideration of £27.6 million. This included £24.6 million for a distribution warehouse in Revolution Park, Chorley and is inclusive of capital works of £8.3 million for a racking system which was partly installed as at the end of the year. This purchase increased the Company's exposure to the industrial and logistics sector and with the initial yield of over 9 per cent provides an enhancement to the revenue account.
The Company made one disposal during the year: a shop in Commercial Street, Leeds for £8.8 million. The Company also sold the remaining units in its two indirect property funds, the Industrial Property Investment Fund and The Mall LP, for a total consideration of £9.0 million, realising a small gain over their valuations at the end of the previous year.
During the year the Company started the re-development of 24-27 Great Pulteney Street, London W1 with a contracted cost of £10.7 million. This is an exciting development of 32,000 sq ft of Grade A specification office space in London's West End which is expected to complete in October 2011. This and other property initiatives undertaken during the year are detailed in the Managers' Review.
The following table provides an analysis of the movement in the NAV per share for the year:
Pence
NAV per share as at 31 December 2009 86.6
Realised gain on disposal of indirect property holdings 0.4
Realised gain on disposal of direct properties 0.0
Unrealised increase in valuation of direct property portfolio 11.2
Movement in interest rate swap (0.1)
Merger abort costs (0.1)
Net revenue 4.3
Dividends paid (6.0)
---------
NAV per share as at 31 December 2010 96.3
---------
The Board is pleased that the Company was recognised as the best property investment trust of 2010 by Investment Week. This award is in recognition of the Company's good long term performance record and the quality of the fund management process.
Dividends
Twelve interim dividends, each of 0.5p per share, were paid during the year maintaining the annual dividend of 6.0p per share. Barring unforeseen circumstances, the Board intends that dividends in 2011 will continue to be paid monthly at the same rate.
Borrowings and Cash Balances
The Company's principal borrowings comprise £230 million Secured Bonds which have been assigned an 'Aaa' rating by Moody's Investor Services. The bonds mature in June 2015 and carry interest at a fixed rate of 5.23 per cent per annum.
During the year, and as reported in detail in the Interim Report, the Board announced that the Company had transferred its interests in St. Christopher's Place Estate, London W1 to a newly-established wholly-owned company within the Group. It also announced that the Company had drawn down a new £50 million secured bank facility (the 'Facility') with Barclays Bank plc, which is repayable in 2017. The interest payable, including the margin, was fixed through an interest rate swap at an aggregate interest rate of 4.88 per cent per annum for the full term of the Facility.
The Board believes that the Facility offers attractive terms for longer dated debt and diversifies the periods to the repayment of the Company's borrowings. It also provides additional cash to take advantage of investment opportunities.
As at 31 December 2010 the Company's borrowings amounted to £279 million in aggregate and it held cash balances of £112 million. This resulted in a level of gearing net of cash of 20.4 per cent as at 31 December 2010, which compares with 18.5 per cent as at 31 December 2009.
Management Arrangements
In April 2010 the Board announced that it had received an unsolicited proposal which would have resulted in the merger of the Company with UK Commercial Property Trust Limited ('UKCPT'). At the same time, it was announced that the Company's majority shareholder, Resolution Limited ('Resolution'), had reduced its shareholding from 50.3 per cent to 34.1 per cent and that the shares sold had been acquired by Phoenix Group which owns Ignis Investment Services Limited, the investment manager of UKCPT. The proposals were conditional upon the support of a majority of the Company's independent shareholders (comprising 49.7 per cent of the total shares not held by Resolution or Phoenix Group) at an Extraordinary General Meeting ('EGM') held on 9 August 2010. The required majority of the independent shareholders did not support the proposals at the EGM and therefore the merger did not take effect.
I am pleased to report that throughout the period of the merger proposals, the Managers acted in an extremely professional manner, continuing to manage the portfolio in the best interests of shareholders. Following the EGM, and after consultation with the Company's key shareholders, the Board announced the continuing appointment of F&C REIT Property Asset Management plc as the Company's Property Managers. The revised terms of their appointment are as previously announced. The Board considers the revised terms to be competitive. Excluding performance fees, which reflect portfolio performance in the interests of shareholders, the revised terms will further reduce the Company's actual total expense ratio and improve its dividend cover.
Board Composition
After serving as a non-executive Director since the Company's launch in 2005 and as Chairman since October 2009, I shall step down from the Board at the Annual General Meeting on 19 May 2011 ('the AGM'). I am pleased that Chris Russell, who was appointed as a non-executive Director in October 2009 and Deputy Chairman in September 2010, will succeed me as Chairman following the AGM.
I am delighted to announce the appointment of Martin Moore as an independent non-executive Director with effect from 31 March 2011. Martin has very considerable real estate experience from his role as Managing Director of Prudential Property Investment Managers Limited, the property asset management arm of Prudential plc. He is also a board adviser to The Crown Estate and a board member and past president of the British Property Federation. He is a past chairman of the Investment Property Forum and is a UK resident. There is no information required to be disclosed pursuant to Listing Rule 9.6.13R in relation to Martin Moore's appointment.
I know that Chris and Martin will excel in their roles and that the Company is in excellent hands. I thank each of my Board colleagues for their support, particularly during my tenure as Chairman.
Outlook
The economy remains in a subdued state with recovery likely to be slow and hesitant. Growth prospects are influenced by uncertainty as to how the Government's austerity measures will affect the economy and there are continuing problems in the financial markets both nationally and globally.
The coming year is expected to be challenging and with investors risk-averse prime properties are expected to continue to outperform. Stock selection will be critical together with active property asset management to preserve and enhance income and minimise voids.
In such an environment, the Board continues to believe that the quality and weighting of the portfolio and the availability of cash reserves for investment in suitable opportunities mean that the Company is well placed to make further progress in the months ahead.
John Stephen
Chairman
Managers' Review
The market total return for the year, as measured by the Investment Property Databank ('IPD') All Quarterly and Monthly Valued Funds, was 15.1 per cent. Performance was front-loaded but total returns were positive throughout the year, continuing the recovery which began in mid-2009.
Capital values rose by 8.5 per cent in 2010 and positive growth was sustained throughout the year. Most of the uplift occurred in the first six months of 2010 with values rising by only 2.2 per cent during the six-month period to December 2010. The upturn to date has been driven by yield compression, particularly at the prime end. With investors remaining risk-averse given the uncertain economic and property market outlook, competition for the limited amount of prime stock available characterised the market in 2010.
The property market has continued to deliver a solid income return. The market income return totalled 6.2 per cent in 2010, according to IPD quarterly data, less than in 2009 but attractive in comparison with other asset classes and cash.
The occupational market has remained subdued with rents falling in most segments. Vacancy rates have edged lower and incentives have stabilised, which contributed to a rise in net income in the second half of 2010 although the full year figure was marginally lower. There was a wide difference in income streams from prime and secondary stock in 2010. IPD data shows low yielding (prime) property recording positive growth in net income in all segments of the market. In contrast, higher yielding (more secondary) stock saw income fall - by more than 10 per cent in the case of offices and industrials.
Market uncertainty has led investors to focus on core markets, established locations and prime buildings. The need to protect income has favoured assets let on long leases to sound covenants. The year also saw London and the South East generally outperforming other regions, as concern about the impact of cuts in public spending intensified.
As the year drew to a close, there were signs that yields were stabilising and total returns were being driven by the income return.
Portfolio
During 2010 the Company's portfolio, including net purchases, increased in value by £99.4 million to £838.3 million. This represents an ungeared capital increase, net of purchases, sales and capital expenditure, of 11.3 per cent.
The Company's direct property portfolio recorded a total return of 17.7 per cent over the period, compared with the return from the IPD All Quarterly and Monthly Valued Funds (comprising directly held properties only) of 15.1 per cent. The portfolio continues to present both a strong absolute and relative outperformance of the benchmark, and over the period the portfolio was ranked 37 out of 230 funds representing the benchmark, and on the 16th percentile. The Company's portfolio has now achieved top quartile performance over one, three and five years.
Strategy and Positioning of Portfolio
The portfolio maintains a strong conviction position to Central London offices and especially the West End, whilst St. Christopher's Place Estate, London W1 remains the largest asset and provides a well diversified income stream with asset management opportunities. The portfolio is underweight to benchmark retail - rest of UK and shopping centres and its industrial exposure has increased due to the recent acquisitions which are explained in more detail below. Geographically, the portfolio has a strong weighting to Central London, rest of London and the South East and is underweight to the UK regions generally. Notably, it has no exposure to Northern Ireland, Wales, North East and South West - regions which may be vulnerable to their public sector exposure.
Strategically, the focus is to invest the Company's liquidity into the direct property market. Stock selection is critical, coupled with the quality of income. When appraising investment opportunities we are very aware of covenant risk, the weighted average unexpired lease term and the lease expiry profile of the portfolio. The quality of available stock remains in short supply but we are seeking to invest in the City of London, retail warehouses, industrials with a preference to the South East and, selectively, shopping centres in tight affluent towns.
Retail
The retail sector recorded a total return of 15.7 per cent for the year, its best performance since 2005. The South East was the strongest performing IPD retail sub-sector producing a total return of 17.4 per cent for the year, much of this dominated by the strength of Central London. Shopping centres, after a weak 2009, performed more strongly in 2010 with total returns in the final quarter of 4.4 per cent. Retail warehousing also delivered above-average total returns although the outperformance was concentrated in the early months of the year. High Street Retail - Rest of UK was the weakest sub-sector with a total return of 11.1 per cent reflecting the high level of voids and negative rental performance of many high streets throughout the UK.
The Company's retail properties produced a total return of 20.3 per cent for the year, comparing favourably with the IPD sector return of 15.7 per cent. The Company's strongest performance derived from its South East retail properties which recorded a total return of 24.8 per cent. The Company maintains a strategic overweight position to this sector which is dominated by its exposure to St. Christopher's Place Estate.
At St. Christopher's Place Estate, significant asset management initiatives were undertaken and, in all, we completed 18 lettings of retail, restaurant and office premises generating £1.5 million per annum in rental income.
Of particular note was the surrender of the lease to Speciality Retail Group at 372 Oxford Street and a re-letting to Aldo, the Canadian footwear retailer, at a rent of £700,000 per annum reflecting a Zone A rent of £700 psf. The rental tone of shop premises at St. Christopher's Place Estate also increased. Elsewhere on the estate we completed the refurbishment of two shops, a restaurant on James Street and nine residential apartments. We are now looking to rebrand the estate and to improve the public realm in certain areas, especially on and around James Street. Early in 2010 the Company completed the purchase of 77/77a Wigmore Street, London W1 for £2.96 million, a freehold property occupying a key corner location on the estate and one of the few properties on the estate not owned by the Company.
The Company's retail warehouses recorded a total return of 16.3 per cent compared with a benchmark return of 16.0 per cent. The major asset management activity occurred at Newbury Retail Park, where a surrender was taken of the former JJB lease on Unit 6 (15,000 sq ft), thereby reducing the Company's exposure to this particular tenant. The unit was extended by 5,000 sq ft coupled with the installation of a 15,000 sq ft mezzanine floor. This involved capital expenditure of approximately £2.48 million. The unit was re-let to Matalan Retail Limited at a rent of £490,000 per annum for a term of 15 years, representing an increase of £133,600 per annum over the previous rent passing. Following the demise of Borders Books, Unit 12 was re-let to M&S Simply Food at a commencing rent of £300,000 per annum, equating to the previous passing rent. Both these lettings are subject to rent-free periods which expire during the first half of 2011. They improve the tenant mix and retail offering on the park and hopefully build a base from which to leverage future asset management opportunities. Two rent reviews were settled on the park, increasing the passing rent on these units by £91,000 per annum, or 24 per cent.
The Company does not own any shopping centres having disinvested from the sector in 2008. We are now selectively looking at acquisitions within the sector.
Offices
IPD All Offices produced a total return of 16.7 per cent but this masks a significant divergence of returns, with City and West End offices recording 25.4 and 23.0 per cent respectively, whilst Offices - Rest of UK recorded 7.7 per cent. The office sector last year was a Central London story with the re-emergence of rental growth, some large occupational deals, a restricted pipeline of supply and yield compression driven by investor demand, especially from overseas buyers. In contrast, sentiment towards offices outside the South East markedly deteriorated as concerns grew about the impact of government spending cuts in areas heavily dependent on public sector employment.
The Company's offices produced a total return of 17.8 per cent. The Company maintains an overweight position to Central London Offices so returns benefitted from this weighting, with both West End properties and the City exposure beating benchmark returns.
As reported last year, the Company's most significant development is the commitment to 24/27 Great Pulteney Street, London W1. The redevelopment of approximately 32,000 sq ft of new building is well progressed, on budget and on programme with practical completion scheduled for October 2011. We remain confident of launching this property into a market with a severe shortage of Grade A accommodation and well ahead of the main body of completions in the market due to come through in 2014.
The regional office markets remain difficult. The Company's largest void remains at 82 King Street, Manchester where three and a half floors totalling 20,024 sq ft remain vacant. We are pushing for these floors to be let as soon as possible and have recently been encouraged that tenant enquiries have picked up.
Industrials
The industrial sector was the weakest performing sector in 2010 recording a total return of 10.5 per cent, having been relatively resilient during the downturn. The market is extremely patchy with shortages of space emerging in core areas but other areas still struggling with massive over-supply.
The Company's industrial portfolio recorded a total return of 8.4 per cent. The underperformance compared with benchmark was due to properties where valuations were marked out for shorter leases, and the acquisition costs associated with the purchase of Revolution Park, Chorley. The Company remains underweight to the sector.
We continue to masterplan the Cowdray Centre, Colchester where discussions continue with the local planning authority. We have made some progress with regard to the conditional sale of a parcel of land to a major national retailer, which remains subject to an exclusivity agreement. If it becomes unconditional it should prove the catalyst for the regeneration of this area. Elsewhere in the industrial portfolio we are focused on renegotiating and regearing the shorter leases where we expect progress will be made in 2011.
Purchases and Disposals
At the start of the year, the Company purchased 77/77a Wigmore Street, London W1 for £2.96 million reflecting a net initial yield of 4.55 per cent and it sold 27/28 Commercial Street, Leeds for £8.8 million, at a surplus to valuation.
The major acquisition last year was of Units 6 & 8, Buckshaw Avenue, Revolution Park, Chorley, Lancashire, for a total consideration of £24.6 million, reflecting a net initial yield of 9.15 per cent. The property comprises a modern detached distribution warehouse totalling 368,513 sq ft and was acquired vacant, at vacant possession value. Upon completion, the unit was simultaneously let to Kimberly-Clark Limited as its northern distribution centre, on a new lease for a term of 11 years, subject to a rent-free period of 12 months. The lease provides for fixed 2 per cent annual rental uplifts. The acquisition price was inclusive of capital works of £8.3 million to include the installation of an automated racking system to be provided to Kimberly-Clark. These works are close to completion and are on budget and programme. The rent-free period will expire in June 2011, whereupon the rent will commence at £2.25 million per annum.
During the year, the Company announced the strategic disposal of its remaining units in the Industrial Property Investment Fund and The Mall LP. The total consideration was £9.0 million, providing an uplift of £2.9 million over the previous valuation.
Property Management
Against a difficult leasing market the sustainability and protection of income from the portfolio remains of paramount importance to the Company. During the year the Company documented 37 lease events, at a passing rent of £1.1 million per annum. The Company remains successful in dealing with its lease expiries and the leasing of void accommodation. Although vacancy levels increased very marginally over the year from 2.5 per cent to 2.6 per cent (excluding properties held for development), voids remain significantly better than the IPD benchmark rate of 8.1 per cent. Rent arrears and bad debts are, as always, consistently managed and an out-turn for the year of 1.5 per cent remains low for a portfolio of this size and complexity.
Outlook
The economic recovery is fragile and with austerity measures being implemented, inflation moving up and concerns about the international credit markets continuing, the coming year will be challenging. The occupational market is expected to remain subdued and voids will be a key issue in determining performance. New supply is constrained and although the banks are starting to release stock, they are not flooding the market nor setting fire sale prices. Total returns are expected to be driven by income in 2011 and the protection of that income stream will be of paramount importance. As the output gap narrows and economic growth becomes sustained, rental growth may broaden and increase, especially in areas of low new supply, lifting performance over the medium-term. We believe that the Company's quality portfolio, strong and diverse tenant base, low void levels and opportunity to benefit from active management, coupled with its bias towards London and the South East will make it resilient in the short-term and will benefit performance over a longer time horizon.
Richard Kirby
Investment Manager
F&C REIT Property Asset Management plc
F&C Commercial Property Trust Limited
Consolidated Comprehensive Statement of Income (audited)
|
|
|
Year ended 31 December 2010 |
Year ended 31 December 2009 |
|
|
|
£'000 |
£'000 |
|
Revenue |
|
|
|
|
Rental income |
|
53,561 |
50,056 |
|
Income from indirect property funds |
|
161 |
145 |
|
|
|
--------- |
----------- |
|
Total revenue |
|
53,722 |
50,201 |
|
|
|
|
|
|
Gains on investment properties |
|
|
|
|
Unrealised gains on revaluation of investment properties |
|
75,601 |
17,764 |
|
Unrealised gains on revaluation of indirect property funds |
|
- |
956 |
|
Gains on sale of investment properties realised |
|
19 |
308 |
|
Gains on sale of indirect property funds realised |
|
2,905 |
11 |
|
|
|
---------- |
----------- |
Total income |
|
132,247 |
69,240 |
|
|
|
---------- |
----------- |
|
Expenditure |
|
|
|
|
Investment management fee |
|
(8,137) |
(7,688) |
|
Other expenses |
|
(5,018) |
(4,303) |
|
|
|
---------- |
----------- |
|
Total expenditure |
|
(13,155) |
(11,991) |
|
|
|
----------- |
----------- |
|
Operating profit before finance costs |
|
119,092 |
57,249 |
|
|
|
----------- |
----------- |
|
Net finance costs |
|
|
|
|
Interest receivable |
|
481 |
1,532 |
|
Finance costs |
|
(13,450) |
(12,139) |
|
|
|
----------- |
----------- |
|
|
|
(12,969) |
(10,607) |
|
|
|
----------- |
----------- |
Profit before taxation |
|
106,123 |
46,642 |
|
|
|
|
|
|
Taxation |
|
791 |
(238) |
|
|
|
---------- |
----------- |
|
|
|
|
|
Profit for the year |
|
106,914 |
46,404 |
|
|
|
---------- |
----------- |
|
Other comprehensive income |
|
|
|
|
Movement in fair value of interest rate swap |
|
(389) |
- |
|
|
|
---------- |
---------- |
|
Total comprehensive income for the year |
|
106,525 |
46,404 |
|
|
|
---------- |
---------- |
|
|
|
|
|
|
Basic and diluted earnings per share |
|
15.7p |
6.8p |
|
|
|
|
|
All of the profit and total comprehensive income for the year is attributable to the owners of the Company.
F&C Commercial Property Trust Limited
Consolidated Balance Sheet (audited)
|
|
As at 31 December 2010 £'000 |
As at 31 December 2009 £'000 |
|
Non-current assets |
|
|
|
Investment properties |
832,003 |
722,536 |
|
Investments in indirect property funds held at fair value |
- |
6,072 |
|
|
----------- |
----------- |
|
|
832,003 |
728,608 |
|
|
----------- |
----------- |
Current assets |
|
|
|
Properties held for sale |
- |
8,694 |
|
Trade and other receivables |
8,377 |
5,400 |
|
Cash and cash equivalents |
111,578 |
95,138 |
|
|
----------- |
----------- |
|
|
119,955 |
109,232 |
|
|
----------- |
----------- |
Total assets |
951,958 |
837,840 |
|
|
----------- |
----------- |
|
|
|
|
Current liabilities |
|
|
|
Trade and other payables |
(17,735) |
(18,518) |
|
|
----------- |
----------- |
Non-current liabilities |
|
|
|
Interest-bearing bonds |
(229,424) |
(229,308) |
|
Interest-bearing bank loan |
(49,329) |
- |
|
Interest rate swap |
(389) |
- |
|
Deferred taxation |
- |
(626) |
|
|
------------ |
----------- |
|
|
(279,142) |
(229,934) |
|
|
------------- |
----------- |
Total liabilities |
(296,877) |
(248,452) |
|
|
------------- |
------------ |
NET ASSETS |
655,081 |
589,388 |
|
|
------------- |
----------- |
|
|
|
|
Represented by: |
|
|
|
Share capital |
6,805 |
6,805 |
|
Reverse acquisition reserve |
831 |
831 |
|
Special reserve |
576,729 |
664,063 |
|
Capital reserve - investments sold |
(48,271) |
(20,974) |
|
Capital reserve - investments held |
33,852 |
(71,970) |
|
Hedging reserve |
(389) |
- |
|
Revenue reserve |
85,524 |
10,633 |
|
|
----------- |
----------- |
Equity SHAREHOLDERS' FUNDS |
655,081 |
589,388 |
|
|
----------- |
----------- |
|
|
|
|
Net asset value per share |
96.3p |
86.6p |
F&C Commercial Property Trust Limited
Consolidated Statement of Changes in Equity
for the year ended 31 December 2010 (audited)
|
|
Share Capital £'000 |
Reverse Acquisition Reserve £'000 |
Special Reserve £'000 |
Capital Reserve - Investments Sold £'000 |
Capital Reserve - Investments Held £'000 |
Hedging Reserve £0'000 |
Revenue Reserve £'000 |
Total £'000 |
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2010 |
6,805 |
831 |
664,063 |
(20,974) |
(71,970) |
- |
10,633 |
589,388 |
|
Total comprehensive income for the year |
|
|
|
|
|
|
|
|
|
Profit for the year |
- |
- |
- |
- |
- |
- |
106,914 |
106,914 |
|
Movement in fair value of interest rate swap |
- |
- |
- |
- |
- |
(389) |
- |
(389) |
|
Transfer in respect of unrealised gains on investment properties |
- |
- |
- |
- |
75,601 |
- |
(75,601) |
- |
|
Gains on sale of investment properties realised |
- |
- |
- |
19 |
- |
- |
(19) |
- |
|
Gains on sale of indirect property funds realised |
- |
- |
- |
2,905 |
- |
- |
(2,905) |
- |
|
Transfer of prior years' revaluation to realised reserve |
- |
- |
- |
(30,221) |
30,221 |
- |
- |
- |
|
Transfer from special reserve |
- |
- |
(87,334) |
- |
- |
- |
87,334 |
- |
|
Total comprehensive income for the year |
- |
- |
(87,334) |
(27,297) |
105,822 |
(389) |
115,723 |
106,525 |
|
|
|
|
|
|
|
|
|
|
|
Transfer with owners of the Company recognised directly in equity |
|
|
|
|
|
|
|
|
|
Dividends paid |
- |
- |
- |
- |
- |
- |
(40,832) |
(40,832) |
|
At 31 December 2010 |
6,805 |
831 |
576,729 |
(48,271) |
33,852 |
(389) |
85,524 |
655,081 |
Consolidated Statement of Changes in Equity
for the year ended 31 December 2009 (audited)
|
|
Share Capital £'000 |
Capital Redemption Reserve £'000 |
Reverse Acquisition Reserve £'000 |
Special Reserve £'000 |
Capital Reserve - Investments Sold £'000 |
Capital Reserve - Investments Held £'000 |
Revenue Reserve £'000 |
Total £'000 |
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2009 |
7,531 |
105 |
- |
673,010 |
(21,293) |
(90,690) |
15,520 |
584,183 |
|
Total comprehensive income for the year |
|
|
|
|
|
|
|
|
|
Profit for the year |
- |
- |
- |
- |
- |
- |
46,404 |
46,404 |
|
Transfer in respect of unrealised gains on investment properties |
- |
- |
- |
- |
- |
17,764 |
(17,764) |
- |
|
Transfer in respect of unrealised gains on indirect property funds |
- |
- |
- |
- |
- |
956 |
(956) |
- |
|
Gains on sale of investment properties realised |
- |
- |
- |
- |
308 |
- |
(308) |
- |
|
Gains on sale of indirect property funds realised |
- |
- |
- |
- |
11 |
- |
(11) |
- |
|
Transfer from special reserve |
- |
- |
- |
(8,580) |
- |
- |
8,580 |
- |
|
Total comprehensive income for the year |
- |
- |
- |
(8,580) |
319 |
18,720 |
35,945 |
46,404 |
|
|
|
|
|
|
|
|
|
|
|
Group reconstruction |
(726) |
(105) |
831 |
(367) |
- |
- |
- |
(367) |
|
Transactions with owners of the Company recognised directly in equity |
|
|
|
|
|
|
|
|
|
Dividends paid |
- |
- |
- |
- |
- |
- |
(40,832) |
(40,832) |
|
At 31 December 2009 |
6,805 |
- |
831 |
664,063 |
(20,974) |
(71,970) |
10,633 |
589,388 |
F&C Commercial Property Trust Limited
Consolidated Statement of Cash Flows (audited)
|
|
Year ended 31 December 2010 |
Year ended 31 December 2009 |
|
|
£'000 |
£'000 |
Cash flows from operating activities |
|
|
|
Profit for the year before taxation |
106,123 |
46,642 |
|
Adjustments for: |
|
|
|
Finance costs |
13,450 |
12,139 |
|
Interest receivable |
(481) |
(1,532) |
|
Unrealised gains on revaluation of investment properties |
(75,601) |
(17,764) |
|
Unrealised gains on revaluation of indirect property funds |
- |
(956) |
|
Gain on sale of investment properties realised |
(19) |
(308) |
|
Gains on sale of indirect property funds realised |
(2,905) |
(11) |
|
Increase in operating trade and other receivables |
(2,977) |
(195) |
|
(Decrease)/increase in operating trade and other payables |
(625) |
4,409 |
|
|
----------- |
----------- |
|
|
36,965 |
42,424 |
|
|
----------- |
----------- |
|
Interest received |
481 |
1,532 |
|
Interest paid |
(13,272) |
(12,029) |
|
Taxation refunded |
- |
1,066 |
|
|
----------- |
----------- |
|
|
(12,791) |
(9,431) |
|
|
----------- |
----------- |
Net cash inflow from operating activities |
24,174 |
32,993 |
|
|
----------- |
----------- |
Cash flows from investing activities |
|
|
|
Purchases of investment properties |
(24,315) |
(54,785) |
|
Sale of investment properties |
8,801 |
320 |
|
Sale of indirect property funds |
8,978 |
11 |
|
Capital expenditure |
(9,639) |
(4,538) |
|
|
----------- |
----------- |
|
Net cash outflow from investing activities |
(16,175) |
(58,992) |
|
|
------------ |
----------- |
Cash flows from financing activities |
|
|
|
Dividends paid |
(40,832) |
(40,832) |
|
Bank loan drawn down (net of costs) |
49,273 |
- |
|
Costs of share reconstruction charged to capital |
- |
(367) |
|
|
----------- |
----------- |
|
Net cash inflow/(outflow) from financing activities |
8,441 |
(41,199) |
|
|
----------- |
----------- |
|
Net increase/(decrease) in cash and cash equivalents |
16,440 |
(67,198) |
|
Opening cash and cash equivalents |
95,138 |
162,336 |
|
|
-------- |
----------- |
|
Closing cash and cash equivalents |
111,578 |
95,138 |
|
|
----------- |
----------- |
F&C Commercial Property Trust Limited
Principal Risks and Risk Management
The Company's assets comprise direct investments in UK commercial property, although market uncertainty has resulted in cash being held. Its principal risks are therefore related to the commercial property market in general and its investment properties. More detailed explanations of these risks and the way in which they are managed are contained in note 2. The Managers also seek to mitigate these risks through active asset management initiatives and carrying out due diligence work on potential tenants before entering into any new lease agreements. All of the properties in the portfolio are insured.
Other risks faced by the Company include the following:
· Economic - external shocks, inflation or deflation, economic recessions and movements in interest rates could affect property valuations.
· Investment and strategic - incorrect strategy, including sector and geographic allocations and use of gearing could lead to poor returns for shareholders.
· Regulatory - breach of regulatory rules could lead to suspension of the Company's Stock Exchange listing, financial penalties or a qualified audit report.
· Management and control - changes that cause the management and control of the Company to be exercised in the United Kingdom could lead to the Company becoming liable to United Kingdom taxation on income and capital gains.
· Operational - failure of the Managers' accounting systems or disruption to the Managers' business, or that of third party service providers, could lead to an inability to provide accurate reporting and monitoring, leading to a loss of shareholders' confidence.
· Financial - inadequate controls by the Managers or third party service providers could lead to misappropriation of assets. Inappropriate accounting policies or failure to comply with accounting standards could lead to a qualified audit report, misreporting or breaches of regulations. Breaching loan covenants could lead to a loss of shareholders' confidence and financial loss for shareholders.
The Board seeks to mitigate and manage these risks through continual review, policy-setting and enforcement of contractual obligations. It also regularly monitors the investment environment and the management of the Company's property portfolio, and applies the principles detailed in the internal control guidance issued by the Financial Reporting Council.
F&C Commercial Property Trust Limited
Statement of Directors' Responsibilities in Respect of the Annual Financial Report
In accordance with Chapter 4 of the Disclosure and Transparency Rules, we confirm that to the best of our knowledge:
· The financial statements contained within the Annual Report for the year ended 31 December 2010, of which this statement of results is an extract, have been prepared in accordance with applicable International Financial Reporting Standards, on a going concern basis, and give a true and fair view of the assets, liabilities, financial position and return of the Company;
· The Chairman's Statement and Managers' Review include a fair review of the important events that have occurred during the financial year and their impact on the financial statements;
· 'Principal Risks and Risk Management' includes a description of the Company's principal risks and uncertainties; and
· The Annual Report includes details of related party transactions that have taken place during the financial year.
On behalf of the Board
N J M Tostevin
Director
F&C Commercial Property Trust Limited
Notes to the audited Consolidated Financial Statements
for the year ended 31 December 2010
1. The Board has declared an eleventh interim dividend for the year of 0.50p per share to be paid on 25 March 2011 to shareholders on the register on 11 March 2011. The ex-dividend date was 9 March 2011.
The Board has declared a twelfth, and last, interim dividend for the year of 0.50p per share to be paid on 28 April 2011 to shareholders on the register on 8 April 2011. The ex-dividend date will be 6 April 2011.
It is the Directors' intention that the Company will continue to pay dividends monthly.
2. Financial Instruments
The Company's investment objective is to provide ordinary shareholders with an attractive level of income together with the potential for capital and income growth from investing in a diversified UK commercial property portfolio.
Consistent with that objective, the Group holds UK commercial property investments. In addition, the Group's financial instruments comprise interest bearing bonds, an interest-bearing bank loan, cash, and receivables and payables that arise directly from its operations. The Group does not have exposure to any derivative instruments other than the interest rate swap entered into to hedge the interest paid on the interest-bearing bank loan.
The Group is exposed to various types of risk that are associated with financial instruments. The most important types are credit risk, liquidity risk, interest rate risk and market price risk. There is no foreign currency risk as all assets and liabilities of the Group are maintained in pounds sterling.
The Board reviews and agrees policies for managing the Group's risk exposure. These policies are summarised below and have remained unchanged for the year under review.
Credit risk
Credit risk is the risk that an issuer or counterparty will be unable or unwilling to meet a commitment that it has entered into with the Group.
In the event of default by an occupational tenant, the Group will suffer a rental shortfall and incur additional costs, including legal expenses, in maintaining, insuring and re-letting the property. The Board receives regular reports on concentrations of risk and any tenants in arrears. The Managers monitor such reports in order to anticipate, and minimise the impact of, defaults by occupational tenants.
All of the Group's cash is placed with financial institutions with a long term credit rating of AA or better. Bankruptcy or insolvency of such financial institutions may cause the Group's ability to access cash placed on deposit to be delayed or limited. Should the credit quality or the financial position of the banks currently employed significantly deteriorate, cash holdings would be moved to another bank.
During the year and the prior year, due to the quantum of cash balances held, counterparty risk was spread by placing cash across a number of different financial institutions.
Liquidity risk
Liquidity risk is the risk that the Group will encounter in realising assets or otherwise raising funds to meet financial commitments. The Group's investments comprise UK commercial property. Property and property related assets in which the Group invests are not traded in an organised public market and may be illiquid. As a result, the Group may not be able to liquidate quickly its investments in these properties at an amount close to their fair value in order to meet its liquidity requirements.
The Group's liquidity risk is managed on an ongoing basis by the Managers and monitored on a quarterly basis by the Board. In order to mitigate liquidity risk the Group aims to have sufficient cash balances (including the expected proceeds of any property sales) to meet its obligations for a period of at least twelve months.
The Group's investments may, from time to time, include investments in indirect property funds which are not traded in an organised public market and which generally may be illiquid. As a result, similar to the directly held properties, the Group may not be able to liquidate quickly some of its investments in those instruments in order to meet its liquidity requirements. As at 31 December 2010 the Group did not hold any investments in indirect property funds (2009: £6,072,000).
Interest rate risk
Some of the Group's financial instruments are interest bearing. They are a mix of both fixed and variable rate instruments with differing maturities. As a consequence, the Group is exposed to interest rate risk due to fluctuations in the prevailing market rate.
The Group's exposure to interest rate risk relates primarily to the Group's long-term debt obligations. Interest rate risk on long-term debt obligations is managed by fixing the interest rate on such borrowings, either directly or through an interest rate swap for the same notional value and duration. Long-term debt obligations and the interest rate risk they confer to the Group is considered by the Board on a quarterly basis. Long term debt obligations consist of £230 million Secured Bonds due 2017 on which the rate has been fixed at 5.23 per cent until the expected maturity date of 30 June 2015. If the bonds are not redeemed at this date they will carry interest at 0.6 per cent over LIBOR until the final maturity date of 30 June 2017. The Group also has a £50 million interest-bearing bank loan on which the rate has been fixed through an interest rate swap at 4.88 per cent until the maturity date of 28 June 2017.
When the Group retains cash balances, they are ordinarily held on interest-bearing deposit accounts. The benchmark which determines the interest income received on interest bearing cash balances is the bank base rate which was 0.5 per cent as at 31 December 2010 (2009: 0.5 per cent). The Company's policy is to hold cash in variable rate or short-term fixed rate bank accounts and not usually in fixed rate securities with a term greater than three months.
Market price risk
The Group's strategy for the management of market price risk is driven by the investment policy. The management of market price risk is part of the investment management process and is typical of commercial property investment. The portfolio is managed with an awareness of the effects of adverse valuation movements through detailed and continuing analysis, with an objective of maximising overall returns to shareholders. Investments in property and property-related assets are inherently difficult to value due to the individual nature of each property. As a result, valuations are subject to substantial uncertainty. There is no assurance that the estimates resulting from the valuation process will reflect the actual sales price even where such sales occur shortly after the valuation date. Such risk is minimised through the appointment of external property valuers.
The Group may also hold investments in indirect property funds which in turn invest directly in commercial property. In addition to the price risk attaching to the underlying assets, such funds also carry the risk that the investment cannot be disposed of at its net asset value due to a lack of liquidity. The Company did not hold any investments in indirect property funds at 31 December 2010.
3. There were 680,537,003 Ordinary Shares in issue at 31 December 2010 (2009: 680,537,003).
At 31 December 2010, the Company did not hold any Ordinary Shares in treasury (2009: nil)
4. The basic and diluted earnings per Ordinary Share are based on the profit for the year of £106,914,000 (2009: £46,404,000) and on 680,537,003 (2009: 680,537,003) Ordinary Shares, being the weighted average number of shares in issue during the year.
5. The Group results consolidate those of FCPT Holdings Limited, a wholly owned subsidiary which acts as a holding company for F&C Commercial Property Holdings Limited.
The Group results also consolidate those of SCP Estate Holdings Limited, a wholly owned subsidiary which acts as a holding company for SCP Estate Limited.
The Group results also consolidate those of F&C Commercial Property Holdings Limited, a wholly owned subsidiary of FCPT Holdings Limited, which invests in properties, SCP Estate Limited, a wholly owned subsidiary of SCP Estate Holdings Limited, which invests in properties, and F&C Commercial Property Finance Limited, a special purpose vehicle incorporated to issue the interest bearing bonds.
6. These are not full statutory accounts. The full audited accounts for the year to 31 December 2010 will be sent to shareholders and will be available for inspection at Trafalgar Court, Les Banques, St Peter Port, Guernsey, the registered office of the Company and from the Company's website www.fccpt.co.uk
All enquiries to:
The Company Secretary
Northern Trust International Fund Administration (Guernsey) Limited
Trafalgar Court
Les Banques
St Peter Port
Guernsey GY1 3QL
Tel: 01481 745324
Fax: 01481 745051
Richard Kirby
F&C REIT Asset Management LLP
Tel: 0207 016 3577
This information is provided by RNS