In 2010, we again concentrated our efforts on managing cash flow. We have also reviewed our unutilised banking facilities and reduced them wherever possible. As a result we have achieved a net annualised cash saving of £0.3 million.
As a result of the continuing crisis in the UK banking sector and as mentioned in the Chief Executive’s review, we have commenced negotiations with a number of property funds to provide alternative sources of finance.
Cash Flow Net cash increased over the year from £1.44 million to £4.72 million. This was after the repayment of £11.58 million of debt. Term debt reduced from £148.38 million to £136.80 million. This compares favourably with a peak level of £163.70 million at the end of 2007. Antiquarius, our property in Chelsea, London, was sold in August for £17.8 million and the sale of the Foxtons unit in Islington completed in January 2010.
Our Revolving Credit Facility with the Royal Bank of Scotland was extended during the year and will now expire in September 2012. We also reduced the total facility to £60 million from £90 million. This facility has been reduced further to £47 million since the year end because we considered it unlikely that we would borrow further against the facility before expiry.
Income Statement The Group's loss before tax as reported under IFRS was £10.69 million compared to a profit of £21.4 million in 2009. This volatility in our results reflects a number of changes in value which are taken directly to our Income Statement. Firstly, there have been considerable swings in the interest rates which have affected the fair value of our derivatives and this has led to a loss of £7.28 million (2009: £13.27 million profit). Secondly, the revaluation of our property portfolio has shown an increase of £1.57 million (2009: £9.42 million). The table below shows the underlying performance of the Group on a management adjusted basis.
The interest charge, excluding the change in fair value of derivatives and one-off costs incurred on the termination of interest rate swaps, was cut in the year to £11.9 million (2009: £12.4 million). This is due to the reduction in the level of debt and the reduced swap contracts.p> During the year we reduced our long term hedging to be more in line with the total debt outstanding. The total value of our swaps was £125.4 million against a long term debt of £115.1 million. This was reduced in the year from £145.0 million and the £3.5 million cost of breaking the swaps has been shown as an expense in the income statement.s strategy of hedging our interest payments means that we are protected against future interest fluctuations. We do not trade our swaps and we try to align them to the debt levels we have in the Group at any given time. Rental income during the year reduced to £16.5 million (2009: £17.1 million). On a like for like basis the group’s rental income, excluding joint ventures, increased by 2.4% to £15.6 million (2009: £15.2 million), as shown in the table below.
Overheads were down 22.4% to £3.8 million (2009: £4.9 million). This partly reflects increased fees received from managing third party assets, as well as lower direct costs.
Operating profit, excluding property and other investment revaluations, increased to £11.0 million (2009: £9.7 million), a rise of 14.1%. Excluding exceptional items we improved the net result by £1.9 million in the year.
The tax charge in the year shows a credit of £7.2 million. This is made up of a current tax credit in relation to prior years of £0.9 million and deferred tax credit of £6.3 million. This deferred tax charge has arisen due to a £2.0 million movement in the derivatives, valuation of the properties, including the indexation, of £2.8 million, and other timing differences of £1.5 million.
Balance Sheet The underlyiThe underlying net assets of the Group on a management adjusted basis are shown in the table below.
Group net assets under IFRS were £55.8 million at the year end. The more meaningful EPRA figure shows net assets of £72.1 million, equivalent to 87.5p per share. The EPRA NNNAV reduced to 66.7p per share, predominately due to the increase in the number of shares in issue as a result of paying a proportion of last year’s final dividend in shares.
The Directors exercise their commercial judgements when reviewing the cash flow forecasts of Group and the underlying assumptions on which they are based. The Group’s business activities, together with the factors likely to affect its future development, are set out in the Chairman’s Statement, the Chief Executive’s Report and in this Report. In addition the directors considered note 17 to the financial statements which include the company’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; its exposure to credit risk and liquidity risk.
With a quality portfolio comprising a majority of long leases and suitable financial arrangements, the directors believe that the company is well placed to manage its business risks successfully despite the continuing uncertain economic climate. The directors therefore have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.
Dividends The company is proposing a final dividend of 0.4p, payable on 1 July 2011 to shareholders on the register as at 10 June 2011. This makes a total dividend for the year of 1.15p. The directors have decided against the capitalisation issue of new shares as in the previous two years, as this is felt to be too dilutive on the net asset per share of the company.
Our associated company Bisichi Mining PLC, in which we hold a 41.7% stake, had a difficult year and suffered losses after taxation of £1.3 million. This figure is after a revaluation surplus under IFRS of £0.1 million.
I feel confident that the continued policy of prudently managing the Group’s cash resources will benefit us as we go through this period of uncertainty.
Robert Corry, Finance Director 15 April 2011
