RNS Number : 0733C
Advantage Property Inc Tst (The)Ld
27 August 2008
The Advantage Property Income Trust Limited
(formerly known as Teesland Advantage Property Income Trust Limited)
Unaudited report and financial statements
For the six months ended 30 June 2008
Guernsey Registered Number 42048
PERFORMANCE SUMMARY AND FINANCIAL HIGHLIGHTS
26 August 2008
The Advantage Property Income Trust Limited
"TAP" or the "Company"
Half Year Results for the six months to 30 June 2008
The Advantage Property Income Trust Limited (LSE: TAP), a company focused on investment in
a diversified portfolio of income-producing
commercial property in the United Kingdom and the Channel Islands, presents its half year
results for the six months to 30 June 2008.
Performance Highlights
* Five disposals totalling £4.63 million, 6.8% above preceding valuation
* Settlement of insurance claim at Hemel Hempstead following Buncefield explosion at
£7.87 million
* H1 total return -3.4%* compared to IPD at -6.0%
* Asset management activity adding £0.17 million of income
* Net asset value per share fallen to 87.6p at June 2008 (97.8p at December 2007)
* Portfolio income return for H1 3.1% (IPD Quarterly Funds 2.6%)
* Dividend cover on a recurring income cash basis for H1 was 65%
*As measured by IPD
PERFORMANCE SUMMARY AND FINANCIAL HIGHLIGHTS
Financial Summary
30 June 31 December 2007 30 June
2008 2007
Share price 43.0p 70.0p 105.5p
Net asset value per share* 87.6p 97.8p 119.3p
Earnings per share (6.96p) (13.02p) 5.22p
Dividends 3.25p 6.50p 3.25p
Portfolio value £233,452,400 £260,798,000 £274,013,000
Gearing** 50.4% 48.2% 41.4%
Notes
Net asset value and earnings per share calculated under International Financial Reporting
Standards.
* Including unrealised gains.
** Long term debt as a percentage of portfolio value. Long term debt is determined as the
actual bank debt, excluding fair value
adjustments arising from swaps, and excluding debt issue costs.
For further information, please visit www.tapincome.com or contact:
Christopher Carter Keall,
Valad Asset Management (UK) Ltd 020 7659 6666
Graham Swindells, Brad Cheng
Kaupthing Singer & Friedlander Capital Markets Ltd 020 3205 7500
Jeremy Carey, Gemma Bradley,
Tavistock Communications Ltd 020 7920 3150
Anson Fund Managers Ltd,
Secretary
01481 722260
CHAIRMAN'S STATEMENT
The quoted real estate sector and specifically offshore investment companies have seen
discounts to NAV increase significantly during
the last six months as the peer group's share prices have reduced.
The share price dip and associated widening in discounts has been caused by an increase in
negative sentiment for commercial property
within the context of an increasingly poor wider economy.
Against this background, I report a half year result with significant negative market
valuation movement. However, I am pleased that our
key strategies of high income and added value allow me to report continued outperformance when
compared to the commercial property market.
Total Returns 3mths 6mths 12mths
TAP -1.4 -3.4 -9.8
IPD monthly -2.7 -6.0 -14.9
Property activity has been concentrated on asset management and the disposal of assets
that have been either forecast to under-perform
over the coming years or where asset management initiatives have been completed and offer
limited future performance.
The Company has sold five assets in the first half of the year, completed 17 rent reviews
and lease renewals, along with 7 new lettings,
adding £170,000p.a to the income of the Company.
The Board continues to concentrate on certain key targets and strategies to improve
dividend cover, reduce costs and narrow the
historically large discounts to Net Asset Value. These include:
* Further sales of stabilised assets
* A continuing strategy of debt repayment
* The consideration of share buy-backs
Further news will follow on these strategies, however, a number of initiatives have been
successfully completed in H1 including:
* The repayment of £8 million of debt
* The completion of the renegotiation of the HBOS loan and the conversion to a
revolving facility
* The stabilisation of the Total Expense Ratio (TER) at a six month average of 1.18%
* Renegotiation of the Property Fund Adviser (PFA) agreement thereby reducing the fee
payable to the PFA from 85bps to 65bps of
Gross Asset Value (GAV)
* Appointment of a new Company broker
* Introduction of a new PFA team and the commencement of a significantly increased set
of Investor presentations
* The launch of a new website, www.tapincome.com, increasing communication with
investors and analysts and most recently including a
Webcast outlining the strategy of the Company to those shareholders we have either not met or
are unable to meet.
CHAIRMAN'S STATEMENT (Continued)
Results
The net asset value of the Company, as at 30 June 2008 has fallen to 87.6p per share a
reduction from 97.8p per share as at 31 December
2007. Profit before tax, excluding unrealised gains/losses on investments and derivative
movement, for the first half of the year totalled
£2.69 million. Unrealised loss on the investment properties amounted to £14.53 million
during the period and the NAV total return, defined
as change in NAV plus dividends paid, was -7.2%.
Gearing
TAP has bank debt of £117.8 million, equivalent to 50.4% (Dec 2007: 48.2%) of gross
property assets.
The bank debt is made up of two facilities: one from the Bank of Scotland plc for £98.3
million, of which £80.3 million has been drawn
down and one from Capmark Bank Europe plc for £37.5 million which has been fully drawn down.
Current Hedging
The interest rate on £81.3 million of debt is currently fixed at a blended rate of 5.2%
(before margin) with the interest rate on the
remaining £36.5 million floating. As at Q2 this meant that 69% of the debt was at fixed rates
(Q4 2007: 65%).
The weighted average cost of all debt including margin for the six months was 5.9%. With
a substantial proportion of its debt hedged, I
believe TAP is protected against a fluctuating interest rate environment.
The Board continues to review methods by which we are able to influence positively the
discount to NAV. In the last six months we have
adopted a strategy of debt repayment and future receipts will continue to be utilised in the
most effective way.
Future prospects
The Board and PFA consider two main property market forecasts when setting strategy; The
Investment Property Forum (IPF) consensus
forecasts and The Property Market Analysis LLP (PMA). It is interesting to note that both show
further declines in 2008, both show small
capital value declines in 2009 offset by income and both show recoveries in 2010. The Board
and PFA will continually review these in the
light of market outputs.
CHAIRMAN'S STATEMENT (Continued)
The most important outputs are through IPD (Investment Property Databank). The IPD Monthly
Index published capital falls which looked to
have peaked in March, as April and May monthly numbers showed falls reducing. However, in June
capital took an unexpected additional drop
and commentators began speaking of double dips in the market.
We are yet to see whether June highlighted a longer term trend or a short term anomaly and
we are unlikely to get any sensible evidence
until the end of September when transaction volumes increase as owners endeavour to complete
sales for the year end.
Once again the TAP fundamentals of high income and income growth will be at the forefront
of our strategy to maximise performance.Through these fundamentals, we anticipate being well placed when market sentiment turns.
Christopher N Fish
Chairman
26 August 2008
PROPERTY FUND ADVISER'S REPORT
Property Market
The performance of the UK property market in the first six months of 2008 has continued in
much the same vein as the second half of
2007. The IPD all property total return for H1 is -5.9%, driven by -8.5% capital growth and
2.7% income return. There have now been four
consecutive months of negative total returns as a result of falling capital growth. This is
due to outward yield shift across all sectors.Global property consultancy CB Richard Ellis recorded the UK prime equivalent yield at June
2008 as 6.2%, the same level as June 2004 and
140 bps above the 4.8% they recorded at the peak of the market in June 2007.
Rental growth has all but disappeared in June 2008 as a result of a loss of momentum in
the occupier markets, although encouragingly,
void rates have stabilised as landlords continue to encourage occupiers to take space and
thereby avoid empty rates.
The property investment market is currently in its summer slowdown, but in the last 12
months has shown significant signs of increased
illiquidity. Market transactions have reduced significantly in volume. In the three months to
June 2008, just under £5 billion of
transactions completed, compared to more than £17 billion in the same period last year
(CBRE). Debt continues to be scarce and only then at
high cost and low gearing levels. A notable feature of the current market is that it is now
easier to raise equity than debt but that equity
is generally chasing stock from distressed vendors.
Future Prospects
The Property Market Analysis LLP (PMA) summer forecasts outline further capital falls for
all property, and all the individual sectors
for 2008. The forecasts do show a significant bounce in total returns for 2010 with the spring
forecasts showing an 8.7% total return, up
from -9.2% in 2008. The best performing sector in 2008 is forecast to be retail shop units,
and the worst sector is Central London offices.Retail warehouses are expected to be the strongest performing sector in 2009 and 2010, which
bodes well for future TAP fund performance due
to our exposure to this sector.
In terms of rental growth, retail shop units are expected to show the strongest
performance over the course of 2008 at 1.0%, whilst
Central London offices are forecast to show the weakest growth at -0.7%. PMA's forecasts for
2009, 2010 and 2011 show retail warehousing as
the top performing sector in terms of rental growth.
PROPERTY FUND ADVISER'S REPORT (continued)
Property Activity
The PFA has continued to actively manage the property portfolio and during the first six
months of the year has completed the disposal
of five property investments. These sales have produced proceeds of £4.63 million for the
Company and profits over valuation of £0.3 million
(6.8%).
In line with the wider commercial property market, the TAP portfolio net value has fallen
over the period by 8.8% on a like for like
basis to £233,580,000, but when one takes into account capital receipts resulting from asset
management and sales, the capital growth fall
for H1 is -6.4% (as measured by IPD).
The disposals included three retail premises, one office building and the converted upper
parts of another. In Morecambe, the sale of
the retail premises were split and sold as three individual units in order to maximise the
price achieved. All three units were let with
shortening income profiles and the disposal completed in January 18% above valuation. In
March, TAP sold their asset in Beastfair
Pontefract. This secondary retail shop was let with seven years unexpired to a national
multiple and was successfully sold at 2% above
valuation. In June, the sale of the Company's retail shop in Lincoln, let to a national
retailer, completed at auction which provided
further cash to the Company. Furthermore, the upper parts of the Company's retail holding in
Aberdeen were sold. These were converted into
two residential flats in 2007 and then sold off on a long-leasehold basis, again at a
significant premium to valuation.
In Bradford, the Company sold a small rack-rented office premises, with a shortening
income profile in May. These sales provided cash to
the Company and reduced management costs on our small assets as per our stated fund strategy.
Other cash generating initiatives have included the settlement, after prolonged and
detailed negotiation between the PFA and the loss
adjuster, of the outstanding insurance claim following the Buncefield explosion and the
destruction of the Company's premises at Hemel
Hempstead. A settlement was agreed at £7.87 million. The monies have now been recovered in
full and the claim concluded.
The net proceeds of the disposals and insurance claim have been applied to the repayment
of debt in line with the Company strategy.
The portfolio remains balanced with a slight bias towards retail, with retail warehousing
(20.9%), high street retail (17.7%), office
(35.8%), industrial (21.6%) and leisure (4.0%) continuing to provide good sector
diversification.
The net lettable void of the portfolio at June 30 was 5.81% whilst the total void when
taking into account the vacancy created through
the implementation of asset management initiatives is at 9.25%. The current unexpired lease
term of 6.84 years has improved relative to the
December 2007 figure of 6.44 years.
PROPERTY FUND ADVISER'S REPORT (continued)
Asset Management
A total of seven new lettings were successfully completed during the period securing
£110,000p.a of headline rental income. A further 17
lease renewals and rent reviews have been settled contributing an additional £60,000p.a, a
7.9% increase over the original rent passing.
Additional added value has also been achieved at Trident Retail Park in Birmingham where a
strategic letting to Triumph Motorcycles was
completed. The 5,000 sq ft unit was let for a ten year term at a rent of £55,000p.a
establishing a new level of rent for the scheme, some
4.6% above the preceding rental valuation. The unit is Triumph's UK flagship showroom and they
are now fully open and trading strongly.
A lease renewal has been completed with Britannia Building Society at our Torquay
property. The occupier has completed a new 10 year
lease at £58,750p.a, providing the Company with a 38% uplift on the previous passing rent.
A new reversionary lease has been completed at the Company's Kettering property along with
an assignment of the current lease to Travis
Perkins (Properties) Limited, providing an unexpired term of 15 years. No rent free period was
granted to the occupier. The outstanding rent
review was also settled at £61,635p.a, an 8% uplift on the passing rent. The asset management
team continues to maximise income returns from
the existing portfolio.
Future performance is also being created through the substantial refurbishment and
repositioning of AdVantage Reading (formally
Associates House). This project will be delivered into the central Reading market, which is
currently experiencing limited supply, in
December 2008. Refurbishment projects have also been completed at Advantage One, Milton Keynes
and Caswell Road, Northampton, where we
currently have good interest from potential occupiers and owners.
Elsewhere, asset management initiatives are currently ongoing at Brunswick Point in Leeds,
and within a number of our Halfords units
where we anticipate adding value over the medium term.
The asset management initiatives during the period have made a positive contribution to
the performance of the underlying assets. The
PFA continues to identify and execute added value initiatives to continue to provide income
and income growth to investors.
PROPERTY FUND ADVISER'S REPORT (continued)
Fund Strategy
The Company is now fully invested and through its performance against the market the
portfolio has shown its resilience and value adding
opportunities. The PFA continues to implement the investment strategy with an emphasis on
asset management with a view to maximising income
returns and seeking out capital value growth. Selective disposals will continue to be made
where capital growth has been maximised through
asset management or where assets are forecast to under-perform in the future, whilst in turn
generating profits for the Company.
There is currently £18 million of undrawn facility from HBOS. It is the Company's
strategy to utilise receipts in the appropriate way to
work towards the reduction in the current discount to NAV that currently exists.
We will also consider utilising the undrawn facility where significant performance can be
achieved. The portfolio is broadly balanced
across the main sectors and the acquisition and disposal strategy will focus on maintaining
higher income yielding opportunities or assets
that provide the opportunity to achieve higher income returns through active management.
INVESTMENT OBJECTIVE AND POLICY
Since Admission to the official list of the London Stock Exchange on 8 February 2005, the
Company's investment objective has been to
provide shareholders with an attractive level of income together with the potential for income
and capital growth derived from investment in
the Group's diversified portfolio of commercial property in the United Kingdom and the Channel
Islands.
The Group's diversified portfolio comprises both freehold and long leasehold (over 60
years remaining at the time of acquisition)
commercial properties in the United Kingdom and the Channel Islands. The Group intends to
invest predominantly in income producing
investments and will principally invest in the main commercial property sectors: office,
retail, leisure and industrial.
The Group currently owns a portfolio of properties which has been designed to give balance
across the main commercial property sectors.The Group will not invest in other investment companies or funds.
Any material change to the Company's investment objective and policy may only be made with
shareholder approval.
GROUP STRUCTURE
Parent company:
The Advantage Property Income Trust Limited (formerly known as Teesland Advantage Property
Income Trust Limited).
Subsidiaries:
TAPP Property Limited (a property holding Guernsey company)
TOPP Holdings Limited (a Guernsey company)
Subsidiaries of TAPP Property Limited:
TAPP Hemel Hempstead Limited (a UK company)
TAPP Manchester Limited (a UK company)
TAPP Maidenhead Limited (a property holding Guernsey company)
TAPP Northampton Limited (a UK company)
Acopia Limited (a Jersey company)
Alta Rica Limited (a Jersey company)
De-Di Investments Limited (a Jersey company which was dissolved 30 January 2008)
Heatherhill Property Limited (a Jersey company which was dissolved 30 January 2008)
Southgate Limited (a Jersey company which was dissolved 30 January 2008)
Coleridge (Fleet GP) Limited (a UK company)
Loch (Warrington GP) Limited (a UK company)
All of the above subsidiaries are dormant except for TAPP Maidenhead Limited.
Subsidiaries of TOPP Holdings Limited:
TOPP Bletchley Limited (a property holding Guernsey company)
TOPP Property Limited (a property holding Guernsey company)
All subsidiaries are 100% owned by The Advantage Property Income Trust Limited.
Directors of the Company
Christopher N Fish
Robert J Bould
Caroline M Burton
Charles N K Parkinson
Nicholas C M Renny
No director past or present had or has a contract of employment with the Company.
COMPANY SUMMARY
Name change
At the Annual General Meeting of the Company held on 27 May 2008 the shareholders passed a
special resolution to change the Company's
name to The Advantage Property Income Trust Limited.
Share Capital
As at 30 June 2008, the Company had an authorised share capital of £1,750,000 divided
into 175,000,000 Ordinary Shares of £0.01 each, of
which 142,747,300 shares are in issue.
Inter-Company Loan Agreements
The Company enters into Inter-Company Loan Agreements with its subsidiary companies when
appropriate. Interest is charged on these loans
at a rate of 6.25%.
Bank Facility and Other Financing Arrangements
TAPP Property Limited has a facility with the Bank of Scotland of up to £98,320,000
repayable on or before 27 January 2015 secured by
fixed and floating charges over the assets of the Group (the "HBOS Facility"). On 7 March 2008
the facility was changed to a revolver
facility.
Repayments during the period to 30 June 2008 were:-
B/f 1 January 2008 £88,293,083
11 March 2008 (£8,000,000)
£80,293,083
Under the terms of the Revolver Facility the percentage of the Term Loan to the market
value of the properties in which the Group has an
interest shall not be greater than 55%.
As at 30 June 2008 TOPP Property Limited maintained a facility with CapMark Bank Europe
plc of up to £37,461,250, which had been fully
drawn down.
Interest Rate Swap Agreements
TAPP Property Limited has entered into the following Interest Rate Swap Agreements with
HBOS Treasury Services plc:-
Trade date 17 March 2005; Effective Date 5 May 2005 to 17 February 2015 on £22,000,000 at
a fixed rate of 5.150% (plus 0.79% margin =
5.94%).
Trade date 22 March 2005; Effective Date 5 May 2005 to 17 February 2015 on £21,800,000 at
a fixed rate of 5.135% (plus 0.79% margin =
5.925%).
Accounting policies - Basis of preparation
The accounting policies of the Group comply with IAS 34, as adopted by the European Union
and applicable Guernsey law. In conforming
with these standards, the financial statements include freehold and leasehold properties
valued at their fair value based upon open market
valuations provided by independent valuers.
Property Investments
Property Address
INDUSTRIAL £55,545,000
BIRMINGHAM Europa House, Tilton Road
BOURNE END Units 1,2 & 3 Wessex Road Industrial Estate, Wessex
Road
BRIGHOUSE Armytage Road
CLEVEDON Units 5a, 5b, 5c, 6a & 6b, Tweed Road Industrial
Estate
HEMEL HEMPSTEAD 3 Cherry Trees Lane
KETTERING Travis Perkins/Kettering Tiles, Linnell Way
LIVINGSTON Kirkton Campus
MANCHESTER 1 St Modwen Road, Trafford Park
MANCHESTER Europa, Second Avenue, Trafford Park
MILTON KEYNES Advantage One, Third Avenue, Bletchley
NEWBURY Parceline Distribution Depot, Hambridge Lane
NORTHAMPTON 51 Caswell Road, Brackmills
NORTHAMPTON 53 Caswell Road, Brackmills
PORTSMOUTH Units A & B, Fisher Grove, Farlington
RUNCORN Units 1001/1004 Lime Court, Manor Park
SHEFFIELD Unit C, Thorncliffe Park Estate, Brookdale Road
STOKE-ON-TRENT Unit 1, Festival Trade Park, Festival Park
STRATFORD UPON AVON Swan Development, Avenue Farm Industrial
Estate
STROUD Stroud Business Centre, Stonedale Road
INDUSTRIAL (CONTINUED)
SWINDON Pagoda Park, Mead Way
TELFORD Unit C, Hortonwood
UDDINGSTON Unit 6, Bedlay View, Tannochside Park
WITHAM 3,16 & 18 Freebournes Road
WORCESTER Unit 15b Blackpole Trading Estate
LEISURE £9,300,000
DUNDEE Kingscourt Leisure Complex, Douglas Road
OFFICES £78,550,000
FLEET Integration House, Ancells Business Park, Rye Close
FLEET Waterfront Business Park, Fleet Road
GUERNSEY National Westminster House, Le Truchot, St Peter Port
HEATHROW Princess House, Nobel Drive
LEEDS Brunswick Point
MAIDENHEAD Geoffrey House
NEWCASTLE UPON TYNE Hadrian House, Balliol Business Park
READING Associates House, Castle Street
STIRLING Laurel House, Laurel Hill Business Park
SWINDON The Orbit Centre, Ashworth Road, Bridgemead
WARRINGTON The Links, Kelvin Close
OFFICES (CONTINUED)
WELWYN GARDEN CITY Units 1/6 Silver Court, Watchmead
WHETSTONE Brook Point 1412-1420 High Road
RETAIL £29,055,000
ABERDEEN 127 Union Street & 68/70 The Green
AYLESBURY Market House, High Street
AYR 156&158/160 High Street
AYR 52/56 Newmarket Street
BAKEWELL Units 1-4, Rutland Square
BRIGHTON 5-8 London Road
FELIXSTOWE York House, 96/102a Hamilton Road
HINKLEY 70-76 Castle Street
HORSHAM 7 West Street
HUYTON 32-36 Derby Road
LEICESTER 10 Cheapside
MAIDSTONE 27 Week Street
PALMERS GREEN 290-296 Green Lanes
RUGELEY Shrewsbury Arms Shopping Mall, High Street
SOUTHAMPTON 82 Above Bar Street
SUTTON Units 1 & 2, 153 High Street
TORQUAY 46 Union Street
RETAIL WAREHOUSE £61,130,000
BIRMINGHAM Trident Retail Park
BLETCHLEY The Brunel Centre
COVENTRY Halfords, 36 Foleshill Road
DERBY Southgate Retail Park, Normanton Road
DOVER Halfords, Granville Street
HUDDERSFIELD Halfords Bradford Road
MITCHAM Halfords, 23 Streatham Road
NORTHAMPTON Halfords Weedon Road
NORWICH Halfords, Barker Street
NUNEATON Halfords, Newtown Road
SLOUGH Halfords, 380 Bath Road
SUTTON IN ASHFIELD Forest Retail Park, Forest Street
WINNERSH Halfords, Reading Road
WREXHAM Halfords, Mount Street
TOTAL £233,580,000*
* Difference to Balance Sheet value of £233,452,400 due to accounting adjustment for UITF
28 lease incentive of £127,600
A description of important events that have occurred during the first six months of the
financial year, their impact on the performance
of the Company as shown in the financial statements and a description of the principal risks
and uncertainties facing the Company for the
remaining six months of the financial year is given in the Property Fund Adviser's Report on
pages 6 to 9 and is incorporated here by
reference.
There were no material related party transactions which took place in the first six months
of the financial year.
This half-yearly financial report has been reviewed by Ernst & Young LLP pursuant to the
Auditing Practices Board guidance on Review of
Interim Financial Information and their Interim Review Report is included in its entirety at
page 18.
Responsibility Statement
The Board of directors jointly and severally confirm that, to the best of their
knowledge:
(a) The condensed set of financial statements, prepared in accordance with IAS 34 as
adopted by the European Union, give a true and
fair view of the assets, liabilities, financial position and profit or loss of the Company;
and that the interim management report herein
includes a fair review of the information required by DTR 4.2.7R (an indication of important
events during the first six months and a
description of the principle risks and uncertainties for the remaining six months of the year)
and by DTR4.2.8R (a disclosure of related
party transactions and charges therein) of the Disclosure and Transparency Rules.
(b) This Interim Management Report includes or incorporates by reference:
a. an indication of important events that have occurred during the first six months of
the financial year and their impact on the
financial statements;
b. a description of the principal risks and uncertainties for the remaining six
months of the financial year;
c. confirmation that there were no related party transactions in the first six months
of the current financial year that have
materially affected the financial position or the performance of the Company during that
period; and
d. confirmation that there have been no changes in the related parties transactions
described in the last annual report that could
have a material effect on the financial position or performance of the Company in the first
six months of the current financial year.
Director Director
26 August 2008
INDEPENDENT REVIEW REPORT TO THE ADVANTAGE PROPERTY INCOME TRUST LIMITED
Introduction
We have been engaged by the company to review the condensed set of financial statements in
the half-yearly financial report for the 6
months ended 30 June 2008 which comprises the Group Income Statement, Group Balance Sheet,
Group Statement of Changes in Equity, Group Cash
Flow Statement and the related notes 1 to 10. We have read the other information contained in
the half yearly financial report and
considered whether it contains any apparent misstatements or material inconsistencies with the
information in the condensed set of financial
statements.
This report is made solely to the company in accordance with guidance contained in ISRE
2410 (UK and Ireland) "Review of Interim
Financial Information Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the company,
for our work, for this report, or for the
conclusions we have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the
directors. The directors are responsible for
preparing the half-yearly financial report in accordance with the Disclosure and Transparency
Rules of the United Kingdom's Financial
Services Authority.
As disclosed in note 1, the condensed set of financial statements included in this
half-yearly financial report has been prepared in
accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted
by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of
financial statements in the half-yearly financial
report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements
(UK and Ireland) 2410, "Review of Interim
Financial Information Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board for use in the United
Kingdom. A review of interim financial information consists of making enquiries, primarily of
persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and consequently does not
enable us to obtain assurance that we would
become aware of all significant matters that might be identified in an audit. Accordingly, we
do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the
condensed set of financial statements in the
half-yearly financial report for the 6 months ended 30 June 2008 is not prepared, in all
material respects, in accordance with International
Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union and the
Disclosure and Transparency Rules of the
United Kingdom's Financial Services Authority.
Ernst & Young LLP
Guernsey
26 August 2008
Group income statement
For the six months ended 30 June 2008
(unaudited)
Six months to 30 Six months to 30 Year to
31 December
June 2008 June 2007
2007
Notes £ £
£
Revenue
Rental income from investment 8,390,724 8,039,702
16,566,782
properties
Lease incentive charge (244,310) (233,392)
(475,785)
Net rental income 8,146,414 7,806,310
16,090,997
Expenditure
Property outgoings (601,089) (773,870)
(1,100,468)
Property fund adviser's fee (1,014,295) (1,156,429)
(2,279,743)
Other expenses (397,764) (334,176)
(745,191)
3 (2,013,148) (2,264,475)
(4,125,402)
Net operating profit for the 6,133,266 5,541,835
11,965,595
period before finance costs
Gain/(Loss) from investments
Realised gain on sale of 56,192 622,978
802,214
investment properties
Movement on unrealised (14,526,173) 2,072,319
(24,279,124)
(loss)/gain on revaluation of
investment properties
(14,469,981) 2,695,297
(23,476,910)
Finance income/(costs)
Interest receivable 207,010 159,836
365,875
Interest payable and similar (3,574,694) (2,982,705)
(6,771,549)
charges
Amortised debt issue costs (136,170) (120,491)
(256,910)
Fair value gain/(loss) on 1,941,494 2,251,471
(288,286)
interest rate swaps
(1,562,360) (691,889)
(6,950,870)
Net profit on ordinary (9,899,075) 7,545,243
(18,462,185)
activities before taxation
Taxation on net profit on 6 (38,953) (99,656)
(121,809)
ordinary activities
Net result for the period (9,938,028) 7,445,587
(18,583,994)
Dividends per share 5 3.25p 3.25p
6.50p
(Loss)/Earnings per share 7 (6.96p) 5.22p
(13.02p)
The accompanying notes form an integral part of this income statement.
Group balance sheet as at 30 June 2008
(unaudited)
Notes As at As at As at
30 June 30 June 31 December 2007
2008 2007
£ £ £
Non-current assets
Investment properties 230,124,775 270,205,294 257,232,687
Reverse lease premium 3,327,625 3,807,706 3,565,313
8 233,452,400 274,013,000 260,798,000
Current assets
Debtors 5,362,407 4,727,438 5,770,956
Cash and cash equivalents 4 7,302,775 8,046,580 4,922,431
12,665,182 12,774,018 10,693,387
Total assets 246,117,582 286,787,018 271,491,387
Current liabilities
Financial liabilities (6,016,251) (6,910,447) (7,017,870)
Income tax payable (147,596) (216,647) (169,625)
(6,163,847) (7,127,094) (7,187,495)
Non-current liabilities
Bank loans (117,754,332) (113,354,572) (125,754,332)
Fair value of swap instrument 1,758,062 2,356,325 (183,432)
Debt issue costs 1,453,013 1,700,319 1,582,711
Deferred Tax (387,441) (92,778) (348,488)
(114,930,698) (109,390,706) (124,703,541)
Net assets 125,023,037 170,269,218 139,600,351
Represented by:
Share capital 1,427,473 1,427,473 1,427,473
Share premium 68,878,048 68,878,048 68,878,048
Reserves 54,717,516 99,963,697 69,294,830
Shareholders' funds 125,023,037 170,269,218 139,600,351
Net Asset Value per share 87.58p 119.28p 97.80p
The accompanying notes form an integral part of this balance sheet.
Approved by:
Christopher N Fish Nicholas C M Renny
Director Director
26 August 2008
Group statement of changes in equity
For the six months ended 30 June 2008
(unaudited)
Issued share capital Revenue reserves
Total
Share Other
premium reserves
£ £ £
£ £
Opening at 1 January 2008 1,427,473 68,878,048 69,706,994
(412,164) 139,600,351
- - 4,588,145
(14,526,173) (9,938,028)
Net result for the period
- - 1,729,352
(1,729,352) -
Current year crystallisation
of unrealised property gain
Dividend paid - - (4,639,286)
- (4,639,286)
At 30 June 2008 1,427,473 68,878,048 71,385,205
(16,667,689) 125,023,037
For the six months ended 30 June 2007
(unaudited)
Issued share capital Revenue
Total
reserves
Share Other
premium reserves
£ £ £
£ £
Opening at 1 January 2007 1,427,473 72,588,604
24,568,792 167,428,982
68,844,113
Share issue expenses - 33,935 -
- 33,935
Net gain for the period - 5,373,268
2,072,319 7,445,587
-
Current year crystallisation - - 421,406
(421,406) -
of unrealised property gains
Prior year crystallisation of - - 397,322
(397,322) -
unrealised property gains
Dividend paid - - (4,639,286)
- (4,639,286)
At 30 June 2007 1,427,473 68,878,048 74,141,314
25,822,383 170,269,218
The accompanying notes form an integral part of this statement of changes in equity.
Group cash flow statement
For the six months ended 30 June 2008
(unaudited)
Six months ended Six months
ended Year ended 31
30 June 2008 30
June 2007 December 2007
£
£ £
Operating activities
Net operating profit for the period before finance costs
11,965,595
6,133,266
5,541,835
Adjustment for:
Decrease/(increase) in operating debtors 408,277
(330,079) (1,376,031)
(Decrease)/increase in operating creditors (499,900)
(716,327) 667,684
Reverse premium amortisation 237,688
233,392 475,785
6,279,331
4,728,821 11,733,033
Interest received 207,010
157,130 365,875
Interest paid (4,018,031)
(2,045,328) (6,388,889)
Taxation paid (22,029)
- (111,961)
Net cash inflow from operating activities 2,446,281
2,840,623 5,598,058
Investing activities
Purchase of investment properties (218,082)
(21,298,849) (36,826,941)
Proceeds from sale of investment properties 4,932,903
9,383,828 11,288,674
Proceeds from insurance claim 7,865,000
- -
Net cash inflow/(outflow) from investing activities 12,579,821
(11,915,021) (25,538,267)
Financing activities
Share issue costs -
(4,065) (4,065)
Drawdown of bank loans -
17,764,723 30,164,482
Repayment of bank loans (8,000,000)
(948,750) (948,750)
Debt issue costs paid (6,472)
(134,986) (153,797)
Dividends paid (4,639,286)
(4,639,286) (9,278,572)
Net cash (outflow)/inflow from financing activities (12,645,758)
12,037,636 19,779,298
Net increase/(decrease) in cash and cash equivalents 2,380,344
2,963,238 (160,911)
Opening cash and cash equivalents 4,922,431
5,083,342 5,083,342
Closing cash and cash equivalents 7,302,775
8,046,580 4,922,431
The accompanying notes form an integral part of this cash flow statement.
NOTES TO THE FINANCIAL STATEMENTS
1 Basis of preparation
The consolidated financial statements of The Advantage Property Income Trust Limited as at
31 December 2007 were drawn up in accordance
with International Financial Reporting Standards (IFRSs) issued by the International
Accounting Standards Board (IASB). The half year Group
financial statements as at 30 June 2008, which have been prepared in accordance with
International Accounting Standard 34 (Interim Financial
Reporting), have been drawn up using the same accounting methods as in the 2007 Group
financial statements. All interpretations of the
International Financial Reporting Interpretations Committee (IFRIC), formerly the Standing
Interpretations Committee (SIC), which were
mandatory as at 30 June 2008, were also applied.
2 Accounting policies
The six months' figures are unaudited; the accounting policies and methods of computation
followed are as stated in the last annual
financial statements of the group.
3 Property outgoings and other expenses
During the period the Company incurred £601,089 (2007: £773,870) property outgoing costs
and £397,764 (2007: £334,176) of other expenses
that did not generate rental income. During the period, the Company incurred £30,787 (2007:
£56,208) of audit fees and £12,463 (2007:
£8,250) of non audit fees due to the auditors.
4 Cash and cash
equivalents
Six Months to 30 Six Months to 30 June 2007 Year to 31
December 2007 Group
June 2008
Group Group
£ £
£
Cash at bank and in hand 5,302,775 8,046,580
4,922,431
Short term deposits 2,000,000 -
-
7,302,775 8,046,580
4,922,431
5 Dividends
Six Months to 30 Six Months to 30 Year to 31 December
June 2008 June 2007 2007 Group
Group Group
£ £
£
Interim dividends paid 4,639,286 4,639,286 9,278,572
4,639,286 4,639,286 9,278,572
During the period the Company paid two dividends, each comprising of 1.625 pence per each
Ordinary Share. The dividends were paid in
February and May.
In line with the prospectus, the Company will pay a third interim dividend of 1.625 pence
per ordinary share in August 2008.
6 Taxation
* Tax on profit on ordinary activities
Six Months to 30 Six Months to 30 June Year to 31
December 2007
June 2008 2007
Current income tax: £ £
£
UK Income Tax - 99,656
(137,280)
Adjustments in respect of - -
(89,399)
prior years
- 99,656
(226,679)
Deferred Tax:
Origination and reversal of 38,953 -
348,488
timing differences
Total deferred tax 38,953 -
348,488
Tax charge in the income 38,953 99,656
121,809
statement
7 Earnings per share
Six Months to 30 Six Months to 30 Year to 31
December 2007
June 2008 June 2007
£ £
£
Profit used to calculate basic EPS (9,938,028) 7,445,587
(18,583,994)
Weighted average number of shares 142,747,300 142,747,300
142,747,300
8 Investment properties
Freehold Long Leasehold Total
Cost £ £ £
At 1 January 2008 238,452,576 16,935,058 255,387,634
Additions during the period at cost 123,618 36,355 159,973
Disposals during the period at cost (10,617,534) (394,826) (11,012,360)
At 30 June 2008 227,958,660 16,576,587 244,535,247
Revaluation
At 1 January 2008 243,303,000 17,495,000 260,798,000
Additions during the period at cost 123,618 36,355 159,973
Disposals during the period at valuation (12,414,797) (326,915) (12,741,712)
Reverse lease premium (225,152) (12,536) (237,688)
Revaluation movement in the period (13,239,269) (1,286,904) (14,526,173)
At 30 June 2008 217,547,400 15,905,000 233,452,400
Valuation at 30 June 2008 217,547,400 15,905,000 233,452,400
Adjustment for lease incentive 127,600 - 127,600
Market valuation per external valuation 217,675,000 15,905,000 233,580,000
8 Investment properties (continued)
Cushman & Wakefield Healey & Baker, a firm of independent chartered
surveyors, completed a valuation of the properties at the period end on an
open market basis in accordance with the Practice Statements contained in the
RICS Appraisal and Valuation Standards published by the Royal Institution of
Chartered Surveyors ('Red Book') in May 2003. The valuation has been prepared
by an appropriate valuer who conforms to the requirements as set out in the
Red Book, acting in the capacity of external valuer.
9 Interest bearing loans and borrowings
Repayment of debt
On 11 March 2008, the Group repaid £8,000,000 of a secured bank loan bearing an interest
rate of Libor + 0.74%.
Facility amendment
On 7 March 2008 the HBOS bank facility of £98,320,000 was amended to a credit revolver
facility.
10 Related party transactions
The Group has undertaken transactions with companies related by virtue of their
shareholding in The Advantage Property Income Trust
Limited.
Valad Asset Management (UK) Limited, a subsidiary company of Valad Holdings (UK) plc,
charged the Group property fund adviser's fees of
£1,062,038 (2007: £1,201,078) in the six month period. As at 30 June 2008, Valad Asset
Management (UK) Limited was owed £522,267 (2007:
£603,915).
DIRECTORS AND SERVICE PROVIDERS
Directors Christopher N Fish (Chairman)
Robert J Bould
Caroline M Burton
Charles N K Parkinson
Nicholas C M Renny
Property Fund Adviser Valad Asset Management (UK) Limited
5th Floor, 1 Mount Street
London
England
W1K 3NB
Administrator and Secretary Anson Fund Managers Limited
(and Registered Office of Anson Place
Company) Mill Court
La Charroterie
St Peter Port
Guernsey
GY1 1EJ
Lending Bankers The Governor and Company of the Bank of Scotland
155 Bishopsgate
London
England
EC2M 3YB
Capmark Bank Europe Plc
31 St James' Square
London
England
SW1Y 4JJ
Auditors Ernst & Young LLP
14 New Street
St Peter Port
Guernsey
GY1 4AF
Registrar, Transfer Agent Anson Registrars Limited
and Paying Agent PO Box 426
Anson Place
Mill Court
La Charroterie
St Peter Port
Guernsey
GY1 3WX
Property Valuers Cushman & Wakefield Healey & Baker
43-45 Portman Square
London
England
W1A 3BG
The Company's Ordinary Shares are listed and traded on the London Stock Exchange and the
Channel Islands Stock Exchange.
SHAREHOLDER INFORMATION
REPORT AND FINANCIAL STATEMENTS
The Annual Financial Report for the period ended 31 December each year is intended to be
sent to Shareholders in the following April.
The Half-Yearly Financial Report for the period ended 30 June each year is intended to be
made public in the following August and sent
to Shareholders in the following September.
DIVIDENDS
The Company intends to declare and pay a dividend in each of the months of February, May,
August and November.
SHARE DEALING
Shares may be dealt in directly through a stockbroker or professional adviser acting on an
investor's behalf. The buying and selling of
shares may be settled through CREST.
The SEDOL for Ordinary Shares is B05LNH5.
The ISIN for Ordinary Shares is GB00B05LNH59.
The Company's Registrar, Transfer Agent and Paying Agent is Anson Registrars Limited at
the address given below.
The Company's UK Transfer Agent is Anson Administration (UK) Limited, 3500 Parkway,
Whiteley, Fareham, Hampshire, England, PO15 7AL.
SHAREHOLDER ENQUIRIES
The Company's Registrar is Anson Registrars Limited at PO Box 426, Anson Place, Mill
Court, La Charroterie, St Peter Port, Guernsey GY1
3WX. They can be contacted by telephone on 01481 711301 or by e-mail at
registrars@anson-group.com
Anson Fund Managers Limited
27 August 2008
E&OE - in transmission
END OF ANNOUNCEMENT
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The company news service from the London Stock Exchange
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