Net Asset Value(s)

RNS Number : 0097L

AXA Property Trust Ld

29 August 2012

 



To:                    Company Announcements

Date:                29 August 2012

Company:         AXA Property Trust Limited

Subject:            Net Asset Value 30 June 2012  

CORPORATE SUMMARY

-     The Company's unaudited Consolidated Net Asset Value at 30 June 2012 was £60.02 million (60.02 pence per share), £62.34 million (62.34 pence per share) as at 31 March 2012), a decrease of £2.32 million;

-     The Company and its subsidiaries made a loss after tax of -£0.79 million in the twelve month period to 30 June 2012;

-     Subsequent to 30 June 2012, the Company and its subsidiaries are now in compliance with the 50% LTV covenant on the Company's principal loan facility following the prepayment down to €64.62 million. A further loan prepayment was made on 25 July 2012 following the disposal at Treuchtlingen, Germany, resulting in a new loan balance of €60.56 million and LTV of 49.03%;

-     The sale of the asset at Treuchtlingen, Germany, completed at €5.7 million on 6 July 2012. An offer has been accepted for the asset at Pankower Allee, Germany, for €6.6 million, and it is expected to be notarised in the next few weeks;

-     As announced on 21 August 2012, the Company has, upon the advice of the Manager, suspended the June 2012 dividend and further dividends for the short term in order to more prudently manage its cash and debt positions;

-     The Board has reviewed its current investment strategy and determined it would be in the best interests of the Company to reduce its level of gearing.  In order to achieve this the Company intends to realise assets considered as non-core in an orderly manner over the next 12-18 months with a view to further paying down the Company's current debt. Once the debt obligations of the Company have been stabilised, the Board will undertake a consultation exercise to determine whether the Company should continue in its current form or whether the Board should implement a new strategy, such options to include a broader reconstruction or winding-up prior to the 2015 continuation vote.

PORTFOLIO UPDATE

Country Allocation at 30 June 2012 (by value)

Country                         % of portfolio

Germany                                   69%

Italy                                          21%

Netherlands                               5%

Belgium                                    5%

Sector Allocation at 30 June 2012 (by value)

Sector                           % of portfolio

Retail                                        69%

Industrial                                   20%

Leisure                                      11%

At Fuerth, a new five year lease has been signed with a local operator to take over the discotheque unit where the tenant will invest circa €250k in relation to fit out and refurbishment works, which have now commenced.

Following the letting at Fuerth to international furniture retailer Seats & Sofas, the planning application for a change of use was submitted to the local authority and consent has now been granted. The refurbishment works have commenced and are progressing according to plan. The unit will be delivered to the tenant mid-November 2012.

The Investment Manager is in discussions with two potential tenants for the entire unit previously occupied by EDEKA. The business activity of both tenants would be compliant with the restrictive local planning constraints.

At Dasing the tenant DB Schenker has agreed to a lease extension on the 9,580m² expiring in September 2012. The lease will now expire in March 2014. The same tenant also signed a short term lease extension (three months) on the 7,294m² due to be vacated at the end of June 2012.

Following the notarisation of the disposal of the asset at Treuchtlingen, Germany, for €5.7 million, the completion of the sale took place on the 7^th July 2012.

A further asset in Germany is under offer, Pankower Allee, Berlin, Germany at a value above valuation. The prospective buyer has completed due diligence and the notarisation of the sale is expected to take place in the next few weeks.

MARKET UPDATE

As we progressed through Q2 2012, economic growth prospects deteriorated in a number of European markets. Business sentiment has deteriorated as has consumer confidence, both largely due to the escalation of the euro crisis from the peripheral to the larger economies.  The two key issues raised in our last quarterly update - confidence in the eurozone and the resulting regional polarisation have effectively converged and the northern economies are now much more affected than previously.  But the most significant changes relate to the southern European countries, where the austerity programmes are having a much more negative effect than previously expected. 

Our 2012 GDP forecasts for Italy, Spain and Portugal have been reduced by 30 basis points, 50 basis points and 60 basis points respectively. Similarly, the UK, the Czech Republic and Hungary have also been downgraded substantially after a first half of the year that was poorer than expected. While Germany, the Nordics, Switzerland and Slovakia have all seen forecast upgrades, this was largely on the basis of stronger first quarter growth, rather than any real improvement in economic prospects.

As the prospects for a robust recovery in 2013 have weakened over recent months we have reduced our growth forecasts for most European economies. Whilst the largest reduction comes in Portugal (130 basis points), the eurozone's four largest economies have seen reductions of 50 basis points or more. However, Portugal is the only country for which we are also forecasting the recession to continue into 2014. Our forecasts for both European and eurozone GDP growth are broadly unchanged for 2012 (0.0% and -0.3%), and those for 2013 (0.8% and 0.4%) have been reduced by 0.3% points and 0.5% points respectively since the last quarter.

Despite the deterioration in the economic conditions, our forecasts of European retail rental value growth forecasts have not been changed. Generally, retail sales are expected to fall or, at best, to remain static over 2012 and this will be a large contributor to rental value declines, even at the prime end of the market. Those countries facing extended austerity programmes, in particular, will likely experience weakened consumer confidence and retail sales growth. Spain is already in its fifth year of falling retail sales and, whilst Italy saw an upturn in late-2009/early-2010, it is once again enduring retail sales declines. In these markets, prime locations in main retail centres are the most insulated from consumer weakness, benefitting from the most affluent catchments and being supported by tourism spending. However, we still expect rental declines in average and secondary locations.

Our outlook for the office sector, reflecting our reduced economic forecasts, has weakened as occupiers defer expansion/re-location plans pending some resolution of the euro crisis. As a result, take-up has slowed, even in key locations. We continue to believe that office markets with exposure to the banking, finance, professional and business service sectors will remain the stronger performers over the short-term. Regional office markets, more heavily exposed to public sector cutbacks as a result of austerity programmes, will experience further rises in vacancy levels and limited potential for rental value growth in the medium term.

Given our forecast of weak economic growth in 2012, we do not expect significant improvement in trade flows and, as a result, we believe that net demand for logistics space will be limited. Some occupier activity stemming from consolidation will persist in the short-term as tenants take advantage of favourable letting conditions to secure better located or more efficient space. Cost-cutting, rather than expansionary activity, will remain the focus in the short-term for most markets. However, the strongest locations, in particular those supporting the key trade hubs (ports and airports) of northern Europe, may see pockets of undersupply driving modest rental growth and instigating some speculative development. Overall, we expect occupier demand to remain low and vacancy levels to remain elevated - in this context, we remain cautious about secondary quality and poorly located stock where obsolescence will be a key issue.

As a result of the continued uncertainty surrounding the euro crisis, we maintain our belief that risk aversion continues to be at the forefront of investors' minds. Transactional activity slowed during H1 2012 and, given the limited availability of the big ticket, prime stock that investors are chasing, we expect investment volumes for 2012 to be 20-30% below the levels observed in 2011, with even greater falls in southern European markets.

CONSOLIDATED PERFORMANCE SUMMARY

	Unaudited	Unaudited
	9 months ended	12 months ended
	31 March 2012	30 June 2012	Quarterly Movement
	Pence per share	Pence per share	Pence per share /(%)
Net Asset Value per share	62.34	60.02	-2.32 (-3.7%)
Earnings per share	-0.78	-0.79	-0.01
Dividend paid in the  period	1.75	2.50	0.75
Share price (mid market)	35.38	31.75	-3.63 (-10.3%)
Share price discount to Net Asset Value	43.2%	47.1%	3.9 percentage points.

Total return	Unaudited	Unaudited
	9 months ended	12 months ended
	31 March 2012	30 June 2012
Net Asset Value Total Return	-14.2%*	-16.4%
Share Price Total Return
- AXA Property Trust	-26.5%	-32.7%
- FTSE All Share Index	-0.5%	-3.1%
- FTSE Real Estate Investment Trust Index	-13.1%	-9.6%

Source: Datastream; AXA Real Estate

* Calculation restated to cover a nine month period (previously three months)

Total net loss was -£0.79 million (-0.79 pence per share) for the twelve months to 30 June 2012, including £4.23 million of "revenue" profit (excluding capital items such as revaluation of property) and -£5.02 million "capital" loss analysed as follows:

	Unaudited	Unaudited	Unaudited
	9 months ended	3 months ended	12 months ended
	31 March 2012	30 June 2012	30 June 2012
	£million	£million	£million
Net property income	7.75	2.27	10.02
Net foreign exchange gains	0.42	0.17	0.59
Investment Manager's fees	(0.92)	(0.28)	(1.20)
Other income and expenses	(1.20)	(0.34)	(1.54)
Net finance costs	(2.54)	(0.79)	(3.33)
Current tax	(0.18)	(0.13)	(0.31)
Revenue profit	3.33	0.90	4.23
Unrealised (losses)/gains on revaluation of investment properties	(3.53)	0.36	(3.17)
(Losses)/gains on disposal of investment properties	(0.34)	0.01	(0.33)
Gains/(losses) on derivatives (hedging interest rate and currency exposures)	0.64	(0.94)	(0.30)
Finance costs	(0.86)	(0.19)	(1.05)
Net foreign exchange losses	(0.07)	(0.09)	(0.16)
Deferred tax	0.05	(0.06)	(0.01)
Capital loss	(4.11)	(0.91)	(5.02)
Total net loss	(0.78)	(0.01)	(0.79)

NET ASSET VALUE

The Company's unaudited Consolidated Net Asset Value per share as at 30 June 2012 was 60.02 pence (62.34 pence as at 31 March 2012), a decrease of 2.32 pence.

The Net Asset Value attributable to the Ordinary Shares is calculated under International Financial Reporting Standards. It includes all current year income after the deduction of dividends paid prior to 30 June 2012.

The £2.32 million decrease in Net Asset Value over the quarter ended 30 June 2012 can be analysed as follows:

	Unaudited	Unaudited
	3 months ended	3 months ended
	31 March 2012	30 June 2012
	£million	£million
Opening Net Asset Value	63.65	62.34
Net loss after tax	(0.30)	(0.01)
Unrealised movement on derivatives	(0.37)	0.64
Dividends paid	(0.50)	(0.75)
Foreign exchange translation losses	(2.39)	(2.20)
Closing Net Asset Value	62.34	60.02

The Euro valuation of the property portfolio increased by 0.38% to €150.38 million for the quarter.  In Sterling currency terms, the property valuation was £121.73 million (including the effects of valuation movements, capital expenditure and foreign exchange movements). The £/€ foreign exchange rate applied to the Company's Euro investments in its subsidiary companies at 30 June 2012 was 1.24 (31 March 2012: 1.20).

The Company's net property yield on current market valuation (after acquisition and operating costs) as at 30 June 2012 was 7.25% (7.17% as at 31 March 2012).

SHARE PRICE AND DISCOUNT TO NET ASSET VALUE

As at close of business on 30 June 2012, the mid market price of the Company's shares on the London Stock Exchange was 31.75 pence, representing a discount of 47.1% on the Company's Net Asset Value at 30 June 2012 and a 7.8% annual dividend yield for the year to 30 June 2012.

As at close of business on 24 August 2012, the mid market price of the Company's shares was 29.62 pence, representing a discount of 50.6% on the Company's Net Asset Value at 30 June 2012 and an 8.4% annual dividend yield.

FUND GEARING

	Unaudited	Unaudited
	31 March 2012	30 June 2012	Movement
	£million /%	£million /%	£million /%
Property portfolio *	124.92	121.73	-3.19 (-2.5%)
Borrowings (net of capitalised issue costs)	62.90	60.84	-2.06 (-3.3%)
Total gross gearing	50.3%	50.0%	-0.3 percentage pts
Total net gearing	45.7%	46.0%	+0.3 percentage pts

*Portfolio value based on the Company's independent valuation

Fund gearing decreased by -0.3 percentage points over the quarter to 50.0% as at 30 June 2012.

Fund gearing is included to provide an indication of the overall indebtedness of the Company and does not relate to any covenant terms in the Company's loan facilities. Gross gearing is calculated as debt over property portfolio at fair value. Net gearing is calculated as debt less cash over property portfolio at fair value.

The Board believes that, given the current market environment, it would be in the best interests of the Company to reduce its level of gearing, and will reduce debt using proceeds from sales over the next 12-18 months. 

LOAN FACILITIES

Gross Loan to Value (LTV) Covenants	Unaudited	Unaudited
	31 March 2012	30 June 2012	Maximum
Main loan facility	49.5%	52.0%	65.0%
Joint venture Property Trust Agnadello S.r.l.	60.4%	55.6%	65.0%

As at 30 June 2012, the loan-to-value ratio on the main facility was 52.0% based on the bank's valuation of the property portfolio, and after applying the surplus proceeds from the two realised asset sales in February 2012.

Subsequent to 30 June 2012, and as per the Company's RNS released on 27 July 2012, the Company and its subsidiaries made a prepayment of the loan facility down to €64.62 million following the LTV testing date of 2 July 2012.  A further loan prepayment was made on 25 July 2012 following the disposal of the asset at Treuchtlingen, Germany, resulting in a new loan balance of €60.56 million and LTV of 49.03%, bringing the loan into compliance with the 50% LTV covenant at 2 July 2012.  The new LTV covenant will be 60% from August 2012 to the end of the facility in July 2016.

Interest Cover Ratio at 30 June 2012	Historic (Unaudited)	Minimum	Projected (Unaudited)	Minimum	Net rental income headroom
Main loan facility covenant	290.8%	200.0%	302.4%	185.0%	38.8%
Joint venture Property Trust Agnadello S.r.l.	351.1%	125.0%	554.0%	125.0%	77.4%

Interest Cover Ratio (ICR) is calculated as net financing expense payable as a percentage of net rental income less movement in arrears. Net rental income headroom is based on projected interest cover.

CASH POSITION AND CAPITAL EXPENDITURE

The Company and its subsidiaries held total cash of £4.88 million (€6.05 million) at 30 June 2012, including surplus proceeds of £2.59 million (€3.22 million) in relation to the recent asset sales. Further to the 2 July 2012 LTV test, this £2.59 million was applied to the main facility, in addition to an amount of £876k (€1.087 million). 

The anticipated capital expenditure over the next twelve months is £1.08 million.

MATERIAL EVENTS

Except for those noted above, the Board of the Company is not aware of any significant event or transaction which occurred between 30 June 2012 and the date of the publication of this Statement which would have a material impact on the financial position of the Company.

Company website:

http://www.axapropertytrust.com

All Enquiries:

Investment Manager 

AXA Investment Managers UK Limited

Broker Services

7 Newgate Street

London EC1A 7NX

Tel: [phone]
Email: [e-mail]

Broker

Oriel Securities Limited

Joe Winkley / Neil Winward

Tel: [phone]

Company Secretary

Northern Trust International Fund Administration Services (Guernsey) Limited

Trafalgar Court

Les Banques

St Peter Port

GY1 3QL

Tel: [phone]

Fax: [phone]

 

END

 

 

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