To:
RNS
Date:
25 March 2019
From:
F&C UK Real Estate Investments Limited
LEI:
231801XRCB89W6XTR23
Interim results in respect of the six
month period ended 31 December
2018
- Net asset value total return* of
0.0 per cent for the 6 months
- Portfolio ungeared total return* of
1.0 per cent for the 6 months
- Annualised dividend yield* of 5.4 per cent
based on the period end share price
- Dividend cover* was 90.3 per cent for the
period
* See Alternative Performance Measures
The Chairman, Vikram Lall,
stated:
The Company has experienced six months of challenging conditions
in the UK commercial property market with portfolio capital values
decreasing in the period by 1.5 per cent and delivering a total
return of 1.0 per cent. The net asset value (‘NAV’) total return*
per share for the period was nil and the NAV per share at the
period end was 106.0 pence.
There was caution in the market given the uncertainty
surrounding Brexit and concerns over the retail sector. Against
this backdrop, the share price fell by 7.6 per cent over the six
months. The share price total return* was -5.0 per cent over the
period and the shares were trading at a discount* to the NAV of
13.0 per cent at the period end, compared to a discount of 8.0 per
cent as at 30 June 2018. This trend
has been experienced by other companies in the sector.
Property Market
The UK commercial property market delivered a total return of
2.4 per cent as measured by the MSCI UK Quarterly Property Index
for all assets in the six months to 31
December 2018. The return for the year to December was 6.2
per cent. Momentum slowed during the six-month period with both
all-property capital growth and rental value growth turning
negative in the latter half of the period. This was in part due to
significant markdowns for retail property, with regional retail and
shopping centres especially affected. The industrial and
distribution sector continued its strong out-performance,
particularly in the South East, but the pace has eased. The office
market performed well, led by offices in the regions and in the
City of London. Total returns for
Alternatives also exceeded the all-property average. Investment
activity moderated from the levels of a year earlier but remained
well above the long-term average, with institutions and overseas
purchasers both being net investors in property. Post period there
are, however, indications of a marked slowdown in volumes.
In the six months to 31st December 2018, the income return for the Index
held steady and the all-property initial yield was unchanged at 4.5
per cent.
Property Portfolio
The Company’s property portfolio produced an ungeared return* of
1.0 per cent over the six months to December
2018, trailing the MSCI UK Quarterly Property Index which
recorded total returns of 2.4 per cent. The portfolio continues to
deliver outperformance against the index over the medium term and
the longer term. The main driver of performance for the period was
again the above market income return of 2.6 per cent. This
management of the income stream has been the mainstay of the
portfolio’s long-term outperformance.
In keeping with the wider market and continuing the main theme
from the last reporting period, positive investor sentiment towards
the Industrial sector and successful leasing and asset management
activity on the held assets led to the portfolio’s industrial and
distribution assets again being the key contributors to Company
performance. The structural overweight to this sector verses the
Index continues to be beneficial with 38.2 per cent of the
Company’s asset base classified as South-East Industrials. The
portfolio’s Offices performed strongly over the period to December,
particularly the regional assets, led by asset management and
leasing initiatives at Edinburgh Park (HSBC), Royal Standard Place, Standard Hill,
Nottingham (The College of Law)
and Strathclyde Business Park, Glasgow (Virgin
Media).
Retail continues to be of concern, despite the recent repricing
in the sector. The Company does not own any shopping centres or
department stores but was not immune over the period where
performance of the retail warehouse sub-sector was impacted by the
Company Voluntary Arrangement (‘CVA’) of Homebase. While none of
the Company’s properties affected by the CVA were earmarked for
closure in relation to this event, rent receivable and
corresponding valuations suffered. The Manager is progressing
business plans in relation to these assets. In one case this has
included the completion of an insurance lease to a major UK
retailer with the head income unaffected. Another is subject
to a planning application linked to a proposed pre-let of
accommodation to a food-store with adjoining drive through.
With notable uncertainty in parts of the leasing market,
continued focus on the basics of keeping properties let and
occupied has kept the void rate stable at 4.3 per cent at the
period close. This has been significantly reduced post period
following the successful leasing of the Company’s largest void (the
office asset at Standard Hill, Nottingham) as well as the two vacant floors
at the Company’s largest asset (Berkeley Street, London). The initial yield was 5.1 per cent at
period end and the portfolio delivers an average weighted unexpired
lease term of 6.1 years to earliest termination.
The strategy for portfolio composition continues to be the
retention of an overweight position to Industrial and Logistics
property, continued review of the Alternatives sector for viable
investment opportunities and an ongoing active appraisal of the
Company’s retail exposure given the specific problems currently
impacting this sector. The Manager’s primary focus has been on the
disposal of non-core and secondary assets alongside deployment of
Company resources to attractive asset management initiatives within
the portfolio. The Company has completed few transactions over the
period other than continuing the process of disposing of non-core
retail assets. A shop unit in Swindon was disposed of in July, and that has
been followed by further activity around the period close. Since
the start of 2019 a sale of a Retail Warehouse asset in
Gateshead has completed with terms
agreed in respect of a further sale from the high street
portfolio.
Dividends
The first interim dividend for the year ending 30 June 2019 of 1.25
pence per share was paid in December
2018, with a second interim dividend of 1.25 pence per share to be paid on 29 March 2019 to shareholders on the register on
15 March 2019.
The dividend cover* for the six months was 90.3 per cent,
compared with a dividend cover of 95.7 per cent for the year ended
30 June 2018.
The dividend is currently at a sustainable level, and in the
absence of unforeseeable circumstances, it is expected that the
Company will continue to pay quarterly dividends at this rate, the
equivalent of 5.0 pence per share per
annum.
Borrowings
The Company currently has borrowings of £97 million made up of a
£90 million non-amortising term loan facility agreement with Canada
Life Investments which expires in November
2026 and a £20 million 5-year revolving credit facility
agreement with Barclays Bank plc which expires in November 2020, £7 million of which is currently
drawn down. Net gearing* represented 26.6 per cent of the
investment properties of the Company as at 31 December 2018. The weighted average interest
rate (including amortisation of refinancing costs) on the Company's
total current borrowings is 3.2 per cent. The Company continues to
maintain a prudent attitude to gearing.
The Company had £9.4 million of cash available at 31 December 2018 with a further £13.0 million of
the revolving credit facility also available if required.
Change of Company Name
Shareholder approval was granted at the AGM in November 2018 to change the Company name to BMO
Real Estate Investments Limited. This will align the
Company’s name with the Investment Manager and will be effective
from 29 April 2019.
Responsible Property Investment
The Company continues to make good progress with its Responsible
Property Investment (‘RPI’) strategy and set out a series of
commitments and targets. Supported by industry specialist
Hillbreak, the Manager has developed a framework by which to
appraise the Environmental, Social and Governance (‘ESG’)
credentials of the portfolio for the principle purpose of
understanding and assessing ESG risk and profile and integrating
necessary measures into the asset business planning
process.
The Company submitted to the Global Real Estate Sustainability
Benchmark (‘GRESB’) in 2018, achieving a score in line with first
time participation, and aims to demonstrate year on year
improvement going forward. Recognising that GRESB delivers a single
metric against a highly heterogenous asset class, the Company
intends to produce an inaugural RPI Report shortly and follow this
with publication of annual RPI Reports alongside the Annual Report
& Accounts to provide greater transparency of performance
against ESG factors.
Both the Board and the Manager recognise the importance of
maintaining focus on ESG related matters and in continuing to
improve insight and capability within this fast-evolving
landscape.
Outlook
The short-term outlook is likely to be dominated by Brexit and
its economic and political ramifications. This could lead to a
period of market volatility and heightened levels of risk aversion
from both occupiers and investors. The fall in retail values may
also have further to run. The industrials market is likely to
continue to benefit from structural change, but perhaps not to the
extent witnessed recently. The scope for rental uplifts may be
limited by modest rates of economic growth and margin pressure. Any
forthcoming rises in interest rates are expected to be gradual and
modest but may affect parts of the market which are already highly
priced. The market has now passed the peak in the current
cycle and for the next few years, performance is expected to be
driven by the income return.
Whilst remaining cautious in these uncertain times, we believe
that the Company’s balanced portfolio offers relatively attractive
defensive characteristics, and a sustainable income return,
combined with some value enhancing near-term asset management
opportunities.
* See Alternative Performance Measures
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
P Lowe, S Macrae
BMO Investment Business Limited
Tel: 0207 628 8000
Fax: 0131 225 2375
F&C UK Real
Estate Investments Limited
Condensed Consolidated Statement of Comprehensive Income
|
Notes |
Six months to 31
December
2018 (unaudited) |
Six months
to 31 December
2017
(unaudited) |
Year to
30 June
2018
(audited) |
|
|
£’000 |
£’000 |
£’000 |
Revenue |
|
|
|
|
Rental income |
|
9,380 |
9,403 |
19,134 |
Other income |
|
- |
4,375 |
4,375 |
Total revenue |
|
9,380 |
13,778 |
23,509 |
Gains/(losses) on investment properties |
|
|
|
|
Gains on sale of investment
properties realised |
5 |
24 |
20 |
1,568 |
Unrealised (losses)/gains on
revaluation of investment properties |
5 |
(5,466) |
7,711 |
14,851 |
Total
Income |
|
3,938 |
21,509 |
39,928 |
|
|
|
|
|
Expenditure |
|
|
|
|
Investment management fee |
|
(1,064) |
(1,052) |
(2,156) |
Other expenses |
2 |
(943) |
(866) |
(1,619) |
Total expenditure |
|
(2,007) |
(1,918) |
(3,775) |
|
|
|
|
|
Net operating profit before
finance costs and taxation |
|
1,931 |
19,591 |
36,153 |
|
|
|
|
|
Net finance costs |
|
|
|
|
Interest receivable |
|
4 |
1 |
2 |
Finance costs |
|
(1,797) |
(1,766) |
(3,550) |
|
|
(1,793) |
(1,765) |
(3,548) |
|
|
|
|
|
Net profit from
ordinary activities before taxation |
|
138 |
17,826 |
32,605 |
Taxation on profit on ordinary
activities |
|
(147) |
(147) |
(295) |
(Loss)/profit for
the period |
|
(9) |
17,679 |
32,310 |
|
|
|
|
|
|
|
|
|
|
Basic and diluted
earnings per share |
4 |
0.0p |
7.3p |
13.4p |
F&C UK Real
Estate Investments Limited
Condensed Consolidated Balance Sheet
|
Notes |
31 December
2018
(unaudited)
£’000 |
31 December
2017
(unaudited)
£’000 |
30 June
2018
(audited)
£’000 |
Non-current assets |
|
|
|
|
Investment properties |
5 |
343,093 |
346,449 |
349,268 |
Trade and other receivables |
|
3,354 |
3,894 |
3,692 |
|
|
346,447 |
350,343 |
352,960 |
Current assets |
|
|
|
|
Trade and other receivables |
|
2,394 |
1,277 |
1,282 |
Cash and cash equivalents |
|
9,354 |
9,578 |
15,037 |
|
|
11,748 |
10,855 |
16,319 |
|
|
|
|
|
Total assets |
|
358,195 |
361,198 |
369,279 |
|
|
|
|
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
Interest-bearing bank loans |
6 |
(96,418) |
(102,170) |
(102,299) |
Trade and other payables |
|
(158) |
(248) |
(291) |
|
|
(96,576) |
(102,418) |
(102,590) |
|
|
|
|
|
Current liabilities |
|
|
|
|
Trade and other payables |
|
(6,383) |
(6,130) |
(5,279) |
Tax payable |
|
(147) |
(147) |
(294) |
|
|
(6,530) |
(6,277) |
(5,573) |
Total liabilities |
|
(103,106) |
(108,695) |
(108,163) |
|
|
|
|
|
|
|
|
|
|
Net assets |
|
255,089 |
252,503 |
261,116 |
|
|
|
|
|
|
|
|
|
|
Represented by: |
|
|
|
|
Share capital |
8 |
2,407 |
2,407 |
2,407 |
Special distributable reserve |
|
177,161 |
177,161 |
177,161 |
Capital reserve |
|
72,251 |
69,005 |
77,693 |
Revenue reserve |
|
3,270 |
3,930 |
3,855 |
Equity shareholders’
funds |
|
255,089 |
252,503 |
261,116 |
|
|
|
|
|
|
|
|
|
|
Net asset value per
share |
9 |
106.0p |
104.9p |
108.5p |
|
|
|
|
|
F&C UK Real
Estate Investments Limited
Condensed Consolidated Statement of Changes in Equity
For the period ended 31 December 2018
|
Share
Capital
£’000 |
Special Distributable Reserve
£’000 |
Capital Reserve
£’000 |
Revenue
Reserve
£’000 |
Total
£’000 |
At 1 July 2018 |
2,407 |
177,161 |
77,693 |
3,855 |
261,116 |
|
|
|
|
|
|
Loss for the period |
- |
- |
- |
(9) |
(9) |
Dividends paid |
- |
- |
- |
(6,018) |
(6,018) |
Transfer in respect of losses on
investment properties |
- |
- |
(5,442) |
5,442 |
- |
|
|
|
|
|
|
At 31 December 2018 |
2,407 |
177,161 |
72,251 |
3,270 |
255,089 |
For the period ended 31 December 2017
|
Share
Capital
£’000 |
Special Distributable Reserve
£’000 |
Capital Reserve
£’000 |
Revenue
Reserve
£’000 |
Total
£’000 |
At 1 July 2017 |
2,407 |
177,161 |
61,274 |
- |
240,842 |
|
|
|
|
|
|
Profit for the period |
- |
- |
- |
17,679 |
17,679 |
Dividends paid |
- |
- |
- |
(6,018) |
(6,018) |
Transfer in respect of gains on
investment properties |
- |
- |
7,731 |
(7,731) |
- |
|
|
|
|
|
|
At 31 December 2017 |
2,407 |
177,161 |
69,005 |
3,930 |
252,503 |
For the year ended 30 June 2018
|
Share
Capital
£’000 |
Special Distributable Reserve
£’000 |
Capital Reserve
£’000 |
Revenue
Reserve
£’000 |
Total
£’000 |
At 1 July 2017 |
2,407 |
177,161 |
61,274 |
- |
240,842 |
|
|
|
|
|
|
Profit for the year |
- |
- |
- |
32,310 |
32,310 |
Dividends paid |
- |
- |
- |
(12,036) |
(12,036) |
Transfer in respect of gains on
investment properties |
- |
- |
16,419 |
(16,419) |
- |
|
|
|
|
|
|
At 30 June 2018 |
2,407 |
177,161 |
77,693 |
3,855 |
261,116 |
F&C UK Real
Estate Investments Limited
Condensed
Consolidated Statement of Cash Flows
|
Notes |
Six months
to
31 December 2018
(unaudited) |
Six months to 31
December 2017
(unaudited) |
Year
to
30 June
2018
(audited) |
|
|
|
|
|
|
|
£’000 |
£’000 |
£’000 |
|
|
|
|
|
Cash flows from operating
activities |
|
|
|
|
Net profit for the period before
taxation |
|
139 |
17,826 |
32,605 |
Adjustments for: |
|
|
|
|
Gains on sale of
investment properties
realised
Unrealised losses/(gains) on revaluation
of
investment properties |
5
5 |
(24)
5,466 |
(20)
(7,711) |
(1,568)
(14,851) |
(Increase)/decrease in
operating trade and other receivables |
|
(774) |
14 |
211 |
Increase/(decrease) in operating trade and
other
payables |
|
971 |
3 |
(805) |
Interest
received |
|
(4) |
(1) |
(2) |
Finance
costs |
|
1,797 |
1,766 |
3,550 |
|
|
7,571 |
11,877 |
19,140 |
|
|
|
|
|
Taxation
paid |
|
(294) |
(306) |
(306) |
Net cash inflow
from operating activities |
|
7,277 |
11,571 |
18,834 |
|
|
|
|
|
Cash flows from investing
activities |
|
|
|
|
Purchase of investment
properties |
|
- |
(10,191) |
(10,190) |
Capital
expenditure |
5 |
(341) |
(986) |
(1,067) |
Sale of investment
properties |
5 |
1,074 |
3,293 |
9,242 |
Interest received |
|
4 |
1 |
2 |
|
|
|
|
|
Net cash inflow/(outflow) from
investing activities |
|
737 |
(7,883) |
(2,013) |
|
|
|
|
|
Cash flows from financing
activities |
|
|
|
|
Dividends paid |
3 |
(6,018) |
(6,018) |
(12,036) |
Bank loan interest paid |
|
(1,679) |
(1,657) |
(3,313) |
Bank loan repaid, net of costs –
Barclays |
|
(6,000) |
(3,000) |
(3,000) |
|
|
|
|
|
Net cash outflow from financing
activities |
|
(13,697) |
(10,675) |
(18,349) |
|
|
|
|
|
Net decrease in cash and cash
equivalents |
|
(5,683) |
(6,987) |
(1,528) |
Opening cash and cash
equivalents |
|
15,037 |
16,565 |
16,565 |
Closing cash and cash
equivalents |
|
9,354 |
9,578 |
15,037 |
F&C UK Real
Estate Investments Limited
Notes to the
Condensed Financial Statements
for the six months to 31 December
2018
1. General information
The condensed consolidated financial statements have been
prepared in accordance with the Disclosure and Transparency Rules
of the United Kingdom Financial Conduct Authority, IAS 34 ‘Interim
Financial Reporting’ and the accounting policies set out in the
statutory accounts of the Group for the year ended 30 June 2018. The condensed consolidated
financial statements do not include all of the information required
for a complete set of IFRS financial statements and should be read
in conjunction with the consolidated financial statements for the
Group for the year ended 30 June 2018
which were prepared under full IFRS requirements. The accounting
policies used in preparation of the condensed consolidated
financial statements are consistent with those of the consolidated
financial statements of the Group for the year ended 30 June 2018.
2. Other
expenses
|
Six
months to
31 December
2018
£’000 |
Six
months to
31 December 2017
£’000 |
Year to
30 June 2018
£’000 |
|
|
|
|
Direct operating expenses of let
rental property |
379 |
457 |
672 |
Direct operating expenses of vacant
property |
142 |
(7) |
109 |
Provision for bad debts |
- |
3 |
12 |
Administrative fee |
54 |
52 |
105 |
Valuation and other professional
fees |
113 |
114 |
234 |
Directors’ fees |
77 |
77 |
154 |
Other expenses |
178 |
170 |
333 |
|
|
|
|
|
943 |
866 |
1,619 |
3. Dividends
|
Six
months to
31 December 2018 |
Six
months to
31 December 2017 |
Year
ended
30 June 2018 |
|
£’000 |
Rate
(pence) |
£’000 |
Rate
(pence) |
£’000 |
Rate
(pence) |
Property Income
Distributions: |
|
|
|
|
|
|
Fourth interim for the prior
year |
3,009 |
1.25 |
3,009 |
1.25 |
3,009 |
1.25 |
First interim |
3,009 |
1.25 |
3,009 |
1.25 |
3,009 |
1.25 |
Second interim |
- |
- |
- |
- |
3,009 |
1.25 |
Third interim |
- |
- |
- |
- |
3,009 |
1.25 |
|
6,018 |
2.50 |
6,018 |
2.50 |
12,036 |
5.00 |
A second interim dividend for the year to 30 June 2019, of 1.25
pence per share, will be paid on 29
March 2019 to shareholders on the register at close of
business on 15 March 2019.
4. Earnings per share
Earnings per Ordinary Share are based on 240,705,539 Ordinary
Shares, being the weighted average number of shares in issue during
the period (31 December 2017:
240,705,359 and 30 June 2018:
240,705,539). Earnings for the six months to 31 December 2018 should not be taken as a guide
to the results for the year to 30 June
2019.
5. Investment
properties
|
|
Six months to
31 December 2018
£’000 |
Six months to
31 December 2017
£’000 |
Year to
30 June
2018
£’000 |
Freehold and
leasehold properties
Opening market value |
|
353,625 |
335,350 |
335,350 |
Purchase of investment
properties |
|
- |
10,191 |
10,190 |
Capital expenditure |
|
341 |
986 |
1,067 |
Sales net proceeds
(losses)/gains on sales |
|
(1,074)
(3,426) |
(3,293)
900 |
(9,242)
1,686 |
Unrealised losses/(gains) realised
during the period |
|
3,450 |
(880) |
(118) |
Unrealised gains on
investment properties
Unrealised losses on investment properties |
|
4,718
(10,184) |
12,013
(4,302) |
20,337
(5,486) |
Movement in lease incentive
receivable |
|
(150) |
(235) |
(159) |
Closing market value |
|
347,300 |
350,730 |
353,625 |
Adjustment for lease incentives |
|
(4,207) |
(4,281) |
(4,357) |
Balance sheet carrying
value |
|
343,093 |
346,449 |
349,268 |
|
|
|
|
|
All the Group’s investment properties were valued as at
31 December 2018 by qualified
professional valuers working in the company of Cushman &
Wakefield. All such valuers are chartered surveyors, being
members of the Royal Institution of Chartered Surveyors
(‘RICS’). There were no significant changes to the valuation
techniques used during the period and these valuation techniques
are detailed in the consolidated financial statements as at and for
the year ended 30 June 2018. The market value of these
investment properties amounted to £347,300,000 (31 December 2017: £350,730,000; 30 June 2018: £353,625,000), however an
adjustment has been made for lease incentives of £4,207,000 that
are already accounted for as an asset (31
December 2017: £4,281,000; 30 June
2018: £4,357,000).
6. Interest-bearing bank
loans
On 9 November 2015, the Group
entered into an eleven year £90 million non-amortising term loan
agreement with Canada Life and a five year £20 million revolving
credit facility agreement with Barclays. The interest rate
payable on the Canada Life loan is at a fixed rate of 3.36% per
annum and the interest payable on the Barclays loan is at a
variable rate based on 3 month LIBOR plus a margin of 1.45% per
annum. During the period, the Company repaid £6 million of the
revolving credit facility to Barclays.
At 31 December 2018 borrowings of
£97 million were drawn down. The balance sheet value is
stated at an amortised cost of £96,418,000 (31 December 2017: £102,170,000 and 30 June 2018: £102,299,000). Amortised cost
is calculated by deducting loan arrangement costs, which are
amortised back over the life of the loan. The fair value of
the Canada Life loan is shown in note 7.
7. Fair value
measurements
The fair value measurements for financial assets and financial
liabilities are categorised into different levels in the fair value
hierarchy based on the inputs to valuation techniques
used.
The different levels are defined as follows:
· Level 1 – Unadjusted, fully
accessible and current quoted prices in active markets for
identical assets or liabilities. Examples of such instruments
would be investments listed or quoted on any recognised stock
exchange.
· Level 2 – Quoted prices for
similar assets or liabilities, or other directly or indirectly
observable inputs which exist for the duration of the period of
investment. Examples of such instruments would be those for
which the quoted price has been suspended, forward exchange rate
contracts and certain other derivative instruments.
· Level 3 – External inputs are
unobservable. Fair value is the Directors’ best estimate,
based on advice from relevant knowledgeable experts, use of
recognised valuation techniques and on assumptions as to what
inputs other market participants would apply in pricing the same or
similar instruments.
All of the Group’s investments in direct property are included
in Level 3 as it involves the use of significant inputs. There were
no transfers between levels of the fair value hierarchy during the
six month period ended 31 December
2018.
Other than the fair values stated in the table below, the fair
value of all other financial assets and liabilities is not
materially different from their carrying value in the financial
statements.
|
31
December
2018
£’000 |
31
December 2017
£’000 |
30 June
2018
£’000 |
£90 million Canada Life Loan
2026* |
(96,586) |
(97,334) |
(96,996) |
*The fair value of the interest-bearing Canada Life Loan is
based on the yield on the Treasury 2% 2025 which would be used as
the basis for calculating the early repayment of such loan plus the
appropriate margin.
The Group’s financial risk management objectives and policies
are consistent with those disclosed in the consolidated financial
statements as at and for the year ended 30
June 2018.
8. Share capital
|
£’000 |
Allotted, called-up and fully paid |
|
240,705,539 Ordinary Shares of 1p each in issue |
|
at 31 December 2018 |
2,407 |
The Company issued nil Ordinary Shares during the period.
9. Net asset value per
share
|
31 December 2018 |
31 December 2017 |
30 June
2018 |
Net asset value per
ordinary share – pence |
106.0 |
104.9 |
108.5 |
Net assets attributable
at the period end (£’000) |
255,089 |
252,503 |
261,116 |
Number of ordinary
shares in issue at the period end |
240,705,539 |
240,705,539 |
240,705,539 |
10. Going concern
In assessing the going concern basis of accounting the Directors
have had regard to the guidance issued by the Financial Reporting
Council.They have considered the current cash position of the
Group, the availability of the loans and compliance with their
covenants, forecast rental income and other forecast cash flows.The
Group has agreements relating to its borrowing facilities with
which it has complied during the period.Based on this information
the Directors believe that the Group has the ability to meet its
financial obligations as they fall due for a period of at least
twelve months from the date of the approval of the accounts.For
this reason, they continue to adopt the going concern basis in
preparing the accounts.
11. Related party
transactions
The Directors of the Company received fees for their services
and dividends from their shareholdings in the Company. No
fees remained payable at the period end.
12. Operating segments
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 Group 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 Group. The key measure of performance used by the Board to
assess the Group’s performance is the total return on the Group’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.
13. Investment in subsidiary
undertakings
The Group results consolidate those of IRP Holdings Limited
(‘IRPH’) and IPT Property Holdings Limited (‘IPTH’). IRPH and IPTH
are companies incorporated in Guernsey whose principal business is
that of a property investment company. These companies are
100 per cent owned by the Group’s ultimate parent company, which is
F&C UK Real Estate Investments Limited.
14. Subsequent events
There are no material subsequent events that need to be
disclosed.
15. The report and accounts for the half-year ended
31 December 2018 are available on the
websites fcre.co.uk and fcre.gg.
Statement of Principal Risks and Uncertainties
The Group’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 Group include market,
investment and strategic, regulatory, tax efficiency, financial,
reporting, credit, geo-political, operational and environmental
risks. The Group is also exposed to risks in relation to its
financial instruments. These risks, and the way in which they are
mitigated and managed, are described in more detail under the
heading ‘Principal Risks and Risk Management’ within the Business
Model and Strategy in the Group’s Annual Report for the year ended
30 June 2018. The Group’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 Group’s financial year.
Directors’ Responsibilites Statement
in Respect of the Interim Report
We confirm that to the best of our knowledge:
· the condensed set of
consolidated financial statements has been prepared in accordance
with IAS 34 ‘Interim Financial Reporting’ as adopted by the
European Union;
· 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 consolidated 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 Group 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
Vikram Lall
Chairman
22 March 2019
Alternative Performance Measures
The Company uses the following Alternative Performance Measures
(‘APMs’). APMs do not have a standard meaning prescribed by GAAP
and therefore may not be comparable to similar measures presented
by other entities.
Discount or Premium – The share price of an Investment Company
is derived from buyers and sellers trading their shares on the
stock market. If the share price is lower than the NAV per share,
the shares are trading at a discount. This usually indicates that
there are more sellers than buyers. Shares trading at a price above
the NAV per share, are said to be at a premium.
Dividend Cover – The percentage by which profits for the year
(less gains/losses on investment properties) cover the dividend
paid.
A reconciliation of dividend cover is shown below:
|
Six months to
31 December
2018
£’000 |
Six months to
31 December
2017
£’000 |
Year to
30 June
2018
£’000 |
|
|
|
|
(Loss)/profit for the year |
(9) |
17,679 |
32,310 |
Add back: Realised
gains
Unrealised losses/(gains) |
(24)
5,466 |
(20)
(7,711) |
(1,568)
(14,851) |
Other income |
- |
(4,375) |
(4,375) |
Profit before investment gains and
losses |
5,433 |
5,573 |
11,516 |
Dividends |
6,018 |
6,018 |
12,036 |
Dividend Cover percentage |
90.3% |
92.6% |
95.7% |
Dividend Yield – The annualised dividend divided by the share
price at the period end. An analysis of dividends is contained in
note 3.
Net Gearing – Borrowings less net current assets divided by
value of investment properties.
Portfolio (Property) Capital Return – The change in property
value during the period after taking account of property purchases
and sales and capital expenditure, calculated on a quarterly
time-weighted basis.
Portfolio (Property) Income Return – The income derived from a
property during the period as a percentage of the property value,
taking account of direct property expenditure, calculated on a
quarterly time-weighted basis.
Portfolio (Property) Total Return – Combining the Portfolio
Capital Return and Portfolio Income Return over the period,
calculated on a quarterly time-weighted basis.
Total Return – The return to shareholders calculated on a per
share basis by adding dividends paid in the period to the increase
or decrease in the Share Price or NAV. The dividends are assumed to
have been reinvested in the form of Ordinary Shares or Net Assets,
respectively, on the date on which they were quoted
ex-dividend.