Worsley Inv Ltd Regulatory News (WINV)

6 Nov 2008 10:28



To: Company Announcements

Date: 5 November 2008

Company: AXA Property Trust Limited

Subject: Interim Management Statement

INTERIM MANAGEMENT STATEMENT - Three months to 30 September 2008

To the members of Axa Property Trust Limited

This is the Company's first interim management statement for the year ending 30 June 2009.

The Company's objective is to secure attractive Sterling-based total returns for shareholders through a combination of dividends and capital appreciation from investment in commercial property in Europe.

CONSOLIDATED PERFORMANCE SUMMARY

Source: Datastream; AXA REIM

Total net profit was £0.65 million (0.65 pence per share) for the three months to 30 September 2008, analysed as follows:

The total net profit of £0.65 million included £0.85 million of "revenue" profit and £0.20 million "capital" loss relating to items such as unrealised losses on the revaluation of the property portfolio and derivatives and the related deferred tax. The dividend declared on 3 November 2008 is 85.0% covered by "revenue" profit for the three months to 30 September 2008.

Net property income was lower than prior quarter, due to one-off property expenses relating to a provision against rental arrears of one tenant in Germany. Excluding this item, "revenue" profit would have been £222 thousand higher, giving dividend cover of 107.2% for the quarter. 

Other income and expenses of £1.19 million included £1.82 million foreign exchange gains on the net investment ("equity") hedges of Euro/Sterling.

In the three months to 30 September 2008, there was an unrealised loss on revaluation of property and investments of -£2.40 million (-1.5% of the portfolio valuation).

The Company's net yield on current market valuation (after acquisition and operating costs) for the three months to 30 September 2008 was 6.5% (6.4% for the 12 months to 30 June 2008).

The Company's Consolidated Net Asset Value declined by £1.39 million on the position at 30 June 2008, which can be analysed as follows:

The Net Asset Value is calculated under International Financial Reporting Standards. It includes all current year income and is calculated after the deduction of dividends paid prior to 30 September 2008, but does not include provision for the quarterly interim dividend announced 3 November 2008 to be paid 28 November 2008.

Share Price and Discount to Net Asset Value

As at close of business on 30 September 2008, the mid market price of the Company's shares on the London Stock Exchange was 68.00 pence, representing a discount of 40.0% on the Company's Net Asset Value at 30 September 2008.

As at close of business on 4 November 2008, the mid market price of the Company's shares was 40.75 pence, representing a discount of 72.7% on the Company's Net Asset Value at 30 September 2008.

Dividends

The first interim dividend of 1.00 pence per share in respect of the year ended 30 June 2009 was declared on 3 November 2008, with a payment date of 28 November 2008. The quarterly dividend is 85.0% covered by "revenue" profits. Excluding the one-off tenant-specific provision, "revenue" profit would have been £222 thousand higher, giving dividend cover of 107.2% for the quarter. 

FUND GEARING

Total gross fund gearing decreased in the three months to 30 September as a result of repayment in full of a £4.4 million (EUR 5.5 million) loan from Calyon Corporate and Investment Bank by the joint venture Property Trust Agnadello S.r.l. in which the Company has a 50% interest. The loan facility was put in place to finance VAT on the acquisition of the property which has since been refunded by the Italian tax authorities.

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.

LOAN FACILITIES - LOAN TO VALUE COVENANTS

Under the terms of the Company's main loan facility, the maximum permitted Gross Loan to Value (LTV) is 50%. At 30 September 2008 the Gross LTV was 43.7%. A decrease in the Company's property valuations as at 30 September 2008 of over 12% would be necessary to breach the Gross LTV covenant. Gross LTV is calculated as debt over property portfolio at fair value. 

The Company and its subsidiaries held total cash of £17.8 million (EUR 22.6 million) at 30 September 2008, giving a Net LTV of 31.4%. Net LTV is calculated as debt net of cash over property portfolio at fair value. Details are included for information purposes; it does not form part of the loan covenants.

The £17.8 million cash held by the Company at 30 September 2008 has been allocated between working capital and uncommitted capital expenditure of up to £11.0 million, principally to develop the Company's retail asset in Fuerth, Germany. £11.0 million (EUR 14.0 million) cash has been invested in fixed term deposits which will be realised as required for the capital expenditure programme. If the cash allocated to uncommitted capital expenditure were utilised to repay part of the bank debt, property valuations could decline by over 28% before breaching the Gross LTV covenant. 

The Company's loans with Calyon are fully hedged at an average rate of 5.21% via interest rate swaps and caps to April 2011 when the loan facility expires.

Under the terms of the Porto Kali consortium investment's loan facility, the maximum permitted Gross Loan to Value (LTV) is 65.0%. At 30 September 2008 the Gross LTV was 64.9%. Discussions with the lender HSH are in progress. The business plan strategy is under review.

Interest Cover Ratio is calculated as net financing expense payable as a percentage of gross rental income less movement in arrears.

STRATEGY AND MARKET

Country Allocation at 30 September 2008

Country % of portfolio

Germany 61%

Netherlands 20%

Italy 15%

Belgium 4%

Sector Allocation at 30 September 2008

Sector % of portfolio

Retail 60%

Industrial 17%

Office 15%

Leisure 8%

AXA REIM, the Company's Real Estate Adviser, believes that the continental European real estate market will see a significant reduction in value over the coming year, driven by deteriorating international economic and financial conditions and greater risk aversion on the part of both lenders and investors. 

AXA Property Trust is relatively well placed to weather this downturn. The portfolio tenant base is weighted towards the defensive food retail sector and enjoys a long weighted average lease length of 6.2 years. In addition Germany, where 61% of the portfolio is located, is not expected to experience value reductions of the magnitude foreseen in Spain and France. 

Long-term property initiatives aim to enhance the portfolio's income stream and capital values through lease re-structuring, as well as the development project at Fuerth. The portfolio also benefits from rental indexation. The Company continues to maintain its focus on cost control at portfolio and corporate level. 

The Company believes that the combination of prudent fiscal management and practical real estate initiatives will together protect and enhance the future dividend and support Net Asset Value. 

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 September 2008 and the date of the publication of this Statement which would have a material impact on the financial position of the Company. 

This statement has been produced to comply with the requirements of the Disclosure and Transparency Rules issued by the UKLA and should not be relied upon by any other party or for any other purpose.

Company website:

http://www.axapropertytrust.com

All Enquiries:

Investment Manager 

AXA Investment Managers UK Limited 8th Floor 155 Bishopsgate London EC2M 3XJ

Tel: +44 (0)845 766 0184 (Option 3) Email: broker.services@axa-im.com

Company Secretary 

Northern Trust International Fund Administration Services (Guernsey) Limited

Trafalgar Court

Les Banques

St Peter Port

GY1 3QL

Tel: +44 (0)1481 745529

Fax: +44 (0)1481 745085