F&C Commercial Property Trust H1 profit dives

F&C Commercial Property Trust Limited has seen its first-half profit decline by 80% to £15.6m from £78.7m reached in H1 2015.

The company posted a £4.3m unrealised loss on revaluation of investment properties, compared to last year’s gain of £57.4m.

Total income decreased by 69% to £27.9m, year-on-year, despite an improvement of rental income to £32.2m from £30.7m a year ago.

The company’s net asset value total return was 1.4% and the ungeared total return from the property portfolio was 2%. This compares with a total return of 2.6% from the Investment Property Databank All Quarterly and Monthly Valued Funds.

The share price total return for the period was -13.3%. An initial share price fall was primarily due to lower expectations for capital growth in UK commercial property values. Subsequent weakness followed the announcement of the referendum in February and Stamp Duty changes in March, with sharp falls across the sector in the immediate aftermath of the Brexit vote in the last week of June.

As at 30 June 2016, the share price was 113.8p, a discount of 17.8% on the June net asset value, but it subsequently recovered, closing the discount to 8.1% by 22 August 2016, when a number of open-ended funds re-opened for business after temporary closure and several property market transactions took place on lower discounts to pre-Brexit prices than expected.

“The outlook for property will be strongly influenced by the Brexit negotiations and we are now in a very uncertain phase as the implications of the vote are evaluated. We would expect investors to remain cautious and risk averse and for this to favour prime property in established locations,” fund manager Richard Kirby said.

“Low interest rates may further support the prime end of the market while a lower sterling rate could potentially attract overseas buyers. The economic outlook is for lower but positive growth over the medium-term and for some increase in inflation,” Kirby said.

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