Last checked at 
16 May 2014 13:01
To: Company Announcements
Date: 16 May 2014
Company: AXA Property Trust Limited
Subject: Net Asset Value 31 March 2014 (Unaudited)
SUMMARY
CAPITAL REDEMPTIONS
- The Company returned £2.0m to Shareholders by means of a capital redemption on 19 March 2014;
- The Company returned a further £2.1m to Shareholders on 9 April 2014.
QUARTERLY RESULTS
- The Company's unaudited Consolidated Net Asset Value at 31 March 2014 was £54.62 million (31 December 2013: £54.92 million) after payment of the £2.0m capital redemption;
- The unaudited net asset value per share of the remaining shares increased to 56.68 pence (31 December 2013: 54.92 pence per share);
- The Company and its subsidiaries made a net loss after tax of £1.92 million in the nine month period to 31 March 2014.
MANAGED WIND-DOWN STATUS
- The Company continues to progress the managed wind-down of its portfolio with a view to realising its investments by December 2015 in a manner that achieves a balance between maximising the value from the Company's investments and making timely returns of capital to shareholders. Sales of the assets located in Montbaur and Karben, both in Germany, have been completed during the quarter.
- As of April 2014 discussions with the German broker Corpus Sireo have been held regarding the marketing for disposal of the assets located in Koethen, Wurzburg, Dasing and Lindheim all in Germany. A new broker is to be appointed shortly to market the asset at Venray, The Netherlands following some significant improvements to the fabric of the property.
PORTFOLIO UPDATE
Country Allocation at 31 March 2014 (by asset value)
Country % of portfolio
Germany 67%
Netherlands 7%
Italy 26%
Sector Allocation at 31 March 2014 (by asset value)
Sector % of portfolio
Retail 58%
Industrial 27%
Leisure 15%
Four German assets at Koethen, Wurzburg, Dasing and Lindheim are in the course of being prepared to be brought to the market in accordance with the strategy set to pursue individual sales as and when assets become ready for disposal following the completion of any asset management improvements.
The asset at Venray, The Netherlands is to be re-introduced to the market with a different broker and the benefit of having renewal of the roof of the building nearing completion.
In Italy, a new lease for 8+6 years has been signed with the existing tenant during the quarter for the entirety of the Agnadello logistics unit with retrospective effect from January 2014. Despite the fact that there are tenant break options (exercisable only on payment of penalties) in 2015 and 2018, the successful conclusion of the negotiations with the tenant gives a resolution to the previous short term rolling nature of the tenancy.
MARKET UPDATE
EU28 GDP rose by 0.4% in Q4 2013, with a further rise expected to have occurred in Q1 2014. Net exports were supportive, with a contribution of 0.4% points in the quarter. The most positive indicator, though, came from fixed investment, which contributed 1.1% points to Q4 growth. Assuming it can be maintained, this a very positive indicator of business sentiment, as it suggests renewed investment in increased output to meet anticipated demand. Consumer spending posted year-on-year growth in H2 2013, after two years of declines.
Retail sales have bottomed-out at the European aggregate level and were growing at 0.7% year-on-year in March, their strongest growth rate since August 2008. Germany experienced above-average growth but it remained moderate at +0.5%. Although southern Europe's retail sales are still falling year-on-year, they have stopped deteriorating and are expected to start growing by mid-year as economic conditions improve. The retail sector continues to polarise between the most prime (predominantly high street) locations and secondary markets.
European prime retail rental values rose by 8.8% over the year to Q1 2014, although this reflected a slowdown in growth in Q1 2014 (0.5% q-o-q). Secondary retail locations continue to deteriorate in all but the strongest economies and even then, any improvement is limited to the best locations. The growth of online retail and still relatively weak consumer environment in many European economies is limiting footfall and retail spending in many secondary retail locations. The top six German cities produced prime retail rental growth of 2.5% in Q1 2014, the strongest of any European country, due to growth of close top 3% in each of Berlin, Hamburg and Munich. After a weak Q4, the German market began strongly in 2014 with an increase in take-up of 60% in the first quarter. Indeed, at 166,000 sq m, take-up in Q1 2014 represented the strongest first quarter in the last three years. The main driver of demand has, once again, been the international retailers, accounting for 57% of concluded lease contracts.
In the industrial market, occupier activity continued to recover in the strongest European markets (UK, Germany, Sweden, Norway, Poland). This has been reflected in improving take-up figures and rental value growth in prime locations (1.0% in the year to March for Europe) in the last 6-9 months. Secondary locations have yet to see much improvement though and the prospects for poorly located and older assets are far weaker. Instead, occupiers' focus on modern, well-configured units means developers are increasingly building speculatively.
The first quarter transaction volume was EUR38bn, a 39% fall on Q4 2013. But Q4 was close to a record high for Europe and Q4 turnovers are normally above other quarters. Stripping out the seasonal effects, the upward trend appears to be intact. Indeed, with the current level of marketing and purchaser interest, it is almost inevitable that we will see the lagging results in terms of rising transaction completions over at least the next 12 months. In recent quarters, office transactions have represented c.50% of total volumes, but retail has been moving up towards the 30% level and industrial to above 10%, while 'other property' has been reducing.
CONSOLIDATED PERFORMANCE SUMMARY
Unaudited | Unaudited | ||
6 months ended | 9 months ended | ||
31 December 2013 | 31 March 2014 | Quarterly Movement | |
Pence per share | Pence per share | Pence per share /(%) | |
Net Asset Value per share | 54.92 | 56.68 | 1.76 3.20% |
Earnings per share | -4.16 | -1.99 | 2.17 |
Share price (mid market) | 38.13 | 39.07 | 0.94 2.47% |
Share price discount to Net Asset Value | 30.6% | 31.1% | -0.5 percentage points |
Total return per Share | Unaudited | Unaudited |
6 months ended | 9 months ended | |
31 December 2013 | 31 March 2014 | |
Net Asset Value Total Return | -7.3% | -9.7% |
Share Price Total Return | ||
- AXA Property Trust | 1.7% | 7.6% |
- FTSE All Share Index | 11.3% | 10.6% |
- FTSE Real Estate Investment Trust Index | 12.4% | 19.3% |
Source: Datastream; AXA Real Estate | ||
Total net loss was -£1.92 million (-1.99 pence per share) for the nine months to 31 March 2014, including £0.58 million of "revenue" profit (excluding capital items such as revaluation of property) and -£2.50 million of "capital" loss, analysed as follows:
Unaudited | Unaudited | Unaudited | |
6 months ended | 3 months ended | 9 months ended | |
31 December 2013 | 31 March 2014 | 31 March 2014 | |
£million | £million | £million | |
Net property income | 3.52 | 1.55 | 5.07 |
Net foreign exchange (losses)/gains | (0.14) | 0.18 | 0.04 |
Investment Manager's fees | (0.26) | (0.12) | (0.38) |
Other income and expenses | (1.29) | (1.13) | (2.42) |
Net finance costs | (1.06) | (0.68) | (1.74) |
Revenue profit | 0.78 | (0.20) | 0.58 |
Unrealised (losses) / gains on revaluation of investment properties | (3.29) | 2.09 | (1.20) |
Net losses on disposal of investment properties | (0.36) | (0.12) | (0.48) |
(Losses) / gains on derivatives | (0.62) | 0.63 | 0.01 |
Share in losses of Joint Venture | (0.14) | 0.00 | (0.14) |
Finance costs | (0.41) | (0.10) | (0.51) |
Net foreign exchange losses | (0.06) | (0.03) | (0.09) |
Deferred tax | (0.06) | (0.02) | (0.08) |
Capital loss | (4.94) | 2.44 | (2.50) |
Total (net loss) / profit | (4.16) | 2.24 | (1.92) |
NET ASSET VALUE
The Company's unaudited Consolidated Net Asset Value decreased by £0.30 million during the quarter mainly as a result of the £2.0 million capital redemption, unfavourable movements in the Euro/Sterling exchange rate (-£0.52 million) and the £2.24 million profit (see above).
Unaudited | Unaudited | Unaudited | |
6 months ended | 3 months ended | 9 months ended | |
31 December 2013 | 31 March 2014 | 31 March 2014 | |
£million | £million | £million | |
Opening Net Asset Value | 59.22 | 54.92 | 59.22 |
Net (loss) / profit after tax | (4.16) | 2.24 | (1.92) |
Unrealised movement on derivatives | 1.13 | (0.02) | 1.12 |
Share Redemption | - | (2.00) | (2.00) |
Foreign exchange translation losses | (1.28) | (0.52) | (1.80) |
Closing Net Asset Value | 54.92 | 54.62 | 54.62 |
Net Asset Value per share as at 31 March 2014 was 56.68 pence (54.92 pence as at 31 December 2013).
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 and capital redemptions paid prior to 31 March 2014.
On a like-for-like basis the Euro valuation of the property portfolio increased by 2.4% to €103.7 million for the quarter. In Sterling currency terms, the property valuation was £85.7 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 31 March 2014 was 1.210 (31 December 2013: 1.202).
The Company's net property yield on current market valuation (after acquisition and operating costs) as at 31 March 2014 was 7.70% (8.27% as at 31 December 2013).
SHARE PRICE AND DISCOUNT TO NET ASSET VALUE
As at close of business on 31 March 2014, the mid-market price of the Company's shares on the London Stock Exchange was 39.07 pence, representing a discount of 31.1% to the Net Asset Value of 56.68 pence per share.
As at close of business on 15 May 2014, the mid-market price of the Company's shares was 40.25 pence, representing a discount of 29.0% to the Company's Net Asset Value at 31 March 2014.
FUND GEARING
Unaudited | Unaudited | ||
31 December 2013 | 31 March 2014 | Movement | |
£million /% | £million /% | £million /% | |
Property portfolio * | 95.89 | 85.74 | -10.15 11.8% |
Borrowings (net of capitalised issue costs) | 41.03 | 34.14 | -6.89 20.2% |
Total gross gearing | 42.8% | 39.8% | -3.0 percentage points |
Total net gearing | 39.2% | 32.5% | -6.7 percentage points |
*Portfolio value based on the Company's independent valuation.
Fund net gearing decreased by 6.7 percentage points over the quarter to 32.5% as at 31 March 2014 following the sale of the two German assets at Karben and Montabaur and valuation gains during the quarter.
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.
LOAN FACILITIES
Gross Loan to Value (LTV) Covenants | Unaudited | Unaudited | |
31 December 2013 | 31 March 2014 | Maximum | |
Main loan facility | 48.26% | 44.85% | 60.00% |
As at 31 March 2014, the loan-to-value ratio on the main loan facility was 44.85% based on the Company's independent valuation.
The loan has an LTV covenant of 60% through to its expiry in July 2016.
Interest Cover Ratio at 31 March 2014 | Historic | Minimum | Projected | Minimum | Net rental income |
Unaudited | Unaudited | headroom | |||
Main loan facility covenant | 261.7% | 200.00% | 304.8% | 185.00% | 39.30% |
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 £6.26 million (€7.57 million) at 31 March 2014. The Company returned a further £2.1m to Shareholders on 9 April 2014. The anticipated capital expenditure over the next twelve months is £1.0 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 31 March 2014 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: +44 (0)20 7003 2345Email: broker.services@axa-im.com
Broker
Oriel Securities Limited
Neil Winward / Mark Bloomfield / Matthew Marshall
Tel: +44 (0)20 7710 7600
Company Secretary
Northern Trust International Fund Administration Services (Guernsey) Limited
Trafalgar Court
Les Banques
St Peter Port
GY1 3QL
Tel: +44 (0)1481 745324