24 Feb 2012 07:00
To: RNS
Date: 24 February 2012
From: IRP Property Investments Limited
Interim results in respect of the period ended 31 December 2011
·; Net asset value per share total return since launch of 37.8 per cent
·; Net asset value per share total return of 0.9 per cent for the 6 months
·; Portfolio ungeared total return of 4.0 per cent for the 6 months
·; Share price total return of -19.6 per cent for the 6 months
·; Dividend of 3.6 pence per share for the period
·; Dividend yield of 10.4 per cent as at 31 December 2011
The Chairman, Quentin Spicer, stated:
The last six months has seen returns from UK commercial property moderate in the light of increasing concerns over the economic outlook in both the UK and overseas. Capital growth was virtually flat over this period according to the Investment Property Databank ('IPD') Quarterly Universe, with total portfolio returns of 3.3 per cent. Against this background, the Company's property portfolio outperformed during the period and recorded a total return of 4.0 per cent for the six month period to 31 December 2011, driven principally by the income return on the portfolio of 3.2 per cent. The net asset value ('NAV') total return per share for the period was 0.9 per cent, with the NAV per share at the period end at 79.9 pence. The return was negatively affected by the increase in the interest rate swap liability which caused the NAV to fall by 2.6 pence per share.
The share price has fallen by 23.3 per cent over the period, going from a premium to the net asset value of 8.7 per cent as at 30 June 2011 to a discount of 13.6 per cent at the period end. The share price has recovered since the period end and at the time of writing is trading at 76.5 pence per share at a discount of 4.3 per cent.
Dividends
The Company is currently paying an annualised dividend of 7.2 pence per share in the form of quarterly interim dividends of 1.8 pence per share, a yield of 9.0 per cent on the period end NAV. The first interim dividend for the year ending 30 June 2012 was paid in December 2011, with a second interim dividend of 1.8 pence per share to be paid on 30 March 2012 to shareholders on the register on 9 March 2012. The Board remains comfortable with the Company's position relative to its banking covenants and with its level of income collection and is therefore happy to confirm that, in the absence of unforeseen circumstances, it intends to pay a further two dividends at this rate in respect of the current financial year.
Borrowings
The Company is in a relatively strong financial position with a long term facility of £75 million available until 2017. £65 million of this facility has been drawn down to date and, as at 31 December 2011, the loan to value ratio ('LTV') was 37.6 per cent, net of current assets and liabilities of £5.1 million. This remains comfortably within the LTV restriction of 60 per cent. The other significant covenant is the amount by which rental income covers interest, with a minimum restriction of 150 per cent. As at 31 December the interest rate cover was 212 per cent, providing significant headroom.
The interest rate has been fixed at 5.55 per cent with an interest rate swap against £60 million of the loan. The additional £5 million of the loan drawn down pays interest at one month LIBOR plus 45 basis points. The valuation of the swap was a liability on the balance sheet as at 31 December of £11.8 million. This liability accounts for 13.4 pence per share and will reduce as the contract gets closer to its expiry date in 2017. It would also be expected to decrease if interest rates increase from their current low levels.
Property Market
The second half of 2011 saw total returns moderate as capital growth moved lower. Rental growth also became more subdued. Central London continued to out-perform but the gap began to narrow and strength in this part of the market has masked weakness elsewhere. The second half of the year saw capital values fall for regional shops, offices and industrials and for shopping centres. Investment activity has been buoyed by investment from overseas and the completion of several large deals. Institutional net investment, which had been positive in the first part of 2011 turned negative as the second half progressed. Prime property has generally continued to out-perform secondary stock and the differential can be substantial at the sector level.
Portfolio
The Company's portfolio increased in value by 0.7 per cent since June and is currently valued at £162.7 million. Capital value growth was particularly driven by the Company's retail property which increased in value by 3.1 per cent over the period. Offices and industrial saw capital value declines of 1.4 per cent and 0.2 per cent respectively.
In particular, the value of 7-8 High Street, Winchester increased by £985,000, or 17.9 per cent to £6.5 million. This uplift was due to the Company granting a renewal lease to the tenant, C & H Fabrics Ltd for a term of 10 years at £225,000 per annum, combined with a new letting of the ground floor restaurant to Jamie Bianco Ltd t/a Union Jacks Restaurants (one of Jamie Oliver's new restaurants) at £175,000 per annum, on a 25 year lease. As a result the total rent on the holding increased from £338,750 per annum to £400,000 per annum.
At 51/53 High Street, Guildford a satisfactory lease renewal to Vision Express increased the value of the property by £500,000, or 10.5 per cent, to £5.2 million. The rent increased from £211,000 per annum to £270,000 per annum on the basis of a new ten year lease.
Principal new lettings included the leasing of Unit 6, Lakeside Industrial Estate, Colnbrook which was let to Freightnet (Handling) Ltd, who also occupy Unit 7, at a rent of £121,950 per annum on a five and a half year lease.
As at 31 December the vacancy rate on the portfolio was 3.9 per cent by estimated rental value (ERV). This had increased from 2.3 per cent during the period, mainly as a result of the tenant of Unit B Hemel Gateway, Hemel Hempstead going into liquidation. The unit comprises 27,636 square feet of well specified industrial/distribution space and has an ERV of £207,200 per annum.
The Company did not sell or purchase any property during the period. However, the Company acquired 25-27 Bridlesmith Gate, Nottingham in January 2012. The property, purchased for £3.2 million reflecting a yield of 6.1 per cent, is a prime unit shop let to Hobbs Limited on a lease expiring in October 2019 at a rent of £205,000 per annum.
As a result of new lettings and lease renewals the average weighted unexpired lease term is now 8.3 years, an increase from 8.1 years at the beginning of the period.
Outlook
With little or no impetus to total returns from rental or capital growth, the focus for the coming year will be to preserve and protect the income stream. This will be challenging given the weak macro-economic outlook but the Company's portfolio is well positioned in terms of voids and lease expiry profile to ride the current market uncertainty and present opportunities when markets regain confidence.
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
I McBryde, S Macrae
F&C Investment Business Limited
Tel: 0207 628 8000
Fax: 0131 225 2375
IRP Property Investments Limited
Consolidated Statement of Comprehensive Income
Notes | Six months to 31 December 2011 (unaudited) | Six months to 31 December 2010 (unaudited) | Year to 30 June 2011 (audited) |
£'000 | £'000 | £'000 | |
Revenue | |||
Rental income | 5,708 | 5,797 | 11,241 |
Gains/(losses) on investment properties 2 | 1,025 | 1,357 | (1,705) |
Total income | 6,733 | 7,154 | 9,536 |
Expenditure | |||
Investment management fee | (561) | (544) | (1,095) |
Direct operating expenses of let rental property |
(278) |
(328) |
(587) |
Provision for bad debts | (42) | 30 | (29) |
Administrative fee | (35) | (35) | (70) |
Valuation and other professional fees | (61) | (69) | (123) |
Directors' fees | (65) | (52) | (105) |
Other expenses | (124) | (124) | (248) |
Total expenditure | (1,166) | (1,122) | (2,257) |
Net operating profit before finance costs | 5,567 | 6,032 | 7,279 |
Net finance costs | |||
Interest receivable | 6 | 33 | 59 |
Finance costs | (1,731) | (1,717) | (3,409) |
| (1,725) | (1,684) | (3,350) |
| |||
Net profit from ordinary activities before taxation |
3,842 |
4,348 |
3,929 |
Taxation on profit on ordinary activities | (163) | (246) | (245) |
Net profit for the period | 3,679 | 4,102 | 3,684 |
Other comprehensive income: | |||
Net (loss)/profit on cash flow hedges net of tax | (2,914) | 1,451 | 1,429 |
Net comprehensive gain for the period, net of tax | 765 | 5,553 | 5,113 |
Basic and diluted earnings per share 3 | 3.3p | 3.7p | 3.3p |
IRP Property Investments Limited
Consolidated Balance Sheet
Notes | 31 December 2011 (unaudited) £'000 | 31 December 2010 (unaudited) £'000 | 30 June 2011 (audited) £'000 |
Non-current assets | |||
Investment properties | 160,399 | 155,388 | 159,274 |
Current assets | |||
Trade and other receivables | 2,879 | 3,142 | 3,470 |
Cash and cash equivalents | 5,785 | 10,679 | 1,931 |
8,664 | 13,821 | 5,401 | |
Total assets | 169,063 | 169,209 | 164,675 |
Non-current liabilities | |||
Interest-bearing bank loan | (65,411) | (60,365) | (60,379) |
Interest rate swap | (9,368) | (6,322) | (6,353) |
(74,779) | (66,687) | (66,732) | |
Current liabilities | |||
Trade and other payables | (3,543) | (4,039) | (3,888) |
Interest rate swap | (2,469) | (2,580) | (2,570) |
(6,012) | (6,619) | (6,458) | |
Total liabilities | (80,791) | (73,306) | (73,190) |
Net assets | 88,272 | 95,903 | 91,485 |
Represented by: | |||
Share capital | 1,105 | 1,105 | 1,105 |
Special distributable reserve | 90,423 | 93,082 | 91,747 |
Capital reserve | 8,581 | 10,618 | 7,556 |
Other reserve | (11,837) | (8,902) | (8,923) |
Equity shareholders' funds | 88,272 | 95,903 | 91,485 |
Net asset value per share 4 | 79.9p | 86.8p | 82.8p |
IRP Property Investments Limited
Consolidated Statement of Changes in Equity
Notes | Six months to 31 December 2011 (unaudited) £'000 | Six months to 31 December 2010 (unaudited) £'000 | Year to 30 June 2011 (audited) £'000 |
Opening net assets | 91,485 | 94,328 | 94,328 |
Net profit for the period | 3,679 | 4,102 | 3,684 |
Dividends paid 5 | (3,978) | (3,978) | (7,956) |
Movement in other reserve | (2,914) | 1,451 | 1,429 |
Closing net assets | 88,272 | 95,903 | 91,485 |
IRP Property Investments Limited
Consolidated Statement of Cash Flow
Six months to 31 December 2011 (unaudited) | Six months to 31 December 2010 (unaudited) |
Year to 30 June 2011 (audited) | |
£'000 | £'000 | £'000 | |
Cash flows from operating activities | |||
Net operating profit for the period before taxation | 3,842 | 4,348 | 3,929 |
Adjustments for: | |||
(Gains)/losses on investment properties | (1,025) | (1,357) | 1,705 |
Decrease/(increase) in operating trade and other receivables |
591 |
(664) |
(992) |
(Decrease)/increase in operating trade and other payables |
(360) |
28 |
280 |
Net finance costs | 1,725 | 1,684 | 3,350 |
4,773 | 4,039 | 8,272 | |
Taxation | (127) | (45) | (426) |
Net cash inflow from operating activities | 4,646 | 3,994 | 7,846 |
Cash flows from investing activities | |||
Purchase of investment properties | - | - | (9,154) |
Capital expenditure | (100) | (47) | (371) |
Sale of investment properties | - | 3,625 | 6,155 |
Interest received | 6 | 33 | 59 |
Net cash (outflow)/inflow from investing activities | (94) | 3,611 | (3,311) |
Cash flows from financing activities | |||
Dividends paid | (3,978) | (3,978) | (7,956) |
Bank loan interest paid | (386) | (288) | (643) |
Payments under interest swap arrangement | (1,334) | (1,421) | (2,766) |
Bank loan drawn down | 5,000 | - | - |
Net cash outflow from financing activities | (698) | (5,687) | (11,365) |
Net increase/(decrease) in cash and cash equivalents | 3,854 | 1,918 | (6,830) |
Opening cash and cash equivalents | 1,931 | 8,761 | 8,761 |
Closing cash and cash equivalents | 5,785 | 10,679 | 1,931 |
IRP Property Investments Limited
Notes to the Consolidated Financial Statements
for the six months to 31 December 2011
1. The condensed consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS'), IAS 34 'Interim Financial Reporting' and the accounting policies set out in the statutory accounts of the Group for the year ended 30 June 2011. The condensed consolidated financial statements do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements for the Group for the year ended 30 June 2011 which were prepared under full IFRS requirements.
2. Investment properties
Six month period to 31 December 2011 £'000 | |
Opening valuation | 159,274 |
Capital Expenditure | 100 |
Gains on investment properties | 1,025 |
Closing valuation | 160,399 |
3. 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 2010 - 110,500,000 and 30 June 2011 - 110,500,000). Earnings for the six months to 31 December 2011 should not be taken as a guide to the results for the year to 30 June 2012.
4. The net asset value per Ordinary Share is based on net assets of £88,272,000 (31 December 2010 - £95,903,000 and 30 June 2011 - £91,485,000) and 110,500,000 Ordinary Shares (31 December 2010 - 110,500,000 and 30 June 2011 - 110,500,000) being the number of shares in issue at the period end.
5. Dividends paid
Six months to 31 December 2011 | Six months to 31 December 2010 | Year ended 30 June 2011 | ||||
Fourth interim dividend | 1,989 | 1.80 | 1,989 | 1.80 | 1,989 | 1.80 |
First interim dividend | 1,989 | 1.80 | 1,989 | 1.80 | 1,989 | 1.80 |
Second interim dividend | 1,989 | 1.80 | ||||
Third interim dividend | 1,989 | 1.80 | ||||
3,978 | 3.60 | 3,978 | 3.60 | 7,956 | 7.20 | |
A second interim dividend for the year to 30 June 2012, of 1.8 pence per share, will be paid on 30 March 2012 to shareholders on the register at close of business on 9 March 2012.
6. The Board has considered the requirements of IFRS 8 'Operating Segments'. The Board is of the view that the Group is engaged in a single segment of business, being property investment, and in one geographical area, the United Kingdom, and that therefore the Company has only a single operating segment. The Board of Directors, as a whole, has been identified as constituting the chief operating decision maker of the Company. The key measure of performance used by the Board to assess the Company's performance is the total return of the Company's net asset value, as calculated under IFRS, and therefore no reconciliation is required between the measure of profit or loss used by the Board and that contained in the condensed consolidated financial statements.
7. No Director has any interest in any transactions which are or were unusual in their nature or significant to the Group. F&C REIT Asset Management received fees for its services as Investment Managers. The total charge to the Income Statement during the period was £561,200 of which £282,300 remained payable at the period end.
The Directors of the Company received fees for their services totalling £65,000, of which £nil remained payable at the period end.
8. The accounts have not been audited nor reviewed under the requirements of ISRE 2410 'Review of interim financial information performed by the independent auditor of the Company'.
9. The Group results consolidate those of IRP Holdings Limited ('IRPH'), a wholly-owned subsidiary. IRPH is incorporated in Guernsey and its principal business is that of an investment and property company.
10. Report and accounts
The report and accounts for the half-year ended 31 December 2011 will be posted to shareholders and made available on the website www.irppropertyinvestments.com shortly.
Statement of Principal Risks and Uncertainties
The Company's assets consist of direct investments in UK commercial property. Its principal risks are therefore related to the UK commercial property market in general but also the particular circumstances of the properties in which it is invested and their tenants. Other risks faced by the Company include economic, strategic, regulatory, management and control, financial and operational. These risks, and the way in which they are mitigated and managed, are described in more detail under the heading Principal Risks and Uncertainties within the Report of the Directors in the Company's Annual Report for the year ended 30 June 2011. The Company's principal risks and uncertainties have not changed materially since the date of that report and are not expected to change materially for the remaining six months of the Company's financial year.
Directors' Responsibility Statement in Respect of the Half-yearly Financial Report
We confirm that to the best of our knowledge:
·; The condensed set of financial statements has been prepared in accordance with IAS34 'Interim Financial Reporting';
·; the Chairman's Statement constituting the Interim Management Report together with the Statement of Principal Risks and Uncertainties include a fair review of the information required by the Disclosure and Transparency Rules ('DTR') 4.2.7R, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of consolidated financial statements; and
·; the Chairman's Statement together with the financial statements include a fair review of the information required by DTR 4.2.8R, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Company during that period, and any changes in the related party transactions described in the last Annual Report that could do so.
On behalf of the Board
Quentin Spicer
Chairman
24 February 2012