Balanced Commercial Property Trust Regulatory News (BCPT)

31 Jul 2007 13:12

F&C Commercial Property Trust Ltd31 July 2007 To: RNS Date: 31 July 2007 From: F&C Commercial Property Trust Limited Interim results in respect of the period ended 30 June 2007 • Net asset value total return of 6.3 per cent • Dividend yield of 4.8 per cent The Chairman, Peter Niven, stated: 'Performance Having experienced three years of exceptional total returns, the UK commercialproperty market is now slowing. Yield compression, which has largely drivenperformance of the sector during this period, would now appear to havestabilised. This is unsurprising as the all-property initial yield of 4.56 percent from the Investment Property Databank UK Monthly Index (the 'IPD MonthlyIndex') as at 30 June 2007 was below the five year swap rate and risk free yieldon gilts. The slowdown is evident from a more moderate return of 4.4 per centfrom the IPD Monthly Index for the six months to 30 June 2007 compared with thereturn of 18.1 per cent achieved in 2006. The market is, however, still experiencing strong investment demand for primeproperties but demand is weakening for more secondary properties. In particular,overseas buyers continue to be very active in the market, especially in CentralLondon. The Board believes that the Company's portfolio comprises primeproperties in the main. Portfolio The Company had total assets (less current liabilities) of £1.3 billion as at 30June 2007, an increase of 2.6 per cent for the period. The ungeared total returnof the portfolio for the six months was 6.1 per cent which compares veryfavourably with the IPD Monthly Index return of 4.4 per cent referred to above.The net asset value total return for the period was 6.3 per cent. Retail The total return from the Company's retail properties during the period was 4.7per cent which compares with the IPD Monthly Index all-retail total return of2.9 per cent. Investment demand for prime shopping centres and Open A1 consentedretail warehouse parks remains strong. However, the investment market for highstreet shops is weakening and retail warehouses with bulky goods or restrictedplanning consents, especially the big DIY units, are also beginning to weaken.This is evidenced by retailers beginning to have concerns over retail saleslevels and the changing of formats seen in the DIY sector. This is an important year for the Company's retail properties, with significantrent reviews due at Newbury Retail Park, Dane Street, Rochdale and WimbledonBroadway, London SW19. In a more challenging environment these negotiations aretaking considerably longer to settle, often by referral to a third partysurveyor. However, the Company has received a favourable rent reviewdetermination on a unit at Sears Retail Park, Solihull reflecting an uplift of36 per cent over the previous contracted rent. St Christopher's Place Estate, London W1 continues to let successfully and theCompany currently has a number of quality retail lettings in solicitors' hands.The Estate also benefits from a diversified income stream with its exposure torestaurants, offices and residential units. The Estate's office elementcontinues to benefit from the significant rental growth being experienced inCentral London with £50 psf now firmly established on the Estate. The Companycontinues to refurbish and upgrade the office content on a rolling programme. Offices The total return from the Company's office properties during the period was 8.0per cent which compares with the IPD Monthly Index all-office total return of6.9 per cent. The office market continues to be the best performing sector,being driven by Central London which is still experiencing strong rental growthand investor demand for properties. The Company has a significant exposure toCentral London and is well placed to capture rental growth. It is shortly tocommence refurbishment works to three floors of offices at Charles House, 5-11Regent Street, London SW1 and a further three floors at 7 Birchin Lane, LondonEC3. Resolution to grant planning consent, subject to agreement of a S.106 Agreement,has been given for a proposed redevelopment of 24-27 Great Pulteney Street,London W1. This is a significant opportunity for the Company to developapproximately 34,000 sq. ft. of high quality office space in Soho and to letinto a strong leasing cycle. Elsewhere in Central London, Cassini House, St James's Street, London SW1 hasperformed strongly with a letting of the ground floor contracted at £75 psf. Thefirst floor in the property has recently been sub-let at £92.50 psf, whichprovides further evidence of the strength of occupier demand in Central London. Industrials The total return from the Company's industrial properties during the period was5.3 per cent which compares with the IPD Monthly Index all-industrial totalreturn of 4.2 per cent. There is some concern that the abolition of empty ratesrelief from next April is not being factored into the current pricing ofinvestments, especially for secondary and older stock. A masterplan for theindustrial site at The Cowdray Centre, Colchester continues to be developed withthe local authority and the Company intends to submit a planning application forredevelopment of the site. Portfolio Management 2007 is an important year for the Company, with a significant portion of itsincome subject to rent review, lease renewal or break options. The Managers arefocused on managing this process. The Company's voids were measured at 1.8 percent of rental value as at 30 June 2007 which is low, reflecting the size andnature of the portfolio. Sales and Purchases Since the beginning of the year the Company has been reducing its exposure tothe Industrial Property Investment Fund which, as at 31 December 2006, was itslargest asset. The Company realised £45.8 million in three separate transactionsduring the period, at a premium to net asset value. The Company also realised£4.9 million from the disposal of units in The Mall LP. There were no purchases during the period. However, the Managers continue tolook for ways to enhance the quality of the portfolio through attractivepurchase opportunities. Dividends A first interim dividend of 1.5p per share was paid on 27 July 2007. The Boardhas declared a second interim dividend of 1.5p per share which will be paid on26 October 2007 to shareholders on the register on 28 September 2007. The current annual rate of dividend, of 6.0p per share, is unchanged from thatset at the time of the Company's launch in March 2005 and represented a dividendyield of 4.8 per cent as at 30 June 2007. Discount and Share Buy Backs As a reflection of the more challenging environment for property as an assetclass and in common with the peer group and wider quoted property sector, theCompany shares started to trade at a discount to net asset value for the firsttime during the period. The discount at the end of the period as shown in theaccounts was 15.9 per cent. However, it is the Company's practice not to issuequarterly net asset values until after the end of each quarter and the discountto the most recently published net asset value (adjusted for any quarterlydividends for which the share price has gone ex-dividend) at the end of theperiod was 11.8 per cent. The average discount on this basis during the periodwas 5.9 per cent and, over the six months, the share price fell by 5.3 per cent. During the period the Company bought back 7 million shares, equivalent to 0.95per cent of the issued share capital as at 31 December 2006. The shares werebought back at an average discount of 9.3 per cent to the published net assetvalue (adjusted for any quarterly dividends for which the share price has goneex-dividend) and provided an enhancement of 0.14p per share to the net assetvalue. The shares were bought back to be held in treasury, for subsequentre-issue at a premium to net asset value. In carrying out these share buy backsthe Board gave careful consideration to the Company's cashflow and bond covenantconstraints as well as amounts committed to future development opportunities. Shareholders will be aware of the statement in the prospectus that the Directorsintend to use the share buy back authority to purchase shares (subject to theincome and cash flow requirements of the Company) if the share price is morethan five per cent below the published net asset value for a continuous periodof 20 dealing days or more. To ensure a fair comparison, the Directors believethat such discount should be calculated by adjusting the published net assetvalue for any quarterly dividends for which the share price has goneex-dividend. It is also stated in the prospectus that, in the event of the discount to thepublished net asset value being more than five per cent for 90 dealing days ormore, the Directors will convene an Extraordinary General Meeting to be heldwithin three months to consider an ordinary resolution for the continuation ofthe Company. This condition has not been met to date but, should the discountremain in excess of five per cent, will be met on 22 August 2007. Borrowings As a result of the continued rise in the valuation of the property portfolio andthe disposals during the period, the level of gearing fell during the periodfrom 18.0 per cent to 17.6 per cent. This compares with 24.4 per cent at launchin March 2005. The Company's borrowings are represented by £230 million Secured Bonds due 2017which have been assigned an 'Aaa' rating by Moody's Investors Services. Thebonds carry interest at a fixed rate of 5.23 per cent per annum. Issue of Shares Since the end of the period the Board has announced that it is proposing toissue shares in connection with the proposed liquidation and reconstruction (the'Scheme') of The UK Balanced Property Trust Limited ('UKBPT') that has beenannounced by UKBPT. Under the Scheme, it is intended that shareholders in UKBPT will have theopportunity to roll-over their investment into the Company. The Company will bethe default option for shareholders in UKBPT. Ordinary shares will be issued toshareholders in UKBPT at an issue price equal to the net asset value of a sharein the Company at the time the Scheme becomes effective, which is expected to bemid-October 2007, adjusted for any accrued dividends in the Company to which theroll-over shareholders may or may not be entitled. The Company's Managers, F&C Investment Business Limited, have agreed to make acontribution to the costs to the Company of the roll-over which is expected tocover the costs to the Company of participating in the Scheme. As such, theCompany's participation in the Scheme will not be dilutive to the net assetvalue per share. It is the intention that the number of shares to be issued willbe limited to 44.5 million. Subsidiaries of Friends Provident plc will retainover 50 per cent of the issued shares in the Company following the Scheme. Outlook Property returns are beginning to slow and the Managers' in-house forecast forthe sector is for total returns of between 7 and 8 per cent for 2007. This issomewhat more conservative than consensus forecasts. It is apparent thatsecondary stock is weakening as there is not the strength and depth of bidderspreviously seen. Total returns are likely to be income driven with pockets ofcapital growth being enhanced by rental growth, superior stock selection andcontinued asset management. Since its launch in March 2005, the Company has produced a net asset value totalreturn of 64.7 per cent. The Board believes that the Company continues to offera robust and liquid means for investors to access a high quality portfolio ofreal estate in the UK.' All enquiries to: The Company SecretaryNorthern Trust International Fund Administration Services (Guernsey) LimitedTrafalgar CourtLes BanquesSt. Peter PortGuernsey GY1 3QL Tel: 01481 745001Fax: 01481 745051 Paul HerringtonF&C Investment Business Limited Tel: 0207 628 8000 F&C Commercial Property Trust Limited Consolidated Income Statement (unaudited) for the six months to 30 June 2007 Six months Six months Year to to 30 June to 30 June 31 December 2007 2006 2006* £'000 £'000 £'000RevenueRental income 27,672 25,982 53,427Income from indirect property funds 3,421 4,354 7,747Gains on investmentsGain on investment properties 40,815 79,618 155,511 Gain on indirect property funds 3,464 15,503 27,653 Total income 75,372 125,457 244,338 ExpenditureInvestment management fee (4,824) (4,277) (9,050)Direct operating expenses of let (1,004) (1,524) (3,156)rental propertyProvision for bad debts (74) 36 127Valuation and other professional fees (244) (151) (388)Administrative fee (51) (50) (102)Directors' fees (49) (49) (97)Other expenses (155) (192) (254) Total expenditure (6,401) (6,207) (12,920) Net operating profit before finance 68,971 119,250 231,418costs Net finance costsInterest revenue receivable 1,513 855 1,573Interest payable (6,063) (6,062) (12,123) (4,550) (5,207) (10,550) Net profit from ordinary activities 64,421 114,043 220,868before taxation Taxation on profit on ordinary (313) (333) (457)activities Net profit for the period 64,108 113,710 220,411 Earnings per share 8.7p 15.5p 30.0p *Audited F&C Commercial Property Trust Limited Consolidated Balance Sheet as at 30 June 2007 (unaudited) +----------------------------------------+---------+--+----------+--+---------+| |30 June | |30 June | |31 Dec || | | |2006 | | || |2007 | | | |2006* || | | | £'000| | || |£'000 | | | |£'000 |+----------------------------------------+---------+--+----------+--+---------+|Non-current assets | | | | | |+----------------------------------------+---------+--+----------+--+---------+|Investment properties |1,087,550| | 991,885| |1,046,980|+----------------------------------------+---------+--+----------+--+---------+|Investments in indirect property funds | 135,153| | 169,727| | 181,877||held at fair value | | | | | |+----------------------------------------+---------+--+----------+--+---------+| |1,222,703| | 1,161,612| |1,228,857|+----------------------------------------+---------+--+----------+--+---------+|Current assets | | | | | || | | | | | |+----------------------------------------+---------+--+----------+--+---------+|Trade and other receivables | 34,909| | 4,084| | 6,217|+----------------------------------------+---------+--+----------+--+---------+|Cash and cash equivalents | 63,687| | 35,397| | 53,291|+----------------------------------------+---------+--+----------+--+---------+| | 98,596| | 39,481| | 59,508|+----------------------------------------+---------+--+----------+--+---------+| | | | | | |+----------------------------------------+---------+--+----------+--+---------+|Total assets |1,321,299| | 1,201,093| |1,288,365|| | | | | | |+----------------------------------------+---------+--+----------+--+---------+| | | | | | |+----------------------------------------+---------+--+----------+--+---------+|Current liabilities | | | | | || | | | | | |+----------------------------------------+---------+--+----------+--+---------+|Trade and other payables | (19,029)| | (16,767)| | (19,243)|+----------------------------------------+---------+--+----------+--+---------+| | | | | | || | | | | | |+----------------------------------------+---------+--+----------+--+---------+|Non-current liabilities | | | | | || | | | | | |+----------------------------------------+---------+--+----------+--+---------+|Interest bearing bonds |(229,043)| | (228,946)| |(228,993)|+----------------------------------------+---------+--+----------+--+---------+|Deferred taxation | (434)| | (262)| | (360)|+----------------------------------------+---------+--+----------+--+---------+| |(229,477)| | (229,208)| |(229,353)|| | | | | | |+----------------------------------------+---------+--+----------+--+---------+|Total liabilities |(248,506)| | (245,975)| |(248,596)|+----------------------------------------+---------+--+----------+--+---------+| | | | | | |+----------------------------------------+---------+--+----------+--+---------+|NET ASSETS |1,072,793| | 955,118| |1,039,769|| | | | | | |+----------------------------------------+---------+--+----------+--+---------+| | | | | | |+----------------------------------------+---------+--+----------+--+---------+| | | | | | |+----------------------------------------+---------+--+----------+--+---------+|Represented by: | | | | | || | | | | | |+----------------------------------------+---------+--+----------+--+---------+|Share capital | 661,500| | 661,500| | 661,500|+----------------------------------------+---------+--+----------+--+---------+|Special reserve | 58,434| | 62,337| | 58,434|+----------------------------------------+---------+--+----------+--+---------+|Capital reserve - realised | 9,172| | -| | 4,202|+----------------------------------------+---------+--+----------+--+---------+|Capital reserve - unrealised | 342,687| | 228,571| | 312,412|+----------------------------------------+---------+--+----------+--+---------+|Revenue reserve | 1,000| | 2,710| | 3,221|+----------------------------------------+---------+--+----------+--+---------+| | | | | | |+----------------------------------------+---------+--+----------+--+---------+|Equity SHAREHOLDERS' FUNDS |1,072,793| | 955,118| |1,039,769|| | | | | | |+----------------------------------------+---------+--+----------+--+---------+| | | | | | |+----------------------------------------+---------+--+----------+--+---------+| | | | | | |+----------------------------------------+---------+--+----------+--+---------+|Net asset value per share | 147.4p| | 129.9p| | 141.5p|| | | | | | |+----------------------------------------+---------+--+----------+--+---------+ *Audited F&C Commercial Property Trust Limited Consolidated Statement of Changes in Equity (unaudited) for the six months to 30 June 2007 Capital Capital Share Special Reserve- Reserve- Revenue Capital Reserve Realised Unrealised Reserve Total £'000 £'000 £'000 £'000 £'000 £'000 At 1 January 2007 661,500 58,434 4,202 312,412 3,221 1,039,769Net profit for the - - - - 64,108 64,108periodDividends paid - - - - (22,050) (22,050)Gain on investmentproperties - - 33 40,782 (40,815) -Gain on indirect property funds - - 13,971 (10,507) (3,464) -Share buy-backs - - (9,034) - - (9,034) At 30 June 2007 661,500 58,434 9,172 342,687 1,000 1,072,793 For the six months to 30 June 2006 Capital Capital Share Special Reserve- Reserve- Revenue Capital Reserve Realised Unrealised Reserve Total £'000 £'000 £'000 £'000 £'000 £'000 At 1 January 2006 661,500 62,337 - 133,450 6,171 863,458Net profit for the - - - - 113,710 113,710periodDividends paid - - - - (22,050) (22,050)Gain on investment properties - - - 79,618 (79,618) -Gain on indirect property funds - - - 15,503 (15,503) - At 30 June 2006 661,500 62,337 - 228,571 2,710 955,118 For the year to 31 December 2006* Capital Capital Share Special Reserve- Reserve- Revenue Capital Reserve Realised Unrealised Reserve Total £'000 £'000 £'000 £'000 £'000 £'000 At 1 January 2006 661,500 62,337 - 133,450 6,171 863,458Net profit for the - - - - 220,411 220,411yearDividends paid - - - - (44,100) (44,100)Transfer fromspecial - (3,903) - - 3,903 -reserveGain on investmentproperties - - 4,202 151,309 (155,511) -Gain on indirect property funds - - - 27,653 (27,653) - At 31 December 661,500 58,434 4,202 312,412 3,221 1,039,7692006 *Audited F&C Commercial Property Trust Limited Consolidated Cash Flow Statement (unaudited) for the six months to 30 June 2007 Six months Six months Year to 31 to 30 June to 30 June Dec 2006* 2007 2006 £'000 £'000 £'000Cash flows from operating activities Net operating profit for the period 68,971 119,250 231,418before finance costsAdjustments for:Gain on investment properties (40,815) (79,618) (155,511)Gain on indirect property funds (3,464) (15,503) (27,653)Decrease/(increase) in operating trade 1,608 479 (1,654)and other receivables(Decrease)/increase in operating trade (134) (26) 2,452and other payables 26,166 24,582 49,052 Interest received 1,513 855 1,573Interest paid (6,015) (6,015) (12,029)Taxation paid (317) (283) (311) (4,819) (5,443) (10,767) Net cash inflow from operating 21,347 19,139 38,285activities Cash flows from investing activities Purchase of investments - (975) (975)Sale of investments 20,921 - 23,237Capital expenditure (788) (2,397) (4,836)Net cash inflow/(outflow) frominvesting activities 20,133 (3,372) (17,426) Cash flows from financing activities Share buy backs (9,034) - -Dividends paid (22,050) (22,050) (44,100)Net cash outflow from financing (31,084) (22,050) (44,100)activities Net increase/(decrease) in cash and 10,396 (6,283) 11,611cash equivalentsOpening cash and cash equivalents 53,291 41,680 41,680Closing cash and cash equivalents 63,687 35,397 53,291 *Audited F&C Commercial Property Trust Limited Notes to the Consolidated Financial Statements for the six months to 30 June 2007 1. The unaudited interim results have been prepared on thebasis of International Financial Reporting Standards and the accounting policiesset out in the statutory accounts of the Group for the year ended 31 December2006. 2. Earnings per Ordinary Share are based on 733,683,000 shares,being the weighted average number of shares in issue during the period (periodto 30 June 2006 - 735,000,000; year to 31 December 2006 - 735,000,000). 3. Earnings for the six months to 30 June 2007 should not betaken as a guide to the results for the year to 31 December 2007. 4. Dividends Six months to Six months to Year ended 30 June 2007 30 June 2006 31 December 2006 Total Rate Total Rate Total Rate £'000 (pence) £'000 (pence) £'000 (pence) In respect of the previous period: Third interim 11,025 1.50 11,025 1.50 11,025 1.50 dividend Fourth interim 11,025 1.50 11,025 1.50 11,025 1.50 dividend In respect of the period under review: First interim n/a n/a n/a n/a 11,025 1.50 dividend Second interim n/a n/a n/a n/a 11,025 1.50 dividend 22,050 3.00 22,050 3.00 44,100 6.00 A first interim dividend for the year to 31 December 2007, of 1.5p per share,was paid on 27 July 2007 to shareholders on the register at close of business on29 June 2007. A second interim dividend of 1.5p per share will be paid on 26 October 2007 toshareholders on the register at close of business on 28 September 2007. Theex-dividend date will be 26 September 2007. 5. During the period the Company purchased 7,000,000 Ordinary Shares to be heldin Treasury at a cost of £9,034,000 (period to 30 June 2006 - nil; year to 31December 2006 - nil). There were 728,000,000 Ordinary Shares in issue at 30 June2007 (30 June 2006 and 31 December 2006 - 735,000,000). The Company held 7,000,000 shares in treasury at 30 June 2007 (30 June 2006 and31 December 2006 - nil). 6. The Group results consolidate the results of F&C Commercial Property HoldingsLimited, a wholly owned subsidiary which invest in properties, and F&CCommercial Property Finance Limited, a special purpose company which has issuedthe £230 million Secured Bonds. 7. The Interim Report will be posted to shareholders during August 2007. This information is provided by RNS The company news service from the London Stock Exchange