REG-AXA Property Trust: Half-year Report
01/04/2019 07:05
AXA PROPERTY TRUST LIMITED
LEI: 213800AF85VEZMDMF931
(Classified Regulated Information, under DTR 6 Annex 1 section 1.2)
Explanatory Note
This Half Year Report and Consolidated Financial Statements covers a period
prior to the appointment of any of the current directors and was approved (but
not signed) at an Audit Committee meeting consisting of Mr Farrell and Mr
Lawson (“the Former Directors”) on the evening of 28 March 2019. Such
approval was subject to receiving confirmations from the Investment Manager in
relation to the brought forward balances agreeing to the Year End Financial
Statements for the year ended 30 June 2018 and various minor amendments. The
Year End Financial Statements for the year ended 30 June 2018 had been
approved by the previous Board and signed by the Former Directors earlier that
evening on the 28 March 2019.
After review of the minutes of the Audit Committee meeting of the Former
Directors on 28 March 2019 and after due and careful enquiry of the
Administrator and Manager, with no impediment thereby identified, this Half
Year Report and Consolidated Financial Statements has been approved by the
current directors of the company.
Key Financial Information
As at 31 December 2018
· Sterling currency Net Asset Value (“NAV”) was £10.8 million
(30 June 2018: £10.6 million)
· NAV was 46.07 pence per share (30 June 2018: 45.43 pence)
· Share price(1) was 36.90 pence per share (30 June 2018: 38.40
pence per share)
For the six months ended 31 December 2018
· Profit was 0.07 pence per share (31 December 2017 loss was: 4.24
pence per share)
· No redemptions of shares were made during the period (31 December
2017: none)
· On 28 January 2018 the Company returned £1.2 million capital its
shareholders redeeming 2,644,440 shares.
(1) Closing price on 1 November 2018 since the shares were suspended at this
date (source: Stifel Nicolaus Europe Limited).
Performance Summary
Six months ended 31 December 2018 Year ended 30 June 2018 % change
NAV (£000s) 10,782 (1) 10,631 1.4%
NAV per share 46.07p (1) 45.43p 1.4%
Profit/(Loss) per share 0.07p (20.95)p 100.3%
Share redemptions made nil nil n/a
Share price (2,3) 36.90p (3) 38.40p (3.9)%
Share price discount to NAV 19.9% 15.5% n/a
Total assets less current liabilities (£000s) 10,935 10,840 0.9%
Past performance is not a guide to future performance.
(1) Refer to note 15
(2) Mid-market share price (source: Stifel Nicolaus Europe Limited).
(3) Trading of shares was temporarily suspended from 1 November 2018.
Source: AXA Investment Managers UK Limited and Stifel Nicolaus Europe Limited
Investment Manager’s Report
Investment Manager
AXA Investment Managers UK Limited (the “Investment Manager”, “AXA
IM”) is the UK subsidiary of AXA Investment Managers, a dedicated asset
manager within the AXA Group. AXA Investment Managers is an active, long term,
global multi asset investor with Asset Under Management (“AUM”) of €730
billion as at 31 December 2018.
AXA Real Estate Investment Managers UK Limited (the “Real Estate Adviser”)
is part of the real estate management arm of AXA Investment Managers S.A.
(“AXA IM Real Assets”). AXA IM Real Assets offers a 360° view of real
asset markets, investing in both equity and debt, across different geographies
and sectors, and via private and listed instruments. AXA IM Real Assets
comprises about 600 people in 14 offices around the world, operating in over
20 countries.
Source: AXA Investment Managers UK Limited
Fund Manager
Ian Chappell was appointed as the Fund Manager for AXA Property Trust in
November 2015. He has very broad experience across Europe's real estate
markets, having worked through several market cycles over the past 25 years
and transacting and managing real estate assets covering core, core plus and
value added strategies.
Ian graduated from Nottingham Trent University in 1991 and also holds a Master
of Arts from the University of Newcastle Upon Tyne (1992). He was elected as
Member of the Royal Institution of Chartered Surveyors in 1993. Ian is also a
member of AXA IM Real Assets' Global Leadership Group.
Market Outlook
Having slowed to its lowest pace in four years in Q3 2018, first estimates
suggest Eurozone GDP growth remained stable at 0.2% quarter-on-quarter (q-o-q)
in Q4. This took growth for the year as a whole to an estimated 1.8%, down
from 2.3% in 2017. Economic sentiment indicators suggest the deceleration
continued into 2019. AXA IM forecasts that Eurozone GDP growth will slow to
1.4% in 2019.
According to Eurostat's flash estimate, the Eurozone HICP index fell to 1.6%
in December 2018 and stood at an average of 2% in Q4. In the coming months, a
deceleration appears plausible as the base effects from past energy price
increases start fading. At their January 2019 meeting, the ECB decided to keep
their policy interest rates unchanged; it expects them to remain unchanged
until Autumn 2019 at the earliest. The ECB ended net purchases under the asset
purchase programme (APP) in December 2018.
We expect political risks to remain elevated as Europe heads into an eventful
year; European elections will take place in May and national elections are
scheduled in seven Member States. We expect European populist parties to
continue to exert pressure on political mainstream parties, at both the
national and European level. As a result, populists are increasingly able to
influence the policy agenda in and around Europe, constraining national reform
efforts and making deeper European integration unlikely in 2019, and possibly
for some time to come. Thus, uncertainties related to political factors (for
example, Brexit), trade wars, vulnerabilities in emerging markets and
financial market volatility could threaten economic and financial prospects
for 2019. Moreover, the impact of the US’s monetary policy normalisation on
the World economy is difficult to assess.
The Italian economy shrank by 0.2% q-o-q in Q4 2018, following a 0.1%
contraction in the previous period. Year-on-year, the economy grew by 0.1% in
Q4 2018, slowing from a 0.6% expansion in the previous period. AXA IM forecast
Italian GDP to grow at 0.5% in 2019 and at 0.5% in 2020.
After a few weeks of intense negotiations, the European Commission (EC) and
the Italian government reached a deal on the 2019 budget. The Italian
government agreed on corrective measures worth approximately €10 billion
(0.6% of GDP). In addition, the EC agreed to grant an allowance for
exceptional circumstances (of around 0.2% of GDP) to finance both the
improvement of road safety and actions to fight hydrogeological instability
following last October's floods. Finally, the Italian government accepted a
safeguard clause worth €2 billion for planned expenditures, which will only
be implemented if the deficit is on track. Thus, the EC decided to not
recommend an Excessive Deficit Procedure (EDP).
This is, however, unlikely to be the end of the budget problem as the EC can
still recommend an EDP until February - and it may if the measures agreed upon
are not adopted. Furthermore, the EC is expected to reconsider (most likely a
few days after the European elections) recommending an EDP against Italy next
spring. Overall, there is still a significant lack of clarity on the true
intentions of the Italian government, as trimming the target deficit to 2%
effectively means halving the originally promised flagship measures, including
the already approved (January 2019) law decree that introduced both a minimum
universal income/pension scheme and reforms of the pension system in a
direction that allows citizens to retire at a younger age. In 2020-2021, the
cost of these measures are planned to be covered by increases in VAT rates.
Additionally, if the measures are more expensive than projected, ministry
spending cuts are planned.
Asset Management Update
After an extensive period of negotiation with UCI, the new lease contract was
signed in front of a notary on 13 December 2018. The key terms of the lease
are as follows:
Base Rent
Year 1 – EUR 800,000, subject to a rent-free incentive equivalent to five
months’ rent.
Year 2 – EUR 830,000, and thereafter to be indexed to 100% of the ISTAT
Consumer Index on an upwards-only basis.
As part of the overall negotiation package the tenant also received a fixed
contribution of approximately EUR 330,000.
Variable Rent
There will be an incremental rent of between EUR 1.50 and EUR 2.50 per ticket
sold above a minimum threshold of 350,000 tickets per year.
Tenant Guarantee
There will be an increased guarantee package as security against the
tenant’s obligations throughout the term of the lease.
Following the escalation by the tenant regarding their trading concerns, the
marketing process was deferred until the lease terms had been renegotiated.
The Manager has now resumed marketing and approached a targeted list of
investor groups which are considered likely investors for this type of lot
size.
Property Portfolio at 31 December 2018
Investment name Country Sector Net Yield on valuation (1)
Curno, Bergamo Italy Leisure 8.42%
1 Source - external independent valuers to the Company, Knight Frank LLP.
Net yield on valuation is Gross rental income over
valuation.
31 December 2018 30 June 2018
Weighted average lease term 14.5 years 6.5 years*
* Based on the lease contract in place as at 30 June 2018.
Creditreform Dun & Badstreet
Covenant strength analysis at 31 December 2018 <199 A1
Source: AXA Real Estate Investment Managers UK Limited
Board of Directors
William Scott (Chairman), a Guernsey resident, has been was appointed to the
board of the Company as an independent Director on 28 March 2019. Mr Scott
also currently serves as independent non-executive director of a number of
investment companies and funds, of which Axiom European Financial Debt Fund
Limited is listed on the Premium Segment of the LSE. He is also a director of
The Flight and Partners Recovery Fund Limited and a number of funds sponsored
by Man Group (Absolute Alpha Fund PCC Limited, AHL Strategies PCC Limited and
MAN AHL Diversified PCC Limited) which are listed on The International Stock
Exchange. From 2003 to 2004, Mr Scott worked as senior vice president with FRM
Investment Management Limited, which is now part of Man Group plc. Previously,
Mr Scott was a director at Rea Brothers (which became part of the Close
Brothers group in 1999) from 1989 to 2002 and assistant investment manager
with the London Residuary Body Superannuation Scheme from 1987 to 1989. Mr
Scott graduated from the University of Edinburgh in 1982 and is a chartered
accountant having qualified with Arthur Young (now Ernst & Young LLP) in 1987.
Mr Scott also holds the Securities Institute Diploma and is a chartered fellow
of the Chartered Institute for Securities & Investment. He is also a chartered
wealth manager.
Robert Burke, a resident of Ireland, was appointed to the board of the Company
as an independent Director on 28 March 2019. He also serves as an independent
non-executive director of a number of investment companies and investment
management companies which are domiciled in Ireland as well as a number of
companies engaged in retail activities, aircraft leasing, pharmaceuticals,
corporate service provision and group treasury activities. He is a graduate of
University College Dublin with degrees of Bachelor of Civil Law (1968) and
Master of Laws (1970). He was called to the Irish Bar in 1969 and later
undertook training for Chartered Accountancy with Price Waterhouse (now
PricewaterhouseCoopers) in London, passing the final examination in 1973. He
later was admitted as a Solicitor of the Irish Courts and was a tax partner in
the practice of McCann FitzGerald in Dublin from 1981 to 2005 at which point
he retired from the partnership to concentrate on directorship roles in which
he was involved. He continues to hold a practice certificate as a solicitor
and is a member of the Irish Tax Institute.
Blake Nixon was one of the pioneers of activism in the UK and has wide
corporate experience in the UK and overseas. Following three years at Jordan
Sandman Smythe (now part of Goldman Sachs), a New Zealand stockbroker, Blake
emigrated to Australia, where he spent three years as an investment analyst at
Industrial Equity Limited (‘IEL’), then Australia’s fourth largest
listed company. In 1989 he transferred to IEL’s UK operation and early in
1990 led the takeover of failing LSE listed financial conglomerate, Guinness
Peat Group plc (‘GPG’). The group was then relaunched as an investment
company, applying an owner orientated approach to listed investee companies.
Blake was UK Executive Director, responsible for GPG’s UK operations and
corporate function, for the following 20 years, finally retiring as a
non-executive director in December 2015. He is a founding partner of Worsley
Associates LLP, an activist fund manager, and has served as a non-executive
director of a number of other UK listed companies, as well as numerous
unlisted companies. He is a British resident and was appointed to the Board on
23 January 2019.
Directors’ Responsibility Statement
We confirm that to the best of our knowledge:
· the Condensed Half Year Consolidated Financial Statements have
been prepared in accordance with International Accounting Standard 34 Interim
Financial Reporting; and
· this Half Year Report provides a fair review of the information
required by:
a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first six months
of the financial year and their impact on the Condensed Half Year Consolidated
Financial Statements; and a description of the principal risks and
uncertainties for the remaining six months of the year; and
b) DTR 4.2.8R of the Disclosure and Transparency Rules, 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 entity during that period; and any changes in
the related party transactions described in the last annual report that could
materially affect the financial position or performance of the entity.
Signed on behalf of the Board by:
Blake Nixon
Robert Burke
Director
Director
29 March
2019
29 March 2019
Condensed Half Year Consolidated Income Statement
For the six months ended 31 December 2018 (unaudited)
Six month period ended Six month period ended
31 December 2018 31 December 2017
Notes £000s £000s
Gross rental income 3 376 663
Property operating expenses (70) (169)
Net rental and related income 306 494
Valuation gain/(loss) on investment property 240 (710)
Loss on liquidation of subsidiary (43) -
General and administrative expenses 4 (463) (315)
Operating profit/(loss) 40 (531)
Net foreign exchange gain/(loss) 4 -
Share in loss of a joint venture 8 (14) (1)
Net finance cost (2) (11)
Profit/(Loss) before tax 28 (543)
Income tax expense (12) (449)
Profit/(Loss) for the period 16 (992)
Basic and diluted loss per ordinary share (pence) 0.07 (4.24)
Condensed Half Year Consolidated Statement of Comprehensive Income
For the six months ended 31 December 2018 (unaudited)
Six month period ended Six month period ended
31 December 2018 31 December 2017
£000s £000s
Profit/(Loss) for the period 16 (992)
Other comprehensive income
Foreign exchange translation gain 135 232
Total items that are or may be reclassified to profit or loss 135 232
Total comprehensive profit/( loss)/for the period 151 (760)
Condensed Half Year Consolidated Statement of Changes in Equity
For the six months ended 31 December 2018 (unaudited)
Revenue reserve Distributable reserve Foreign currency reserve Total
£000s £000s £000s £000s
Balance at 1 July 2018 (46,315) 44,853 12,093 10,631
Profit for the period 16 - - 16
Other comprehensive income - - 135 135
Balance at 31 December 2018 (46,299) 44,853 12,228 10,782
For the six months ended 31 December 2017 (unaudited)
Revenue reserve Distributable reserve Foreign currency reserve Total
£000s £000s £000s £000s
Balance at 1 July 2017 (41,411) 44,853 12,223 15,665
Loss for the period (992) - - (992)
Other comprehensive income - - 232 232
Balance at 31 December 2017 (42,403) 44,853 12,455 14,905
Condensed Half Year Consolidated Statement of Financial Position
As at 31 December 2018 (unaudited)
31 December 2018 30 June 2018
Notes £000s £000s
Non-current assets
Investment property 6 8,527 7,871
Current assets
Cash and cash equivalents 2,808 3,298
Trade and other receivables 9 614 495
Investment in joint venture held for sale 8 - 165
Total assets 11,949 11,829
Current liabilities
Trade and other payables 10 1,014 989
Non-current liabilities
Provisions 11 153 209
Total liabilities 1,167 1,198
Net assets 10,782 10,631
Reserves 10,782 10,631
Total equity 10,782 10,631
Number of ordinary shares 23,402,881 23,402,881
Net asset value per ordinary share (pence) 46.07 45.43
By order of the Board
Blake Nixon Robert Burke
Director
Director
29 March 2019 29 March 2019
Condensed Half Year Consolidated Statement of Cash Flow
For the six months ended 31 December 2018 (unaudited)
Six month period ended Six month period ended
31 December 2018 31 December 2017
Notes £000s £000s
Operating activities
Profit/(loss) before tax 28 (543)
Adjustments for:
(Gain)/Loss on valuation and disposals of a subsidiary and investment property (341) 710
Shares in loss of joint-venture 8 14 1
Gain on financial instruments (4)
(Increase)/decrease in trade and other receivables 9 (415) 615
Decrease in provisions 11 (56) (234)
Increase /(decrease) in trade and other payables 10 25 (477)
Net finance cost 2 11
Net cash (used in)/generated from operations (747) 83
Interest paid (2) (10)
Tax paid (12) (927)
Net cash outflow from operating activities (761) (854)
Investing activities
Investment in joint-ventures 151 -
Net cash inflow from investing activities 151 -
Effects of exchange rate fluctuations 120 41
(Decrease) in cash and cash equivalents (490) (813)
Cash and cash equivalents at start of the period 3,298 3,846
Cash and cash equivalents at the period end 2,808 3,033
Notes to the Condensed Half Year Consolidated Financial Statements
For the period ended 31 December 2018
1. Operations
AXA Property Trust Limited (the “Company”) is a limited liability,
closed-ended investment company incorporated in Guernsey. The Company has
historically invested in commercial properties in Europe which were held
through its subsidiaries. The Condensed Half Year Consolidated Financial
Statements of the Company for six month ended 31 December 2018 comprise the
financial statements of the Company and its subsidiaries (together referred to
as the “Group”).
2. Significant accounting policies
(a) Statement of compliance
The Condensed Half Year Consolidated Financial Statements have been prepared
in accordance with the Disclosure Transparency Rules of the Financial Conduct
Authority and with IAS 34, ‘Interim Financial Reporting’. They do not
include all the information required for the full annual financial statements
and should be read in conjunction with the consolidated financial statements
of the Group for the year ended 30 June 2018, which were prepared under full
International Financial Reporting Standard (“IFRS”) requirements as issued
by the International Accounting Standards Board.
(b) Basis of preparation
The same accounting policies and methods of computation have been applied to
the Condensed Half Year Consolidated Financial Statements as in the Annual
Report and Consolidated Financial Statements for the year ended 30 June 2018.
The presentation of the Condensed Half Year consolidated Financial Statements
is consistent with the Annual Report and Consolidated Financial Statements.
(c) Going concern
The discount control provisions established when the Company was launched
required a continuation vote to be proposed to shareholders at the Company's
Annual General Meeting (“AGM”) in 2015. As a result of the large discount
to Net Asset Value at which shares were trading there was little chance of
raising new capital. After extensive shareholder consultation, the Board
resolved not to seek continuation of the Company in 2015 and proposed to
shareholders that the Company enter into a managed wind-down. This proposal
was approved at an Extraordinary General Meeting (“EGM”) held on 26 April
2013.
In accordance with IFRS, the Financial Statements have been prepared on a
non-going concern basis reflecting the orderly wind-down of the Group.
Accordingly, the going concern basis of accounting is not considered
appropriate. All assets and liabilities continue to be measured in accordance
with IFRS. The Board recognises that the timely disposal of the remaining
property is uncertain and continues to keep under review the most appropriate
course of action with regard to this asset over the coming months with the aim
of maximising shareholder return. The Directors estimate that the remaining
wind-down costs to be incurred will be approximately £153,000. The Board
believes that the Group has sufficient funds available to meet its wind-down
costs and day-to-day running costs. There are no amounts due in terms of any
third party loan facilities.
An Extraordinary General Meeting (“EGM”) was held on 7 September 2018 to
approve the Board’s recommendation to place the Company into voluntary
liquidation. The EGM was adjourned to 21 September 2018 at the request of a
shareholder holding close to 30% of the Company’s shares. At the adjourned
EGM the recommendation did not receive the required 75% majority due to this
shareholder transferring their shares to a new shareholder, Mr. Blake Nixon,
who voted against the Board’s recommendation. At the Company General Meeting
held on 28 December 2018 Mr Hunter and Mr Monier were not re-elected to the
Board, and subsequently tendered retirement and resignation notice
respectively. Mr Nixon was elected to the Board at the Extraordinary General
Meeting held on 23 January 2019. In the event, the Board will continue to
pursue the wind down strategy unless shareholders agree to an alternative
investment policy.
3. Gross rental income
Gross rental income for the six months ended 31 December 2018 amounted to
£0.37 million (31 December 2017: £0.7 million). The Group leases out its
investment property under an operating lease which is structured in accordance
with local practices in Italy. The lease benefits from indexation.
Minimum Lease Payments
Rental income Rental income
31 December 2018 30 June 2018
£000s £000s
0-1 year 800 1,284
1-5 years 3,320 6,420
5+ years 7,885 616
The forecasted rental income reflects the lease terms at the end of the
reporting period. The change in forecasted rental income in December 2018
compared to June 2018 reflects the terms of the lease agreed during the
period.
The rental income for the period ending 31 December 2018 was reduced by the
lease discount agreed during the period as part of the new lease negotiations.
4. General and administrative expenses
Six month Six month
period ended period ended
31 December 2018 31 December 2017
£000s £000s
Administration fees (84) (89)
General expenses (16) (40)
Corporate and accounting fees (48) (43)
Valuation and technical advise (30) (10)
Audit fees (91) (82)
Legal and professional fees (66) (10)
Director's fees (29) (35)
Insurance fees (31) (30)
Liquidation costs - 24
Corporate Broker’s fees (13) (13)
Investment management fees (55) (197)
Performance fee - 210
Total (463) (315)
5. Share capital redemptions
No share redemptions took place during the period.
6. Investment property
31 December 2018 30 June 2018
£000s £000s
Fair value of investment property at beginning of the period/year 7,871 12,310
Lease incentives 296 -
Fair value adjustments 240 (4,527)
Foreign exchange translation 120 88
Fair value of investment property at the end of the period/year 8,527 7,871
Total investment property 8,527 7,871
Investment property is carried at fair value.
7. Investment property held for sale
As at 31 December 2018, there is no investment property classified as held
for sale (30 June 2018: none).
8. Divestment from joint venture
The Group holds a 50% joint venture interest in the equity of the Italian
joint venture Property Trust Agnadello S.r.l. which held a logistics warehouse
in Agnadello, Italy. In 2017, Property Trust Agnadello S.r.l. sold its
logistic warehouse. The remaining 50% equity interest is held by European
Added Value Fund S.à r.l., a subsidiary of European Added Value Fund Limited.
Property Trust Agnadello S.r.l was fully liquidated in November 2018.
The Group’s interest in Property Trust Agnadello S.r.l. was accounted for
using the equity method in the consolidated financial statements, which
approximates the lower of its carrying amount and its fair value less cost to
sell.
The following table summarises the financial information of Property Trust
Agnadello S.r.l. which also reconciles the summarised financial information to
the carrying amount of the Group’s interest in the joint venture:
Summarised Consolidated Statement of Financial Position 31 December 2018 30 June 2018
£000s £000s
Current assets - 431
Current liabilities - (102)
Net assets (100%) - 329
Group's share of net assets (in percent) 50% 50%
Group's share of net assets - 165
Carrying amount of interest in joint-venture - 165
Summarised Consolidated Income Statement Period Six month
Until liquidation period ended
9 November 2018 31 December 2017
£000s £000s
Total administrative and other expenses (28) (2)
Loss before tax (28) (2)
Loss for the period (28) (2)
Group's share of loss for the period (14) (1)
Summarised Consolidated Statement of Comprehensive Income Period Six month
Until liquidation period ended
9 November 2018 31 December 2017
£000s £000s
Loss for the period (28) (2)
Total comprehensive loss for the period (28) (2)
Group's share of comprehensive loss for the period (14) (1)
9. Trade and other receivables
31 December 2018 30 June 2018
£000s £000s
Other receivables 131 303
VAT receivable 191 137
Tax receivable 132 19
Rent receivables - 11
Prepayments 160 25
Total 614 495
The carrying values of trade and other receivables are considered to be
approximately equal to their fair value. Rent receivable is non-interest
bearing and typically due within 30 days.
The Group signed a new lease agreement for its remaining assets, applicable as
from 1(st) January 2019, and granted lease incentive for an amount of £0.3
million. These lease incentive are amortised over the new lease agreement
period of 15 years.
10. Trade and other payables
31 December 2018 30 June 2018
£000s £000s
VAT payable (3) 94
Tax payable (income, transfer, capital and other) 122 507
Legal and professional fees 109 10
Audit fee 186 114
Rent prepaid 427 5
Other payables 93 259
Administration fees payables 73 -
Director fees 7 -
Total 1,014 989
The carrying values of trade and other payables are considered to be
approximately equal to their fair value. Trade and other payables are
non-interest bearing and are normally settled on 30-day terms.
11. Provisions
31 December 2018 30 June 2018
£000s £000s
Provision for performance fees - -
Provision for wind-down costs 153 153
Other provisions - 56
Total 153 209
12. Financial risk management
The Group is exposed to various types of risk that are associated with
financial instruments. The Group's financial instruments comprise bank
deposits, cash, receivables and payables that arise directly from its
operations. The carrying value of financial assets and liabilities approximate
the fair value.
The main risks arising from the Group's financial instruments are market risk,
credit risk, liquidity risk, interest risk and foreign currency risk. The
Board reviews and agrees policies for managing its risk exposure. These
policies are summarised below
Market Price Risk
Property and property related assets are inherently difficult to value due to
the individual nature of each property. As a result, valuations are subject to
uncertainty. There is no assurance that the estimates resulting from the
valuation process will reflect the actual sales price even where a sale occurs
shortly after the valuation date. Rental income and the market value for
properties are generally affected by overall conditions in the local economy,
such as growth in Gross Domestic Product (“GDP”), employment trends,
inflation and changes in interest rates. Changes in GDP may also impact
employment levels, which in turn may impact the demand for premises.
Furthermore, movements in interest rates may affect the cost of financing for
real estate companies.
Both rental income and property values may be affected by other factors
specific to the real estate market, such as competition from other property
owners, the perceptions of prospective tenants of the attractiveness,
convenience and safety of properties, the inability to collect rents because
of the bankruptcy or the insolvency of tenants, the periodic need to renovate,
repair and release space and the costs thereof, the costs of maintenance and
insurance, and increased operating costs. The Investment Manager addresses
market risk through a selective investment process, credit evaluations of
tenants, ongoing monitoring of tenants and through effective management of the
property.
Credit risk
Credit risk refers to the risk that counterparty will default on its
contractual obligations resulting in financial loss to the Group. The Group
has adopted a policy of only dealing with creditworthy counterparties and
obtaining sufficient collateral where appropriate as a means of mitigating the
risk of financial loss from defaults. The Group’s and Company’s exposure
and the credit-ratings of its counterparties are continuously monitored and
the aggregate value of transactions concluded is spread amongst approved
counterparties.
The credit risk on liquid funds is limited because the counterparties are
banks with high credit-ratings assigned by international credit-ratings
agencies. The Group banks with Barclays Bank plc which has a Fitch rating of
A, HSBC Bank plc with a Fitch rating of AA- and BIL with a Fitch rating of
BBB+.
Cash and cash equivalents and trade and other receivables presented in the
consolidated statement of financial position are subject to credit risk with
maturities within one year. The Company’s maximum credit exposure is limited
to the carrying amount of financial assets recognised as at the Consolidated
Statement of Financial Position date.
Liquidity risk
Liquidity risk is the risk that the Company will encounter in realising assets
or otherwise raising funds to meet financial commitments in a reasonable
timeframe or at a reasonable price.
The Group invests the majority of its assets in investment property which is
relatively illiquid. The Group prepares forecasts in advance which enables the
Group's operating cash flow requirements to be anticipated and ensures that
sufficient liquidity is available to meet foreseeable needs and to invest any
surplus cash assets safely and profitably. The Group also monitors the cash
position in all subsidiaries to ensure that any working capital needs are
addressed as early as possible.
The Company suspended dividends from June 2012 in order to prudently manage
cash position during the wind-down phase.
Foreign currency risk
The European subsidiaries invested in properties using currencies other than
Sterling (that is Euros), the Company's functional and presentational
currency, and the Consolidated Statement of Financial Position may be
significantly affected by movements in the exchange rates of such currencies
against Sterling.
13. Related party transactions
The Directors are responsible for the determination of the Company's
investment objective and policy and have overall responsibility for the
Group's activities including the review of investment activity and
performance.
Mr Hunter, (Chairman, retired on 28 December 2018) was also Director of the
Company’s subsidiaries, Property Trust Luxembourg 2 S.à r.l. and Property
Trust Luxembourg 3 S.à r.l. and was able to control the investment policies
of the Luxembourg subsidiaries to ensure they conformed with the investment
policy of the Company.
Mr Lawson, a Director of the Company is also a product manager for alternative
asset services across EMEA region and Chairman of Northern Trust (Guernsey)
Limited, the Company’s bankers, and member of the same group as the
Administrator and Secretary. The total charge to the Consolidated Income
Statement during the period in respect of Northern Trust administration fees
was £72,500 (31 December 2017: £72,500).
Under the Investment Management Agreement, fees are payable to the Investment
Manager, Real Estate Adviser and other entities within the AXA Group. These
entities are involved in the planning and direction of the Company and Group,
as well as controlling aspects of their day to day activity, subject to the
overall supervision of the Directors. During the period, fees of £0.05
million (31 December 2017: £0.20 million) were expensed to the Consolidated
Income Statement.
All the above transactions were undertaken at arm’s-length.
14. Commitments and contingent liability
As at 31 December 2018 the Company has no commitments.
Disposal of the Curno property may incur Italian taxes which may be material
in the context of shareholders’ funds depending the terms of the disposal.
As at the 31 December 2018 and up to the date of approval, the Board are not
able to determine the likelihood or amount of such tax. As a result, no
provision has been included in these financial statements.
15. NAV Reconciliation
The following is a reconciliation of the NAV per share attributable to
ordinary shareholders as presented in these Interim Financial Statements to
the unaudited NAV per share reported to the LSE:
NAV per
Ordinary
NAV Share
31 December 2018 £000s £
Net Asset Value reported to London Stock Exchange (unaudited) 10,836 46.30p
NAV adjustment following the auditors review on June 2018 accounts (54) (0.23)p
Net Assets Attributable to Shareholders per Financial Statements (unaudited) 10,782 46.07p
16. Subsequent events
At the Extraordinary General Meeting held on 23 January 2019, the proposal to
appoint Mr Nixon to the Board of Directors was passed and he was appointed
with immediate effect.
On 28 January 2018 the Company returned £1.2 million capital its shareholders
redeeming 2,644,440 shares.
Gavin Farrell has tendered his resignation from the Board which will take
effect from close of business in Guernsey on 28 March 2019.
Stuart Lawson has tendered his resignation from the Board which will take
effect from close of business in Guernsey on 28 March 2019.
William Scott has been appointed to the Board which will take effect from
close of business in Guernsey on 28 March 2019.
Robert Burke has been appointed to the Board which will take effect from close
of business in Guernsey on 28 March 2019.
AXA Investment Managers UK Limited has indicated its intention to resign as
Investment Manager of the Company should the Board take definitive steps
towards convening an Extraordinary General Meeting of the Company to consider
a change to the Company’s investment policy. The resignation would take
effect immediately or at a later date by mutual agreement. AXA REIM Luxembourg
S.A. has separately tendered its resignation as administrator of each of the
Company’s two Luxembourg subsidiaries, which will take effect following the
expiration of the 3-month notice period or earlier if by mutual agreement.
Northern Trust International Fund Administration Services (Guernsey) Limited
has tendered its resignation as Administrator and Secretary which will take
effect following the expiration of the 90 day notice period or earlier if by
mutual agreement..
Corporate Information
Directors (All non-executive)
W. Scott (Chairman) (appointed 28 March 2019)
R. Burke (appointed 28 March 2019)
B.A. Nixon (appointed on 23 January 2019)
G. J. Farrell (resigned 28 March 2019)
S. J. Lawson (resigned 28 March 2019)
Registered Office
PO Box 255
Trafalgar Court
Les Banques
St Peter Port
Guernsey GY1 3QL
Channel Islands
Investment Manager
AXA Investment Managers UK Limited
7 Newgate Street
London EC1A 7NX
United Kingdom
Real Estate Adviser
AXA Real Estate Investment Managers UK Limited
155 Bishopsgate
London EC2M 3XJ
United Kingdom
Corporate Broker
Stifel Nicolaus Europe Limited
150 Cheapside
London EC2V 6ET
United Kingdom
Administrator and Secretary
Northern Trust International Fund
Administration Services (Guernsey) Limited
PO Box 255
Trafalgar Court
Les Banques
St Peter Port
Guernsey GY1 3QL
Channel Islands
Registrar
Computershare Investor Services (Guernsey) Limited
1(st) Floor
Tudor House
Le Bordage
St Peter Port
Guernsey GY1 1DB
Channel Islands
Independent Auditor
KPMG Channel Islands Limited
Glategny Court, Glategny Esplanade
St Peter Port
Guernsey GY1 1WR
Channel Islands
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