Half Yearly Report

RNS Number : 5650M

Alpha Pyrenees Trust Limited

18 August 2011

 



18 August 2011

ALPHA PYRENEES TRUST LIMITED
("ALPHA PYRENEES TRUST" OR THE "TRUST" OR THE "COMPANY")

ALPHA PYRENEES TRUST POSTS RESULTS FOR THE HALF YEAR ENDED 30 JUNE 2011:

18,200 SQUARE METRES OF LEASE EXTENSIONS AND NEW LEASES

EARNINGS PER SHARE 1.8p (ADJUSTED)

DIVIDEND MAINTAINED AT 0.9p PER SHARE FOR THE SECOND QUARTER

NET ASSET VALUE 28.7p PER SHARE (ADJUSTED)

Alpha Pyrenees Trust Limited, the property company investing primarily in commercial real estate in France, today posts its results for the half year to 30 June 2011.

The Trust announced adjusted earnings of £2.1 million (1.8p per share) for the period together with the declaration of a further dividend of 0.9p per share in respect of the second quarter. The Trust has now paid and declared dividends totalling 1.8p per share for the half year to 30 June 2011.

Highlights of the period to 30 June 2011 include:

·      Lease extensions and new leases covering approximately 18,200 square metres achieved since 1 January 2011

·      91% of the Trust's portfolio by value is in France

·      French economy has continued to grow in the first half of 2011

·      84% of rental income comes from Grade A tenants

·      No loan to value covenant tests on any of the Trust's properties until February 2014; interest cover ratio covenant of 110% (average interest cover in H1 2011 of 168%)

·      99% of borrowings are fixed long term at a weighted average interest rate of 5.26% per annum to maturity in February 2015

·      Current portfolio valuation yield of 8.4%

·      Rental indexation trend improving

·      Weighted average lease length of 6.8 years to expiry and 3.5 years to next break

·      Adjusted earnings of £2.1 million for the six months to 30 June 2011 (adjusted earnings per share of 1.8p)

·      Dividend of 0.9p per share paid for the quarter to 31 March 2011 and a further dividend of 0.9p per share declared for the quarter to 30 June 2011

·      NAV (adjusted) of 28.7p per share as at 30 June 2011 (31 December 2010: 34.0p); the change is primarily due to net movements on currency hedges

Dick Kingston, Chairman of Alpha Pyrenees Trust, commented:

"Management emphasis during the period has continued to focus on active asset management within the existing portfolio, with particular emphasis on the extension of lease terms and the letting of vacant units to secure the Trust's income and the Board is pleased to note the important progress achieved on this front. Despite continuing uncertainty in financial markets, the French economy remains one of the better performing in Europe and leasing take-up has shown some signs of improvement. As tenants become more active, the Trust should be in a position to exploit opportunities that have been identified to add value at some of the Trust's properties. With this in mind the Board believes that it is sensible to conserve available cash for future investment in such opportunities. The Board has taken into consideration the current market conditions and progress on leasing and other initiatives that are being pursued and has maintained the dividend of 0.9p per share for the second quarter of 2011."

Paul Cable, Fund Manager, Alpha Real Capital LLP, commented:

"The Trust owns a diversified portfolio of properties focused primarily on the French property market which represents 91% of the portfolio by value of which 82% by value is located in the Ile-de-France region which remains one of Europe's more stable markets. The properties are generally well let, well located and offer good value accommodation to the Trust's occupiers and 84% of the Trust's current rent roll is secured by leases to Grade A tenants. The trend in rental indexation continues to improve for both France and Spain. The Investment Manager will continue to concentrate on opportunities that exist within the Trust's property portfolio to add value through active asset management and targetted investment." 

Contact:

Dick Kingston
Chairman, Alpha Pyrenees Trust Limited
01481 735540

Paul Cable
Fund Manager, Alpha Real Capital LLP                                            
020 7268 0300

For more information on the Trust please visit www.alphapyreneestrust.com.

For more information on the Trust's Investment Manager please visit www.alpharealcapital.com.

FORWARD-LOOKING STATEMENTS

These results contain forward-looking statements which are inherently subject to risks and uncertainties because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements.  Forward-looking statements are based on the Board's current view and information known to them at the date of this statement. The Board does not make any undertaking to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Nothing in these results should be construed as a profit forecast

ALPHA PYRENEES TRUST LIMITED

Half Year Report for the period ending 30 June 2011

Trust summary and objective

Objective

Alpha Pyrenees Trust Limited ("the Trust" or "the Company" or "Alpha Pyrenees") primarily invests in higher-yielding properties in France, focusing on commercial property in the office, industrial, logistics and retail sectors let to tenants with strong covenants.

The Trust seeks to provide shareholders with a regular, secure dividend stream whilst also having the potential for capital growth in the long term from a combination of rent increases (leases are typically indexed to increase in line with inflation) and active asset management.

The Trust seeks to diversify risk by investing in a portfolio spread of properties across different property sectors with a variety of tenants.

Dividends

Dividends are paid quarterly.

Listing

The Trust is a closed-ended Guernsey registered investment company which has been declared under the relevant legislation to be an Authorised Closed-Ended Collective Investment Scheme. Its shares are listed on the Official List of the UK Listing Authority and traded on the London Stock Exchange.

Management

The Trust's Investment Manager is Alpha Real Capital LLP ("the Investment Manager"). Control of the Trust rests with the non-executive Guernsey-based Board of Directors.

ISA/SIPP status

The Trust's shares are eligible for Individual Savings Accounts (ISAs) and Self Invested Personal Pensions (SIPPs).

Financial highlights

	Half year ending 30 June 2011	Year ending 31 December 2010	Half year ending 30 June 2010
Net asset value (adjusted) (£'000)*	33,740	39,921	40,972
Net asset value per ordinary share (adjusted)*	28.7p	34.0p	34.9p
Net asset value per ordinary share	15.0p	17.1p	12.7p
Earnings per share (adjusted - basic & diluted)**	1.8p	3.6p	1.8p
Earnings per share (basic & diluted)	(0.1)p	4.9p	0.1p
Dividend per share (paid)	2.7p	3.6p	2.7p

*
The net asset value and net asset value per ordinary share have been adjusted for the fair value mark-to-market revaluation of the interest component of the currency swap, the interest rate swap derivatives and deferred tax provisions; full analysis is given in note 10 to the accounts.

**
The adjusted earnings per share includes adjustments for the effect of the fair value mark-to-market revaluation of the properties, currency swap and interest rate swap derivatives, deferred tax provisions, rental guarantee income and foreign exchange gains and losses. A full analysis is given in note 9 to the accounts.

Chairman's statement

Management emphasis during the period has continued to focus on active asset management within the existing portfolio with particular emphasis on the extension of lease terms and the letting of vacant units to secure the Trust's income. The Board is pleased to note the important progress achieved on this front, most notably at the Fresnes, Roissy, Ivry and Vitry properties. During the period lease extensions or new leases were achieved on a total of approximately 18,200 square metres representing around 7% of the portfolio by area. Further detail on asset management progress appears in the Property review section.

Despite continuing uncertainty in financial markets, the French economy remains one of the better performing in Europe and leasing take-up has shown some signs of improvement. As tenants become more active the Trust should be in a position to exploit opportunities that have been identified to add value at some of the Trust's properties. With this in mind the Board believes that it is sensible to conserve available cash for investment in such opportunities.

Results and dividend

Results for the period show adjusted earnings of £2.1 million and adjusted earnings per share of 1.8p (note 9).

The Trust continues to operate in a leasing environment characterised by higher vacancy and generally longer re-leasing periods. The Trust currently has vacant space with an estimated annual rental value of approximately £2.7 million (€3 million) and predicting the timing and level of re-leasing that will be achieved remains difficult. The Trust's earnings have also been constrained by the strategic decision to retain substantial cash reserves (£15.8 million), which earn a low rate of return at present, in order to maximise the Trust's future flexibility. The Board has taken into consideration the current market conditions and progress on leasing and other initiatives that are being pursued and has maintained the dividend for the second quarter to 30 June 2011.

The dividend of 0.9p for the second quarter will be payable to the shareholders on the register as of 16 September 2011 and will be paid on 10 October 2011. This brings the total dividend for the period to 30 June 2011 to 1.8p per share. No scrip alternative will be offered for this dividend.

Revaluation and Net Asset Value

Investment properties are included in the balance sheet at an independent valuation of £265.7 million (€295.7 million) providing an average valuation yield across the portfolio of 8.4% as at 30 June 2011.

The portfolio totals approximately 262,000 square metres (approximately 2.8 million square feet) and many of the tenants are well known companies belonging to large groups with strong covenants such as, Alcatel‑Lucent, Aldi, BNP Paribas, Carrefour, Credit Lyonnais, GlaxoSmithKline, Husqvarna, Klöckner Group, La Poste, MediaMarkt, McDonalds, Norauto, OCP, Plastic Omnium, Saint Gobain, and Vinci Group. Grade A tenants also include government or quasi-government bodies and together the rent from such tenants accounts for 84% of the Trust's rental income.

The weighted average lease length within the portfolio is currently 6.8 years to expiry and 3.5 years to the next break.

As at 30 June 2011 the adjusted net asset value per ordinary share is 28.7p (note 10). The change in adjusted net asset value from 31 December 2010 (34.0p per share) is primarily due to net movements on currency hedges.

Portfolio Summary 

Country	Property	Sqm		Description	Valuation £m	Valuation €m
France	Villarceaux-Nozay	78,800		Business park	112.6	125.3
France	Aubervilliers	8,750		Offices	19.3	21.5
France	Goussainville	20,500		Warehouse and offices	14.9	16.6
France	Champs sur Marne	5,930		Offices	12.6	14.0
France	Aubergenville	27,700		Logistics	9.9	11.0
France	St Cyr L'Ecole	6,340		Offices	9.3	10.4
France	Athis Mons	23,280		Logistics with offices	8.8	9.8
France	Gennevilliers	3,330		Offices with light industrial	8.4	9.4
France	Mulhouse	5,250		Offices	7.9	8.8
France	Evreux	14,130		Logistics with offices	7.5	8.3
France	Nimes	3,100		Offices and retail	7.3	8.1
France	Roissy-en-France	7,800		Offices and warehouse	7.0	7.8
France	Ivry-sur-Seine	7,420		Warehouse and offices	6.1	6.8
France	Fresnes	6,540		Warehouse and offices	5.0	5.6
France	Vitry-sur-Seine	5,180		Warehouse and offices	4.8	5.3
Spain	Córdoba	16,880		Retail park	15.3	17.0
Spain	Zaragoza	9,520		Warehouses	3.4	3.8
Spain	Écija	5,950		Shopping centre	2.8	3.1
Spain	Alcalá de Guadaíra	5,700		Shopping centre	2.8	3.1
Total		262,100			265.7	295.7

Finance

The Trust has total borrowings of £218.5 million (€243.2 million) as at 30 June 2011 under its facilities with Barclays Bank PLC.

The key features of the Trust's borrowings are:

·      No loan to value ("LTV") covenant test until February 2014 on any of the Trust's properties.

·      Long term maturities - the French (€221.0 million) and Spanish (€22.2 million) borrowings mature in February 2015.

·      99% of borrowings have interest rates that are fixed to maturity at a weighted average rate of 5.26% per annum.

·      Interest cover ratio ("ICR") covenant is set at 110% - the Trust's weighted average ICR over the six months to 30 June 2011 was 168%.

·      On the LTV test date in February 2014, the Trust's LTV should not exceed 87.5% on a country portfolio basis (with the exception of the Alcatel-Lucent property, Villarceaux-Nozay, where it should not exceed 85%). The weighted average loan to value covenant is 86.5%. As at 30 June 2011 the Trust has net leverage of 76.3% (taking into account cash of £15.8 million).

·      The French and Spanish borrowings are independent and are not cross-collateralised.

The Trust holds £15.8 million of cash and un-mortgaged properties with a value of £7.3 million (€8.1 million) as at 30 June 2011.

Currency hedge instruments are in place that significantly protect the conversion of the shareholders' original equity back to Sterling.

Market outlook

·      Leasing activity in the French and Spanish markets has remained subdued over the period reflecting economic conditions, although the Trust has achieved lease extensions and new leases on 18,200 square meters (7% of its portfolio) since 1 January 2011.

·      Vacancy rates and take-up in our principal occupational markets have stabilised. In the Paris region (Ile-de-France), where the majority of the Trust's portfolio is situated, office vacancy remains low at 6.7% and significant oversupply appears unlikely in the medium term.

·      The Trust's portfolio with 84% of current income from Grade A tenants is significantly insulated from weaker covenants.

·      In France, the annualised construction cost index showed positive growth for the fifth consecutive quarter running at 3.05% in the first quarter of 2011. In Spain, CPI was running at an annualised rate of 3.2% at the end of June 2011.

·      The French economy remains one of the better performing in Europe with positive growth in GDP since the second quarter of 2009.

·      Valuation yields have stabilised and investment confidence in our principal market continues.

Summary

·      The Trust owns a diversified freehold portfolio of properties totalling £265.7 million (€295.7 million) with an average valuation yield of 8.4% at the June valuation.

·      The Trust's leases are subject to annual index-linked rent reviews, which are positive in both markets.

·      84% of the Trust's rental income comes from Grade A tenants with a strong capacity to pay.

·      The Trust's current average lease length is 6.8 years to expiry and 3.5 years to the next break.

·      99% of borrowings are fixed long term at a weighted average interest rate of 5.26% per annum to maturity in February 2015.

·      There are no LTV covenant tests on any of the Trust's borrowings before February 2014.

·      The outlook for property investment in the Trust's principal market continues to show signs of improving.

·      The Trust's cash reserves of £15.8 million leave it well positioned to redeploy some of the low-returning cash in value added opportunities within the existing portfolio as markets continue to improve and tenant activity increases.

Dick Kingston
Chairman
17 August 2011

Statement of Directors' Responsibilities

The Directors confirm that this condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the European Union, and that the interim management report herein includes a fair review of the information required by the United Kingdom's Financial Services Authority's Disclosure and Transparency Rules 4.2.7 and 4.2.8.

The Directors of Alpha Pyrenees Trust Limited are listed on page 24 and have been Directors throughout the period.

By order of the Board

Dick Kingston
Chairman
17 August 2011

Property review

Portfolio overview

The Trust owns a portfolio of fifteen properties in France and four properties in Spain totalling approximately 262,000 square metres (approximately 2.8 million square feet) of commercial real estate. The properties are generally well let, well located and offer good value accommodation to occupiers. Of the total property portfolio, 91% is invested in France and 9% in Spain in terms of capital value.

The valuation of the portfolio as at 30 June 2011 was approximately £265.7 million (€295.7 million) giving an average valuation yield of 8.4% with the French portfolio producing an average valuation yield of 8.4% and the Spanish portfolio 8.5% respectively. The portfolio as a whole showed a small valuation decline of 0.1% on a Euro like-for-like basis compared to 31 December 2010. This consisted of a decline of 0.2% in the French portfolio and an increase of 0.4% in the Spanish portfolio.  The average capital value of the portfolio is approximately £1,013 (€1,128) per square metre (equivalent to £94 per square foot) and the average rental value is approximately £93 (€104) per square metre per annum (equivalent to £8.65 per square foot). Of the overall portfolio, 82% by value is located within the Ile-de-France region around Paris. The portfolio has 67% exposure to the French office and business park sector of which 61% of the total portfolio is in the Ile-de-France region. The reinstatement cost of the portfolio buildings has been assessed at £246 million (€274 million) representing approximately 93% of current value.

The Trust's portfolio is diversified across business sectors with 67% in offices and business park property, 25% in warehouses and 8% in retail.

The portfolio benefits from strong credit tenants with 84% of its current rent roll secured by leases to Grade A tenants (large international/national companies or public sector). Examples of those categorised as Grade A are given in the Chairman's Statement.

The portfolio also enjoyed a level of average occupancy of 89% measured by rental income as a percentage of potential total income with vacancy representing 11%.

The weighted average lease length as at 30 June 2011 is 6.8 years to expiry and 3.5 years to next break.

Asset management review

The Investment Manager has continued to concentrate on active asset management and property management initiatives, including investment within the existing portfolio, to secure the Trust's income and we are pleased to report a number of important achievements since 1 January 2011 in the following areas:

·      extending the lease maturity profile of the property portfolio through lease extensions, and,

·      letting of vacant units.

More generally, the Trust maintains a close relationship with all its tenants and is in regular discussions to establish their potential needs for lease extensions and building extensions at the properties they occupy.

Strong attention continues to be given to ensuring service charges are spent effectively, the annual level of property costs is closely monitored and additional sources of income are identified.

France

Fresnes - the main tenant, Exapaq, part of the La Poste Group extended the term of their lease on 5,230 square metres of warehouse space. The fixed length of their lease was extended by 7 years through signing a new 9 year lease without breaks with effect from 1 January 2011 at a market rent.

Roissy - OCP Repartition, a leading distributor of pharmaceuticals, extended the term of their lease on a 4,735 square metre logistics unit until June 2014.

Ivry - GTIE Telecoms, part of the Vinci Group extended their lease until December 2014 on 1,350 square metres of offices and Metallerie Marie extended their lease until April 2014 on an 835 square metre light industrial unit.

Vitry - a new 6/9 year lease from 1 April 2011 has been signed with GFF on a 330 square metre vacant light industrial unit and a new 3/6/9 year lease from 15 April 2011 has been signed with SCR on a 360 square metre light industrial unit. Mediapost and Stanbridge extended their respective leases until March 2014 on 895 square metre and 500 square metre light industrial units.

Goussainville - a new 3/6/9 year lease from 1 March 2011 has been signed with Cabinet Rabec on 385 square metres of vacant office space. AMPS extended their lease until November 2013 on 200 square metres of offices.

Mulhouse - BNP Paribas extended their lease until November 2014 on 610 square metres of banking hall and offices.

Nimes - France Telecom extended their lease until February 2014 on a 215 square metre retail unit.

Spain

Five new leases were signed on the Spanish properties; four units at Ecija totaling 290 square metres and one at Alcala on a 40 square metre unit.

Cordoba - Sprinter extended their lease until September 2012 on their 2,000 square metre retail unit.

Ecija - Balmont and Imagina Sport extended leases until 2012 on their 115 square metre and 100 square metre retail units.

Market overview

The property markets in France and Spain remain characterised by higher vacancy and longer re-leasing periods reflecting the cautious approach resulting from concerns over the business climate and economy. These trends are more marked in Spain where the economic conditions remain more challenging than in France.

France

After an annual growth of 1.4% in 2010, France showed GDP growth of 0.9% in the first quarter of 2011 but this growth leveled off in the second quarter and GDP is forecast to grow by around 1.5% over 2011. As at June 2011 manufacturing output showed a year-on-year increase of 3.8% but on a slowing trend and household consumption expenditure has slowed over the second quarter. France still benefits from a high household saving rate and low household debt and the economy has been supported by a relatively modest labour market downturn, with the unemployment rate decreasing 0.1% in the first quarter of 2011 to stand at 9.2%. In July 2011 the consumer price index showed a 1.9% increase year-on-year.

Of the total property portfolio, 91% is in France, 82% is in the Ile-de-France and 61% is in Ile-de-France office and business park space.

Despite the economic and financial markets' uncertainties, the Paris region remains one of Europe's more stable office markets. In the first half of 2011 take-up in the Ile-de-France increased to 1.1 million square metres which was 3% higher than the same period last year. There was letting activity across different size requirements, business sectors and geographic spread.  The financial services and industrial sectors remained the largest in terms of take-up, together accounting for 46%. The information technology, industry and transport, logistics and distribution sectors had a higher share of the take-up than in previous quarters with 20% combined.

The average office rent in Ile-de-France has remained broadly stable year-on-year at €306 per square metre per annum as at 1 July 2011. The slight fall in Central Paris rents in the second quarter is due to the scarcity of properties available that command the highest rents and the consequent lack of comparable transactions. The majority of the remaining market has tended to remain stable.

The office vacancy rate for the Paris region has fallen slightly to 6.7% and the prospect of a future shortage of good quality office space in Paris CBD and La Défense has encouraged the resumption of selective development projects in these areas. The low volume of speculative development in other parts of the Ile-de-France office market means that in the medium term there is little prospect of significant over supply emerging.

Spain

The Spanish economy is growing gradually with a quarter-on-quarter growth of 0.3% in the first quarter and 0.2% in the second quarter of 2011. As a result the year-on-year growth in GDP was 0.7% in the second quarter of 2011 due primarily to an increase in the exports of goods and services and a slight moderation in imports. However, the unemployment rate has increased to over 21% in the first quarter which continues to have a detrimental effect on household income. In June 2011 the consumer price index showed a 3.2% increase year-on-year which was slightly lower than the 3.6% increase registered in March.

Although there are currently a few tentative signs of stabilisation, with fiscal tightening, Spain still looks set to lag behind its neighbours in the north of the euro-zone and with GDP having shrunk by 0.1% in 2010 it is forecast to grow by  a moderate 0.5% in 2011.

Rental indexation

The trend in rental indexation continues to improve for both France and Spain. The INSEE Construction Cost Index, applicable to the Trust's leases in France, has shown annualised growth for the last five published quarters as a result of which the annual indexation base as at Q1 2011 increased to  3.05% (1.73% Q4 2010). The Spanish Consumer Price Index, applicable to the Trust's leases in Spain, was running at an annualised rate of increase of 3.2% as at the end of June 2011.

Paul Cable
For and on behalf of the Investment Manager

17 August 2011

Independent review report

To Alpha Pyrenees Trust Limited

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half yearly report for the six months ended 30 June 2011 which comprises the consolidated statement of comprehensive income, consolidated balance sheet, consolidated cash statement, consolidated statement of changes in equity and related notes. 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.

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 interim financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. 

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union.  The condensed set of financial statements included in this half-yearly financial report have 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 report based on our review.  This report, including the conclusion, has been prepared for, and only for, the Company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose.  We do not, in producing this report, accept or assume responsibility for 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 (UK and Ireland) 2410, 'Review of Interim 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 six months to 30 June 2011 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

Chartered Accountants

Place du Pré

Rue du Pré

St Peter Port

Guernsey

17 August 2011

Condensed consolidated statement of comprehensive income

		For the six months ended 30 June 2011 (unaudited)			For the six months ended 30 June 2010 (unaudited)
	Notes	Revenue £'000	Capital £'000	Total £'000	Revenue  £'000	Capital £'000	Total £'000
Income
Revenue	3	12,808	-	12,808	12,228	-	12,228
Property operating expenses		(2,871)	-	(2,871)	(2,457)	-	(2,457)
Net rental income		9,937	-	9,937	9,771	-	9,771
Expenses
Net change in losses on revaluation of investment properties	11	-	(924)	(924)	-	(2,138)	(2,138)
Investment  Manager's fee		(1,023)	(439)	(1,462)	(962)	(413)	(1,375)
Other administration costs		(603)	-	(603)	(606)	-	(606)
Operating profit/(loss)		8,311	(1,363)	6,948	8,203	(2,551)	5,652
Finance income	4	103	6,051	6,154	36	12,798	12,834
Finance costs	5	(6,335)	(6,670)	(13,005)	(6,446)	(11,915)	(18,361)
Profit/(loss) before taxation		2,079	(1,982)	97	1,793	(1,668)	125
Taxation	7	-	(185)	(185)	-	-	-
Profit/(loss) for the period		2,079	(2,167)	(88)	1,793	(1,668)	125
Other comprehensive income
Foreign exchange gains/(losses) on translation of foreign operations (translation reserve)		-	826	826	-	(1,349)	(1,349)
Other comprehensive income/(expense) for the period		-	826	826	-	(1,349)	(1,349)
Total comprehensive income/(expense) for the period		2,079	(1,341)	738	1,793	(3,017)	(1,224)
Earnings per share  - basic & diluted	9			(0.1)p			0.1p
Adjusted earnings per share  - basic & diluted	9			1.8p			1.8p

All items in the above statement derive from continuing operations.

The accompanying notes below are an integral part of this statement.

Condensed consolidated balance sheet

	Notes	30 June 2011 (unaudited) £'000	31 December 2010 (audited) £'000
Non-current assets
Investment properties	11	265,669	253,502
Current assets
Trade and other receivables	12	17,917	14,425
Cash and cash equivalents		15,794	15,541
		33,711	29,966
Total assets		299,380	283,468
Current liabilities
Trade and other payables	13	(7,630)	(2,877)
Bank borrowings	14	(1,624)	(1,673)
		(9,254)	(4,550)
Total assets less current liabilities		290,126	278,918
Non-current liabilities
Financial liabilities at fair value through profit or loss	15	(53,195)	(50,262)
Bank borrowings	14	(216,293)	(205,854)
Rent deposits		(2,818)	(2,769)
Deferred Taxation	7	(185)	-
		(272,491)	(258,885)
Total liabilities		(281,745)	(263,435)
Net assets		17,635	20,033
Equity
Share capital	16	-	-
Share premium account	16	-	2,500
Special reserve		113,131	110,592
Translation reserve		23,487	22,661
Capital reserve		(121,755)	(119,588)
Revenue reserve		2,772	3,868
Total equity		17,635	20,033
Net asset value per share	10	15.0p	17.1p
Net asset value per share (adjusted)	10	28.7p	34.0p

The half-year financial statements were approved by the Board of Directors and authorised for issue on 17 August 2011.

David Jeffreys                                                                                                        Serena Tremlett

Director                                                                                                                   Director

The accompanying notes below are an integral part of this statement.

Condensed consolidated cash flow statement

	For the six months ended 30 June 2011 (unaudited) £'000	For the six months ended 30 June 2010 (unaudited) £'000
Operating activities
(Loss)/profit for the period	(88)	125
Adjustments for :
Net change in losses on revaluation of investment properties	924	2,138
Deferred taxation	185	-
Finance income	(6,154)	(12,834)
Finance costs	13,005	18,361
Operating cash flows before movements in working capital	7,872	7,790
Movements in working capital:
(Increase) / decrease in operating trade and other receivables	(2,015)	1,374
Decrease / (increase) in operating trade and other payables	4,802	(309)
Cash generated from operations	10,659	8,855
Interest received	93	36
Swap interest paid	(453)	(503)
Bank loan interest paid and costs	(5,586)	(5,636)
Other finance costs	-	(165)
Taxation	-	-
Cash flows from operating activities	4,713	2,587
Investing activities
Capital expenditure	(596)	(451)
Cash flows from Investing activities	(596)	(451)
Financing activities
Currency swap collateral (paid)/received	(1,023)	2,917
Repayment of borrowings	(191)	(196)
Dividends paid	(3,136)	(3,173)
Cash flows from financing activities	(4,350)	(452)
Net (decrease) / increase in cash and cash equivalents	(233)	1,684
Cash and cash equivalents at beginning of period	15,541	16,430
Exchange translation movement	486	(1,817)
Cash and cash equivalents at end of period	15,794	16,297

The accompanying notes below are an integral part of this statement.

Condensed consolidated statement of changes in equity

For the six months ended 30 June 2011 (unaudited)	Share capital £'000	Share premium £'000	Special reserve £'000	Warrant reserve £'000			Translation reserve £'000	Capital reserve £'000	Revenue reserve £'000	Total reserves £'000
At 1 January 2011	-	2,500	110,592		-	22,661		(119,588)	3,868	20,033
Total comprehensive income/(expense) for the period	-	-	-		-	826		(2,167)	2,079	738
Share premium transfer	-	(2,500)	2,500		-	-		-	-	-
Dividends	-	-	-		-	-		-	(3,175)	(3,175)
Scrip dividend	-	-	39		-	-		-	-	39
At 30 June 2011	-	-	113,131		-	23,487		(121,755)	2,772	17,635

For the six months ended 30 June 2010 (unaudited)	Share capital £'000	Share premium £'000	Special reserve £'000	Warrant reserve £'000	Translation reserve £'000	Capital reserve £'000	Revenue reserve £'000	Total reserves £'000
At 1 January 2010	-	2,500	110,462	130	23,571	(121,682)	4,395	19,376
Total comprehensive income/(expense) for the period	-	-	-	-	(1,349)	(1,668)	1,793	(1,224)
Dividends	-	-	-	-	-	-	(3,173)	(3,173)
At 30 June 2010	-	2,500	110,462	130	22,222	(123,350)	3,015	14,979

The accompanying notes below are an integral part of this statement.

Notes to the financial statements

1. General information

The Company is a limited liability, closed-ended investment company incorporated in Guernsey, which has been declared under the relevant legislation to be an Authorised Closed-Ended Collective Investment Scheme. The Group comprises the Company and its subsidiaries. The Group invests in commercial property in France and Spain with inflation-indexed rents that will provide an income return to investors as well as potential for capital growth. These financial statements are presented in pounds Sterling as this is the currency in which the funds are raised and in which the investors are seeking a return. The Company's functional currency is Sterling and the subsidiaries' currency is Euros. The presentational currency of the Group is Sterling. The period-end exchange rate used is £1:€1.113 (December 2010: £1:€1.168) and the average rate for the period used is £1:€1.152 (June 2010: £1:€1.147).

2. Significant accounting policies

The unaudited condensed financial information included in the half year report for the six months ended 30 June 2011, have been prepared in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority and International Accounting Standard (IAS) 34, 'Interim Financial Reporting' as adopted by the European Union. The half year report should be read in conjunction with the Group's Annual Report and Accounts for the year ended 31 December 2010, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union.

The same accounting policies and methods of computation are followed in these condensed financial statements as were applied in the preparation of the Group's financial statements for the year ended 31 December 2010, which are available on the Company's website (www.alphapyreneestrust.com).

The Directors considered all relevant new standards, amendments and interpretations to existing standards effective for the half year report for the six months ended 30 June 2011: their adoption has not led to any changes in the Groups accounting policies and they had no material impact on the financial statements of the Group.

The interim condensed financial statements are made up from 1 January 2011 to 30 June 2011, and have been prepared under the historical cost convention as modified by the revaluation of investment properties and the mark to market of derivative instruments.

The preparation of the interim condensed financial statements requires Directors to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the date of the condensed interim financial statements. If in the future such estimates and assumptions, which are based on the Directors' best judgement at the date of the interim condensed financial statements, deviate from actual circumstances, the original estimates and assumptions will be modified as appropriate in the period in which the circumstances change.

3. Revenue

	1 January 2011 to 30 June 2011 £'000	1 January 2010 to 30 June 2010 £'000
Rental income	10,734	10,412
Service charge income	2,074	1,816
Total	12,808	12,228

4. Finance income

	1 January 2011 to 30 June 2011 £'000	1 January 2010 to 30 June 2010 £'000
Bank interest income	103	36
Foreign exchange gain	1,552	-
Net gains on financial liabilities at fair value through profit or loss (note 6)	4,499	12,798
Total	6,154	12,834

5. Finance costs

	1 January 2011 to 30 June 2011 £'000	1 January 2010 to 30 June 2010 £'000
Interest on bank borrowings	5,568	5,540
Loan fee amortisation	298	326
Foreign exchange loss	-	3,614
Net losses on financial liabilities at fair value through profit or loss (note 6)	7,123	8,774
Other charges	16	107
Total	13,005	18,361

6. Net gains and losses on financial assets and liabilities at fair value through profit or loss

	1 January 2011 to 30 June 2011 £'000	1 January 2010 to 30 June 2010 £'000
Net change in unrealised gains and losses on financial assets and liabilities held at fair value through profit or loss
Currency swaps	(6,670)	12,798
Interest rate swap	4,499	(8,271)
Net realised gains and losses on financial assets and liabilities held at fair value through profit or loss
Currency swaps - interest received	4,281	4,331
Currency swaps - interest paid	(4,734)	(4,834)
Net expense from currency swaps	(453)	(503)
Net (loss)/gain on financial assets and liabilities held at fair value through profit or loss	(2,624)	4,024
Disclosed as:
Finance costs (note 5)	(7,123)	(8,774)
Finance income (note 4)	4,499	12,798
Net (loss)/gain on financial assets and liabilities held at fair value through profit or loss	(2,624)	4,024

7. Taxation

The Company is exempt from Guernsey taxation on income derived outside Guernsey and bank interest earned in Guernsey. A fixed annual fee of £600 is payable to the States of Guernsey in respect of this exemption.  No charge to Guernsey taxation arises on capital gains.

Deferred taxation has been calculated in accordance with IFRS. The Group is currently liable to French income tax at 33.33% and Spanish income tax at 30% arising on the activities of the Group's operations in France and Spain.

8. Dividends

Dividend reference period	Shares	Dividend	Paid	Date
	'000	per share	£
Quarter ending 30 September 2010	117,500,000	0.9p	1,057,500	10 January 2011
Quarter ending 31 December 2010	117,627,056	0.9p	1,058,644	26 April 2011
Quarter ending 31 March 2011	117,627,056	0.9p	1,058,644	20 June 2011
Total			3,174,788

For the quarter ended 30 September 2010 a scrip dividend alternative was granted to investors. Shareholders who opted for the scrip dividend alternative (of £39,265) were issued 127,056 new shares at a price of 30.9p each on 10 January 2011. Shareholders who did not opt received a dividend of £1,018,235 (0.9p per share), which was paid on 10 January 2011.

The Directors have resolved to pay a dividend of 0.9p per share for the second quarter taking the total dividend for the period to 30 June 2011 to 1.8p per share. This dividend has not been included as a liability in the half year report.

9. Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

	1 January 2011 to 30 June 2011	1 January 2010 to 31 December 2010	1 January 2010 to 30 June 2010
Earnings after tax per income statement (£'000)	(88)	5,797	125
Basic and diluted earnings per share	(0.1)p	4.9p	0.1p
Earnings after tax per income statement (£'000)	(88)	5,797	125
Revaluation (gains)/losses in investment properties	924	(140)	2,138
Mark to market of currency swaps	6,670	(7,759)	(12,798)
Mark to market of interest rate swaps	(4,499)	3,194	8,271
Interest rate swap - break costs and other loan restructuring costs	-	-	30
Investment Manager's fee (capital)	439	842	413
Deferred taxation	185	-	-
Rental guarantee income	-	512	355
Foreign exchange (gains)/losses	(1,552)	1,769	3,614
Adjusted earnings (£'000)	2,079	4,215	2,148
Adjusted earnings per share	1.8p	3.6p	1.8p
Weighted average number of ordinary shares (000's)	117,620	117,500	117,500

The adjusted earnings are presented to provide what the Company believes is a more appropriate assessment of the operational income accruing to the Group's activities. Hence, the Company adjusts basic earnings for income and costs which are not of a recurrent nature or which may be more of a capital nature.

10. Net asset value per share

	30 June 2011	31 December 2010
Net asset value  (£'000)	17,635	20,033
Net asset value per share	15.0p	17.1p
Net asset value (£'000)	17,635	20,033
Mark to market of currency hedge*	1,046	1,277
Mark to market of interest rate swaps	14,874	18,611
Deferred taxation	185	-
Adjusted net asset value	33,740	39,921
Net asset value per share (adjusted)	28.7p	34.0p
Number of ordinary shares (000's)	117,627	117,500

* The mark to market of the currency hedge necessarily includes both a movement in relation to currency fluctuation and a movement due to relative future interest rates. For the purpose of providing an adjusted net asset value the element of valuation in relation to the interest rates is included as an adjustment; the intention is to hold the instruments to maturity at which point this element will have unwound.

The adjusted net assets are presented to provide what the Company believes is a more relevant assessment of the Group's net asset position. The Company has determined that certain fair value and accounting requirements, as adjusted in the above table, may not be realisable in the longer term.

11. Investment properties

	30 June 2011 £'000	31 December 2010 £'000
Market value of investment properties at 1 January	253,502	265,408
Subsequent capital expenditure after acquisition	596	908
Fair value adjustment in the period/year	(924)	140
Effect of foreign exchange	12,495	(12,954)
Market value of investment properties at 30 June/31 December	265,669	253,502

The fair value of the Group's investment properties at 31 December 2010 and 30 June 2011 have been arrived at on the basis of valuations carried out at that date by Knight Frank LLP, independent valuers not connected to the Group. The portfolio has been valued on a market value basis as defined by the Royal Institution of Chartered Surveyors Approval and Valuations Standards ("RICS").

The approved RICS definition of market value is the "estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm's length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion."

12. Trade and other receivables

	30 June 2011 £'000	31 December 2010 £'000
Trade receivables	2,861	1,894
Amounts receivable from Property Managing Agents	2,799	2,112
Bank interest receivable	10	4
Prepayments	621	218
Other debtors	11,626	10,197
Total	17,917	14,425

The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.

Included in other debtors is collateral of £10.8 million (€12.0 million) (December 2010: £9.3 million (€10.9 million)) held with Barclays Bank PLC in relation to the currency swap (note 15).

13. Trade and other payables

	30 June 2011 £'000	31 December 2010 £'000
Trade creditors	1,577	347
Deferred income	4,099	502
Investment Manager's fee payable	761	744
VAT payable	250	136
Accruals	943	1,148
Total	7,630	2,877

Trade creditors and accruals primarily comprise amounts outstanding for trade purchases and ongoing costs. The Group has financial risk management policies in place to ensure that all payables are paid within the credit time frame.

The Directors consider that the carrying amount of trade and other payables approximates to their fair value.

14. Bank borrowings

	30 June 2011 £'000	31 December 2010 £'000
Current liabilities: interest payable and bank borrowing	1,624	1,673
Non-current liabilities: bank borrowing	216,293	205,854
Total liabilities	217,917	207,527
The borrowings are repayable as follows:
Interest payable	1,624	1,548
On demand or within one year	-	125
In the second to fifth years inclusive	216,293	205,854
After five years	-	-
	217,917	207,527

Movements in the Group's bank borrowings is analysed as follows:

	1 January 2011 to 30 June 2011 £'000	1 January 2010 to 31 December 2010 £'000
Opening balance	205,979	216,280
Amortisation of finance costs	298	615
Deferred finance cost adjustment	-	(78)
Repayment of loan	(191)	(258)
Exchange differences on translation of foreign currencies	10,207	(10,580)
Total	216,293	205,979

15. Financial assets and financial liabilities at fair value through profit or loss

	30 June 2011 £'000	31 December 2010 £'000
Non-current assets
Interest rate swaps	-	-
Non-current liabilities
Currency swap  - a	(30,045)	(24,722)
Currency swap  - b	(8,276)	(6,929)
Interest rate swaps	(14,874)	(18,611)
	(53,195)	(50,262)
Total	(53,195)	(50,262)

Interest rate swap

The Company is required under the financing agreements with Barclays Bank PLC to fix the rate at which it borrows over the duration of each loan. The Company has agreed a fixed interest rate with Barclays Bank PLC at each loan draw-down.

The bank has undertaken a variable to fixed rate swap with a third party. The Company is not party to the swap agreement but via the financing agreement the Company has all the risks and rewards of the swap as should the loan be repaid early the Company would be required to pay the swap break costs or, alternatively accrue a swap benefit as a repayment reduction depending on the value of the underlying swap at that point in time.

The interest rate swaps are valued by reference to the bank's redemption notice of amounts due if the Company repaid it's borrowings at the balance sheet date; the Directors consider this to represent fair value.

Currency swap

The Group uses currency derivatives to hedge significant future foreign currency transactions and cash flows to safeguard the equity investments of shareholders against significant adverse movements between Sterling and Euros.

a) On 13 October 2006, Alpha Pyrenees Trust Finance Company Limited ("Alpha Finance"), a wholly owned subsidiary of the Company, entered into a currency swap with Barclays Bank PLC. Under the terms of this agreement, Alpha Finance will pay Barclays Bank PLC €130.1 million and Barclays Bank PLC will pay Alpha Finance £87.6 million on 16 October 2013. ln addition, there are quarterly periodic payments in February, May, August and October of each year starting on 16 February 2007 and ending 16 October 2013. On these dates Barclays Bank PLC will pay Alpha Finance an amount equal to 7 per cent per annum on £87.6 million and Alpha Finance will pay Barclays Bank PLC an amount equal to 6 per cent per annum on €130.1 million.

b) On 18 January 2007, Alpha Finance entered into a further currency swap with Barclays Bank Plc. Under the terms of this swap, Alpha Finance will pay Barclays Bank PLC €33.0 million and Barclays Bank PLC will pay Alpha Finance £21.6 million on 16 October 2013. In addition, there are quarterly periodic payments in February, May, August and November of each year starting on 16 February 2007 and ending on 16 October 2013. On these dates Barclays Bank PLC will pay Alpha Finance an amount equal to 7 per cent per annum on £21.6 million and Alpha Finance will pay Barclays Bank PLC an amount equal to 5.9725 per cent per annum on €33.0 million.

At 30 June 2011, a total amount of £10.8 million (€12.0 million) (December 2010: £9.3 million (€10.9 million)) had been deposited as collateral with Barclays Bank PLC to support both the 13 October 2006 and 18 January 2007 swaps.

The fair value of the currency swap contracts is determined by reference to an applicable valuation model.

16. Share capital

The authorised share capital is unlimited. The Company has one class of shares which carry no right to fixed income. All ordinary shares have a nil par value. The number of shares in issue is 117.6 million.

In January 2011, as a result of a scrip dividend offer (note 11), a number of shareholders opted for the alternative which resulted in the issue by the Company of 127,056 new shares at price of 30.9p each.

There have been no shares cancellations during the period.

17. Related party transactions

Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions. Alpha Real Capital LLP is the Investment Manager to the Company under the terms of the Investment Manager Agreement and is thus considered a related party of the Company.

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

The Investment Manager is entitled to receive a fee from the Group at an annual rate of 1% of the gross assets of the Group, payable quarterly in arrears.  The Investment Manager is also entitled to receive an annual performance fee calculated with reference to total shareholder return ("TSR"), whereby the fee is 20% of any excess over an annualised TSR of 12% and then a further 15% of any excess over 20%; the performance fee is subject to a three year high watermark with a minimum threshold of 100 pence. Details of the investment management fees for the current accounting period are shown on the face of the income statement and any balances outstanding are disclosed separately in note 13.

The Directors of the Company received total fees as follows:

	Six months ending 30 June 2011 £	Year ending 31 December 2010 £
Dick Kingston	15,000	30,000
Christopher Bennett	10,000	20,000
David Jeffreys	10,000	20,000
Phillip Rose	10,000	20,000
Serena Tremlett	10,000	20,000
Total	55,000	110,000

The Directors' interests in the shares of the Company are detailed below:

	30 June 2011 shares held	31 December 2010 shares held
Dick Kingston	5,000	5,000
Christopher Bennett	-	-
David Jeffreys	250,000	250,000
Phillip Rose	1,290,079	1,290,079
Serena Tremlett	23,341	23,341

The following, being partners of the Investment Manager held the following shares in the Company:

	30 June 2011 shares held	31 December 2010 shares held
Rockmount Ventures Limited and ARRCO Limited*	21,437,393	20,437,393
Sir John Beckwith	3,472,681	3,472,681
Phillip Rose**	1,290,079	1,290,079
Bradley Bauman	459,289	459,289
Karl Devon-Lowe	24,650	24,650
Ronnie Armist	7,450	7,450

*Rockmount Ventures Limited became a partner in the investment manager on 23 December 2010. Rockmount Ventures Limited is the parent company of ARRCO Limited. The interest attributed to the two corporate partners represents 20,437,393 shares held by a fellow group company, Antler Investment Holdings Limited.

**Phillip Rose is the CEO and a partner of the Investment Manager.

Paul Cable, being the Investment Manager's Fund Manager responsible for the Trust's investments, holds 84,918 (31 December 2010: 80,878) shares in Alpha Pyrenees Trust Limited.

Serena Tremlett is also the Managing Director and a major shareholder of Morgan Sharpe Administration Limited, the Company's administrator and secretary. During the period the Company paid Morgan Sharpe Administration Limited fees of £40,500 (31 December 2010: £89,900).

18. Events after the balance sheet date

There are no material events after the balance sheet date.

Directors and Trust information

Directors:

Dick Kingston (Chairman)
Christopher Bennett
David Jeffreys
Phillip Rose
Serena Tremlett

Registered office:

Isabelle Chambers

Route Isabelle

St Peter Port

Guernsey

Investment Manager:

Alpha Real Capital LLP
1b Portland Place
London W1B 1PN

Administrator and secretary:

Morgan Sharpe

Administration Limited

Isabelle Chambers

Route Isabelle

St Peter Port

Guernsey GY1 3TX

Joint brokers:

Numis Securities Limited

10 Paternoster Square
London EC4M 7LT

Peel Hunt LLP

111 Old Broad Street

London EC2U 1PH

Independent valuers:

Knight Frank LLP
55 Baker Street
London W1V 8AN

Auditors:

BDO Limited
PO Box 180
Place du Pré

Rue du Pré
Ruette Braye
St Peter Port
Guernsey GY1 3LL

Tax advisors:

BDO LLP
55 Baker Street
London W1U 7EU

Deloitte LLP
Hill House
1 Little New Street
London EC4A 3TR

Legal advisors in Guernsey:

Carey Olsen
PO Box 98

Carey House
Les Banques
St Peter Port
Guernsey GY1 4BZ

Legal advisors in the UK:

Norton Rose

3 More London Riverside

London SE1 2AQ

Registrar:

Computershare Investor Services (Channel Islands) Limited
Ordnance House
31 Pier Road
St Helier
Jersey  JE4 8PW

 Shareholder information

Dividends

Ordinary dividends are paid quarterly. Shareholders who wish to have dividends paid directly into a bank account rather than by cheque to their registered address can complete a mandate form for this purpose. Mandates may be obtained from the Group's Registrar. Where dividends are paid directly to shareholders' bank accounts, dividend vouchers are sent directly to shareholders' registered addresses.

Share Price

The Trust's Ordinary Shares are listed on the London Stock Exchange.

Change of address

Communications with shareholders are mailed to the addresses held on the share register. In the event of a change of address or other amendment, please notify the Trust's Registrar under the signature of the registered holder.

Investment Manager

The Company is advised by Alpha Real Capital LLP which is authorised and regulated by the Financial Services Authority in the United Kingdom.

Financial Calendar

Financial reporting	Reporting/Meeting dates	Dividend period	Ex-dividend date	Record date	Payment date
Half Yearly Report and announcement of dividend	18 August 2011	Quarter ended 30 June 2011	14 September 2011	16 September 2011	10 October 2011
Interim Management Statement (Q3)	17 November 2011	Quarter ended 30 September 2011	7 December 2011	9 December 2011	9 January 2012
Annual Report and Accounts announcement	16 March 2012	Quarter ended 31 December 2011	28 March 2012	30 March 2012	23 April 2012
Annual Report Published	30 March 2012
Annual General Meeting	26 April 2012

 

END

 

 

IR GGUMGRUPGGQM