Blackrock International Land plc interim results - markets remain difficult

Blackrock International Land plc has released its interim results for the six months to 30 June 2009.

Key Points:

• As a result of the economic downturn, the property markets in which Blackrock International Land plc ("Blackrock") operates remain difficult and have not functioned actively or normally during the first six months of 2009. The few transactions that have taken place have been at prices that do not appear to reflect fair value.    In the absence of reliable market evidence, the board has not commissioned  independent valuations of the group's portfolio for the interim financial statements.

• The company has no plans to realise any assets in the current market conditions.

• In such circumstances, the board is unable to arrive at a better estimate of the fair value of the group's property assets at the interim stage than that which was reported at 31 December 2008, adjusted only for known and measurable changes, including movements in exchange rates.

• Summary of movements in net assets:

• Net assets per share at 30 June 2009 were €0.2507 compared to €0.2571 at 31 December 2008.

• By way of information, based on movements in the Investment Property Data (IPD) indices during the period, net assets per share would be of the order of €0.186.  However, the directors believe that, in the absence of a market that is functioning actively or normally, these indices are not helpful in determining the fair value of the group's portfolio at 30 June 2009.

• The company is continuing to discuss its loan facilities with its lenders with a view to securing satisfactory arrangements for the future. 

Commenting on the results, Blackrock International Land plc chairman, Carl McCann, said:

While international credit markets are showing many signs of improvement, the Irish economy awaits the impact of the significant amount of new capital that will flow from the ECB following the implementation of the proposed Nama structure. This new capital should positively affect the direction of the economy, increase employment and lift demand for property. The economic stimulus measures that have been introduced in Europe and the US should also have a positive impact on the commercial property sector in due course. In the meantime, the group's priorities continue to be to maximise income and reduce costs in anticipation of the opportunities that will arise when conditions improve."

Blackrock International Land plc

3 September 2009

For further information, please contact:

Debbie O'Brien, WHPR, Tel: +353 1 669 0030

  Blackrock International Land plc

Interim results to 30 June 2009

Developments during the first six months of 2009

As stated at the Annual General Meeting in June, the general economic downturn, particularly the resultant restriction on the availability of capital for investment in property, is severely impacting on the markets in which Blackrock operates and this has constrained the scope and timing of the group's plans to develop its business over the medium term. Very limited investment activity has been undertaken and management has concentrated on maintaining and increasing rental income, reducing costs and adding value wherever possible:

• Overall, the group continues to benefit from a robust rental income stream. 76% of the group's property portfolio is income producing. No defaults have arisen among lessees during the year to date and there are no significant lease expiries until 2011.

• The group's joint venture with Lagan Developments Limited has completed the first phase of development of Navan Retail Park.  The anchor tenant is currently carrying out its store fit-out and will open for trading in late autumn.  A number of other tenants are already trading in the park or will commence before the year end.

• Earlier this year, the group's 105 acre land holding at Broxburn, west of Edinburgh, was rezoned as part of the local core development area for mixed use, primarily residential. A planning application for a first phase of development will be submitted before the year-end.

• A planning application will also be presented to Bexley Council later this year for a phased residential re-development of the group's 15 acre land holding at Erith in Thames Gateway, London. In the meantime, part of this property continues to be let to a major UK retailer.

• In the Netherlands, following successful new lettings at Amersfoort, the Dutch portfolio is performing well, with an 8% increase in income having been achieved on an annualised basis.

• In Belgium, there has also been good progress on lettings and our warehouse / office portfolio at Zaventhem, beside Brussels airport, is now more than 90% let, up from 84% at the start of the year.

• In relation to the group's 255 acre land holding in north Dublin, owned partly in a joint venture with Total Produce plc, proposals have recently been submitted to Fingal Council seeking its re-designation. The submission is currently being considered by the relevant authorities.

• In Dublin, consequent on the present downturn in the commercial property sector, Dublin City Council and the Markets Regeneration Consortium, in which Blackrock has a 50% stake, have ended formal discussions on the proposed redevelopment of the markets area in central Dublin. Regeneration of this strategically important part of the city, in which Blackrock already directly holds other assets key to its successful development, remains an attractive longer-term prospect and the Consortium will continue to maintain dialogue with the Council on the matter.

• In Scotland, again as a result of the economic downturn, the demand for residential property has declined significantly. Following the receivership of Applecross Properties Limited, the companies that were planning the development of Queen Margaret Drive in Glasgow and Jewel and  Esk College  near Edinburgh,  projects promoted and managed by Applecross, have been placed in administration. Full provision  was  made against Blackrock's investments in these ventures at 31 December 2008 and no further financial consequences have arisen as a result.

• Group administration costs in the first half of the year have been reduced by €0.5m compared to the same period in 2008 and further savings are targeted for the second half of the year.

Property valuation

In accordance with IAS 40 Investment Property, Blackrock has adopted the fair value basis of accounting for its investment property. IAS 40 encourages, but does not require, that fair value be determined on the basis of a valuation by an independent valuer. However, it is ultimately for the board to determine the fair value of investment property at any reporting date. 

IAS 40 defines 'fair value' as the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm's length transaction, and states that the best evidence of fair value is provided by current prices in an active market for property similar to the property being valued. As a consequence of the current economic downturn and, in particular, the resultant unavailability of credit for property transactions, the markets in the locations and sectors in which the company operates are functioning neither actively nor normally at the present time. No significant volume of property transactions is taking place and those that have occurred recently in the segments of the market that might be considered relevant to the group have reflected values at which Blackrock would not consider selling.

The group's properties were acquired and are being held for their medium to long term investment or development returns. The board does not envisage undertaking any significant transactions in the current economic environment and, in particular, has no intention of realising any of its assets in the market conditions that prevail at present. In these circumstances, the board has not commissioned independent valuations of its investment property assets for the purposes of the interim financial statements.  In the absence of reliable and relevant market evidence, the board is unable to arrive at a better estimate of the fair value of the group's property assets at the interim stage than that which was reported at last year end and, accordingly, has  determined to carry those properties in the interim financial statements at the same values as they were recorded at 31 December 2008, adjusted only for known and measurable changes in circumstances, including movements in exchange rates.  

Analysis of movement in total property assets

Below is a geographical analysis of the movement in total property assets, including equity accounted investees, during the first half of 2009:

Investments during the period relate to capital expenditures undertaken on individual properties and the group's share of interest payments made on behalf of equity accounted investees. Fair value adjustments during the period relate to other known and measurable changes in circumstances other than exchange rate movements.

Impact of foreign exchange on movement in net assets

The increase in value of the group's UK property assets arising from the translation impact of foreign exchange was €9.0m. This was offset by a net €10.6m loss on translation of sterling loans, cash and other balances. The net impact of foreign exchange on the group's net assets for the period was a loss of €1.8m, analysed as follows:

Finance

Based on its current cash position and projected cash flows, the group anticipates that it will have sufficient funds to meet its ongoing commitments. At the same time, cognisant of the prevailing economic conditions and uncertainties, the company is continuing its discussions with its lenders with a view to consolidating and strengthening its financial position to meet its future requirements.

  Financial Performance

Net rental income

Gross rental income was €8.6m (2008: €9.2m) and property outgoings were €1.7m (2008: €2.2m), resulting in a net rental income for the period of €6.9m (2008: €7.0m).

Net property valuation

The basis of accounting for the group's net property in the interim financial statements is discussed above.

The net property valuation gain of €9.0m (2008: loss of (€7.9m)) comprised valuation gains of nil (2008: €0.4m) plus exchange gain of €9.0m (2008: (€8.3m)) on sterling assets.  

Administration expenses

Administration expenses for the period were €2.1m (2008: €2.6m).  The group is targeting further savings in the second half of the year.

Share of result of equity accounted investees

The group's share of losses in its equity accounted investees in the period was €2.6m (2008: €6.3m).  

Net finance income/(expense)

Net finance income/(expense) for the period was (€14.7m) (2008: gain €1.8m) comprising a loss on sterling denominated borrowings of €(10.6m) (2008: gain €7.1m), interest on borrowings in the period of (€4.2m) (2008: €6.0m) and interest earned on cash balances during the period €0.1m (2008: €0.6m).

Taxation

The tax charge for the half year of €0.1m (2008: €1.4m) comprised deferred tax of nil (2008: €1.2m)   relating to revaluation uplifts during the period and income tax of €0.1m (2008: €0.2m). 

 Earnings per share

Basic and diluted loss per share for the period was €0.64 cent (2008: €1.60 cent).

Shareholders' funds and net asset value per share

Shareholders' funds at 30 June 2009 amounted to €146.2m resulting in basic and diluted net asset values per share of €25.07 cent (June 2008: €37.46 cent).  

Net bank borrowings

Bank borrowings, net of cash and cash equivalents, amounted to €185.2m at 30 June 2009, compared to €190.5m at 30 June 2008.  

Conclusion

The property sector continues to be constrained by the effects of the general economic conditions. The supply of credit remains tight and market confidence has yet to re-emerge. In these circumstances, management focus remains directed toward maintaining and enhancing rental income and reducing the cost base in anticipation of the opportunities that will arise when market conditions improve.

3 September 2009

For further information, please contact:

Debbie O'Brien, Wilson Hartnell PR - Tel: +353 1 669 0030

Consolidated interim income statement

for the period ended 30 June 2009

Consolidated interim statement of comprehensive income

for the period ended 30 June 2009

Consolidated interim statement of changes in equity

for the period ended 30 June 2009

Consolidated interim balance sheet

at 30 June 2009

Consolidated interim statement of cash flows

for the period ended 30 June 2009

Notes to the condensed consolidated interim financial statements 

1.    General information and basis of preparation

General Information

The condensed consolidated interim financial statements of the company for the six month period ended 30 June 2009 are unaudited. The financial statements presented herein do not amount to statutory financial statements that are required by Section 7 of the Companies (Amendment) Act, 1986 to be annexed to the annual return of the company. The statutory financial statements for the financial year ended 31 December 2008 were annexed to the annual return and filed with the Registrar of Companies. The audit report on those statutory financial statements was unqualified. It did, however, contain an emphasis of matter made in relation to the basis of preparation of the financial statements. 

Basis of preparation 

The condensed consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standards, as adopted by the EU (EU IFRSs).

The financial information contained in the condensed consolidated interim financial statements has been prepared in accordance with the accounting policies set out in the last annual report with the exception of the policies pertaining to IAS 1 (Presentation of Financial Statements) and IFRS 8 (Operating Segments).

Presentation of financial statements

The group has applied revised IAS 1 Presentation of Financial Statements (2007), which became

effective as of 1 January 2009. As a result, the group has presented a consolidated income statement and a statement of comprehensive income as two separate statements and has also presented a statement of changes in equity. This presentation has been applied in these condensed interim financial statements as of and for the six months period ended on 30 June 2009.

Comparative information has been re-presented so that it also is in conformity with the revised standard.  The adoption of this revised standard impacts presentation aspects but there is no impact on earnings per share.

IFRS8 Operating Segments

This new standard was applicable to the group from 1 January 2009.  It requires segmented information to be presented based on the data that the chief operating decision maker receives and uses to make key decisions. As the group monitors its financial information based principally on geographic metrics, which meets the definition of segments within IFRS 8, no significant adjustment to the group's segmental reporting has been required. The group has also chosen to present certain operating segment results as supplementary information as these are also reviewed by the chief operating decision maker. Comparative information has accordingly not been re-presented as there was no impact on reported results or earnings per share.

New Accounting Standards

The following are new accounting standards that will be effective for the financial year ending 31 December  2009 - these have had no impact on the financial position of the group or earnings per share.

-    Revised IAS 23    Borrowing Costs - The group is already applying the provisions of IAS23(e).

-    IFRS 3 (Revised)    Business Combinations - None in the period.

There were a number of other standards and interpretations issued in the period. However, none are expected to have an impact on the group in the near term.  

The financial information is presented in euro, rounded to the nearest thousand.

The condensed consolidated interim financial statements were authorised for issue on 2 September 2009.

 2.    Segment reporting    

Analysis of property assets

The group manages its business principally on the basis of geographical segments.  Supplementary information based on the following categorisations has also been provided as this is also used by the chief operating decision maker:

-    Investment properties are properties which are held either to earn rental income or for capital appreciation or
     for both.

-    Development properties are properties which do not generate a current investment return but are held with a 
     view to re-designation and/or development for an alternative use.

3.    Net finance income/(expense)

4.    Tax                

Current tax        

Current tax expense for the interim period is the expected tax payable on the taxable income for the period, calculated at the estimated average annual effective income tax rate applied to the pre-tax income of the interim period.  

5.    Investment property 

6.    Investment in equity accounted investees 

The following is a summary of the group's share of the assets and liabilities of its equity accounted investees:

7.    Loans and borrowings

Principal movements in loans and borrowings are dealt with in the cash flow statement.

Terms and debt repayment schedule

(a)    Bank loans of €130,763,000 are guaranteed by certain nominated subsidiaries and subject to covenants 
         relating to asset cover.

These loans, denominated in both pounds sterling and euro, are repayable in full five years from the date of drawdown. The loans outstanding at 30 June 2009 are due to mature at various dates from 5 June 2011 to 12 June 2013. Interest is payable at the relevant interbank market rate plus a margin.

(b)    A secured bank loan drawn down by a subsidiary of €11,340,000 is secured by certain investment properties
         in Belgium. The loan is denominated in euro, and is repayable in quarterly capital repayments over the next 
         three years. Interest is payable at a 3 months Euribor rate plus margin.

(c)    Secured bank loans drawn down by a subsidiary of €47,983,000 are secured by certain investment properties 
         in the Netherlands and by a guarantee from the company.

The loans are denominated in euro and repayable in quarterly capital repayments over the next three years. The remaining capital is due in January 2011. Interest is payable at fixed interest rates between 5.4% and 5.5%.

8.    Earnings per share 

Basic result per share    

The calculation of basic result per share for the period ended 30 June 2009 was based on the result attributable to ordinary shareholders in the period and the weighted average number of equity shares outstanding during the period. 

Diluted earnings per share    

The calculation of diluted earnings per share for the period ended 30 June 2009 was based on the result attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding during the period ended 30 June 2009 as calculated for basic earnings per share above as there were no potentially dilutive instruments in issue.

9.    Net asset value per share    

The calculation of net asset value per share for the period ended 30 June 2009 was based upon the total equity attributable to the shareholders of the company at 30 June 2009 and the number of ordinary shares outstanding at 30 June 2009 as follows:

10.    Related Party transactions

There have been no new material related party transactions during the period.

11.    Contingencies and guarantees

(a)    The company has provided a guarantee of €4.4m in respect of the bank borrowings of the joint venture 
         companies involved in developing property in Navan, Ireland.  In the context of securing additional facilities 
         to complete this project, the company has provided an additional €1m guarantee since the period end.

(b)    The company has provided a guarantee of €0.9m in respect of interest arising on the €13.5m bank 
        borrowings of Tilder Holdings Limited, the joint venture company which owns lands in north county Dublin.

(c)    The company has provided a guarantee of €1.5 million in respect of the bank borrowings of Blackrock
         International Land Vida BV in relation to the financing of a building in Amsterdam.

(d)    South East Edinburgh Development Company, a 50:50 joint venture, acquired approximately 300 acres 
        of  agricultural land south of Edinburgh during 2007. The company has guaranteed its 50% share of any
        additional consideration payable to the vendor, calculated as 50% of the open market value net of all costs
        of the land, when planning consents have been received.  The company has provided a joint and several
        guarantee for bank borrowings of SEEDCo.

(e)    The company has provided a guarantee of €0.1m in respect of interest arising on the borrowings of 
        Silverfields LLP.

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