Interim Results
ISIS Property Trust 2 Limited
09 March 2006
To: RNS
Date: 09 March 2006
From: ISIS Property Trust 2 Limited
Interim Results in respect of the period from 1 July 2005 to 31 December 2005
Financial Highlights
• Net asset value per share increased by 13.0 per cent
• Dividend yield of 5.2 per cent
The Chairman, Quentin Spicer, stated:
'Results
The Company has continued to make good progress since I reported on the annual
results to 30 June 2005. For the six months to 31 December 2005 the net asset
value total return was 16.1 per cent which compares favourably to a half year
return of 10.8 per cent from the Investment Property Databank ('IPD') Monthly
Index. The Company's net asset value per share increased by 13.0 per cent to
127.2 pence and the share price increased by 3.4 per cent to 128.8 pence per
share, as at 31 December 2005, representing a premium of 1.3 per cent to the net
asset value.
Property Market Overview
The second half of 2005 was another good period for the commercial property
market. Continuing strong investment demand led to further yield compression and
resulted in increased capital values.
For the half year as a whole, rental growth returned to all the main property
sectors. There was a convergence in performance by sector with Retail retaining
top place with a 11.3 per cent total return, Offices continuing their recovery
with a return of 10.5 per cent, whilst Industrials recorded a return of 9.4 per
cent. The period saw record levels of investment activity, particularly from
overseas investors and institutions.
Portfolio
The capital value of the portfolio increased to £214.1 million as at 31 December
2005, representing a net un-geared uplift of 8.3 per cent for the six month
period. This compares favourably to a reported increase of 7.7 per cent in the
IPD Monthly Index.
The largest increase came from 48/49 St James Street, London SW1, where the
value rose by £2.9 million to £15.3 million (22.9 per cent) reflecting the
continued strength of the occupational and investment market for West End
offices. Further substantial increases came from 99/103 Long Acre, London WC2
(£1.5 million, 11.8 per cent), Southampton International Park, Eastleigh (£1.2
million, 10.0 per cent) and Mercury House, Strathclyde Business Park, Bellshill
(£1.1 million, 8.5 per cent).
The lease of Unit 3663, Echo Park, Banbury was re-geared in return for a payment
to the tenant of £1.2 million. The existing term of 10 years has been extended
to 20 years, and the rent increased by £41,000 per annum (3.8 per cent) subject
to a fixed uplift in 2010. The value increased from £15.0 million as at 30 June
2005 to £19.0 million as at 31 December 2005, a net uplift of 18.5 per cent.
Across the portfolio, void rates remain low at 1.1 per cent by estimated rental
value ('ERV'). During the period, two rent reviews were agreed which increased
rents by £14,400 per annum.
As previously advised, at the beginning of December the property at Hemel
Gateway, Boundary Way, Hemel Hempstead was severely damaged as a result of the
fuel explosion at the neighbouring Buncefield fuel terminal. This property is
fully insured and the Board does not expect there to be any material capital or
income loss to the Company.
Although no new properties were purchased during the period, Pincents Lane,
Reading was sold in December for £5.0 million (8.7 per cent above valuation)
with vacant possession, due to the tenants, Allders plc, being put into
administration.
Dividends
A first interim dividend of 1.6875 pence per share was paid on 16 December 2005,
in respect of the year ending 30 June 2006. The Board has declared a second
interim dividend of 1.6875 pence per Ordinary Share, which will be paid on 31
March 2006 to shareholders on the register on 17 March 2006.
Borrowings
As a result of the strong rise in the value of the portfolio, the gearing level
as at 31 December 2005 was 32.8 per cent, which compared to 35.3 per cent as at
30 June 2005 and 40.0 per cent at launch on 1 June 2004.
The Company's borrowings are represented by a ten year fixed rate bank loan of
£70.7 million which is drawn down to 30 May 2014.
Outlook
Prospects for the property market in 2006 remain positive, although we would
expect returns to be lower than those of the last two years. The Managers'
forecast for 2006 is for a modest improvement in rental growth, further fall in
yields and for all property returns of 10.6 per cent. Over the medium term, we
would expect returns from property to continue to be attractive, but at more
sustainable levels.'
All enquiries to:
The Company Secretary
Northern Trust International Fund Administration Services (Guernsey) Limited
Trafalgar Court
Les Banques
St Peter Port
Guernsey GY1 3QL
Tel: 01481 745001
Fax: 01481 745051
ISIS Property Trust 2 Limited
Consolidated Income Statement (unaudited)
for the six months to 31 December 2005
Total
£'000
Revenue
Rental income 6,201
Gains on Investment Properties
Unrealised gains on revaluation of investment properties 16,173
Realised gains on disposal of investment properties 596
-----------
Total Income 22,970
-----------
Expenditure
Investment management fee (898)
Direct operating expenses of let rental property (87)
Administrative fee (31)
Valuation and other professional fees (70)
Directors' fees (33)
Other expenses (263)
-----------
Total expenditure (1,382)
-----------
Net operating profit before finance costs 21,588
-----------
Finance costs
Interest revenue receivable 64
Interest payable (2,270)
-----------
(2,206)
-----------
Net profit from ordinary activities before taxation 19,382
Taxation on profit on ordinary activities -
-----------
Net profit for the period 19,382
===========
Earnings per Ordinary Share 17.5p
ISIS Property Trust 2 Limited
Consolidated Income Statement (unaudited) for the period from 10 May 2004
(incorporation) to 31 December 2004
Total
£'000
Revenue
Rental income 7,148
Gains on Investment Properties
Unrealised gains on revaluation of investment properties 15,785
-----------
Total Income 22,933
-----------
Expenditure
Set-up costs (1,528)
Investment management fee (914)
Direct operating expenses of let rental property (92)
Administrative fee (35)
Valuation and other professional fees (107)
Directors' fees (43)
Other expenses (106)
-----------
Total expenditure (2,825)
-----------
Net operating profit before finance costs 20,108
-----------
Finance costs
Interest revenue receivable 114
Interest payable (2,613)
-----------
(2,499)
-----------
Net profit from ordinary activities before taxation 17,609
Taxation on profit on ordinary activities -
-----------
Net profit for the period 17,609
===========
Earnings per Ordinary Share 15.9p
ISIS Property Trust 2 Limited
Consolidated Income Statement (audited) for the period from 10 May 2004
(incorporation) to 30 June 2005
Total
£'000
Revenue
Rental income 13,410
Gains on Investment Properties
Unrealised gains on revaluation of investment properties 24,237
-----------
Total Income 37,647
-----------
Expenditure
Set-up costs (1,528)
Investment management fee (1,772)
Direct operating expenses of let rental property (162)
Administrative fee (65)
Valuation and other professional fees (180)
Directors' fees (75)
Other expenses (323)
-----------
Total expenditure (4,105)
-----------
Net operating profit before finance costs 33,542
-----------
Finance costs
Interest revenue receivable 270
Interest payable (4,859)
-----------
(4,589)
-----------
Net profit from ordinary activities before taxation 28,953
Taxation on profit on ordinary activities -
-----------
Net profit for the period 28,953
===========
Earnings per Ordinary Share 26.2p
ISIS Property Trust 2 Limited
Consolidated Balance Sheet at 31 December 2005
31 December 2005 31 December 2004 30 June 2005
£'000 £'000 £'000
(unaudited) (unaudited) (audited)
Non-current assets
Investment properties 214,065 192,595 201,050
------------- ------------- -----------
Current assets
Trade and other
receivables 1,046 1,261 1,304
Cash and cash equivalents 7,578 4,729 4,100
------------- ------------- -----------
8,624 5,990 5,404
------------- ------------- -----------
Total assets 222,689 198,585 206,454
------------- ------------- -----------
Non-current liabilities
Interest bearing bank
loan (71,330) (70,566) (71,362)
Interest rate swap (5,741) (4,284) (6,167)
------------- ------------- -----------
(77,071) (74,850) (77,529)
------------- ------------- -----------
Current liabilities
Trade and other payables (5,062) (4,988) (4,447)
------------- ------------- -----------
Total liabilities (82,133) (79,838) (81,976)
------------- ------------- -----------
------------- ------------- -----------
NET ASSETS 140,556 118,747 124,478
============= ============= ===========
Represented by:
Share capital 1,105 1,105 1,105
Special distributable
reserve 104,186 106,792 105,303
Capital reserves 41,006 15,785 24,237
Other reserve (5,741) (4,284) (6,167)
Revenue reserves - (651) -
------------- ------------- -----------
EQUITY SHAREHOLDERS'
FUNDS 140,556 118,747 124,478
============= ============= ===========
Net asset value per
Ordinary Share 127.2p 107.5p 112.6p
ISIS Property Trust 2 Limited
Consolidated Statement of Changes in Equity (unaudited)
for the six months to 31 December 2005
£'000
Opening net assets 124,478
Net profit for the period 19,382
Dividends paid (3,730)
Unrealised gain on revaluation of interest rate swap 426
-----------
Closing net assets 140,556
===========
ISIS Property Trust 2 Limited
Consolidated Statement of Changes in Equity (unaudited)
for the period 10 May 2004 to 31 December 2004
£'000
Opening net assets -
Net profit for the period 17,609
Issue of ordinary share capital, net of issue costs 107,897
Dividends paid (2,475)
Unrealised loss on revaluation of interest rate swap (4,284)
-----------
Closing net assets 118,747
===========
ISIS Property Trust 2 Limited
Consolidated Statement of Changes in Equity (audited)
for the period 10 May 2004 to 30 June 2005
£'000
Opening net assets -
Net profit for the period 28,953
Issue of ordinary share capital, net of issue costs 107,897
Dividends paid (6,205)
Unrealised loss on revaluation of interest rate swap (6,167)
-----------
Closing net assets 124,478
===========
ISIS Property Trust 2 Limited
Consolidated Statement of Cash Flows (unaudited)
for the six months to 31 December 2005
£'000
Cash flows from operating activities
Net operating profit for the period before finance costs 21,588
Adjustments for:
Unrealised gains on revaluation of investment properties (16,173)
Realised gains on disposal of investment properties (596)
Decrease in operating trade and other receivables 258
Increase in operating trade and other payables 565
-----------
5,642
-----------
Interest received 64
Bank loan interest paid (1,959)
Payment under interest rate swap arrangement (293)
-----------
(2,188)
-----------
Net cash inflow from operating activities 3,454
-----------
Cash flows from investing activities
Purchases of investment properties (1,246)
Sales of investment properties 5,000
-----------
Net cash inflow from investing activities 3,754
-----------
Cash flows from financing activities
Dividends paid (3,730)
-----------
Net cash outflow from financing activities (3,730)
-----------
Net increase in cash and cash equivalents 3,478
Opening cash and cash equivalents 4,100
-----------
Closing cash and cash equivalents 7,578
===========
ISIS Property Trust 2 Limited
Consolidated Statement of Cash Flows (unaudited)
for the period from 10 May 2004 to 31 December 2004
£'000
Cash flows from operating activities
Net operating profit for the period before finance costs 20,108
Adjustments for:
Unrealised gains on revaluation of investment properties (15,785)
Increase in operating trade and other receivables (1,261)
Increase in operating trade and other payables 3,722
-----------
6,784
-----------
Interest received 96
Bank loan interest paid (1,478)
Payments under interest rate swap arrangement (235)
-----------
(1,617)
-----------
Net cash inflow from operating activities 5,167
-----------
Cash flows from investing activities
Purchases of investment property (176,695)
-----------
Net cash outflow from investing activities (176,695)
-----------
Cash flows from financing activities
Proceeds of issue of Ordinary Shares 110,500
Issue costs of ordinary share capital (2,328)
Draw down of bank loan 70,662
Issue costs of bank loan (102)
Dividends paid (2,475)
-----------
Net cash inflow from financing activities 176,257
-----------
Net increase in cash and cash equivalents 4,729
Opening cash and cash equivalents -
-----------
Closing cash and cash equivalents 4,729
===========
ISIS Property Trust 2 Limited
Consolidated Statement of Cash Flows (audited)
for the period from 10 May 2004 to 30 June 2005
£'000
Cash flows from operating activities
Net operating profit for the period before finance costs 33,542
Adjustments for:
Unrealised gains on revaluation of investment properties (24,237)
Increase in operating trade and other receivables (1,304)
Increase in operating trade and other payables 4,353
-----------
12,354
-----------
Interest received 270
Bank loan interest paid (3,469)
Payments under interest rate swap arrangement (494)
-----------
(3,693)
-----------
Net cash inflow from operating activities 8,661
-----------
Cash flows from investing activities
Purchases of investment properties (176,813)
-----------
Net cash outflow from investing activities (176,813)
-----------
Cash flows from financing activities
Proceeds of issue of Ordinary Shares 110,500
Issue costs of ordinary share capital (2,603)
Draw down of bank loan 70,662
Issue costs of bank loan (102)
Dividends paid (6,205)
-----------
Net cash inflow from financing activities 172,252
-----------
Net increase in cash and cash equivalents 4,100
Opening cash and cash equivalents -
-----------
Closing cash and cash equivalents 4,100
===========
ISIS Property Trust 2 Limited
Notes to the interim accounts
for the six months to 31 December 2005
1. The unaudited interim results have been prepared on the basis of
International Financial Reporting Standards and the accounting policies set out
in the statutory accounts of the Group for the period from 10 May 2004 to 30
June 2005.
2. Earnings per Ordinary Share are based on 110,500,000 shares, being the
weighted average number of shares in issue during the period (31 December 2004 -
110,500,000; 30 June 2005 - 110,500,000).
3. Earnings for the six months to 31 December 2005 should not be taken as a
guide to the results for the year to 30 June 2006.
4. Dividends
Period to 31 December 2005
Rate
(pence) £'000
______ ______
Fourth interim dividend for the period to
30 June 2005, paid 30 September 2005 1.6875 1,865
First interim dividend for the year to
30 June 2006, paid 16 December 2005 1.6875 1,865
_______ ______
3.3750 3,730
_______ ______
A second interim dividend for the year to 30 June 2006, of 1.6875p per share,
will be paid on 31 March 2006 to shareholders on the register at close of
business on 17 March 2006.
5. Related party transactions
No Director has an interest in any transactions which are or were unusual in
their nature or significant to the nature of the Group. F&C Asset Management plc
received fees for its services as Investment Managers. The total charge to the
Income Statement during the period was £898,000 of which £448,000 remained
payable at the period end.
The Directors of the Company received fees for their services totalling £33,000.
No fees remained payable at the period end.
6. Investment properties
The property at Pincents Lane, Reading was sold in December 2005 for £5.0
million. The resulting realised gain on disposal of £0.6 million is included in
the Income Statement.
At the beginning of December 2005 the property at Hemel Gateway, Boundary Way,
Hemel Hempstead, was severely damaged as a result of a fuel explosion at the
neighbouring Buncefield fuel terminal. This property is fully insured and the
Board does not expect there to be any material capital or income loss to the
Company.
7. The Group results consolidate those of IPT2 Property Holdings Limited, a
wholly owned subsidiary which invests in properties.
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