+44 (0)207 415 5000
2nd Floor, 12 Little Portland Street, London, W1W 8BJ
FOR IMMEDIATE RELEASE
30 April 2012
LONDON & ASSOCIATED PROPERTIES PLC:
RESULTS FOR 12 MONTHS TO 31 DECEMBER 2011
HIGHLIGHTS
- Major turnaround in operating profits of £0.89m against losses of £0.81m in 2010
- Operating profits before financing charges of £12.2m against £11.1m - 10% increase
- Group rental income grew by 2% on a like-for-like basis
- Despite difficult retailing environment voids continue to be low at under 2%
- Acquisition of new Joint Venture in partnership with Columbus Capital Management
- Under EPRA standards net assets were £67.9m and NAV per share of 80.9p
- Total group assets stand at £289m (2010: £289m)
- Growth of Group asset management business - London & Associated Management Services
"The economic environment continues to be challenging. Against this
background, we are pleased to report on another period of satisfactory
progress for LAP. The quality of our portfolio, particularly our key shopping
centres, when combined with our strategic management expertise has protected
us from the worst of the property recession," Michael Heller, Chairman and
John Heller, Chief Executive.
Contact:
London & Associated Properties PLC Tel: 020 7415 5000
John Heller, Chief Executive
Robert Corry, Finance Director
Baron Phillips Associates Tel: 020 7920 3161
Baron Phillips
Chairman and Chief Executive's statement
The economic environment continues to be challenging. Against this background,
we are pleased to report on another period of satisfactory progress for LAP.
The quality of our portfolio, particularly our key shopping centres, when
combined with our strategic management expertise has protected us from the
worst of the property recession.
We are also pleased that operating profit after financing charges has shown a
major turnaround to a profit of £0.884 million for the 12 months to 31
December 2011 from a loss of £0.812 million in 2010. We expect this trend to
continue. We have sustained our rental income at £15.4 million (2010: £15.6
million) on investment properties we still hold.
As at 31 December 2011, our directly owned portfolio of shopping centres and
other retail properties was independently valued at £194 million (2010: £195
million). This followed the sale of Phelps Cottage in Islington during 2011
for £0.9 million (against a book value of £0.6 million). Over the years we
have always managed our assets intensively and disposed of them when they are
deemed to have reached maturity.
During 2011, we obtained vacant possession of a unit formerly let to Boots at
Windsor. This has provided a major opportunity to re-configure the space and
produce an increased overall rent. On a like-for-like basis, Group rental
income during the year grew by 2%, after adjusting for the Boots unit under
development.
2011 was a difficult year for retailers and there have been several major
retail insolvencies in the sector. We have not been immune, but our spread of
retail tenants within the portfolio has provided some protection. With the
exception of one unit in Halifax, all the units affected have remained trading
under their pre-pack arrangements with their successors taking new leases.
Void levels, at under 2% of our portfolio by rental value, continue to remain
low notwithstanding these retailers' failures.
As mentioned in last year's statement we have looked at differing methods of
funding new property opportunities. As part of this we acquired a shopping
centre at Langney, near Eastbourne in a new Joint Venture with a fund managed
by Columbus Capital Management LLP, part of Schroders' real estate investment
and asset management business. We have invested £887,500 for a 12.5% interest
in the Joint Venture. Additionally London & Associated Management Services (LAMS),
our asset management subsidiary, has been appointed to manage the property for
an on-going management fee.
We report on our major centres as follows:
King Edward Court, Windsor
Following our programmes of disposing of mature assets, this centre accounts
for almost one half of the value of our portfolio. As already stated, during
2011 we took back the Boots unit which we are in the process of dividing into
three separate retail units. New lettings have been agreed with Superdry (the
fashion retailer) and Cotswold Outdoor (the outdoor clothing and equipment
specialist). The third unit is currently being marketed and we have interest
from a number of national retailers. We expect to be able to report further
progress on this unit in due course.
Elsewhere in the centre Gatward the Jewellers, an existing tenant, has taken a
new lease on the adjacent unit to their existing one and have opened a Rolex
watch franchise. We have also agreed with a Timberland franchisee an
assignment of a lease formerly held by Early Learning Centre. This is part of
our continued policy to have an exciting mix of tenants at King Edward Court.
The car park continues to operate at the same high level as last year.
During 2012 a number of our major tenants will have rent reviews and we are
confident that overall these units will show a significant increase in income.
Orchard Square, Sheffield
Orchard Square, Sheffield, continues to perform satisfactorily. A single unit
has become available for the first time in several years and interest in it
has been encouraging. We continue to generate strong income from this centre
and it continues to be otherwise fully let.
Kings Square, West Bromwich
In spite of the difficulties experienced in most West Midlands economies, our
centre at West Bromwich (Kings Square) has the same high level of occupancy as
last year. Sandwell College, which will house some 11,000 students, has opened
to the rear of our Centre and this has further increased footfall.
Bon Marché, which has a substantial unit in the centre, wishes to continue to
trade their unit and we have agreed terms for a new lease at the same rent.
Brixton Market
Our two indoor markets were let on 25 year leases from 1 April 2011 to In
Shops Limited, a subsidiary of Groupe Geraud, who operate 200 markets across
Europe.
Although LAP had already established Brixton Village as a quality cafe and
restaurant location, Groupe Geraud has built on our earlier success.
They have already made progress on an extensive scheme of redecoration and
refurbishment. As a result both markets (Brixton Village and Market Row) are
trading at unprecedented levels.
Our agreement with Groupe Geraud includes a base rent of £817,500 plus a 50%
profit share, once income received exceeds a certain level. Current trading
there exceeds that level by some margin.
Interestingly, several of the cafes and restaurants located within the markets
now have their own websites and have been reviewed in the national papers.
Our arrangement with Groupe Geraud will establish a strong income stream
together with a saving in our head office costs which we have already started
to see.
Halifax
Trading at this centre, which we continue to own in a 50:50 joint venture with
Lloyds Banking Group (formerly HBoS), continues to be strong, despite the loss
of a single tenant which went into administration. Interest in the empty unit
has been very encouraging, and we are now under offer to let the unit to a
national retailer.
We are also pleased to report that Tesco has re-geared its lease for a further
10 years with an uplift in rent of some 33% being achieved.
We have also entered into negotiations with the Council as tenant of most of
the upper parts, to adjust their lease and create a greater period of income
certainty. These negotiations are almost finalised and should have a positive
impact on values.
Commentary on reported results
International Financial Reporting Standards (IFRS)
We prepare our accounts under International Financial Reporting Standards
(IFRS). Unfortunately these Standards require a rigid approach to hedging
instruments. In order to provide certainty over the maximum level of our
interest payments (which are a significant element of our expenses) we entered
into a swap arrangement the effect of which is that we pay interest at a fixed
rate (see note 17). Even though we do not trade these swaps, there is no
requirement for us to settle them early and the interest cost is expensed as
incurred, the Standards require us to recognise the theoretical impact of
"marking to market value" the hedging instrument at each balance sheet date.
This market to market valuation is highly volatile and is a direct reflection
of the low levels of term interest rates. We show below under both IFRS and
the standards of the European Real Estate Association (EPRA) our net assets.
Net assets £'000 2011 2010
Exclude swap valuation 70,779 69,388
As disclosed with swap valuation 39,929 55,761
Under EPRA, which is used by most property companies, our net assets stood at
£67.9 million in December 2011 compared to £72.1 million in December 2010.
Under EPRA net asset per share is now 80.9p compared to 87.5p a year ago. The
detail of this calculation is shown in the Finance Director's Report.
Operating profit before financing charges, on a management adjusted basis,
grew to £12.2 million compared with £11.1 million in 2010. This excludes the
impact of property valuations and the effect of marking to market the hedging
instruments.
London & Associated Management Services
Our management company, LAMS, is already building a good reputation in the
asset management sector. We have taken on further work from administrators and
banks by managing shopping centres on their behalf. For this we are paid an
on-going management fee with a further success fee payable on the final
disposal of the centres. This has produced extra revenue for the Group and is
a growing area of our business during these difficult times.
Total Group assets, including those of Bisichi Mining PLC, our associate
company, and Dragon Retail Properties, our joint venture with Bisichi, stand
at £289 million (2010: £289 million).
Bisichi Mining PLC
Bisichi Mining PLC, in the second half of 2011, enjoyed the benefit of higher
coal prices and achieved a significant turnaround in profitability compared to
the first half of the year.
Banking
Our £44.1 million Revolving Credit Facility with RBS expires in September this
year. Discussions on the renewal of this facility have commenced and we will
report more fully when these discussions are concluded but we are confident at
this stage that we will reach a satisfactory result.
Dividends
The Board has taken the decision not to pay a final dividend. This means the
total dividend for the year is 0.75p per share. This is necessary to retain
cash in the business and adopt a cautious approach during this period of
economic uncertainty although we hope to resume a dividend in 2012.
Finally we have sub-let our office space at St James's Square and have moved
to new premises at 24 Bruton Place, London W1. This will save the business
£0.4 million per annum.
We would like to thank all of the directors, staff and advisors who have
contributed to our progress in what has been a very demanding 12 months during
2011.
Michael Heller John Heller
Chairman Chief Executive
20 April 2012
FINANCE DIRECTOR'S REPORT
During 2011 management of our cash flow remained a vital priority for the
Group since the provision of new finance for property companies remains
restricted.
As mentioned elsewhere in this report, our new joint venture with Columbus
Capital Management LLP, part of Schroders real estate investment and asset
management business, purchased a shopping centre in Langney, Eastbourne. Our
investment for a 12.5% interest was £887,500. Our management subsidiary,
London & Associated Management Services, is managing this property on behalf
of the Joint Venture. We have also been instructed to manage various shopping
centres on behalf of administrators and banks which is producing a very useful
further revenue stream into the Group.
Cash flow
Our only disposal during 2011 was of Phelps Cottage in Islington for £0.9
million. The proceeds were used to pay down borrowings.
During the year term debt remained at the same level of £136.8 million (2010
£136.8 million). We paid down the Revolving Credit Facility ("RCF") by £0.9
million to reduce it to £44.1 million and we also converted an overdraft
facility into a new 4 year term debt which is being amortised over the term.
We have cancelled the remaining undrawn balance of the RCF. As mentioned above
the RCF is due to expire in September this year and is being refinanced. We
are currently in discussions which are on-going with the bank and we will
report more fully when appropriate but we are confident at this stage that
they will reach a satisfactory result.
The utilisation of the cash over the year is shown in the bar chart below:
Income statement
The income statement has been presented in a different format this year to
better illustrate the performance of the various activities of the group. As
can be seen, the Group has made an operating profit after financing charges,
of £0.884 million, representing a considerable improvement on the loss of the
previous year of £0.812 million. This has been achieved primarily as a result
of a reduction in Group overheads of some £1.1 million and interest savings of
£0.6 million.
Total rental income in the year was £16.4 million (2010: £16.0 million). An
analysis of the rental income during the year is as follows:
2011 2010
£'000 £'000
Annual rental income from properties still held 15,420 15,550
Surrenders 943 -
Income from properties sold 16 435
Revenue as per income statement 16,379 15,985
At the start of the year Boots surrendered its lease in Windsor which reduced
the annual rental by £400,000. This has now been sub-divided into 3 separate
units, two of which have been pre-let to Superdry and Cotswold Outdoor. Income
from these three units will exceed that previously achieved and if this is
added back to the annual rental from properties still held, this shows a
growth in group income in the year of almost 2%, a very creditable performance
in this difficult trading period.
Overheads are constantly under review and we are trying to reduce them
wherever we can. In this regard we are relocating our head office in London
which should save a further £0.4 million per annum on an annualised basis.
The revaluation and other movements, associates and joint ventures in the
income statement show the distortion caused by valuing the hedging instruments
at a theoretical market value. A series of swaps were contracted in 2007 to
remove the risk to our cash flow of higher interest rates. We are required to
show the Net Present Value of the estimated future difference between the long
term cost of our fixed rate instrument and the current interest rate. Clearly
this is only relevant if the swap has to be cancelled but does not give a true
picture of the ultimate liability or the financial position of the business.
As these rates have fluctuated substantially in recent years, this has led to
large and volatile movements in the IFRS calculation of the Group's net
assets. Since the year end the movement in rates has reduced this negative
movement by some £3.8 million before tax with a corresponding increase in the
IFRS net assets.
The tax charge in the year is a credit of £3.7 million. This relates to
deferred tax as there is no current tax in the year. The deferred tax too has
arisen as a result of the movement in derivatives giving a credit of £7.7
million offset by other timing differences including the revaluation of
properties and movements in capital allowances.
Balance Sheet
The underlying assets of the Group on a management adjusted basis are shown in
the table below:
2011
EPRA
Per IFRS Mark-to-market
balance Deferred of interest Head Adjusted
sheet tax swaps leases net assets
£'000 £'000 £'000 £'000 £'000
Investment properties 222,409 (28,661) 193,748
Other fixed assets 2,482 2,482
Investments in
associate and joint
ventures 9,050 9,050
Other assets 8,614 (2,841) 5,773
Other liabilities (68,964) 30,850 28,661 (9,453)
Net debt (133,662) (133,662)
Net assets 39,929 (2,841) 30,850 - 67,938
Adjusted NAV per share 47.5p 80.9p
2010
Per IFRS Mark-to-market
balance Deferred of interest Head Adjusted
sheet tax swaps leases net assets
£'000 £'000 £'000 £'000 £'000
Investment properties 223,610 (28,664) 194,946
Other fixed assets 2,558 2,558
Investments in
associate and joint
ventures 8,646 8,646
Other assets 4,809 2,607 7,416
Other liabilities (52,377) 64 13,627 28,664 (10,022)
Net debt (131,485) (131,485)
Net assets 55,761 2,671 13,627 - 72,059
Adjusted NAV per share 66.7p 87.5p
Group net assets under IFRS were £39.9 million (2010: £55.8 million), but,
under EPRA, the figure we consider to be more meaningful shows net assets of
£67.9 million, equivalent to 80.9p per share. The EPRA NNNAV reduced to 47.5p
per share (2010: 66.7p) having taken into account the mark-to-market value of
the derivatives and tax.
Accounting judgements and going concern
The most significant judgements made in preparing these accounts relate to the
carrying values of the properties, investments and the hedge instruments,
which are stated at open market value. The Group uses external professional
valuers to determine the values of its properties. Interest rate hedges (as
explained above) are stated at net present value of the extra costs arising to
maturity compared to current market rates.
The Directors exercise their commercial judgements when reviewing the Group's
cash flow forecasts 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 and Chief Executive's
Statement and in this Report. The Directors have also considered the on-going
discussions with RBS on the renewal of the current £44.1 million RCF as
referred to above. In addition the Directors considered the information in
note 17 to the financial statements which includes 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 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 not proposing a final dividend so the total dividend for the
year will remain at 0.75p paid at the half year. This will preserve cash
within the Group whilst we see how the year develops.
Our associated company Bisichi Mining PLC, in which we hold a 42% stake, had a
difficult first half to the year and suffered losses although it returned to
profitability in the second half. The annual loss after taxation was £0.5
million. This figure is after a revaluation deficit under IFRS of £42,000.
I am confident that the continued policy of prudently managing the Group's
cash resources will benefit us as we continue to face this period of economic
uncertainty.
Robert Corry,
Finance Director
20 April 2012
Directors & Advisors
DIRECTORS
EXECUTIVE DIRECTORS
Michael A Heller MA FCA (Chairman)
John A Heller LLB MBA (Chief Executive)
Robert J Corry BA FCA (Finance Director)
NON-EXECUTIVE DIRECTORS
† Howard D Goldring BSC (ECON) ACA
Howard Goldring has been a member of the board since July 1992 and is a global
asset allocation specialist. He is chairman of Delmore Asset Management
Limited which manages investment portfolios and provides global asset
allocation advice to private clients, family offices and pension funds. From
1997-2003 he was consultant director on global asset allocation to Liverpool
Victoria Asset Management Limited.
#† Clive A Parritt FCA CF FIIA
Clive A Parritt joined the board on 1 January 2006. He is a chartered
accountant with over 30 years experience of providing strategic, financial and
commercial advice to businesses. He is chairman of Baronsmead VCT 2 plc,
DiGiCo Europe Limited, ASL Technology Holdings Limited and BG Consulting Group
Limited as well as being a director of F&C US Smaller Companies plc. Clive is
currently the President of the Institute of Chartered Accountants in England
and Wales. He is chairman of the audit committee and as Senior Independent
Director he chairs the Nomination and Remuneration Committees.
* Member of the nomination committee
# Senior independent director
† Member of the audit, remuneration and nomination committees
Secretary & registered office
Heather A Curtis ACIS
24 Bruton Place,
London W1J 6NE
Director of property
Mike J Dignan FRICS
Auditor
Baker Tilly UK Audit LLP
Principal bankers
HSBC Bank PLC
Lloyds Banking Group PLC
National Westminster Bank PLC
Royal Bank of Scotland PLC
Solicitors
Olswang LLP
Pinsent Masons LLP
Stockbroker
Oriel Securities Limited
Registrars & transfer office
Capita Registrars
Shareholder Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Telephone 0871 664 0300
(Calls cost 10p per minute + network extras, lines are open Mon-Fri 8.30am to
5.30pm)
or +44 208 639 3399 for overseas callers.
Website: www.capitaregistrars.com
Email: ssd@capitaregistrars.com
Company registration number
341829 (England and Wales)
Website
www.lap.co.uk
E-mail
admin@lap.co.uk
DIRECTORS' REPORT
The directors submit their report and the audited accounts, for the
year ended 31 December 2011.
Activities
The principal activities of the Group during the year were property
investment and development, as well as investment in joint ventures and an
associated company. The associated company is Bisichi Mining PLC in which the
company holds a 42 per cent interest. Bisichi Mining PLC is listed on the
London Stock Exchange and operates in England and South Africa with
subsidiaries which are involved in overseas mining and mining investment.
Business Review
Review of the group's development and performance
The Chairman and Chief Executive's Statement and Finance Director's Report on
the preceding pages 3 to 12 provide a comprehensive review and assessment of
the Group's activities during the year as well as its position at the year end
and prospects for the forthcoming year.
Property activities
The Group is a long-term investor in property. It acquires retail properties,
actively manages those assets to improve rental income and thus enhance the
value of its properties over time. In reviewing performance, the principal
areas regularly monitored by the Group include:
- Rental income - the aim of the Group is to maximise the
maintainable income from each property by careful tenant management supported
by sympathetic and revenue enhancing development. Whilst income may be
adversely affected by the inability of tenants to pay their rent, rent
collection and tenant quality are monitored carefully. Risk is also minimised
by a diversified tenant base, which should limit the impact of the failure of
any individual tenant.
- Cash flow - allowing for voids, acquisitions, development
expenditure, disposals and the impact of operating costs and interest charges,
the Group aims to maintain a positive cash flow.
- Financing costs - the exposure of the Group to interest rate
movements is managed by the use of swap arrangements (see note 17 on page 41
for full details of the contracts in place). These swap arrangements are
designed to ensure that our interest costs are fixed and always covered by
anticipated rental income. Once put in place we intend that such swaps are
generally retained until maturity. Details of key estimates adopted are
contained in the accounting policies note on page 51.
- Property valuations - market sentiment and economic conditions
have a direct effect on property valuations, which can vary significantly
(upwards or downwards) over time. Bearing in mind the long-term nature of the
Group's business, valuation changes have little direct effect on the ongoing
activities or the income and expenditure of the Group. Tenants generally have
long-term leases, so rents are unaffected by short-term valuation changes.
Borrowings are secured against property values and if those values fall very
significantly, this could limit the ability of the Group to develop the
business using external borrowings. The risk is minimised by trying to ensure
that there is adequate cover to allow for fluctuations in value on a
short-term basis.
It continues to be the policy of the Group to realise property
assets when the valuation of those assets reaches a level at which the
directors consider that the long-term rental yield has been reached. The Group
also seeks to acquire additional property investments on an opportunistic
basis when the potential rental yields offer scope for future growth.
Investment activities
The investments in joint ventures and the associate are for the long term.
The Group is an investor in the associate and manages the UK
property assets of the associate. However the principal activity of the
associate is overseas mining investment (principally in South Africa). The
investment is held to generate income and capital growth over the longer term.
The other listed investments are held as current assets to provide the
liquidity needed to support the property activities while generating income
and capital growth.
Investments in property are made through joint ventures when the
financing and spreading of risk make it desirable.
Corporate responsibility
Environment
The Group's principal UK activity is property investment, which involves
renting premises to retail businesses. We seek to provide those tenants with
good quality premises from which they can operate in an efficient and
environmentally friendly manner. Wherever possible, improvements, repairs and
replacements are made in an environmentally efficient manner and waste
re-cycling arrangements are in place at all of the company's locations.
Employment
The Group's policy is to attract staff and motivate employees by offering
competitive terms of employment. The Group provides equal opportunities to all
employees and prospective employees including those who are disabled.
Performance indicators
Our success is principally measured in terms of net asset value per share and
trading cash flow (where we aim over a period of time to deliver a positive
cash return) and net asset value per share after adjusting for valuation
volatility and excluding IFRS adjustments. The
directors consider that the Key Performance Indicator of the Group
is the Net Asset per Share value shown at the foot of the Balance Sheet on
page 29 and as discussed in the Finance Director's Report. Cash flow is shown
on page 31.
Dividend Policy
An interim dividend for 2011 of 0.75p was paid on 20 January 2012
(2010: Interim dividend 0.75p paid on 22 January 2011). The directors are not
recommending payment of a final dividend for 2011 (2010: 0.4p).
The company's ordinary shares held in treasury
During 2011 the company issued 714,136 of its own shares from Treasury at an
average price of 46.15p per ordinary share. The company also purchased 295,000
of its own ordinary shares of 10p each for treasury (being 0.35% of the issued
ordinary shares). The effect of these combined transactions is shown in the
table on page 15. At 31 December 2011 1,538,398 (2010:1,957,534) ordinary
shares were held in Treasury with a market value of £403,829 (2010:£822,164).
At the Annual General Meeting (AGM) in June 2011 members renewed the authority
for the company to purchase up to 10 per cent of its issued ordinary shares.
The company will be asking members to renew this authority at the next AGM in
May 2012.
Movements in Treasury Transaction Number of
shares during the year: price shares
Treasury shares held at 1 January 2011 1,957,534
28 February 2011 - Issue of Treasury
shares in lieu of directors and staff
bonuses 41.75p (674,839)
21 September 2011 - Purchase of own shares
for Treasury 34.00p 295,000
12 October 2011 - Issue of Treasury shares
in lieu of a staff bonus 30.5p (12,897)
12 October 2011 - Issue of Treasury shares
in connection with the HMRC approved share
incentive plan 30.5p (26,400)
Treasury shares held at 31 December 2011 1,538,398
Treasury shares are not included in issued share capital for the
purposes of calculating earnings per share and net assets per share, and they
do not qualify for dividends payable.
Investment properties
The freehold and long leasehold properties of the company and its
subsidiaries were revalued as at 31 December 2011 by external professional
firms of chartered surveyors - Allsop LLP, London (49.11 per cent of the
portfolio), Jones Lang LaSalle Limited (48.81 per cent), and BNP Paribas,
Leeds (2.08 per cent). The valuations, which are reflected in the financial
statements, amount to £193.7 million (2010: £194.9 million).
Taking account of prevailing market conditions, the valuation of
Group properties at 31 December 2011 resulted in a reduction of £1million
(2010: increase of £1.6 million). This has been reflected in the income
statement in accordance with the requirements of IFRS. The impact of property
revaluations on the company's joint ventures (Analytical Ventures Limited,
Dragon Retail Properties Limited and Langney Shopping Centre Unit Trust) and
the associate company (Bisichi Mining PLC) was a reduction of £0.5 million
(2010: increase of £1.4 million). The proportion of this revaluation
attributable to the Group (net of taxation) is reflected in the income
statement and the consolidated balance sheet.
Financial instruments
Note 17 to the financial statements sets out the risks in respect
of financial instruments. The board reviews and agrees overall treasury
policies, delegating appropriate authority for applying these policies to the
Chief Executive and Finance Director. Financial instruments are used to manage
the financial risks facing the Group - speculative transactions are
prohibited. Treasury operations are reported at each board meeting and are
subject to weekly internal reporting. Hedging arrangements are in place for
the company, its subsidiaries and joint ventures in order to limit the effect
of higher interest rates upon the Group.
Directors
M A Heller, J A Heller, R J Corry, H D Goldring, C A Parritt were directors of
the company for the whole of 2011. M C Stevens was a director until he retired
on 30 April 2011.
R J Corry, H D Goldring, J A Heller and C A Parritt are retiring by
rotation at the Annual General Meeting in 2012 and offer themselves for
re-election.
Brief details of the directors offering themselves for re-election
are as follows:
Robert Corry has been Finance Director since 1993. He has a
contract of employment determinable upon six months notice. Robert Corry is a
chartered accountant and has worked in the retail and real estate sectors for
much of his career.
Howard Goldring has been a director since 1992 and has a contract
of service determinable upon three months notice. He is a member of the audit,
remuneration and nomination committees. Howard Goldring is a chartered
accountant and global asset allocation specialist. He is executive chairman of
Delmore Asset Management Limited which specialises in the management of
investment portfolios and the provision of asset allocation advice for private
clients, family offices and pension funds. The board has considered the
re-appointment of Howard Goldring and recommends his re-election as a
director. His specialised economic knowledge and broad business experience are
of significant benefit to the business.
John Heller has been a director since 1998 and was appointed Chief
Executive in September 2001. He has a contract of service determinable upon
twelve months notice.
Clive Parritt has been a director since January 2006 and has a
contract of service determinable at three months notice and is the Senior
Independent Director and chairman of the audit, nomination and remuneration
committees. He is a chartered accountant with over 30 years experience in
providing strategic, financial and commercial advice to business. The board
has considered the re-appointment of Clive Parritt and recommends his
re-election as a director. His financial knowledge and broad commercial
experience are of significant benefit to the business.
Directors' interests
The interests of the directors in the ordinary shares of the
company, including family and trustee holdings, where appropriate, were as
follows:
Non-beneficial
Beneficial interests interests
31 Dec 11 1 Jan 11 31 Dec11 1 Jan 11
M A Heller 6,304,002 6,016,577 19,277,931 19,277,931
R J Corry 998,355 962,527 - -
H D Goldring 19,819 19,819 - -
J A Heller 1,630,649 1,923,320 †14,073,485 †14,073,485
C A Parritt 36,166 36,166 - -
M C Stevens* - 922,326 - +1,163,088
†These non-beneficial holdings are duplicated with those of M A
Heller.
+The non-beneficial interest of M C Stevens at 1 January 2011
arose by reason of his being a director of London & Associated Securities
Limited, a company which acts as a trustee.
* M C Stevens retired from his executive duties on 30 April 2011.
No director had any material interest in any contract or agreement
with the Group during the year other than as shown in this annual report.
(Please see note 20 to the financial statements and the remuneration report).
Between 1 January 2012 and the date of this report there were no
changes in the directors' holdings as detailed above.
The beneficial holdings of directors shown above include their
interests in the Share Incentive Plan.
Substantial shareholdings
At 31 December 2011 M A Heller and his family had an interest in
47.5 million shares of the company, representing 56.6 per cent of the issued
share capital net of treasury shares (2010: 47.4 million shares representing
56.7 per cent) and Cavendish Asset Management Limited had an interest in
5,667,134 shares representing 6.75 per cent of the issued share capital of the
company (2010: 5,186,065 shares representing 6.2 per cent).
The company is not aware of any other holdings exceeding 3 per cent
of the issued share capital and no relevant changes have occurred between 1
January 2012 and the date of this report.
Takeover Directive
The company has one class of share capital, namely ordinary shares.
Each ordinary share carries one vote. All the ordinary shares rank pari passu.
There are no securities issued in the company which carry special rights with
regard to control of the company.
The identity of all significant direct or indirect holders of
securities in the company and the size and nature of their holdings is shown
in "Substantial shareholdings" above.
The rights of the ordinary shares to which HMRC approved Share
Incentive Plan relate, are exercisable by the trustees on behalf of the
employees.
There are no restrictions on voting rights or on the transfer of
ordinary shares in the company, save in respect of Treasury Shares. The rules
governing the appointment and replacement of directors, alteration of the
articles of association of the company and the powers of the company's
directors accord with usual English company law provisions. Each director is
re-elected at least every three years. The company has requested authority
from shareholders to buy back its own ordinary shares and there will be a
resolution to renew the authority at this year's AGM (Resolution 11).
The company is not party to any significant agreements that take
effect, alter or terminate upon a change of control of the company following a
takeover bid. The company is not aware of any agreements between holders of
its ordinary shares that may result in restrictions on the transfer of its
ordinary shares or on voting rights.
There are no agreements between the company and its directors or
employees providing for compensation for loss of office or employment that
occurs because of a takeover bid.
Statement as to disclosure of information to the auditor
The directors in office on 31 December 2011 have confirmed that, so far as
they are aware, there is no relevant audit information of which the auditor is
unaware. Each of the directors has confirmed that they have taken all the
steps that they ought to have taken as a director in order to make them aware
of any relevant audit information and to establish that it has been
communicated to the auditor.
Corporate governance
The Company has adopted the Guidance for Smaller Quoted Companies (SQC)
published by the Quoted Companies Alliance. The Alliance provides guidance to
SQC and their guidance covers the implementation of The UK Corporate
Governance Code for SQC. The paragraphs below set out how the company has
applied this guidance during the year. The company has complied with the
Quoted Companies Alliance guidance throughout the year, except insofar that
non-executive directors are not appointed for fixed terms (section A.7.2).
Principles of corporate governance
The board promotes good corporate governance in the areas of risk management
and accountability as a positive contribution to business prosperity. The
board endeavours to apply corporate governance principles in a sensible and
pragmatic fashion having regard to the circumstances of the business. The key
objective is to enhance and protect shareholder value.
Board structure
During the year the board comprised the chairman, the chief executive, two
other executive directors and two non-executive directors, (one of the
executive directors retired on 30 April 2011). Their details appear on page
13. The board is responsible to shareholders for the proper management of the
Group.
The directors' responsibility statement in respect of the accounts
is set out on page 25. The non-executive directors have a particular
responsibility to ensure that the strategies proposed by the executive
directors are fully considered. To enable the board to discharge its duties,
all directors have full and timely access to all relevant information and
there is a procedure for all directors, in furtherance of their duties, to
take independent professional advice, if necessary, at the expense of the
Group. The board has a formal schedule of matters reserved to it and normally
has eleven regular meetings scheduled each year. Additional meetings are held
for special business when required.
The board is responsible for overall Group strategy, approval of
major capital expenditure and consideration of significant financial and
operational matters.
The board committees, which have written terms of reference, deal
with specific aspects of the Group's affairs:
- The nomination committee is chaired by C A Parritt and comprises
the non-executive directors and the executive chairman. The committee is
responsible for proposing candidates for appointment to the board, having
regard to the balance and structure of the board. In appropriate cases
recruitment consultants are used to assist the process. All directors are
subject to re-election at a maximum of every three years.
- The remuneration committee is responsible for making
recommendations to the board on the company's framework of executive
remuneration and its cost. The committee determines the contract terms,
remuneration and other benefits for each of the executive directors, including
performance related bonus schemes, pension rights and compensation payments.
The board itself determines the remuneration of the non-executive directors.
The committee comprises the non-executive directors and it is chaired by C A
Parritt. The executive chairman of the board is normally invited to attend.
The directors' remuneration report is set out on pages 21 to 23.
- The audit committee comprises the non-executive directors and is
chaired by C A Parritt. The audit committee report is set out on page 24.
Board and board committee meetings held in 2011
The number of regular meetings during the year and attendance was as follows:
Meetings Meetings
held attended
R J Corry Board 11 11
Audit committee 2 2
H D Goldring Board 11 10
Audit committee 2 2
Nomination committee 1 1
Remuneration committee 1 1
M A Heller Board 11 11
Nomination committee 1 1
Remuneration committee 1 1
J A Heller Board 11 11
Audit committee 2 2
C A Parritt Board 11 11
Audit committee 2 2
Nomination committee 1 1
Remuneration committee 1 1
M C Stevens * Board 3 2
Audit committee 2 2
Nomination committee 1 1
* M C Stevens retired on 30 April 2011
Performance evaluation - board, board committees and directors
The performance of the board as a whole and of its committees and
the non-executive directors is assessed by the chairman and the chief
executive and is discussed with the senior independent director. Their
recommendations are discussed at the nomination committee prior to proposals
for re-election being recommended to the board. The performance of executive
directors is discussed and assessed by the remuneration committee. The senior
independent director meets regularly with the chairman, executive and
non-executive directors individually outside of formal meetings. The directors
will take outside advice in reviewing performance but have not found this to
be necessary to date.
Independent directors
The senior independent non-executive director is C A Parritt. The other
independent non-executive director is H D Goldring. Delmore Asset Management
Limited (Delmore) is a company in which H D Goldring is a majority shareholder
and director. Delmore provides consultancy services to the company on a fee
paying basis. H D Goldring's association with Delmore and the length of his
service on the board mean that the criteria for independence set out in the UK
Corporate Governance Code are not met.
However, the board considers that the independence of H D Goldring
is not impaired either because he has served on the board for more than nine
years or because of his association with Delmore. The board therefore regards
H D Goldring as being independent.
The independent directors regularly meet prior to and after board
meetings to discuss corporate governance and other issues concerning the
Group.
Directors and officers liability insurance
The Group maintains directors and officers insurance, which is reviewed
annually and is considered to be adequate by the company and its insurance
advisers.
Internal control
The directors are responsible for the Group's system of internal control and
for reviewing its effectiveness at least annually, and for the preparation and
review of its financial statements. The board has designed the Group's system
of internal control in order to provide the directors with reasonable
assurance that assets are safeguarded, that transactions are authorised and
properly recorded and that material errors and irregularities are either
prevented or would be detected within a timely period. However, no system of
internal control can eliminate the risk of failure to achieve business
objectives or provide absolute assurance against material misstatement or
loss. The key elements of the control system in operation are:
- The board meets regularly with a formal schedule of matters
reserved for its decision and has put in place an organisational structure
with clearly defined lines of responsibility and with appropriate delegation
of authority;
- There are established procedures for planning, approval and
monitoring of capital expenditure and information systems for monitoring the
Group's financial performance against approved budgets and forecasts;
- The departmental heads are required annually to undertake a full
assessment process to identify and quantify the risks that face their
departments and functions, and assess the adequacy of the prevention,
monitoring and modification practices in place for those risks. In addition,
regular reports about significant risks and associated control and monitoring
procedures are made to the executive directors. The process adopted by the
Group accords with the guidance contained in the document "Internal Control
Guidance for Directors on the Combined Code" issued by the Institute of
Chartered Accountants in England and Wales. The audit committee receives
reports from external auditors and from executive directors of the group.
During the period, the audit committee has reviewed the effectiveness of the
system of internal control as described above. The board receives periodic
reports from all committees.
- There are established procedures for the presentation and review
of the financial statements and the Group has in place an organisational
structure with clearly defined lines of responsibility and with appropriate
delegation of authority.
There are no internal control issues to report in the annual report
and financial statements for the year ended 31 December 2011. Up to the date
of approval of this report and the financial statements, the board has not
been required to deal with any related material internal control issues. The
directors confirm that the board has reviewed the effectiveness of the system
of internal control as described during the period.
Risk assessment
The audit committee has assessed the key risks to the group as follows:
Description of Risk Description of Impact Mitigation
Asset Management:
Tenant failure Financial loss Initial and subsequent
assessment of tenant
covenant strength
combined with an
active credit control
function.
Leases not renewed Financial loss Lease expiries
regularly reviewed.
Experienced in house
teams with strong
tenant and market
knowledge who manage
appropriate tenant
mix.
Asset illiquidity (size Assets may be illiquid and Regular reporting of
and geographical location) affect flexing of balance current and projected
sheet position to the Board
with efficient
treasury management.
People:
Retention and recruitment Unable to retain and attract Nomination Committee
of staff the best people for the key and senior staff
roles. review skills gaps and
succession planning.
Loss of knowledge and key Training and
skills. development offered.
Reputation:
Business interruption Loss in revenue. Documented Recovery
Plan in place.
Impact on footfall.
General and terrorism
Adverse publicity. insurance policies in
place and risks
Potential for criminal/civil monitored by trained
proceedings. security staff.
Health and Safety
policies in place.
CCTV in centres.
Financing:
Fluctuation in property Impact on covenants and Secure income flows.
values other loan and other loan
agreement obligations. Regular monitoring of
LTV and IC covenants
and other obligations.
Focus on quality
assets.
Reduced availability of Insufficient funds to meet Efficient treasury
borrowing facilities existing debts/interest management.
payments and operational
payments. Loan facilities
extended where
possible.
Regular reporting of
current and projected
position to the Board.
Loss of cash and deposits Financial loss Only use a spread of
banks and financial
institutions which
have a strong credit
rating.
Fluctuation of interest Uncertainty of interest rate Manage derivative
rates costs contracts to achieve a
balance between
hedging interest rate
exposure and
minimising potential
cash calls.
Communication with shareholders
Prompt communication with shareholders is given high priority. Extensive
information about the Group and its activities is provided in the Annual
Report. In addition, a half-year report and two interim management statements
are produced for each financial year and published on the company's website.
The company's website www.lap.co.uk is promptly updated with announcements and
Annual Reports upon publication. Copies from previous years are also available
on the website.
The company's share price is published daily in the Financial
Times. The share price history and market information can be found at
http://www.londonstockexchange.com/prices-and-markets/markets/prices.htm. Our
code is LAS.
There is a regular dialogue with the company's stockbrokers and
institutional investors. Enquiries from individuals on matters relating to
their shareholdings and the business of the group are dealt with promptly and
informatively.
The company's website is under continuous development to enable
better communication with both existing and potential new shareholders.
The Bribery Act 2010
The Bribery Act 2010 came into force on 1 July 2011. Since that date all
directors and staff have been asked to complete an e-learning training course.
The company is committed to acting ethically, fairly and with integrity in all
its endeavours and compliance of the code is closely monitored. A copy of the
company's new Anti-Bribery Policy will be circulated in due course.
Payments to suppliers
The Company and the Group agree the terms of contracts when orders are placed.
It is Group policy that payments to suppliers are made in accordance with
those terms, provided that suppliers also comply with all relevant terms and
conditions. Trade creditors outstanding at the year-end represent 15.8 days
annual trade purchases (2010: 5.4 days).
Donations
No political donations were made during the year (2010: £Nil). Donations for
charitable purposes amounted to £2,000 (2010: £250).
Going concern
The Group's business activities, together with the factors likely to affect
its future development are set out in the Chairman and Chief Executive's
Statement on the preceding pages 3 and 6. The Finance Director's Report on
pages 7 to 12 sets out the financial position of the company, its cash flows,
liquidity position and borrowing facilities. The Directors have also
considered the impact of the renewal of the £44.1 million Revolving Credit
Facility with RBS which expires in September 2012, as has been set out in both
the Chairman and Chief Executives Statement and the Finance Directors Report.
In addition Note 17 to the financial statements gives details of the group's
financial instruments and interest rate risk, and maturity and hedging
profile.
The Group has sufficient financial resources together with long
term leases with the majority of the tenants of its property portfolio. As a
consequence, the directors believe that the company is well placed to manage
its business risks successfully despite the current uncertain economic
outlook.
The directors 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.
Annual General Meeting
The Annual General Meeting will be held at the Company's offices at
the Royal Automobile Club, 89 Pall Mall, London SW1Y 5HS on Wednesday 30 May
2012 at 10.30 a.m. Items 1 to 9 will be proposed as ordinary resolutions. More
than 50 per cent of shareholders' votes must be in favour for these
resolutions to be passed. Items 10 to 12 will be proposed as special
resolutions. At least 75 per cent of shareholders' votes must be in favour for
these resolutions to be passed. The directors consider that all of the
resolutions to be put to the meeting are in the best interests of the company
and its shareholders as a whole and accordingly the board unanimously
recommends that shareholders vote in favour of all of the resolutions, as the
directors intend to do in respect of their own beneficial holdings of ordinary
shares. Please note that the following paragraphs are only summaries of
certain of the resolutions to be proposed at the Annual General Meeting and
not the full text of the resolutions. You should therefore read this section
in conjunction with the full text of the resolutions contained in the notice
of Annual General Meeting.
Ordinary Resolutions
1. Resolution 9 - Authority to allot securities
Paragraph 9.1.1 of Resolution 9 would give the directors the
authority to allot shares in the company and grant rights to subscribe for or
convert any security into shares in the company up to an aggregate nominal
value of £2,797,344. This represents approximately 33.3 per cent of the
ordinary share capital of the company in issue (excluding treasury shares) as
at 17 April 2012 (being the last practicable date prior to the publication of
this Directors' Report).
In line with guidance issued by the Association of British Insurers
('ABI') paragraph 9.1.2 of Resolution 9 would give the directors the authority
to allot shares in the company and grant rights to subscribe for or convert
any security into shares in the company up to a further aggregate nominal
value of £2,797,344, in connection with a rights issue. This amount represents
approximately 33.3 per cent of the ordinary share capital of the company in
issue (excluding treasury shares) as at 17 April 2012 (being the last
practicable date prior to the publication of this Directors' Report).
The directors' authority will expire at the conclusion of the next
Annual General Meeting. The directors do not currently intend to make use of
this authority. However, if they do exercise the authority, the directors
intend to follow best practice as recommended by the ABI regarding its use
(including as regards the directors standing for re-election in certain
cases).,.
Special Resolutions
The following special resolutions will be proposed at the Annual General
Meeting:
Resolution 10 - Disapplication of pre-emption rights
Under company law, when new shares are allotted or treasury shares
are sold for cash (otherwise than pursuant to an employee share scheme) they
must first be offered to existing shareholders in proportion to their existing
shareholdings. This special resolution gives the directors authority, for the
period ending on the date of the next Annual General Meeting to be held in
2013, to: (a) allot shares of the company and sell treasury shares for cash in
connection with a rights issue or other pre-emptive offer; and (b) otherwise
allot shares of the company, or sell treasury shares, for cash up to an
aggregate nominal value of £420,021 representing in accordance with
institutional investor guidelines, approximately 5 per cent of the total
ordinary share capital in issue as at 17 April 2012 (being the last
practicable date prior to the publication of this Directors' Report) in each
case as if the pre-emption rights in company law did not apply.
Save in respect of issues of shares in respect of employee share
schemes and share dividend alternatives, the directors do not currently intend
to make use of these authorities. The board intends to adhere to the
provisions in the Pre-emption Group's Statement of Principles not to allot
shares for cash on a non-pre-emptive basis in excess of an amount equal to
7.5% of the company's ordinary share capital within a rolling three-year
period without prior consultation with shareholders.
Resolution 11 - Purchase of own ordinary shares
The effect of Resolution 11 would be to renew the directors'
current authority to make limited market purchases of the company's ordinary
shares of 10 pence each. The power is limited to a maximum aggregate number of
8,554,271 ordinary shares (representing approximately 10 per cent of the
company's issued share capital as at 17 April 2012 (being the latest
practicable date prior to publication of this Directors' Report). The minimum
price (exclusive of expenses) which the company would be authorised to pay for
each ordinary share would be 10 pence (the nominal value of each ordinary
share). The maximum price (again exclusive of expenses) which the company
would be authorised to pay for an ordinary share is an amount equal to the
higher of (i) 105% of the average market price for an ordinary share for the
five business days preceding any such purchase and (ii) the higher of the last
independent trade for an ordinary share and the highest current independent
bid for an ordinary share as derived from the trading venue where the purchase
is carried out. The authority conferred by Resolution 11 will expire at the
conclusion of the company's next Annual General Meeting to be held in 2013 or
15 months from the passing of the resolution, whichever is the earlier. Any
purchases of ordinary shares would be made by means of market purchase through
the London Stock Exchange.
If granted, the authority would only be exercised if, in the
opinion of the directors, to do so would result in an increase in earnings per
share or asset values per share and would be in the best interests of
shareholders generally. In exercising the authority to purchase ordinary
shares, the directors may treat the shares that have been bought back as
either cancelled or held as treasury shares (shares held by the company
itself). No dividends may be paid on shares which are held as treasury shares
and no voting rights are attached to them.
As at 17 April 2012 (being the last practicable date prior to the
publication of this Directors' Report) options were outstanding to subscribe
for a total of 70,000 ordinary shares representing 0.08% of the company's
issued share capital. If the authority to make new market purchases sought
under Resolution 11 is ever used in full, such options would represent
approximately 0.09% of the reduced issued share capital of the company (based
on the share capital as at 17 April 2012).
Other matters
Baker Tilly UK Audit LLP has expressed its willingness to continue in office
as auditor. A proposal will be made at the Annual General Meeting for
reappointment.
By order of the board
Heather Curtis
Secretary
20 April 2012
24 Bruton Place
London
W1J 6NE
Remuneration Report
The remuneration committee is pleased to present its report for the
year ended 31 December 2011.
The remuneration committee is a formally constituted committee of
the board and is comprised entirely of independent non-executive directors.
The members of the committee are C A Parritt (chairman) and H D Goldring.
Remuneration policy for executive directors and non-executive
directors
The principal function of the remuneration committee is to
determine, on behalf of the board, the remuneration and other benefits of the
executive directors and senior executives, including pensions, share options
and service contracts. The company's policy is designed to attract, retain and
motivate individuals of a calibre who will ensure the successful leadership
and management of the company. Remuneration packages are designed to reward
the executive directors and senior executives fairly for their contributions
whilst remaining within the range of benefits offered by similar companies in
the sector. The emoluments of each executive director comprise basic salary, a
bonus at the discretion of the remuneration committee, provision of a car;
premiums paid in respect of individual defined-contribution pension
arrangements, health insurance premium and share options. The remuneration of
non-executive directors is determined by the board, and takes into account
additional remuneration for services outside the scope of the ordinary duties
of non-executive directors. No pension costs are incurred on behalf of
non-executive directors and they do not participate in the share option
schemes.
The board's policy is to grant share incentives to executive
directors, managers and staff at appropriate times to provide them with an
interest in the longer term development of the Group.
The remuneration committee receives updates on pay and employment
conditions applying to other Group employees. These are taken into
consideration when setting executive directors' remuneration consistent with
the group's general aim of seeking to reward all employees
fairly according to the nature of their role, their performance and
market forces."
Service and employment contracts
All executive directors have full-time contracts of employment with
the company. Non-executive directors have contracts of service. No director
has a contract of employment or contract of service with the company, its
joint venture or associated companies with a fixed term which exceeds twelve
months. All directors' contracts, as amended from time to time, have run from
the date of appointment. Details of the directors standing for re-election are
provided under `Directors' in the Directors' report.
It is the policy of the committee to issue employment contracts to
executive directors with normal commercial terms and without extended terms of
notice which could give rise to extraordinary termination payments.
Summary of directors' terms
Date of contract Unexpired term Notice period
Executive directors
M A Heller 01-Jan-71 Continuous 6 months
J A Heller 01-May-03 Continuous 12 months
R J Corry 01-Sep-92 Continuous 6 months
Non-executive directors
H D Goldring 01-Jul-92 Continuous 3 months
C A Parritt 01-Jan-06 Continuous 3 months
The following information has been audited
Directors' Remuneration for the year ended 31 December 2011
2011 total 2010 total
before before
Salary Bonus Bonus pension Pension pension Pension
And in in Other contrib- contrib- Total contrib- contrib- Total
fees cash shares benefits utions utions 2011 utions utions 2010
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Executive directors
M A Heller* 7 - - 44 51 - 51 251 - 251
J A Heller 300 300 - 41 641 30 671 547 30 577
R J Corry 167 - - 22 189 33 222 260 33 293
M C Stevens† 31 - - 20 51 3 54 116 23 139
505 300 - 127 932 66 998 1,174 86 1,260
Non-executive directors
H D Goldring* 43 - - 4 47 - 47 51 - 51
C A Parritt * 33 - - - 33 - 33 37 - 37
76 - - 4 80 - 80 88 - 88
Total remuneration for
directors' service during year 581 300 - 131 1,012 66 1,078 1,262 86 1,348
* See "Directors" below and Note 20 "Related party transactions".
Other benefits include the provision of car, health and other insurance and
subscriptions.
†M C Stevens retired 30 April 2011
Pension schemes and incentives
Three (2010: three) directors have benefits under money purchase pension
schemes. Contributions in 2011 were £66,000 (2010: £86,000) as set out in the
table above. Directors are not entitled to benefits under any bonus or
incentive schemes apart from the share option and share incentive plan,
details of which are set out below. Bonuses are awarded by the remuneration
committee when merited. In assessing the performance of the executive team
and, in particular to determine whether bonuses are merited the remuneration
committee takes account of the overall performance of the business. Specific
areas addressed include: enhancement of the asset base by effective
development; changes in rental income generated; quality and risk profile of
the tenant base; voids; timely acquisitions and disposals; security of funding
arrangements; and overall teamwork. Bonuses were awarded by the remuneration
committee to one executive director during 2011 (2010: four) and no
non-executive directors (2010: nil).
Directors
Although M A Heller receives reduced remuneration in respect of his services
to the Group, the Group does supply office premises, property management,
general management accounting and administration services for a number of
companies in which M A Heller has an interest. The board estimates that the
value of these services, if supplied to a third party, would have been
£275,000 (2010: £275,000) for the year. Further details of these services are
set out in Note 20 "Related party transactions" to the financial statements.
H D Goldring's company, Delmore Asset Management Limited provides consultancy
services to the Group. This is dealt with in Note 20 to the financial
statements.
C A Parritt provides consultancy services to the group. This is dealt with in
Note 20 to the financial statements.
Share option scheme
The company has an HMRC approved scheme (Approved Scheme) was set up in 1986
in accordance with HMRC rules to gain HMRC approved status which gave the
members certain tax advantages. No director has any options outstanding under
the Approved Scheme.
There are no performance criteria for the exercise of options under the
Approved Scheme, as this was set up before such requirements were considered
to be necessary.
A share option scheme known as the "Non-approved Executive Share Option
Scheme" (Unapproved Scheme) which does not have HMRC approval was set up
during 2000. At 31 December 2011 there were no options to subscribe for
ordinary shares outstanding. The exercise of options under the unapproved
scheme is subject to the satisfaction of objective performance conditions
specified by the remuneration committee which conforms to institutional
shareholder guidelines and best practice provisions. No options under the
unapproved scheme were exercised, granted or lapsed during the year to 31
December 2010. Further details of this scheme are set out in Note 19 "Share
Capital" to the financial statements
The bid market price of London & Associated Properties PLC ordinary shares at
31 December 2011 was 26.25p (2010: 42.0p). During the year the share
mid-market price ranged between 26.25 and 42.0p.
Share incentive plan
Following a recommendation of the remuneration committee the directors set up
an HMRC approved share incentive plan (SIP) in May 2006. The purpose of the
plan, which is open to all eligible LAP head office, based executive directors
and staff is to enable them to acquire shares in the company to give them a
continuing stake in the group. The SIP comprises four types of share - (1)
free shares under which the company may award shares up to the value of £3,000
each year, (2) partnership shares, under which members may save up to £1,500
per annum to acquire shares, (3) matching shares through which the company may
award up to two shares for each share acquired as a partnership share, and (4)
dividend shares acquired from dividends paid on shares within the SIP.
1. Free shares: On 28 February 2011, 76,397 free shares up to the annual
maximum of £3,000 per member were awarded at 41.75p (2010: nil shares awarded)
Free shares awarded:
Number of members Number of shares Value of shares
2011 2010 2011 2010 2011 2010
£ £
Directors:
R J Corry 1 0 7,185 0 3,000 0
J A Heller 0 0 0 0 0 0
M C Stevens† 1 0 7,185 0 3,000 0
Staff 11 0 62,027 0 25,896 0
Total at 31 December 13 0 76,397 0 31,896 0
2. Partnership shares: No partnership shares were issued between November 2010
and October 2011.
Partnership shares issued:
Number of members Number of shares Value of shares
2011 2010 2011 2010 2011 2010
£ £
Directors:
R J Corry 0 1 0 3,947 0 1,500
J A Heller 0 1 0 3,947 0 1,500
M C Stevens† 0 1 0 3,947 0 1,500
Staff 0 9 0 35,523 0 13,500
Total at 31 December 0 12 0 47,364 0 18,000
3. Matching shares: The partnership share agreements for the year to 31
October 2011 provide for two matching shares to be awarded free of charge for
each partnership share acquired. No partnership shares were acquired in 2011
(2010: 87,809 shares). Matching shares will usually be forfeited if a member
leaves employment in the group within 5 years of their grant.
Matching shares granted:
Number of members Number of shares Value of shares
2011 2010 2011 2010 2011 2010
£ £
Directors:
R J Corry 0 1 0 7,894 0 3,000
J A Heller 0 1 0 7,894 0 3,000
M C Stevens† 0 1 0 7,894 0 3,000
Staff 0 9 0 64,127 0 27,000
Total at 31 December 0 12 0 87,809 0 36,000
4. Dividend shares: Dividends on shares acquired under the SIP will be
utilised to acquire additional shares. Accumulated dividends received on
shares in the SIP to 31 December 2011 amounted to £5,775 (2010: £6,088).
Dividend shares issued:
Number of members Number of shares Value of shares
2011 2010 2011 2010 2011 2010
£ £
Directors:
R J Corry 1 1 2,423 1,783 739 660
J A Heller 1 1 2,329 1,783 710 660
M C Stevens† 0 1 0 1,783 0 660
Staff 15 17 21,648 18,353 6,603 6,790
Total at 31 December 17 20 26,400 23,702 8,052 8,770
† M C Stevens retired 30 April 2011
The SIP is set up as an employee benefit trust - The trustee is London &
Associated Securities Limited, a wholly owned subsidiary of LAP, and all
shares and dividends acquired under the SIP will be held by the trustee until
transferred to members in accordance with the rules of the SIP.
The following information is unaudited
The graph illustrates the company's performance as compared with a broad
equity market index over a five year period. Performance is measured by total
shareholder return. The directors have chosen the FTSE All Share - Total
Return Index as a suitable index for this comparison as it gives an indication
of performance against a large spread of quoted companies.
C A Parritt
Chairman - Remuneration Committee
20 April 2012
Audit Committee Report
The committee's terms of reference have been approved by the board and follow
published guidelines, which are available on request from the company
secretary.
At the year end the audit committee comprised the two non-executive directors
- H D Goldring and C A Parritt, both of whom are Chartered Accountants.
The audit committee's prime tasks are to:
- review the scope of external audit, to receive regular reports from Baker
Tilly UK Audit LLP and to review the half-yearly and annual accounts before
they are presented to the board, focusing in particular on accounting policies
and areas of management judgement and estimation;
- monitor the controls which are in force to ensure the integrity of the
information reported to the shareholders;
- act as a forum for discussion of internal control issues and contribute to
the board's review of the effectiveness of the Group's internal control and
risk management systems and processes;
- to review the risk assessments made by management, consider key risks with
action taken to mitigate these and to act as a forum for discussion of risk
issues and contribute to the board's review of the effectiveness of the
Group's risk management control and processes;
- consider once a year the need for an internal audit function;
- advise the board on the appointment of the external auditor, the rotation of
the audit partner every five years and on their remuneration for both audit
and non-audit work; discuss the nature and scope of their audit work and
undertake a formal assessment of the auditor's independence each year, which
includes:
i) a review of non-audit services provided to the Group and related fees;
ii) discussion with the auditor of their written report detailing all
relationships with the company and any other parties that could affect
independence or the perception of independence;
iii) a review of the auditor's own procedures for ensuring the independence of
the audit firm and partners and staff involved in the audit, including the
regular rotation of the audit partner; and
iv) obtaining a written confirmation from the auditor that, in their
professional judgement, they are independent.
Meetings
The committee meets at least twice prior to the publication of the annual
results and discusses and considers the half year results prior to their
approval by the board. The audit committee meetings are attended by the
external audit partner, chief executive, finance director and company
secretary. Prior to monthly board meetings the members of the committee meet
on an informal basis to discuss any relevant matters which may have arisen.
Additional formal meetings may be held as necessary.
During the past year the committee:
- met with the external auditor, and discussed their reports to the audit
committee.
- approved the publication of annual and half year financial results.
- considered and approved the annual review of internal controls.
- decided that there was no current need for an internal audit function.
- agreed the independence of the auditor and approved their fees for both
audit and non-audit services as set out in note 2 to the financial statements.
- in accordance with the rules for rotation of audit partners, reviewed and
approved the proposals from the external auditor to introduce a new senior
audit partner to lead the audit.
- the chairman of the audit committee has also had separate meetings with the
external audit partner.
External Auditor
Baker Tilly UK Audit LLP held office throughout the period under review. In
the United Kingdom London & Associated Properties PLC provides extensive
administration and accounting services to Bisichi Mining PLC, which has its
own audit committee and employs PKF (UK) LLP, a separate and independent firm
of registered auditor.
C A Parritt
Chairman - Audit Committee
20 April 2012
DIRECTORS' RESPONSIBILITY STATEMENT
The directors are responsible for preparing the Directors' Report,
the Directors' Remuneration Report and the financial statements in accordance
with applicable law and regulations.
Company law requires the directors to prepare Group and company
financial statements for each financial year. The directors are required under
the Listing Rules of the Financial Services Authority to prepare Group
financial statements in accordance with International Financial Reporting
Standards ("IFRS") as adopted by the European Union ("EU") and have elected
under company law to prepare the company financial statements in accordance
with United Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable law).
The Group financial statements are required by law and IFRS adopted
by the EU to present fairly the financial position and performance of the
Group; the Companies Act 2006 provides in relation to such financial
statements that references in the relevant part of that Act to financial
statements giving a true and fair view are references to their achieving a
fair presentation.
Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair view of
the state of affairs of the Group and the company and of the profit or loss of
the Group for that period.
In preparing each of the Group and company financial statements,
the directors are required to:
a. select suitable accounting policies and then apply them
consistently;
b. make judgements and accounting estimates that are reasonable and
prudent;
c. for the Group financial statements, state whether they have been
prepared in accordance with IFRSs adopted by the EU and for the company
financial statements state whether applicable UK accounting standards have
been followed, subject to any material departures disclosed and explained in
the company financial statements;
d. prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and the company will
continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group's and the company's
transactions and disclose with reasonable accuracy at any time the financial
position of the Group and the company and enable them to ensure that the
financial statements and the Directors' Remuneration Report comply with the
Companies Act 2006 and, as regards the Group financial statements, Article 4
of the IAS Regulations. They are also responsible for safeguarding the assets
of the Group and the company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Directors' statement pursuant to the Disclosure and Transparency
Rules
Each of the directors, whose names and functions are listed on page
21 confirm that, to the best of each person's knowledge:
a. the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view of the
assets, liabilities, financial position and loss of the company and the
undertakings included in the consolidation taken as a whole; and
b. the Directors report contained in the Annual Report includes a
fair review of the development and performance of the business and the
position of the company and the undertakings included in the consolidation
taken as a whole, together with a description of the principal risks and
uncertainties that they face.
The directors are responsible for the maintenance and integrity of
the corporate and financial information included on the London & Associated
Properties PLC website.
Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in other
jurisdictions.
VALUERS' CERTIFICATES To the Directors of London & Associated Properties PLC
In accordance with your instructions we have carried out a valuation of the
freehold and leasehold property interests held as at 31 December 2011 by the
company as detailed in our Valuation Report dated 27 January 2012.
Having regard to the foregoing, we are of the opinion that the open market
value as at 31 December 2011 of these interests was:
£'000
Freehold 73,035
Leasehold 22,120
95,155
27 Soho Square, London W1D 3AY Allsop LLP
27 January 2012 Regulated by Royal Institution of
Chartered Surveyors
To the Directors of London & Associated Properties PLC
In accordance with your instructions we have carried out a valuation of the
freehold and leasehold property interests held as at 31 December 2011 by the
company as detailed in our Valuation Report as at 11 January 2012.
Having regard to the foregoing, we are of the opinion that the open market
value as at 31 December 2011 of these interests was:
£'000
Freehold 2,610
Leasehold 91,950
94,560
22 Hanover Square
London W1S 1JA Jones Lang LaSalle Limited
Regulated by Royal Institution of
11 January 2012 Chartered Surveyors
To the Directors of London & Associated Properties PLC
In accordance with your instructions we have carried out a valuation of the
freehold property interests held as at 31 December 2011 by the company as
detailed in our Valuation Report dated 2 February 2012.
Having regard to the foregoing, we are of the opinion that the open market
value as at 31 December 2011 of these interests was:
£'000
4,033
Freehold
Capitol House, Russell Street,
Leeds LS1 5SP BNP Paribas Real Estate Advisory
and Property Management UK Limited
Regulated by Royal Institution of
2 February 2012 Chartered Surveyors
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF London & Associated Properties PLC
We have audited the Group and parent company financial statements
("the financial statements") on pages 28 to 57. The financial reporting
framework that has been applied in the preparation of the group financial
statements is applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union. The financial reporting framework
that has been applied in the preparation of the parent company financial
statements is applicable law and United Kingdom Accounting Standards (United
Kingdom Generally Accepted Accounting Practice).
This report is made solely to the company's members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work
has been undertaken so that we might state to the company's members those
matters we are required to state to them in an auditor's report and for no
other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company and the company's
members as a body, for our audit work, for this report, or for the opinions we
have formed.
Respective responsibilities of directors and auditor
As more fully explained in the Directors' Responsibilities
Statement set out on page 25, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give
a true and fair view. Our responsibility is to audit and express an opinion on
the financial statements in accordance with applicable law and International
Standards on Auditing (UK and Ireland). Those standards require us to comply
with the Auditing Practices Board's (APB's) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is
provided on the APB's website at www.frc.org.uk/apb/scope/private.cfm
Opinion on financial statements
In our opinion
- the financial statements give a true and fair view of the state
of the Group's and of the parent company's affairs as at 31 December 2011 and
of the Group's loss for the year then ended;
- the Group financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union;
- the parent company financial statements have been properly
prepared in accordance with United Kingdom Generally Accepted Accounting
Practice; and
- the financial statements have been prepared in accordance with
the requirements of the Companies Act 2006 and, as regards the Group financial
statements, Article 4 of the IAS Regulation.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
- the part of the Directors' Remuneration Report to be audited has
been properly prepared in accordance with the Companies Act 2006;
- the information given in the Directors' Report for the financial
year for which the financial statements are prepared is consistent with the
financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if,
in our opinion:
- adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received from
branches not visited by us; or
- the parent company financial statements and the part of the
Directors' Remuneration Report to be audited are not in agreement with the
accounting records and returns; or
- certain disclosures of directors' remuneration specified by law
are not made; or
- we have not received all the information and explanations we
require for our audit.
Under the Listing Rules we are required to review:
- the directors' statement, set out on page 19, in relation to
going concern;
- the part of the Corporate Governance Statement relating to the
company's compliance with the nine provisions of the UK Corporate Governance
Code specified for our review; and
- certain elements of the report to shareholders by the Board of
directors' remuneration.
Euan Banks (Senior Statutory Auditor)
For and on behalf of BAKER TILLY UK AUDIT LLP, Statutory Auditor
Chartered Accountants
25 Farringdon Street,
London, EC4A 4AB
20 April 2012
Consolidated income statement
for the year ended 31 December 2011
2011 2010
Notes £'000 £'000
Gross rental income
Group and share of joint ventures 16,990 16,503
Less: joint ventures - share of rental income (611) (518)
Revenue 1 16,379 15,985
Direct property expenses (1,819) (1,839)
Overheads (2,700) (3,780)
Property overheads 1 (4,519) (5,619)
Net rental income 1 11,860 10,366
Listed investments held for trading 3 24 43
Profit on sale of investment properties 310 637
Operating profit before financing charges 1 12,194 11,046
Finance income 5 34 64
Finance expenses 5 (11,344) (11,922)
Operating profit/(loss) after financing charges 884 (812)
Revaluation and other movements,
associates and joint ventures
Net (decrease)/increase on revaluation of (1,021) 1,569
investment properties
Net (decrease)/increase in value of investments (104) 89
held for trading
Share of profit/(loss) of joint ventures, after tax 10 10 (233)
Share of loss of associate, after tax 11 (189) (505)
Interest rate derivative break cost 17 (920) (3,515)
Adjustment to the Net Present Value of 17 (17,223) (7,280)
interest rate derivative
Loss including revaluation and other movements (18,563) (10,687)
Income tax 6 3,742 7,192
Loss for the year attributable to (14,821) (3,495)
the owners of the parent
Basic loss per share 8 (17.63)p (4.24)p
Diluted loss per share 8 (17.63)p (4.24)p
Operating profit/(loss) after financing 8 1.05p (0.99)p
charge per share
The revenue and operating result for the year is derived from continuing
operations in the United Kingdom.
As more fully explained in the accounting policies comparative information,
the consolidated income statement has been re-presented to better reflect
the nature of the business.
consolidated balance sheet
at 31 December 2011
2011 2010
Notes £'000 £'000
Non-current assets
Market value of properties attributable to Group 193,748 194,946
Present value of head leases 28,661 28,664
Property 9 222,409 223,610
Plant and equipment 9 484 612
Investments in joint ventures 10 2,039 1,163
Investments in associated company 11 7,011 7,483
Held to maturity investments 12 1,998 1,946
Deferred tax 18 3,678 -
237,619 234,814
Current assets
Trade and other receivables 13 4,301 4,092
Financial assets-investments held for trading 14 635 717
Cash and cash equivalents 6,464 8,584
11,400 13,393
Total assets 249,019 248,207
Current liabilities
Trade and other payables 15 (9,453) (10,022)
Financial liabilities-borrowings 16 (48,012) (3,863)
(57,465) (13,885)
Non-current liabilities
Financial liabilities-borrowings 16 (92,114) (136,206)
Interest rate derivatives 17 (30,850) (13,627)
Present value of head leases on properties (28,661) (28,664)
Deferred tax 18 - (64)
(151,625) (178,561)
Total liabilities (209,090) (192,446)
Net assets 39,929 55,761
Equity attributable to the owners of the parent
Share capital 19 8,554 8,554
Share premium account 4,866 4,866
Translation reserve in associate (216) 30
Capital redemption reserve 47 47
Retained earnings (excluding treasury shares) 28,099 44,342
Treasury shares 19 (1,421) (2,078)
Retained earnings 26,678 42,264
Total shareholders' equity 39,929 55,761
Net assets per share 8 47.53p 66.71p
Diluted net assets per share 8 47.53p 66.69p
These financial statements were approved by the board of directors and
authorised for issue on 20 April 2012 and signed on its behalf by:
M A Heller R J Corry
Director Director
Company Registration No. 341829
Consolidated statement of changes in shareholders' equity
for the year ended 31 December 2011
Retained earnings
retained
earnings
Translation Capital excluding
Share Share reserves in redemption Treasury treasury Total
capital premium associate reserve shares shares equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2010 8,392 5,042 (284) 47 (4,558) 50,465 59,104
Loss for year - - - - - (3,495) (3,495)
Other comprehensive income:
Currency translation in associate - - 314 - - - 314
Total other comprehensive income - - 314 - - - 314
Total comprehensive income - - 314 - - (3,495) (3,181)
Transactions with owners:
Equity share options in associate - - - - - 2 2
Minority interest on share
disposal in associate - - - - - (199) (199)
Issue of own shares and expenses 162 (176) - - - - (14)
Disposal of own shares - - - - 973 - 973
Loss on transfer of own shares - - - - 1,507 (1,507) -
Dividends paid - - - - - (924) (924)
Transactions with owners 162 (176) - - 2,480 (2,628) (162)
Balance at 31 December 2010 8,554 4,866 30 47 (2,078) 44,342 55,761
Loss for year - - - - - (14,821) (14,821)
Other comprehensive income:
Currency translation in associate - - (246) - - - (246)
Total other comprehensive income - - (246) - - - (246)
Total comprehensive income - - (246) - - (14,821) (15,067)
Transaction with owners:
Equity share options in associate - - - - - 6 6
Aquisition of own shares and expenses - - - - (101) - (101)
Disposal of own shares - - - - 294 - 294
Loss on transfer of own shares - - - - 464 (464) -
Dividends paid - - - - - (964) (964)
Transactions with owners - - - - 657 (1,422) (765)
Balance at 31 December 2011 8,554 4,866 (216) 47 (1,421) 28,099 39,929
All the above are attributable to the owners of the parent.
Consolidated statement of comprehensive income
for the year ended 31 December 2011
2011 2010
£'000 £'000
Loss for the year (14,821) (3,495)
Other comprehensive income:
Currency translation in associate (246) 314
Other comprehensive income for the year net of tax (246) 314
Total comprehensive income for the period
attributable to owners of the parent (15,067) (3,181)
Consolidated cash flow statement
for the year ended 31 December 2011
2011 2010
£'000 £'000
Operating activities
Operating profit before financing charges 12,194 11,046
Depreciation 158 197
Loss/(profit) on disposal of non-current assets 9 (3)
Profit on sale of investment properties (310) (637)
Increase in net current assets (1,160) (1,019)
Cash generated from operations 10,891 9,584
Income tax repaid - 111
Cash inflows from operating activities 10,891 9,695
Investing activities
Investment in shares and loan stock in joint ventures (940) (141)
Investment in shares in associate (131) -
Property acquisitions and improvements (298) (754)
Sale of properties 910 21,302
Purchase of office equipment and motor vehicles (70) (78)
Sale of office equipment and motor vehicles 33 86
Interest received 34 64
Dividends received from associate and joint ventures 181 173
Cash (outflows)/inflows from investing activities (281) 20,652
Financing activities
Issue expenses - (14)
Purchase of treasury shares (101) -
Sale of treasury shares 294 973
Equity dividends paid (964) (924)
Interest paid (10,926) (12,010)
Interest rate derivatives break costs paid (920) (3,515)
Repayment of short term loan (910) -
Payment/(repayment) of medium term bank loan 943 (11,575)
Cash outflows from financing activities (12,584) (27,065)
Net (decrease)/increase in cash and cash equivalents (1,974) 3,282
Cash and cash equivalents at beginning of year 4,721 1,439
Cash and cash equivalents at end of year 2,747 4,721
Cash and cash equivalents
For the purpose of the cash flow statement, cash and cash equivalents comprise
the following balance sheet amounts:
2011 2010
£'000 £'000
Cash and cash equivalents (before bank overdrafts) 6,464 8,584
Bank overdrafts (3,717) (3,863)
Cash and cash equivalents at end of year 2,747 4,721
Group accounting policies
The following are the principal group accounting policies:
Basis of accounting
The group financial statements for the year ended 31 December 2011 are
prepared in accordance with International Financial Reporting Standards
(IFRS), as adopted by the European Union and with those parts of the Companies
Act 2006 applicable to companies reporting under IFRS.
The company has elected to prepare the parent company's financial statements
in accordance with UK GAAP, as applied in accordance with the provisions of
the Companies Act 2006 and these are presented in note 25. The financial
statements are prepared under the historical cost convention, except for the
revaluation of freehold and leasehold properties and financial assets held for
trading and fair value of interest derivatives. The group financial statements
are presented in Pounds Sterling and all values are rounded to the nearest
thousand pounds (£'000) except when otherwise stated.
London & Associated Properties PLC is a public listed parent company,
incorporated and domiciled in England and quoted on the London Stock Exchange.
The Company registration number is 341829.
Going concern
The most significant judgements made in preparing these accounts relate to the
carrying value of the properties, investments and interest rate hedges which
are stated at open market value. The Group uses external professional valuers
to determine the values of our properties.
The Directors exercised their commercial judgements when reviewing the cash
flow forecasts of the Group and the underlying assumptions on which they are
based. They have also considered the impact of the renewal of its banking
facilities. The Group's business activities, together with the factors likely
to affect its future development, are set out in the Chairman and Chief
Executive's Statement and Finance Director's Report. In addition the Directors
considered note 17 of the financial statements which includes 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 sound financial resources and long term leases in place with the tenants,
the Directors believe that the Group is well placed to manage its business
risks despite the current uncertain economic outlook. The Directors therefore
have a reasonable expectation that the Group 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.
Comparative information
The Directors consider `revaluation and other movements, associates and joint
ventures' require separate disclosure from the `operating profit before and
after financing charges', in the Consolidated Income Statement as the
Directors consider this is a more appropriate presentation for the
understanding of the business and the Group's results. As a result the prior
year is re-presented in the Consolidated Income Statement.
Key judgements and estimates
The preparation of the financial statements requires management to make
assumptions and estimates that may affect the reported amounts of assets and
liabilities and the reported income and expenses, further details of which are
set out below. Although management believes that the assumptions and estimates
used are reasonable, the actual results may differ from those estimates.
Further details of which are contained in the Directors' Report.
International Accounting Standards (IAS/IFRS)
At the date of approval of these financial statements, the following new
standards and interpretations which have been applied in these financial
statements, were in issue:
IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments
The following standards and interpretations have been issued and adopted by
the EU but are not effective for the year ended 31 December 2011 and have not
been adopted early:
IFRS 7 Financial Instruments: Disclosures (amendment)
The adoption of the standards and interpretations in issue but not yet
effective is not expected to have a material impact on the financial
statements of the Group.
Basis of consolidation
The Group accounts incorporate the accounts of London & Associated
Properties PLC and all of its subsidiary undertakings, together with the
Group's share of the results and net assets of its joint ventures and
associate.
Subsidiaries
Subsidiaries are those entities controlled by the Group. Control is assumed
when the Group has the power to govern the financial and operating policies of
an entity or business and to economically benefit
from its activities. Subsidiaries acquired during the year are consolidated
using the acquisition method. Their results are incorporated from the date
that control passes.
All intra group transactions, balances, income and expenses are eliminated on
consolidation. Details of Group trading subsidiary companies are set out in
note 25.4.
Joint ventures
Investments in joint ventures, being those entities over whose activities the
Group has joint control, as established by contractual agreement, include the
appropriate share of the results and net assets of those undertakings.
Associates
Undertakings in which the Group has a participating interest of not less than
20% of the voting capital and over which it has the power to exert significant
influence are defined as associated undertakings. The financial statements
include the appropriate share of the results and reserves of those
undertakings.
Goodwill
Goodwill arising on acquisition is recognised as an intangible asset and
initially measured at cost, being the excess of the cost of the acquired
entity over the Group's interest in the fair value of the assets and
liabilities acquired. Goodwill is carried at cost less accumulated impairment
losses. Goodwill arising from the difference in the calculation of deferred
tax for accounting purposes and fair value in negotiations is judged not to be
an asset and is accordingly impaired on completion of the relevant
acquisition.
Revenue
Rental income
Rental income arises from operating leases granted to tenants. An operating
lease is a lease other than a finance lease. A finance lease is one whereby
substantially all the risks and rewards of ownership are passed to the lessee.
Rental income is recognised in the group income statement on a straight-line
basis over the term of the lease. This includes the effect of lease incentives
to tenants, which are normally in the form of rent free periods. Contingent
rents, being the difference between the rent currently receivable and the
minimum lease payments, are recognised in property income in the periods in
which they are receivable. Rent reviews are recognised when such reviews have
been agreed with tenants.
Reverse surrender premiums
Payments received from tenants to surrender their lease obligations
are recognised immediately in the income statement.
Dilapidations
Dilapidations monies received from tenants in respect of their lease
obligations are recognised immediately in the income statement.
Other revenue
Revenue in respect of listed investments held for trading represents
investment dividends received and profit or loss recognised on realisation.
Dividends are recognised in the income statement when the dividend is
received.
Property operating expenses
Property operating expenses are expensed as incurred and any property
operating expenditure not recovered from tenants through service charges is
charged to the income statement.
Employee benefits
Share based remuneration
The company operates a long-term incentive plan and two share option schemes.
The fair value of the conditional awards on shares granted under the long-
term incentive plan and the options granted under the share option scheme is
determined at the date of grant. This fair value is then expensed on a
straight-line basis over the vesting period, based on an estimate of the
number of shares that will eventually vest. At each
reporting date, the fair value of the non-market based performance criteria of
the long-term incentive plan is recalculated and the expense is revised. In
respect of the share option scheme, the fair value of options granted is
calculated using a binomial method.
Pensions
The company operates a defined contribution pension scheme.
The contributions payable to the scheme are expensed in
the period to which they relate.
Group accounting policies continued
Financial instruments
Investments
Held to maturity investments are stated at amortised cost using the effective
interest rate method.
Investments held for trading are included in current assets at fair value. For
listed investments, fair value is the bid market listed value at the balance
sheet date. Realised and unrealised gains or losses arising from changes in
fair value are included in the income statement of the period in which they
arise.
Trade and other receivables
Trade and other receivables are recognised initially at fair value.
A provision for impairment of trade receivables is made when there
is evidence that the Group will not be able to collect all amounts due.
Trade and other payables
Trade and other payables are non interest bearing and are stated
at their nominal value.
Bank loans and overdrafts
Bank loans and overdrafts are included as financial liabilities on the group
balance sheet net of the unamortised discount and costs of issue. Interest
payable on those facilities is expensed as a finance cost in the period to
which it relates.
Debenture loans
The debenture loans are included as a financial liability on the balance sheet
net of the unamortised costs on issue. The cost of issue is recognised in the
group income statement over the life of the debenture. Interest payable to
debenture holders is expensed in the period to which it relates.
Finance lease liabilities
Finance lease liabilities arise for those investment properties held under a
leasehold interest and accounted for as investment property. The liability is
calculated as the present value of the minimum lease payments, reducing in
subsequent reporting periods by the apportionment of payments to the lessor.
Lease payments are allocated between the liability and finance charges so as
to achieve a constant financing rate. Contingent rents payable, such as rent
reviews or those related to rental income, are charged as an expense in the
period in which they are incurred.
Interest rate derivatives
The Group uses derivative financial instruments to hedge the interest rate
risk associated with the financing of the group's business. No trading in such
financial instruments is undertaken. At each reporting date, these interest
rate derivatives are recognised at their fair value to the business, being the
Net Present Value of the difference between the hedged rate of interest and
the market rate of interest for the remaining period of the hedge.
Where a derivative is designated as a hedge of the variability of a highly
probable forecast transaction i.e. an interest payment, the element of the
gain or loss on the derivative that is an effective hedge is recognised
directly in equity. When the forecast transaction subsequently results in the
recognition of a financial asset or a financial liability, the associated
gains or losses that were recognised directly in equity are reclassified into
the income statement in the same period or periods during which the asset
acquired or liability assumed affects the income statement i.e. when interest
income or expense is recognised.
The gain or loss arising from any adjustment to the fair value to the business
calculation is recognised immediately in the group income statement when the
criteria set out in IAS 32 allowing the movements to be shown in equity have
not been met.
Ordinary Shares
Shares are classified as equity when there is no obligation to transfer cash
or other assets. Incremental costs directly attributable to the issue of new
shares are shown in equity as a deduction, net of tax, from the proceeds.
Treasury Shares
When the Group's own equity instruments are repurchased, consideration paid is
deducted from equity as treasury shares until they are cancelled.
When such shares are subsequently sold or reissued, any consideration received
is included in equity.
or for capital appreciation or both, including those that are undergoing
redevelopment. They are reported on the Group balance sheet at fair value,
being the amount for which an investment property could be
exchanged between knowledgeable and willing parties in an arm's length
transaction. The valuation is undertaken by independent valuers who hold
recognised and relevant professional qualifications and have recent experience
in the locations and categories of properties being valued. Surpluses or
deficits resulting from changes in the fair value of investment property are
reported in the Group income statement in the period in which they arise.
Capital expenditure
Investment properties are measured initially at cost, including related
transaction costs. Additions to capital expenditure, being costs of a capital
nature, directly attributable to the redevelopment or refurbishment of an
investment property, up to the point of it being completed for its intended
use, are capitalised in the carrying value of that property. The redevelopment
of an existing investment property will remain an investment property measured
at fair value and is not reclassified. Capitalised interest is calculated with
reference to the actual rate payable on borrowings for development purposes,
or for that part of the development costs financed out of borrowings the
capitalised interest is calculated on the basis of the average rate of
interest paid on the relevant debt outstanding.
Disposal
The disposal of investment properties is accounted for on completion of
contract. On disposal, any gain or loss is calculated as the difference
between the net disposal proceeds and the valuation at the last year end plus
subsequent capitalised expenditure in the period.
Depreciation and amortisation
In applying the fair value model to the measurement of investment properties,
depreciation and amortisation are not provided in respect of investment
properties.
Plant and equipment
Other non-current assets, comprising motor vehicles and office equipment, are
depreciated at a rate of between 10% and 33% per annum which is calculated to
write off the cost, less estimated residual value of the assets, on a straight
line basis over their expected useful lives.
Income taxes
The charge for current taxation is based on the results for the year as
adjusted for disallowed or non-assessable items. Tax payable upon realisation
of revaluation gains recognised in prior periods is recorded as a current tax
charge with a release of the associated deferred tax. Deferred tax is the tax
expected to be payable or recoverable on differences between the carrying
amounts of assets and liabilities in the financial statements and the
corresponding tax bases used in the tax computations, and is accounted for
using the balance sheet liability method. Deferred tax liabilities are
generally recognised for all taxable temporary differences and deferred tax
assets are recognised to the extent that it is probable that taxable profits
will be available against which deductible temporary differences can be
utilised. In respect of the deferred tax on the revaluation surplus, this is
calculated on the basis of the chargeable gains that would crystallise on the
sale of the investment portfolio as at the reporting date. The calculation
takes account of indexation on the historic cost of properties and any
available capital losses. Deferred tax is calculated at the tax rates that are
expected to apply in the period when the liability is settled or the asset is
realised. Deferred tax is charged or credited in the group income statement,
except when it relates to items charged or credited directly to equity, in
which case it is also dealt with in equity.
Cash and cash equivalents
Cash comprises cash in hand and on demand deposits, net of bank overdrafts.
Cash equivalents comprise short-term, highly liquid investments that are
readily convertible to known amounts of cash and which are subject to an
insignificant risk of changes in value and original maturities of three months
or less.
Segmental Reporting
For management reporting purposes, the Group is organised into
business segments distinguishable by economic activity. The Group's only
business segments are investment properties and other investments.
Investment properties
Valuation
Investment properties are those that are held either to earn rental income
.
These business segments are subject to risks and returns that are different
from those of other business segments and are the primary basis
on which the Group reports its segment information. This is consistent with
the way the Group is managed and with the format of the Group's internal
financial reporting.
Notes to the financial statements
for the year ended 31 December 2011
1. Segmental analysis
Operating Segments are based on the internal reporting and operational
management of the Group. The Group is organised into Property and other
investments.
Business segments
2011 2010
Other Other
Property investments Total Property investments Total
£'000 £'000 £'000 £'000 £'000 £'000
Rental income 16,379 - 16,379 15,985 - 15,985
Property overheads (4,519) - (4,519) (5,619) - (5,619)
Net rental income 11,860 - 11,860 10,366 - 10,366
Listed investment income - 24 24 - 43 43
Profit on sale of investment properties 310 - 310 637 - 637
Operating profit before financing charges* 12,170 24 12,194 11,003 43 11,046
Total assets (excluding investments i
n associate and joint ventures) 237,336 635 237,971 237,023 717 237,740
Total liabilities (excluding borrowings
and current tax) (68,964) - (68,964) (52,377) - (52,377)
Borrowings (140,126) - (140,126) (140,194) - (140,194)
Net assets 28,246 635 28,881 44,452 717 45,169
Investments in joint ventures:
non segmental (notes 10 and 12) 4,032 3,104
Investments in associate:
non segmental (note 11) 7,011 7,483
Investments in unlisted companies 5 5
Net assets as per balance sheet 39,929 55,761
Other segment items:
Net (decrease)/increase on revaluation
of investment properties (1,021) - (1,021) 1,569 - 1,569
Net (decrease)/increase on revaluation - (104) (104) - 89 89
of investments held for trading
Finance income 34 - 34 64 - 64
Finance expenses 11,344 - 11,344 11,992 - 11,992
Depreciation 158 - 158 197 - 197
Capital expenditure 493 - 493 567 - 567
Rental income
Joint Ventures
Group Langney
exclude: Dragon Shopping Group
joint Analytical Retail Centre Share
ventures Ventures Properties Unit Trust Total 2011 2010
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Rental income 16,379 866 191 662 18,098 16,990 16,503
Direct property expenses (1,819) (31) (33) (74) (1,957) (1,860) (1,874)
Overheads (2,700) (236) (117) (150) (3,203) (2,895) (3,960)
11,860 599 41 438 12,938 12,235 10,669
Less: attributable to joint ventures (375) (303)
Net rental income 11,860 10,366
*Operating profit before financing charges is defined as profit before tax and
excludes the share of profit & losses of joint ventures and associate, finance
income and expenses, movement on revaluation of investment properties and
investrments held for trading and the movement of interest rate derivatives.
Geographical segments
At net rental income level, the Group operates in the United Kingdom only. The
directors consider it to be the only geographical segment of the business.
Further information in respect of the property reportable segment is included
within the primary statements. No customer represents revenue in excess of 10
per cent of total revenue (2010: none).
notes to the financial statements
for the year ended 31 December 2011
2. Loss before taxation
2011 2010
£'000 £'000
Loss before taxation is arrived at after charging/(crediting):
Staff costs (note 21) 2,283 2,631
Depreciation on tangible fixed assets - owned assets 158 197
Operating lease rentals - land and buildings 375 375
Loss/(profit) on disposal of motor vehicles and office equipment 10 (3)
Amounts payable to the auditor in respect of both audit and non-audit
services
Audit services:
Statutory - company and consolidation 63 84
- subsidiaries 32 41
Further assurance services 3 6
Other services 8 9
106 140
Staff costs and depreciation of tangible fixed assets are included in
overheads.
3. Listed investments held for trading
2011 2010
£'000 £'000
Investment sales - 119
Dividends receivable 24 15
24 134
Cost of sales - (86)
24 48
Attributable overheads - (5)
Net income from listed investments 24 43
4. Directors' emoluments
2011 2010
£'000 £'000
Emoluments 1,011 1,262
Defined contribution pension scheme contributions 66 86
1,077 1,348
Details of directors' emoluments and share options are set out in the
remuneration report.
5. Finance income and expenses
2011 2010
£'000 £'000
Finance income 34 64
Finance expenses
Interest on bank loans and overdrafts (2,518) (2,164)
Other loans (2,103) (2,134)
Interest on derivatives adjustment (4,743) (5,575)
Interest on obligations under finance leases (1,980) (2,049)
Total finance expenses (11,344) (11,922)
(11,310) (11,858)
notes to the financial statements
for the year ended 31 December 2011
6. Income tax
2011 2010
£'000 £'000
Current tax
Corporation tax on loss of the period - -
Adjustments in respect of previous periods - (861)
Total current tax - (861)
Deferred tax
Origination and reversal of timing differences (381) (1,578)
Revaluation of investment properties (547) (2,781)
Accelerated capital allowances 1,045 97
Fair value of interest derivatives (3,897) (2,038)
Adjustments in respect of previous periods 38 (31)
Total deferred tax (note 18) (3,742) (6,331)
Tax on loss on ordinary activities (3,742) (7,192)
Factors affecting tax charge for the year
The corporation tax assessed for the year is different from that at the
standard rate of corporation tax in the United Kingdom of 26.5 per cent (2010:
28 per cent). The differences are explained below:
Loss on ordinary activities before taxation (18,563) (10,687)
Taxation on ordinary activities
at 26.5 per cent (2010: 28%) (4,919) (2,992)
Effects of:
Other differences 951 (3,265)
Joint ventures and associate (41) (43)
Deferred tax rate adjustment 229 -
Adjustment in respect of prior years 38 (892)
Tax credit for the period (3,742) (7,192)
The main component of other differences in the reconciliation relates to
potential indexation for capital gains of £0.8 million (2010: indexation
allowance £3.2 million).
Factors that may affect future tax charges:
Based on current capital expenditure plans, the Group expects to continue to
be able to claim capital allowances in excess of depreciation in future years,
but at a slightly lower level than in the current year.
Deferred tax provision has been made for gains on revaluing investment
properties. At present it is not envisaged that any tax will become payable in
the foreseeable future.
7. Dividend
2011 2010
Per share £'000 Per share £'000
Dividends paid during the year
relating to the prior period 1.15p 964 1.15p 924
Dividends to be paid:
Interim dividend for 2011 paid
on 20 January 2012 0.75p 630 0.75p 627
Proposed final dividend - - 0.40p 337
0.75p 630 1.15p 964
notes to the financial statements
for the year ended 31 December 2011
8. Loss per share and net assets per share
Loss per share have been calculated as follows: 2011 2010
Loss for the year for the purposes of basic and
diluted loss per share (£'000) (14,821) (3,495)
Weighted average number of ordinary shares in
issue for the purpose of basic loss per share ('000) 84,074 82,389
Basic loss per share (17.63)p (4.24)p
Weighted average number of ordinary shares in
issue for the purpose of diluted loss per share ('000) 84,074 82,389
Fully diluted loss per share (17.63)p (4.24)p
Weighted average number of shares in issue is calculated after excluding
treasury shares of 1,538,398 (2010: 1,957,534).
There was no dilutive effect of the outstanding options in either year.
Operating profit after financing charge per share of 1.05p (loss 2010:
(0.99)p) is based on the operating profit after financing charges of £884,000
(2010: operating loss after financing charges £812,000) divided by the
weighted average number of ordinary shares in issue of 84,074,000 (2010:
82,389,000).
Net assets per share have been calculated as follows:
Net assets Shares in issue Net assets per share
2011 2010 2011 2010 2011 2010
£'000 £'000 `000 `000 Pence Pence
Basic
At 31 December 39,929 55,761 84,004 83,585 47.53 66.71
Dilution adjustments for shares
subject to option agreements:
Issue of outstanding share options 28 28 70 70
Diluted 39,957 55,789 84,074 83,655 47.53 66.69
9. Property and plant and equipment
Investment Properties
Office
Leasehold Leasehold equipment
over under and motor
Total Freehold 50 years 50 years vehicles
£'000 £'000 £'000 £'000 £'000
Cost or valuation at 1 January 2011 223,610 82,973 140,131 506 1,586
Additions 423 - 423 - 70
Disposals (600) (600) - - (312)
Decrease in present value of head leases (3) - (3) - -
(Decrease)/increase on revaluation (1,021) (2,695) 1,724 (50) -
Cost or valuation at 31 December 2011 222,409 79,678 142,275 456 1,344
Representing assets stated at:
Valuation 193,748 79,678 113,620 450 -
Present value of head leases 28,661 - 28,655 6 -
Cost - - - - 1,344
222,409 79,678 142,275 456 1,344
Depreciation at 1 January 2011 - - - - 974
Charge for the year - - - - 158
Disposals - - - - (272)
Depreciation at 31 December 2011 - - - - 860
Net book value at 1 January 2011 223,610 82,973 140,131 506 612
Net book value at 31 December 2011 222,409 79,678 142,275 456 484
notes to the financial statements
for the year ended 31 December 2011
9. Property and plant and equipment continued
Investment Properties
Office
Leasehold Leasehold equipment
over under and motor
Total Freehold 50 years 50 years vehicles
£'000 £'000 £'000 £'000 £'000
Cost or valuation at 1 January 2010 243,109 83,598 159,511 - 1,734
Reclassification - - (576) 576 -
Additions 489 - 489 - 78
Disposals (20,736) (3,736) (17,000) - (226)
Decrease in present value of head leases (821) - (821) - -
Increase/(decrease) on revaluation 1,569 3,111 (1,472) (70) -
Cost or valuation at 31 December 2010 223,610 82,973 140,131 506 1,586
Representing assets stated at:
Valuation: 194,946 82,973 111,473 500 -
Present value of head leases 28,664 - 28,658 6 -
Cost - - - - 1,586
223,610 82,973 140,131 506 1,586
Depreciation at 1 January 2010 - - - - 918
Charge for the year - - - - 197
Disposals - - - - (141)
Depreciation at 31 December 2010 - - - - 974
Net book value at 1 January 2010 243,109 83,598 159,511 - 816
Net book value at 31 December 2010 223,610 82,973 140,131 506 612
The leasehold and freehold properties, excluding the present value of head
leases, were valued as at 31 December 2011 by external professional firms of
chartered surveyors. The valuations were made at open market value.
2011 2010
£'000 £'000
Allsop LLP 95,155 96,750
BNP Paribas Real Estate 4,033 4,196
Jones Lang LaSalle 94,560 -
King Sturge LLP - 94,000
193,748 194,946
Add: Present value of headleases 28,661 28,664
222,409 223,610
The historical cost of investment properties, including total capitalised
interest of £6,051,000 (2010: £6,051,000) was as follows:
2011 2010
Leasehold Leasehold
Over 50 Short Over 50 Short
Freehold years Leasehold Freehold years Leasehold
£'000 £'000 £'000 £'000 £'000 £'000
Cost at 1 January 76,308 121,466 785 80,608 133,462 -
Reclassification - - - - (785) 785
Additions - 423 - - 489 -
Disposals (175) - - (4,300) (11,700) -
Cost at 31 December 76,133 121,889 785 76,308 121,466 785
notes to the financial statements
for the year ended 31 December 2011
10. Investment in joint ventures
2011 2010
£'000 £'000
Group share of:
Turnover 611 518
Loss before tax (15) (226)
Taxation 25 (7)
Profit/(loss) after tax 10 (233)
Non-current assets 8,268 6,333
Current assets 1,586 1,500
Current liabilities (443) (3,712)
Non-current liabilities (7,372) (2,958)
Net assets 2,039 1,163
Analytical Ventures Limited (Analytical Ventures) - unlisted property
investment company. The company owns 50 per cent of the issued share capital
and £1,992,897 of loan stock of Analytical Ventures. The remaining 50 per cent
is owned by Uberior Ventures Limited. Analytical Ventures is incorporated and
operates in England and Wales and has issued share capital of 7,558,000
ordinary shares (2010:7,558,000 ordinary shares of £1 each). Analytical
Ventures is managed by a board of directors with neither party having overall
control.
Dragon Retail Properties Limited (Dragon) - unlisted property trading and
investment company. The company owns 50 per cent of the issued share capital.
The remaining 50 per cent is owned by Bisichi Mining PLC. Dragon is
incorporated and operates in England and Wales and has issued share capital of
500,000 ordinary shares of £1 each (2010:500,000 ordinary shares of £1 each).
Dragon is managed by a board of directors with neither party having overall
control.
Langney Shopping Centre Unit Trust (Langney) - unlisted property investment
unit trust.
The company acquired 12.50 per cent of the total ordinary units in issue in
June 2011. A further 12.50 per cent is owned by Bisichi Mining PLC.The
remaining 75 per cent is owned by Columbus Capital Management LLP. Langney is
incorporated in Jersey and has 7,100 total ordinary units in issue of £1,000
each. The company has a management contract to manage the property for Langney
and accordingly has a significant influence in Langney. It is a single asset
unit trust.
Shares in joint ventures: 2011 2010
£'000 £'000
At 1 January 1,163 1,396
Share of profit/(loss) after tax 10 (233)
Dividend received (22) -
Investment in shares 888 -
876 (233)
At 31 December 2,039 1,163
11. Investments in associated company
Associate 2011 2010
£'000 £'000
Bisichi Mining PLC - listed mining and
property investment company
Group share of:
Turnover 12,551 13,681
Loss before tax (568) (725)
Taxation 379 220
Loss after tax (189) (505)
Non-current assets 10,383 10,718
Current assets 5,083 4,811
Current liabilities (7,071) (4,162)
Non-current liabilities (1,324) (3,720)
Minority interest (60) (164)
Net assets 7,011 7,483
notes to the financial statements
for the year ended 31 December 2011 continued
11. Investments in associated company continued
2011 2010
£'000 £'000
Share in associate:
At 1 January 7,483 8,044
Share of loss after tax (189) (505)
Investment in shares 131 -
Equity share options 6 2
Currency translation (246) 314
Dividend received (174) (173)
Minority interest - (199)
(472) (561)
At 31 December 7,011 7,483
The company owns 42 per cent (2010: 42 per cent) of the issued share capital
of Bisichi Mining PLC (Bisichi), a company registered in England and Wales.
Bisichi has an issued share capital of 10,556,839 (2010: 10,451,506) ordinary
shares of 10p each, and its principal countries of operation are the United
Kingdom (property investment) and South Africa (coal mining). Bisichi is an
associated undertaking because London & Associated Properties PLC has a
participating interest. Bisichi has an independent board of directors which
controls its operating and financial policies.
The market (bid) value of this investment at 31 December 2011 was £6,206,000
(2010: £8,700,000). No impairment is necessary as the Directors consider the
market value deficit temporary.
12. Held to maturity investments
Loan Loan
Stock Stock
2011 Unlisted in joint 2010 Unlisted in joint
Total Shares ventures Total Shares ventures
£'000 £'000 £'000 £'000 £'000 £'000
Cost
At 1 January 1,946 5 1,941 1,805 5 1,800
Loan stock issue 220 - 220 180 - 180
Repayments (168) - (168) (39) - (39)
At 31 December 1,998 5 1,993 1,946 5 1,941
13. Trade and other receivables
2011 2010
£'000 £'000
Trade receivables 1,100 1,089
Amounts due from associate and joint ventures 442 328
Other receivables 191 206
Prepayments and accrued income 2,568 2,469
4,301 4,092
The Directors consider that the carrying amount of trade and other receivables
approximates to their fair value.
14. Investments held for trading
2011 2010
£'000 £'000
Market bid value of the listed investment portfolio 635 717
Unrealised deficit of market value over cost (499) (395)
Listed investment portfolio at cost 1,134 1,112
All investments are listed on the London Stock Exchange.
15. Trade and other payables
2011 2010
£'000 £'000
Trade payables 426 256
Amounts owed to joint ventures 1,144 1,133
Other taxation and social security costs 954 981
Other payables 725 801
Accruals and deferred income 6,204 6,851
9,453 10,022
The Directors consider that the carrying amount of trade and other payables
approximates to their fair value.
notes to the financial statements
for the year ended 31 December 2011 continued
16. Borrowings
Current borrowings - amounts falling due within one year
2011 2010
£'000 £'000
Bank overdrafts (secured) 3,717 3,863
£1 million term bank loan repayable by 2015 (unsecured) 226 -
£47 million revolving credit facility repayable in 2012*+ (secured) 44,069 -
48,012 3,863
Non-current borrowings - amounts falling due after more than one year
Term borrowings
Debenture stocks:
£5 million First Mortgage Debenture Stock 2013 at 11.3 per cent 5,000 5,000
£1.7 million First Mortgage Debenture Stock 2016 at 8.67 per cent 1,700 1,700
£5 million First Mortgage Debenture Stock 2018 at 11.6 per cent 5,000 5,000
£10 million First Mortgage Debenture Stock 2022 at 8.109 per cent* 9,821 9,804
21,521 21,504
Term bank loans:
£1 million term bank loan repayable by 2015 706 -
£47 million revolving credit facility repayable in 2012*+ - 44,855
£70 million term bank loan repayable in 2014* 69,887 69,847
70,593 114,702
92,114 136,206
*The £10 million debenture and bank loans are shown after deduction of
outstanding amortised issue costs.
+The £47 million facility was reduced from £60 million.
Interest payable on the term bank loans is variable being based upon the
London inter-bank offered rate (LIBOR) plus margin.
First Mortgage Debenture Stocks 2013, 2016, 2018 and 2022, the long term £47
million bank revolving credit facility repayable in September 2012 and the
long term £70 million term bank loan repayable in November 2014 are secured on
specific freehold and leasehold properties which are included in the financial
statements at a value of £191.0 million.
The bank loans and debentures are secured by way of a first charge over the
investment properties in the UK.
The Group's objectives when managing capital are:
- To safeguard the Group's ability to continue as a going concern, so that it
may provide returns for shareholders and benefits for other stakeholders; and
- To provide adequate returns to shareholders by ensuring returns are
commensurate with the risk.
17. Financial instruments
Treasury policy
The Group enters into derivative transactions such as interest rate swaps and
forward exchange contracts in order to help manage the financial risks arising
from the Group's activities. The main risks arising from the Group's financing
structure are interest rate risk, liquidity risk and market price risk. The
policies for managing each of these risks and the principal effects of these
policies on the results are summarised below.
Interest rate risk
Treasury activities take place under procedures and policies approved and
monitored by the Board to minimise the financial risk faced by the Group. The
bank loans are secured by way of a first charge on certain fixed assets. The
rates of interest vary based on LIBOR in the UK.
Sensitivity analysis
As all term debt has been covered by hedged derivatives it is not considered
that there is any material sensitivity for the Group to changes in interest
rates.
Liquidity risk
The Group's policy is to minimise refinancing risk by balancing its exposure
to interest risk and to refinancing risk. In effect the Group seeks to borrow
for as long as possible at the lowest acceptable cost. Efficient treasury
management and strict credit control minimise the costs and risks associated
with this policy which ensures that funds are available to meet commitments as
they fall due. Cash and cash equivalents earn interest at rates based on LIBOR
in the UK. These facilities are considered adequate to meet the Group's
anticipated cash flow requirements for the foreseeable future.
notes to the financial statements
for the year ended 31 December 2011 continued
17. Financial instruments continued
The table below analyses the Group's financial liabilities into maturity
Groupings and also provides
details of the liabilities that bear interest at fixed, floating and
non-interest bearing rates.
Less
than 2-5 Over 5 2011
1 year years years Total
£'000 £'000 £'000 £'000
Bank overdrafts (floating) 3,717 - - 3,717
Debentures (fixed) - 6,700 15,000 21,700
Bank loans (floating)* 44,420 70,706 - 115,126
Trade and other payables (non-interest) 9,453 - - 9,453
57,590 77,406 15,000 149,996
Less
than 2-5 Over 5 2010
1 year years years Total
£'000 £'000 £'000 £'000
Bank overdrafts (floating) 3,863 - - 3,863
Debentures (fixed) - 5,000 16,700 21,700
Bank loans (floating)* - 115,104 - 115,104
Trade and other payables (non-interest) 10,022 - - 10,022
13,885 120,104 16,700 150,689
The Group would normally expect that sufficient cash is generated in the
operating cycle to meet the contractual cash flows as disclosed above through
effective cash management.
*All the bank loans are fully hedged with appropriate interest derivatives.
Details of all hedges are shown below.
Market price risk
The Group is exposed to market price risk through interest rate and currency
fluctuations.
Credit risk
At the balance sheet date there were no significant concentrations of credit
risk. The maximum exposure to credit risk is represented by the carrying
amount of each financial asset in the balance sheet. The Group only deposits
surplus cash with well-established financial institutions of high quality
credit standing.
Borrowing facilities
At 31 December 2011 London & Associated Properties PLC was within its bank
borrowing facilities and was not in breach of any of the covenants. Overdrafts
are renewable annually. Term loan repayments are as set out below. Details of
other financial liabilities are shown in notes 15 and 16.
The Group has undrawn facilities of £3,089,000 (2010: £16,033,000) as follows:
2011 2010
£'000 £'000
Overdrafts 283 1,137
Term facilities expiring in one year 2,806 -
Term facilities expiring in two to five years - 14,896
3,089 16,033
Hedge profile
a) There is a hedge to cover the £47 million revolving credit facility, which
currently covers the full £44 million drawn. It consists of a 20 year swap for
£10.4 million (2010: £15.4 million) with a 7 year call option in favour of the
bank, taken out in November 2007, at 4.76 per cent and a 20 year swap for £40
million with a 7 year call option in favour of the bank, taken out in December
2007, at 4.685 per cent.
b) There is a hedge to cover the £70 million term bank loan drawn. It consists
of a 20 year swap for £70 million with a 7 year call option in favour of the
bank, taken out in November 2007, at 4.76 per cent.
At the year end the amount recognised was £23,137,000 deficit (2010:
£9,811,000 deficit) being the estimated financial effect of the fair value to
the business of these hedging instruments less the deferred tax thereon.
During the year the Company broke £5 million (2010: £19.6 million) of the 4.76
per cent swap at a cost of £920,000 (2010: £3.515 million).
The Directors have estimated the financial effect of the fair value to the
business of these hedging instruments. This has been calculated as the Net
Present Value of the difference between the 16 year interest rate, which was
2.74 per cent at 31 December 2011 against the rate payable under the specific
hedge. This has given a liability at 31 December 2011 of £30,850,000 (2010:
£13,627,000) as shown in the balance sheet and this value changes by
approximately £1,600,000 for each 0.1% change in interest rate. The banks own
initial quotation at 31 December 2011 to close each of the hedges was
£37,039,000 (2010: £16,236,000). It is not the company's intention to
crystallise the derivatives.
Under IAS 39 the hedges are not deemed to be eligible for hedge accounting and
any movement in the value of the hedges is therefore charged directly to the
consolidated income statement. The banks have an option to cancel the hedges
in November 2014 and January 2015. The cost to the Group to exit the
instruments before November 2014 and January 2015 has been attributed a cost
by the bank of £1,280,000 (2010: £5,679,000). It is not the intention of the
Directors to exit the instruments and this cost has not been recognised.
notes to the financial statements
for the year ended 31 December 2011 continued
17. Financial instruments continued
Fair value of financial instruments
Fair value estimation
Effective 1 January 2009, the Group adopted the amendment to IFRS 7 for
financial instruments that are measured in the balance sheet at fair value,
this requires disclosure of fair value measurements by level of the following
fair value hierarchy:
- Quoted prices (unadjusted) in active markets for identical assets or
liabilities (level 1).
- Inputs other than quoted prices included within level 1 that are observable
for the asset or liability, either directly (that is, as prices) or indirectly
(that is, derived from prices) (level 2).
- Inputs for the asset or liability that are not based on observable market
data (that is unobservable inputs) (level 3).
2011
Gain/(loss)
to income
Level 1 Level 2 Level 3 Total statement
£'000 £'000 £'000 £'000 £'000
Financial assets
Other financial assets held for trading
Quoted equities 635 - - 635 (104)
Financial liabilities
Derivative financial instruments
Interest rate swaps - - 30,850 30,850 (17,223)
2010
Gain/(loss)
to income
Level 1 Level 2 Level 3 Total statement
£'000 £'000 £'000 £'000 £'000
Financial assets
Other financial assets held for trading
Quoted equities 717 - - 717 15
Financial liabilities
Derivative financial instruments
Interest rate swaps - - 13,627 13,627 (7,280)
Capital structure
The Group sets the amount of capital in proportion to risk. It ensures that
the capital structure is commensurate to the economic conditions and risk
characteristics to the underlying assets. In order to maintain or adjust the
capital structure, the Group may adjust the capital structure, vary the amount
of dividends paid to shareholders, return capital to shareholders, issue new
shares or sell assets to reduce debt.
The Group considers its capital to include share capital, share premium,
capital redemption reserve, translation reserve and retained earnings, but
excluding the interest rate derivatives.
Consistent with others in the industry, the Group monitors its capital by its
debt to equity ratio (gearing levels). This is calculated as the net debt
(loans less cash and cash equivalents) as a percentage of the equity. During
2011 this decreased to 188.8 per cent (2010: 189.5 per cent) which was
calculated as follows:
2011 2010
£'000 £'000
Total debt 140,126 140,069
Less cash and cash equivalents (6,464) (8,584)
Net debt 133,662 131,485
Total equity 70,779 69,388
188.8% 189.5%
All the debt, apart from the overdrafts, is at fixed rates of interest as
shown in notes 16 and 17. The Group does not have any externally imposed
capital requirements.
Financial assets
Financial assets are disclosed in notes 12, 13 and 14 and above.
The Group's principal financial assets are bank balances and cash, trade and
other receivables and investments. The Group has no significant concentration
of credit risk as exposure is spread over a large number of counterparties and
customers. The credit risk in liquid funds and derivative financial
instruments is limited because the counterparties are banks with high credit
ratings assigned by international credit-rating agencies. The Group's credit
risk is primarily attributable to its trade receivables. The amounts presented
in the balance sheet are net of allowances for doubtful receivables, estimated
by the Group's management based on prior experience and the current economic
environment.
notes to the financial statements
for the year ended 31 December 2011 continued
17. Financial instruments continued
Financial assets maturity
Cash and cash equivalents all have a maturity of less than three months.
2011 2010
£'000 £'000
Cash at bank and in hand 6,464 8,584
These funds are primarily invested in short term bank deposits maturing within
one year bearing interest at the bank's variable rates.
Financial liabilities maturity
Repayment of borrowings
2011 2010
£'000 £'000
Bank loans and overdrafts:
Repayable on demand or within one year 48,012 3,863
Repayable between two and five years 70,593 114,702
118,605 118,565
Debentures:
Repayable between two and five years 6,700 5,000
Repayable in more than five years 14,821 16,504
140,126 140,069
Certain borrowing agreements contain financial and other conditions that if
contravened by the Group, could alter the repayment profile.
Group undrawn banking facilities
which expire within one year 3,089 1,137
which expire in two to five years - 14,896
3,089 16,033
Interest rate risk and hedge profile
2011 2010
£'000 £'000
Fixed rate borrowings 21,700 21,700
Floating rate borrowings
- Subject to interest rate swap 120,400 125,400
- Excess hedge (6,206) (10,296)
135,894 136,804
Average fixed interest rate 9.69% 9.69%
Weighted average swapped interest rate 6.00% 5.57%
Weighted average cost of debt on
overdrafts, bank loans and debentures 6.48% 6.12%
Average period for which borrowing
rate is fixed 7.5 years 8.5 years
Average period for which
borrowing rate is swapped 15.9 years 16.9 years
The swapped interest rate
have calls by the bank 2.9 years 3.9 years
The Group's floating rate debt bears interest based on LIBOR for the term bank
loans and Bank base rate for the overdrafts.
notes to the financial statements
for the year ended 31 December 2011 continued
17. Financial instruments continued
Total financial assets and liabilities
The Group's financial assets and liabilities and their fair values are as
follows:
2011 2010
Fair Carrying Fair Carrying
value value Value value
£'000 £'000 £'000 £'000
Cash and cash equivalents 6,464 6,464 8,584 8,584
Financial assets - investments 635 635 717 717
held for trading
Other assets 4,302 4,302 4,092 4,092
Derivative liabilities (30,850) (30,850) (13,627) (13,627)
Bank overdrafts (3,717) (3,717) (3,863) (3,863)
Bank loans (115,126) (114,888) (115,104) (114,702)
Present value of head leases on properties (28,661) (28,661) (28,664) (28,664)
Other liabilities (9,453) (9,453) (10,022) (10,022)
Total financial liabilities before debentures (176,406) (176,168) (157,887) (157,485)
Fair value of debenture stocks
Fair value of the Group's
debenture liabilities: 2011 2010
Book Fair Fair value Fair Value
value value adjustment adjustment
£'000 £'000 £'000 £'000
Debenture stocks (21,700) (29,621) (7,921) (4,889)
Tax at 25 per cent (2010: 28 per cent) 1,980 1,369
Post tax fair value adjustment (5,941) (3,520)
Post tax fair value adjustment - basic pence per share (6.79)p (4.21)p
There is no material difference in respect of other financial liabilities or
any financial assets.
The fair values were calculated by the directors as at 31 December 2011 and
reflect the replacement value of the financial instruments used to manage the
Group's exposure to adverse rate movements.
The fair values of the debentures are based on the net present value at the
relevant gilt interest rate of the future payments of interest on the
debentures. The bank loans and overdrafts are at variable rates and there is
no material difference between book values and fair values.
notes to the financial statements
for the year ended 31 December 2011 continued
18. Deferred tax
2011 2010
£'000 £'000
Balance at 1 January 64 6,395
Transfer to consolidated income statement (3,742) (6,331)
Balance at 31 December (3,678) 64
The deferred tax balance comprises the following:
Revaluation of investment properties 2,406 2,953
Accelerated capital allowances 3,263 2,213
Fair value of interest derivatives (7,712) (3,815)
Short-term timing differences 1,209 1,320
(834) 2,671
Loss relief (2,844) (2,607)
Provision at end of period (3,678) 64
The directors consider the temporary differences arising in connection with
the interests in associate and joint ventures are insignificant. There is no
time limit in respect of the Group tax loss relief.
19. Share capital
Number of Number of
ordinary 10p ordinary 10p
shares shares
2011 2010 2011 2010
£'000 £'000
Authorised: Ordinary shares of 10p each 110,000,000 110,000,000 11,000 11,000
Allotted, issued and fully paid 83,922,029 83,922,029 8,392 8,392
Ordinary shares of 10p - issued during the year 1,620,682 1,620,682 162 162
Share capital 85,542,711 85,542,711 8,554 8,554
Less: held in Treasury (see below) (1,538,398) (1,957,534) (154) (196)
"Issued share capital" for reporting purposes 84,004,313 83,585,177 8,400 8,358
The company has one class of ordinary shares which carry no right to fixed
income.
Treasury shares
Number of ordinary
10p shares Cost/issue value
2011 2010 2011 2010
Price
Date excl. £'000 £'000
costs
Shares held in Treasury at 1 January 1,957,534 4,293,051 2,078 4,558
Issued to meet directors bonuses
(Jan 10 -106.18p) Feb-11 106.18p (538,203) (2,069,524) (571) (2,198)
Issued to meet staff bonuses
(Jan 10 -106.18p) Feb-11 106.18p (57,751) (88,021) (61) (93)
Issued for new share incentive plan Feb-11 106.18p (78,885) - (84) -
Purchase of shares Sep-11 295,000 - 101 -
Issued to meet directors' bonuses
(Oct 10-106.18p) - (19,097) - (20)
Issued for new share incentive plan Oct-11 106.18p (26,400) (23,702) (28) (25)
Issued to meet staff bonuses Oct-11 106.18p (12,897) - (14) -
Issued for new share incentive plan
(Dec 10 -106.18p) - (135,173) - (144)
Shares held in Treasury at 31 December 1,538,398 1,957,534 1,421 2,078
notes to the financial statements
for the year ended 31 December 2011 continued
19. Share capital continued
Share Option Schemes
Employees' share option scheme (Approved scheme)
At 31 December 2011 the following options to subscribe for ordinary shares
were outstanding, issued under the terms of the Employees' Share Option
Scheme:
Number of shares Date of grant Option Price Normal Exercise Date
70,000 14 October 2003 39.5p 14 October 2006 to 13 October 2013
This share option scheme was approved by members in 1986, and has been
approved by Her Majesty's Revenue and Customs (HMRC).
There are no performance criteria for the exercise of options under the
Approved scheme, as this was set up before such requirements were considered
to be necessary.
A summary of the shares allocated and options issued under the scheme up to 31
December 2011 is as follows:
Changes during the year
At
At 1 January Options Options Options 31 December
2011 Exercised granted lapsed 2011
Shares issued to date 2,367,604 - - - 2,367,604
Options granted which have 70,000 - - - 70,000
not been exercised
Shares allocated over which options 1,549,955 - - - 1,549,955
have not been granted
Total shares allocated for issue to 3,987,559 - - - 3,987,559
employees under the scheme
Non-approved Executive Share Option Scheme (Unapproved scheme)
A share option scheme known as the "Non-approved Executive Share Option
Scheme" which does not have HMRC approval was set up during 2000. At 31
December 2011 there were no options to subscribe for ordinary shares
outstanding.
The exercise of options under the Unapproved scheme is subject to the
satisfaction of objective performance conditions specified by the remuneration
committee which conforms to institutional shareholder guidelines and best
practice provisions.
A summary of the shares allocated and options issued under the scheme up to 31
December 2011 is as follows:
Changes during year
Changes during the year
At
At 1 January Options Options Options 31 December
2011 Exercised granted lapsed 2011
Shares issued to date 450,000 - - - 450,000
Options granted which have not been exercised - - - - -
Shares allocated over which options
have not yet been granted 550,000 - - - 550,000
Total shares allocated for issue to
employees under the scheme 1,000,000 - - - 1,000,000
notes to the financial statements
for the year ended 31 December 2011 continued
20. Related party transactions
Cost Amounts Cash
recharged Owed advanced
to(by) (to) by to (by)
related related related
party party party
£'000 £'000 £'000
Related party:
Analytical Ventures Limited
Current Account 74 20 -
Dragon Retail Properties Limited
Current account 43 61 19
Loan account - (1,205) -
Langney Shopping Centre Unit Trust
Current account 51 (ii) 55 -
Bisichi Mining PLC
Current account 328 (i) 367 -
Directors and key management
M A Heller and J A Heller 18 (ii) - -
H D Goldring
(Delmore Asset Management Limited) (25) (iii) - -
C A Parritt (17) (iv) - -
Totals at 31 December 2011 472 (702) 19
Totals at 31 December 2010 433 (803) -
Nature of costs recharged - (i) Management fees (ii) Property management fees
(iii) Portfolio management fees (iv) Consultancy fees.
The related party companies above are the associate and joint ventures and are
treated as non current asset investments - details are shown in Note 10 and
11.
Analytical Ventures Limited (joint venture)
Analytical Ventures Limited (Analytical Ventures) is owned 50 per cent by the
company and 50 per cent by the Bank of Scotland.
Dragon Retail Properties Limited (joint venture)
Dragon Retail Properties Limited (Dragon) is owned 50 per cent by the company,
and 50 per cent by Bisichi Mining PLC. Dragon had surplus cash which was
deposited equally with London & Associated Properties PLC and Bisichi Mining
PLC. The deposit is currently interest free. Langney Shopping Centre Unit
Trust (joint venture)
Langney Shopping centre Unit Trust (Langney) is owned 12.5 per cent by the
company and 12.5 per cent by Bisichi Mining PLC.The remaining 75 per cent is
owned by Columbus Capital Management LLP.
The company provides office premises, property management, general management,
accounting and administration services for both Analytical Ventures and Dragon
and property management services to Langney.
Bisichi Mining PLC (associate)
The company provides office premises, property management, general management,
accounting and administration services for Bisichi Mining PLC and its
subsidiaries.
Directors
London & Associated Properties PLC provides office premises, property
management, general management, accounting and administration services for a
number of private property companies in which M A Heller and J A Heller have
an interest. Under an agreement with M A Heller no charge is made for these
services on the basis that he reduces by an equivalent amount the charge for
his services to London & Associated Properties PLC. The board estimates that
the value of these services, if supplied to a third party, would have been
£275,000 for the year (2010: £275,000).
The companies for which services are provided are: Barmik Properties Limited,
Cawgate Limited, Clerewell Limited, Cloathgate Limited, Ken-Crav Investments
Limited, London & South Yorkshire Securities Limited, Metroc Limited, Penrith
Retail Limited, Shop.com Limited, South Yorkshire Property Trust Limited,
Wasdon Investments Limited, Wasdon (Dover) Limited, and Wasdon (Leeds)
Limited.
In addition the company received management fees of £30,000 (2010: £40,000)
for work done for two charitable foundations,
the Michael & Morven Heller Charitable Foundation and the Simon Heller
Charitable Trust.
Delmore Asset Management Limited (Delmore) is a company in which H D Goldring
is a majority shareholder and director. Delmore provides consultancy services
to the company on an invoiced fee basis.
M A Heller is a director of Bisichi Mining PLC, the associated company and
received a salary of £75,000 (2010: £75,000) for services.
The directors are considered to be the only key management personnel and their
remunerations including employers national insurance for the year were
£1,208,000 (2010: £1,504,000). All other disclosures required including
interest in share options in respect of those directors are included within
the remuneration report.
21. Employees
The average number of employees, including directors, of the Group during the
year involved in management and administration was 31 (2010: 36).
2011 2010
£'000 £'000
Staff costs during the year were as follows:
Salaries and other costs 1,713 1,873
Social security costs 220 386
Pension costs 350 372
2,283 2,631
notes to the financial statements
for the year ended 31 December 2011 continued
22. Capital Commitments
2011 2010
£'000 £'000
Commitments to capital expenditure
contracted for at the year end 735 -
The Group's share of capital commitments of joint ventures at the year end
amounted to £Nil (2010: £Nil).
23. Commitments under operating and finance leases
Operating leases on land and buildings
At 31 December 2011 the Group had commitments under non-cancellable operating
leases on land and buildings as follows:
2011 2010
£'000 £'000
Within one year 390 399
In the second to fifth years inclusive 714 1,197
1,104 1,596
Operating lease payments represent rentals payable by the Group for its office
premises.
The leases are for an average term of 5 years and rentals are fixed for an
average of one year.
Present value of head leases on properties
Minimum Present value
lease of minimum
payments lease payments
2011 2010 2011 2010
£'000 £'000 £'000 £'000
Amounts payable under finance leases:
Within one year 1,821 1,821 1,821 1,821
In the second to fifth years inclusive 7,285 7,285 6,770 6,970
After five years 227,293 229,114 20,070 20,073
236,399 238,220 28,661 28,864
Future finance charges on finance leases (207,738) (209,556) - -
Present value of finance lease liabilities 28,661 28,664 28,661 28,864
Finance lease liabilities are in respect of leased investment property. Many
leases provide for contingent rent in addition to the rents above, usually a
proportion of rental income.
Finance lease liabilities are effectively secured as the rights to the leased
asset revert to the lessor in the event of default.
Future aggregate minimum rentals receivable
The Group leases out its investment properties to tenants under operating
leases. The future aggregate minimum rentals receivable under non-cancellable
operating leases are as follows:
2011 2010
£'000 £'000
Within one year 10,446 11,811
In the second to fifth years inclusive 36,772 40,537
After five years 38,321 41,273
85,539 93,621
24. Contingent Liabilities
There were no contingent liabilities at 31 December 2011 (2010: £Nil), except
as disclosed in Note 17.
notes to the financial statements
for the year ended 31 December 2011 continued
25. Company financial statements
Company balance sheet at 31 December 2011
2011 2010
Notes £'000 £'000
Fixed assets
Tangible assets 25.3 85,282 86,758
Other investments:
Associated company 25.4 489 358
Subsidiaries and others 25.4 47,371 46,431
25.4 47,860 46,789
133,142 133,547
Current assets
Debtors 25.5 24,911 22,553
Investments 25.6 635 717
Bank balances 4,540 5,966
30,086 29,236
Creditors
Amounts falling due within one year 25.7 (89,796) (42,416)
Net current liabilities (59,710) (13,180)
Total assets less current liabilities 73,432 120,367
Creditors
Amounts falling due after
more than one year 25.8 (34,887) (72,146)
Net assets 38,545 48,221
Capital and reserves
Share capital 25.10 8,554 8,554
Share premium account 25.11 4,866 4,866
Capital redemption reserve 25.11 47 47
Revaluation reserve 25.11 12,059 13,407
Treasury shares 25.10 (1,421) (2,078)
Retained earnings 25.11 14,440 23,425
Shareholders' funds 38,545 48,221
These financial statements were approved by the board of directors and
authorised for issue on 20 April 2012 and signed on its behalf by:
M A Heller R J Corry
Director Director
Company Registration No. 341829
notes to the financial statements
for the year ended 31 December 2011 continued
25.1. Company
Accounting policies
The following are the main accounting policies of the company:
Basis of accounting
The financial statements have been prepared under the historical cost
convention as modified to include the revaluation of freehold and leasehold
properties and fair value adjustments in respect of current asset investments
and interest rate hedges and in accordance with applicable accounting
standards. All accounting policies applied are consistent with those of prior
periods.
Investment properties are accounted for in accordance with SSAP 19,
"Accounting for Investment Properties", which provides that these should not
be subject to periodic depreciation charges, but should be shown at open
market value. This is contrary to the Companies Act 2006 which states that,
subject to any provision for depreciation or diminution in value, fixed assets
are normally to be stated at purchase price or production cost. Current cost
accounting or the revaluation of specific assets to market value, as
determined at the date of their last valuation, is also permitted.
The treatment of investment properties under the Companies Act 2006 does not
give a true and fair view as these assets are not held for consumption in the
business but as investments, the disposal of which would not materially affect
any manufacturing or trading activities of the enterprise. In such a case it
is the current value of these investments, and changes in that current value,
which are of prime importance. Consequently, for the proper appreciation of
the financial position, the accounting treatment required by SSAP 19 is
considered appropriate for investment properties. Details of the current value
and historical cost information for investment properties are set out in note
25.3. Depreciation or amortisation is only one of the many factors reflected
in the annual revaluation and the amount that might otherwise have been shown
cannot be separately identified or quantified.
The financial statements have been prepared on a going concern basis. Further
details of which are contained in the Directors' report.
Revenue
Revenue comprises rental income, listed investment sales, dividends and other
income. The profit or loss on disposal of properties is recognised on
completion of sale.
Dividends receivable
Dividends are credited to the profit and loss account when the dividend is
received.
Tangible fixed assets
a) Investment properties
An external professional valuation of investment properties is carried out
every year. Properties professionally valued by Chartered Surveyors are on an
existing use open market value basis, in accordance with the Practice
Statements contained within the RICS valuation standards 2011 prepared by the
Royal Institution of Chartered Surveyors.
The cost of improvements includes attributable interest.
b) Other tangible fixed assets
Other tangible fixed assets are stated at historical cost. Depreciation is
provided on all other tangible fixed assets at rates calculated to write each
asset down to its estimated residual value evenly over its expected useful
life. The rates generally used are - office equipment - 10 to 33 per cent per
annum, and motor vehicles - 20 per cent per annum, on a straight line basis.
Investments
Long term investments are described as participating interests and are
classified as fixed assets. Short term investments are classified as current
assets.
a) Investments held as fixed assets
These comprise investments in subsidiaries and investments in Analytical
Ventures Limited, Dragon Retail Properties Limited and Langney Shopping Centre
Unit Trust (unlisted joint ventures), Bisichi Mining PLC (listed associate),
and in unlisted companies which are all held for the long term. Provision is
made for any impairment in the value of fixed asset investments.
b) Investments held as current assets
Investments held for trading are included in current assets and are revalued
to fair value. For listed investments, fair value is the bid market listed
value at the balance sheet date. Realised and unrealised gains or losses
arising from changes in fair value are included in the income statement of the
period in which they arise.
Financial Instruments
Bank loans and overdrafts
Bank loans and overdrafts are included in creditors on the company balance
sheet at the amounts drawn on the particular facilities. Interest payable on
those facilities is expensed as a finance cost in the period to which it
relates.
Interest rate derivatives
The company uses derivative financial instruments to hedge the interest rate
risk associated with the financing of the company's business. No trading in
such financial instruments is undertaken. At each reporting date, these
interest rate derivatives are recognised at their fair value to the business,
being the Net Present Values of the difference between the hedged rate of
interest and the rate of interest for the remaining period of the hedge.
Where a derivative is designated as a hedge of the variability of a highly
probable forecast transaction i.e. an interest payment, the element of the
gain or loss on the derivative that is an effective hedge is recognised
directly in equity. When the forecast transaction subsequently results in the
recognition of a financial asset or a financial liability, the associated
gains or losses that were recognised directly in equity are reclassified into
the income statement in the same period or periods during which the asset
acquired or liability assumed affects the income statement i.e. when interest
income or expense is recognised.
The gain or loss arising from any adjustment to the fair value to the business
is recognised in the income statement.
Debtors
Debtors do not carry any interest and are stated at their nominal value as
reduced by appropriate allowances for estimated recoverable amounts.
Creditors
Creditors are not interest bearing and are stated at their nominal value.
Joint ventures
Investments in joint ventures, being those entities over whose activities the
Group has joint control as established by contractual agreement, are included
at cost.
Deferred taxation
Deferred tax is recognised in respect of all timing differences that have
originated but not reversed at the balance sheet date where transactions or
events that result in an obligation to pay more tax in the future or a right
to pay less tax in the future have occurred at the balance sheet date. Timing
differences are differences between the company's taxable profits and its
results as stated in the financial statements. Deferred tax is measured at the
average tax rates which are expected to apply in the periods in which timing
differences are expected to reverse, based on tax rates and laws that have
been enacted or substantially enacted by the balance sheet date. Deferred tax
is measured on a non-discounted basis.
Leased assets and obligations
All leases are "Operating Leases" and the annual rentals are charged to the
profit and loss account on a straight line basis over the lease term. Rent
free periods or other incentives received for entering into a lease are
accounted for over the period of the lease so as to spread the benefit
received over the lease term.
Retirement benefits
For defined contribution schemes the amount charged to the profit and loss
account in respect of pension costs and other post retirement benefits is the
contributions payable for the year. Differences between contributions payable
in the year and contributions actually paid are shown as either prepayments or
accruals at the balance sheet date.
notes to the financial statements
for the year ended 31 December 2011 continued
25.2. Loss for the financial year
The company's loss for the year was £7,557,000 (loss 2010: £6,182,000). In
accordance with the exemption conferred by Section 408 of the Companies Act
2006, the company has not presented its own profit and loss account.
25.3. Tangible assets
Investment Properties
Office
Equipment
Long Short and motor
Total Freehold leasehold leasehold vehicles
£'000 £'000 £'000 £'000 £'000
Cost or valuation at 1 January 2011 87,778 63,123 22,523 500 1,632
Additions 70 - - - 70
Disposals (312) - - - (312)
Decrease on revaluation (1,348) (445) (853) (50) -
Cost or valuation at 31 December 2011 86,188 62,678 21,670 450 1,390
Representing assets stated at:
Valuation 84,798 62,678 21,670 450 -
Cost 1,390 - - - 1,390
86,188 62,678 21,670 450 1,390
Depreciation at 1 January 2011 1,020 - - - 1,020
Charge for the year 158 - - - 158
Disposals (272) - - - (272)
Depreciation at 31 December 2011 906 - - - 906
Net book value at 1 January 2011 86,758 63,123 22,523 500 612
Net book value at 31 December 2011 85,282 62,678 21,670 450 484
The freehold and leasehold properties were valued as at 31 December 2011 by
external professional firms of chartered surveyors. The valuations were made
at open market value on the basis of existing use. The decrease in book value
was transferred from revaluation reserve.
2011 2010
£'000 £'000
Allsop LLP 80,765 81,950
BNP Paribas Real Estate 4,033 4,196
84,798 86,146
The historical cost of investment properties, including total capitalised
interest of £1,222,000 (2010: £1,222,000) was as follows:
Short
Long
Freehold Leasehold Leasehold
£'000 £'000 £'000
Cost at 1 January 2011 54,620 17,293 785
Reclassification - - -
Additions - - -
Disposals - - -
Cost at 31 December 2011 54,620 17,293 785
Long leasehold properties are held on leases with an unexpired term of more
than fifty years at the balance sheet date.
notes to the financial statements
for the year ended 31 December 2011 continued
25.4. Other investments
Loan Loan
Shares in stock in Shares in stock
subsidiary subsidiary joint in joint Shares in Unlisted
Total companies companies ventures ventures associate shares
Cost £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2011 46,789 40,663 3,658 164 1,941 358 5
Additions 1,239 - - 888 220 131 -
Repayments (168) - - - (168) - -
At 31 December 2011 47,860 40,663 3,658 1,052 1,993 489 5
Subsidiary companies
The company owns 100 per cent of the ordinary share capital of the following
companies that are trading, all of which are registered in England and Wales:
Activity % Held by % Held
company by Group
LAP Ocean Holdings Limited Property investment 100 100
Antiquarius Limited Property investment - 100
Brixton Village Limited Property investment - 100
Market Row Limited Property investment - 100
Ski Investments Limited Property investment - 100
Analytical Properties Holdings Limited Property investment 100 100
Analytical Properties Limited Property investment - 100
Analytical Properties (St Helens) Limited Property investment - 100
London & Associated Property Management Services 100 100
Management Services Limited
In the opinion of the directors the value of the investment in subsidiaries is
not less than the amount shown in these financial statements.
Details of the associate and joint ventures are set out in notes 10 and 11.
25.5. Debtors
2011 2010
£'000 £'000
Trade debtors 851 639
Amounts due from subsidiary companies 17,431 17,525
Amounts due from associate and joint ventures 402 328
Deferred tax asset (note 25.9) 4,550 2,657
Other debtors 56 41
Prepayments and accrued income 1,621 1,363
24,911 22,553
25.6. Investments
2011 2010
£'000 £'000
Market value of the listed investment portfolio 635 717
Unrealised deficit of market value over cost (499) (395)
Listed investment portfolio at cost 1,134 1,112
All investments are listed on the London Stock Exchange.
notes to the financial statements
for the year ended 31 December 2011 continued
25.7. Creditors: Amounts falling due within one year
2011 2010
£'000 £'000
Bank overdrafts (unsecured) 3,717 3,863
Bank loans (secured) 44,069 -
Bank loans (unsecured) 226 -
Amounts owed to subsidiary companies 35,256 31,659
Amounts owed to joint ventures 1,144 1,133
Other taxation and social security costs 693 649
Other creditors 450 328
Accruals and deferred income 4,241 4,784
89,796 42,416
25.8. Creditors: Amounts falling due after more than one year
2011 2010
£'000 £'000
Interest rate derivatives 12,660 5,787
Term Debenture stocks:
£5 million First Mortgage Debenture
Stock 2013 at 11.3 per cent 5,000 5,000
£1.7 million First Mortgage Debenture
Stock 2016 at 8.67 per cent 1,700 1,700
£5 million First Mortgage Debenture
Stock 2018 at 11.6 per cent 5,000 5,000
£10 million First Mortgage Debenture
Stock 2022 at 8.109 per cent* 9,821 9,804
21,521 21,504
Bank loans:
Repayable after more than two years*+ 706 44,855
34,887 72,146
*The £10 million debenture and bank loans are shown after deduction of
un-amortised issue costs.
+The £47 million facility was reduced from £60 million.
Details of terms and security of overdrafts, loans and debentures are set out
in note 16.
Repayment of borrowings:
Bank loans and overdrafts:
Repayable within one year 48,012 3,863
Repayable between two and three years 706 44,855
48,718 48,718
Debentures:
Repayable between three and five years 5,000 5,000
Repayable in more than five years 16,521 16,504
70,239 70,222
Hedge profile
There is a hedge to cover the £47 million revolving credit facility, which
currently covers the full £44 million drawn. It consists of a 20 year swap for
£10.4 million (2010: £15.4 million) with a 7 year call option in favour of the
bank, taken out in November 2007, at 4.76 per cent and a 20 year swap for £40
million with a 7 year call option in favour of the bank, taken out in December
2007, at 4.685 per cent.
At the year end the amount recognised was £9,495,000 deficit (2010: £4,166,000
deficit) being the estimated financial effect of the fair value to the
business of these hedging instruments less the deferred tax thereon.
The Directors have estimated the financial effect of the fair value to the
business of these hedging instruments. This has been calculated as the Net
Present Value of the difference between the 16 year interest rate, which was
2.74 per cent at 31 December 2011 against the rate payable under the specific
hedge. This has given a liability at 31 December 2011 of £12,660,000 (2010:
£5,787,000) as shown in the balance sheet. The banks own initial quotation at
31 December 2011 to close each of the hedges was £15,416,000 (2010:
£7,180,000).
The hedges are not deemed to be eligible for hedge accounting, as the banks
have an option to cancel the hedge in January 2015, to which they separately
attribute a cost of £600,000 (2010: £2,511,000), even though this is after the
expiry of the term loans and the level of the hedges closely equate to the
amount of the loans outstanding. Any movement in the value of the hedges has
therefore to be charged directly to the profit and loss account. It is not the
intention of the Directors to exit the instruments and this cost has not been
recognised.
During the year the company broke £5.0 million (2010: £19.6 million) of the
4.76 per cent swap at a cost of £920,000 (2010: £3.515 million).
notes to the financial statements
for the year ended 31 December 2011 continued
25.8. Creditors: Amounts falling due after more than one year continued
Fair value of financial instruments
Fair value estimation
Effective 1 January 2009, the Group adopted the amendment to FRS29 for
financial instruments that are measured in the balance sheet at fair value,
this requires disclosure of fair value measurements by level of the following
fair value hierarchy:
- Quoted prices (unadjusted) in active markets for identical assets or
liabilities (level 1).
- Inputs other than quoted prices included within level 1 that are observable
for the asset or liability, either directly (that is, as prices) or indirectly
(that is, derived from prices) (level 2).
- Inputs for the asset or liability that are not based on observable market
data (that is unobservable inputs) (level 3).
2011
Gain/(loss)
to profit
and loss
Level 1 Level 2 Level 3 Total account
£'000 £'000 £'000 £'000 £'000
Financial assets
Other financial assets held for trading
Quoted equities 635 - - 635 (104)
Financial liabilities
Derivative financial instruments
Interest rate swaps - - 12,660 12,660 (6,873)
2010
Gain/(loss)
to profit
and loss
Level 1 Level 2 Level 3 Total account
£'000 £'000 £'000 £'000 £'000
Financial assets
Other financial assets held for
trading
Quoted equities 717 - - 717 15
Financial liabilities
Derivative financial instruments
Interest rate swaps - - 5,787 5,787 (2,705)
notes to the financial statements
for the year ended 31 December 2011 continued
25.8. Creditors: Amounts falling due after more than one year continued
Liquidity
The table below analyses the company's financial liabilities into maturity
Groupings and also provides details of the liabilities that bear interest at
Fixed, floating and non-interest bearing rates.
Less
than Over 2011
1 year 2-5 years 5 years Total
£'000 £'000 £'000 £'000
Bank overdrafts (floating) 3,717 - - 3,717
Debentures (fixed) - 6,700 15,000 21,700
Bank loans (floating)* 44,420 706 - 45,126
Trade and other payables (non-interest) 41,784 - - 41,784
89,921 7,406 15,000 112,327
Less
than Over 2010
1 year 2-5 years 5 years Total
£'000 £'000 £'000 £'000
Bank overdrafts (floating) 3,863 - - 3,863
Debentures (fixed) - 5,000 16,700 21,700
Bank loans (floating)* - 45,104 - 45,104
Trade and other payables (non-interest) 38,553 - - 38,553
42,416 50,104 16,700 109,220
The company would normally expect that sufficient cash is generated in the
operating cycle to meet the contractual cash flows as disclosed above through
effective cash management.
*The bank loans are fully hedged with appropriate interest derivatives.
Details of the hedges are shown above.
Total financial assets and liabilities
The company's financial assets and liabilities and their fair values are as
follows:
2011 2010
Carrying Fair Carrying
Fair value value value value
£'000 £'000 £'000 £'000
Cash and cash equivalents 4,540 4,540 5,966 5,966
Investments 635 635 717 717
Other assets 24,911 24,911 22,553 22,553
Bank overdrafts (3,717) (3,717) (3,863) (3,863)
Bank loans (45,126) (45,001) (45,104) (44,855)
Derivative liabilities (12,660) (12,660) (5,787) (5,787)
Other liabilities (41,784) (41,784) (38,553) (38,553)
Before debentures (73,201) (73,076) (64,071) (63,822)
Additional details of borrowings and financial instruments are set out in
notes 16 and 17.
notes to the financial statements
for the year ended 31 December 2011 continued
25.9. Provisions for liabilities and charges
2011 2010
£'000 £'000
Deferred Taxation
Balance at 1 January (2,657) (267)
Transfer to profit and loss account (1,893) (2,390)
Balance at 31 December (4,550) (2,657)
No provision has been made for the approximate taxation liability at 26.5 per
cent (2010: 28 per cent) of £545,000 (2010: £992,000) which would arise if the
investment properties were sold at the stated valuation.
The deferred tax balance comprises the following:
Accelerated capital allowances 1,140 1,243
Fair value of interest derivatives (3,165) (1,620)
Short-term timing differences 170 153
Losses (2,695) (2,433)
Provision at end of period (4,550) (2,657)
25.10. Share capital
Details of share capital, treasury shares and share options are set out in
note 19.
25.11. Reserves
Share Capital
Premium redemption Revaluation Retained
Account reserve reserve Earnings Total
£'000 £'000 £'000 £'000 £'000
Balance at 1 January 2011 4,866 47 13,407 23,425 41,745
Decrease on valuation of
investment properties - - (1,348) - (1,348)
Retained loss for year - - - (7,557) (7,557)
Dividends paid in year - - - (964) (964)
Loss on disposal of Treasury Shares - - - (464) (464)
Balance at 31 December 2011 4,866 47 12,059 14,440 31,412
25.12. Related party transactions
Details of related party transactions are given in note 20.
As provided under Financial Reporting Standard 8: Related Party Disclosures,
the company has taken advantage of the exemption from disclosing transactions
with other Group companies.
25.13. Capital commitments
2011 2010
£'000 £'000
Commitments to capital expenditure contracted for at the year end - -
25.14. Commitments under operating leases
At 31 December 2011 the company had annual commitments under non-cancellable
operating leases on land and buildings as follows:
2011 2010
£'000 £'000
Expiring in more than one year
but less than five years 390 390
In addition, the company has an annual commitment to pay ground rents on its
leasehold investment properties which amount to £354,000 (2010: £344,000).
25.15. Contingent liabilities
There were no contingent liabilities at 31 December 2011 (2010: £Nil), except
as disclosed in Note 25.8.
Five year financial summary
2011 2010 2009 2008 2007
£m £m £m £m £m
Portfolio size
Investment properties-Group^ 194 195 214 219 248
Investment properties-joint ventures 29 13 13 13 3
Investment properties-associate 12 12 12 12 15
235 220 239 244 266
Portfolio activity £m £m £m £m £m
Acquisitions - - - 9.18 112.71
Disposals (0.60) (20.74) (17.79) (15.33) (41.37)
Capital Expenditure 0.42 0.49 3.46 9.73 9.15
(0.18) (20.25) (14.33) 3.58 80.49
Consolidated income statement £m £m £m £m £m
Rental income - Group and share of joint ventures 16.99 16.50 17.07 16.77 14.26
Less: attributable to joint venture partners (0.61) (0.52) (0.52) (0.27) (1.23)
Group rental income 16.38 15.98 16.55 16.50 13.03
Profit/(loss) before interest and tax 10.89 11.97 20.49 (24.91) (16.59)
Profit/(loss) before tax (18.56) (10.69) 21.41 (57.27) (23.89)
Taxation 3.74 7.19 (2.36) 9.81 11.38
Profit/(loss) attributable to shareholders (14.82) (3.50) 19.05 (47.46) (12.51)
Earnings/(loss) per share - basic (17.63)p (4.24)p 24.32p (62.30)p (16.40)p
Earnings/(loss) per share - fully diluted (17.63)p (4.24)p 24.32p (62.30)p (16.40)p
Dividend per share 0.75p 1.15p 1.15p 1.15p 1.95p
Consolidated balance sheet £m £m £m £m £m
Shareholders' funds 39.93 55.76 59.10 40.30 88.99
Net borrowings 133.03 130.77 145.65 157.17 147.54
Net assets per share - basic 47.53p 66.71p 74.22p 52.73p 116.86p
- fully diluted 47.53p 66.69p 74.19p 52.70p 116.73p
Consolidated cash flow statement £m £m £m £m £m
Cash generated from operations 10.89 9.58 12.18 12.02 3.97
Capital investment and financial investment (0.50) 20.42 13.94 (6.09) 9.84
Note: ^Excluding the present value of head leases