To:
RNS
Date:
26 February 2018
From:
F&C UK Real Estate Investments Limited
LEI:
231801XRCB89W6XTR23
(Classified Regulated Information, under DTR 6 Annex 1
Section 1.2)
Interim results in respect of the six
month period ended 31 December
2017
- Net asset value total return* of 7.4 per cent for the 6
months
- Portfolio ungeared total return* of 6.2 per cent for the 6
months
- Annualised dividend yield* of 4.8 per cent based on the period
end share price
- Dividend cover* was 92.6 per cent for the period
* See Alternative Performance Measures
The Chairman, Vikram Lall,
stated:
Despite continuing uncertainties about the outcome of the Brexit
negotiations, the UK commercial property market has witnessed
strong demand and the Group has experienced six months of steady
performance with capital values increasing in the period by 3.5 per
cent. The net asset value (‘NAV’) total return* per share for the
period was 7.4 per cent and the NAV per share at the period end was
104.9 pence.
Despite the positive returns on the portfolio, there was still a
degree of caution in the market and the share price fell by 3.3 per
cent over the six months. The share price total return* was -0.9
per cent over the period and the shares were trading at a slight
discount* to the NAV of 1.5 per cent at the period end, compared to
a premium of 6.7 per cent as at 30 June
2017.
Property Market
The UK commercial property market delivered a total return of
5.4 per cent as measured by the Investment Property Databank
(‘IPD’) UK Quarterly Index for all assets in the six months to
31 December 2017, and 10.3 per cent
over the year to December as momentum built over the period.
Performance was driven by strength in investment demand, with
overseas buyers still active and institutions returning to the
market later in the period. Industrial property and alternative
asset sectors continued to out-perform with all the standard
segments of the IPD Index delivering positive benchmark total
returns for the period.
In the six months to 31 December
2017, the income return held steady as capital growth
improved and the all-property initial yield edged lower. Open
market rental value growth was positive but the bulk of the upward
move in capital value was due to yield compression.
Property Portfolio
The Group’s property portfolio produced an ungeared return* of
6.2 per cent over the six months to December, outperforming the IPD
Quarterly Index. Performance was led by a top quartile income
return* of 2.6 per cent. The portfolio’s industrial and
distribution assets were again the key contributors to performance,
producing a total return in excess of both the IPD UK Quarterly
Index and the sector level return for the period. The exposure to
industrial and logistics property at close to 35 per cent of
portfolio value continues to be the mainstay of the Fund strategy
alongside the majority weighting to the core south east
markets.
In a further continuation of the trend witnessed last year, the
portfolio’s retail assets also outperformed their peers; however
the portfolio’s office assets, led lower by the regional holdings,
delivered poorer performance in both actual and relative terms. The
Company’s retail warehousing continues to deliver an income return,
a key contributor to dividend cover, and outperform the peer group.
Indeed, active asset management at the retail warehouse located at
Northfields Retail Park, Rotherham delivered the highest weighted
contribution to portfolio return of any property over the
period.
Given the weight of money pursuing core assets, particularly
Industrials, alternatives and long Income assets the Company has
preserved its measured, opportunistic approach to the deployment of
capital, with emphasis on the disposal of non-core assets,
reflected in recent sales from the retail portfolio. Acquisitions
that meet the returns criteria for the Company have been more
difficult to come by in a very competitive marketplace. However we
believe the acquisition of the single let industrial asset at
Lister Road, Basingstoke, yielding 5.2 per cent and let for 9 years
meets our criteria in the current market.
The portfolio continues to offer sustainable defensive
fundamentals, including an above market income yield, a low void
rate of 3.8 per cent and contractual income with an average
weighted lease term of 6 years.
Dividends
The first interim dividend for the year ending 30 June 2018 of 1.25
pence per share was paid in December
2017, with a second interim dividend of 1.25 pence per share to be paid on 29 March 2018 to shareholders on the register on
9 March 2018.
The dividend cover* for the six months was 92.6 per cent,
although this excludes the receipt of a negotiated surrender
premium of £4,375,000 from the previous tenant at Northfields
Retail Park, Rotherham. This property was subsequently re-let.
The dividend is currently at a sustainable level, and in the
absence of unforeseen 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 Group currently has borrowings of £103 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, £13 million of which is currently
drawn down. Net gearing* represented 28.2 per cent of the
investment properties of the Group as at 31
December 2017. The weighted average interest rate (including
amortisation of refinancing costs) on the Group's total current
borrowings is 3.2 per cent. The Company continues to maintain a
prudent attitude to gearing.
The Group had £9.6 million of cash
available at 31 December 2017 with a
further £7.0 million of the revolving credit facility also
available if required.
Responsible Property Investment
The Company continues to make good progress with its
Environmental, Social and Governance (‘ESG’) related activities.
The portfolio now has energy performance ratings for all of its
assets and has developed a detailed strategy for addressing and
maintaining a low exposure to the risks presented by energy
efficiency legislation. The Company has also completed individual
property sustainability appraisals to capture other investment
critical information.
A major exercise is currently under way to establish baseline
carbon usage for directly managed properties against which year on
year reduction targets can be set, alongside longer-term portfolio
objectives consistent with climate science. At asset level,
directly managed assets are shortly expected to achieve the
ISO14,001 environmental accreditation whilst the Manager continues
to implement green lease clauses as standard, whenever possible and
commercially viable. The Company will make its inaugural submission
to the influential annual GRESB survey this year whilst the
Manager’s recruitment of additional resource to help manage and
monitor continual improvement is further indication of the
Company’s aspiration to further improve its ESG credentials.
Outlook
Although there were some signs of progress in the EU
negotiations as the period drew to a close, the outlook continues
to be dominated by Brexit considerations and wider political
uncertainty. Interest rates were raised during this reporting
period and the timing and magnitude of further increases is also
likely to be a consideration for property investors moving forward.
Within property, performance has been buoyed by investment,
especially from overseas, but the impact of proposed new tax
regulations on foreign buyers in 2019, if implemented, is unclear.
The economy is recording positive, if modest, growth, which is
expected to persist on consensus forecasts. Sentiment is adjusting
to the changed political and economic environment, however, our
outlook on the market remains cautious.
* 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
F&C 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
2017
(unaudited) |
Six months
to
31 December
2016
(unaudited) |
Year to
30 June
2017
(audited) |
|
|
£’000 |
£’000 |
£’000 |
Revenue |
|
|
|
|
Rental income |
|
9,403 |
10,322 |
19,191 |
Other |
2 |
4,375 |
- |
- |
Total revenue |
|
13,778 |
10,322 |
19,191 |
Gains/(losses) on investment
properties |
|
|
|
|
Gains/(losses) on sale
of investment properties realised |
6 |
20 |
(207) |
781 |
Unrealised
gains/(losses) on revaluation of investment properties |
6 |
7,711 |
(4,827) |
2,008 |
|
|
21,509 |
5,288 |
21,980 |
|
|
|
|
|
Expenditure |
|
|
|
|
Investment management fee |
|
(1,052) |
(1,046) |
(2,013) |
Other expenses |
3 |
(866) |
(1,080) |
(1,966) |
Total expenditure |
|
(1,918) |
(2,126) |
(3,979) |
|
|
|
|
|
Net operating profit before
finance costs and taxation |
|
19,591 |
3,162 |
18,001 |
|
|
|
|
|
Net finance costs |
|
|
|
|
Interest receivable |
|
1 |
2 |
4 |
Finance costs |
|
(1,766) |
(1,824) |
(3,598) |
|
|
(1,765) |
(1,822) |
(3,594) |
|
|
|
|
|
Net profit from
ordinary activities before taxation |
|
17,826 |
1,340 |
14,407 |
Taxation on profit on ordinary
activities |
|
(147) |
(155) |
(306) |
Profit for the
period |
|
17,679 |
1,185 |
14,101 |
|
|
|
|
|
|
|
|
|
|
Basic and diluted
earnings per share |
5 |
7.3p |
0.5p |
5.9p |
F&C UK Real Estate Investments Limited
Condensed Consolidated Balance Sheet
|
Notes |
31 December
2017
(unaudited)
£’000 |
Restated*
31 December
2016
(unaudited)
£’000 |
30 June
2017
(audited)
£’000 |
Non-current assets |
|
|
|
|
Investment properties |
6 |
346,449 |
326,445 |
330,834 |
Trade and other receivables |
|
3,894 |
4,759 |
3,894 |
|
|
350,343 |
331,204 |
334,728 |
Current assets |
|
|
|
|
Trade and other receivables |
|
1,277 |
1,616 |
1,291 |
Cash and cash equivalents |
|
9,578 |
12,000 |
16,565 |
|
|
10,855 |
13,616 |
17,856 |
|
|
|
|
|
Total assets |
|
361,198 |
344,820 |
352,584 |
|
|
|
|
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
Interest-bearing bank loans |
7 |
(102,170) |
(104,956) |
(105,061) |
Trade and other payables |
|
(248) |
(712) |
(352) |
|
|
(102,418) |
(105,668) |
(105,413) |
|
|
|
|
|
Current liabilities |
|
|
|
|
Trade and other payables |
|
(6,130) |
(6,754) |
(6,023) |
Tax payable |
|
(147) |
(439) |
(306) |
|
|
(6,277) |
(7,193) |
(6,329) |
Total liabilities |
|
(108,695) |
(112,861) |
(111,742) |
|
|
|
|
|
|
|
|
|
|
Net assets |
|
252,503 |
231,959 |
240,842 |
|
|
|
|
|
|
|
|
|
|
Represented by: |
|
|
|
|
Share capital |
9 |
2,407 |
2,387 |
2,407 |
Special distributable reserve |
|
177,161 |
175,367 |
177,161 |
Capital reserve |
|
69,005 |
53,451 |
61,274 |
Revenue reserve |
|
3,930 |
754 |
- |
Equity shareholders’
funds |
|
252,503 |
231,959 |
240,842 |
|
|
|
|
|
|
|
|
|
|
Net asset value per
share |
10 |
104.9p |
97.2p |
100.1p |
* See Note 1 |
|
|
|
|
F&C UK Real Estate Investments Limited
Condensed Consolidated Statement of Changes in Equity
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 period ended 31 December
2016
|
Share Capital
£’000 |
Special
Distributable
Reserve
£’000 |
Capital
Reserve
£’000 |
Revenue
Reserve
£’000 |
Total
£’000 |
At 1 July 2016 |
2,387 |
175,367 |
58,485 |
503 |
236,742 |
|
|
|
|
|
|
Profit for the period |
- |
- |
- |
1,185 |
1,185 |
Dividends paid |
- |
- |
- |
(5,968) |
(5,968) |
Transfer in respect of losses on
investment properties |
- |
- |
(5,034) |
5,034 |
- |
|
|
|
|
|
|
At 31 December 2016 |
2,387 |
175,367 |
53,451 |
754 |
231,959 |
For the year ended 30 June
2017
|
Share Capital
£’000 |
Special
Distributable
Reserve
£’000 |
Capital
Reserve
£’000 |
Revenue
Reserve
£’000 |
Total
£’000 |
At 1 July 2016 |
2,387 |
175,367 |
58,485 |
503 |
236,742 |
|
|
|
|
|
|
Profit for the year |
- |
- |
- |
14,101 |
14,101 |
Issue of ordinary
shares |
20 |
1,965 |
- |
- |
1,985 |
Dividends paid |
- |
- |
- |
(11,986) |
(11,986) |
Transfer in respect of gains on
investment properties |
- |
- |
2,789 |
(2,789) |
- |
Transfer to revenue reserve |
- |
(171) |
- |
171 |
- |
|
|
|
|
|
|
At 30 June 2017 |
2,407 |
177,161 |
61,274 |
- |
240,842 |
F&C UK Real Estate Investments Limited
Condensed Consolidated Statement of Cash Flows
|
Notes |
Six months
to
31 December
2017
(unaudited) |
Six months
to
31 December
2016
(unaudited) |
Year to
30 June
2017
(audited) |
|
|
|
|
|
|
|
£’000 |
£’000 |
£’000 |
|
|
|
|
|
Cash flows from operating
activities |
|
|
|
|
Net profit for the period before
taxation |
|
17,826 |
1,340 |
14,407 |
Adjustments for: |
|
|
|
|
(Gains)/losses on sale of investment
properties
realised |
6 |
(20) |
207 |
(781) |
Unrealised (gains)/losses on revaluation
of
investment properties |
6 |
(7,711) |
4,827 |
(2,008) |
Decrease in operating trade and other
receivables |
|
14 |
639 |
1,829 |
Increase/(decrease) in operating trade and
other
payables |
|
3 |
594 |
(497) |
Interest
received |
|
(1) |
(2) |
(4) |
Finance
costs |
|
1,766 |
1,824 |
3,598 |
|
|
11,877 |
9,429 |
16,544 |
|
|
|
|
|
Taxation
paid |
|
(306) |
- |
(284) |
Net cash inflow
from operating activities |
|
11,571 |
9,429 |
16,260 |
|
|
|
|
|
Cash flows from investing
activities |
|
|
|
|
Purchase of investment
properties |
|
(10,191) |
- |
(450) |
Capital
expenditure |
6 |
(986) |
(228) |
(1,257) |
Sale of investment properties
|
6 |
3,293 |
2,547 |
7,460 |
Interest received |
|
1 |
2 |
4 |
|
|
|
|
|
Net cash (outflow)/inflow from
investing activities |
|
(7,883) |
2,321 |
5,757 |
|
|
|
|
|
Cash flows from financing
activities |
|
|
|
|
Shares issued (net of costs) |
|
- |
- |
1,985 |
Dividends
paid |
4 |
(6,018) |
(5,968) |
(11,986) |
Bank loan interest paid |
|
(1,657) |
(1,713) |
(3,382) |
Bank loan repaid, net of costs –
Barclays |
|
(3,000) |
(4,000) |
(4,000) |
|
|
|
|
|
Net cash outflow from financing
activities |
|
(10,675) |
(11,681) |
(17,383) |
|
|
|
|
|
Net (decrease)/increase in cash
and cash equivalents |
|
(6,987) |
69 |
4,634 |
Opening cash and cash
equivalents |
|
16,565 |
11,931 |
11,931 |
Closing cash and cash
equivalents |
|
9,578 |
12,000 |
16,565 |
F&C UK Real Estate Investments Limited
Notes to the
Condensed Financial Statements
for the six months to 31 December
2017
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 2017. 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 2017
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 2017.
In the previously issued interim financial statements of the
Company for the period ended 31 December
2016, lease incentives of £5,005,000 and cash deposits held
for tenants of £756,000 were classified as current assets. In
the comparative figures of the current year financial statements,
£4,047,000 for lease incentives and £712,000 for tenant deposits
have been reclassified to non-current assets. The Directors
have considered the impact on the previously issued financial
statements of the Company and have noted that no adjustment is
required to the previously reported total assets, liabilities or
equity of the Company. On this basis, the Directors do not
consider the above reclassification between current and non-current
assets to be material to the users of the financial statements.
2. Other income
The Company received £4,375,000 for the surrender at a leasehold
interest at Northfields Retail Park, Rotherham. The Company
entered into a lease arrangement at this property with a new tenant
and it is now fully let.
3. Other expenses
|
Six months to
31 December
2017
£’000 |
Six months to
31 December
2016
£’000 |
Year to 30
June 2017
£’000 |
|
|
|
|
Direct operating expenses of let
rental property |
457 |
429 |
825 |
Direct operating expenses of vacant
property |
(7) |
153 |
107 |
Provision for bad debts |
3 |
60 |
194 |
Administrative fee |
52 |
52 |
102 |
Valuation and other professional
fees |
114 |
92 |
265 |
Directors’ fees |
77 |
72 |
144 |
Other expenses |
170 |
222 |
329 |
|
|
|
|
|
866 |
1,080 |
1,966 |
|
|
|
|
|
|
|
|
|
|
|
4. Dividends
|
Six
months to
31 December 2017 |
Six
months to
31 December 2016 |
Year
ended
30 June 2017 |
|
£’000 |
Rate (pence) |
£’000 |
Rate (pence) |
£’000 |
Rate (pence) |
Property Income
Distributions: |
|
|
|
|
|
|
Fourth interim for the prior
year |
3,009 |
1.25 |
2,984 |
1.25 |
2,984 |
1.25 |
First interim |
3,009 |
1.25 |
2,984 |
1.25 |
2,984 |
1.25 |
Second interim |
|
|
|
|
3,009 |
1.25 |
Third interim |
|
|
|
|
3,009 |
1.25 |
|
6,018 |
2.50 |
5,968 |
2.50 |
11,986 |
5.00 |
A second interim dividend for the year to 30 June 2018, of 1.25
pence per share, will be paid on 29
March 2018 to shareholders on the register at close of
business on 9 March 2018.
5. 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 2016:
238,705,539 and 30 June 2017:
239,568,005). Earnings for the six months to 31 December 2017 should not be taken as a guide
to the results for the year to 30 June
2018.
6. Investment
properties
|
|
Six months
to
31 December
2017
£’000 |
Six months
to
31 December
2016
£’000 |
Year to 30
June 2017
£’000 |
Freehold and
leasehold properties
Opening market value |
|
335,350 |
339,150 |
339,150 |
Purchase of investment
properties |
|
10,191 |
- |
450 |
Capital expenditure |
|
986 |
228 |
1,257 |
Sales -
net proceeds
-
gains/(losses) on sales |
|
(3,293)
900 |
(2,547)
(3,387) |
(7,460)
(2,404) |
Unrealised (gains)/losses realised
during the period |
|
(880) |
3,180 |
3,185 |
Unrealised gains on
investment properties
Unrealised losses on investment properties |
|
12,013
(4,302) |
5,263
(10,090) |
13,344
(11,336) |
Movement in lease incentive
receivable |
|
(235) |
(347) |
(836) |
Closing market value |
|
350,730 |
331,450 |
335,350 |
Adjustment for lease incentives |
|
(4,281) |
(5,005) |
(4,516) |
Balance sheet carrying
value |
|
346,449 |
326,445 |
330,834 |
|
|
|
|
|
All the Group’s investment properties were valued as at
31 December 2017 by qualified
professional valuers working in the company of Cushman &
Wakefield, Chartered Surveyors. 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
2017. The market value of these investment properties
amounted to £350,730,000 (31 December
2016: £331,450,000; 30 June
2017: £335,350,000), however an adjustment has been made for
lease incentives of £4,281,000 that are already accounted for as an
asset (31 December 2016: £5,005,000;
30 June 2017: £4,516,000).
7. 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 £3 million of the
revolving credit facility to Barclays.
At 31 December 2017 borrowings of
£103 million were drawn down. The balance sheet value is
stated at an amortised cost of £102,170,000 (31 December 2016: £104,956,000 and 30 June 2017: £105,061,000). 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 8.
8. 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 instrument.
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
2017.
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
2017
£’000 |
31 December
2016
£’000 |
30 June
2017
£’000 |
£90 million Canada Life Loan
2026* |
(97,334) |
(97,872) |
(97,695) |
|
|
|
|
|
|
|
|
|
|
*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 2017.
9. Share
capital |
£’000 |
Allotted, called-up and fully
240,705,539 Ordinary Shares of 1p each in issue
at 31 December 2017 |
2,407 |
The Company issued nil Ordinary Shares during the period.
10. Net asset value per
share
The net asset value per Ordinary Share is based on net assets of
£252,503,000 (31 December 2016:
£231,959,000 and 30 June 2017:
£240,842,000) and 240,705,539 Ordinary Shares (31 December 2016: 238,705,539 and 30 June 2017: 240,705,539) being the number of
shares in issue at the period end.
11. 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.
12. 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.
13. 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.
14. 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.
15. Subsequent events
There are no material subsequent events that need to be
disclosed.
16. The report and accounts for the half-year
ended 31 December 2017 are available
on the websites www.fcre.co.uk and www.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, 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 2017. 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’ Responsibility 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
23 February 2018
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
2017
£’000 |
Six months to 31
December
2016
£’000 |
Year to 30
June
2017
£’000 |
|
|
|
|
Profit for the year |
17,679 |
1,185 |
14,101 |
Add back: Realised
(gains)/losses
Unrealised (gains)/losses |
(20)
(7,711) |
207
4,827 |
(781)
(2,008) |
Other income |
(4,375) |
- |
- |
Profit before investment gains
and losses |
5,573 |
6,219 |
11,312 |
Dividends |
6,018 |
5,968 |
11,986 |
Dividend Cover
percentage |
92.6 |
104.2 |
94.4 |
Dividend Yield – The annualised dividend divided by
the share price at the period end.
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.