Interim Results

27th Aug 2008 07:00



The Advantage Property Income Trust Limited 

(formerly known as Teesland Advantage Property Income Trust Limited)

Unaudited report and financial statements

For the six months ended 30 June 2008

Guernsey Registered Number 42048

PERFORMANCE SUMMARY AND FINANCIAL HIGHLIGHTS

 

26 August 2008

The Advantage Property Income Trust Limited

"TAP" or the "Company"

Half Year Results for the six months to 30 June 2008

The Advantage Property Income Trust Limited (LSE: TAP), a company focused on investment in a diversified portfolio of income-producing commercial property in the United Kingdom and the Channel Islands, presents its half year results for the six months to 30 June 2008.

Performance Highlights

Five disposals totalling £4.63 million, 6.8% above preceding valuation

Settlement of insurance claim at Hemel Hempstead following Buncefield explosion at £7.87 million

H1 total return -3.4%* compared to IPD at -6.0%

Asset management activity adding £0.17 million of income

Net asset value per share fallen to 87.6p at June 2008 (97.8p at December 2007)

Portfolio income return for H1 3.1% (IPD Quarterly Funds 2.6%)

Dividend cover on a recurring income cash basis for H1 was 65%

*As measured by IPD

 

PERFORMANCE SUMMARY AND FINANCIAL HIGHLIGHTS

Financial Summary

	30 June  2008	31 December 2007	30 June  2007
Share price	43.0p	70.0p	105.5p
Net asset value per share*	87.6p	97.8p	119.3p
Earnings per share	(6.96p)	(13.02p)	5.22p
Dividends	3.25p	6.50p	3.25p
Portfolio value	£233,452,400	£260,798,000	£274,013,000
Gearing**	50.4%	48.2%	41.4%

Notes

Net asset value and earnings per share calculated under International Financial Reporting Standards.

* Including unrealised gains.

** Long term debt as a percentage of portfolio value. Long term debt is determined as the actual bank debt, excluding fair value adjustments arising from swaps, and excluding debt issue costs.

For further information, please visit www.tapincome.com or contact:

Christopher Carter Keall,

Valad Asset Management (UK) Ltd 020 7659 6666

Graham Swindells, Brad Cheng

Kaupthing Singer & Friedlander Capital Markets Ltd 020 3205 7500

Jeremy Carey, Gemma Bradley,

Tavistock Communications Ltd 020 7920 3150

Anson Fund Managers Ltd,

Secretary 01481 722260

 

CHAIRMAN'S STATEMENT

The quoted real estate sector and specifically offshore investment companies have seen discounts to NAV increase significantly during the last six months as the peer group's share prices have reduced.

The share price dip and associated widening in discounts has been caused by an increase in negative sentiment for commercial property within the context of an increasingly poor wider economy.

Against this background, I report a half year result with significant negative market valuation movement. However, I am pleased that our key strategies of high income and added value allow me to report continued outperformance when compared to the commercial property market.

Total Returns	3mths	6mths	12mths
TAP	-1.4	-3.4	-9.8
IPD monthly	-2.7	-6.0	-14.9

Property activity has been concentrated on asset management and the disposal of assets that have been either forecast to under-perform over the coming years or where asset management initiatives have been completed and offer limited future performance.

The Company has sold five assets in the first half of the year, completed 17 rent reviews and lease renewals, along with 7 new lettings, adding £170,000p.a to the income of the Company.

The Board continues to concentrate on certain key targets and strategies to improve dividend cover, reduce costs and narrow the historically large discounts to Net Asset Value. These include:

Further sales of stabilised assets

A continuing strategy of debt repayment

The consideration of share buy-backs

Further news will follow on these strategies, however, a number of initiatives have been successfully completed in H1 including:

The repayment of £8 million of debt

The completion of the renegotiation of the HBOS loan and the conversion to a revolving facility 

The stabilisation of the Total Expense Ratio (TER) at a six month average of 1.18% 

Renegotiation of the Property Fund Adviser (PFA) agreement thereby reducing the fee payable to the PFA from 85bps to 65bps of Gross Asset Value (GAV)

Appointment of a new Company broker 

Introduction of a new PFA team and the commencement of a significantly increased set of Investor presentations 

The launch of a new website, www.tapincome.com, increasing communication with investors and analysts and most recently including a Webcast outlining the strategy of the Company to those shareholders we have either not met or are unable to meet.

  CHAIRMAN'S STATEMENT (Continued)

 Results

The net asset value of the Company, as at 30 June 2008 has fallen to 87.6p per share a reduction from 97.8p per share as at 31 December 2007. Profit before tax, excluding unrealised gains/losses on investments and derivative movement, for the first half of the year totalled £2.69 million. Unrealised loss on the investment properties amounted to £14.53 million during the period and the NAV total return, defined as change in NAV plus dividends paid, was -7.2%.

Gearing

TAP has bank debt of £117.8 million, equivalent to 50.4% (Dec 2007: 48.2%) of gross property assets.

The bank debt is made up of two facilities: one from the Bank of Scotland plc for £98.3 million, of which £80.3 million has been drawn down and one from Capmark Bank Europe plc for £37.5 million which has been fully drawn down.

Current Hedging

The interest rate on £81.3 million of debt is currently fixed at a blended rate of 5.2% (before margin) with the interest rate on the remaining £36.5 million floating. As at Q2 this meant that 69% of the debt was at fixed rates (Q4 2007: 65%).

The weighted average cost of all debt including margin for the six months was 5.9%. With a substantial proportion of its debt hedged, I believe TAP is protected against a fluctuating interest rate environment.

The Board continues to review methods by which we are able to influence positively the discount to NAV. In the last six months we have adopted a strategy of debt repayment and future receipts will continue to be utilised in the most effective way.

Future prospects

The Board and PFA consider two main property market forecasts when setting strategy; The Investment Property Forum (IPF) consensus forecasts and The Property Market Analysis LLP (PMA). It is interesting to note that both show further declines in 2008, both show small capital value declines in 2009 offset by income and both show recoveries in 2010. The Board and PFA will continually review these in the light of market outputs.

 

CHAIRMAN'S STATEMENT (Continued)

The most important outputs are through IPD (Investment Property Databank). The IPD Monthly Index published capital falls which looked to have peaked in March, as April and May monthly numbers showed falls reducing. However, in June capital took an unexpected additional drop and commentators began speaking of double dips in the market.

We are yet to see whether June highlighted a longer term trend or a short term anomaly and we are unlikely to get any sensible evidence until the end of September when transaction volumes increase as owners endeavour to complete sales for the year end.

Once again the TAP fundamentals of high income and income growth will be at the forefront of our strategy to maximise performance. Through these fundamentals, we anticipate being well placed when market sentiment turns.

Christopher N Fish

Chairman

26 August 2008

PROPERTY FUND ADVISER'S REPORT

Property Market 

The performance of the UK property market in the first six months of 2008 has continued in much the same vein as the second half of 2007. The IPD all property total return for H1 is -5.9%, driven by -8.5% capital growth and 2.7% income return. There have now been four consecutive months of negative total returns as a result of falling capital growth. This is due to outward yield shift across all sectors. Global property consultancy CB Richard Ellis recorded the UK prime equivalent yield at June 2008 as 6.2%, the same level as June 2004 and 140 bps above the 4.8% they recorded at the peak of the market in June 2007.

Rental growth has all but disappeared in June 2008 as a result of a loss of momentum in the occupier markets, although encouragingly, void rates have stabilised as landlords continue to encourage occupiers to take space and thereby avoid empty rates.

The property investment market is currently in its summer slowdown, but in the last 12 months has shown significant signs of increased illiquidity. Market transactions have reduced significantly in volume. In the three months to June 2008, just under £5 billion of transactions completed, compared to more than £17 billion in the same period last year (CBRE). Debt continues to be scarce and only then at high cost and low gearing levels. A notable feature of the current market is that it is now easier to raise equity than debt but that equity is generally chasing stock from distressed vendors. 

Future Prospects

The Property Market Analysis LLP (PMA) summer forecasts outline further capital falls for all property, and all the individual sectors for 2008. The forecasts do show a significant bounce in total returns for 2010 with the spring forecasts showing an 8.7% total return, up from -9.2% in 2008. The best performing sector in 2008 is forecast to be retail shop units, and the worst sector is Central London offices. Retail warehouses are expected to be the strongest performing sector in 2009 and 2010, which bodes well for future TAP fund performance due to our exposure to this sector.

In terms of rental growth, retail shop units are expected to show the strongest performance over the course of 2008 at 1.0%, whilst Central London offices are forecast to show the weakest growth at -0.7%. PMA's forecasts for 2009, 2010 and 2011 show retail warehousing as the top performing sector in terms of rental growth. 

 

PROPERTY FUND ADVISER'S REPORT (continued)

Property Activity

The PFA has continued to actively manage the property portfolio and during the first six months of the year has completed the disposal of five property investments. These sales have produced proceeds of £4.63 million for the Company and profits over valuation of £0.3 million (6.8%).

In line with the wider commercial property market, the TAP portfolio net value has fallen over the period by 8.8% on a like for like basis to £233,580,000, but when one takes into account capital receipts resulting from asset management and sales, the capital growth fall for H1 is -6.4% (as measured by IPD). 

The disposals included three retail premises, one office building and the converted upper parts of another. In Morecambe, the sale of the retail premises were split and sold as three individual units in order to maximise the price achieved. All three units were let with shortening income profiles and the disposal completed in January 18% above valuation. In March, TAP sold their asset in Beastfair Pontefract. This secondary retail shop was let with seven years unexpired to a national multiple and was successfully sold at 2% above valuation. In June, the sale of the Company's retail shop in Lincoln, let to a national retailer, completed at auction which provided further cash to the Company. Furthermore, the upper parts of the Company's retail holding in Aberdeen were sold. These were converted into two residential flats in 2007 and then sold off on a long-leasehold basis, again at a significant premium to valuation.

 

In Bradford, the Company sold a small rack-rented office premises, with a shortening income profile in May. These sales provided cash to the Company and reduced management costs on our small assets as per our stated fund strategy.

Other cash generating initiatives have included the settlement, after prolonged and detailed negotiation between the PFA and the loss adjuster, of the outstanding insurance claim following the Buncefield explosion and the destruction of the Company's premises at Hemel Hempstead. A settlement was agreed at £7.87 million. The monies have now been recovered in full and the claim concluded. 

The net proceeds of the disposals and insurance claim have been applied to the repayment of debt in line with the Company strategy. 

The portfolio remains balanced with a slight bias towards retail, with retail warehousing (20.9%), high street retail (17.7%), office (35.8%), industrial (21.6%) and leisure (4.0%) continuing to provide good sector diversification. 

The net lettable void of the portfolio at June 30 was 5.81% whilst the total void when taking into account the vacancy created through the implementation of asset management initiatives is at 9.25%. The current unexpired lease term of 6.84 years has improved relative to the December 2007 figure of 6.44 years. 

PROPERTY FUND ADVISER'S REPORT (continued)

Asset Management 

A total of seven new lettings were successfully completed during the period securing £110,000p.a of headline rental income. A further 17 lease renewals and rent reviews have been settled contributing an additional £60,000p.a, a 7.9% increase over the original rent passing.

Additional added value has also been achieved at Trident Retail Park in Birmingham where a strategic letting to Triumph Motorcycles was completed. The 5,000 sq ft unit was let for a ten year term at a rent of £55,000p.a establishing a new level of rent for the scheme, some 4.6% above the preceding rental valuation. The unit is Triumph's UK flagship showroom and they are now fully open and trading strongly. 

A lease renewal has been completed with Britannia Building Society at our Torquay property. The occupier has completed a new 10 year lease at £58,750p.a, providing the Company with a 38% uplift on the previous passing rent. 

A new reversionary lease has been completed at the Company's Kettering property along with an assignment of the current lease to Travis Perkins (Properties) Limited, providing an unexpired term of 15 years. No rent free period was granted to the occupier. The outstanding rent review was also settled at £61,635p.a, an 8% uplift on the passing rent. The asset management team continues to maximise income returns from the existing portfolio.

Future performance is also being created through the substantial refurbishment and repositioning of AdVantage Reading (formally Associates House). This project will be delivered into the central Reading market, which is currently experiencing limited supply, in December 2008. Refurbishment projects have also been completed at Advantage One, Milton Keynes and Caswell Road, Northampton, where we currently have good interest from potential occupiers and owners.

Elsewhere, asset management initiatives are currently ongoing at Brunswick Point in Leeds, and within a number of our Halfords units where we anticipate adding value over the medium term.

The asset management initiatives during the period have made a positive contribution to the performance of the underlying assets. The PFA continues to identify and execute added value initiatives to continue to provide income and income growth to investors.

  PROPERTY FUND ADVISER'S REPORT (continued)

Fund Strategy

The Company is now fully invested and through its performance against the market the portfolio has shown its resilience and value adding opportunities. The PFA continues to implement the investment strategy with an emphasis on asset management with a view to maximising income returns and seeking out capital value growth. Selective disposals will continue to be made where capital growth has been maximised through asset management or where assets are forecast to under-perform in the future, whilst in turn generating profits for the Company.

There is currently £18 million of undrawn facility from HBOS. It is the Company's strategy to utilise receipts in the appropriate way to work towards the reduction in the current discount to NAV that currently exists.

We will also consider utilising the undrawn facility where significant performance can be achieved. The portfolio is broadly balanced across the main sectors and the acquisition and disposal strategy will focus on maintaining higher income yielding opportunities or assets that provide the opportunity to achieve higher income returns through active management.

  INVESTMENT OBJECTIVE AND POLICY

Since Admission to the official list of the London Stock Exchange on 8 February 2005, the Company's investment objective has been to provide shareholders with an attractive level of income together with the potential for income and capital growth derived from investment in the Group's diversified portfolio of commercial property in the United Kingdom and the Channel Islands.

The Group's diversified portfolio comprises both freehold and long leasehold (over 60 years remaining at the time of acquisition) commercial properties in the United Kingdom and the Channel Islands. The Group intends to invest predominantly in income producing investments and will principally invest in the main commercial property sectors: office, retail, leisure and industrial.

The Group currently owns a portfolio of properties which has been designed to give balance across the main commercial property sectors. The Group will not invest in other investment companies or funds.

Any material change to the Company's investment objective and policy may only be made with shareholder approval.

GROUP STRUCTURE

 

Parent company:

The Advantage Property Income Trust Limited (formerly known as Teesland Advantage Property Income Trust Limited). 

Subsidiaries:

TAPP Property Limited (a property holding Guernsey company)

TOPP Holdings Limited (a Guernsey company)

Subsidiaries of TAPP Property Limited:

TAPP Hemel Hempstead Limited (a UK company)

TAPP Manchester Limited (a UK company)

TAPP Maidenhead Limited (a property holding Guernsey company)

TAPP Northampton Limited (a UK company)

Acopia Limited (a Jersey company)

Alta Rica Limited (a Jersey company)

De-Di Investments Limited (a Jersey company which was dissolved 30 January 2008)

Heatherhill Property Limited (a Jersey company which was dissolved 30 January 2008)

Southgate Limited (a Jersey company which was dissolved 30 January 2008)

Coleridge (Fleet GP) Limited (a UK company)

Loch (Warrington GP) Limited (a UK company)

All of the above subsidiaries are dormant except for TAPP Maidenhead Limited.

Subsidiaries of TOPP Holdings Limited:

TOPP Bletchley Limited (a property holding Guernsey company)

TOPP Property Limited (a property holding Guernsey company)

All subsidiaries are 100% owned by The Advantage Property Income Trust Limited.

Directors of the Company

Christopher N Fish 

Robert J Bould

Caroline M Burton 

Charles N K Parkinson

Nicholas C M Renny

No director past or present had or has a contract of employment with the Company.

COMPANY SUMMARY

Name change

At the Annual General Meeting of the Company held on 27 May 2008 the shareholders passed a special resolution to change the Company's name to The Advantage Property Income Trust Limited.

Share Capital

As at 30 June 2008, the Company had an authorised share capital of £1,750,000 divided into 175,000,000 Ordinary Shares of £0.01 each, of which 142,747,300 shares are in issue.

Inter-Company Loan Agreements

The Company enters into Inter-Company Loan Agreements with its subsidiary companies when appropriate. Interest is charged on these loans at a rate of 6.25%.

Bank Facility and Other Financing Arrangements

TAPP Property Limited has a facility with the Bank of Scotland of up to £98,320,000 repayable on or before 27 January 2015 secured by fixed and floating charges over the assets of the Group (the "HBOS Facility"). On 7 March 2008 the facility was changed to a revolver facility.

Repayments during the period to 30 June 2008 were:-

B/f 1 January 2008 £88,293,083

11 March 2008  (£8,000,000)

£80,293,083

Under the terms of the Revolver Facility the percentage of the Term Loan to the market value of the properties in which the Group has an interest shall not be greater than 55%. 

As at 30 June 2008 TOPP Property Limited maintained a facility with CapMark Bank Europe plc of up to £37,461,250, which had been fully drawn down.

Interest Rate Swap Agreements

TAPP Property Limited has entered into the following Interest Rate Swap Agreements with HBOS Treasury Services plc:-

Trade date 17 March 2005; Effective Date 5 May 2005 to 17 February 2015 on £22,000,000 at a fixed rate of 5.150% (plus 0.79% margin = 5.94%).

Trade date 22 March 2005; Effective Date 5 May 2005 to 17 February 2015 on £21,800,000 at a fixed rate of 5.135% (plus 0.79% margin = 5.925%).

Accounting policies - Basis of preparation

The accounting policies of the Group comply with IAS 34, as adopted by the European Union and applicable Guernsey law. In conforming with these standards, the financial statements include freehold and leasehold properties valued at their fair value based upon open market valuations provided by independent valuers.

Property Investments

Property Address
INDUSTRIAL	£55,545,000
BIRMINGHAM Europa House, Tilton Road
BOURNE END Units 1,2 & 3 Wessex Road Industrial Estate, Wessex Road
BRIGHOUSE Armytage Road
CLEVEDON Units 5a, 5b, 5c, 6a & 6b, Tweed Road Industrial Estate
HEMEL HEMPSTEAD  3 Cherry Trees Lane
KETTERING Travis Perkins/Kettering Tiles, Linnell Way
LIVINGSTON Kirkton Campus
MANCHESTER 1 St Modwen Road, Trafford Park
MANCHESTER Europa, Second Avenue, Trafford Park
MILTON KEYNES Advantage One, Third Avenue, Bletchley
NEWBURY Parceline Distribution Depot, Hambridge Lane
NORTHAMPTON 51 Caswell Road, Brackmills
NORTHAMPTON 53 Caswell Road, Brackmills
PORTSMOUTH Units A & B, Fisher Grove, Farlington
RUNCORN Units 1001/1004 Lime Court, Manor Park
SHEFFIELD Unit C, Thorncliffe Park Estate, Brookdale Road
STOKE-ON-TRENT Unit 1, Festival Trade Park, Festival Park
STRATFORD UPON AVON Swan Development, Avenue Farm Industrial Estate
STROUD Stroud Business Centre, Stonedale Road
INDUSTRIAL (CONTINUED)
SWINDON Pagoda Park, Mead Way
TELFORD Unit C, Hortonwood
UDDINGSTON Unit 6, Bedlay View, Tannochside Park
WITHAM 3,16 & 18 Freebournes Road
WORCESTER Unit 15b Blackpole Trading Estate
LEISURE	£9,300,000
DUNDEE Kingscourt Leisure Complex, Douglas Road
OFFICES	£78,550,000
FLEET Integration House, Ancells Business Park, Rye Close
FLEET Waterfront Business Park, Fleet Road
GUERNSEY National Westminster House, Le Truchot, St Peter Port
HEATHROW Princess House, Nobel Drive
LEEDS Brunswick Point
MAIDENHEAD Geoffrey House
NEWCASTLE UPON TYNE Hadrian House, Balliol Business Park
READING Associates House, Castle Street
STIRLING Laurel House, Laurel Hill Business Park
SWINDON The Orbit Centre, Ashworth Road, Bridgemead
WARRINGTON The Links, Kelvin Close
OFFICES (CONTINUED)
WELWYN GARDEN CITY Units 1/6 Silver Court, Watchmead
WHETSTONE Brook Point 1412-1420 High Road
RETAIL	£29,055,000
ABERDEEN 127 Union Street & 68/70 The Green
AYLESBURY  Market House, High Street
AYR  156&158/160 High Street
AYR 52/56 Newmarket Street
BAKEWELL Units 1-4, Rutland Square
BRIGHTON 5-8 London Road
FELIXSTOWE York House, 96/102a Hamilton Road
HINKLEY 70-76 Castle Street
HORSHAM 7 West Street
HUYTON 32-36 Derby Road
LEICESTER 10 Cheapside
MAIDSTONE 27 Week Street
PALMERS GREEN 290-296 Green Lanes
RUGELEY Shrewsbury Arms Shopping Mall, High Street
SOUTHAMPTON 82 Above Bar Street
SUTTON Units 1 & 2, 153 High Street
TORQUAY 46 Union Street
RETAIL WAREHOUSE	£61,130,000
BIRMINGHAM Trident Retail Park
BLETCHLEY The Brunel Centre
COVENTRY Halfords, 36 Foleshill Road
DERBY Southgate Retail Park, Normanton Road
DOVER Halfords, Granville Street
HUDDERSFIELD Halfords Bradford Road
MITCHAM Halfords, 23 Streatham Road
NORTHAMPTON Halfords Weedon Road
NORWICH Halfords, Barker Street
NUNEATON Halfords, Newtown Road
SLOUGH Halfords, 380 Bath Road
SUTTON IN ASHFIELD Forest Retail Park, Forest Street
WINNERSH Halfords, Reading Road
WREXHAM Halfords, Mount Street
TOTAL	£233,580,000*

 

* Difference to Balance Sheet value of £233,452,400 due to accounting adjustment for UITF 28 lease incentive of £127,600

A description of important events that have occurred during the first six months of the financial year, their impact on the performance of the Company as shown in the financial statements and a description of the principal risks and uncertainties facing the Company for the remaining six months of the financial year is given in the Property Fund Adviser's Report on pages 6 to 9 and is incorporated here by reference.

There were no material related party transactions which took place in the first six months of the financial year.

This half-yearly financial report has been reviewed by Ernst & Young LLP pursuant to the Auditing Practices Board guidance on Review of Interim Financial Information and their Interim Review Report is included in its entirety at page 18.

Responsibility Statement

The Board of directors jointly and severally confirm that, to the best of their knowledge:

(a) The condensed set of financial statements, prepared in accordance with IAS 34 as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and that the interim management report herein includes a fair review of the information required by DTR 4.2.7R (an indication of important events during the first six months and a description of the principle risks and uncertainties for the remaining six months of the year) and by DTR4.2.8R (a disclosure of related party transactions and charges therein) of the Disclosure and Transparency Rules.

(b) This Interim Management Report includes or incorporates by reference:

a.  an indication of important events that have occurred during the first six months of the financial year and their impact on the financial statements;

b. a description of the principal risks and uncertainties for the remaining six months of the financial year;

c. confirmation that there were no related party transactions in the first six months of the current financial year that have materially affected the financial position or the performance of the Company during that period; and

d. confirmation that there have been no changes in the related parties transactions described in the last annual report that could have a material effect on the financial position or performance of the Company in the first six months of the current financial year.

Director Director

26 August 2008

INDEPENDENT REVIEW REPORT TO THE ADVANTAGE PROPERTY INCOME TRUST LIMITED

Introduction 

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the 6 months ended 30 June 2008 which comprises the Group Income Statement, Group Balance Sheet, Group Statement of Changes in Equity, Group Cash Flow Statement and the related notes 1 to 10. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. 

This report is made solely to the company in accordance with guidance contained in ISRE 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

Directors' Responsibilities 

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. 

As disclosed in note 1, the condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union.

Our Responsibility 

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. 

Scope of Review 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. 

Conclusion 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the 6 months ended 30 June 2008 is not prepared, in all material respects, in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. 

Ernst & Young LLP

Guernsey

26 August 2008

Group income statement

For the six months ended 30 June 2008

(unaudited)

		Six months to 30 June 2008	Six months to 30 June 2007	Year to 31 December 2007
	Notes	£	£	£
Revenue
Rental income from investment properties		8,390,724	8,039,702	16,566,782
Lease incentive charge		(244,310)	(233,392)	(475,785)
Net rental income		8,146,414	7,806,310	16,090,997
Expenditure
Property outgoings		(601,089)	(773,870)	(1,100,468)
Property fund adviser's fee		(1,014,295)	(1,156,429)	(2,279,743)
Other expenses		(397,764)	(334,176)	(745,191)
	3	(2,013,148)	(2,264,475)	(4,125,402)
Net operating profit for the period before finance costs		6,133,266	5,541,835	11,965,595
Gain/(Loss) from investments
Realised gain on sale of investment properties		56,192	622,978	802,214
Movement on unrealised (loss)/gain on revaluation of investment properties		(14,526,173)	2,072,319	(24,279,124)
		(14,469,981)	2,695,297	(23,476,910)
Finance income/(costs)
Interest receivable		207,010	159,836	365,875
Interest payable and similar charges		(3,574,694)	(2,982,705)	(6,771,549)
Amortised debt issue costs		(136,170)	(120,491)	(256,910)
Fair value gain/(loss) on interest rate swaps		1,941,494	2,251,471	(288,286)
		(1,562,360)	(691,889)	(6,950,870)
Net profit on ordinary activities before taxation		(9,899,075)	7,545,243	(18,462,185)
Taxation on net profit on ordinary activities	6	(38,953)	(99,656)	(121,809)
Net result for the period		(9,938,028)	7,445,587	(18,583,994)
Dividends per share	5	3.25p	3.25p	6.50p
(Loss)/Earnings per share	7	(6.96p)	5.22p	(13.02p)

The accompanying notes form an integral part of this income statement.

Group balance sheet as at 30 June 2008

(unaudited)

	Notes	As at	As at	As at
		30 June  2008	30 June  2007	31 December 2007
		£	£	£
Non-current assets
Investment properties		230,124,775	270,205,294	257,232,687
Reverse lease premium		3,327,625	3,807,706	3,565,313
	8	233,452,400	274,013,000	260,798,000
Current assets
Debtors		5,362,407	4,727,438	5,770,956
Cash and cash equivalents	4	7,302,775	8,046,580	4,922,431
		12,665,182	12,774,018	10,693,387
Total assets		246,117,582	286,787,018	271,491,387
Current liabilities
Financial liabilities		(6,016,251)	(6,910,447)	(7,017,870)
Income tax payable		(147,596)	(216,647)	(169,625)
		(6,163,847)	(7,127,094)	(7,187,495)
Non-current liabilities
Bank loans		(117,754,332)	(113,354,572)	(125,754,332)
Fair value of swap instrument		1,758,062	2,356,325	(183,432)
Debt issue costs		1,453,013	1,700,319	1,582,711
Deferred Tax		(387,441)	(92,778)	(348,488)
		(114,930,698)	(109,390,706)	(124,703,541)
Net assets		125,023,037	170,269,218	139,600,351
Represented by:
Share capital		1,427,473	1,427,473	1,427,473
Share premium		68,878,048	68,878,048	68,878,048
Reserves		54,717,516	99,963,697	69,294,830
Shareholders' funds		125,023,037	170,269,218	139,600,351

Net Asset Value per share

87.58p

119.28p

97.80p

The accompanying notes form an integral part of this balance sheet.

Approved by:

Christopher N Fish Nicholas C M Renny

Director Director

26 August 2008

Group statement of changes in equity 

For the six months ended 30 June 2008

(unaudited)

		Issued share capital			Revenue reserves						Total
			Share premium					Other  reserves
		£	£		£			£			£
Opening at 1 January 2008		1,427,473	68,878,048		69,706,994			(412,164)			139,600,351
Net result for the period		-	-		4,588,145			(14,526,173)			(9,938,028)
Current year crystallisation of unrealised property gain		-	-		1,729,352			(1,729,352)			-
Dividend paid		-	-		(4,639,286)			-			(4,639,286)
At 30 June 2008		1,427,473	68,878,048		71,385,205			(16,667,689)			125,023,037

For the six months ended 30 June 2007

(unaudited)

		Issued share capital			Revenue reserves						Total
			Share premium					Other  reserves
		£	£		£			£			£
Opening at 1 January 2007		1,427,473	68,844,113		72,588,604			24,568,792			167,428,982
Share issue expenses		-	33,935		-			-			33,935
Net gain for the period		-	-		5,373,268			2,072,319			7,445,587
Current year crystallisation of unrealised property gains		-	-		421,406			(421,406)			-
Prior year crystallisation of unrealised property gains		-	-		397,322			(397,322)			-
Dividend paid		-	-		(4,639,286)			-			(4,639,286)
At 30 June 2007		1,427,473	68,878,048		74,141,314			25,822,383			170,269,218
The accompanying notes form an integral part of this statement of changes in equity.

  Group cash flow statement

For the six months ended 30 June 2008

(unaudited)

						Six months ended  30 June 2008	Six months ended  30 June 2007	Year ended 31 December 2007
						£	£	£
Operating activities
Net operating profit for the period before finance costs						6,133,266	5,541,835	11,965,595
Adjustment for:
	Decrease/(increase) in operating debtors					408,277	(330,079)	(1,376,031)
	(Decrease)/increase in operating creditors					(499,900)	(716,327)	667,684
	Reverse premium amortisation					237,688	233,392	475,785
						6,279,331	4,728,821	11,733,033
	Interest received					207,010	157,130	365,875
	Interest paid					(4,018,031)	(2,045,328)	(6,388,889)
	Taxation paid					(22,029)	-	(111,961)
Net cash inflow from operating activities						2,446,281	2,840,623	5,598,058
Investing activities
Purchase of investment properties						(218,082)	(21,298,849)	(36,826,941)
Proceeds from sale of investment properties						4,932,903	9,383,828	11,288,674
Proceeds from insurance claim						7,865,000	-	-
Net cash inflow/(outflow) from investing activities						12,579,821	(11,915,021)	(25,538,267)
Financing activities
Share issue costs						-	(4,065)	(4,065)
Drawdown of bank loans						-	17,764,723	30,164,482
Repayment of bank loans						(8,000,000)	(948,750)	(948,750)
Debt issue costs paid						(6,472)	(134,986)	(153,797)
Dividends paid						(4,639,286)	(4,639,286)	(9,278,572)
Net cash (outflow)/inflow from financing activities						(12,645,758)	12,037,636	19,779,298
Net increase/(decrease) in cash and cash equivalents						2,380,344	2,963,238	(160,911)
Opening cash and cash equivalents						4,922,431	5,083,342	5,083,342
Closing cash and cash equivalents						7,302,775	8,046,580	4,922,431
The accompanying notes form an integral part of this cash flow statement.

NOTES TO THE FINANCIAL STATEMENTS

1 Basis of preparation

The consolidated financial statements of The Advantage Property Income Trust Limited as at 31 December 2007 were drawn up in accordance with International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board (IASB). The half year Group financial statements as at 30 June 2008, which have been prepared in accordance with International Accounting Standard 34 (Interim Financial Reporting), have been drawn up using the same accounting methods as in the 2007 Group financial statements. All interpretations of the International Financial Reporting Interpretations Committee (IFRIC), formerly the Standing Interpretations Committee (SIC), which were mandatory as at 30 June 2008, were also applied.

2 Accounting policies

The six months' figures are unaudited; the accounting policies and methods of computation followed are as stated in the last annual financial statements of the group. 

3 Property outgoings and other expenses

During the period the Company incurred £601,089 (2007: £773,870) property outgoing costs and £397,764 (2007: £334,176) of other expenses that did not generate rental income. During the period, the Company incurred £30,787 (2007: £56,208) of audit fees and £12,463 (2007: £8,250) of non audit fees due to the auditors. 

4 Cash and cash equivalents
	Six Months to 30 June 2008	Six Months to 30 June 2007	Year to 31 December 2007 Group
	Group	Group
	£	£	£
Cash at bank and in hand	5,302,775	8,046,580	4,922,431
Short term deposits	2,000,000	-	-
	7,302,775	8,046,580	4,922,431

5 Dividends
						Six Months to 30 June 2008	Six Months to 30 June 2007	Year to 31 December 2007 Group
						Group	Group
						£	£	£
Interim dividends paid						4,639,286	4,639,286	9,278,572
						4,639,286	4,639,286	9,278,572

During the period the Company paid two dividends, each comprising of 1.625 pence per each Ordinary Share. The dividends were paid in February and May.

In line with the prospectus, the Company will pay a third interim dividend of 1.625 pence per ordinary share in August 2008. 

 

6 Taxation
Tax on profit on ordinary activities
	Six Months to 30 June 2008	Six Months to 30 June 2007	Year to 31 December 2007
Current income tax:	£	£	£
UK Income Tax	-	99,656	(137,280)
Adjustments in respect of prior years	-	-	(89,399)
	-	99,656	(226,679)
Deferred Tax:
Origination and reversal of timing differences	38,953	-	348,488
Total deferred tax	38,953	-	348,488
Tax charge in the income statement	38,953	99,656	121,809

7 Earnings per share
						Six Months to 30 June 2008	Six Months to 30 June 2007	Year to 31 December 2007
						£	£	£
Profit used to calculate basic EPS						(9,938,028)	7,445,587	(18,583,994)
Weighted average number of shares						142,747,300	142,747,300	142,747,300

8 Investment properties
						Freehold	Long Leasehold	Total
Cost						£	£	£
At 1 January 2008						238,452,576	16,935,058	255,387,634
Additions during the period at cost						123,618	36,355	159,973
Disposals during the period at cost						(10,617,534)	(394,826)	(11,012,360)
At 30 June 2008						227,958,660	16,576,587	244,535,247
Revaluation
At 1 January 2008						243,303,000	17,495,000	260,798,000
Additions during the period at cost						123,618	36,355	159,973
Disposals during the period at valuation						(12,414,797)	(326,915)	(12,741,712)
Reverse lease premium						(225,152)	(12,536)	(237,688)
Revaluation movement in the period						(13,239,269)	(1,286,904)	(14,526,173)
At 30 June 2008						217,547,400	15,905,000	233,452,400
Valuation at 30 June 2008						217,547,400	15,905,000	233,452,400
Adjustment for lease incentive						127,600	-	127,600
Market valuation per external valuation						217,675,000	15,905,000	233,580,000

  

8 Investment properties (continued)

Cushman & Wakefield Healey & Baker, a firm of independent chartered surveyors, completed a valuation of the properties at the period end on an open market basis in accordance with the Practice Statements contained in the RICS Appraisal and Valuation Standards published by the Royal Institution of Chartered Surveyors ('Red Book') in May 2003. The valuation has been prepared by an appropriate valuer who conforms to the requirements as set out in the Red Book, acting in the capacity of external valuer.

9 Interest bearing loans and borrowings

Repayment of debt

On 11 March 2008, the Group repaid £8,000,000 of a secured bank loan bearing an interest rate of Libor + 0.74%.

Facility amendment

On 7 March 2008 the HBOS bank facility of £98,320,000 was amended to a credit revolver facility.

10 Related party transactions

The Group has undertaken transactions with companies related by virtue of their shareholding in The Advantage Property Income Trust Limited. 

Valad Asset Management (UK) Limited, a subsidiary company of Valad Holdings (UK) plc, charged the Group property fund adviser's fees of £1,062,038 (2007: £1,201,078) in the six month period. As at 30 June 2008, Valad Asset Management (UK) Limited was owed £522,267 (2007: £603,915).

DIRECTORS AND SERVICE PROVIDERS

Directors	Christopher N Fish (Chairman) Robert J Bould Caroline M Burton Charles N K Parkinson Nicholas C M Renny
Property Fund Adviser	Valad Asset Management (UK) Limited 5th Floor, 1 Mount Street London England  W1K 3NB
Administrator and Secretary (and Registered Office of Company)	Anson Fund Managers Limited Anson Place Mill Court La Charroterie St Peter Port Guernsey GY1 1EJ
Lending Bankers	The Governor and Company of the Bank of Scotland  155 Bishopsgate London England EC2M 3YB
	Capmark Bank Europe Plc 31 St James' Square London England SW1Y 4JJ
Auditors	Ernst & Young LLP 14 New Street St Peter Port Guernsey GY1 4AF
Registrar, Transfer Agent and Paying Agent	Anson Registrars Limited PO Box 426 Anson Place Mill Court La Charroterie St Peter Port Guernsey GY1 3WX
Property Valuers	Cushman & Wakefield Healey & Baker 43-45 Portman Square London England W1A 3BG

The Company's Ordinary Shares are listed and traded on the London Stock Exchange and the Channel Islands Stock Exchange.

SHAREHOLDER INFORMATION

 

REPORT AND FINANCIAL STATEMENTS

The Annual Financial Report for the period ended 31 December each year is intended to be sent to Shareholders in the following April.

The Half-Yearly Financial Report for the period ended 30 June each year is intended to be made public in the following August and sent to Shareholders in the following September.

DIVIDENDS

The Company intends to declare and pay a dividend in each of the months of February, May, August and November.

SHARE DEALING

Shares may be dealt in directly through a stockbroker or professional adviser acting on an investor's behalf. The buying and selling of shares may be settled through CREST.

The SEDOL for Ordinary Shares is B05LNH5.

The ISIN for Ordinary Shares is GB00B05LNH59.

The Company's Registrar, Transfer Agent and Paying Agent is Anson Registrars Limited at the address given below.

The Company's UK Transfer Agent is Anson Administration (UK) Limited, 3500 Parkway, Whiteley, Fareham, Hampshire, England, PO15 7AL.

SHAREHOLDER ENQUIRIES

The Company's Registrar is Anson Registrars Limited at PO Box 426, Anson Place, Mill Court, La Charroterie, St Peter Port, Guernsey GY1 3WX. They can be contacted by telephone on 01481 711301 or by e-mail at registrars@anson-group.com

Anson Fund Managers Limited

27 August 2008

 

E&OE - in transmission

END OF ANNOUNCEMENT

ENDIR ILFFTTDIRFIT

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