TIDMBCPT
To: RNS
Date: 17 September 2019
From: BMO Commercial Property Trust Limited (formerly F&C
Commercial Property Trust Limited)
LEI: 213800A2B1H4ULF3K397
(Classified Regulated Information, under DTR 6 Annex 1 Section 1.2)
Interim Report for the Period ended 30 June 2019
Highlights
* Share price total return of -8.0 per cent for the six months*
* -0.4 per cent net asset value total return*
* Maintained annualised dividend at 6.0 pence per share giving a yield of 5.4
per cent on the period end share price*
* See Alternative Performance Measures
Chairman's Statement
Performance for the period
The first six months of 2019 has seen continued uncertainty surrounding
commercial property markets in the UK, with the trading environment for
retailers and the potential impact of Brexit causing particular concern. This
has been challenging for the listed real estate sector with many of the large
cap companies trading at significant discounts to their Net Asset Values
('NAV's). Against this backdrop, the Company's share price total return to
shareholders over the six-months to 30 June 2019 was -8.0 per cent. The share
price at the period-end was 111.8p, representing a discount of 18.0 per cent to
the NAV per share of 136.3p.
The NAV total return over the six months was -0.4 per cent. The following table
provides an analysis of the movement in the NAV per share for the period:
Pence
NAV per share as at 31 December 2018 139.8
Unrealised decrease in valuation of direct property (2.9)
portfolio
Other net revenue 2.4
Dividends paid (3.0)
NAV per share as at 30 June 2019 136.3
The total return from the underlying portfolio was 0.5 per cent, compared with
a total return of 0.9 per cent from the MSCI Quarterly Property Universe. The
Income return from the portfolio over the period was 2.1 per cent, offset by
negative capital returns of -1.7 per cent. Unsurprisingly the weakest sector in
the MSCI Quarterly Universe was retail with the strongest returns again coming
from industrials, driven by rental growth and further modest yield compression.
One of our priorities has been the selective disposal of assets which were felt
to have limited future growth prospects and we were delighted to complete the
sales of Thames Valley Park 1, Thames Valley Park 2 and Building A, Watchmoor
Park, Camberley during the period. We will look to recycle some of this capital
into a number of the advanced asset management opportunities the Manager is
currently working on and where we expect the outcomes will deliver sustainable,
long-term income and support future fund performance.
Another current priority is to replace the income lost or at risk at both
Newbury Retail Park in Newbury and Sears Retail Park in Solihull. We have
already completed a large letting to Lidl at Newbury for a 25-year lease with a
break option at year 20. Beyond this, there are significant ongoing
negotiations at both Parks and we hope to report on these at a later date.
St. Christopher's Place continues to enjoy strong occupier demand although this
popular West End estate has not been immune to the current challenges facing
the retail sector and we expect rental growth may be muted here in the
short-term.
Borrowings
The Group's available borrowings comprise a GBP260 million term loan with Legal &
General Pensions Limited, maturing on 31 December 2024 and a GBP50 million term
loan facility and an undrawn GBP50 million revolving credit facility, both with
Barclays and available until June 2021. The Group's net gearing was 20.4 per
cent at the end of the period and the weighted average interest rate on total
current borrowings is 3.3 per cent.
Dividends and Dividend Cover
Monthly interim dividends of 0.5p per share continued during the period,
maintaining the annual dividend of 6.0p per share paid since 2006 and providing
a dividend yield of 5.4 per cent based on the period-end share price. Barring
unforeseen circumstances, your Board intends that dividends will continue to be
paid monthly at the same rate.
The Company's level of dividend cover for the period was 81.7 per cent,
slightly higher than the equivalent period last year (79.2 per cent). There has
been a small fall in rental income compared with the same period last year due
to the sale of the property at Thames Valley Park 2 and to the loss of income
at Solihull and Newbury. This was more than compensated for by a fall in the
level of taxation payable and a reduction in expenses, where a one-off
surrender premium was paid in 2018.
REIT Conversion
Shareholders voted in favour of the REIT proposals at an extraordinary general
meeting held on 30 May 2019 and the Group entered the UK REIT regime on 3 June
2019. The adoption of REIT status by the Group will alter the shareholders' tax
positions in respect of the receipt of distributions under the REIT regime, as
the majority of the distributions from the Company will be property income
distributions. The first distribution that the Company will make under the REIT
regime will relate to profits earned from June 2019. The amount and payment
date of such property income distribution will be announced in October 2019.
Board Composition
Having served nine years on the Board, Chris Russell stepped down as Chairman
of the Company and retired from the Board at the annual general meeting on 30
May 2019. I became Chairman from that date and Paul Marcuse took on the role of
Senior Independent Director. Chris joined the Board in 2009 and became Chairman
in 2011. He excelled in this role and I would like to thank him for his
significant contribution and leadership over the years.
Following the approval of the REIT conversion proposals, Peter Cornell and
David Preston, both Guernsey directors, also stood down from the Board with
effect from 30 May 2019. I'd like to thank them too, at the same time welcoming
Linda Wilding. Linda is UK based and joined the Board on 3 June 2019.
Following these changes, the Board now consists of five Directors, three male
and two female, four of whom are based in the UK and one in Guernsey.
Outlook
The property market continues to deliver positive total return, but the pace
has slowed and investment activity has weakened. The market is likely to
encounter continued headwinds related to Brexit and its political and economic
ramifications. Slower economic growth and political uncertainties
internationally are also affecting sentiment. However, post Brexit, if there is
some easing in fiscal policy and interest rates are kept low, as the market
expects, then this should provide some support for property, particularly from
investors seeking a higher-yielding alternative to gilts.
Total returns are expected to be low single-digit and will be driven by income,
with well-specified and well-let assets in established locations likely to
out-perform.
Notwithstanding the short-term pressures in the retail sector, the Company has
a well-positioned and resilient portfolio with exciting opportunities across
many sectors to add value and deliver sustainable long-term rental income. Our
efforts continue to be focused on delivering these over the months ahead.
Martin Moore
Chairman
Performance Summary
Half year
ended 30 June
2019
Total Returns for the period *
Net asset value per share (0.4)%
Ordinary Share price (8.0)%
Portfolio 0.5%
MSCI UK Quarterly Property Universe 0.9%
FTSE All-Share Index 13.0%
Half year Year ended 31
ended 30 June December 2018 % change
2019
Capital Values
Total assets less current liabilities (GBP'000) 1,400,346 1,427,310 (1.9)
Net asset value per share 136.3p 139.8p (2.5)
Ordinary Share price 111.8p 124.6p (10.3)
FTSE All-Share Index 4,056.88 3,675.06 10.4
Discount to net asset value per share* (18.0)% (10.9)%
Net Gearing * 20.4% 21.2%
Half year Half year
ended 30 June ended 30 June
2019 2018
Earnings and Dividends
Earnings per Ordinary Share (0.4)p 5.0p
Dividends per Ordinary Share 3.0p 3.0p
Annualised dividend yield * 5.4% 4.0%
Sources: BMO Investment Business, MSCI Inc and Refinitiv Eikon
* See Alternative Performance Measures
Managers' Review
Property highlights over the period
* Six-month total return of 0.5 per cent versus the MSCI UK Quarterly
Property Universe ('MSCI') return of 0.9 per cent.
* Completed the sales of Thames Valley Park 1 & 2 and Watchmoor Park Building
A, as part of the strategic office sales programme.
* Signed new lease agreements to Lidl and Hobbycraft at Newbury Retail Park
and made good progress in attracting new retailers to both Newbury and
Solihull retail parks.
* Completed the lease to Shore Capital who took the 4th and 5th floors at
Cassini House, London SW1.
Property Market Review
The market total return for the six months to 30 June 2019, as measured by the
MSCI UK Quarterly Property Universe ('MSCI') was 0.9 per cent. Returns,
although positive, are moderating, with capital values falling by 1.3 per cent
and income returns of 2.2 per cent. Rental growth was -0.2 per cent at the
all-property level, although the fall was largely attributable to problems in
the retail market, where rents fell by 1.9 per cent.
Performance was led by a 3.4 per cent total return for industrials.
Alternatives (such as hotels and student accommodation) delivered 2.6 per cent,
with offices returning 2.1 per cent and retail the weakest sector at -2.4 per
cent.
Key Benchmark Metrics - All Property
Jan-June Jan-June
2019 2018
% %
Total Returns 0.9 3.7
Income Return 2.2 2.2
Capital Return (1.3) 1.5
Open Market Rental Value Growth (0.2) 0.5
Initial Yield 4.6 4.5
Equivalent Yield 5.5 5.5
Source: MSCI Inc
The UK economy saw modest growth over the period. Monetary policy and interest
rates were unchanged although gilt yields continued to fall, finishing the
period below 1.0 per cent. Investor sentiment was affected by growing political
uncertainty involving the lack of agreement in Brexit negotiations, which looks
set to continue as we enter the autumn. The weakening in global growth
prospects and the advance of protectionism globally are also areas of concern.
This uncertainty has caused a sharp drop in investment activity across all
sectors. Net investment from overseas buyers was still positive, demonstrating
the continued attraction of UK commercial real estate. Local authorities were
also net purchasers of property, whilst institutions were marginal net sellers
during the period, as were listed and unlisted property companies.
CBRE market data showed yields moving higher across most parts of the retail
market, with office and industrial yields broadly stable. There was some yield
compression in the alternatives space, notably for student accommodation, and
for properties secured on long leases with inflation linked uplifts, where
investor appetite remains strong. The all-property initial yield moved higher
during the period, leading to some widening in the yield gap between property
and ten-year gilts. Property, measured on this basis, looks fairly priced in
relation to the average margin over the longer-term.
The occupational market has been less affected, but not immune, to the
political and economic climate. Offices saw 0.5 per cent rental growth and
industrials 1.4 per cent in the six-month period. Occupier most affected appear
to be large multi-national corporates with pan-European presence who are
generally waiting until after Brexit before making any long-term strategic
decisions.
The structural problems and challenges in the retail sector have continued.
Although central London shops delivered a positive total return, performance
has slipped compared with the same period a year ago. Most other parts of the
retail market recorded a negative total return, with shopping centres and
retail warehousing being particularly weak. The central London office market
has remained resilient despite Brexit uncertainty, with higher than average
occupancy rates and continued rental growth. Overall, property performance was
driven by the strength in the industrials market with both distribution
warehousing and standard industrials outperforming the all-property average.
Valuation and Portfolio
Total Portfolio Performance
Year ended
30 June 31 December
2019 2018
No of properties 36 38
Valuation (GBP'000) 1,383,125 1,430,190
Average Lot Size (GBP'm) 38.4 37.6
Portfolio MSCI
Six months to 30 June 2019 (%) (%)
Portfolio Capital Return* (1.7) (1.3)
Portfolio Income Return* 2.1 2.2
Portfolio Total Return* 0.5 0.9
Source: BMO REP Asset Management plc, MSCI Inc
* See Alternative Performance Measures
The total return from the portfolio over the period was 0.5 per cent compared
with the MSCI return of 0.9 per cent. The Company's underperformance at
portfolio level over the period has been driven by valuation movements of the
two large retail warehouse parks, with the valuation of Newbury falling by 10.2
per cent and Solihull falling by 2.2 per cent. Despite the challenges faced in
the sector the portfolio's retail total return outperformed MSCI which was
helped by the fact that the Company doesn't hold any shopping centres which was
the weakest performing retail sub-sector.
The office portfolio also outperformed MSCI with a 2.3 per cent total return
versus 2.1 per cent, although industrials were lower at 1.3 per cent versus 3.4
per cent, predominantly owing to a relatively quiet period of asset management.
Geographical Analysis (% of total property portfolio)
30 June 2019
(%)
South East 21.6
London - West End 36.0
Eastern 2.2
Midlands 11.9
Scotland 12.6
North West 11.8
Rest of London 1.5
South West 2.4
Source: BMO REP Asset Management plc
Sector Analysis (% of total property portfolio)
30 June 2019
(%)
Offices 39.5
Retail 22.4
Retail Warehouses 10.6
Industrial 18.2
Alternative 9.3
Source: BMO REP Asset Management plc
Income Analysis
The portfolio continues to benefit from a resilient and secure income stream.
We have reduced the void rate to 5.0 per cent (31 December 2018: 8.5 per cent)
through a combination of asset management initiatives, such as the letting of
two floors at Cassini House, London and the sale of non-core assets which were
largely vacant. Other opportunities are in hand to reduce the void level
further.
Lease Expiry Profile
At 30 June 2019 the weighted average lease length for the portfolio, assuming
all break options are exercised, was 6.8 years
% of leases expiring (weighted by rental 30 June 2019 31 December 2018
value) (%) (%)
0 - 5 years 45.8 44.4
5 - 10 years 33.5 30.2
10 - 15 years 14.9 17.1
15 - 25 years 5.8 8.3
Source: BMO REP Asset Management plc
Covenant Strength (% of income by risk bands)
30 June 2019
(%)
Unscored and ineligible 6.0
Maximum 9.9
High 1.7
Medium to High 3.1
Low to Medium 2.0
Low 18.2
Negligible and Government 59.1
Source: IRIS Report, MSCI Inc
Retail
It has been a busy period for the Company with a number of significant retail
leases either completed or in negotiation. The challenges faced by UK retailers
have been well documented and the Company experienced a concentrated period of
defaults or Company Voluntary Arrangements (CVAs) on its two large retail parks
(Newbury and Solihull) during the middle part of 2018.
Newbury
We have recently completed an important letting on the retail park to Lidl, who
signed an agreement for a 25-year lease with CPI linked reviews (break at year
20) at a rent equating to GBP23.00 per square foot to occupy the majority of the
former Homebase unit. Landlord works have commenced, and Lidl are expected to
open for trade in early 2020. This follows the letting to Hobbycraft at Unit 8A
(GBP215,578 per annum for 10 years) replacing Poundworld, who went into
administration last year. We are also close to exchanging an agreement with
another large retailer to occupy part of the former Mothercare store. These
lettings demonstrate the resilience of the park and its attractiveness to
retailers and shoppers alike. There remain two small units to let at the park
and we hope to put these under offer shortly.
Solihull
We are now under offer to a major UK retailer to occupy the former Homebase
store and hope to exchange a conditional agreement for lease shortly. The store
was vacated in February 2019 and will require significant capital-investment in
return for a long lease commitment. The new store will be transformational for
the park and, like Newbury, demonstrates that quality assets can still attract
desirable retailers for whom physical real estate remains a key part of their
long-term sales strategy.
St Christopher's Place
We believe that the long-term future of physical retail lies in experience led
"destination" retailing, be that food and beverage (F&B) or traditional
retailing. This is core to the strategy for St Christopher's Place, which is
the principal F&B destination for the area around the Bond Street/Oxford Street
interchange.
Our asset management strategy for the mixed-use estate continues to deliver
income growth through refurbishment, selective re-lettings, and the enhancement
of the F&B offer on James Street. The residential element of the estate remains
well occupied and progress has been made in letting recently refurbished office
space, most notably to Leica Camera Ltd at 6-8 James Street on a 10-year lease.
We have recently exchanged a lease to steak restaurant Flat Iron at 42-44 James
Street, starting at GBP240,000 per annum on a 15-year lease. This follows the
lettings to Harry's Bar, Patty & Bun and Bone Daddies which have proved popular
since opening.
The estate remains a continuing source of asset management opportunity to
protect and enhance income.
There are five initiatives in progress or recently completed, with a further
six that could be pursued over the next 12-24 months; a number of these
requiring planning permission and redevelopment. We are carefully managing the
timing of projects to ensure they are delivered to market at the optimum time
to capture the most attractive lease terms possible. We are supportive of the
ongoing works being considered by the New West End Company to enhance the
pedestrian experience on and surrounding Oxford Street and are optimistic about
the benefits following the opening of the Bond Street Elizabeth Line station
(Crossrail), currently scheduled for late 2020 / early 2021.
Office
There has been progress and success with the strategic sales program to dispose
of non-income producing assets with challenging re-letting prospects. The
largest of these, Thames Valley Park One and Thames Valley Park Two, exchanged
in December 2018 and completed in January 2019 at a combined sale price of GBP
24.5 million. This sale alone removed 103,900 sq. ft. of vacant office space
from the portfolio, which would have required around GBP8 million of reinvestment
to undertake refurbishment. We prefer to focus capital expenditure on
opportunities that provide greater prospects of success for the Company. In
April, Building A, Watchmoor Park, Camberley, sold for a net price of GBP3.94
million following the sale of Building B last year.
In March, two more floors at the recently refurbished Cassini House, London SW1
were let. Shore Capital took the 4th and 5th floors at a headline rent of GBP105
per sq. ft. for 10 years (with a tenant break option at the end of year 5). The
letting was in line with the valuers estimated rental value (ERV) and has had
an accretive impact on valuation. There is a strong level of occupier interest
in the remaining un-let floor and this will complete the leasing program for
the asset.
We have signed two new tenants at Building C, Watchmoor Park in Camberley in
advance of Novartis vacating the building in 2020. The new rents achieved are
at a headline of GBP22.50 per sq. ft., reflecting a significant uplift from the
current passing rent of GBP14.00 per sq. ft. At Edinburgh Park, Diageo have now
taken possession of their new Scottish headquarters at Ness & Nevis House
following a significant GBP6.5m refurbishment by the Company. Diageo are
currently fitting out their offices and aim to start operating from the
building in November 2019 on a 16-year lease (break at year 10) at a rent of GBP
21.00 per square foot. Over the summer, we have also let two further floors at
7 Birchin Lane, EC3, where all office accommodation is now fully occupied at
the time of writing. The 5-yearly rent reviews of all properties at Prime Four
in Aberdeen have completed at 3 per cent per annum compounded.
Industrial & logistics
The Company's industrial portfolio is characterised by secure single-let
logistics assets. Owing to the stable nature of the income, no major lease
events occurred over the period.
Last year we acquired Hurricane 47, Estuary Business Park, Liverpool (a 47,500
sq. ft. logistics unit) for GBP3.995 million and are in advance discussions with
a number of potential occupiers at rents that exceed the original underwrite.
The purchase also included an adjoining 3.6-acre site for GBP1.080 million with
the Company entering into an agreement to fund a second warehouse for an
additional sum of GBP3.382 million. Works are likely to start on this in the
second half of 2019 with completion in 2020.
The industrial market continues to see solid rental growth for existing quality
assets and this was demonstrated by the recent rent review to Syncreon at 6A
Hams Hall, which we settled at GBP6.25 per sq. ft. reflecting a notable uplift
from the previous passing rent of GBP5.57 per sq. ft.
In July 2019, we successfully completed the sale of phase 1 of the former
Ozalid Works site in Colchester to Persimmon Homes which had been conditional
upon them securing a revised planning consent and agreeing the 'Section 106'
obligations. The sale of phase 2 will now complete in July 2020, exactly 12
months after the sale of phase 1, which is an excellent result for the Company,
allowing us to dispose of an obsolete light-industrial park for above
valuation. We can now focus our resources on the neighbouring Cowdray Centre
Trade Park, where we have recently submitted a planning application to
construct a new terrace of trade units.
Alternative property sector
Following the re-classification of sector weightings at the end of 2018 (as
highlighted in the 2018 Annual Report) the Company's weighting to alternatives
is c. 9 per cent. The Company's exposure relates to the purpose-built student
accommodation block in Winchester, the residential properties within St
Christopher's Place, and the leisure units at Wimbledon Broadway, which
comprise an Odeon Cinema and Nuffield Health gym. The student accommodation
block continues to perform well, driven by the annual RPI-linked rent reviews.
Outlook
Investment volumes have fallen by almost 50 per cent in the first half of 2019
compared to the same period last year, following the uncertainty that crept in
at the end of 2018. The second half of 2019 looks set to be dominated by the
potential economic and political ramifications surrounding Brexit as well as
the nervousness around retail assets. Retail values have fallen steadily over
the past three quarters, and we expect this to continue throughout 2019 and
2020 as rents are rebased, yields find their new longer-term discounts and
occupier woes continue for many. The rise of the CVA has had a lasting effect
on the risk adjusted returns required from retail assets and unless the
Insolvency Act revises how CVA's can be applied this is unlikely to change.
Therefore, the importance of quality core assets cannot be underestimated.
Despite the drop off in activity, values in all sectors except for retail have
held up relatively well, particularly at the prime end of the market. Yields
for secondary and tertiary assets have moved out marginally after the highly
bullish market of early 2018.
There may be a 'bounce' in investment and letting activity following Brexit,
but values are likely to remain high compared to long-term levels and we
consider it unlikely for pricing to increase significantly. Lending remains
constrained the expected pressure on commercial property yields from future
increases in interest rates is likely to curtail any medium-term capital
growth.
UK commercial real estate is expected to produce positive returns, but the
performance will remain muted in the short to medium term compared to long-term
values and retail will be a notable drag. Despite this, UK commercial property
will likely continue to offer an attractive level of income and the
opportunities offered by demographic and technological change will increase in
significance as the economy adapts to the post-Brexit world.
The Company continues to look at quality assets in the industrial, alternative
and regional office sectors and remains focused on long-term value creation but
will remain highly selective until we see better value in the market. The
current uncertain economic and political climate serves to reinforce the
Manager's strategy of investing resource and capital into the existing assets;
to protect, enhance and sustain income for the longer term. We have enjoyed
recent successes with many more opportunities to pursue over the coming months.
Richard Kirby and Matthew Howard
Fund Managers
BMO REP Asset Management plc
Responsible Property Investment
Highlights for the period to 30 June 2019
The Company has continued to advance the implementation of its Responsible
Property Investment ('RPI') Strategy over the period with material progress
being made in a number of key areas.
* Achieved an overall score of 68 in the 2019 GRESB (Global Real Estate
Sustainability Benchmark) survey, the 21-point improvement representing a
44.7% increase over the previous year's count and enabling the Company to
obtain two green star status.
* Compared with the six-month period to 30 June 2018, the Company has
realised:
+ a 0.4% reduction in like-for-like energy consumption
+ a 14.7% reduction in absolute energy consumption
+ a 5.7% like-for-like reduction in carbon emissions
+ a 20% absolute reduction in carbon emissions
+ a 6kWhe/m2 reduction in energy intensity
+ a 1% reduction in like-for-like water consumption
+ an 11% reduction in absolute water consumption
+ a 0.04m3/m2 reduction in water intensity
* Launched a major exercise to assess the exposure of the portfolio to
physical climate risks through scenario-based analysis.
* The Company attained an A rating in the GRESB Public Disclosure assessment
representing the highest level of transparency for disclosure of ESG
related information.
* Following submission to the minimum tier of the CDP climate change module
in 2018, the Company submitted to the full tier in 2019 and expects to
receive a rating by the end of this calendar year.
A considerable degree of reduction in absolute energy consumption and
associated carbon emissions has been realised through the disposal of several
property assets. In contrast, the reduction in like-for-like energy consumption
has been tempered by increased demand driven by key property refurbishments
undertaken by the Company, as well as increased demands on landlord central
services from occupiers scaling up operations following occupation. Against a
2016 baseline the reduction in like-for-like energy intensity currently equates
to 14%. The Company's Property Manager continues its efforts to identify and
implement further energy efficiency opportunities across its directly managed
properties. Water consumption reduction and the collection and finessing of
waste data remain on target.
The distribution of Energy Performance Certificate (EPC) ratings remains
broadly unchanged across the portfolio taking certificate expiry and renewal
into account. The number of 'C' rated demises has fallen due to property sales.
Using the desktop flood risk assessments undertaken in 2018, the overall flood
risk profile of the portfolio has marginally improved on account of property
disposals.
The Company continues to monitor its tenant mix as part of its commitment to
minimising leasing exposure to organisations connected to the production,
storage, distribution or use of Controversial Weapons*. At the period ending 30
June 2019 zero per cent of rental income was attributable to organisations that
appear on the exclusion lists managed by BMO Global Asset Management.
* Including cluster munitions, anti-personnel mines and biochemical weapons as
covered by the 1972 Biological and Toxic Weapons Convention, the 1997 Chemical
Weapons Convention, the 1999 Anti-Personnel Mine Ban Convention, and the 2008
Convention on Cluster Munitions
BMO Commercial Property Trust Limited
Condensed Consolidated Statement of Comprehensive Income (unaudited)
for the six months to 30 June 2019
Notes Six months Six months Year to
to 30 June to 30 June 31 December
2019 2018 2018*
GBP'000 GBP'000 GBP'000
Revenue
Rental income 31,938 32,638 64,903
Other income - - 1,483
Total revenue 31,938 32,638 66,386
Gains / (losses) on investments properties
Unrealised (losses)/gains on revaluation of 5 (22,593) 20,971 (6,171)
investment properties
(Loss)/gain on sale of investment properties 5 (316) - 2,613
realised
Total income 9,029 53,609 62,828
Expenditure
Investment management fee (3,716) (3,876) (7,823)
Other expenses 3 (3,214) (3,461) (6,191)
Total expenditure (6,930) (7,337) (14,014)
Operating profit before finance costs and taxation 2,099 46,272 48,814
Net finance costs
Interest receivable 1 6 6
Finance costs (5,445) (5,450) (10,912)
(5,444) (5,444) (10,906)
(Loss) / profit before taxation (3,345) 40,828 37,908
Taxation 17 (871) (1,510)
(Loss) / profit for the period (3,328) 39,957 36,398
Other comprehensive income
Items that are or may be reclassified subsequently
to profit
or loss
Movement in fair value of effective interest rate (350) 315 362
swap
Total comprehensive income for the period (3,678) 40,272 36,760
Basic and diluted earnings per share 4 (0.4)p 5.0p 4.6p
All of the profit and total comprehensive income for the period is attributable
to the owners of the Group.
All items in the above statement derive from continuing operations.
* These figures are audited.
BMO Commercial Property Trust Limited
Condensed Consolidated Balance Sheet (unaudited)
as at 30 June 2019
Notes 30 June 30 June 31 Dec
2019 2018 2018*
GBP'000 GBP'000 GBP'000
Non-current assets
Investment properties 5 1,361,685 1,429,277 1,384,856
Trade and other receivables 20,204 19,394 19,344
Interest rate swap - 55 102
1,381,889 1,448,726 1,404,302
Current assets
Investment properties held for sale - - 23,562
Trade and other receivables 5,979 5,067 6,630
Cash and cash equivalents 29,954 19,933 10,127
35,933 25,000 40,319
Total assets 1,417,822 1,473,726 1,444,621
Current liabilities
Trade and other payables (17,389) (17,608) (16,282)
Taxation payable (87) (1,384) (1,029)
(17,476) (18,992) (17,311)
Non-current liabilities
Trade and other payables (2,118) (1,947) (1,847)
Interest-bearing loans (308,191) (307,846) (308,015)
Interest rate swap (248) - -
(310,557) (309,793) (309,862)
Total liabilities (328,033) (328,785) (327,173)
Net assets 1,089,789 1,144,941 1,117,448
Represented by:
Share capital 6 7,994 7,994 7,994
Special reserves 589,593 589,593 589,593
Capital reserves 389,036 436,474 411,945
Hedging reserve (248) 55 102
Revenue reserve 103,414 110,825 107,814
Equity shareholders' funds 1,089,789 1,144,941 1,117,448
Net asset value per share 7 136.3p 143.2p 139.8p
* These figures are audited.
BMO Commercial Property Trust Limited
Condensed Consolidated Statement of Changes in Equity (unaudited)
for the six months to 30 June 2019
Share Special Capital Hedging Revenue
Capital Reserves Reserves Reserve Reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Notes
At 1 January 7,994 589,593 411,945 102 107,814 1,117,448
2019
Total
comprehensive
income for the
period
Loss for the - - - - (3,328) (3,328)
period
Movement in fair
value of
interest rate - - - (350) - (350)
swap
Transfer in
respect of
unrealised
losses on 5 - - (22,593) - 22,593 -
investment
properties
Loss on sale of
investment
properties 5 - - (316) - 316 -
realised
Total
comprehensive
income for the
period - - (22,909) (350) 19,581 (3,678)
Transactions
with owners of
the Company
recognised
directly in
equity
Dividends paid 2 - - - - (23,981) (23,981)
At 30 June 2019 7,994 589,593 389,036 (248) 103,414 1,089,789
BMO Commercial Property Trust Limited
Condensed Consolidated Statement of Changes in Equity (unaudited)
for the six months to 30 June 2018
Share Special Capital Hedging Revenue
Capital Reserves Reserves Reserve Reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Notes
At 1 January 7,994 589,593 415,503 (260) 115,820 1,128,650
2018
Total
comprehensive
income for the
period
Profit for the - - - - 39,957 39,957
period
Movement in fair
value of
interest rate - - - 315 - 315
swap
Transfer in
respect of
unrealised gains
on investment 5 - - 20,971 - (20,971) -
properties
Total
comprehensive
income for the
period - - 20,971 315 18,986 40,272
Transactions
with owners of
the Company
recognised
directly in
equity
Dividends paid 2 - - - - (23,981) (23,981)
At 30 June 2018 7,994 589,593 436,474 55 110,825 1,144,941
BMO Commercial Property Trust Limited
Condensed Consolidated Statement of Changes in Equity
for the year to 31 December 2018*
Share Special Capital Hedging Revenue
Capital Reserves Reserves Reserve Reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Notes
At 1 January 2018 7,994 589,593 415,503 (260) 115,820 1,128,650
Total
comprehensive
income for the
year
Profit for the - - - - 36,398 36,398
year
Movement in fair
value of interest - - - 362 - 362
rate swaps
Transfer in
respect of
unrealised losses 5 - - (6,171) - 6,171 -
on investment
properties
Gains on sale of
investment
properties 5 - - 2,613 - (2,613) -
realised
Total
comprehensive - - (3,558) 362 39,956 36,760
income for the
year
Transactions with
owners of the
Company recognised
directly in equity
Dividends paid 2 - - - - (47,962) (47,962)
At 31 December 7,994 589,593 411,945 102 107,814 1,117,448
2018
* These figures are audited.
BMO Commercial Property Trust Limited
Condensed Consolidated Statement of Cash Flows (unaudited)
for the six months to 30 June 2019
Six months Six months Year to
to 30 June to 30 June 31 December
Notes 2019 2018 2018*
GBP'000 GBP'000 GBP'000
Cash flows from operating activities
(Loss)/profit for the period before taxation (3,345) 40,828 37,908
Adjustments for:
Finance costs 5,445 5,450 10,912
Interest receivable (1) (6) (6)
Unrealised losses/(gains) on revaluation of 5 22,593 (20,971) 6,171
investment properties
Losses/(gains) on sale of investment properties 316 - (2,613)
realised
Increase in operating trade and other receivables (260) (490) (2,054)
Decrease/(increase) in operating trade and other 1,393 (872) (2,317)
payables
Cash generated from operations 26,141 23,939 48,001
Interest received 1 6 6
Interest and bank fees paid (5,320) (5,303) (10,551)
Taxation paid (918) (227) (1,220)
(6,237) (5,524) (11,765)
Net cash inflow from operating activities 19,904 18,415 36,236
Cash flows from investing activities
Sale of investment properties 5 28,440 - 5,100
Purchase of investment properties 5 - (5,777) (5,754)
Capital expenditure of investment properties 5 (4,536) (3,880) (12,649)
Net cash inflow/(outflow) from investing 23,904 (9,657) (13,303)
activities
Cash flows from financing activities
Dividends paid 2 (23,981) (23,981) (47,962)
Net cash outflow from financing activities (23,981) (23,981) (47,962)
Net increase/(decrease) in cash and cash 19,827 (15,223) (25,029)
equivalents
Opening cash and cash equivalents 10,127 35,156 35,156
Closing cash and cash equivalents 29,954 19,933 10,127
* These figures are audited
BMO Commercial Property Trust Limited
Notes to the Consolidated Financial Statements
for the six months to 30 June 2019
1. General information and basis of preparation
The condensed consolidated financial statements have been prepared in
accordance with the Disclosure Guidance and Transparency Rules of the United
Kingdom Financial Conduct Authority and IAS 34 'Interim Financial Reporting'.
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 of the Group
for the year ended 31 December 2018, which were prepared under full IFRS as
adopted by the European Union requirements. The accounting policies used in the
preparation of the condensed consolidated financial statements are consistent
with those of the consolidated financial statements of the Group for the year
ended 31 December 2018. The Group's entry to UK REIT Regime was effective from
3 June 2019. The Group's rental profits arising from both income and capital
gains are exempt from UK corporation tax from that date, subject to the Group's
continuing compliance with the UK REIT rules. These condensed interim financial
statements have been reviewed, not audited.
After making enquiries, and bearing in mind the nature
of the Company's business and assets, the Directors consider that the Company
has adequate resources to continue in operational existence for the next twelve
months. 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, 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 the
information the Directors believe that the Group has the ability to meet its
financial obligations as they fall due for the foreseeable future, which is
considered to be for a period of at least twelve months from the date of
approval of the accounts. For this reason they continue to adopt the going
concern basis in preparing the accounts.
These condensed interim financial statements were
approved for issue on 16 September 2019.
2. Dividends
Six months to Six months to Year to 31
30 June 2019 30 June 2018 December 2018
GBP'000 GBP'000 GBP'000
In respect of the previous
period:
Ninth interim (0.5p per share) 3,997 3,997 3,997
Tenth interim (0.5p per share) 3,997 3,997 3,997
Eleventh interim (0.5p per share) 3,996 3,996 3,996
Twelfth interim (0.5p per share) 3,997 3,997 3,997
In respect of the period
under review:
First interim (0.5p per share) 3,997 3,997 3,997
Second interim (0.5p per share) 3,997 3,997 3,997
Third interim (0.5p per share) - - 3,996
Fourth interim (0.5p per share) - - 3,997
Fifth interim (0.5p per share) - - 3,997
Sixth interim (0.5p per share) - - 3,997
Seventh interim (0.5p per share) - - 3,997
Eighth interim (0.5p per share) - - 3,997
23,981 23,981 47,962
A third interim dividend for the year to 31 December 2019, of 0.5 pence per
share totalling GBP3,997,000 was paid on 31 July 2019. A fourth interim dividend
of 0.5 pence per share was paid on 30 August 2019 to shareholders on the
register on 9 August 2019. A fifth interim dividend of 0.5 pence per share will
be paid on 30 September 2019 to shareholders on the register on 13 September
2019. Although these payments relate to the period ended 30 June 2019, under
IFRS they will be accounted for in the period during which they are declared.
Barring unforeseen circumstances, it is the Directors' intention that the
Company will continue to pay dividends monthly.
3. Other expenses
Six months Six months Year to 31
to 30 June to 30 June December
2019 2018 2018
GBP'000 GBP'000 GBP'000
Direct operating expenses of rental 2,114 2,069 4,017
property
Surrender premium - 613 613
Valuation and other professional fees 243 207 399
Professional fees for REIT conversion 314 - -
Directors' fees 166 145 302
Administration fee 76 74 151
Depositary fee 80 86 172
Other 221 267 537
3,214 3,461 6,191
The basis of payment for the Directors' and investment management fees are
detailed within the consolidated financial statements of the Group for the year
ended 31 December 2018.
4. Earnings per share
The Group's basic and diluted earnings per Ordinary Share are based on the loss
for the period of GBP3,328,000 (period to 30 June 2018: profit GBP39,957,000; 31
December 2018: profit GBP36,398,000) and on 799,366,108 (period to 30 June 2018:
799,366,108; 31 December 2018: 799,366,108) Ordinary Shares, being the weighted
average number of shares in issue during the period. Earnings for the six
months to 30 June 2019 should not be taken as guide to the results for the year
to 31 December 2019.
5. Investment properties
Six months Six months Year to 31
to 30 June to 30 June December
2019 2018 2018
Non-current assets - Investment properties GBP'000 GBP'000 GBP'000
Freehold and leasehold properties
Opening fair value 1,384,856 1,398,894 1,398,894
Sales - proceeds (3,940) - (5,100)
- loss on sale (4,705) - (5,355)
Capital expenditure 4,616 3,880 12,649
Purchase of investment properties - 5,532 5,533
Unrealised losses realised during the period 3,451 - 7,968
Unrealised gains on investment properties 7,254 31,353 37,468
Unrealised losses on investment properties (29,847) (10,382) (43,639)
Transfer to asset classified as held for sale - - (23,562)
Closing fair value 1,361,685 1,429,277 1,384,856
Historic cost at the end of the period 947,145 999,866 951,155
Current assets - Investment properties held
for sale
Freehold properties
Opening fair value 23,562 - -
Sales - proceeds (24,500) - -
- loss on sale (22,507) - -
Unrealised losses realised during the period 23,445 - -
Closing fair value - - 23,562
Historic cost at the end of the period - - 47,026
Six months Six months Year to 31
to 30 June to 30 June December
2019 2018 2018
GBP'000 GBP'000 GBP'000
Losses on sale (27,212) - (5,355)
Unrealised losses realised during the period 26,896 - 7,968
(Losses) / gains on sales of investment (316) - 2,613
properties realised
The fair value of investment properties reconciled to the appraised value as
follows:
Six months Six months Year to 31
to 30 June to 30 June December
2019 2018 2018
GBP'000 GBP'000 GBP'000
Appraised value prepared by CBRE excluding
asset classified as held for sale 1,383,125 1,450,035 1,405,790
Lease incentives held as debtors (21,440) (20,758) (20,934)
Closing fair value 1,361,685 1,429,277 1,384,856
The assets classified as held for sale reconciled to the appraised value as
follows:
Six months Six months Year to 31
to 30 June to 30 June December
2019 2018 2018
GBP'000 GBP'000 GBP'000
Appraised value prepared by CBRE of asset
classified as held for sale - - 24,400
Lease incentives held as debtors - - (538)
Selling costs of assets held for sale - - (300)
Closing fair value - - 23,562
There were no properties held for sale at 30 June 2019 (2018: 2 properties).
All the Group's investment properties were valued as at 30 June 2019 by RICS
Registered Valuers working for CBRE Limited ('CBRE'), commercial real estate
advisors, acting in the capacity of a valuation adviser to the AIFM. All such
valuers are Chartered Surveyors, being members of the Royal Institution of
Chartered Surveyors ('RICS').
CBRE completed the valuation of the Group's investment properties at 30 June
2019 on a fair value basis and in accordance with The RICS Valuation - Global
Standards 2017.
There were no significant changes to the valuation process, assumptions and
techniques used during the period, further details on which were included in
note 9 of the consolidated financial statements of the Group for the year ended
31 December 2018.
As at 30 June 2019, all of the Group's properties are Level 3 in the fair value
hierarchy as it involves the use of significant unobservable inputs and there
were no transfers between levels during the period. Level 3 inputs used in
valuing the properties are those which are unobservable, as opposed to Level 1
(inputs from quoted prices) and Level 2 (observable inputs either directly i.e.
as priced, or indirectly, i.e. derived from prices).
6. Share capital
GBP'000
Allocated, called-up and fully paid
799,366,108 Ordinary Shares of 1p each in issue at 7,994
30 June 2019
Under the Company's Articles of Incorporation, the Company may issue an
unlimited number of Ordinary Shares. The Company issued nil Ordinary Shares
during the period (2018: nil) raising net proceeds of GBPnil (2018: GBPnil).
The Company did not repurchase any Ordinary Shares during the period.
7. Net asset value per share
The Group's net asset value per Ordinary Share of 136.3p (30 June 2018: 143.2p;
31 December 2018: 139.8p) is based on equity shareholders' funds of GBP
1,089,789,000 (30 June 2018: GBP1,144,941,000; 31 December 2018: GBP1,117,448,000)
and on 799,366,108 (30 June 2018: 799,366,108; 31 December 2018: 799,366,108)
Ordinary Shares, being the number of shares in issue at the period
end.
8. 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.
9. Capital commitments
The Group had capital commitments totalling GBP2,400,000 as at 30 June 2019 (30
June 2018: GBP10,300,000; 31 December 2018: GBP3,600,000). These commitments
related mainly to contracted development works at the Group's properties at
Cassini House, London SW1 and Nevis/Ness Houses, Edinburgh.
10. List of Subsidiaries
The Group results consolidate the results of the following
companies:
- FCPT Holdings Limited (the parent company of F&C Commercial
Property Holdings Limited and Winchester Burma Limited)
- F&C Commercial Property Holdings Limited (a company which invests
in properties)
- SCP Estate Holdings Limited (the parent company of SCP Estate
Limited and Prime Four Limited)
- SCP Estate Limited (a company which invests in properties)
- Prime Four Limited (a company which invests in properties)
- Winchester Burma Limited (a company which invests in properties)
- Leonardo Crawley Limited (a company which invests in properties)
All of the above named companies are registered in Guernsey.
The Group's ultimate parent company is BMO Commercial Property Trust Limited.
11. Subsequent events
On 30 July 2019, the Group completed the sale of phase 1 of the former Ozalid
Works site in Colchester to Persimmon Homes for a price of GBP6.2 million.
12. Forward looking statements
Certain statements in this report are forward looking statements. By their
nature, forward looking statements involve a number of risks, uncertainties or
assumptions that could cause actual results or events to differ materially from
those expressed or implied by those statements. Forward looking statements
regarding past trends or activities should not be taken as representation that
such trends or activities will continue in the future. Accordingly, undue
reliance should not be placed on forward looking statements.
Statement of Principal Risks and Uncertainties
The Company's assets comprise mainly of direct investments in UK commercial
property. Its principal risks are therefore related to the commercial property
market in general. Other risks faced by the Company include market,
geopolitical, investment and strategic, regulatory, environmental, taxation,
management and control, operational, and financial risks. The Company is also
exposed to risks in relation to its financial instruments. These risks, and the
way in which they are managed, are described in more detail under the heading
'Principal Risks and Risk Management' within the Business Model and Strategy in
the Company's Annual Report for the year ended 31 December 2018. The Company's
principal risks and uncertainties have not changed materially since the date of
that report and are not expected to change materially for the remainder of the
Company's financial year.
Statement of Directors' Responsibilities 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 and Managers' Review (together
constituting the Interim Management Report) together with the Statement of
Principal Risks and Uncertainties above 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 condensed set of
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 Company 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
Martin Moore
Director
BMO Commercial Property Trust Limited
Independent Review Report to BMO Commercial Property Trust Limited
Our conclusion
We have reviewed the accompanying condensed consolidated interim financial
information of BMO Commercial Property Trust Limited (the "Company") and its
subsidiaries (together the "Group") as of 30 June 2019. Based on our review,
nothing has come to our attention that causes us to believe that the
accompanying condensed consolidated interim financial information 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 Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
What we have reviewed
The accompanying condensed consolidated interim financial information comprise:
* the condensed consolidated balance sheet as of 30 June 2019;
* the condensed consolidated statement of comprehensive income for
the six-month period then ended;
* the condensed consolidated statement of changes in equity for the
six-month period then ended;
* the condensed consolidated statement of cash flows for the
six-month period then ended; and
* the notes, comprising a summary of significant accounting policies
and other explanatory information.
The condensed consolidated interim financial information has been prepared in
accordance with International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
Our responsibilities and those of the Directors
The Directors are responsible for the preparation and presentation of this
condensed consolidated interim financial information in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
Our responsibility is to express a conclusion on this condensed consolidated
interim financial information based on our review. This report, including the
conclusion, has been prepared for and only for the Company for the purpose of
complying with the Disclosure Guidance and Transparency Rules sourcebook of the
United Kingdom's Financial Conduct Authority and for no other purpose. We do
not, in giving this conclusion, accept or assume responsibility for any other
purpose or to any other person to whom this report is shown or into whose hands
it may come save where expressly agreed by our prior consent in writing.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements 2410, 'Review of interim financial information performed by the
independent auditor of the entity' issued by the International Auditing and
Assurance Standards Board. A review of interim financial information consists
of making inquiries, 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 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.
We have read the other information contained in the Interim Report and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
PricewaterhouseCoopers CI LLP
Chartered Accountants
Guernsey, Channel Islands
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. Further details of
the APMs methodology are available in the Company's Annual Report for the year
ended 31 December 2018.
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:
30 June 30 June
2019 2018
GBP'000 GBP'000
(Loss)/profit for the period (3,328) 39,957
Add back: Unrealised losses / (gains) on revaluation (20,971)
of investment properties 22,593 (20,971)
Losses on sales of investment properties 316 - -
realised
Profit before investment gains and losses (a) 19,581 18,986 18,986
Dividends (b) 23,981 23,981
Dividend Cover percentage (c = a/b) (c) 81.7 79.2 79.2
Dividend Yield - The annualised dividend divided by the share price at the
period-end. An analysis of dividends is contained in note 2 to the accounts.
Net Gearing - Borrowings less cash dividend by total assets (less current
liabilities and cash).
Portfolio (Property) Capital Return - The change in property value during the
period after taking account of property purchase 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 theoretical 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.
All 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 745324
Fax: 01481 745051
Richard Kirby
BMO REP Asset Management plc
Tel: 0207 499 2244
Graeme Caton
Winterflood Securities Limited
Tel: 0203 100 0268
The full interim report for the period to 30 June 2019 will be sent to
shareholders and will be available for inspection at Trafalgar Court, Les
Banques, St Peter Port, Guernsey GY1 3QL, the registered office of the Company,
and from the Company's website: www.bmocommercialproperty.com
END
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