Invesco Property Income Trust Limited

Transcription

1 Invesco Property Income Trust Limited Half-Yearly Financial Report for the Six Months to 30 September 2009 KEY FACTS Invesco Property Income Trust Limited ( the Company ) is a closed-ended investment company with limited liability incorporated in Jersey. The Company s ordinary shares are listed on the London and the Channel Islands Stock Exchanges. Objective of the Company The investment objective of the Company is to provide shareholders with an attractive level of income together with the prospect of income and capital growth through investing in commercial properties in the European Union. As noted in the 2009 annual financial report s Chairman s Statement, the Company is unlikely to pay any dividends for the foreseeable future. Full details of the Company s Investment Policy (incorporating the Company s investment objective) can be found on page 14 and 15 of the 2009 annual financial report. Investment Manager Invesco Asset Management Limited acts as Investment Manager to the Company. Gearing and Hedging It is the stated intention of the Directors that borrowings will in the medium to longer term be limited to a maximum of 55% of gross assets, although declines in asset values have led to the borrowing ratio rising well above this level. The Company hedges the majority of its interest rate and currency exposure through the use of interest rate and currency swaps respectively. Foreign currency exposure is managed by matching investment in euro denominated assets with borrowings in euro or by cross currency swaps. Share Capital The Company s share capital consists of 153,000,000 ordinary shares of no par value. Financial Highlights AT AT 30 SEPTEMBER 31 MARCH % CHANGE Assets Net assets (32.3)m (21.1)m 53 Adjusted net assets (1) (10.3)m 2.4m 529 Net asset value per share (per accounts) (21.1)p (13.8)p 53 Adjusted net asset value per share (1) (6.7)p 1.6p 519 Ordinary mid-market share price 7.4p 1.9p +289 Gearing based on: gross assets (2) 97.7% 91.9% net assets n/a n/a Note: (1) The difference between the Accounts Net Asset Value per share and the Adjusted Net Asset Value per share arises from the treatment of derivatives, goodwill and tax charges in the published accounts as explained in Note 5. (2) Gearing represents the LTV ratio under the Company s banking arrangements (excluding applicable cash balances). INTERIM MANAGEMENT REPORT INCORPORATING THE CHAIRMAN S STATEMENT Chairman s Statement The six months under review have seen further falls in the Company s net asset value, predominately as a result of declines in the value of the property portfolio. The NAV for the Company is negative, and Company s LTV ratio remains well in excess of the maximum permitted under its current banking agreement. Longer term value for shareholders therefore depends critically on securing financing which will allow investors to participate in a recovery. The worst of the economic recession and the bear market in property assets may be behind us but the pace and timing of a recovery remain uncertain. In the context of this background it is a relief to report an increase in the value of the Company s UK property portfolio over the second quarter, led by the Company s industrial portfolio, our largest sector exposure, albeit that this increase only partially offsets the decline in the first quarter. The Board is also pleased to report the sale, following the period end, of Finsgate House, a central London office property, for a price in excess of the 30 September 2009 valuation. Performance For the half year the portfolio returned a fall in capital value of 6.7%, with the UK portfolio down 7.0% and the European portfolio down 5.2% measured in Euros. As previously announced, the half year decline masks improving valuation performance over the second quarter, in which the UK portfolio improved in value by 0.3%, and the European portfolio decline slowed from 3.9% in the first quarter to a decline of only 1.3%. The adjusted net asset value per share (excluding goodwill, deferred tax and the value of interest rate hedges) fell from 1.6p to 6.7p, with the IFRS net asset value per share decreasing from 13.8p to 21.1p. The share price improved from 1.9p at the year end to 7.4p at 30 September The Company s revenue performance remains solid. Revenue earnings per share were 3.5p compared with 1.7p for the period ended 30 September 2008 and 3.7p for the year ended 31 March Financing The Company s borrowings at 30 September 2009 were million and q140.2 million, unchanged over the period. Since the period end 14.3 million of sterling debt has been repaid from the proceeds of sale of Finsgate House and cash resources. Following this sale and debt repayment, the pro forma LTV ratio was 95.8% compared with 91.9% at 31 March. At this level the Company is not in compliance with the LTV covenant under its banking agreement. The interest cover ratio was 153.4%, ahead of the minimum 145% under the Company s banking covenant. The Company continues in constructive discussions with its lending bank towards securing a financing package. The Board s primary concern remains to protect shareholders interests to allow them the opportunity to share in any market recovery. There can, however, be no guarantee that discussions will lead to a positive outcome. Property Activity The most notable event for the portfolio occurred after the period end with the sale of Finsgate House, London EC1. The price agreed was million, 6% ahead of the 30 September 2009 valuation and 16% ahead of the value as at 30 June 2009.

2 This disposal reflects the Managers ongoing strategy to seek asset disposals on a selective basis. The improving market sentiment, coupled with renewed investor appetite has the potential to unlock opportunities where a disposal can be agreed and where proceeds exceed the value of the asset to the Company. Further disposals will be considered when the transaction would be accretive to cash flow and earnings, for example where there are ongoing vacancies or significant short term capital expenditure liabilities. Asset management across the portfolio continues to prove fruitful, with 3 lease renewals/restructurings concluded over the period, maintaining 0.3 million rental income within the UK portfolio. There were four properties within the European portfolio which benefited from lease indexation, adding q1.1 million per annum to rental income. The vacancy rate at the period end was 7.8%, with the UK portfolio at 12.4%, and the European portfolio at 3.5%. Ongoing negotiations continue with a number of potential new tenants for new leases, reflecting the relative strength of the local occupier markets, particularly for the more cost effective accommodation offered by the Company s portfolio. Outlook Whilst welcoming the better news on both the property valuations and the income performance, which together with positive returns from IPD indices reflects an improvement in investor sentiment towards commercial property, the Board recognises that the economic outlook remains uncertain. The recent emergence of both the French and German economies from their very sharp recessions, along with an expectation that the UK will follow suit by the end of 2009, is helping to underpin wider market confidence. Many asset classes have responded over the third quarter of 2009 with stabilising, and in many cases improving, asset prices. The European real estate markets have followed this pattern, having been led by a return in investor demand for the best quality (lowest risk) assets located in major cities in the UK, France and Germany. Improving demand, coupled with the relative scarcity of investment opportunities is leading to some increase in interest levels from investors in higher risk properties. This gradual widening of investor demand has fed through to the Company s portfolio valuations as at 30 September The increased demand for investment property, while accompanied by improving sentiment, masks continuing concerns that the market fundamentals are not yet fully supporting asset valuations. A return to positive GDP growth, while encouraging, must be considered against the depth of the preceding recession. It is likely to take many months for the respective economies to resolve all of the legacies of recession, and as a result any recovery is also likely to be a gradual process, with unemployment a continuing concern, placing an ongoing pressure on occupancy rates and rental income. Related Parties Invesco Asset Management Limited ( IAML ), a wholly owned subsidiary of Invesco Limited, acts as Investment Manager to the Company. Details of IAML s services and fees arrangements are given in the latest annual financial report, which is available on the Company s website. Principal Risks and Uncertainties The principal risks and uncertainties that could affect the Company s business can be divided into the following various areas: Investment Objective and Policy; Ordinary Shares and Dividends; Gearing; Interest and Currency Risks; Market Movements and Portfolio Performance; and Regulatory. A detailed explanation of these principal risks and uncertainties can be found on pages 18 to 20 of the 2009 annual financial report, which is available on the Company s website. In the view of the Board, these principal risks and uncertainties are equally applicable to the remaining six months of the financial year as they were to the six months under review. DIRECTORS RESPONSIBILITY STATEMENT In respect of the preparation of the half-yearly financial report The Directors are responsible for preparing the half-yearly financial report using accounting policies consistent with applicable law and International Financial Reporting Standards. The Directors confirm that to the best of their knowledge: the condensed set of financial statements contained within the half-yearly financial report have been prepared in accordance with International Accounting Standards 34 Interim Financial Reporting ; the interim management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R of the FSA s Disclosure and Transparency Rules; and the interim management report includes a fair review of the information required on related party transactions. The half-yearly financial report has not been audited or reviewed by the Company s auditors. Signed on behalf of the Board of Directors. Richard Barnes Chairman 30 November 2009 Richard Barnes Chairman 30 November

3 INVESTMENT PROPERTIES AS AT 30 SEPTEMBER 2009 VALUE % OF PROPERTY COUNTRY 000 PORTFOLIO Le Directoire, St Cloud France 39, St Michel Sur Orge, Ile de France France 21, Schickardstraße 30, Böblingen Germany 19, Le Diapason, Paris France 17, Colonel Bourg, Brussels Belgium 14, Finsgate House, London EC1 UK 9, Old Jewry, London EC2 UK 9, Priory Business Park, Bedford UK 9, Sant Esteve Sesrovires, Barcelona Spain 9, Le Verdun, Gentilly France 8, Total of top ten investment properties 158, Other properties: 95, LEASE EXPIRY PROFILE 30 SEPTEMBER MARCH 2009 ANNUAL % OF ANNUAL % OF INCOME ANNUAL INCOME ANNUAL 000 INCOME 000 INCOME 0-3 yrs 10, , yrs 11, , yrs 1, , yrs 1, yrs Current annual income from properties 25, , Annual income is derived from leases in place at 30 September 2009 and so will differ from total annual income received by the Group. Total market value of properties (29 properties) 253, Investment properties are analysed after deduction of obligations under finance leases of 6.4 million. SECTOR WEIGHTINGS OF PORTFOLIO BY GEOGRAPHIC AREA AS AT 30 SEPTEMBER 2009 % OF PORTFOLIO SECTOR TOTAL UK FRANCE BELGIUM SPAIN GERMANY Industrial Offices Retail Total AS AT 31 MARCH 2009 % OF PORTFOLIO SECTOR TOTAL UK FRANCE BELGIUM SPAIN GERMANY Industrial Offices Retail Total LOCATION OF THE PROPERTY PORTFOLIO Excellent geographic diversification Figures shown as a % of the property portfolio as at 30 September 2009 (31 March 2009 figures in brackets) UK 43.4% (43.5%) North West 0.8% (0.6%) Yorks & Humberside 2.7% (2.4%) West Midlands 0.4% (0.8%) East Midlands 5.0% (4.8%) BELGIUM 8.5% (8.5%) GREAT GERMANY BELGIUM 7.6% LUXEMBURG (6.4%) FRANCE FRANCE 36.9% (37.4%) East 6.9% (10.0%) London 7.8% (7.7%) South East 15.3% (13.0%) South West 4.5% (4.2%) SPAIN 3.6% SPAIN (4.3%) 3

4 CONDENSED STATEMENT OF COMPREHENSIVE INCOME SIX MONTHS TO SIX MONTHS TO YEAR ENDED 30 SEPTEMBER SEPTEMBER MARCH 2009 (UNAUDITED) (UNAUDITED) (AUDITED) REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL TOTAL Income Rental and service charge income 15,557 15,557 15,770 15,770 30,715 Interest receivable and other income 2,110 2, Realised gains on swaps 3,030 3,030 3,030 Unrealised losses on swaps (5,595) Losses on investment properties Unrealised losses on revaluation of properties (17,204) (17,204) (35,639) (35,639) (94,432) Realised losses on disposal of properties (11,587) (11,587) (11,763) 17,667 (17,204) ,093 (44,196) (28,103) (77,400) Expenses Management fees (470) (64) (534) (825) (112) (937) (1,640) Property expenses (4,675) (4,675) (3,724) (3,724) (6,393) Professional fees (930) (930) (1,673) (1,673) (3,040) Goodwill impairment (2,301) (2,301) (2,431) (2,431) (5,797) (6,075) (2,365) (8,440) (6,222) (2,543) (8,765) (16,870) Profit/(loss) before finance costs and tax 11,592 (19,569) (7,977) 9,871 (46,739) (36,868) (94,270) Finance costs (6,441) (878) (7,319) (6,930) (945) (7,875) (17,066) Profit/(loss) before tax 5,151 (20,447) (15,296) 2,941 (47,684) (44,743) (111,366) Tax credit/(charge) 237 2,203 2,440 (275) 3,541 3,266 8,697 Profit/(loss) for the period attributable to equity shareholders 5,388 (18,244) (12,856) 2,666 (44,143) (41,477) (102,639) Loss per ordinary share basic and diluted (8.4)p (27.1)p (67.1)p The total column of this statement represents the Group s consolidated income statement. The supplementary revenue and capital columns are presented in accordance with the Statement of Recommended Practice issued by the Association of Investment Companies. All items in the above statement are derived from continuing operations. No operations were discontinued in the period. CONDENSED CONSOLIDATED BALANCE SHEET AT AT AT 30 SEPTEMBER 30 SEPTEMBER 31 MARCH (UNAUDITED) (UNAUDITED) (AUDITED) Non-current assets Investment properties 259, , ,965 Intangible assets goodwill 6,521 8,861 9, , , ,092 Current assets Trade and other receivables 5,725 3,421 4,242 Cash and cash equivalents 13,130 11,606 10,074 18,855 15,027 14,316 Total assets 285, , ,408 Current liabilities Trade and other payables (16,788) (15,121) (15,506) Taxation (525) (60) Bank loan (247,410) (249,189) Total assets less current liabilities 20, ,334 36,653 Non-current liabilities Bank loan (228,604) Other payables (2,090) (1,935) (2,010) Interest rate swaps liability (15,517) (325) (17,010) Currency swaps liability (16,083) (5,884) (16,691) Obligations under finance lease (6,431) (6,435) (6,431) Deferred taxation (13,042) (17,885) (15,561) (53,163) (261,068) (57,703) Net assets (32,288) 57,266 (21,050) Capital and reserves Stated capital 101, , ,368 Other reserve (15,517) (325) (17,010) Translation reserve 1,677 2,021 1,552 Capital reserves (169,299) (86,876) (151,055) Revenue reserve 49,483 41,078 44,095 Issued capital and reserves (32,288) 57,266 (21,050) CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW SIX MONTHS SIX MONTHS ENDED ENDED YEAR ENDED 30 SEPTEMBER 30 SEPTEMBER 31 MARCH (UNAUDITED) (UNAUDITED) (AUDITED) Operating activities Rent and service charges received 17,819 15,522 29,457 Bank interest received Proceeds on swap disposal 3,030 3,030 Bank loan interest paid (7,319) (7,749) (15,185) Operating expense payments (6,277) (5,771) (9,097) Tax received/(paid) 32 (20) (79) Net cash inflow from operating activities 4,263 5,205 8,393 Investing activities Investment in group undertakings (468) (1,024) Purchase of investment properties (1,391) (1,370) (4,114) Sale of investment properties 71,310 71,310 Net cash (outflow)/inflow from investing activities (1,391) 69,472 66,172 Financing activities Loan facility fee (1,250) (1,250) Repayment of loan (69,000) (69,000) Dividends paid (5,164) (5,164) Net cash (outflow)/inflow from financing activities (75,414) (75,414) Change in cash and cash equivalents 2,872 (737) (849) Cash and cash equivalents at beginning of period 10,074 11,908 11,908 Effect of foreign exchange changes (985) Cash and cash equivalents at end of period 13,130 11,606 10,074 Net asset value note 5 (21.1)p 37.4p (13.8)p 4

5 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY STATED OTHER TRANSLATION CAPITAL REVENUE CAPITAL RESERVE RESERVE RESERVE RESERVE TOTAL Six months ended 30 September 2009 (Unaudited) Balance at 31 March ,368 (17,010) 1,552 (151,055) 44,095 (21,050) (Loss)/profit for the period (18,244) 5,388 (12,856) Unrealised gain on revaluation of cross currency swaps Exchange differences on translating foreign operations (482) (482) Unrealised gain on revaluation of interest rate swaps 1,493 1,493 Balance at 30 September ,368 (15,517) 1,677 (169,299) 49,483 (32,288) Six months ended 30 September 2008 (Unaudited) Balance at 31 March ,368 (2,093) 1,336 (42,733) 43, ,454 (Loss)/profit for the period (44,143) 2,666 (41,477) Unrealised gain on revaluation of cross currency swaps Exchange differences on translating foreign operations Unrealised gain on revaluation of interest rate swaps 1,768 1,768 Dividends paid (5,164) (5,164) Balance at 30 September ,368 (325) 2,021 (86,876) 41,078 57,266 Year ended 31 March 2009 (Audited) Balance at 31 March ,368 (2,093) 1,336 (42,733) 43, ,454 (Loss)/profit for the period (108,322) 5,683 (102,639) Unrealised loss on revaluation of cross currency swaps (4,695) (4,695) Exchange differences on translating foreign operations 4,911 4,911 Unrealised loss on revaluation of interest rate swaps (15,780) (15,780) Transfer to income realised gains on interest swaps Dividends paid (5,164) (5,164) Balance at 31 March ,368 (17,010) 1,552 (151,055) 44,095 (21,050) NOTES TO THE CONDENSED FINANCIAL STATEMENTS 1. Accounting Policies (a) Accounting Standards and Policies The condensed financial statements of the Group have been prepared using the same accounting policies as those adopted in the 2009 annual financial report, which are consistent with International Financial Reporting Standards ( IFRS ), and Standing Interpretation Committee and International Financial Reporting Interpretation Committee interpretations issued by International Accounting Standards Board to the extent adopted by the EU. (b) Changes to Presentation IAS1 Presentation of Financial Statements affects the presentation of IFRS financial statements and is effective for periods beginning on or after 1 January As a result, the income statement has been redesignated as the statement of comprehensive income. There is no effect on either the net assets or earnings of the Group or Company. 2. Taxation The Company was granted exempt company status under Article 123A of the Income Tax (Jersey) Law 1961 for the 2008 year of assessment. In order to hold exempt status an annual fee of 600 was payable. The fee was included as an expense in the income statement as it was not dependant on the Company s results. Exempt company status has been abolished and a general zero rate of Jersey corporate income tax introduced as from 1 January 2009, and this rate applies to the current accounting period and all accounting periods ending on or after 1 January Basis of Returns The total, revenue and capital, basic and diluted earnings per ordinary share, are based on the applicable net returns for the period and on 153,000,000 ordinary shares being the amount of ordinary shares in issue in the period. financial information for the year ended 31 March 2009 are extracted and abridged from the latest published accounts and do not constitute the statutory accounts for that period. Those accounts included the Report of the Independent Auditors, which was unqualified. 5. Net Asset Value per Ordinary Share The NAV per ordinary share is based on 153,000,000 ordinary shares of no par value in issue at 30 September Reconciliation of accounts NAV per share to adjusted NAV: 30 SEPTEMBER 2009 PENCE PER SHARE 000 Accounts net asset value (21.1) (32,288) Adjustments: Accounting for derivatives on balance sheet ,517 Goodwill (4.3) (6,521) Tax charge: deferred tax ,042 Adjusted net asset value (6.7) (10,250) The adjusted NAV is per the European Public Real Estate Association ( EPRA ) measure, published in January The EPRA NAV per share excludes the fair value adjustments for debt and interest rate derivatives, deferred taxation on revaluations, capital allowances and goodwill. By order of the Board R & H Fund Services (Jersey) Limited Company Secretary 30 November Status of Half-Yearly Financial Report The financial information contained in this half-yearly financial report, which has not been audited or reviewed by the auditors, does not constitute statutory accounts as defined in Article 104 of Companies (Jersey) Law The financial information for the half years ended 30 September 2009 and 2008 has not been audited. The figures and 5

6 DIRECTORS, ADVISERS AND PRINCIPAL SERVICE PROVIDERS Directors Richard Barnes (Chairman) Douglas Gardner Susan McCabe Angus Spencer-Nairn Ian White All Directors are non-executive Administrator, Company Secretary and Registered Office R & H Fund Services (Jersey) Limited Ordnance House 31 Pier Road St. Helier Jersey JE4 8PW Investment Manager Invesco Asset Management Limited 30 Finsbury Square London EC2A 1AG Registrars Capita IRG (Offshore) Limited PO Box 378 St Helier Jersey JE4 0FF If you hold your shares directly and have queries relating to your shareholding, you should contact the Registrars on: between 8.30 am and 5.30 pm every working day Calls cost 10p per minute plus network extras. The Registrars provide sharedealing services for existing shareholders as follows: between 8.00 am and 4.30 pm every working day Calls cost 10p per minute plus network extras. Shareholders can also access their holding details via Capita s website: or Invesco Perpetual Customer Services Invesco Perpetual has a Customer Services Team available to assist you from 8.30 am to 6.30 pm every working day on: or visiting the website below. Website The Company s website can be found at Invesco Asset Management Limited 30 Finsbury Square London EC2A 1AG Invesco Asset Management Limited is a wholly owned subsidiary of Invesco Limited and is authorised and regulated by the Financial Services Authority Invesco Perpetual is a business name of Invesco Asset Management Limited Linkway L15768