Interim Results

TR Property Investment Trust PLC 24 November 2000 EMBARGOED FOR RELEASE AT 7.00 AM ON FRIDAY 24 NOVEMBER 2000 TR PROPERTY INVESTMENT TRUST PLC HENDERSON GLOBAL INVESTORS TR PROPERTY INVESTMENT TRUST PLC Unaudited interim results for the half year ended 30 September 2000 Group Financial Highlights Half year ended 30 September 2000 1999 (Unaudited) (Unaudited) £'000 £'000 Restated Gross revenue 7,383 6,757 Revenue pre-tax 4,896 4,332 Shareholders' funds 316,968 276,622 Pence Pence per share Per share Revenue return 0.93 0.79 Capital return 12.49 5.77 Total return 13.42 6.56 Dividend (net) 0.55 0.52 Net asset value - basic 71.57 58.96 - fully diluted 67.71 57.05 Market capitalisation at 30 September £246,911,000 £215,820,000 Share price at 30 September 55.75p 46.00p FTSE Real Estate Index at 30 September 2,111 1,977 % % NAV total return + 23.1 9.8 Share price total return + 25.1 8.3 Total return from quoted securities * 24.3 12.0 FTSE Real Estate Index total return * 20.2 5.4 Total return from direct property * 10.9 9.1 IPD Monthly Index total return * 5.0 7.5 Sources: +AITC/*Datastream/*WM Company Dividend An interim dividend of 0.55p (1999: 0.52p) per ordinary share has been declared payable on 8 January 2001 to shareholders on the register on 8 December 2000. The shares will be quoted ex-dividend on 4 December 2000. - MORE - - 2 - TR PROPERTY INVESTMENT TRUST PLC Unaudited interim results for the half year ended 30 September 2000 Chairman's Statement I am pleased to report a strong performance for the Trust's NAV and the share price in the six month period to 30 September 2000. The net asset value total return for the period was 23.1%. The share price rose by 23.2% and produced a total return to shareholders of 25.1%. These numbers compare with the total return from our benchmark, the FTSE Real Estate Index, of 20.2% over the period. The Sector has done much better than the main market, where the All Share Index and the FTSE 100 Index recorded negative total returns of 1.5% and 3% respectively. The out performance primarily reflects a return of investor sentiment back towards old economy industries and to shares in companies backed by tangible assets, but this trend has also been aided by an increase in take-over and other corporate activity among property companies over the summer. This year our interim report is in a larger format and, for the first time, includes a manager's report. This gives greater details of the industry background over the period and the changes that have taken place in the portfolio and in the spread of assets. Revenue Earnings and Dividends The Group financial highlights table shows the current and comparative half year figures. The revenue return for the period was 0.93p per share, an increase of 17.7% over revenue return for the comparable period last year. The board has declared an interim dividend of 0.55p per share, an increase of 0.03p or 5.8% over last year's interim payment. Directorate Richard Stone FCA has accepted an invitation to become a non-executive director of the Company and I am delighted to welcome him. He has just retired as a senior partner of PricewaterhouseCoopers. Share Repurchases We continued to use the power to repurchase shares and warrants during the half year. A total of 11.75m shares were repurchased at an average price of 53.7p, and a total of 8.1m warrants were repurchased at an average cost of 8.9p. Together these repurchases had the effect of increasing the diluted assets per share by some 0.24p or 0.35%. Outlook UK property shares have now recovered strongly since the early spring. Some consolidation may be expected at current price levels, though with the sector average discount to asset value at 26%, the downside should be well protected. In the direct market we are noticing some increase in investment yields, especially in the retail area, and property company net asset value growth is likely to moderate in 2001 as a result. Though the level of take-over interest has slowed from its midsummer peak, any sharp reversal in share prices now should be a trigger for renewed corporate activity. Meanwhile the managers will continue to concentrate our equity and direct investments in the business space markets in London and the South East. Here the clustering of new economy related business continues to create 'hot-spots' of tenant demand and rental growth. W G Cochrane Chairman 23 November 2000 - MORE - - 3 - TR PROPERTY INVESTMENT TRUST PLC Unaudited interim results for the half year ended 30 September 2000 Manager's Report The FTSE Real Estate Index generated strong absolute and relative performance in the period. However, at the individual stock level, price performances were much more disparate than usual, with half the 18% performance accounted for by three shares, Canary Wharf, Chelsfield and MEPC, whilst other larger companies such as Land Securities, Slough and Hammerson under performed the Index by between 10% and 15%. Two major themes have dominated property price movements this summer - corporate activity and portfolio location. With significant corporate activity occurring or threatened, it has been important for the Trust to be invested in the companies that have received, or are thought likely to receive, take-over bids. We have had our share of successes, so far. The second theme has been portfolio location. As the year has progressed the NAV growth results and forecasts for individual companies have become more diverse. It is clear that a select number of companies whose assets are concentrated in the best markets (principally London offices and SE Industrial) are continuing to generate very strong earnings and NAV growth while many other companies seem to be struggling to generate mid single digit growth. Making sure that we have sufficient exposure to bid targets while still maintaining our overweight positions in businesses likely to outperform in fundamental terms continues to be a juggling act. In these circumstances we are pleased that the Trust has out performed the Sector over the period, though the level of the out performance was less than we hoped. Over the period we have been underweight in Canary Wharf shares, which performed very strongly. This company is now amongst our top ten equity investments but even so the Trust remains underweight. Following its share price growth this summer, and following the cash take-over of MEPC, Canary Wharf has joined Land Securities in having a capitalisation greater than 15% of our benchmark, and therefore the Trust is prevented from being fully weighted in either share by the rule that an investment trust may not hold more than 15% of its gross assets in any individual security. Distribution of Investments There has been no major alteration in the distribution of the assets. The largest change has been in the overseas equity section which has risen from 1.4% to 6.1% while UK securities and loans have dropped some three percentage points to 75% and UK investment properties have dropped by 1.5% to just under 19%. Our stated target distribution levels are 60% to 80% in UK equities, 15% to 30% direct property and 0% to 10% overseas equities. On this basis we continue to have a weighting in UK equities above our median target level. We think this is appropriate given the current average discount to asset value for UK property shares. - MORE - - 4 - TR PROPERTY INVESTMENT TRUST PLC Unaudited interim results for the half year ended 30 September 2000 Top Down UK Strategy Our strategy of seeking to be overweight in the West End of London and in office and industrial markets around the M25 continues in place. Normally by this stage in a property cycle we would expect to see the strong tenant demand for business space rippling out from the South East to impact values across the whole country. This is not happening in the current cycle and hot spots of demand outside the London area seem limited to academic centres. The raw material for the 'new economy' is skilled personnel and growth businesses are finding that they must locate to where their potential labour pool already lives. We continue to remain underweight in shop property believing that rental levels and future rental growth prospects must be adversely impacted by the sharp drop in profit margins being experienced by many UK retailers. Largest Holdings Slough and Hammerson remained our largest equity investments. We reduced the holding in British Land which fell from 3rd to 5th in our list and MEPC, our 4th largest investment in March was taken over for cash. We more than doubled the investment in Land Securities which moves into 3rd place. Big Yellow Group, which was our major unquoted investment at March, moved into 4th place following its flotation in May. The only other new entrant to the top ten list was Canary Wharf Group in 8th place. Overseas Activity We started this interim period with only 1.4% of the portfolio in overseas real estate equities. Over the summer this level has been increased to just over 6%. In France we added to Unibail and have bought Castellum in Sweden. The bulk of the purchases however have been in the US where we have targeted REITs specialising in office property in and around San Francisco and New York. These two markets have seen very strong rental growth from new economy business demand. Direct Property Portfolio Our direct properties showed a total return of 10.9% for the six month period - well ahead of the comparable figure of 5.0% produced by the IPD Monthly Index. The two major factors contributing to this out performance were the portfolio spread and the management activity over the period. Values in Central London, where we hold over 60% of our buildings by value, continued to show excellent growth. Management activity over the summer included the acquisition, for £1.6m, of the Daks Simpson's occupational leases over the upper floors of 32/34, Jermyn Street. This will now allow us to gain possession of the entire Piccadilly property by early 2003. After a light refurbishment the 12,000 sq ft of offices are to be relet on a short term basis. Round the corner in St James's Street, we have refurbished two first floor suites for reletting. At Piccadilly and elsewhere, we are actively investigating refurbishment and redevelopment potential of other assets. During the period we sold three buildings for a total of £6.15m and bought two properties at a cost of £6.1m. The two purchases were an industrial estate just to the south of Wandsworth Bridge and a car showroom and garage in London Road, Staines. The larger sales were made at Croydon and Richmond where the tenant of these two self storage centres exercised an option to buy. The remaining sale was at Bolton where a vacant industrial unit was sold to a local business for owner occupation. - MORE - - 5 - TR PROPERTY INVESTMENT TRUST PLC Unaudited interim results for the half year ended 30 September 2000 Unquoted Investments Our major unquoted investment at March was the Big Yellow Group. They floated onto the AIM market in May. We also sold our remaining investment in the River Beauly Fishings over the summer and as a result of these two events the unquoted portfolio has shrunk from 3.3% of assets at March to 0.3% at September. - MORE - - 6 - TR PROPERTY INVESTMENT TRUST PLC Unaudited interim results for the half year ended 30 September 2000 Group Statement of Total Return (Incorporating the Revenue Account) for the half year ended 30 September 2000 (Unaudited) Half year ended 30 September 2000 Revenue Capital Total £'000 £'000 £'000 Total capital gains from - 59,210 59,210 investments Repurchase of warrants - (721) (721) Investment income 4,589 - 4,589 Net rental income 2,506 - 2,506 ----------- --------- ---------- 7,095 58,489 65,584 Interest receivable and 288 - 288 similar income ----------- --------- ---------- Gross revenue and 7,383 58,489 65,872 capital gains Management fee (707) (349) (1,056) Performance fee - (863) (863) Other administrative (486) - (486) expenses ----------- --------- ---------- Net return on ordinary 6,190 57,277 63,467 activities before interest payable and taxation Interest payable and (1,294) (1,294) (2,588) similar charges ----------- --------- ---------- Net return on ordinary 4,896 55,983 60,879 activities before taxation Taxation on net return (696) 363 (333) on ordinary activities ----------- --------- ---------- Net return on ordinary 4,200 56,346 60,546 activities after taxation Equity minority (12) - (12) interests ----------- --------- ---------- Net return attributable 4,188 56,346 60,534 to ordinary shares Ordinary dividends Interim of 0.55p (1999: 0.52p) (2,431) - (2,431) Final of 0.80p - - - ----------- --------- ---------- (2,431) - (2,431) ----------- --------- ---------- Transfer to reserves 1,757 56,346 58,103 ====== ===== ====== Return per ordinary share Basic 0.93p 12.49p 13.42p Fully diluted 0.91p 12.29p 13.20p (Unaudited) Half year ended 30 September 1999 Revenue Capital Total £'000 £'000 £'000 Restated* Restated* Total capital gains from - 28,377 28,377 investments Repurchase of warrants - - - Investment income 3,828 - 3,828 Net rental income 2,610 - 2,610 ---------- --------- ---------- 6,438 28,377 34,815 Interest receivable and 319 - 319 similar income ---------- --------- ---------- Gross revenue and 6,757 28,377 35,134 capital gains Management fee (826) (405) (1,231) Performance fee - - - Other administrative (382) - (382) expenses ---------- --------- ---------- Net return on ordinary 5,549 27,972 33,521 activities before interest payable and taxation Interest payable and (1,217) (1,217) (2,434) similar charges ---------- --------- ---------- Net return on ordinary 4,332 26,755 31,087 activities before taxation Taxation on net return (542) 487 (55) on ordinary activities ---------- --------- ---------- Net return on ordinary 3,790 27,242 31,032 activities after taxation Equity minority (48) (88) (136) interests ---------- --------- ---------- Net return attributable 3,742 27,154 30,896 to ordinary shares Ordinary dividends Interim of 0.55p (1999: 0.52p) (2,440) - (2,440) Final of 0.80p - - - ---------- --------- ---------- (2,440) - (2,440) ---------- --------- ---------- Transfer to reserves 1,302 27,154 28,456 ====== ===== ====== Return per ordinary share Basic 0.79p 5.77p 6.56p Fully diluted n/a n/a n/a (Audited) Year ended 31 March 2000 Revenue Capital Total £'000 £'000 £'000 Total capital gains - 25,682 25,682 from investments Repurchase of warrants - (48) (48) Investment income 6,725 - 6,725 Net rental income 5,108 - 5,108 ----------- ---------- ---------- 11,833 25,634 37,467 Interest receivable and 860 - 860 similar income ----------- ---------- ---------- Gross revenue and 12,693 25,634 38,327 capital gains Management fee (1,640) (805) (2,445) Performance fee - - - Other administrative (943) - (943) expenses ----------- ---------- ---------- Net return on ordinary 10,110 24,829 34,939 activities before interest payable and taxation Interest payable and (2,622) (2,622) (5,244) similar charges ----------- ---------- ---------- Net return on ordinary 7,488 22,207 29,695 activities before taxation Taxation on net return (855) 781 (74) on ----------- ---------- ---------- ordinary activities Net return on ordinary 6,633 22,988 29,621 activities after taxation Equity minority (42) (122) (164) interests ----------- ---------- ---------- Net return attributable 6,591 22,866 29,457 to ordinary shares Ordinary dividends Interim of 0.55p (1999: 0.52p) (2,440) - (2,440) Final of 0.80p (3,635) - (3,635) ----------- ---------- ---------- (6,075) - (6,075) ----------- ---------- ---------- Transfer to reserves 516 22,866 23,382 ====== ====== ====== Return per ordinary share Basic 1.41p 4.89p 6.30p Fully diluted n/a n/a n/a The revenue columns of this statement represent the revenue accounts of the Group. * See note 2 - MORE - - 7 - TR PROPERTY INVESTMENT TRUST PLC Unaudited interim results for the half year ended 30 September 2000 Group Balance Sheets as at 30 September 2000 (Unaudited) (Unaudited) (Audited) Half year ended Half year ended Year ended 30 September 2000 30 September 1999 31 March 2000 £'000 £'000 £'000 Fixed assets Tangible assets 56 71 64 Investments 382,896 343,114 326,903 ----------- ----------- ----------- 382,952 343,185 326,967 ----------- ----------- ----------- Current assets Debtors 4,134 5,168 5,668 Cash at bank and short 4,774 5,063 2,284 term deposits ----------- ----------- ----------- 8,908 10,231 7,952 Creditors - amounts falling due within one year 34,682 33,135 29,112 ----------- ----------- ----------- Net current liabilities (25,774) (22,904) (21,160) ----------- ----------- ----------- Total assets less 357,178 320,281 305,807 current liabilities Creditors - amounts falling due after more than one year 40,210 43,300 40,207 ----------- ----------- ----------- Total net assets 316,968 276,981 265,600 ======= ======= ======= Capital and reserves Called up share capital 110,722 117,293 113,593 Share premium 28,450 27,890 27,938 Warrant reserve 4,556 5,056 5,009 Other non-distributable 158,067 111,791 104,822 reserves Revenue reserve 15,173 14,592 13,806 ----------- ----------- ----------- Equity shareholders' 316,968 276,622 265,168 funds Equity minority - 359 432 interests ----------- ----------- ----------- 316,968 276,981 265,600 ======= ======= ======= Net asset value per share: Basic 71.57p 58.96p 58.36p Fully diluted 67.71p 57.05p 56.52p - MORE - - 8 - TR PROPERTY INVESTMENT TRUST PLC Unaudited interim results for the half year ended 30 September 2000 Group Cash Flow Statements for the half year ended 30 September 2000 (Unaudited) (Unaudited) (Audited) Half year ended Half year ended Year ended 30 September 30 September 31 March 2000 1999 2000 £'000 £'000 £'000 Net cash inflow from 4,373 6,264 13,046 operating activities Net cash outflow from (2,533) (2,326) (5,421) servicing of finance Net tax recovered 185 21 190 Net cash inflow/(outflow) 8,351 (13,037) (5,094) from financial investment Equity dividends paid (3,635) (5,980) (8,420) Management of liquid - (33) 1,599 resources ----------- ----------- ----------- Net cash inflow before 6,741 (15,091) (4,100) financing Net cash outflow from (6,879) (814) (7,754) financing ----------- ----------- ----------- Decrease in cash (138) (15,905) (11,854) ======= ======= ======= Reconciliation of operating revenue to net cash inflow from operating activities Net revenue before 6,190 5,550 10,110 interest payable and taxation (Increase)/decrease in (173) 2,081 3,952 operating debtors Decrease in operating (1,133) (771) (70) creditors Tax deducted at source (164) (199) (156) Scrip dividends included (6) - - in investment income Depreciation of tangible 8 8 15 fixed assets Management fee charged to (349) (405) (805) capital ----------- ----------- ----------- 4,373 6,264 13,046 ======= ======= ======= Reconciliation of net cash flow to movement in net debt Decrease in cash (138) (15,905) (11,854) Net repayment/(drawdown) - 71 (1,051) of loans ----------- ----------- ----------- Change in net debt (138) (15,834) (12,905) resulting from cash flows Exchange movements 84 147 143 ----------- ----------- ----------- Movement in net debt in (54) (15,687) (12,762) the period Net debt at the beginning (59,557) (46,795) (46,795) of the period ----------- ----------- ----------- Net debt at the end of (59,611) (62,482) (59,557) the period ======= ======= ======= Represented by: Bank balances and short 4,774 5,063 2,284 term deposits Debt falling due within (24,175) (24,246) (21,634) one year Debt falling due after (40,210) (43,299) (40,207) more than one year ----------- ----------- ----------- (59,611) (62,482) (59,557) ======= ======= ======= - MORE - - 9 - TR PROPERTY INVESTMENT TRUST PLC Unaudited interim results for the half year ended 30 September 2000 Notes to the Accounts 1. Return per Ordinary Share Revenue return per ordinary share is calculated by dividing the net revenue return available for ordinary shareholders of £4,188,000 (half year ended 30 September 1999: £3,742,000 and year ended 31 March 2000: £6,591,000) by 451,174,347 (half year ended 30 September 1999: 470,848,938 and year ended 31 March 2000: 467,752,883) being the weighted average number of ordinary shares in issue. Capital return per ordinary share is calculated by dividing the net capital return available for ordinary shareholders of £56,346,000 (half year ended 30 September 1999: £27,154,000 and year ended 31 March 2000: £22,866,000) by the weighted average number of ordinary shares in issue, as shown above. Fully diluted returns per ordinary share have been calculated in accordance with Financial Reporting Standard 14, 'Earnings per Share'. 2. Change in Accounting Policy These interim accounts have been prepared on the same basis as the last interim statement except that these accounts follow the requirements of Financial Reporting Standard 16, 'Current Taxation' to show franked investment income net of the related tax credits as adopted in the March 2000 Report and Accounts. The figures for income and taxation in respect of the half year ended 30 September 1999 have been restated accordingly. This change has no effect on the net income or net asset values previously reported for that period, although franked investment income and the total tax charge have both decreased by £355,000. 3. Changes in Share Capital During the period the Company made authorised market purchases for cancellation of 11,750,000 of its own issued ordinary shares of 25p. Also during the period the Company repurchased 8,100,000 warrants and 265,671 warrants were exercised. As at 30 September 2000 there were 442,888,893 ordinary shares and 84,537,721 warrants in issue. Since 30 September a further 900,000 shares have been purchased for cancellation at an average price of 55.13p per share. 4. Interim Statement The interim accounts have been approved by the directors on 23 November 2000. 5. Comparative Information The financial information contained in this interim statement does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The financial information for the six months ended 30 September 1999 and 30 September 2000 have not been audited. The figures and financial information for the year ended 31 March 2000 are an extract from the latest published accounts and do not constitute statutory accounts for that year. Those accounts have been delivered to the Registrar of Companies and included the report of the auditors which was unqualified and did not contain a statement under either section 237(2) or 237(3) of the Companies Act 1985. - MORE - - 10 - TR PROPERTY INVESTMENT TRUST PLC Unaudited interim results for the half year ended 30 September 2000 Largest Quoted Investments as at 30 September 2000 Market value Market value £'000 £'000 Slough Estates 25,806 Ashtenne 4,652 Hammerson 20,200 Brixton Estate 4,547 Land Securities 19,309 Burford 4,494 Big Yellow Group 16,986 Unibail (France) 4,476 British Land 16,697 Green Property 4,402 (Ireland) Helical Bar 15,158 Freeport Leisure 3,812 Chelsfield 12,480 Capital and Regional 3,757 Canary Wharf Group 9,999 London Merchant 3,754 Securities St Modwen Properties 9,765 Wates City of London 3,623 Frogmore Estates 8,823 Rugby Estates 3,344 Benchmark 8,773 CLS 3,296 Derwent Valley 7,947 Liberty International 2,941 Compco 7,831 Jermyn Investment 2,928 Properties Pillar Properties 7,502 Mission West (USA) 2,722 Great Portland 6,276 Grainger Trust 2,691 BPT 5,873 Safestore 2,652 Asda Properties 5,418 Trizec Hahn (Canada) 2,559 Capital Shopping 5,256 Minerva 2,471 Centres Development Securities 4,996 Marylebone Warwick 2,265 Balfour Grantchester 4,746 Quintain 2,070 Listed in the UK except as shown in brackets. The above 40 largest quoted investments amount to £287m or 75% of total investments (convertibles and all classes of equities in any one company are treated as one investment). Principal Investment Properties as at 30 September 2000 Location Type Tenure Size sq/ft Valued in excess of £5m 198/202 Piccadilly West End Offices and Leasehold 65,000 and 32/34 Jermyn Retail Street, London W1 29/30 St. James's West End Offices and Leasehold 29,209 Street and 25/27 Retail Bury Street, London SW1 Elizabeth House, Office Freehold 54,150 Duke Street, Woking HQ3, Hook Rise, Warehousing Freehold 56,100 Tolworth Valued between £2m and £5m The Colonnades, Mixed Use Leasehold 44,000+ Bishops Bridge Road, London W2 The Quay, Ocean Office Virtual Freehold 23,150 Village, Southampton Southbank Commercial Light Industrial and Freehold 49,000 Centre, London SW11 Offices Ferrier Street, Industrial Freehold 35,000 London SW18 268 London Road, Car Showroom Freehold 23,000 Staines Valued at under £2m At 30 September 2000 the Group owned 7 further properties with individual values of under £2m. They are located in Addlestone, Bolton, London SE16, London W2, Swanley, Wallington and Weybridge. Their aggregate value was £7.37m. + Commercial element only - ENDS - For further information, please contact : Vicki Staveacre The Press Office, Henderson Global Investors Tel: 020 7410 4222 Chris Turner, TR Property Investment Trust PLC Tel: 020 7410 4348 Stephen Westwood, Henderson Global Investors Tel: 020 7477 5517 Gareth David, College Hill Associates Tel: 020 7457 2020

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