+44 (0)207 415 5000
2nd Floor, 12 Little Portland Street, London, W1W 8BJ
FOR IMMEDIATE RELEASE
28 April 2011
LONDON & ASSOCIATED PROPERTIES PLC:
RESULTS FOR THE 12 MONTHS TO 31 DECEMBER 2010
HIGHLIGHTS
London & Associated Properties PLC is a well- established specialist shopping
centre and retail investor and asset manager.
* Rental income increased 2.4% on like-for-like basis to £16.5m
* Property portfolio value grew 1% on like-for-like basis to £195mUnder EPRA
net assets stood at £72.0m EPRA net asset value per share now 87.5p
* Management adjusted Operating profit up 14.1% to £11.1m
* Maintaining cash element of dividend - final dividend of 0.4p per share
recommended making total of 1.15p per share
* Void levels very low at only 1.5% of portfolio by rental value
* Antiquarius on King's Road sold for £17.8m
* Asset management key feature of business:
*
+ Rental values at Orchard Square grew by 5%
+ Redevelopment of units in King Edward Court achieved record rents
+ Re-branding of Brixton markets has led to 8% rental growth
+ Brixton Village fully let for the first time in 20 years
+ Since year end agreed terms to let Brixton markets in their entirety to
In Shops Ltd
"I remain confident that the quality of our assets and our ability to drive
rental income through intensive management means we are well placed to make
further progress through 2011," Michael Heller, Chairman.
"We have disposed of almost half our portfolio over the last five years and now
retain a core group of quality assets in which we have invested significantly.
Our top five centres account for almost our entire portfolio by value and these
are mostly let on long leases. I therefore remain cautiously optimistic going
forward," John Heller, Chief Executive.
Contact:
London & Associated Properties 020 7415 5000
John Heller, Chief Executive
Robert Corry, Finance Director
Baron Phillips Associates 020 7920 3161
Baron Phillips
Chairman's statement
I am pleased to report on another period of satisfactory progress for LAP
against a difficult economic backdrop. The quality of our portfolio of shopping
centres reflects the high level of investment and strategic management which we
apply to all of our assets. This has protected us from the worst of the
property recession. As at 31 December 2010, our directly owned portfolio of
shopping centres and other retail property was independently valued at £195
million compared to £214 million the previous year. This follows a number of
disposals of properties and on a like for like basis the valuation of our
portfolio grew by 1%.
Rental income in 2010 was £16.5 million compared to £17.1 million in the
previous year. However, again on a like for like basis, rental income grew by
2.4%. We have achieved this increase in sustainable income in spite of selling
properties which had a combined annualised rental income of £1.3 million per
annum. This is a commendable achievement considering that tenant demand is
widely regarded as being weak and IPD reports that rental levels across the
retail sector have dropped significantly.
Void levels remain low at just 1.5% of our portfolio by rental value. This has
enabled us to drive our rental values forward, which in turn has supported our
valuations. We have also been decisive in disposing of those properties from
which we could see no further opportunities for growth. During 2010, we sold
Antiquarius in King's Road, Chelsea for £17.8 million. We acquired this
property as part of the London Portfolio in 2006 and, in 2009, we were
successful in achieving a listed building consent in the face of considerable
opposition to our plans. We pre-let the retail space to Anthropologie, the
American fashion retailer, and carried out a significant refurbishment of the
property. We believe that we had achieved maximum value of this asset, and
consequently saw little point in holding it at a time when prime London retail
property was commanding premium values.
Asset management continues to be a key feature of our business. At King Edward
Court, Windsor, which now accounts for almost half the value of our portfolio,
we undertook a redevelopment of three poorly configured units to provide three
modern shops. These had been pre-let to Fat Face, Robert Gatward Jewellers and
Mystique Lingerie. The new units achieved record rents per square foot
reinforcing the rental levels at the centre and demonstrating the continuing
strong demand from retailers for shops at King Edward Court.
Orchard Square, Sheffield, has remained fully let during the year and we have
been able to achieve growth at rent review. This led to rental values growing
by 5% at this centre on an annualised basis. This centre plus King Edward Court
at Windsor account for rental income approaching £11 million per annum and the
combined annualised rents grew by 3% over the last year.
Our two markets in Brixton have been strong performers in terms of rental
growth. These assets were also acquired as part of the London Portfolio. Since
2009, we have spent considerable time and effort in re-branding the markets as
more exciting places to shop, with a particular emphasis on quality food and
restaurants as well as cutting edge fashion. The net result of this input is
that rents have grown by some 8% and Brixton Village, one of the markets, is
fully let for the first time in some 20 years. As detailed in the Chief
Executive's report, we have plans to work with a leading market operator to
ensure the next phase of this asset's growth.
Under International Financial Reporting Standards (IFRS), the net assets of the
Group were £55.8 million. This compares to £59.1 million the previous year.
However, this figure reflects the carrying cost of our interest rate swaps
which has been marked to market as a negative £13.6 million, a liability some £
7.3 million greater than at the end of 2009. Had the swaps been valued at
today's date, the £7.3 million additional charge would be £ 1.7 million.
We have stated previously that these swaps were contracted to ensure that we
had certainty over our interest payments which are our most significant item of
expense. We do not trade these swaps. It is important to note that under the
standards of the European Real Estate Association (EPRA), as used by most
property companies, our net assets stood at £72.1 million in December 2010
compared to £72.8 million as at December 2009. Under EPRA net asset per share
is now 87.5p compared to 91.5p a year ago. This largely reflects the issue of
additional shares as part of last year's dividend.
Operating profit, on a management adjusted basis, grew to £11.1 million
compared with £9.7 million in 2009, as shown in the table in the Finance
Director's report on page 17. This excludes marking to market the carrying
values of our properties and financial instruments. The growth in operating
profit is partly a result of lower property expenses and other overheads
incurred during the year. Our loss before tax over the same period has
increased to £4.2 million from £2.5 million although this is after deducting a
£3.5 million expense incurred in breaking swaps with a nominal value of £19.6
million. The annual cash saving from breaking these swaps is £0.8 million.
We remain over-hedged by a nominal £10.4 million. This has an annualised
negative effect on cash flow of £0.5 million. The cost of breaking the
over-hedge has fluctuated significantly over the year. We continue to monitor
this situation closely and will break the hedge when it is most appropriate to
do so.
It has been widely reported that bank lending remains subdued for real estate
transactions. Against this backdrop, we have explored alternative sources of
finance from property funds looking for joint venture partners. While it is too
early to report any specific deals, we are currently examining a potential
acquisition with one such partner and I hope to be able to report that this
transaction has successfully concluded in the near future. We are looking to
co-invest with suitable partners and we continue to hold an unencumbered cash
reserve of some £5 million to take advantage of opportunities as they arise.
During the year we were appointed by Grant Thornton, a firm of chartered
accountants, to take on the asset management of a portfolio of shopping centres
where they had been appointed as Administrators. Following the disposal of the
properties this project has now been completed. We understand that the bank
client of Grant Thornton regards the result as a great success. LAP received a
fee for advising on the management of the centres and overseeing the disposal
in 2011.
Total Group assets, including those of Bisichi Mining PLC, our associate
company, and Dragon Retail Properties, our joint venture with Bisichi, now
stand at £289 million compared to £306 million the previous year.
Bisichi Mining PLC, our associate company, had a difficult year and our share
of their loss after taxation was £0.5 million. This was as a result of lower
coal prices combined with a strong South African Rand against the US dollar and
a shortage of railway trucks to transport the coal. Measures have been taken to
address these issues and it is expected that they will return to acceptable
profitability in the second half of 2011.
We believe that LAP has performed well against a testing economy, although we
remain mindful of the reduced bank lending currently available, and the
negative forces facing consumers following last year's budget. As a result, the
Board has taken the decision this year to maintain the cash element of the
dividend at the level paid in 2010. There will be a final dividend of 0.4p
payable on 1 July 2011 to shareholders on the register as at 10 June 2011,
making a total dividend for the year of 1.15p. However, the Board has decided
against the capitalisation issue of new shares as in previous years as this is
felt to be too dilutive at the current price.
Michael Stevens will be retiring this year after 25 years as a director and
Company Secretary of LAP. I would like to take this opportunity to thank him
for all of his hard work over this time, and wish him well in his retirement.
We have promoted Heather Curtis, who joined the company in 2002,to Group
Company Secretary.
The economy in 2011 shows little sign of being an improvement over 2010. I
remain confident that the quality of our assets and our ability to drive rental
income through intensive management means that we are well placed to make
further progress through 2011.
Finally I would like to thank all of the directors, staff and advisors who have
contributed to our progress this year.
Michael Heller
Chairman
15 April 2011
Chief Executive's Report
2010 was another difficult year for the UK economy with bank lending remaining
subdued. This lack of funding has contributed to a polarisation in investor
demand with cash buyers being predominant. These investors look for well-let
property where tenant demand remains high and rental growth is still
achievable.
Our portfolio of retail property comes into this category. We have
significantly re-profiled our portfolio in the last 5 years and disposed of £
178 million of mature property where we felt we would be unable to deliver
further growth. Initially we disposed of secondary shopping centres at a time
when net initial yields were lower than deposit rates, yet investor demand for
this type of asset remained high. More recently, we have been selling assets
with long leases and excellent covenants, again to meet investor demand. Over
this period we have also been investing heavily into our asset base. King
Edward Court, Windsor and Orchard Square, Sheffield account for 72% of our
property portfolio, and we have spent a combined £46 million on them over the
last 5 years. This capital expenditure has produced better configured units to
meet modern retailer demand. These units were pre-let to quality tenants on
long leases.
During 2010, we spent £0.5 million on developing and improving our properties.
This produced an incremental annualised income of £0.16 million. We currently
have no substantial development work underway, although we are constantly
looking to improve our assets and grow rents.
Our property portfolio is now valued at £194.9 million, and our top five
properties by value account for over 90% of this total. All of these properties
are well-let and all of them have either delivered rental income growth over
the last year or confirmed their growth potential. Across the portfolio, our
average weighted unexpired lease term is 7.2 years. Over 63% of our leases by
rental value run for more than 5 years and 31% for more than 10 years. We have
voids of just 1.5%. All of this combines to provide resilience during this
property recession.
Group rental income on a like for like annualised basis grew by 2.4% to £15.6
million compared with £15.2 million in 2009. This has been achieved against a
widely reported reduction in rental levels across most parts of the country.
Our top 50 tenants account for 74% of our gross rents. 93% of all rents were
collected within two weeks of the December quarter day.
We disposed of Antiquarius in King's Road Chelsea during the year for £17.82
million compared to a book value of £17.0 million as at year end 2009. This
followed the completion of the lease in 2009 to Anthropologie at £1.15 million
per annum and represented a net initial yield of 5.74%. We paid down our
revolving credit facility by £12.75 million from the cash proceeds.
During 2010, we were appointed by Grant Thornton as asset manager on a
portfolio of three shopping centres in Burnley, Cardiff and Harlow. The fund
that owned these shopping centres had been placed into administration and the
centres had suffered from under investment and lack of direction as a result.
LAP conducted a strategic review and identified a number of areas where the
centres could be improved. We carried out a number of strategic lettings,
including redeveloping shops where necessary, and applied our rigorous
management controls to reduce irrecoverable costs.
At the time of our appointment, the centres were independently valued at £120
million. We marketed the centres through leading investment agents and since
the year end the disposal completed at £145 million. LAP received fees from
Grant Thornton for the work undertaken and we are in discussion to take on
further similar appointments.
Following the financial crisis there is still much stress in the UK banking
system and lack of credit at acceptable terms. As a result, we have entered
into talks with a number of property funds with a view to establishing joint
ventures. One of these is at an advanced stage of making an acquisition
although contracts have not yet been exchanged. I am, however, confident that
the transaction will conclude in the near future and we will make an
appropriate announcement to shareholders in due course.
I will now report on some of our major centres.
King Edward Court, Windsor
King Edward Court remained fully let throughout 2010 with the exception of a
small office suite. Since the year end we have been able to negotiate the
surrender of leases on two shops where we had less vibrant retailers. The first
of these was originally let to a musical instrument retailer at £72,000 per
annum. This unit has now been re-let to Prêt à Manger for a new café concept at
£85,000 per annum. This not only brings a more exciting retailer to the centre,
but also a rental level equating to a Zone A level of £116 per sq.ft., a record
for this part of the centre.
The second unit had previously been let to a discount book retailer. The unit
is now under offer to an established, upmarket gift retailer at an increased
rent. The new lease should complete soon.
In September 2010, Boots the Chemist vacated its 14,000 sq. ft. Shop, having
taken a lease on the much larger, former Woolworths store outside our
ownership. The lease on our shop continued until 2015. We have, since the year
end, accepted a surrender of this lease in exchange for a payment of £1.025
million, equivalent to over two and a half year's rent. We intend to divide
this unit into three smaller units and incorporate the vacant first floor
offices.
We have seen a high level of retailer interest in these units and already have
offers on all of them from exciting retailers. I look forward to announcing the
lettings in due course. We have made a planning application to change the shop
fronts on these units and, subject to obtaining this consent, anticipate that
the development will be let and completed during 2011.
Sheffield
Orchard Square has remained fully let throughout 2010. As a result, we have
been able to grow the rents by some 5% over the previous year as the rental
levels established by our successful lettings in previous years filter through
to other shops in the centre. Orchard Square is anchored by reputedly one of
the most successful TK Maxx stores in the country, and most of the shops are
let at rents of between £80 and £90 Zone A. We believe this to be an
undemanding level for a major city centre.
Brixton
Since late 2009, we have invested considerable time and effort in establishing
our two Brixton markets as cutting edge retail and leisure locations. Initially
we worked with a specialist marketing company to offer pop-up shops to entice
new retailers into a location that had suffered over the years from high
vacancies and low investment. The vast majority of these early retailers
converted into full leases at market rents at the end of their trial periods.
Once we had established a critical mass of new exciting retailers, word of
mouth and positive press articles created sufficient interest to ensure that
these markets are now fully let for the first time in approximately 20 years.
While this project has been a success throughout 2010, we do not feel LAP has
the resources to develop the Brixton Markets further. Consequently, since the
year end we have agreed terms to let the two markets to In Shops Ltd, a
subsidiary of Groupe Geraud, Europe's largest private market operator. The
leases are at a base rent of £817,500 per annum with a profit share on the net
rent above that amount. This increases to a 50:50 profit share on any net rent
above £1,017,500. There will be a saving of direct staff costs and other
central overheads and therefore we expect this deal to be cash neutral at the
outset.
We are confident that In Shops shares our belief that Brixton will become one
of the most successful market areas in London. In Shops has the resources,
energy and experience to enable this to take place, and we expect to benefit
from its success through the profit share in the medium term.
King's Square, West Bromwich
We invested heavily during 2010 in re-gearing the leases of our anchor tenants
at this shopping centre. These accounted for 29% of the centre's gross rental
income. The centre's age meant that a number of the original leases there had
less than 12 months until expiry. As a result of the re-gearing, the centre's
future is much more stable and we will be able to concentrate on driving rents
forward in the future.
Other Properties
As shareholders will be aware, we have deliberately sought to position the rest
of our portfolio at the value end of retailing. We believe that this offers us
significant defensive qualities in the current economic environment as our
tenants are less dependent on discretionary spending. Last year, tenant
failures across the whole portfolio were limited to an aggregate rental income
of £127,000 per annum. These units have now been re-let at broadly the same
rent.
Outlook
We remain concerned that the outlook for UK consumers will continue to impact
upon retail property in general. However, we believe that the property market
will experience differing levels of success dependent on location,
affordability of rents and attractiveness of the individual centres. We have
sold almost half our portfolio over the last five years and now retain a core
of quality assets in which we have invested significantly. Our top five centres
account for almost our entire portfolio by value and these are mostly fully let
on long leases. I therefore remain cautiously optimistic going forward.
John Heller
Chief Executive
15 April 2011
FINANCE DIRECTOR'S REPORT
In 2010, we again concentrated our efforts on managing cash flow. We have also
reviewed our unutilised banking facilities and reduced them wherever possible.
As a result we have achieved a net annualised cash saving of £0.3 million.
As a result of the continuing crisis in the UK banking sector and, as mentioned
in the Chief Executive's review, we have commenced negotiations with a number
of property funds to provide alternative sources of finance.
Cash flow
Net cash increased over the year from £1.44 million to £4.72 million. This was
after the repayment of £11.58 million of debt. Term debt reduced from £148.38
million to £136.80 million. This compares favourably with a peak level of £
163.70 million at the end of 2007. Antiquarius, our property in Chelsea,
London, was sold in August for £17.8 million and the sale of the Foxtons unit
in Islington completed in January 2010.
The utilisation of the cash over the year is shown in the graph below:
Our Revolving Credit Facility with the Royal Bank of Scotland was extended
during the year and will now expire in September 2012. We also reduced the
total facility to £60 million from £90 million. This facility has been reduced
further to £47 million since the year end because we considered it unlikely
that we would borrow further against the facility before expiry.
Income statement
The Group's loss before tax as reported under IFRS was £10.69 million compared
to a profit of £21.4 million in 2009. This volatility in our results reflects a
number of changes in value which are taken directly to our Income Statement.
Firstly, there have been considerable swings in the interest rates which have
affected the fair value of our derivatives and this has led to a loss of £7.28
million (2009: £13.27 million profit). Secondly, the revaluation of our
property portfolio has shown an increase of £1.57 million (2009: £9.42
million). The table below shows the underlying performance of the Group on a
management adjusted basis.
2010 2009
Cash Non-cash Per income Cash Non-cash Per
items items statement items items income
statement
£'000 £'000 £'000 £'000 £'000 £'000
Net rental income 10,366 10,366 9,517 9,517
Income and gains on 43 43 148 148
investments held for
trading
Profit on sale of 637 637 14 14
investment properties
Net change on 1,569 1,569 9,422 9,422
revaluation of
investment properties
Net change in value 89 89 178 178
of investments held
for trading
Operating profit 11,046 1,658 12,704 9,679 9,600 19,279
Share of joint 174 (912) (738) 131 1,078 1,209
ventures and
associates
Interest rate - (7,280) (7,280) - 13,269 13,269
derivative
Net interest (11,858) (11,858) (12,350) (12,350)
(Loss) / profit (638) (6,534) (7,172) (2,540) 23,947 21,407
before taxation and
exceptional items
Exceptional item -- (3,515) (3,515) - - -
interest derivative
break cost
(Loss) / profit (4,153) (6,534) (10,687) (2,540) 23,947 21,407
before taxation
The interest charge, excluding the change in fair value of derivatives and
one-off costs incurred on the termination of interest rate swaps, was cut in
the year to £11.9 million (2009: £12.4 million). This is due to the reduction
in the level of debt and the reduced swap contracts.
During the year we reduced our long term hedging to be more in line with the
total debt outstanding. The total value of our swaps was £125.4 million against
a long term debt of £115.1 million. This was reduced in the year from £145.0
million and the £3.5 million cost of breaking the swaps has been shown as an
expense in the income statement. This strategy of hedging our interest payments
means that we are protected against future interest fluctuations. We do not
trade our swaps and we try to align them to the debt levels we have in the
Group at any given time.
Rental income during the year reduced to £16.5 million (2009: £17.1 million).
On a like for like basis the group's rental income, excluding joint ventures,
increased by 2.4% to £15.6 million (2009: £15.2 million), as shown in the table
below.
2010 2009
£'000 £'000
Annual rental income from properties still 15,550 15,187
held
Income from properties sold 435 1,361
Revenue as per income statement 15,985 16,548
Overheads were down 22.4% to £3.8 million (2009: £4.9 million). This partly
reflects increased fees received from managing third party assets, as well as
lower direct costs.
Operating profit, excluding property and other investment revaluations,
increased to £11.0 million (2009: £9.7 million), a rise of 14.1%. Excluding
exceptional items we improved the net result by £1.9 million in the year.
The tax charge in the year shows a credit of £7.2 million. This is made up of a
current tax credit in relation to prior years of £0.9 million and deferred tax
credit of £6.3 million. This deferred tax charge has arisen due to a £2.0
million movement in the derivatives, valuation of the properties, including the
indexation, of £2.8 million, and other timing differences of £1.5 million.
Balance sheet
The underlying net assets of the Group on a management adjusted basis are shown
in the table below.
Per IFRS Deferred Mark-to-market Head EPRA
balance tax of interest leases Adjusted
sheet net assets
2010 £'000 £'000 £'000 £'000 £'000
Investment properties 223,610 (28,664) 194,946
Other fixed assets 2,558 2,558
Investments in 8,646 8,646
associate and joint
ventures
Other assets 4,809 4,809
Other liabilities (52,377) 2,671 13,627 28,664 (7,415)
Net debt (131,485) (131,485)
Net assets 55,761 2,671 13,627 72,059
Adjusted NAV per share 87.5p
2009
Investment properties 243,109 (29,485) 213,624
Other fixed assets 2,621 2,621
Investments in 9,440 9,440
associate and joint
ventures
Other assets 4,678 4,678
Other liabilities (54,395) 7,393 6,347 29,485 (11,170)
Net debt (146,349) (146,349)
Net assets 59,104 7,393 6,347 72,844
Adjusted NAV per share 91.5p
Group net assets under IFRS were £55.8 million at the year end. The more
meaningful EPRA figure shows net assets of £72.1 million, equivalent to 87.5p
per share. The EPRA NNNAV reduced to 66.7p per share, predominately due to the
increase in the number of shares in issue as a result of paying a proportion of
last year's final dividend in shares.
Accounting Judgements and going concern
The most significant judgements made in preparing these accounts relate to the
carrying value of the properties, investments and hedges which are stated at
open market value. The Group uses external professional valuers to determine
the values of our 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 cash flow
forecasts of Group and the underlying assumptions on which they are based. The
Group's business activities, together with the factors likely to affect its
future development, are set out in the Chairman's Statement, the Chief
Executive's Report and in this Report. In addition the directors considered
note 17 to the financial statements which include the company's objectives,
policies and processes for managing its capital; its financial risk management
objectives; details of its financial instruments and hedging activities; its
exposure to credit risk and liquidity risk.
With a quality portfolio comprising a majority of long leases and suitable
financial arrangements, the directors believe the company is well placed to
manage its business risks successfully despite the continuing uncertain
economic climate. The directors therefore have a reasonable expectation that
the company has adequate resources to continue in operational existence for the
foreseeable future. Thus they continue to adopt the going concern basis of
accounting in preparing the annual financial statements.
Dividends
The company is proposing a final dividend of 0.4p, payable on 1 July 2011 to
shareholders on the register as at 10 June 2011. This makes a total dividend
for the year of 1.15p.The directors have decided against the capitalisation
issue of new shares as in the previous two years, as this is felt to be too
dilutive on the net asset per share of the company.
Our associated company Bisichi Mining PLC, in which we hold a 41.7% stake, had
a difficult year and suffered losses after taxation of £1.3 million. This
figure is after a revaluation surplus under IFRS of £0.1 million.
I feel confident that the continued policy of prudently managing the Group's
cash resources will benefit us as we go through this period of uncertainty.
Robert Corry,
Finance Director
15 April 2011
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)
Michael C Stevens FCA
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 Barronsmead 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. He is
Deputy President of the Institute of Chartered Accountants in England and Wales
and will become President in June 2011. 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
Carlton House,
22a St James's Square
London SW1Y 4JH
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 2010.
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's Statement, Chief Executive's Report and Finance Director's
Report on the preceding pages 2 to 19 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. Income may be affected adversely by the
inability of tenants to pay their rent. Rent collection and tenant quality are
monitored carefully. This risk is minimised as a result of the 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 49 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 40.
• Property valuations - market sentiment and economic conditions have a direct
effect on property valuations, which therefore 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 providing premises
which are rented 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 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 37 and as discussed in the Finance
Director's Report. Cash flow is shown on page 39.
Dividend Policy
An interim dividend for 2011 of 0.75p was paid on 22 January 2011 (2009:
Interim dividend 0.75p paid on 22 January 2010). The directors recommend
payment of a final cash dividend for 2010 of 0.4p per ordinary share of 10
pence each (the Final Dividend) and Ordinary Share respectively. It is not
proposed to make a capitalisation issue with the final dividend in 2011 (2010:
equivalent to 0.80p per Ordinary Share). In the current economic climate, the
board of directors feels that it is imperative that the Group maximises its
financial flexibility, including conserving cash wherever possible.
Subject to shareholder approval, the total dividend per Ordinary Share for 2010
will be 1.15p (2009: 1.15p).
The Final Dividend of 0.4p per Ordinary Share will be payable on 1 July 2011 to
shareholders registered at the close of business on 10 June 2011.
The company's ordinary shares held in treasury
During 2010 the company issued 2,335,517 of its own shares from Treasury for an
average price of 41.68p which increased the "issued share capital" by the same
number of shares (see table below for details). At 31 December 2010 1,957,534
(2009: 4,293,051) shares were held in Treasury with a market value of £822,164
(2009:£1,856,745). At the Annual General Meeting (AGM) in June 2010 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 June 2011.
Movements in Treasury Transaction Number of
shares during the year: price shares
Treasury shares held at 1 January 2010 4,293,051
27 January 2010 - Issue of Treasury shares 42.00p (2,157,545)
in lieu of directors and staff bonuses
1 October 2010 - Purchase by the Trustee of 37.00p (23,702)
the SIP in
connection with the HMRC approved share
incentive
plan
1 October 2010 - Shares issued for a 37.00p (19,097)
non-executive
directors' bonus
16 December 2010 - Issue of Treasury shares in 38.00p (135,173)
connection with the HMRC approved share
incentive
plan
Treasury shares held at 31 December 2010 1,957,534
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 2010 by external professional firms of
chartered surveyors - Allsop LLP, London (49.6 per cent of the portfolio), King
Sturge International LLP (48.2 per cent), and BNP Paribas, Leeds (2.2 per
cent). The valuations, which are reflected in the financial statements, amount
to £194.9 million (2009: £213.6 million).
Taking account of prevailing market conditions, the valuation of Group
properties at 31 December 2010 resulted in an increase of £1.6 million (2009:
increase of £9.4 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 and Dragon Retail
Properties Limited) and the associate company (Bisichi Mining PLC) was an
increase of £1.4 million (2009: reduction of £0.2 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 have been put in place in the company,
subsidiaries and joint ventures in order to limit the exposure to interest rate
risk.
Directors
M A Heller, J A Heller, R J Corry, H D Goldring, C A Parritt and M C Stevens
were directors of the company for the whole of 2010.
H D Goldring, is retiring by rotation at the Annual General Meeting in 2011 and
offers himself for re-election.
Brief details of the director offering himself for re-election are as follows:
Howard Goldring has been a director since 1992 and has a contract of service
determinable at 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.
Michael Stevens retires from his executive duties on 30 April 2011 after over
25 years service with the group. He is not offering himself for re-election at
the Annual General Meeting.
Directors' interests
The interests of the directors in the ordinary shares of the company, including
family and trustee holdings, where appropriate, were as follows:
Beneficial Non-beneficial
interests interests
31 Dec 10 1 Jan 10 31 Dec 10 1 Jan 10
M A Heller 6,016,577 5,450,109 19,277,931 18,902,994
R J Corry 962,527 661,879 - -
H D Goldring 19,819 11,309 - -
J A Heller 1,923,320 1,310,652 †14,073,485 †13,779,769
C A Parritt 36,166 24,867 - -
M C Stevens 922,326 756,747 +1,163,088 +988,140
†These non-beneficial holdings are duplicated with those of M A Heller.
+The non-beneficial interest of M C Stevens arises by reason of his being a
director of London & Associated Securities Limited, a company which acts as a
trustee.
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 2011 and the date of this report the interests of a number of
directors in the ordinary shares of the company have increased to the following
totals:
Beneficial Non-beneficial
M A Heller 6,495,618 19,277,931
R J Corry 996,014 -
M C Stevens 962,853 1,239,487
No other changes in the directors' holdings took place between 1 January 2011
and the date of this report. However, the interests of M A Heller and his
family company interests also increased in this period and are shown in the
"Substantial shareholdings" paragraph below.
The beneficial holdings of directors shown above include their interests in the
Share Incentive Plan.
Substantial shareholdings
At 31 December 2010 M A Heller and his family had an interest in 47.4 million
shares of the company, representing 56.7 per cent of the issued share capital
net of treasury shares (2009: 44.8 million shares representing 56.2 per cent).
Cavendish Asset Management Limited has an interest in 5,186,065 shares
representing 6.2 per cent of the issued share capital of the company (2009:
4,810,873 shares representing 6.04 per cent).
Between 1 January 2011 and the date of this report the following changes
occurred:
The interest of M A Heller and his family increased to 47.88 million shares in
the company, representing 56.82 per cent of the issued share capital net of
Treasury shares.
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
2011 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 9).
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 2010 have confirmed that, as far as they
are aware, there is no relevant audit information of which the auditor is
unaware. All of the directors have confirmed that they have taken all
reasonable steps that they ought to have taken as directors in order to make
themselves 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 four executive directors, being the
chairman, chief executive, finance director and company secretary, and two
non-executive directors. Their details appear on page 21. 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 34. 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 29 to 31.
• The audit committee comprises the non-executive directors and is chaired by C
A Parritt. The audit committee report is set out on page 32.
Board and board committee meetings held in 2010
The number of regular meetings during the year and attendance was as follows:
Meetings Meetings
held attended
R J Corry Board 10 10
Audit committee 2 2
H D Goldring Board 10 10
Audit committee 2 2
Nomination committee 1 1
Remuneration committee 2 2
M A Heller Board 10 10
Nomination committee 1 1
Remuneration committee 2 2
J A Heller Board 10 10
Audit committee 2 2
C A Parritt Board 10 10
Audit committee 2 2
Nomination committee 1 1
Remuneration committee 2 2
M C Stevens Board 10 9
Audit committee 2 2
Nomination committee 1 1
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
Combined Code of Corporate Governance 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 misstatementor 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 2010 and 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 affect current and
geographical location) flexing of balance sheet projected position to the
Board with
efficient treasury
management.
People:
Retention and Unable to retain and Nomination Committee and
recruitment of attract the senior
staff best people for the key staff review skills gaps
roles. and
Loss of knowledge and key succession planning.
skills. Training and
development offered.
Retention and Unable to retain and Nomination Committee and
recruitment of attract the senior
staff best people for the key staff review skills gaps
roles. and
Loss of knowledge and key succession planning.
skills. Training and
development offered.
Reputation:
Business interruption Loss in revenue. Documented Recovery Plan in
Impact on footfall. place.
Adverse publicity. General and terrorism
Potential for criminal/ insurance
civil policies in place and risks
proceedings. monitored by trained
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 Regular monitoring of LTV
and other loan agreement and IC
obligations. covenants and other
obligations.
Focus on quality assets.
Reduced availability of Insufficient funds to meet Efficient treasury
borrowing facilities existing management.
debts/interest payments Loan facilities extended
and where
operational payments. possible.
Regular reporting of
current and
projected position to the
Board.
Loss of cash and Financial loss Only use a spread of banks
deposits and financial institutions
which have a strong credit
rating.
Fluctuation of interest Uncertainty of interest Manage derivative contracts
rates rate costs 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 reports 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.
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 5.4 days
annual trade purchases (2009: 17.8 days).
Donations
No political donations were made during the year (2009: £Nil). Donations for
charitable purposes amounted to £250 (2009: £1,525).
Going concern
The Group's business activities, together with the factors likely to affect its
future development are set out in the Chairman's Statement on the preceding
pages 2 and 3 and the Chief Executive's Report on pages 6 to 15. The Finance
Director's Report on pages 17 to 19 sets out the financial position of the
company, its cash flows, liquidity position and borrowing facilities. 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 considerable 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 RAC Club, 89 Pall Mall, London
SW1Y 5HS on Monday 6 June 2011 at 10.30 a.m. Items 1 to 7 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 8 to 11 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 7- Directors' authority to allot securities
Paragraph 7.1.1 of Resolution 7 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 £2,805,864. This
represents approximately 33.3 per cent of the ordinary share capital of the
company in issue (excluding treasury shares) at 14 April 2011 (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 7.1.2 of Resolution 7 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 £
2,805,864, 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) at 14 April 2011 (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 have no present intention to make use of this
authority. However, if they do exercise the authority, the directors intend to
follow emerging best practice as regards its use (including as regards the
directors standing for re-election in certain cases), as recommended by the
ABI.
Special Resolutions
The following special resolutions will be proposed at the Annual General
Meeting:
1. Resolution 8- 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 2012, 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
£421,300 representing in accordance with institutional investor guidelines,
approximately 5 per cent of the total ordinary share capital in issue as at 14
April 2011 (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 have no present intention 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 9- purchase of own Ordinary Shares
The effect of Resolution 9 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 14 April 2011 (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 9 will expire at the conclusion of the company's next
Annual General Meeting to be held in 2012 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 14 April 2011 (being the last practicable date prior to the publication
of this Directors' Report) the total number of options to subscribe for new
ordinary shares in the company as at 31 December 2010 was 70,000 shares
representing 0.08% of the company's issued share capital as at 31 December
2010. Such number of options to subscribe for new ordinary shares would
represent approximately 0.09% of the reduced issued share capital of the
company assuming full use of the authority to make market purchases sought
under Resolution 9.
3 Resolution 10 - New Articles of Association
We are also asking shareholders to approve a number of amendments to our
Articles of Association primarily to reflect the implementation of the
remaining provisions of the Companies Act 2006 in October 2009. An explanation
of the main changes between the proposed and existing Articles of Association
is set out on page 70 of this document.
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
15 April 2011
Carlton House
22 St James's Square
London SW1Y 4JH
Remuneration Report
The remuneration committee is pleased to present its report for the year ended
31 December 2010.
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
M C Stevens 14-Oct-85 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 2010
2010 total 2009 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 2010 utions utions 2009
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Executive
directors
M A Heller* 7 - 200 44 251 - 251 357 - 357
J A Heller 300 200 3 44 547 30 577 952 30 982
R J Corry 197 12 28 23 260 33 293 261 146 407
M C Stevens 90 - 6 20 116 23 139 115 65 180
594 212 237 131 1,174 86 1,260 1,685 241 1,926
Non-executive
directors
H D Goldring* 42 - 5 4 51 - 51 44 - 44
C A Parritt * 32 - 5 - 37 - 37 30 - 30
74 - 10 4 88 - 88 74 - 74
Total
remuneration
for
directors'
service
during year 668 212 247 135 1,262 86 1,348 1,759 241 2,000
* See "Directors" below and Note 20 "Related party transactions".
Other benefits include the provision of car, health and other insurance and
subscriptions.
Pension schemes and incentives
Three (2009: three) directors have benefits under money purchase pension
schemes. Contributions in 2010 were £86,000 (2009: £241,000) 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 four executive directors during 2010 (2009: four) and two
non-executive directors (2009: 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 (2009: £
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 2010 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 is 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 2010 was 42.0p (2009: 43.3p). During the year the share mid-market
price ranged between 36.5p and 47.5p.
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: No free shares were awarded in 2010 (2009: 93,723 shares
awarded at 43.00p per share)
Free shares awarded: Number of members Number of shares Value of shares
2010 2009 2010 2009 2010 2009
£ £
Directors:
R J Corry 0 1 0 6,977 0 3,000
J A Heller 0 1 0 6,977 0 3,000
M C Stevens 0 1 0 6,977 0 3,000
Staff 0 17 0 72,792 0 31,300
Total at 31 December 0 20 0 93,723 0 40,300
2. Partnership shares: On 17 November 2009 directors and staff were invited to
complete partnership share agreements and commence saving for partnership
shares over the period November 2009 to October 2010.
Partnership shares issued:
Number of members Number of shares Value of shares
2010 2009 2010 2009 2010 2009
£ £
Directors:
R J Corry 1 1 3,947 3,488 1,500 1,500
J A Heller 1 1 3,947 3,488 1,500 1,500
M C Stevens 1 1 3,947 3,488 1,500 1,500
Staff 9 7 35,523 24,416 13,500 10,500
Total at 31 December 12 10 47,364 34,880 18,000 15,000
3. Matching shares: The partnership share agreements for the year to 31 October
2010 provide for two matching shares to be awarded free of charge for each
partnership share acquired in December 2010. On 16 December 2010 87,809
matching shares were allocated (2009: 69,770). 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
2010 2009 2010 2009 2010 2009
£ £
Directors:
R J Corry 1 1 7,894 6,977 3,000 3,000
J A Heller 1 1 7,894 6,977 3,000 3,000
M C Stevens 1 1 7,894 6,977 3,000 3,000
Staff 9 7 64,127 48,839 27,000 21,000
Total at 31 December 12 10 87,809 69,770 36,000 30,000
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 2010 amounted to £6,088 (2009: £6,547).
Dividend shares issued:
Number of members Number of shares Value of shares
2010 2009 2010 2009 2010 2009
£ £
Directors:
R J Corry 1 1 1,783 1,573 660 464
J A Heller 1 1 1,783 1,573 660 464
M C Stevens 1 1 1,783 1,573 660 464
Staff 17 17 18,353 17,061 6,790 5,033
Total at 31 December 20 20 23,702 21,780 8,770 6,425
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
15 April 2011
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 auditors.
C A Parritt
Chairman - Audit Committee
15 April 2011
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 Reportcomply 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 management reportcontained 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 2010 by the
company as detailed in our Valuation Report dated 12 January 2011.
Having regard to the foregoing, we are of the opinion that the open market
value as at 31 December 2010 of these interests was:
£'000
Freehold 73,727
Leasehold 23,023
96,750
27 Soho Square, London W1D 3AY Allsop LLP
12 January 2011 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
leasehold property interests held as at 31 December 2010 by the company as
detailed in our Valuation Report as at 31 December 2010.
Having regard to the foregoing, we are of the opinion that the open market
value as at 31 December 2010 of these interests was:
£'000
Freehold 5,050
Leasehold 88,950
94,000
30 Warwick Street King Sturge LLP
London W1B 5NH
31 December 2010 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 property interests held as at 31 December 2010 by the company as
detailed in our Valuation Report dated 26 January 2011.
Having regard to the foregoing, we are of the opinion that the open market
value as at 31 December 2010 of these interests was:
£'000
4,196
Freehold
Capitol House, Russell Street, BNP Paribas Real Estate
Leeds LS1 5SP Advisory and
Property Management UK Limited
26 January 2011 Regulated by Royal Institution
of
Chartered Surveyors
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF London & Associated
PropertiesPLC
We have audited the Group and parent company financial statements ("the
financial statements") on pages36 to 65. 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 34, 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 G
roup's and of the parent company's affairs as at 31 December 2010 and ofthe
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 27, in relation to going concern;
* the part of the Corporate Governance Statement relating to the company's
compliance with the nine provisions of the June 2008 Combined Code
specified for our review; and
* certain elements of the report to shareholders by the Board on 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
18 April 2011
Consolidated income statement
for the year ended 31 December 2010
2010 2009
Notes £'000 £'000
Gross rental income
Group and share of joint ventures 16,503 17,067
Less: joint ventures - share of rental (518) (519)
income
Revenue 1 15,985 16,548
Direct property expenses (1,839) (2,166)
Overheads (3,780) (4,865)
Property overheads 1 (5,619) (7,031)
Net rental income 1 10,366 9,517
Listed investments held for trading 3 43 148
Profit on sale of investment properties 637 14
Net increase on revaluation of 1,569 9,422
investment properties
Net increase in value of investments 89 178
held for trading
Operating profit 1 12,704 19,279
Share of loss of joint ventures after 10 (233) (276)
tax
Share of (loss)/profit of associate 11 (505) 1,485
after tax
Profit before interest and taxation 11,966 20,488
Interest rate derivatives 17 (7,280) 13,269
Interest rate derivatives break costs 17 (3,515) -
Finance income 5 64 90
Finance expenses 5 (11,922) (12,440)
(Loss)/profit before taxation (10,687) 21,407
Income tax 6 7,192 (2,355)
(Loss)/profitfor the yearattributable to (3,495) 19,052
the owners of the parent
Basic (loss)/profit per share 8 (4.24)p 24.32p
Diluted (loss)/profit per share 8 (4.24)p 24.32p
The revenue and operating result for the year is derived from continuing
operations in the United Kingdom.
consolidated balance sheet
at 31 December 2010
2010 2009
Notes £'000 £'000
Non-current assets
Market value of properties attributable to 194,946 213,624
Group
Present value of head leases 28,664 29,485
Property 9 223,610 243,109
Plant and equipment 9 612 816
Investments in joint ventures 10 1,163 1,396
Investments in associated company 11 7,483 8,044
Held to maturity investments 12 1,946 1,805
234,814 255,170
Current assets
Trade and other receivables 13 4,092 3,976
Financial assets-investments held for 14 717 702
trading
Cash and cash equivalents 8,584 8,655
13,393 13,333
Total assets 248,207 268,503
Current liabilities
Trade and other payables 15 (10,022) (11,427)
Financial liabilities - borrowings 16 (3,863) (7,216)
Current tax liabilities - (741)
(13,885) (19,384)
Non-current liabilities
Financial liabilities-borrowings 16 (136,206) (147,788)
Interest rate derivatives 17 (13,627) (6,347)
Present value of head leases on properties (28,664) (29,485)
Deferred tax 18 (64) (6,395)
(178,561) (190,015)
Total liabilities (192,446) (209,399)
Net assets 55,761 59,104
Equity attributable to the owners of the
parent
Share capital 19 8,554 8,392
Share premium account 4,866 5,042
Translation reserve in associate 30 (284)
Capital redemption reserve 47 47
Retained earnings (excluding treasury 44,342 50,465
shares)
Treasury shares 19 (2,078) (4,558)
Retained earnings 42,264 45,907
Total shareholders' equity 55,761 59,104
Net assets per share 8 66.71p 74.22p
Diluted net assets per share 8 66.69p 74.19p
These financial statements were approved by the board of directors and
authorised for issue on 15 April 2011 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 2010
Retained Earnings
Translation Capital Treasury Retained Total
Share Share reserves in redemption shares Earnings equity
capital premium associate reserves shares excluding
treasury
shares
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 8,232 5,236 (504) 47 (6,237) 33,532 40,306
2009
Profit for year - - - - - 19,052 19,052
Other comprehensive
income:
Currency translation - - 220 - - - 220
in associate
Total other - - 220 - - - 220
comprehensive income
Total comprehensive - - 220 - - 19,052 19,272
income
Transactions with
owners:
Equity share options - - - - - (76) (76)
in associate
Issue of own shares 160 (194) - - - - (34)
and expenses
Disposal of own - - - - 521 - 521
shares
Loss on transfer of - - - - 1,158 (1,158) -
own shares
Dividends paid - - - - - (885) (885)
Transactions with 160 (194) - - 1,679 (2,119) (474)
owners
Balance at 31 8,392 5,042 (284) 47 (4,558) 50,465 59,104
December 2009
Loss for year - - - - - (3,495) (3,495)
Other comprehensive
income:
Currency translation - - 314 - - - 314
in associate
Total other - - 314 - - - 314
comprehensive income
Total comprehensive - - 314 - - (3,495) (3,181)
income
Transaction with
owners:
Equity share options - - - - - 2 2
in associate
Minority interest on - - - - - (199) (199)
share disposal in
associate
Issue of own shares 162 (176) - - - - (14)
and expenses
Disposal of own - - - - 973 - 973
shares
Loss on transfer of - - - - 1,507 (1,507) -
own shares
Dividends paid - - - - - (924) (924)
Transactions with 162 (176) - - 2,480 (2,628) (162)
owners
Balance at 31 8,554 4,866 30 47 (2,078) 44,342 55,761
December 2010
All the above are attributable to the owners of the parent.
Consolidated statement of comprehensive income
for the year ended 31 December 2010
2010 2009
£'000 £'000
(Loss)/profitfor the year (3,495) 19,052
Other comprehensive income:
Currency translation in associate 314 220
Other comprehensive income for the year net of tax 314 220
Total comprehensive income for the period (3,181) 19,272
attributable to owners of the parent
Consolidated cash flow statement
for the year ended 31 December 2010
2010 2009
£'000 £'000
Operating activities
Profit before interest and taxation 11,966 20,488
Depreciation 197 210
Profit on disposal of non-current assets (3) (3)
Profit on sale of investment properties (637) (14)
Net increase on revaluation of investment properties (1,569) (9,422)
Share of loss/(profit) of joint ventures and associate 738 (1,209)
after tax
Net increase in value of investments held for trading (89) (178)
(Increase)/decrease in net current assets (1,019) 2,303
Cash generated from operations 9,584 12,175
Income tax repaid/(paid) 111 (444)
Cash inflows from operating activities 9,695 11,731
Investing activities
Investment in loan stock in joint ventures (141) -
Property acquisitions and improvements (754) (3,763)
Sale of properties 21,302 17,805
Purchase of office equipment and motor vehicles (78) (133)
Sale of office equipment and motor vehicles 86 27
Interest received 64 90
Dividends received from associate and joint ventures 173 273
Cash inflows from investing activities 20,652 14,299
Financing activities
Issue expenses (14) (34)
Sale of treasury shares 973 521
Equity dividends paid (924) (885)
Interest paid (15,525) (12,132)
Repayment of short term loan from joint ventures - (225)
Repayment of medium term bank loan (11,575) (12,750)
Cash outflows from financing activities (27,065) (25,505)
Net increase in cash and cash equivalents 3,282 525
Cash and cash equivalents at beginning of year 1,439 914
Cash and cash equivalents at end of year 4,721 1,439
Cash and cash equivalents
For the purpose of the cash flow statement, cash and cash equivalents comprise
the following balance sheet amounts:
2010 2009
£'000 £'000
Cash and cash equivalents (before bank overdrafts) 8,584 8,655
Bank overdrafts (3,863) (7,216)
Cash and cash equivalents at end of year 4,721 1,439
£0.6million of cash deposits at 31 December 2009 was charged as security to Axa
Annuity Company. This was released in 2010.
Group accounting policies
The following are the principal group accounting policies:
Basis of accounting
The group financial statements for the year ended 31 December 2010 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. The Group's business activities, together with the factors likely to
affect its future development, are set out in the Chairman's Statement, the
Chief Executive's Report and 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 company is well placed to manage its business
risks despite the current uncertain economic outlook. 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.
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:
IFRS 2 (amended) Group Cash Settled Share-based payment transactions
Improvements to IFRS: 2007-2009 annual improvements
Other than additional disclosure, there is no material impact on reported
income or net assets.
The following standards and interpretations have been issued and adopted by the
EU but are not effective for the year ended 31 December 2010 and have not been
adopted early:
IAS 24 (revised) Related Party Disclosures
IAS 32 (amended) Financial Instruments: Presentation
IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments
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.
Group accounting policies continued
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.
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.
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.
Investment properties
Valuation
Investment properties are those that are held either to earn rental income 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 originalmaturities of three months
or less.
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.
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. 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 2010
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
2010 2009
Property Listed Total Property Listed
investments investments Total
£'000 £'000 £'000 £'000 £'000 £'000
Rental income 15,985 - 15,985 16,548 - 16,548
Property overheads (5,619) - (5,619) (7,031) - (7,031)
Net rental income 10,366 - 10,366 9,517 - 9,517
Listed investment income - 43 43 - 148 148
Profit on sale of 637 - 637 14 - 14
investment properties
Net increase/(decrease) 1,569 - 1,569 9,422 - 9,942
on revaluation of
investment properties
Net increase/(decrease) - 89 89 - 178 178
on revaluation of
investments held for
trading
Operating profit/(loss)* 12,572 132 12,704 18,953 326 19,279
Total assets (excluding 237,023 717 237,740 256,556 702 257,258
investments in associate
and joint ventures)
Total liabilities (52,377) - (52,377) (53,654) - (53,654)
(excluding borrowings
and current tax)
Borrowings (140,194) - (140,194) (155,004) - (155,004)
Net assets 44,452 717 45,169 47,898 702 48,600
Current tax liabilities: - (741)
non segmental
Investments in joint 3,104 3,196
ventures: non segmental
(notes 10 and 12)
Investments in 7,483 8,044
associate: non segmental
(note 11)
Investments in unlisted 5 5
companies
Net assets as per 55,761 59,104
balance sheet
Other segment items:
Finance income 64 - 64 90 - 90
Finance expenses 11,992 - 11,992 12,440 - 12,440
Depreciation 197 - 197 210 - 210
Capital expenditure 567 - 567 3,594 - 3,594
Rental income
Joint Ventures
Group Analytical Dragon Group
excl.joint Ventures Retail Share
ventures Properties Total 2010 2009
£'000 £'000 £'000 £'000 £'000 £'000
Rental income 15,985 830 206 17,021 16,503 17,067
Direct property expenses (1,839) (58) (12) (1,909) (1,874) (2,201)
Overheads (3,780) (226) (135) (4,141) (3,960) (5,011)
10,366 546 59 10,971 10,669 9,855
Less: attributable to joint (303) (338)
ventures
Net rental income 10,366 9,517
*Operating profit is defined as profit before tax and excludes the share of
profit & losses of joint ventures and associate, finance income and expenses,
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 (2009: none).
notes to the financial statements
for the year ended 31 December 2010
2. (Loss)/profit before taxation
2010 2009
£'000 £'000
(Loss)/profit before taxation is arrived at after charging/
(crediting):
Staff costs (note 21) 2,631 3,361
Depreciation on tangible fixed assets - owned assets 197 210
Operating lease rentals - land and buildings 375 385
Profit on disposal of motor vehicles and office equipment (3) (3)
Amounts payable to the auditor in respect of both audit and
non-audit services
Audit services:
Statutory - company and consolidation 84 81
- subsidiaries 41 54
Further assurance services 6 10
Other services 9 8
140 153
Staff costs and depreciation of tangible fixed assets are included in
overheads.
3. Listed investments held for trading
2010 2009
£'000 £'000
Investment sales 119 1,948
Dividends receivable 15 60
134 2,008
Cost of sales (86) (1,835)
48 173
Attributable overheads (5) (25)
Net income from listed investments 43 148
4. Directors' emoluments
2010 2009
£'000 £'000
Emoluments 1,262 1,759
Defined contribution pension scheme contributions 86 241
1,348 2,000
Details of directors' emoluments and share options are set out in the
remuneration report.
5. Finance income and expenses
2010 2009
£'000 £'000
Finance income 64 90
Finance expenses
Interest on bank loans and overdrafts (2,164) (3,013)
Other loans (2,134) (2,108)
Interest on derivatives adjustment (5,575) (5,338)
Interest on obligations under finance leases (2,049) (1,981)
Total finance expenses (11,922) (12,440)
(11,858) (12,350)
notes to the financial statements
for the year ended 31 December 2010
6. Income tax
2010 2009
£'000 £'000
Current tax
Corporation tax on (loss)/profit of the period - -
Adjustments in respect of previous periods (861) (1,232)
Total current tax (861) (1,232)
Deferred tax
Origination and reversal of timing differences (1,578) (1,052)
Revaluation of investment properties (2,781) 658
Accelerated capital allowances 97 270
Fair value of interest derivatives (2,038) 3,715
Adjustments in respect of previous periods (31) (4)
Total deferred tax (note 18) (6,331) 3,587
Tax on (loss)/profit on ordinary activities (7,192) 2,355
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 28 per cent (2009: 28
per cent). The differences are explained below:
(Loss)/profit on ordinary activities before taxation (10,687) 21,407
Taxation on ordinary activities at 28 per cent (2009: (2,992) 5,994
28%)
Effects of:
Expenses not deductible for tax purposes - 4
Other differences (3,265) (2,059)
Joint ventures and associate (43) (348)
Deferred tax rate adjustment - -
Adjustment in respect of prior years (892) (1,236)
Tax (credit)/charge for the period (7,192) 2,355
The main component of other differences in the reconciliation relates to
potential indexation for capital gains of £3.2 million (2009: indexation
allowance £1.9 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
2010 2009
Per £'000 Per £'000
share share
Dividends paid during the year relating to the 1.15p 924 1.15p 885
prior period
Dividends to be paid:
Interim dividend for 2010 paid on 21 January 0.75p 627 0.75p 597
2011
Proposed final dividend for 2010 0.40p 337 0.40p 327
1.15p 964 1.15p 924
The proposed final dividend will be payable on 1 July 2011 to shareholders
registered at the close of business on 10 June 2011 subject to approval at
Annual General Meeting.
notes to the financial statements
for the year ended 31 December 2010
8. (Loss)/profit per share and net assets per share
(Loss)/profit per share have been calculated as follows: 2010 2009
(Loss)/profitfor the year for the purposes of basic and diluted (3,495) 19,052
(loss)/profitper share (£'000)
Weighted average number of ordinary shares in issue for the 82,389 78,345
purpose of basic (loss)/profitper share ('000)
Basic (loss)/profit per share (4.24)p 24.32p
Weighted average number of ordinary shares in issue for the 82,389 78,345
purpose of diluted (loss)/profitper share ('000)
Fully diluted (loss)/profit per share (4.24)p 24.32p
Weighted average number of shares in issue is calculated after excluding
treasury shares of 1,957,534 (2009:4,293,051).
There was no dilutive effect of the outstanding options in either year.
Net assets per share have been calculated as follows:
Net assets Shares in issue Net assets per
share
2010 2009 2010 2009 2010 2009
£'000 £'000 `000 `000 Pence Pence
Basic
At 31 December 55,761 59,104 83,585 79,629 66.71 74.22
Dilution adjustments for
shares subject to option
agreements:
Issue of outstanding share 28 28 70 70
options
Diluted 55,789 59,132 83,655 79,699 66.69 74.19
9. Property and plant and equipment
Investment Properties
Freehold Leasehold Leasehold Office
Total over under equipment
50 years 50 years and motor
vehicles
£'000 £'000 £'000 £'000 £'000
Cost or valuation at 1 January 243,109 83,598 159,511 - 1,734
2010
Reclassification - - (576) 576 -
Additions 489 - 489 - 78
Disposals (20,736) (3,736) (17,000) - (226)
Decrease in present value of (821) - (821) - -
head leases
Increase/(decrease) on 1,569 3,111 (1,472) (70) -
revaluation
Cost or valuation at 31 223,610 82,973 140,131 506 1,586
December 2010
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 - - - - 974
2010
Net book value at 1 January 243,109 83,598 159,511 - 816
2010
Net book value at 31 December 223,610 82,973 140,131 506 612
2010
notes to the financial statements
for the year ended 31 December 2010
9. Property and plant and equipment continued
Investment Properties
Freehold Leasehold Leasehold Office
Total over under equipment
50 years 50 years and motor
vehicles
£'000 £'000 £'000 £'000 £'000
Cost or valuation at 1 January 245,770 95,272 150,498 - 1,682
2009
Additions 3,461 1,450 2,011 - 133
Disposals (17,791) (17,791) - - (81)
Increase in present value of 2,247 - 2,247 - -
head leases
Increase on revaluation 9,422 4,667 4,755 - -
Cost or valuation at 31 243,109 83,598 159,511 - 1,734
December 2009
Representing assets stated at:
Valuation: 213,624 83,598 130,026 - -
Present value of head leases 29,485 - 29,485 - -
Cost - - - - 1,734
243,109 83,598 159,511 - 1,734
Depreciation at 1 January 2009 - - - - 765
Charge for the year - - - - 210
Disposals - - - - (57)
Depreciation at 31 December - - - - 918
2009
Net book value at 1 January 245,770 95,272 150,498 - 917
2009
Net book value at 31 December 243,109 83,598 159,511 - 816
2009
The leasehold and freehold properties, excluding the present value of head
leases, were valued as at 31 December 2010 by external professional firms of
chartered surveyors. The valuations were made at open market value.
2010 2009
£'000 £'000
Allsop LLP 96,750 205,865
BNP Paribas Real Estate 4,196 4,023
King Sturge LLP 94,000 -
Directors' valuation - 3,736
194,946 213,624
Add: Present value of headleases 28,664 29,485
223,610 243,109
Upper Street, Islington, which was held at Directors' valuation at 31 December
2009, was sold in January 2010 for £3.8 million.
The historical cost of investment properties, including total capitalised
interest of £6,051,000 (2009: £6,051,000) was as follows:
2010 2009
Freehold Leasehold Short Freehold Leasehold Short
over 50 Leasehold over 50 Leasehold
years years
£'000 £'000 £'000 £'000 £'000 £'000
Cost at 1 January 80,608 133,462 - 96,308 131,451 -
Reclassification - (785) 785 - - -
Additions - 489 - 1,450 2,011 -
Disposals (4,300) (11,700) - (17,150) - -
Cost at 31 December 76,308 121,466 785 80,608 133,462 -
notes to the financial statements
for the year ended 31 December 2010
10. Investment in joint ventures
2010 2009
£'000 £'000
Group share of:
Turnover 518 519
Loss before tax (226) (242)
Taxation (7) (34)
Loss after tax (233) (276)
Non-current assets 6,333 6,565
Current assets 1,500 1,582
Current liabilities (3,712) (3,871)
Non-current liabilities (2,958) (2,880)
Net assets 1,163 1,396
Analytical Ventures Limited (Analytical Ventures) - unlisted property
investment company. The company owns 50 per cent of the issued share capital
and £1,940,860 of loan stock of Analytical Ventures. The remaining 50 per cent
of the issued share capital and £1,800,000 of loan stock 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 (2009:
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 (2009:500,000 ordinary shares of £1 each).
Dragon is managed by a board of directors with neither party having overall
control.
Shares in joint ventures: 2010 2009
£'000 £'000
At 1 January 1,396 1,793
Share of loss after tax (233) (276)
Dividend received - (121)
(233) (397)
At 31 December 1,163 1,396
11. Investments in associated company
2010 2009
£'000 £'000
Bisichi Mining PLC - listed mining and
property investment company
Group share of:
Turnover 13,681 12,094
(Loss)/profit before tax (725) 2,039
Taxation 220 (554)
(Loss)/profit after tax (505) 1,485
Non-current assets 10,718 9,971
Current assets 4,811 4,308
Current liabilities (4,162) (4,345)
Non-current liabilities (3,720) (1,890)
Minority interest (164) -
Net assets 7,483 8,044
notes to the financial statements
for the year ended 31 December 2010 continued
11. Investments in associated company continued
2010 2009
£'000 £'000
Share in associate:
At 1 January 8,044 6,567
Share of (loss)/profit after tax (505) 1,485
Equity share options 2 (76)
Currency translation 314 220
Dividend received (173) (152)
Minority interest (199) -
(561) 1,477
At 31 December 7,483 8,044
The company owns 42 per cent (2009: 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 10,451,506 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 2010 was £8,700,000
(2009: £7,611,000).
12. Held to maturity investments
2010 Unlisted Loan 2009 Unlisted Loan
Total Shares stock Total Shares Stock
in joint
ventures
£'000 £'000 £'000 £'000 £'000 £'000
Cost
At 1 January 1,805 5 1,800 1,805 5 1,800
Loan stock issue 180 - 180 - - -
Repayments (39) - (39) - - -
At 31 December 1,946 5 1,941 1,805 5 1,800
13. Trade and other receivables
2010 2009
£'000 £'000
Trade receivables 1,089 736
Amounts due from associate and joint ventures 328 196
Other receivables 206 437
Prepayments and accrued income 2,469 2,607
4,092 3,976
The directors consider that the carrying amount of trade and other receivables
approximates to their fair value.
14. Investments held for trading
2010 2009
£'000 £'000
Market bid value of the listed investment 717 702
portfolio
Unrealised deficit of market value over cost (395) (467)
Listed investment portfolio at cost 1,112 1,169
All investments are listed on the London Stock Exchange.
15. Trade and other payables
2010 2009
£'000 £'000
Trade payables 256 691
Amounts owed to joint ventures 1,133 1,165
Other taxation and social security costs 981 825
Other payables 801 789
Accruals and deferred income 6,851 7,957
10,022 11,427
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 2010 continued
16. Borrowings
Current borrowings - amounts falling due within one year
2010 2009
£'000 £'000
Bank overdrafts (unsecured) 3,863 7,216
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 5,000 5,000
cent
£1.7 million First Mortgage Debenture Stock 2016 at 8.67 1,700 1,700
per cent
£5 million First Mortgage Debenture Stock 2018 at 11.6 per 5,000 5,000
cent
£10 million First Mortgage Debenture Stock 2022 at 8.109 9,804 9,787
per cent*
21,504 21,487
Term bank loans:
£60 million revolving credit facility repayable in 2012*+ 44,855 56,494
£70 million term bank loan repayable in 2014* 69,847 69,807
114,702 126,301
136,206 147,788
*The £10 million debenture and bank loans are shown after deduction of
outstanding amortised issue costs.
+The £60 million facility was reduced from £90 million and the term extended by
a year to September 2012.
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 £60
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 £192.1 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 2010 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 2-5 Over 5 2010
than years years Total
1 year
£'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 10,022 - - 10,022
(non-interest)
13,885 120,104 16,700 150,689
Less 2-5 Over 5 2009
than 1 years years Total
year
£'000 £'000 £'000 £'000
Bank overdrafts (floating) 7,216 - - 7,216
Debentures (fixed) - 5,000 16,700 21,700
Bank loans (floating)* - 126,679 - 126,679
Trade and other payables 11,427 - - 11,427
(non-interest)
18,643 131,679 16,700 167,022
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 2010 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 £16,033,000 (2009: £35,105,000) as follows:
2010 2009
£'000 £'000
Overdrafts 1,137 1,784
Term facilities expiring in two to five years 14,896 33,321
16,033 35,105
Hedge profile
a) There is a hedge to cover part of the £60 million revolving credit facility,
which currently covers the full £45 million drawn. It consists of a 20 year
swap for £15.4 million (2009: £35 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 £9,811,000 deficit (2009: £4,570,000
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 £19.6 million of the 4.76 per cent swap at a
cost of £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 17 year interest rate, which was
3.85 per cent at 31 December 2010 against the rate payable under the specific
hedge. This has given a liability at 31 December 2010 of £13,627,000 (2009: £
6,347,000) 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 2010 to close each of the hedges was £
16,236,000 (2009: £9,918,000). 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
£5,679,000 (2009:£8,466,000). 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 £19.6 million of the 4.76 per cent swap at a
cost of £3.515 million.
notes to the financial statements
for the year ended 31 December 2010 continued
17. Financial instruments continued
Fair value of financial instruments
Fair value estimation
Effective 1 January 2009, the Group adopted 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).
2010
Level 1 Level 2 Level 3 Total Gain/
(loss) to
income
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)
2009
Level 1 Level 2 Level 3 Total Gain/
(loss) to
income
statement
£'000 £'000 £'000 £'000 £'000
Financial assets
Other financial assets held for
trading
Quoted equities 702 - - 702 178
Financial liabilities
Derivative financial instruments
Interest rate swaps - - 6,347 6,347 13,269
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
2010 this decreased to 189.8 per cent (2009: 223.6 per cent) which was
calculated as follows:
2010 2009
£'000 £'000
Total debt 140,069 155,004
Less cash and cash equivalents (8,584) (8,655)
Net debt 131,485 146,349
Total equity 69,388 65,451
189.5% 223.6%
The gearing reduced primarily due to the reduction in the debt in the year. 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 2010 continued
17. Financial instruments continued
Financial assets maturity
Cash and cash equivalents all have a maturity of less than three months.
2010 2009
£'000 £'000
Cash at bank and in hand 8,584 8,655
These funds are primarily invested in short term bank deposits maturing within
one year bearing interest at the bank's variable rates. £Nil (2009: £0.6
million) of the cash is secured against the 2022 First Mortgage Debenture.
Financial liabilities maturity
Repayment of borrowings
2010 2009
£'000 £'000
Bank loans and overdrafts:
Repayable on demand or within one year 3,863 7,216
Repayable between two and five years 114,702 126,301
118,565 133,517
Debentures:
Repayable between two and five years 5,000 5,000
Repayable in more than five years 16,504 16,487
140,069 155,004
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 1,137 1,784
which expire in two to five years 14,896 33,321
16,033 35,105
Interest rate risk and hedge profile
2010 2009
£'000 £'000
Fixed rate borrowings 21,700 21,700
Floating rate borrowings
- Subject to interest rate swap 125,400 145,000
- Excess hedge (10,296) (11,105)
136,804 155,595
Average fixed interest rate 9.69% 9.69%
Weighted average swapped interest rate 5.57% 5.58%
Weighted average cost of debt on overdrafts, bank loans 6.12% 5.97%
and debentures
Average period for which borrowing rate is fixed 8.5 years 9.5 years
Average period for which borrowing rate is swapped 16.9 years 17.9 years
The swapped interest rate have calls by the bank 3.9 years 4.9 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 2010 continued
17. Financial instruments continued
Total financial assets and liabilities
The Group's financial assets and liabilities and their fair values are as
follows:
2010 2009
Fair Carrying Fair Carrying
value value value value
£'000 £'000 £'000 £'000
Cash and cash equivalents 8,584 8,584 8,655 8,655
Financial assets - 717 717 702 702
investments held for trading
Other assets 4,092 4,092 3,976 3,976
Derivative liabilities (13,627) (13,627) (6,347) (6,347)
Bank overdrafts (3,863) (3,863) (7,216) (7,216)
Bank loans (115,104) (114,702) (126,679) (126,301)
Present value of head leases (28,664) (28,664) (29,485) (29,485)
on properties
Other liabilities (10,022) (10,022) (12,168) (12,168)
Before debentures (157,887) (157,485) (168,562) (168,184)
Fair value of debenture stocks
Fair value of the
Group's debenture Book Fair 2010 2009
liabilities: value value Fair value Fair Value
adjustment adjustment
£'000 £'000 £'000 £'000
Debenture stocks 21,700 26,589 (4,889) (7,483)
Tax at 28 per cent (2009: 28 1,369 2,095
per cent)
Post tax fair value (3,520) (5,388) adjustment
Post tax fair value (4.21)p (9.40)p
adjustment - basic pence per
share
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 2010 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 2010 continued
18. Deferred tax
2010 2009
£'000 £'000
Balance at 1 January 6,395 2,808
Transfer to profit and loss account (6,331) 3,587
Balance at 31 December 64 6,395
The deferred tax balance comprises the
following:
Revaluation of investment properties 2,953 5,733
Accelerated capital allowances 2,213 2,116
Fair value of interest derivatives (3,815) (1,777)
Short-term timing differences 1,320 1,321
2,671 7,393
Loss relief (2,607) (998)
Provision at end of period 64 6,395
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 2010 2009
ordinary ordinary
10p shares 10p shares
2010 2009
£'000 £'000
Authorised: Ordinary shares of 110,000,000 110,000,000 11,000 11,000
10p each
Allotted, issued and fully paid 83,922,029 82,316,972 8,392 8,232
Ordinary shares of 10p - issued 1,620,682 1,605,057 162 160
during the year
Share capital 85,542,711 83,922,029 8,554 8,392
Less: held in Treasury (see (1,957,534) (4,293,051) (196) (429)
below)
"Issued share capital" for 83,585,177 79,628,978 8,358 7,963
reporting purposes
The company has one class of ordinary shares which carry no right to fixed
income.
The company issued a further 1,620,682 new ordinary shares of 10p each on 2
July 2010, from the amount standing to the credit of the Company's share
premium account and less costs incurred of £14,000. The existing shareholders
as at 4 June 2010 were entitled to the new Capitalisation Issue ordinary shares
as authorised at the Annual General Meeting on 7 June 2010.
Treasury shares
Number of ordinary 10p shares Cost/issue
value
2010 2009 2010 2009
Date Price £'000 £'000
excl.
costs
Shares held in Treasury at 1 4,293,051 5,873,865 4,558 6,237
January
Issued to meet directors Jan-10 106.18p (2,069,524) (1,214,400) (2,198) (1,290)
bonuses(Feb 09 -106.18p)
Issued to meet share options - - (50,000) - (53)
exercised(Feb 09 -106.18p)
Issued for new share - - (21,780) - (23)
incentive plan (Mar 09
-106.18p)
Issued to meet staff bonuses Jan-10 106.18p (88,021) (96,261) (93) (102)
(May 09 -106.18p)
Issued to meet directors' Oct-10 106.18p (19,097) - (20) -
bonuses
Issued for new share Oct-10 106.18p (23,702) - (25) -
incentive plan
Issued for new share Dec-10 106.18p (135,173) (198,373) (144) (211)
incentive plan (Dec 09
-106.18p)
Shares held in Treasury at 31 1,957,534 4,293,051 2,078 4,558
December
notes to the financial statements
for the year ended 31 December 2009 continued
19. Share capital continued
Share Option Schemes
Employees' share option scheme (Approved scheme)
At 31 December 2010 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 2010 is as follows:
Changes during the year
At 1 Options Options Options At
January lapsed
2010 Exercised granted 31
December
2010
Shares issued to date 2,367,604 - - - 2,367,604
Options granted which have not been 70,000 - - - 70,000
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 2010
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 2010 is as follows:
Changes during year
Changes during the year
At 1 Options Options Options At
January lapsed
2010 Exercised granted 31
December
2010
Shares issued to date 450,000 - - - 450,000
Options granted which have not been - - - - -
exercised
Shares allocated over which options 550,000 - - - 550,000
have not yet been granted
Total shares allocated for issue to 1,000,000 - - - 1,000,000
employees under the scheme
notes to the financial statements
for the year ended 31 December 2010 continued
20. Related party transactions
Cost Amounts Owed Cash advanced
recharged to (to) by to (by)
(by) related related party related party
party £'000
£'000
£'000
Related party:
Analytical Ventures Limited
Current Account 42 4 -
Dragon Retail Properties
Limited
Current account 72 72 -
Loan account - (1,205) -
Bisichi Mining PLC
Current account 359 (i) 326 -
Directors and key management
M A Heller and J A Heller 10 (ii) - -
H D Goldring (Delmore Asset (25) (iii) - -
Management Limited)
C A Parritt (25) (iv) - -
Totals at 31 December 2010 433 (803) -
Totals at 31 December 2009 406 (1,021) 225
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 company provides office premises, property management, general management,
accounting and administration services for both joint ventures.
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 (2009: £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 £40,000 (2009: £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 (2009: £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 £
1,504,000 (2009: £2,192,000). 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 36 (2009: 37).
2010 2009
£'000 £'000
Staff costs during the year were as follows:
Salaries and other costs 1,873 2,575
Social security costs 386 325
Pension costs 372 461
2,631 3,361
notes to the financial statements
for the year ended 31 December 2010 continued
22. Capital Commitments
2010 2009
£'000 £'000
Commitments to capital expenditure contracted for at - 500
the year end
The Group's share of capital commitments of joint ventures at the year end
amounted to £Nil (2009: £Nil).
23. Commitments under operating and finance leases
Operating leases on land and buildings
At 31 December 2010 the Group has total future minimum commitments under
non-cancellable operating leases on land and buildings as follows:
2010 2009
£'000 £'000
Within one year 399 390
In the second to fifth years inclusive 1,197 1,495
After five years - -
1,596 1,885
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 lease Present value of minimum
payments lease payments
2010 2009 2010 2009
£'000 £'000 £'000 £'000
Amounts payable under finance
leases:
Within one year 1,821 1,874 1,821 1,874
In the second to fifth years 7,285 7,497 6,970 6,967
inclusive
After five years 229,114 234,145 20,073 20,644
238,220 243,516 28,864 29,485
Future finance charges on (209,556) (214,031) - -
finance leases
Present value of finance 28,664 29,485 28,864 29,485
lease liabilities
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:
2010 2009
£'000 £'000
Within one year 11,811 13,156
In the second to fifth years inclusive 40,537 48,079
After five years 41,273 67,808
93,621 129,043
24. Contingent Liabilities
There were no contingent liabilities at 31 December 2010 (2009: £Nil), except
as disclosed in Note 17.
notes to the financial statements
for the year ended 31 December 2010 continued
25. Company financial statements
Company balance sheet at 31 December 2010
Notes 2010 2009
£'000 £'000
Fixed assets
Tangible assets 25.3 86,758 87,333
Other investments:
Associated company 25.4 358 358
Subsidiaries and others 25.4 46,431 46,290
25.4 46,789 46,648
133,547 133,981
Current assets
Debtors 25.5 22,553 19,638
Investments 25.6 717 702
Bank balances 5,966 6,653
29,236 26,993
Creditors
Amounts falling due within one year 25.7 (42,416) (25,171)
Net current (liabilities)/assets (13,180) 1,822
Total assets less current liabilities 120,367 135,803
Creditors
Amounts falling due after more than 25.8 (72,146) (81,063)
one year
Net assets 48,221 54,740
Capital and reserves
Share capital 25.10 8,554 8,392
Share premium account 25.11 4,866 5,042
Capital redemption reserve 25.11 47 47
Revaluation reserve 25.11 13,407 13,779
Treasury shares 25.10 (2,078) (4,558)
Retained earnings 25.11 23,425 32,038
Shareholders' funds 48,221 54,740
These financial statements were approved by the board of directors and
authorised for issue on 15 April 2011 and signed on its behalf by:
M A Heller R J Corry
DirectorDirector
Company Registration No. 341829 notes to the financial statements
for the year ended 31 December 2010 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 2010 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 and Dragon Retail Properties Limited (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 2010 continued
25.2. (Loss)/profit for the financial year
The company's loss for the year was £6,182,000 (profit 2009: £1,613,000). 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
Total Freehold Long Short Office
leasehold leasehold Equipment
and motor
vehicles
£'000 £'000 £'000 £'000 £'000
Cost or valuation at 1 88,294 62,678 23,840 - 1,776
January 2010
Reclassification - - (570) 570 -
Additions 78 - - - 78
Disposals (222) - - - (222)
Increase/(decrease) on (372) 445 (747) (70) -
revaluation
Cost or valuation at 31 87,778 63,123 22,523 500 1,632
December 2010
Representing assets
stated at:
Valuation 86,146 63,123 22,523 500 -
Cost 1,632 - - - 1,632
87,778 63,123 22,523 500 1,632
Depreciation at 1 961 - - - 961
January 2010
Charge for the year 196 - - - 196
Disposals (137) - - - (137)
Depreciation at 31 1,020 - - - 1,020
December 2010
Net book value at 1 87,333 62,678 23,840 - 815
January 2010
Net book value at 31 86,758 63,123 22,523 500 612
December 2010
The freehold and leasehold properties were valued as at 31 December 2010 by
external professional firms of chartered surveyors. The valuations were made at
open market value on the basis of existing use. The increase in book value was
transferred to revaluation reserve.
2010 2009
£'000 £'000
Allsop LLP 81,950 82,495
BNP Paribas Real Estate 4,196 4,023
86,146 86,518
The historical cost of investment properties, including total capitalised
interest of £1,222,000 (2009: £1,222,000) was as follows:
Freehold Long Short
Leasehold
Leasehold
£'000 £'000 £'000
Cost at 1 January 2010 54,620 18,078 -
Reclassification - (785) 785
Additions - - -
Disposals - - -
Cost at 31 December 2010 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 2010 continued
25.4. Other investments
Shares in Loan stock Shares Loan Shares in Unlisted
Total in in stock
subsidiary subsidiary in joint associate shares
joint
companies companies ventures
ventures
Cost £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2010 46,648 40,663 3,658 164 1,800 358 5
Loan stock issued 180 - - - 180 - -
Repayments (39) - - - (39) - -
At 31 December 46,789 40,663 3,658 164 1,941 358 5
2010
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 by
company 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 Property investment 100 100
Holdings Limited
Analytical Properties Limited Property investment - 100
Analytical Properties (St Property investment - 100
Helens) Limited
London & Associated Property Management 100 100
Management Services Limited Services
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
2010 2009
£'000 £'000
Trade debtors 639 382
Amounts due from subsidiary companies 17,525 17,601
Amounts due from associate and joint ventures 328 196
Deferred tax asset (note 25.9) 2,657 267
Other debtors 41 25
Prepayments and accrued income 1,363 1,167
22,553 19,638
25.6. Investments
2010 2009
£'000 £'000
Market value of the listed investment 717 702
portfolio
Unrealised deficit of market value over cost (395) (467)
Listed investment portfolio at cost 1,112 1,169
All investments are listed on the London Stock Exchange.
notes to the financial statements
for the year ended 31 December 2010 continued
25.7. Creditors: Amounts falling due within one year
2010 2009
£'000 £'000
Bank overdrafts (unsecured) 3,863 7,191
Amounts owed to subsidiary companies 31,659 9,729
Amounts owed to joint ventures 1,133 1,165
Corporation tax - 741
Other taxation and social security costs 649 576
Other creditors 328 360
Accruals and deferred income 4,784 5,409
42,416 25,171
25.8. Creditors: Amounts falling due after more than one year
2010 2009
£'000 £'000
Interest rate derivatives 5,787 3,082
Term Debenture stocks:
£5 million First Mortgage Debenture Stock 2013 5,000 5,000
at 11.3 per cent
£1.7 million First Mortgage Debenture Stock 1,700 1,700
2016 at 8.67 per cent
£5 million First Mortgage Debenture Stock 2018 5,000 5,000
at 11.6 per cent
£10 million First Mortgage Debenture Stock 9,804 9,787
2022 at 8.109 per cent*
21,504 21,487
Term bank loans:
Repayable after more than two years*+ 44,855 56,494
72,146 81,063
*The £10 million debenture and bank loans are shown after deduction of
un-amortised issue costs.
+The £60 million facility was reduced from £90 million and the term extended by
a year to September 2012.
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 3,863 7,191
Repayable between two and three years 44,855 56,494
48,718 63,685
Debentures:
Repayable between three and five years 5,000 5,000
Repayable in more than five years 16,504 16,487
70,222 85,172
Hedge profile
There is a hedge to cover part of the £60 million revolving credit facility,
which currently covers the full £45 million drawn.
It consists of a 20 year swap for £15.4 million (2009: £35 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 £4,166,000 deficit (2009: £2,219,000
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 17 year interest rate, which was
3.85 per cent at 31 December 2010 against the rate payable under the specific
hedge. This has given a liability at 31 December 2010 of £5,787,000 (2009: £
3,082,000) as shown in the balance sheet. The banks own initial quotation at 31
December 2010 to close each of the hedges was £7,180,000 (2009: £5,047,000).
The hedges arenot 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 £2,511,000 (2009: £4,518,000), 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 Income Statement. The cost to the
company to exit the instruments before January 2015 has been attributed a cost
by the bank of £2,511,000 (2009:£4,518,000). 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 £19.6 million of the 4.76 per cent swap at a
cost of £3.515 million.
notes to the financial statements
for the year ended 31 December 2010 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 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).
2010
Level 1 Level 2 Level 3 Total Gain/
(loss) to
£'000 £'000 £'000 £'000 income
statement
£'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)
2009
Level 1 Level 2 Level 3 Total Gain/
(loss) to
£'000 £'000 £'000 £'000 income
statement
£'000
Financial assets
Other financial assets held for
trading
Quoted equities 702 - - 702 178
Financial liabilities
Derivative financial
instruments
Interest rate swaps - - 3,082 3,082 6,844
notes to the financial statements
for the year ended 31 December 2010 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 Over2010
1 year2-5 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 38,553 - - 38,553
(non-interest)
42,416 50,104 16,700 109,220
Less 2-5 Over 5 2009
than 1 years years
year Total
£'000 £'000 £'000 £'000
Bank overdrafts (floating) 7,191 - - 7,191
Debentures (fixed) - 5,000 16,700 21,700
Bank loans (floating)* - 56,679 - 56,679
Trade and other payables 17,980 - - 17,980
(non-interest)
25,171 61,679 16,700 103,550
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:
Fair 2010 Fair 2009
value Carrying value Carrying
value value
£'000 £'000 £'000 £'000
Cash and cash equivalents 5,966 5,966 6,653 6,653
Investments 717 717 702 702
Other assets 22,553 22,553 19,638 19,638
Bank overdrafts (3,863) (3,863) (7,191) (7,191)
Bank loans (45,104) (44,855) (56,679) (56,494)
Derivative liabilities (5,787) (5,787) (3,082) (3,082)
Other liabilities (38,553) (38,553) (17,980) (17,980)
Before debentures (64,071) (63,822) (57,939) (57,754)
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 2009 continued
25.9. Provisions for liabilities and charges
2010 2009
£'000 £'000
Deferred Taxation
Balance at 1 January (267) (1,350)
Transfer to profit and loss account (2,390) 1,083
Balance at 31 December (2,657) (267)
No provision has been made for the approximate taxation liability at 28 per
cent (2009: 28 per cent) of £992,000 (2009: £649,000) which would arise if the
investment properties were sold at the stated valuation.
The deferred tax balance comprises the following:
Accelerated capital allowances 1,243 1,189
Fair value of interest derivatives (1,620) (863)
Short-term timing differences 153 233
Losses (2,433) (826)
Provision at end of period (2,657) (267)
25.10. Share capital
Details of share capital, treasury shares and share options are set out in note
19.
25.11. Reserves
Share Capital Revaluation Retained Total
Premium redemption reserve
Account reserve Earnings
£'000 £'000 £'000 £'000 £'000
Balance at 1 January 2010 5,042 47 13,779 32,038 50,906
Decrease on valuation of - - (372) - (372)
investment properties
Retained loss for year - - - (6,182) (6,182)
Dividends paid in year - - - (924) (924)
Loss on disposal of Treasury - - - (1,507) (1,507)
Shares
Capitalisation issue of new (176) - - - (176)
ordinary shares and expenses
Balance at 31 December 2010 4,866 47 13,407 23,425 41,745
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
2010 2009
£'000 £'000
Commitments to capital expenditure contracted for at the - -
year end
25.14. Commitments under operating leases
At 31 December 2010 the company had annual commitments under non-cancellable
operating leases on land and buildings as follows:
2010 2009
£'000 £'000
Expiring in more than one year but less than 390 -
five years
Expiring in more than five years - 390
In addition, the company has an annual commitment to pay ground rents on its
leasehold investment properties which amount to £344,000 (2009: £323,000).
25.15. Contingent liabilities
There were no contingent liabilities at 31 December 2010 (2009: £Nil), except
as disclosed in Note 25.8.
Five year financial summary
2010 2009 2008 2007 2006
£m £m £m £m £m
Portfolio size
Investment properties-Group^ 195 214 219 248 193
Investment properties-joint 13 13 13 3 91
ventures
Investment 12 12 12 15 17
properties-associate
220 239 244 266 301
Portfolio activity £m £m £m £m £m
Acquisitions - - 9.18 112.71 50.70
Disposals at book value (20.74) (17.79) (15.33) (41.37) (1.62)
Capital Expenditure 0.49 3.46 9.73 9.15 5.13
(20.25) (14.33) 3.58 80.49 54.21
Consolidated income statement £m £m £m £m £m
Rental income - Group and 16.50 17.07 16.77 14.26 11.84
share of joint ventures
Less: attributable to joint (0.52) (0.52) (0.27) (1.23) (3.95)
venture partners
Group rental income 15.98 16.55 16.50 13.03 7.89
Profit/(loss) before interest 11.97 20.49 (24.91) (16.59) 21.76
and tax
(Loss)/profit before tax (10.69) 21.41 (57.27) (23.89) 18.32
Taxation (7.19) 2.36 (9.81) (11.38) 3.11
(Loss)/profit attributable to (3.49) 19.05 (47.45) (12.50) 15.22
shareholders
(Loss)/earnings per share - (4.24)p 24.32p (62.30)p (16.40)p 20.00p
basic
(Loss)/earnings per share - (4.24)p 24.32p (62.30)p (16.40)p 19.97p
fully diluted
Dividend per share 1.15p 1.15p 1.15p 1.95p 1.85p
Consolidated balance sheet £m £m £m £m £m
Shareholders' funds 55.96 59.10 40.30 88.99 101.86
Net borrowings 130.77 145.65 157.17 147.54 86.12
Net gearing 238.68% 246.44% 390.01% 165.79% 84.55%
Net assets per share - basic 66.95p 74.22p 52.73p 116.86p 133.62p
- fully diluted 66.92p 74.19p 52.70p 116.73p 133.47p
Consolidated cash flow £m £m £m £m £m
statement
Net cash inflow from 9.58 12.18 12.02 3.97 3.44
operating activities
Capital investment and 20.42 13.94 (6.09) 9.84 (26.86)
financial investment
Note: ^Excluding the present value of head leases