+44 (0)207 415 5000
2nd Floor, 12 Little Portland Street, London, W1W 8BJ
FOR IMMEDIATE RELEASE
30 April 2013
LONDON & ASSOCIATED PROPERTIES PLC:
RESULTS FOR 12 MONTHS TO 31 DECEMBER 2012
London & Associated Properties is a fully listed focused UK shopping centre and
Central London retail property specialist.
HIGHLIGHTS
* Good progress achieved despite tough economic conditions
* Pre-tax profits of £7.6m against a loss of £18.6m in the comparable period
* Total value of directly owned property portfolio increased 6% to £205m
* EPRA based net assets rose 14.5% to £77.73m - equivalent to 92.5p per share
* Group rental income totalled £15.8m compared to £16.0m following temporary
loss of income at Windsor during redevelopment of former Boots unit
* Portfolio voids continue at less than 2% by rental value
* Average unexpired lease term stands at 8.5 years against 8.1 years in 2011
* London & Associated Management Services continues to perform well
reflecting market recognition of Company's asset management expertise
* Head office move to generate £0.35m of annual saving
"2012 was arguably the most difficult year for retailers in living memory. An
extremely challenging economy together with structural changes to shopping
habits have led to a large number of retailer insolvencies and a surfeit of
vacant shops. We have successfully minimised the impact of those changes on our
portfolio reacting swiftly to dispose of a number of mature assets which would
have been adversely affected by this shift. We now own a limited number of core
shopping centre and other retail assets, all of which we believe will continue
to trade successfully in their respective locations."
Sir Michael Heller, Chairman John Heller, Chief Executive
-more-
Contact:
London & Associated Properties PLC Tel: 020 7415 5000
John Heller, Chief Executive or
Robert Corry, Finance Director
Baron Phillips Associates Tel: 020 7920 3161
Baron Phillips
London & Associated Properties PLC
Annual report & accounts 2012
We are a fully listed UK shopping centre and Central London retail property
specialist. We own and manage £244m of retail investments.
We look to create environments where major brands can thrive.
Financial calendar
Annual General Meeting
Tuesday 4 June 2013
First interim management statement
Friday 17 May 2013
Announcement of half year results to 30 June 2013
Late August 2013
Second interim management statement
Monday 18 November 2013
Announcement of annual results for 2013
Late April 2014
Chairman and Chief Executive's statement
We have successfully minimised the impact of those changes on our portfolio,
reacting swiftly to dispose of a number of mature assets which would have been
adversely affected by this shift
In 2012, LAP has made a profit before tax under IFRS of £7.6 million compared
to a loss of £18.6 million in 2011. The principal reason for this improvement
is the increase in the value of our Shopping Centre portfolio following the
valuation as at 31 December 2012. This is a particularly pleasing result given
the pressure that most asset classes are experiencing in the current market,
and reflects the successful performance of our larger assets.
2012 was arguably the most difficult year for retailers and retail focused
property companies in living memory. A combination of an extremely challenging
economy together with ongoing structural change to shopping habits have led to
a large number of retailer insolvencies and, consequently, a surfeit of vacant
shops in Shopping Centres and High Streets around the country. We have
successfully minimised the impact of those changes on our portfolio, reacting
swiftly to dispose of a number of mature assets which would have been adversely
affected by this shift. As a result we now own a limited number of core
shopping centre and other retail assets, all of which we believe will continue
to trade successfully in their respective locations.
Faced with these challenging conditions, your Board is happy to report that our
group rental income for the year was £15.8 million compared to £ 16.0 million
in 2011, a small reduction primarily due to a temporary loss of income at
Windsor while the former Boots space was being converted into three separate
units. At 31 December 2012 the total value of our directly owned portfolio of
shopping centres and other retail properties was £205 million compared to
£194 million in 2011.
Our diverse spread of retail tenants within the portfolio has provided some
protection from retailer failure. However, those tenants who have used some
form of insolvency and who as a consequence had the opportunity to vacate their
shops have, in all but a couple of cases, remained within their units and taken
new leases at the same rent as previously being paid. Where tenants did vacate,
we have in almost all cases re-let their units with relative ease.
Consequently, void levels in our portfolio by rental value have remained under
2%, which we believe to be a strong performance against the current real estate
backdrop. Our average unexpired lease term is 8.5 years compared to 8.1 in
2011.
We manage our assets intensively - a policy that we have successfully followed
for more than thirty years. We exchanged contracts in December 2012 to sell for
£9.5 million our property in Chesterfield which is let to Primark and Card
Factory, as well as the mainly freehold element of the former Boots unit in
Windsor which we developed and let to Superdry. Completion of the sale is
dependent on freeholder consent from the Royal Borough of Windsor and
Maidenhead. The consent is expected to be received shortly when we anticipate
that the sale will be completed. The proceeds of these two sales will be used
in part to reduce expensive long-term borrowings, the majority of which are due
to expire this year, with the balance being added to our cash reserves.
London & Associated Management Services (LAMS)
LAMS continues to perform well and this highlights market recognition of our
asset management expertise as we continue to be engaged by both lenders and
administrators to manage previously distressed assets on their behalf.
In August 2012 LAMS was appointed to asset manage a portfolio of four shopping
centres in the north west of England. LAMS will receive a management fee for
providing these services. During 2012, LAMS successfully concluded the asset
management and subsequent disposal of a shopping centre and other assets in
Ealing, West London on behalf of NAMA, the Irish Governmental debt management
agency.
In Ealing, our management initiatives involved the removal of a number of
smaller tenants within the shopping centre and pre-letting the entire Centre to
a major fashion retailer, a supermarket and a fast food restaurant. As a result
of these management initiatives, we were
able to generate a gross increase in value of 15% for our clients. We collected
fees of £0.7 million for this work.
We report on our major centres as follows:
King Edward Court, Windsor
King Edward Court remains fully let with the exception of a unit that we
are holding vacant for a potential development. During the year, we experienced
the failure of Game, whose unit has subsequently been re-let to a quality
French patisserie, La Tartine, at a rent over 20% higher than that passing
previously. We also experienced the insolvency of Sony Centre, a multiple
retailer, whose unit is currently under offer to a national retailer at a rent
significantly higher than previously received.
Last year, Travelodge also entered into a widely publicised creditors'
voluntary arrangement. During this process, we were approached by their main
competitor with an offer some 10% higher than the passing rent for the Windsor
hotel, thus underscoring the rental value of this asset. In the event, this
hotel was described as one of Travelodge's best performing locations, and was
retained by them on slightly improved lease terms.
During 2012 there were several major rent reviews and we have achieved
significant increases at Waitrose and Travelodge. King Edward Court is one of
the few UK shopping centres to maintain or increase rental levels during the
current recession.
The car park performs at a high level and we have been able to achieve a price
increase of 5%.
Orchard Square, Sheffield
Orchard Square, Sheffield, also remains fully let in spite of the difficult
trading conditions.
In March 2013, Republic, a tenant of one of our two prime units on Fargate,
Sheffield's principal shopping street, went into administration and was
acquired by Sports Direct. We have received strong outside interest in this
prime unit should it become available to re-let. The Republic lease was already
on a rent geared to 80% of estimated rental value. Consequently, we expect to
at least maintain our income levels at this unit.
Where leases have become due for renewal, all affected tenants have remained in
occupation and we are in the process of negotiating new leases. Those that have
renewed already have been at rents ahead of the levels previously being paid.
Brixton Market
Our two indoor markets are let on 25 year leases from 1 April 2011 to InShops
Limited, a subsidiary of Groupe Geraud, who operate 200 markets across Europe.
LAP established Brixton Village as a quality retail and restaurant location,
this development has continued under Groupe Geraud with our two markets now
recognised as an exciting destination. There has been much press commentary
recommending Brixton Market as an important tourist destination and it has just
been awarded `Best Private Market in Britain' by the Communities Minister, Don
Foster.
The market is fully let, and has currently over 100 retailers on the waiting
list for any available space.
In the period since we signed our lease to InShops, gross revenues have
increased by almost 25%, notwithstanding that the markets were fully let at the
time. InShops believe that the outstanding demand will continue to drive rents
forward in the market and they expect cash flows to continue to increase. We
will receive 50% of this increased rental income in line with our profit share
agreement with InShops.
The three properties detailed above continue to perform strongly and account
for 83% of the LAP portfolio.
Kings Square, West Bromwich
In spite of the difficulties experienced in the the West Midlands economy,
Kings Square has the same high level of occupancy as last year. Sandwell
College, which houses some 11,000 students, has opened to the rear of our
Centre and this has further increased footfall.
During 2012 and early 2013, both Bon Marche and Textiles Direct pursued an
insolvency process. Pleasingly, Bon Marche renewed their lease at the same rent
as previously passing, and we know they trade well from this location. Textiles
Direct continue to trade their unit here, and we are confident that this unit
will remain in occupation.
Halifax
We own this property in a 50:50 joint venture with Lloyds Banking Group
(formerly HBoS). Following a number of management initiatives carried out by us
during the year, the property remains fully let to national retailers. We
agreed with the local authority, who occupy the upper parts to remove its
five-yearly break clauses in exchange for LAP refurbishing the lifts and a
temporary rent concession. As a result, the Local Authority is now about to
invest in the property with a significant refurbishment of its office space.
This is the last joint venture that Uberior, Bank of Scotland's equity arm,
entered into. The agreement comes to an end during the first half of 2013 and
will be liquidated. At this stage we expect to receive cash for our equity
which will be added to our reserves.
The rest of our portfolio continues to trade well.
Banking
Our £44.2million Revolving Credit Facility with RBS expired in September 2012.
We are in discussions with RBS to extend this term facility by three years and
hope to report more fully when these negotiations are successfully concluded.
As previously reported, the relocation of our Head Office has also led to a
decrease in ongoing expenses by c £0.35m per annum.
Dividends
The Board has taken the decision not to pay a final dividend. This
is to retain cash in the business and adopt a cautious approach during this
period of economic uncertainty although we plan to resume dividends in the near
future.
We would like to thank all of the Directors, staff and advisors who have
contributed to our progress in what has been a demanding
12 months to 31 December 2012.
Sir Michael Heller, John Heller,
Chairman Chief Executive
18 April 2013
Finance Director's report
I am confident that the continued policy of managing the Group's cash resources
prudently will benefit us as we continue to go through this period of
uncertainty
During 2012 management of our cash flow continued to be a priority for the
Group. Years of experience, prudent management and reasonably good fortune have
each contributed to comparatively low void levels of around 2% and this has
enabled the group to continue to make good progress.
London & Associated Management Services (LAMS) manages property on behalf of
third parties and this is producing a useful further revenue stream for the
Group. During the year LAMS was appointed by Lloyds Banking Group to manage
four shopping centres, further enhancing its income stream.
Cash flow
During the year term debt reduced marginally to £136.6 million (2011: £136.8
million). The Revolving Credit Facility of £44.2 million is being refinanced
currently and I report on this more fully later in this report.
We have concentrated on maximising income coupled with cost control and, as a
result we show an encouraging trading cash surplus, even after paying out £1.1
million on the redevelopment of the three units in Windsor.
The utilisation of the cash over the year is shown in the chart below:
Income statement
Group operating profit before interest was £11.4 million as compared with £12.2
million in the previous year. The result for the previous year was enhanced by
substantial surrenders of £0.9 million as well as a
£0.3 million profit on property sales. After eliminating these exceptional
items the result in 2012 is a satisfactory improvement of £0.5 million in
operating profit before interest.
Under IFRS rules the accounts are required to reflect the impact of various
non-cash items. Appreciation in property valuations add £10.7 million to the
result (2011 a depreciation of £1.0 million), whilst the mark-to-market
valuations of derivatives resulted in an increased liability of £3.1 million
(2011: £17.2 million). After these items the Group declared a profit before tax
of £7.6 million, a significant turnaround from the loss of £18.6 million in the
previous year.
2012 2011
£'000 £'000
Annual rental income from properties still held 15,189 15,420
Surrenders (23) 943
Income from properties sold in year - 16
Revenue as per income statement 15,166 16,379
As can be seen the continuing rental income has been maintained at a very
similar level as in 2011. However the strength of the ongoing income is
underpinned by the fact that the `Weighted Unexpired Average Lease Term' is
8.55 years across the Group compared to 8.1 years in 2011. Additionally the top
50 tenants produce over 78% of the total income. An analysis of the tenant
income is given in note 23 to the accounts.
We continue to keep our overheads under review and we try to reduce them
wherever we can. During the year we relocated our head office in London which
will give annualised savings of approximately £0.35 million. The operating
profit includes a one-off charge of £0.24 million for the costs incurred in the
move.
In 2007 we entered into interest rate swaps to hedge the risk of the group's
income being severely impacted by higher interest rates. Effectively we have
contracted to pay a fixed rate of interest up to maturity. However we are
required to calculate and disclose the liability which would arise if we were
to settle this liability at the respective balance sheet date. The net present
value (NPV) calculated in this way does not give a true picture of the position
of the business. Interest rates have fluctuated substantially in recent years
and this generates large movements in the IFRS calculation of the Group's net
assets.
Should interest rates rise, the deficit of £33.9 million, as shown on the
balance sheet, will reverse. The tax charge in the year is £0.4 million. This
relates entirely to deferred tax.
Balance sheet
The underlying assets of the Group on a management adjusted basis are shown in
the table below:
2012 Per IFRS Deferred Mark-to- Head EPRA
balance tax market leases Adjusted
sheet £'000 of £'000 net
interest assets
£'000 swaps £'000
£'000
Investment properties 234,069 (28,657) 205,412
Other fixed assets 2,173 2,173
Investments in associate and joint 8,608 8,608
ventures
Other assets 8,000 (2,664) 5,336
Other liabilities (75,106) 33,935 28,657 (12,514)
Net debt (131,287) (131,287)
Net assets 46,457 (2,664) 33,935 - 77,728
Adjusted NAV per share 92.5p
2011
Investment properties 222,409 (28,661) 193,748
Other fixed assets 2,482 2,482
Investments in associate and joint 9,050 9,050
ventures
Other assets 8,614 (2,841) 5,773
Other liabilities (68,964) 30,850 28,661 (9,453)
Net debt (133,662) (133,662)
Net assets 39,929 (2,841) 30,850 - 67,938
Adjusted NAV per share 80.9p
Group net assets under IFRS were £46.5 million (2011: £39.9 million), but the
more meaningful EPRA figure shows net assets of £77.7 million (2011: 67.9
million), equivalent to 92.5p per share (2011: 80.9p), an increase of 14.3% on
2011.
Accounting judgments and 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. Interest rate hedges (as explained
above) are stated at net present value of the estimated extra costs which will
arise to maturity if current market interest rates stayed the same
until maturity.
The Directors exercise their commercial judgement when reviewing the Group's
cash flow forecasts and the underlying assumptions on which the forecasts are
based. The Group's business activities, together with the factors likely to
affect its future development, are set out in the Chairman and Chief
Executive's Report and in this Report. In addition the Directors consider that
note 17 to the financial statements sets out 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.
Negotiations are continuing in relation to the renewal of the £44.2 million
term bank facility that originally expired in September 2012. While these
negotiations are ongoing the existing facility was extended to 2 April 2013 and
a further extension to 2 July 2013 has been agreed. The terms for a new
facility are being finalised and the process of documenting them is being
started. We will report more fully once the facility has been signed.
With a quality property portfolio comprising a majority of long leases
supported by 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
To preserve cash within the Group while we see how the economy develops, the
Directors are not proposing a final dividend.
Our associated company Bisichi Mining PLC, in which we hold a 41.9% stake, had
a strong year. The annual profit after taxation was £1.54 million. This figure
is after a revaluation deficit under IFRS of £0.46 million.
I am confident that the continued policy of managing the Group's cash resources
prudently will benefit us as we continue to go through this period of
uncertainty.
Robert Corry,
Finance Director
18 April 2013
Directors and advisors
Directors
Executive Directors
* Sir Michael Heller MA FCA
(Chairman)
John A Heller LLB MBA
(Chief Executive)
Robert J Corry BA FCA
(Finance Director)
Non-executive Directors
† Howard D Goldring BSC (ECON) ACA
Howard Goldring has been a member of the board since July 1992 and is a global
asset allocation specialist. He is Executive Chairman of Delmore Asset
Management Limited which specialises in the management of investment portfolios
for private clients, charities, family trusts and pension funds. He also acts
as an advisor providing high level asset allocation advice to family offices
and pension schemes, including among others, Tesco Pension Investment Ltd. 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 of all sizes. He is
Chairman of Baronsmead VCT 2 plc, DiGiCo Global Limited and BG Consulting Group
Limited as well as being a director of F&C US Smaller Companies plc. Clive was
President of the Institute of Chartered Accountants in England and Wales in
2011-12. He is Chairman of the audit committee and as Senior Independent
Director he chairs the Nomination and Remuneration Committees.
* Member of the nomination committee
# Senior independent director
† Member of the audit, remuneration and nomination committees
Secretary & registered office
Heather A Curtis ACIS
24 Bruton Place,
London W1J 6NE
Director of property
Mike J Dignan FRICS
Auditor
Baker Tilly UK Audit LLP
Principal bankers
HSBC Bank PLC
Lloyds Banking Group PLC
National Westminster Bank PLC
Royal Bank of Scotland PLC
Solicitors
Olswang LLP
Pinsent Masons LLP
Stockbroker
Westhouse 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 2012.
Activities
The principal activities of the Group during the year were property investment
and development, as well as investment in joint ventures and an associated
company. The associated company is Bisichi Mining PLC in which the company
holds a 42 per cent interest. Bisichi Mining PLC is listed on the London Stock
Exchange and operates in England and South Africa with subsidiaries which are
involved in overseas mining and mining investment.
Business Review
Review of the group's development and performance
The Chairman and Chief Executive's Statement and Finance Director's Report on
the preceding pages 4 to 14 provide a comprehensive review and assessment of
the Group's activities during the year as well as its position at the year end
and prospects for the forthcoming year.
Property activities
The Group is a long-term investor in property. It acquires retail properties,
actively manages those assets to improve rental income and thus enhance the
value of its properties over time. In reviewing performance, the principal
areas regularly monitored by the Group include:
• Rental income - the aim of the Group is to maximise the maintainable income
from each property by careful tenant management supported by sympathetic and
revenue enhancing development. Whilst income may be adversely affected by the
inability of tenants to pay their rent, rent collection and tenant quality are
monitored carefully. Risk is also minimised by a diversified tenant base, which
should limit the impact of the failure of any individual tenant.
• Cash flow - allowing for voids, acquisitions, development expenditure,
disposals and the impact of operating costs and interest charges, the Group
aims to maintain a positive cash flow.
• Financing costs - the exposure of the Group to interest rate movements is
managed by the use of swap arrangements (see note 17 on page 44 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 34.
• Property valuations - market sentiment and economic conditions have a direct
effect on property valuations, which can vary significantly (upwards or
downwards) over time. Bearing in mind the long-term nature of the Group's
business, valuation changes have little direct effect on the ongoing activities
or the income and expenditure of the Group. Tenants generally have long-term
leases, so rents are unaffected by short-term valuation changes. Borrowings are
secured against property values and if those values fall very significantly,
this could limit the ability of the Group to develop the business using
external borrowings. The risk is minimised by trying to ensure that there is
adequate cover to allow for fluctuations in value on a short-term basis.
It continues to be the policy of the Group to realise property assets when the
valuation of those assets reaches a level at which the directors consider that
the long-term rental yield has been reached. The Group also seeks to acquire
additional property investments on an opportunistic basis when the potential
rental yields offer scope for future growth.
Investment activities
The investments in joint ventures and the associate are for the long term.
The Group is an investor in the associate and manages the UK property assets of
the associate. However the principal activity of the associate is overseas
mining investment (principally in South Africa). The investment is held to
generate income and capital growth over the longer term. The other listed
investments are held as current assets to provide the liquidity needed to
support the property activities while generating income and capital growth.
Investments in property are made through joint ventures when the financing and
spreading of risk make it desirable.
Corporate responsibility
Environment
The Group's principal UK activity is property investment, which involves
renting premises to retail businesses. We seek to provide those tenants with
good quality premises from which they can operate in an efficient and
environmentally friendly manner. Wherever possible, improvements, repairs and
replacements are made in an environmentally efficient manner and waste
re-cycling arrangements are in place at all of the company's locations.
Employment
The Group's policy is to attract staff and motivate employees by offering
competitive terms of employment. The Group provides equal opportunities to all
employees and prospective employees including those who are disabled.
Performance indicators
Our success is principally measured in terms of net asset value per share and
trading cash flow (where we aim over a period of time to deliver a positive
cash return) and net asset value per share after adjusting for valuation
volatility and excluding IFRS adjustments. The directors consider that the Key
Performance Indicator of the Group is the Net Asset per Share value shown at
the foot of the Balance Sheet on page 31 and as discussed in the Finance
Director's Report. Cash flow is shown on page 33.
Dividend Policy
The directors are not recommending payment of a dividend for 2012.An interim
dividend for 2011 of 0.75p was paid on 20 January 2012.
The company's ordinary shares held in treasury
At 31 December 2012 1,538,398 (2011: 1,538,398) ordinary shares were held in
Treasury with a market value of £276,042 (2011: £403,829). At the Annual
General Meeting (AGM) in May 2012 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 2013.
Movements in Treasury shares during the year Number of
shares
Treasury shares held at 1 January 2012 1,538,398
Treasury shares held at 31 December 2012 1,538,398
Treasury shares are not included in issued share capital for the purposes of
calculating earnings per share and net assets per share, and they do not
qualify for dividends payable.
Subsequent to the year-end, 283,660 shares have been transferred from Treasury
in respect of shares issued in connection with an approved HMRC share incentive
plan and Directors' and staff bonuses. The shares were issued at a price
between 21.75p and 22p on 2 January 2013.
Investment properties
The freehold and long leasehold properties of the company and its subsidiaries
were revalued as at 31 December 2012 by external professional firms of
chartered surveyors - Allsop LLP, London (97.97 per cent of the portfolio), and
BNP Paribas, Leeds (2.03 per cent). The valuations, which are reflected in the
financial statements, amount to £205.4 million (2011: £193.7 million).
Taking account of prevailing market conditions, the valuation of Group
properties at 31 December 2012 resulted in an increase of £10.7 million (2011:
reduction of £1million). This has been reflected in the income statement in
accordance with the requirements of IFRS. The impact of property revaluations
on the company's joint ventures (Analytical Ventures Limited, Dragon Retail
Properties Limited and Langney Shopping Centre Unit Trust) and the associate
company (Bisichi Mining PLC) was a reduction of £2.5 million (2011: reduction
of £0.5 million). The proportion of this revaluation attributable to the Group
(net of taxation) is reflected in the income statement and the consolidated
balance sheet.
Financial instruments
Note 17 to the financial statements sets out the risks in respect of financial
instruments. The board reviews and agrees overall treasury policies, delegating
appropriate authority for applying these policies to the Chief Executive and
Finance Director. Financial instruments are used to manage the financial risks
facing the Group - speculative transactions are prohibited. Treasury operations
are reported at each board meeting and are subject to weekly internal
reporting. Hedging arrangements are in place for the company, its subsidiaries
and joint ventures in order to limit the effect of higher interest rates upon
the Group.
Directors
Sir Michael Heller, J A Heller, R J Corry, H D Goldring, C A Parritt were
directors of the company for the whole of 2012. Sir Michael Heller and H D
Goldring are retiring by rotation at the Annual General Meeting in 2013 and
offer themselves for re-election.
Brief details of the directors offering themselves for re-election are as
follows:
Sir Michael Heller is executive chairman and has been a director since 1971. He
has a contract of service determinable at six months notice. Sir Michael Heller
is a chartered accountant and a member of the nomination committee. He is
executive chairman of Bisichi Mining PLC, our associate company. The board had
considered the re-appointment of Sir Michael Heller and recommends his
re-election as director.
Howard Goldring has been a director since 1992 and has a contract of service
determinable upon three months notice. He is a member of the audit,
remuneration and nomination committees. Howard Goldring is a chartered
accountant and global asset allocation specialist. He is executive chairman of
Delmore Asset Management Limited which specialises in the management of
investment portfolios for private clients, charities, family trusts and pension
funds. He also acts as an advisor providing high level asset allocation advice
to family offices and pension schemes, including among others, Tesco Pension
Investment Ltd. 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.
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 interests Non-beneficial interests
31 Dec 12 1 Jan 12 31 Dec 12 1 Jan 12
Sir Michael Heller 6,304,002 6,304,002 19,277,931 19,277,931
R J Corry 998,355 998,355 - -
H D Goldring 19,819 19,819 - -
J A Heller 1,630,649 1,630,649 †14,073,485 †14,073,485
C A Parritt 36,166 36,166 - -
† These non-beneficial holdings are duplicated with those of Sir Michael
Heller.
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).
The beneficial holdings of directors shown above include their interests in the
Share Incentive Plan.
Substantial shareholdings
At 31 December 2012 Sir Michael Heller and his family had an interest in 47.5
million shares of the company, representing 56.6 per cent. of the issued share
capital net of treasury shares (2011: 47.5 million shares representing 56.6 per
cent.). Cavendish Asset Management Limited had an interest in 6,985,120 shares
representing 8.32 per cent. of the issued share capital of the company (2011:
5,667,134 shares representing 6.75 per cent.). James Hyslop had an interest in
3,336,258 shares representing 3.97 per cent. of the issued share capital of the
company.
The company is not aware of any other holdings exceeding 3 per cent. of the
issued share capital. Subsequent to the year-end and at the date of this report
Sir Michael Heller and his family's interest increased to 47.6 million shares
of the company representing 56.5 per cent. of the issued share capital net of
treasury shares. James Hyslops' holding increased to 3,376,258 representing
4.01 per cent. of the issued share capital.
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 2012 have confirmed that, so far as they
are aware, there is no relevant audit information of which the auditor is
unaware. Each of the directors has confirmed that they have taken all the steps
that they ought to have taken as a director in order to make them aware of any
relevant audit information and to establish that it has been communicated to
the auditor.
Corporate governance
The Company has adopted the Guidance for Smaller Quoted Companies (SQC)
published by the Quoted Companies Alliance. The Alliance provides guidance to
SQC and their guidance covers the implementation of The UK Corporate Governance
Code for SQC. The paragraphs below set out how the company has applied this
guidance during the year. The company has complied with the Quoted Companies
Alliance guidance throughout the year, except insofar that non-executive
directors are not appointed for fixed terms (section A.7.2).
Principles of corporate governance
The board promotes good corporate governance in the areas of risk management
and accountability as a positive contribution to business prosperity. The board
endeavours to apply corporate governance principles in a sensible and pragmatic
fashion having regard to the circumstances of the business. The key objective
is to enhance and protect shareholder value.
Board structure
During the year the board comprised the chairman, the chief executive, one
other executive director and two non-executive directors. Their details appear
on page 15. 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 27. 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 23 to 25.
• The audit committee comprises the non-executive directors and is chaired by C
A Parritt. The audit committee report is set out on page 26.
Board and board committee meetings held in 2012
The number of regular meetings during the year and attendance was as follows:
Meetings Meetings
held attended
R J Corry Board 11 11
Audit committee 2 2
H D Goldring Board 11 10
Audit committee 2 2
Nomination committee 1 1
Remuneration committee 1 1
Sir Michael Heller Board 11 11
Nomination committee 1 1
Remuneration committee 1 1
J A Heller Board 11 11
Audit Committee 2 2
C A Parritt Board 11 11
Audit committee 2 2
Nomination committee 1 1
Remuneration committee 1 1
Performance evaluation - board, board committees and directors
The performance of the board as a whole and of its committees and the
non-executive directors is assessed by the chairman and the chief executive and
is discussed with the senior independent director. Their recommendations are
discussed at the nomination committee prior to proposals for re-election being
recommended to the board. The performance of executive directors is discussed
and assessed by the remuneration committee. The senior independent director
meets regularly with the chairman, executive and non-executive directors
individually outside of formal meetings. The directors will take outside advice
in reviewing performance but have not found this to be necessary to date.
Independent directors
The senior independent non-executive director is C A Parritt. The other
independent non-executive director is H D Goldring. Delmore Asset Management
Limited (Delmore) is a company in which H D Goldring is a majority shareholder
and director. Delmore provides consultancy services to the company on a fee
paying basis. H D Goldring's association with Delmore and the length of his
service on the board mean that the criteria for independence set out in the UK
Corporate Governance Code are not met.
However, the board considers that the independence of H D Goldring is not
impaired either because he has served on the board for more than nine years or
because of his association with Delmore. The board therefore regards H D
Goldring as being independent.
The independent directors regularly meet prior to and after board meetings to
discuss corporate governance and other issues concerning the Group.
Directors and officers liability insurance
The Group maintains directors and officers insurance, which is reviewed
annually and is considered to be adequate by the company and its insurance
advisers.
Internal control
The directors are responsible for the Group's system of internal control and
for reviewing its effectiveness at least annually, and for the preparation and
review of its financial statements. The board has designed the Group's system
of internal control in order to provide the directors with reasonable assurance
that assets are safeguarded, that transactions are authorised and properly
recorded and that material errors and irregularities are either prevented or
would be detected within a timely period. However, no system of internal
control can eliminate the risk of failure to achieve business objectives or
provide absolute assurance against material misstatement or loss. The key
elements of the control system in operation are:
• The board meets regularly with a formal schedule of matters reserved for its
decision and has put in place an organisational structure with clearly defined
lines of responsibility and with appropriate delegation of authority;
• There are established procedures for planning, approval and monitoring of
capital expenditure and information systems for monitoring the Group's
financial performance against approved budgets and forecasts;
• The departmental heads are required annually to undertake a full assessment
process to identify and quantify the risks that face their departments and
functions, and assess the adequacy of the prevention, monitoring and
modification practices in place for those risks. In addition, regular reports
about significant risks and associated control and monitoring procedures are
made to the executive directors. The process adopted by the Group accords with
the guidance contained in the document "Internal Control Guidance for Directors
on the Combined Code" issued by the Institute of Chartered Accountants in
England and Wales. The audit committee receives reports from external auditors
and from executive directors of the group. During the period, the audit
committee has reviewed the effectiveness of the system of internal control as
described above. The board receives periodic reports from all committees.
• There are established procedures for the presentation and review of the
financial statements and the Group has in place an organisational structure
with clearly defined lines of responsibility and with appropriate delegation of
authority.
There are no internal control issues to report in the annual report and
financial statements for the year ended 31 December 2012. 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 Assets may be illiquid Regular reporting of current and
(size and and affect flexing projected position to the Board
geographical location) of balance sheet with efficient treasury
management.
People:
Retention and Unable to retain and Nomination Committee and senior
recruitment of staff attract the best staff review skills gaps and
people for the key succession planning. Training and
roles. development offered.
Loss of knowledge and
key skills.
Reputation:
Business interruption Loss in revenue. Documented Recovery Plan in place.
Impact on footfall.
Adverse publicity. General and terrorism insurance
Potential for criminal/ policies in place and risks
civil proceedings. monitored by trained security
staff.
Health and Safety policies in
place.
CCTV in centres.
Financing:
Fluctuation in Impact on covenants and Secure income flows.
property values other loan agreement
obligations. Regular monitoring of LTV and IC
covenants and other obligations.
Focus on quality assets.
Reduced availability Insufficient funds to Efficient treasury management.
of borrowing meet existing debts/
facilities interest payments and Loan facilities extended 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 and
deposits financial institutions which have
a strong credit rating.
Fluctuation of Uncertainty of interest Manage derivative contracts to
interest rates rate costs achieve a balance between hedging
interest rate exposure and
minimising potential cash calls.
Communication with shareholders
Prompt communication with shareholders is given high priority. Extensive
information about the Group and its activities is provided in the Annual
Report. In addition, a half-year report and two interim management statements
are produced for each financial year and published on the company's website.
The company's website www.lap.co.uk is promptly updated with announcements and
Annual Reports upon publication. Copies from previous years are also available
on the website.
The company's share price is published daily in the Financial Times. The share
price history and market information can be found at
http://www.londonstockexchange.com/prices-and-markets/markets/prices.htm. Our
code is LAS.
There is a regular dialogue with the company's stockbrokers and institutional
investors. Enquiries from individuals on matters relating to their
shareholdings and the business of the group are dealt with promptly and
informatively.
The company's website is under continuous development to enable better
communication with both existing and potential new shareholders.
The Bribery Act 2010
The Bribery Act 2010 came into force on 1 July 2011. All directors and staff
have since completed an e-learning course and continue to do so on a bi-annual
basis. The company is committed to acting ethically, fairly and with integrity
in all its endeavours and compliance with the code is closely monitored.
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 27 days
annual trade purchases (2011: 16 days).
Donations
No political donations were made during the year (2011: £Nil). Donations for
charitable purposes amounted to £3,200 (2011: £2,000).
Going concern
The Group's business activities, together with the factors likely to affect its
future development are set out in the Chairman and Chief Executive's Statement
on the preceding pages 4 and 7. The Finance Director's Report on pages 10 to 13
sets out the financial position of the company, its cash flows, liquidity
position and borrowing facilities. The Directors have also considered the
impact of the renewal of the £44.2 million Revolving Credit Facility with RBS
and extended to April 2013, as has been set out in both the Chairman and Chief
Executives Statement and the Finance Directors Report. A further extension to
July 2013 has been agreed. In addition Note 17 to the financial statements
gives details of the group's financial instruments and interest rate risk, and
maturity and hedging profile.
The Group has sufficient financial resources and has 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 Royal Automobile Club, 89 Pall
Mall, London SW1Y 5HS on Tuesday 4 June 2013 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 10 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 - 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 £2,809,599. This
represents approximately 1/3 (one third) of the ordinary share capital of the
company in issue (excluding treasury shares) as at 15 April 2013 (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 £
2,809,599, in connection with a rights issue. This amount represents
approximately 1/3 (one third) of the ordinary share capital of the company in
issue (excluding treasury shares) as at 15 April 2013 (being the last
practicable date prior to the publication of this Directors' Report).
The directors' authority will expire at the conclusion of the next Annual
General Meeting. The directors do not currently intend to make use of this
authority. However, if they do exercise the authority, the directors intend to
follow best practice as recommended by the ABI regarding its use (including as
regards the directors standing for re-election in certain cases).
Special Resolutions
The following special resolutions will be proposed at the Annual General
Meeting:
Resolution 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 2014, 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
£421,440 representing in accordance with institutional investor guidelines,
approximately 5 per cent. of the total ordinary share capital in issue as at 15
April 2013 (being the last practicable date prior to the publication of this
Directors' Report) in each case as if the pre-emption rights in company law did
not apply.
Save in respect of issues of shares in respect of employee share schemes and
share dividend alternatives, the directors do not currently intend to make use
of these authorities. The board intends to adhere to the provisions in the
Pre-emption Group's Statement of Principles not to allot shares for cash on a
non-pre-emptive basis in excess of an amount equal to 7.5 per cent. 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 8,428,797 ordinary
shares (representing approximately 10 per cent. of the company's issued share
capital as at 15 April 2013 (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 105 per cent. of the average market
price for an ordinary share for the five business days preceding any such
purchase. The authority conferred by Resolution 9 will expire at the conclusion
of the company's next annual general meeting to be held in 2014 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 15 April 2013 (being the last practicable date prior to the publication
of this Directors' Report) options were outstanding to subscribe for a total of
70,000 ordinary shares representing 0.08 per cent. of the company's issued
share capital. If the authority to make new market purchases sought under
Resolution 9 is ever used in full, such options would represent approximately
0.09 per cent. of the reduced issued share capital of the company (based on the
share capital as at 15 April 2013).
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
18 April 2013
24 Bruton Place
London
W1J 6NE
Remuneration report
The remuneration committee is pleased to present its report for the year ended
31 December 2012.
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 Unexpired term Notice period
contract
Executive Directors
Sir Michael Heller 01-Jan-71 Continuous 6 months
J A Heller 01-May-03 Continuous 12 months
R J Corry 01-Sep-92 Continuous 6 months
Non-executive Directors
H D Goldring 01-Jul-92 Continuous 3 months
C A Parritt 01-Jan-06 Continuous 3 months
The following information has been audited
Directors' Remuneration for the year ended 31 December 2012
Salary Bonus Bonus Other 2012 Pension Total 2011 Pension Total
and in in benefits total contrib- 2012 total contrib- 2011
fees cash shares £'000 before utions £'000 before utions £'000
£'000 £'000 £'000 pension £'000 pension £'000
contrib- contrib-
utions utions
£'000 £'000
Sir Michael 7 - 14 40 61 - 61 51 - 51
Heller*
J A Heller 300 30 15 42 387 30 417 641 30 671
R J Corry 166 - 9 23 198 33 231 189 33 222
M C Stevens† - - - - - - - 51 3 54
473 30 38 105 646 63 709 932 66 998
Non-executive
directors
H D Goldring* 43 - - 4 47 - 47 47 - 47
C A Parritt * 33 - - - 33 - 33 33 - 33
76 - - 4 80 - 80 80 - 80
Total 549 30 38 109 726 63 789 1,012 66 1,078
remuneration
for
directors'
service
during year
* See "Directors" below and Note 20 "Related party transactions".
Other benefits include the provision of car, health and other insurance and
subscriptions.
† M C Stevens retired 30 April 2011
Pension schemes and incentives
Two (2011: three) directors have benefits under money purchase pension schemes.
Contributions in 2012 were £63,000 (2011: £66,000) 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 three
executive directors during 2012 (2011: one) and no non-executive directors
(2011: nil).
Directors
Although Sir Michael 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 Sir Michael Heller has an interest. The board
estimates that the value of these services, if supplied to a third party, would
have been £275,000 (2011: £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). It 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 2012 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 2012. Further
details of this scheme are set out in Note 19 "Share Capital" to the financial
statements
The bid market price of London & Associated Properties PLC ordinary shares at
31 December 2012 was 22.0p (2011: 26.25p). During the year the share mid-market
price ranged between 20.0 and 28.5p.
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: On 20 December 2012, 90,480 free shares up to the annual
maximum of £3,000 per member were awarded at 22.0p (2011: 41.75p)
* The shares below were not transferred from treasury to members until 2
January 2013.
Free shares awarded:
Number of Number of Value of
members shares shares
2012 2011 2012* 2011 2012* 2011
£ £
Directors:
R J Corry 1 1 13,636 7,185 3,000 3,000
J A Heller 1 0 13,636 0 3,000 0
M C Stevens † - 1 - 7,185 - 3,000
Staff 5 11 63,208 62,027 13,906 25,896
Total at 31 December 7 13 90,480 76,397 19,906 31,896
2. Partnership shares: No partnership shares were issued between November 2011
and October 2012.
3. Matching shares: The partnership share agreements for the year to 31 October
2012 provide for two matching shares to be awarded free of charge for each
partnership share acquired. No partnership shares were acquired in 2012 (2011:
nil). Matching shares will usually be forfeited if a member leaves employment
in the group within 5 years of their grant.
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 2012 amounted to nil (2011: £5,775). * The shares in the
table below were not transferred to members until 2 January 2013.
Dividend shares issued:
Number of Number of Value of
members shares shares
2012 2011 2012* 2011 2012* 2011
£ £
Directors:
R J Corry 1 1 2,462 2,423 535 739
J A Heller 1 1 2,211 2,329 481 710
Staff 12 15 20,109 21,648 4,373 6,603
Total at 31 December 14 17 24,782 26,400 5,389 8,052
† M C Stevens retired 30 April 2011
The SIP is set up as an employee benefit trust - The trustee is London &
Associated Securities Limited, a wholly owned subsidiary of LAP, and all shares
and dividends acquired under the SIP will be held by the trustee until
transferred to members in accordance with the rules of the SIP.
The following information is unaudited
The graph illustrates the company's performance as compared with a broad equity
market index over a five year period. Performance is measured by total
shareholder return. The directors have chosen the FTSE All Share - Total Return
Index as a suitable index for this comparison as it gives an indication of
performance against a large spread of quoted companies.
C A Parritt
Chairman - Remuneration Committee
18 April 2013
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 auditors, 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 their independence each year, which includes:
i) a review of non-audit services provided to the Group and related fees;
ii) discussion with the auditors 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 auditors 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 auditors 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. During the year 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 auditors, 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 auditors and approved their fees for both
audit and non-audit services as set out in note 2 to the financial statements.
• the chairman of the audit committee has also had separate discussions with
the external audit partner.
External Auditor
Baker Tilly UK Audit LLP held office throughout the period under review. In the
United Kingdom London & Associated Properties PLC provides extensive
administration and accounting services to Bisichi Mining PLC, which has its own
audit committee and employs PKF (UK) LLP, a separate and independent firm of
registered auditor.
C A Parritt
Chairman - Audit Committee
18 April 2013
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 Conduct Authority to prepare group financial
statements in accordance with International Financial Reporting Standards
("IFRS") as adopted by the European Union ("EU") and have elected under company
law to prepare the company financial statements in accordance with United
Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting
Standards and applicable law).
The group financial statements are required by law and IFRS adopted by the EU
to present fairly the financial position and performance of the group; the
Companies Act 2006 provides in relation to such financial statements that
references in the relevant part of that Act to financial statements giving a
true and fair view are references to their achieving a fair presentation.
Under company law the directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the group and the company and of the profit or loss of the group for
that period.
In preparing each of the group and company financial statements, the directors
are required to:
a. select suitable accounting policies and then apply them consistently;
b. make judgements and accounting estimates that are reasonable and prudent;
c. for the group financial statements, state whether they have been prepared in
accordance with IFRSs adopted by the EU and for the company financial
statements state whether applicable UK accounting standards have been followed,
subject to any material departures disclosed and explained in the company
financial statements;
d. prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the group and the company will continue in
business.
The directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the group's and the company's transactions and
disclose with reasonable accuracy at any time the financial position of the
group and the company and enable them to ensure that the financial statements
and the Directors' Remuneration Report comply with the Companies Act 2006 and,
as regards the group financial statements, Article 4 of the IAS Regulation.
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 15 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 profit of the company and the undertakings included in
the consolidation taken as a whole; and
b. the management report contained in the Annual Report includes a fair review
of the development and performance of the business and the position of the
company and the undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and uncertainties that they
face.
The directors are responsible for the maintenance and integrity of the
corporate and financial information included on the London & Associated
Properties PLC website.
Legislation in the United Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in other jurisdictions.
Valuers' certificates
To the Directors of London & Associated Properties PLC
In accordance with your instructions we have carried out a valuation of the
freehold and leasehold property interests held as at 31 December 2012 by the
company as detailed in our Valuation Reports dated 12 February 2013 and 4 March
2013.
Having regard to the foregoing, we are of the opinion that the open market
value as at 31 December 2012 of these interests was:
£'000
Freehold 73,080
Leasehold 128,155
201,235
33 Wigmore Street, London W1U 1BZ Allsop LLP
4 March 2013 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 2012 by the company as
detailed in our Valuation Report dated 21 February 2013.
Having regard to the foregoing, we are of the opinion that the open market
value as at 31 December 2012 of these interests was:
£'000
Freehold 4,177
Capitol House, Russell Street, Leeds LS1 5SP BNP Paribas Real Estate Advisory &
Property Management UK Limited
21 February 2013 Regulated by Royal Institution of Chartered Surveyors
Independent auditor's report
TO THE MEMBERS OF London & Associated Properties PLC
We have audited the group and parent company financial statements ("the
financial statements") which comprise the Consolidated income statement, the
Consolidated balance sheet, the Consolidated statement of changes in
shareholders' equity, the Consolidated statement of comprehensive income, the
Consolidated cash flow statement, the Group accounting policies, the Notes to
the Financial Statements, the Company balance sheet, and the related notes.
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 27 the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view. Our
responsibility is to audit and express an opinion on the financial statements
in accordance with applicable law and International Standards on Auditing (UK
and Ireland). Those standards require us to comply with the Auditing Practices
Board's (APB's) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on
the APB's website at www.frc.org.uk/apb/scope/private.cfm.
Opinion on financial statements
In our opinion
• the financial statements give a true and fair view of the state of the
group's and of the parent company's affairs as at 31 December 2012 and of the
group's profit 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; and
• 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 21, in relation to going concern;
• the part of the Corporate Governance Statement relating to the company's
compliance with the nine provisions of the UK Corporate Governance Code
specified for our review; and
• certain elements of the report to shareholders by the Board 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 2013
Consolidated income statement
for the year ended 31 December 2012
Notes 2012 2011
£'000 £'000
Gross rental income
Group and share of joint ventures 15,827 16,047
Lease surrenders (23) 943
Less: joint ventures - share of rental income (638) (611)
Revenue 1 15,166 16,379
Direct property expenses (1,351) (1,819)
Overheads (2,514) (2,700)
Property overheads 1 (3,865) (4,519)
Net rental income 1 11,301 11,860
Listed investments held for trading 3 97 24
Profit on sale of investment properties - 310
Operating profit before financing charges 1 11,398 12,194
Finance income 5 47 34
Finance expenses 5 (11,344) (11,344)
Operating profit after financing charges 101 884
Revaluation and other movements, associates and joint
ventures
Net increase/(decrease) on revaluation of investment 10,692 (1,021)
properties
Net increase/(decrease) in value of investments held 4 (104)
for trading
Share of (loss)/profit of joint ventures, after tax 10 (634) 10
Share of profit/(loss) of associate, after tax 11 545 (189)
Interest rate derivative break cost 17 - (920)
Adjustment to the Net Present Value of interest rate 17 (3,085) (17,223)
derivative
Profit/(loss) including revaluation and other movements 7,623 (18,563)
Income tax 6 (354) 3,742
Profit/(loss) for the year attributable to the owners 7,269 (14,821)
of the parent
Basic profit/(loss) per share 8 8.65p (17.63)p
Diluted profit/(loss) per share 8 8.65p (17.63)p
The revenue and operating result for the year is derived from continuing
operations in the United Kingdom.
Consolidated balance sheet
at 31 December 2012
Notes 2012 2011
£'000 £'000
Non-current assets
Market value of properties attributable to Group 205,412 193,748
Present value of head leases 28,657 28,661
Property 9 234,069 222,409
Plant and equipment 9 260 484
Investments in joint ventures 10 1,337 2,039
Investments in associated company 11 7,271 7,011
Held to maturity investments 12 1,913 1,998
Deferred tax 18 3,324 3,678
248,174 237,619
Current assets
Trade and other receivables 13 4,656 4,301
Financial assets - investments held for trading 14 20 635
Cash and cash equivalents 8,303 6,464
12,979 11,400
Total assets 261,153 249,019
Current liabilities
Trade and other payables 15 (12,514) (9,453)
Financial liabilities - borrowings 16 (52,666) (48,012)
(65,180) (57,465)
Non-current liabilities
Financial liabilities - borrowings 16 (86,924) (92,114)
Interest rate derivatives 17 (33,935) (30,850)
Present value of head leases on properties (28,657) (28,661)
(149,516) (151,625)
Total liabilities (214,696) (209,090)
Net assets 46,457 39,929
Equity attributable to the owners of the parent
Share capital 19 8,554 8,554
Share premium account 4,866 4,866
Translation reserve in associate (338) (216)
Capital redemption reserve 47 47
Retained earnings (excluding treasury shares) 34,749 28,099
Treasury shares 19 (1,421) (1,421)
Retained earnings 33,328 26,678
Total shareholders' equity 46,457 39,929
Net assets per share 8 55.30p 47.53p
Diluted net assets per share 8 55.29p 47.53p
These financial statements were approved by the board of directors and
authorised for issue on 18 April 2013 and signed on its behalf by:
Sir Michael Heller R J Corry Company Registration No. 341829
Director Director
Consolidated statement of changes in shareholders' equity
for the year ended 31 December 2012
Retained earnings
Share Share Translation Capital Treasury Retained Total
capital premium reserves in redemption shares earnings equity
£'000 £'000 associate reserve £'000 excluding £'000
£'000 £'000 treasury
shares
£'000
Balance at 1 January 8,554 4,866 30 47 (2,078) 44,342 55,761
2011
Loss for year - - - - - (14,821) (14,821)
Other comprehensive
income:
Currency translation in - - (246) - - - (246)
associate
Total other - - (246) - - - (246)
comprehensive income
Total comprehensive - - (246) - - (14,821) (15,067)
income
Transactions with
owners:
Equity share options in - - - - - 6 6
associate
Acquisition of own - - - - (101) - (101)
shares and expenses
Disposal of own shares - - - - 294 - 294
Loss on transfer of own - - - - 464 (464) -
shares
Dividends paid - - - - - (964) (964)
Transactions with - - - - 657 (1,422) (765)
owners
Balance at 31 December 8,554 4,866 (216) 47 (1,421) 28,099 39,929
2011
Profit for year - - - - - 7,269 7,269
Other comprehensive
income:
Currency translation in - - (122) - - - (122)
associate
Total other - - (122) - - - (122)
comprehensive income
Total comprehensive - - (122) - - 7,269 7,147
income
Transaction with
owners:
Equity share options in - - - - - 11 11
associate
Dividends paid - - - - - (630) (630)
Transactions with - - - - - (619) (619)
owners
Balance at 31 December 8,554 4,866 (338) 47 (1,421) 34,749 46,457
2012
All the above are attributable to the owners of the parent.
Consolidated statement of comprehensive income
for the year ended 31 December 2012
2012 2011
£'000 £'000
Profit/(loss) for the year 7,269 (14,821)
Other comprehensive income:
Currency translation in associate (122) (246)
Other comprehensive income for the year net of tax (122) (246)
Total comprehensive income for the period attributable to owners 7,147 (15,067)
of the parent
Consolidated cash flow statement
for the year ended 31 December 2012
2012 2011
£'000 £'000
Operating activities
Operating profit before financing charges 11,398 12,194
Depreciation 188 158
(Profit)/loss on disposal of non-current assets (121) 9
Profit on sale of investment properties - (310)
Decrease/(increase) in net current assets 1,257 (1,160)
Cash generated from operations 12,722 10,891
Income tax paid - -
Cash inflows from operating activities 12,722 10,891
Investing activities
Investment in shares and loan stock in joint ventures 85 (940)
Investment in shares in associate - (131)
Property acquisitions and improvements (1,115) (298)
Sale of properties - 910
Purchase of office equipment and motor vehicles (37) (70)
Sale of office equipment and motor vehicles 194 33
Interest received 47 34
Dividends received from associate and joint ventures 242 181
Cash outflows from investing activities (584) (281)
Financing activities
Purchase of treasury shares - (101)
Sale of treasury shares - 294
Equity dividends paid (630) (964)
Interest paid (9,514) (9,244)
Interest on obligation under finance leases (1,477) (1,682)
Interest rate derivatives break costs paid - (920)
Short term loan from joint ventures 2,000 -
Repayment of short term bank loan - (910)
(Repayment)/payment of medium term bank loan (236) 943
Cash outflows from financing activities (9,857) (12,584)
Net increase/(decrease) in cash and cash equivalents 2,281 (1,974)
Cash and cash equivalents at beginning of year 2,747 4,721
Cash and cash equivalents at end of year 5,028 2,747
Cash and cash equivalents
For the purpose of the cash flow statement, cash and cash equivalents comprise
the following balance sheet amounts:
2012 2011
£'000 £'000
Cash and cash equivalents (before bank overdrafts) 8,303 6,464
Bank overdrafts (3,275) (3,717)
Cash and cash equivalents at end of year 5,028 2,747
Group accounting policies
The following are the principal group accounting policies:
Basis of accounting
The group financial statements for the year ended 31 December 2012 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 Directors exercised their commercial judgements when reviewing the cash
flow forecasts of the Group and the underlying assumptions on which they are
based. They have also considered the impact of the renewal of its banking
facilities. The Group's business activities, together with the factors likely
to affect its future development, are set out in the Chairman and Chief
Executive's Statement and Finance Director's Report. In addition the Directors
consider that note 17 to the financial statements sets out 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.
Negotiations are continuing in relation to the renewal of the £44.2 million
term bank facility that originally expired in September 2012. While these
negotiations are ongoing the existing facility was extended to 2 April 2013 and
a further extension to 2 July 2013 has been agreed. The terms for a new
facility are being finalised and the process of documenting them is being
started. We will report more fully once the facility has been signed.
With sound financial resources, the pending renewal of the £44 million facility
and long term leases in place with the tenants, the Directors believe that the
Group is well placed to manage its business risks despite the current uncertain
economic outlook. As the Group is working with its bank and advisors on the
renewal of the term facilities the Directors have a reasonable expectation that
the Group has adequate resources to continue in operational existence for the
foreseeable future. Thus they continue to adopt the going concern basis of
accounting in preparing the annual financial statements.
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 the estimates are contained in the Directors' Report.
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.
International Accounting Standards (IAS/IFRS)
The following standards and interpretations have been applied for the first
time in these financial statements, were in issue:
IFRS 7 Financial Instruments: Disclosures (amendment).
At the date of approval of these financial statements, the following standards
and interpretations have been issued and adopted by the EU but are not
effective for the year ended 31 December 2012 and have not been adopted early:
IFRS 7 Financial Instruments (amendment)
IFRS 10 Consolidated Financial Statements
IFRS 11 Joint Arrangements
IFRS 12 Disclosure of Interests in Other Entities
IFRS 13 Fair Value Measurement
IAS 1 Presentation of Financial Statements (amendment)
IAS 12 Income taxes (amendment)
IAS 19 Employee Benefits (revised)
IAS 27 Separate Financial Statements (revised)
IAS 28 Investments in Associates and Joint Ventures (revised)
IAS 32 Financial Instruments: Presentation (amendment)
The adoption of the standards and interpretations in issue but not yet
effective is not expected to have a material impact on the financial statements
of the Group.
Basis of consolidation
The Group accounts incorporate the accounts of London & Associated Properties
PLC and all of its subsidiary undertakings, together with the Group's share of
the results and net assets of its joint ventures and associate.
Subsidiaries
Subsidiaries are those entities controlled by the Group. Control is assumed
when the Group has the power to govern the financial and operating policies of
an entity or business and to benefit economically from its activities.
Subsidiaries acquired during the year are consolidated using the acquisition
method. Their results are incorporated from the date that control passes.
All intra group transactions, balances, income and expenses are eliminated on
consolidation. Details of Group trading subsidiary companies are set out in
note 25.4.
Joint ventures
Investments in joint ventures, being those entities over whose activities the
Group has joint control, as established by contractual agreement, include the
appropriate share of the results and net assets of those undertakings.
Associates
Undertakings in which the Group has a participating interest of not less than
20% of the voting capital and over which it has the power to exert significant
influence are defined as associated undertakings. The financial statements
include the appropriate share of the results and reserves of those
undertakings.
Goodwill
Goodwill arising on acquisition is recognised as an intangible asset and
initially measured at cost, being the excess of the cost of the acquired entity
over the Group's interest in the fair value of the assets and liabilities
acquired. Goodwill is carried at cost less accumulated impairment losses.
Goodwill arising from the difference in the calculation of deferred tax for
accounting purposes and fair value in negotiations is judged not to be an asset
and is accordingly impaired on completion of the relevant acquisition.
Revenue
Rental income
Rental income arises from operating leases granted to tenants. An operating
lease is a lease other than a finance lease. A finance lease is one whereby
substantially all the risks and rewards of ownership are passed to the lessee.
Rental income is recognised in the group income statement on a straight-line
basis over the term of the lease. This includes the effect of lease incentives
to tenants, which are normally in the form of rent free periods. Contingent
rents, being the difference between the rent currently receivable and the
minimum lease payments, are recognised in property income in the periods in
which they are receivable. Rent reviews are recognised when such reviews have
been agreed with tenants.
Reverse surrender premiums
Payments received from tenants to surrender their lease obligations are
recognised immediately in the income statement.
Dilapidations
Dilapidations monies received from tenants in respect of their lease
obligations are recognised immediately in the income statement.
Other revenue
Revenue in respect of listed investments held for trading represents investment
dividends received and profit or loss recognised on realisation. Dividends are
recognised in the income statement when the dividend is received.
Property operating expenses
Property operating expenses are expensed as incurred and any property operating
expenditure not recovered from tenants through service charges is charged to
the income statement.
Employee benefits
Share based remuneration
The company operates a long-term incentive plan and two share option schemes.
The fair value of the conditional awards on shares granted under the long- term
incentive plan and the options granted under the share option scheme is
determined at the date of grant. This fair value is then expensed on a
straight-line basis over the vesting period, based on an estimate of the number
of shares that will eventually vest. At each reporting date, the fair value of
the non-market based performance criteria of the long-term incentive plan is
recalculated and the expense is revised. In respect of the share option scheme,
the fair value of options granted is calculated using a binomial method.
Pensions
The company operates a defined contribution pension scheme. The contributions
payable to the scheme are expensed in the period to which they relate.
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
current market rate of interest assuming that this rate is applied for the
remainder of the hedge.
Where a derivative is designated as a hedge of the variability of a highly
probable forecast transaction e.g. 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 e.g. when interest income or
expense is recognised.
The gain or loss arising from any adjustment to the fair value to the business
calculation is recognised immediately in the group income statement when the
criteria set out in IAS 32 allowing the movements to be shown in equity have
not been met.
Ordinary Shares
Shares are classified as equity when there is no obligation to transfer cash or
other assets. Incremental costs directly attributable to the issue of new
shares are shown in equity as a deduction, net of tax, from the proceeds.
Treasury Shares
When the Group's own equity instruments are repurchased, consideration paid is
deducted from equity as treasury shares until they are cancelled. When such
shares are subsequently sold or reissued, any consideration received is
included in equity.
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 original maturities of three months
or less.
Segmental Reporting
For management reporting purposes, the Group is organised into business
segments distinguishable by economic activity. The Group's 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 2012
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
Property 2012 Total Property 2011 Total
£'000 Other £'000 £'000 Other £'000
investments investments
£'000 £'000
Rental income 15,166 - 15,166 16,379 - 16,379
Property overheads (3,865) - (3,865) (4,519) - (4,519)
Net rental income 11,301 - 11,301 11,860 - 11,860
Listed investment income - 97 97 - 24 24
Profit on sale of - - - 310 - 310
investment properties
Operating profit before 11,301 97 11,398 12,170 24 12,194
financing charges*
Total assets (excluding 250,612 20 250,632 237,336 635 237,971
investments in associate
and joint ventures)
Total liabilities (75,106) - (75,106) (68,964) - (68,964)
(excluding borrowings
and current tax)
Borrowings (139,590) - (139,590) (140,126) - (140,126)
Net assets 35,916 20 35,936 28,246 635 28,881
Investments in joint 3,245 4,032
ventures: non segmental
(notes 10 and 12)
Investments in associate: 7,271 7,011
non segmental (note 11)
Investments in unlisted 5 5
companies
Net assets as per balance 46,457 39,929
sheet
Other segment items:
Net increase/(decrease) 10,692 - 10,692 (1,021) - (1,021)
on revaluation
of investment properties
Net increase/(decrease) - 4 4 - (104) (104)
on revaluation
of investments held for
trading
Finance income 47 - 47 34 - 34
Finance expenses 11,344 - 11,344 11,344 - 11,344
Depreciation 188 - 188 158 - 158
Capital expenditure 1,009 - 1,009 493 - 493
Net rental income
Joint Ventures
Group Analytical Dragon Langney Total Group 2011
exclude: Retail
Ventures Shopping £'000 Share £'000
joint Properties ventures £'000 Centre 2012
£'000
£'000 Unit £'000
Trust
£'000
Rental income 15,166 715 203 1,431 17,515 15,804 16,990
Direct property expenses (1,351) (111) (58) (183) (1,703) (1,458) (1,860)
Overheads (2,514) (211) (118) (129) (2,972) (2,695) (2,895)
11,301 393 27 1,119 12,840 11,651 12,235
Less: attributable to joint (350) (375)
ventures
Net rental income 11,301 11,860
* Operating profit before financing charges is defined as profit before tax and
excludes the share of profit & losses of joint ventures and associate, finance
income and expenses, movement on revaluation of investment properties and
investments held for trading and the movement of interest rate derivatives.
Geographical segments
At net rental income level, the Group operates in the United Kingdom only. The
directors consider it to be the only geographical segment of the business.
Further information in respect of the property reportable segment is included
within the primary statements. No customer represents revenue in excess of 10
per cent of total revenue (2011: none).
2. Profit/(loss) before taxation
2012 2011
£'000 £'000
Profit/(loss) before taxation is arrived at after charging/
(crediting):
Staff costs (note 21) 1,946 2,283
Depreciation on tangible fixed assets - owned assets 188 158
Operating lease rentals - land and buildings 550 375
(Profit)/loss on disposal of motor vehicles and office equipment (121) 10
Amounts payable to the auditor in respect of both audit and
non-audit services
Audit services:
Statutory - company and consolidation 69 63
- subsidiaries 29 32
Further assurance services 2 3
Other services 8 8
108 106
Staff costs and depreciation of tangible fixed assets are included in
overheads.
3. Listed investments held for trading
2012 2011
£'000 £'000
Investment sales 733 -
Dividends receivable 8 24
741 24
Cost of sales (619) -
122 24
Attributable overheads (25) -
Net income from listed investments 97 24
4. Directors' emoluments
2012 2011
£'000 £'000
Emoluments 726 1,012
Defined contribution pension scheme contributions 63 66
789 1,078
Details of directors' emoluments and share options are set out in the
remuneration report.
5. Finance income and expenses
2012 2011
£'000 £'000
Finance income 47 34
Finance expenses
Interest on bank loans and overdrafts (2,574) (2,518)
Other loans (2,206) (2,103)
Interest on derivatives adjustment (4,647) (4,743)
Interest on obligations under finance leases (1,917) (1,980)
Total finance expenses (11,344) (11,344)
(11,297) (11,310)
6. Income tax
2012 2011
£'000 £'000
Current tax
Corporation tax on profit/(loss) of the period - -
Adjustments in respect of previous periods - -
Total current tax - -
Deferred tax
Origination and reversal of timing differences 46 (381)
Revaluation of investment properties 1,770 (547)
Accelerated capital allowances (1,370) 1,045
Fair value of interest derivatives (92) (3,897)
Adjustments in respect of previous periods - 38
Total deferred tax (note 18) 354 (3,742)
Tax on loss on ordinary activities 354 (3,742)
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 24.5 per cent (2011:
26.5 per cent). The differences are explained below:
Profit/(loss) on ordinary activities before taxation 7,623 (18,563)
Taxation on ordinary activities at 24.5 per cent (2011: 26.5%) 1,868 (4,919)
Effects of:
Other differences (1,824) 951
Joint ventures and associate (33) (41)
Deferred tax rate adjustment 343 229
Adjustment in respect of prior years - 38
Tax charge/(credit) for the period 354 (3,742)
The main component of other differences in the reconciliation relates to
potential indexation for capital gains of £0.8 million (2011: indexation
allowance £0.8 million) and the adjustment of capital allowances in the year
which are no longer payable of (£2.3 million) (2011: £NIL).
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
2012 £'000 2011 £'000
Per Per
share share
Dividends paid during the year relating to the 0.75p 630 1.15p 964
prior period
Dividends to be paid:
Interim dividend - - 0.75p 630
Proposed final dividend - - - -
- - 0.75p 630
8. Profit/(loss) per share and net assets per share
Profit/(loss) per share have been calculated as follows:
2012 2011
Profit/(loss) for the year for the purposes of basic and diluted 7,269 (14,821)
profit/(loss) per share (£'000)
Weighted average number of ordinary shares in issue for the 84,004 84,074
purpose of basic profit/(loss) per share ('000)
Basic profit/(loss) per share 8.65p (17.63)p
Weighted average number of ordinary shares in issue for the 84,004 84,074
purpose of diluted profit/(loss) per share ('000)
Fully diluted profit/(loss) per share 8.65p (17.63)p
Weighted average number of shares in issue is calculated after excluding
treasury shares of 1,538,398 (2011: 1,538,398).
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 Net assets
issue per
2012 2011 2012 2011 2012 2011
£'000 £'000 `000 `000 Pence Pence
Basic
At 31 December 46,457 39,929 84,004 84,004 55.30 47.53
Dilution adjustments for shares
subject to option agreements:
Issue of outstanding share options 28 28 70 70
Diluted 46,485 39,957 84,074 84,074 55.29 47.53
9. Property and plant and equipment
Investment Properties
Total Freehold Leasehold Leasehold Office
£'000 £'000 over under equipment
50 years 50 years and motor
£'000 £'000 vehicles
£'000
Cost or valuation at 1 January 2012 222,409 79,678 142,275 456 1,344
Additions 972 626 346 - 37
Disposals - - - - (245)
Decrease in present value of head (4) - (4) - -
leases
Increase/(decrease) on revaluation 10,692 (3,047) 13,889 (150) -
Cost or valuation at 31 December 2012 234,069 77,257 156,506 306 1,136
Representing assets stated at:
Valuation 205,412 77,257 127,855 300 -
Present value of head leases 28,657 - 28,651 6 -
Cost - - - - 1,136
234,069 77,257 156,506 306 1,136
Depreciation at 1 January 2012 - - - - 860
Charge for the year - - - - 188
Disposals - - - - (172)
Depreciation at 31 December 2012 - - - - 876
Net book value at 1 January 2012 222,409 79,678 142,275 456 484
Net book value at 31 December 2012 234,069 77,257 156,506 306 260
9. Property and plant and equipment continued
Investment Properties
Total Freehold Leasehold Leasehold Office
£'000 £'000 over under equipment
50 years 50 years and motor
£'000 £'000 vehicles
£'000
Cost or valuation at 1 January 2011 223,610 82,973 140,131 506 1,586
Additions 423 - 423 - 70
Disposals (600) (600) - - (312)
Decrease in present value of head (3) - (3) - -
leases
(Decrease)/increase on revaluation (1,021) (2,695) 1,724 (50) -
Cost or valuation at 31 December 2011 222,409 79,678 142,275 456 1,344
Representing assets stated at:
Valuation: 193,748 79,678 113,620 450 -
Present value of head leases 28,661 - 28,655 6 -
Cost - - - - 1,344
222,409 79,678 142,275 456 1,344
Depreciation at 1 January 2011 - - - - 974
Charge for the year - - - - 158
Disposals - - - - (272)
Depreciation at 31 December 2011 - - - - 860
Net book value at 1 January 2011 223,610 82,973 140,131 506 612
Net book value at 31 December 2011 222,409 79,678 142,275 456 484
The leasehold and freehold properties, excluding the present value of head
leases, were valued as at 31 December 2012 by external professional firms of
chartered surveyors. The valuations were made at open market value.
2012 2011
£'000 £'000
Allsop LLP 201,235 95,155
BNP Paribas Real Estate 4,177 4,033
Jones Lang LaSalle - 94,560
205,412 193,748
Add: Present value of headleases 28,657 28,661
234,069 222,409
The historical cost of investment properties, including total capitalised
interest of £6,051,000 (2011: £6,051,000) was as follows:
Freehold 2012 Short Freehold 2011 Short
£'000 Leasehold Leasehold £'000 Leasehold Leasehold
Over 50 £'000 Over 50 £'000
years years
£'000 £'000
Cost at 1 January 76,133 121,889 785 76,308 121,466 785
Additions 626 346 - - 423 -
Disposals - - - (175) - -
Cost at 31 December 76,759 122,235 785 76,133 121,889 785
Contracts were exchanged in December 2012 to sell for £9.5million the group
properties in Chesterfield and a shop unit in Windsor. The sale is expected to
be completed by May 2013.
10. Investment in joint ventures
2012 2011
£'000 £'000
Group share of:
Turnover 638 611
Loss before tax (683) (15)
Taxation 49 25
(Loss)/profit after tax (634) 10
Non-current assets 7,522 8,268
Current assets 2,013 1,586
Current liabilities (6,040) (443)
Non-current liabilities (2,158) (7,372)
Net assets 1,337 2,039
Analytical Ventures Limited (Analytical Ventures) - unlisted property
investment company. The company owns 50 per cent of the issued share capital
and £1,992,897 of loan stock of Analytical Ventures. The remaining 50 per cent
is owned by Uberior Ventures Limited. Analytical Ventures is incorporated and
operates in England and Wales and has issued share capital of 7,558,000
ordinary shares of £1 each (2011: 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 (2011: 500,000 ordinary shares of £1 each).
Dragon is managed by a board of directors with neither party having overall
control.
Langney Shopping Centre Unit Trust (Langney) - unlisted property investment
unit trust. The company acquired 12.50 per cent of the total ordinary units in
issue in June 2011. A further 12.50 per cent is owned by Bisichi Mining PLC.The
remaining 75 per cent is owned by Columbus Capital Management LLP. Langney is
incorporated in Jersey and has 7,100 total ordinary units in issue of £1,000
each. The company has a management contract to manage the property for Langney
and accordingly has a significant influence in Langney. It is a single asset
unit trust. Since the year end the unitholders made additional capital
contributions in proportion to their original holdings and the company's share
was £31,250.
Shares in joint ventures:
2012 2011
£'000 £'000
At 1 January 2,039 1,163
Share of (loss)/profit after tax (634) 10
Dividend received (68) (22)
Investment in shares - 888
(702) 876
At 31 December 1,337 2,039
11. Investments in associated company
Associate
2012 2011
£'000 £'000
Bisichi Mining PLC - listed mining and property investment
company
Group share of:
Turnover 15,100 12,551
Profit/(loss) before tax 818 (568)
Taxation (273) 379
Profit/(loss) after tax 545 (189)
Non-current assets 10,397 10,383
Current assets 4,624 5,083
Current liabilities (6,005) (7,071)
Non-current liabilities (1,560) (1,324)
Minority interest (185) (60)
Net assets 7,271 7,011
11. Investments in associated company continued
2012 2011
£'000 £'000
Share in associate:
At 1 January 7,011 7,483
Share of profit/(loss) after tax 545 (189)
Investment in shares - 131
Equity share options 11 6
Currency translation (122) (246)
Dividend received (174) (174)
260 (472)
At 31 December 7,271 7,011
The company owns 42 per cent (2011: 42 per cent) of the issued share capital of
Bisichi Mining PLC (Bisichi), a company registered in England and Wales.
Bisichi has an issued share capital of 10,556,839 (2011: 10,556,839) 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 2012 was £4,654,000
(2011: £6,206,000). No impairment is necessary as the Directors consider the
market value deficit temporary.
12. Held to maturity investments
2012 Unlisted Loan 2011 Unlisted Loan
Stock Stock
Total Shares Total Shares
in joint in joint
£'000 £'000 £'000 £'000
ventures ventures
£'000 £'000
Cost
At 1 January 1,998 5 1,993 1,946 5 1,941
Loan stock issued - - - 220 - 220
Repayments (85) - (85) (168) - (168)
At 31 December 1,913 5 1,908 1,998 5 1,993
13. Trade and other receivables
2012 2011
£'000 £'000
Trade receivables 1,261 1,100
Amounts due from associate and joint ventures 178 442
Other receivables 221 191
Prepayments and accrued income 2,996 2,568
4,656 4,301
The Directors consider that the carrying amount of trade and other receivables
approximates to their fair value.
14. Investments held for trading
2012 2011
£'000 £'000
Market bid value of the listed investment portfolio 20 635
Unrealised deficit of market value over cost (3) (499)
Listed investment portfolio at cost 23 1,134
All investments are listed on the London Stock Exchange.
15. Trade and other payables
2012 2011
£'000 £'000
Trade payables 1,409 426
Amounts owed to joint ventures 3,266 1,144
Other taxation and social security costs 1,216 954
Other payables 939 725
Accruals and deferred income 5,684 6,204
12,514 9,453
The Directors consider that the carrying amount of trade and other payables
approximates to their fair value.
16. Borrowings
Current borrowings - amounts falling due within one year
2012 2011
£'000 £'000
£5 million First Mortgage Debenture Stock 2013 at 11.3 per cent 5,000 -
Bank overdrafts (secured) 3,275 3,717
£1 million term bank loan repayable by 2015 (unsecured) 247 226
£47 million revolving credit facility repayable in 2013* 44,144 44,069
(secured)
52,666 48,012
Non-current borrowings - amounts falling due after more than one year
Term borrowings
Debenture stocks:
£5 million First Mortgage Debenture Stock 2013 at 11.3 per cent - 5,000
£1.7 million First Mortgage Debenture Stock 2016 at 8.67 per cent 1,700 1,700
£5 million First Mortgage Debenture Stock 2018 at 11.6 per cent 5,000 5,000
£10 million First Mortgage Debenture Stock 2022 at 8.109 per cent 9,837 9,821
*
16,537 21,521
Term bank loans:
£1 million term bank loan repayable by 2015 460 706
£70 million term bank loan repayable in 2014* 69,927 69,887
70,387 70,593
86,924 92,114
* The £10 million debenture and bank loans are shown after deduction of
outstanding amortised issue costs.
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 October 2013, 2016, August 2018 and 2022, the £
47 million bank revolving credit facility repayable in April 2013 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 £202.8 million. The Directors are working with their
bank and advisors on the renewal of the facility expiry in April 2013 and which
has been agreed to extend to July 2013.
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.
The table below analyses the Group's financial liabilities into maturity
Groupings and also provides details of the liabilities that bear interest at
fixed, floating and non-interest bearing rates.
Less than 2-5 years Over 2012
1 year £'000 5 years Total
£'000 £'000 £'000
Bank overdrafts (floating) 3,275 - - 3,275
Debentures (fixed) 5,000 1,700 15,000 21,700
Bank loans (floating)* 44,441 70,460 - 114,901
Trade and other payables 12,514 - - 12,514
(non-interest)
65,230 72,160 15,000 152,390
Less than 2-5 years Over 2011
1 year £'000 5 years Total
£'000 £'000 £'000
Bank overdrafts (floating) 3,717 - - 3,717
Debentures (fixed) - 6,700 15,000 21,700
Bank loans (floating)* 44,420 70,706 - 115,126
Trade and other payables (non-interest) 9,453 - - 9,453
57,590 77,406 15,000 149,996
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 2012 London & Associated Properties PLC was within its bank
borrowing facilities and was not in breach of any of the covenants. Overdrafts
are renewable annually. Term loan repayments are as set out below. Details of
other financial liabilities are shown in notes 15 and 16.
The Group has undrawn facilities of £3,531,000 (2011: £3,089,000) as follows:
2012 2011
£'000 £'000
Overdrafts 725 283
Term facilities expiring in one year 2,806 2,806
3,531 3,089
Hedge profile
a) There is a hedge to cover the £47 million revolving credit facility, which
currently covers the full £44 million drawn. It consists of a 20 year swap for
£10.4 million (2011: £10.4 million) with a 7 year call option in favour of the
bank, taken out in November 2007, at 4.76 per cent and a 20 year swap for £40
million with a 7 year call option in favour of the bank, taken out in December
2007, at 4.685 per cent.
b) There is a hedge to cover the £70 million term bank loan drawn. It consists
of a 20 year swap for £70 million with a 7 year call option in favour of the
bank, taken out in November 2007, at 4.76 per cent.
At the year end the amount recognised was £26,130,000 deficit (2011: £
23,137,000 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 £Nil (2011: £5.0 million) of the 4.76 per
cent swap at a cost of £Nil (2011: £0.920 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 15 year interest rate, which was
2.47 per cent at 31 December 2012 against the rate payable under the specific
hedge. This has given a liability at 31 December 2012 of £33,935,000 (2011: £
30,850,000) 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 2012 to close each of the hedges was £
39,423,000 (2011: £37,039,000). 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
£401,000 (2011: £1,280,000). It is not the intention of the Directors to exit
the instruments and this cost has not been recognised.
Fair value of financial instruments
Fair value estimation
The Group has adopted the amendment to IFRS 7 for financial instruments that
are measured in the balance sheet at fair value, this requires disclosure of
fair value measurements by level of the following fair value hierarchy:
- Quoted prices (unadjusted) in active markets for identical assets or
liabilities (level 1).
- Inputs other than quoted prices included within level 1 that are observable
for the asset or liability, either directly (that is, as prices) or indirectly
(that is, derived from prices) (level 2).
- Inputs for the asset or liability that are not based on observable market
data (that is unobservable inputs) (level 3).
Level Level Level Total 2012
1 2 3
£'000 Gain/
£'000 £'000 £'000 (loss)
to income
statement
'000
Financial assets
Other financial assets held for trading
Quoted equities 20 - - 20 4
Financial liabilities
Derivative financial instruments
Interest rate swaps - - 33,935 33,935 (3,085)
Level Level Level Total 2011
1 2 3
£'000 Gain/
£'000 £'000 £'000 (loss)
to income
statement
'000
Financial assets
Other financial assets held for trading
Quoted equities 635 - - 635 (104)
Financial liabilities
Derivative financial instruments
Interest rate swaps - - 30,850 30,850 (17,223)
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
2012 this decreased to 163.3 per cent (2011: 188.8 per cent) which was
calculated as follows:
2012 2011
£'000 £'000
Total debt 139,590 140,126
Less cash and cash equivalents (8,303) (6,464)
Net debt 131,287 133,662
Total equity 80,392 70,779
163.3% 188.8%
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.
Financial assets maturity
Cash and cash equivalents all have a maturity of less than three months.
2012 2011
£'000 £'000
Cash at bank and in hand 8,303 6,464
These funds are primarily invested in short term bank deposits maturing within
one year bearing interest at the bank's variable rates.
Financial liabilities maturity
Repayment of borrowings
Bank loans and overdrafts:
Repayable on demand or within one year 47,666 48,012
Repayable between two and five years 70,387 70,593
118,053 118,605
Debentures:
Repayable within one year 5,000 -
Repayable between two and five years 1,700 6,700
Repayable in more than five years 14,837 14,821
139,590 140,126
Certain borrowing agreements contain financial and other conditions that if
contravened by the Group, could alter the repayment profile.
Group undrawn banking facilities
Which expire within one year 3,531 3,089
Interest rate risk and hedge profile
2012 2011
£'000 £'000
Fixed rate borrowings 21,700 21,700
Floating rate borrowings
- Subject to interest rate swap 120,400 120,400
- Excess hedge (5,499) (5,263)
136,601 136,837
Average fixed interest rate 9.69% 9.69%
Weighted average swapped interest rate 6.00% 6.00%
Weighted average cost of debt on overdrafts, bank loans and 6.48% 6.48%
debentures
Average period for which borrowing rate is fixed 6.5 7.5
years years
Average period for which borrowing rate is swapped 14.9 15.9
years years
The swapped interest rate have calls by the bank 1.9 2.9
years years
The Group's floating rate debt bears interest based on LIBOR for the term bank
loans and Bank base rate for the overdrafts.
Total financial assets and liabilities
The Group's financial assets and liabilities and their fair values are as
follows:
Fair 2012 Fair 2011
value Carrying Value Carrying
£'000 value £'000 value
£'000 £'000
Cash and cash equivalents 8,303 8,303 6,464 6,464
Financial assets - investments held for 20 20 635 635
trading
Other assets 4,656 4,656 4,302 4,302
Derivative liabilities (33,935) (33,935) (30,850) (30,850)
Bank overdrafts (3,275) (3,275) (3,717) (3,717)
Bank loans (114,901) (114,778) (115,126) (114,888)
Present value of head leases on (28,657) (28,657) (28,661) (28,661)
properties
Other liabilities (12,514) (12,514) (9,453) (9,453)
Total financial liabilities before (180,303) (180,180) (176,406) (176,168)
debentures
Fair value of debenture stocks
Fair value of the Group's debenture liabilities:
Book Fair 2012 2011
value value Fair value Fair Value
£'000 £'000 adjustment adjustment
£'000 £'000
Debenture stocks (21,700) (28,611) (6,911) (7,921)
Tax at 23 per cent (2011: 25 per cent) 1,590 1,980
Post tax fair value adjustment (5,321) (5,941)
Post tax fair value adjustment - basic (8.23)p (6.79)p
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 2012 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.
18. Deferred tax
2012 2011
£'000 £'000
Deferred tax (asset)/liability balance at 1 January (3,678) 64
Transfer to consolidated income statement 354 (3,742)
Balance at 31 December (3,324) (3,678)
The deferred tax balance comprises the following:
Revaluation of investment properties 4,177 2,406
Accelerated capital allowances 1,896 3,263
Fair value of interest derivatives (7,805) (7,712)
Short-term timing differences 1,069 1,209
(663) (834)
Loss relief (2,661) (2,844)
Deferred tax asset provision at end of period (3,324) (3,678)
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 2012 2011
ordinary ordinary £'000 £'000
10p 10p
shares shares
2012 2011
Authorised: Ordinary shares of 10p each 110,000,000 110,000,000 11,000 11,000
Allotted, issued and fully paid 85,542,711 85,542,711 8,554 8,554
Ordinary shares of 10p - issued during the - - - -
year
Share capital 85,542,711 85,542,711 8,554 8,554
Less: held in Treasury (see below) (1,538,398) (1,538,398) (154) (154)
"Issued share capital" for reporting 84,004,313 84,004,313 8,400 8,400
purposes
The company has one class of ordinary shares which carry no right to fixed
income.
Treasury shares
Number of ordinary Cost/issue
10p shares value
2012 2011 2012 2011
£'000 £'000
Shares held in Treasury at 1 January 1,538,398 1,957,534 1,421 2,078
Issued to meet directors bonuses (Feb 11 - (538,203) - (571)
-106.18p)
Issued to meet staff bonuses (Feb 11 - (57,751) - (61)
-106.18p)
Issued for new share incentive plan (Feb 11 - (78,885) - (84)
-106.18p)
Purchase of shares (Sep 11) - 295,000 - 101
Issued for new share incentive plan (Oct 11 - (26,400) - (28)
-106.18p)
Issued to meet staff bonuses (Oct 11 - (12,897) - (14)
-106.18p)
Shares held in Treasury at 31 December 1,538,398 1,538,398 1,421 1,421
Share Option Schemes
Employees' share option scheme (Approved scheme)
At 31 December 2012 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 2012 is as follows:
Changes during the year
At 1 Options Options Options At 31
January Exercised granted lapsed December
2012 2012
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 2012
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 2012 is as follows:
Changes during year
Changes during the year
At 1 Options Options Options At 31
January Exercised granted lapsed December
2012 2012
Shares issued to date 450,000 - - - 450,000
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
20. Related party transactions
Cost Amounts Cash
recharged Owed advanced
to/(by) (to)/by to/(by)
related related related
party party party
£'000 £'000 £'000
Related party:
Analytical Ventures Limited
Current Account 61 41 -
Dragon Retail Properties Limited
Current account (61) (61) (19)
Loan account - (3,205) (2,000)
Langney Shopping Centre Unit Trust
Current account 90 (ii) 28 -
Bisichi Mining PLC
Current account 192 (i) 109 -
Directors and key management
M A Heller and J A Heller 7 (ii) 15 -
H D Goldring (Delmore Asset Management (25) (iii) - -
Limited)
C A Parritt (17) (iv) - -
Totals at 31 December 2012 247 (3,073) (2,019)
Totals at 31 December 2011 472 (702) 19
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 £1.2 million deposit is currently
interest free. During the year Dragon loaned £2m to the company at an interest
rate of 6.875 per cent.
Langney Shopping Centre Unit Trust (joint venture)
Langney Shopping centre Unit Trust (Langney) is owned 12.5 per cent by the
company and 12.5 per cent by Bisichi Mining PLC. The remaining 75 per cent is
owned by Columbus Capital Management LLP.
The company provides office premises, property management, general management,
accounting and administration services for both Analytical Ventures and Dragon
and property management services to Langney.
Bisichi Mining PLC (associate)
The company provides office premises, property management, general management,
accounting and administration services for Bisichi Mining PLC and its
subsidiaries.
Directors
London & Associated Properties PLC provides office premises, property
management, general management, accounting and administration services for a
number of private property companies in which Sir Michael Heller and J A Heller
have an interest. Under an agreement with Sir Michael 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 (2011: £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 £10,000 (2011: £30,000) 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.
Sir Michael Heller is a director of Bisichi Mining PLC, the associated company
and received a salary from that company of £75,000 (2011: £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 £883,000
(2011: £1,208,000). 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 28 (2011: 31).
2012 2011
£'000 £'000
Staff costs during the year were as follows:
Salaries and other costs 1,427 1,713
Social security costs 181 220
Pension costs 338 350
1,946 2,283
22. Capital Commitments
2012 2011
£'000 £'000
Commitments to capital expenditure contracted for at the year end - 735
The Group's share of capital commitments of joint ventures at the year end
amounted to £Nil (2011: £Nil).
23. Commitments under operating and finance leases
Operating leases on land and buildings
At 31 December 2012 the Group had commitments under non-cancellable operating
leases on land and buildings as follows:
2012 2011
£'000 £'000
Within one year 600 390
In the second to fifth years inclusive 324 714
924 1,104
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
2012 2011 2012 2011
£'000 £'000 £'000 £'000
Amounts payable under finance leases:
Within one year 1,821 1,821 1,821 1,821
In the second to fifth years inclusive 7,285 7,285 6,770 6,770
After five years 225,472 227,293 20,066 20,070
234,578 236,399 28,657 28,661
Future finance charges on finance leases (205,921) (207,738) - -
Present value of finance lease liabilities 28,657 28,661 28,657 28,661
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:
2012 2011
£'000 £'000
Within one year 12,706 12,369
In the second to fifth years inclusive 46,628 44,283
After five years 66,579 59,524
125,913 116,176
24. Contingent Liabilities
There were no contingent liabilities at 31 December 2012 (2011: £Nil), except
as disclosed in Note 17.
25. Company financial statements
Company balance sheet at 31 December 2012
Notes 2012 2011
£'000 £'000
Fixed assets
Tangible assets 25.3 76,972 85,282
Other investments:
Associated company 25.4 489 489
Subsidiaries and others 25.4 46,196 47,371
25.4 46,685 47,860
123,657 133,142
Current assets
Debtors 25.5 24,287 24,911
Investments 25.6 20 635
Bank balances 6,022 4,540
30,329 30,086
Creditors
Amounts falling due within one year 25.7 (97,083) (89,796)
Net current liabilities (66,754) (59,710)
Total assets less current liabilities 56,903 73,432
Creditors
Amounts falling due after more than one year 25.8 (30,985) (34,887)
Net assets 25,918 38,545
Capital and reserves
Share capital 25.10 8,554 8,554
Share premium account 25.11 4,866 4,866
Capital redemption reserve 25.11 47 47
Revaluation reserve 25.11 6,853 12,059
Treasury shares 25.10 (1,421) (1,421)
Retained earnings 25.11 7,019 14,440
Shareholders' funds 25,918 38,545
These financial statements were approved by the board of directors and
authorised for issue on 18 April 2013 and signed on its behalf by:
Sir Michael Heller R J Corry
Director Director
Company Registration No. 341829
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 Group accounting policies on page 34 and in
the Finance Director's report and Directors' report.
Revenue
Revenue comprises rental income, listed investment sales, dividends and other
income. The profit or loss on disposal of properties is recognised on
completion of sale.
Dividends receivable
Dividends are credited to the profit and loss account when the dividend is
received.
Tangible fixed assets
a) Investment properties
An external professional valuation of investment properties is carried out
every year. Properties professionally valued by Chartered Surveyors are on an
existing use open market value basis, in accordance with the Practice
Statements contained within the RICS valuation standards 2011 prepared by the
Royal Institution of Chartered Surveyors.
The cost of improvements includes attributable interest.
b) Other tangible fixed assets
Other tangible fixed assets are stated at historical cost. Depreciation is
provided on all other tangible fixed assets at rates calculated to write each
asset down to its estimated residual value evenly over its expected useful
life. The rates generally used are - office equipment - 10 to 33 per cent per
annum, and motor vehicles - 20 per cent per annum, on a straight line basis.
Investments
Long term investments are described as participating interests and are
classified as fixed assets. Short term investments are classified as current
assets.
a) Investments held as fixed assets
These comprise investments in subsidiaries and investments in Analytical
Ventures Limited, Dragon Retail Properties Limited and Langney Shopping Centre
Unit Trust (unlisted joint ventures), Bisichi Mining PLC (listed associate),
and in unlisted companies which are all held for the long term. Provision is
made for any impairment in the value of fixed asset investments.
b) Investments held as current assets
Investments held for trading are included in current assets and are revalued to
fair value. For listed investments, fair value is the bid market listed value
at the balance sheet date. Realised and unrealised gains or losses arising from
changes in fair value are included in the income statement of the period in
which they arise.
Financial Instruments
Bank loans and overdrafts
Bank loans and overdrafts are included in creditors on the company balance
sheet at the amounts drawn on the particular facilities. Interest payable on
those facilities is expensed as a finance cost in the period to which it
relates.
Interest rate derivatives
The company uses derivative financial instruments to hedge the interest rate
risk associated with the financing of the company's business. No trading in
such financial instruments is undertaken. At each reporting date, these
interest rate derivatives are recognised at their fair value to the business,
being the Net Present Values of the difference between the hedged rate of
interest and the current market rate of interest assuming that this rate is
applied for the remainder of the hedge.
Where a derivative is designated as a hedge of the variability of a highly
probable forecast transaction e.g. 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 e.g. 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.
25.2. Loss for the financial year
The company's loss for the year was £6,791,000 (2011: £7,557,000). In
accordance with the exemption conferred by Section 408 of the Companies Act
2006, the company has not presented its own profit and loss account.
25.3. Tangible assets
Investment Properties Office
Total Freehold Long Short Equipment
£'000 £'000 leasehold leasehold and motor
£'000 £'000 vehicles
£'000
Cost or valuation at 1 January 2012 86,188 62,678 21,670 450 1,390
Additions 37 - - - 37
Disposals (245) - - - (245)
Impairment (2,880) (2,449) (431) - -
Decrease on revaluation (5,206) (3,672) (1,384) (150) -
Cost or valuation at 31 December 2012 77,894 56,557 19,855 300 1,182
Representing assets stated at:
Valuation 76,712 56,557 19,855 300 -
Cost 1,182 - - - 1,182
77,894 56,557 19,855 300 1,182
Depreciation at 1 January 2012 906 - - - 906
Charge for the year 188 - - - 188
Disposals (172) - - - (172)
Depreciation at 31 December 2012 922 - - - 922
Net book value at 1 January 2012 85,282 62,678 21,670 450 484
Net book value at 31 December 2012 76,972 56,557 19,855 300 260
The freehold and leasehold properties were valued as at 31 December 2012 by
external professional firms of chartered surveyors. The valuations were made at
open market value on the basis of existing use. The decrease in book value was
transferred from revaluation reserve.
2012 2011
£'000 £'000
Allsop LLP 72,535 80,765
BNP Paribas Real Estate 4,177 4,033
76,712 84,798
The historical cost of investment properties, including total capitalised
interest of £1,222,000 (2011: £1,222,000) was as follows:
Freehold Long Short
£'000 Leasehold Leasehold
£'000 £'000
Cost at 1 January 2012 54,620 17,293 785
Additions - - -
Disposals - - -
Cost at 31 December 2012 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.
Contracts were exchanged in December 2012 to sell for £6.3million the company
property in Chesterfield. The sale is expected to be completed by May 2013.
25.4. Other investments
Cost Total Shares in Loan stock Shares Loan Shares in Unlisted
in in stock
£'000 subsidiary associate shares
subsidiary joint in joint
companies £'000 £'000
companies ventures ventures
£'000 £'000 £'000 £'000
At 1 January 2012 47,860 40,663 3,658 1,052 1,993 489 5
Additions - - - - - - -
Repayments (85) - - - (85) - -
Impairment (1,090) - - - (1,090) - -
At 31 December 2012 46,685 40,663 3,658 1,052 818 489 5
Subsidiary companies
The company owns 100 per cent of the ordinary share capital of the following
companies that are trading, all of which are registered in England and Wales:
Activity % Held by % Held 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 Holdings Property investment 100 100
Limited
Analytical Properties Limited Property investment - 100
Analytical Properties (St Property investment - 100
Helens) Limited
London & Associated Management Property Management 100 100
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
2012 2011
£'000 £'000
Trade debtors 903 851
Amounts due from subsidiary companies 17,008 17,431
Amounts due from associate and joint ventures 164 402
Deferred tax asset (note 25.9) 4,644 4,550
Other debtors 187 56
Prepayments and accrued income 1,381 1,621
24,287 24,911
25.6. Investments
2012 2011
£'000 £'000
Market value of the listed investment portfolio 20 635
Unrealised deficit of market value over cost (3) (499)
Listed investment portfolio at cost 23 1,134
All investments are listed on the London Stock Exchange.
25.7. Creditors: Amounts falling due within one year
2012 2011
£'000 £'000
Bank overdrafts (unsecured) 3,275 3,717
Bank loans (secured) 44,144 44,069
Bank loans (unsecured) 247 226
£5 million First Mortgage Debenture Stock 2013 at 11.3 per cent 5,000 -
Amounts owed to subsidiary companies 35,974 35,256
Amounts owed to joint ventures 3,266 1,144
Other taxation and social security costs 726 693
Other creditors 747 450
Accruals and deferred income 3,704 4,241
97,083 89,796
25.8. Creditors: Amounts falling due after more than one year
2012 2011
£'000 £'000
Interest rate derivatives 13,988 12,660
Term Debenture stocks:
£5 million First Mortgage Debenture Stock 2013 at 11.3 per cent - 5,000
£1.7 million First Mortgage Debenture Stock 2016 at 8.67 per cent 1,700 1,700
£5 million First Mortgage Debenture Stock 2018 at 11.6 per cent 5,000 5,000
£10 million First Mortgage Debenture Stock 2022 at 8.109 per cent 9,837 9,821
*
16,537 21,521
Bank loans:
Repayable after more than one year 460 706
30,985 34,887
*The £10 million debenture and bank loans are shown after deduction of
un-amortised issue costs.
Details of terms and security of overdrafts, loans and loan renewal and
debentures are set out in note 16.
Repayment of borrowings:
Bank loans and overdrafts:
Repayable within one year 47,666 48,012
Repayable between two and three years 460 706
48,126 48,718
Debentures:
Repayable within one year 5,000 -
Repayable between three and five years 1,700 5,000
Repayable in more than five years 14,837 16,521
69,663 70,239
Hedge profile
There is a hedge to cover the £47 million revolving credit facility, which
currently covers the full £44 million drawn.
It consists of a 20 year swap for £10.4 million (2011: £10.4 million) with a 7
year call option in favour of the bank, taken out in November 2007, at 4.76 per
cent and a 20 year swap for £40 million with a 7 year call option in favour of
the bank, taken out in December 2007, at 4.685 per cent.
At the year end the amount recognised was £10,771,000 deficit (2011: £9,495,000
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 15 year interest rate, which was
2.47 per cent at 31 December 2012 against the rate payable under the specific
hedge. This has given a liability at 31 December 2012 of £13,988,000 (2011: £
12,660,000) as shown in the balance sheet. The banks own initial quotation at
31 December 2012 to close each of the hedges was £16,398,000 (2011: £
15,416,000).
The hedges are not deemed to be eligible for hedge accounting, as the banks
have an option to cancel the hedge in January 2015, to which they separately
attribute a cost of £182,000 (2011: £600,000), even though this is after the
expiry of the term loans and the level of the hedges closely equate to the
amount of the loans outstanding. Any movement in the value of the hedges has
therefore to be charged directly to the profit and loss account. It is not the
intention of the Directors to exit the instruments and this cost has not been
recognised.
During the year the company broke £Nil (2011: £5.0 million) of the 4.76 per
cent swap at a cost of £Nil (2011: £0.920 million).
Fair value of financial instruments
Fair value estimation
The Group has adopted the amendment to FRS29 for financial instruments that are
measured in the balance sheet at fair value, this requires disclosure of fair
value measurements by level of the following fair value hierarchy:
- Quoted prices (unadjusted) in active markets for identical assets or
liabilities (level 1).
- Inputs other than quoted prices included within level 1 that are observable
for the asset or liability, either directly (that is, as prices) or indirectly
(that is, derived from prices) (level 2).
- Inputs for the asset or liability that are not based on observable market
data (that is unobservable inputs) (level 3).
Level Level Level Total 2012
1 2 3
£'000 Gain/
£'000 £'000 £'000 (loss)
to
profit
and loss
account
£'000
Financial assets
Other financial assets held for trading
Quoted equities 20 - - 20 4
Financial liabilities
Derivative financial instruments
Interest rate swaps - - 13,988 13,988 (1,328)
Level Level Level Total 2011
1 2 3
£'000 Gain/
£'000 £'000 £'000 (loss)
to
profit
and loss
account
£'000
Financial assets
Other financial assets held for trading
Quoted equities 635 - - 635 (104)
Financial liabilities
Derivative financial instruments
Interest rate swaps - - 12,660 12,660 (6,873)
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 2-5 years Over 2012
1 year £'000 5 years Total
£'000 £'000 £'000
Bank overdrafts (floating) 3,275 - - 3,275
Debentures (fixed) 5,000 1,700 15,000 21,700
Bank loans (floating)* 44,441 460 - 44,901
Trade and other payables 44,416 - - 44,416
(non-interest)
97,132 2,160 15,000 114,292
Less than 2-5 years Over 2011
1 year £'000 5 years Total
£'000 £'000 £'000
Bank overdrafts (floating) 3,717 - - 3,717
Debentures (fixed) - 6,700 15,000 21,700
Bank loans (floating)* 44,420 706 - 45,126
Trade and other payables (non-interest) 41,784 - - 41,784
89,921 7,406 15,000 112,327
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 2012 Fair 2011
value Carrying value Carrying
£'000 value £'000 value
£'000 £'000
Cash and cash equivalents 6,022 6,022 4,540 4,540
Investments 20 20 635 635
Other assets 24,287 24,287 24,911 24,911
Bank overdrafts (3,275) (3,275) (3,717) (3,717)
Bank loans (44,441) (44,395) (45,126) (45,001)
Derivative liabilities (13,988) (13,988) (12,660) (12,660)
Other liabilities (44,416) (44,416) (41,784) (41,784)
Before debentures (75,791) (75,745) (73,201) (73,076)
Additional details of borrowings and financial instruments are set out in notes
16 and 17.
25.9. Provisions for liabilities and charges
2012 2011
£'000 £'000
Deferred Taxation
Balance at 1 January (4,550) (2,657)
Transfer to profit and loss account (94) (1,893)
Balance at 31 December (4,644) (4,550)
No provision has been made for the approximate taxation asset at 23 per cent
(2011: 25 per cent) of £51,000 (liability 2011: £545,000) which would arise if
the investment properties were sold at the stated valuation.
The deferred tax balance comprises the following:
Accelerated capital allowances 1,044 1,140
Fair value of interest derivatives (3,217) (3,165)
Short-term timing differences 156 170
Losses (2,627) (2,695)
Provision at end of period (4,644) (4,550)
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 Earnings £'000
Account reserve £'000 £'000
£'000 £'000
Balance at 1 January 2012 4,866 47 12,059 14,440 31,412
Decrease on valuation of - - (5,206) - (5,206)
investment properties
Retained loss for year - - - (6,791) (6,791)
Dividends paid in year - - - (630) (630)
Balance at 31 December 2012 4,866 47 6,853 7,019 18,785
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
2012 2011
£'000 £'000
Commitments to capital expenditure contracted for at the year end - -
25.14. Commitments under operating leases
At 31 December 2012 the company had annual commitments under non-cancellable
operating leases on land and buildings as follows:
2012 2011
£'000 £'000
Expiring in less than one year 210 -
Expiring in more than one year but less than five years 390 390
600 390
In addition, the company has an annual commitment to pay ground rents on its
leasehold investment properties which amount to £354,000 (2011: £354,000).
25.15. Contingent liabilities
There were no contingent liabilities at 31 December 2012 (2011: £Nil), except
as disclosed in Note 25.8.
Five year financial summary
2012 2011 2010 2009 2008
£m £m £m £m £m
Portfolio size
Investment properties-Group^ 205 194 195 214 219
Investment properties-joint ventures 27 29 13 13 13
Investment properties-associate 12 12 12 12 12
244 235 220 239 244
Portfolio activity £m £m £m £m £m
Acquisitions - - - - 9.18
Disposals - (0.60) (20.74) (17.79) (15.33)
Capital Expenditure 0.97 0.42 0.49 3.46 9.73
0.97 (0.18) (20.25) (14.33) 3.58
Consolidated income statement £m £m £m £m £m
Rental income - Group and share of joint 15.80 16.99 16.50 17.07 16.77
ventures
Less: attributable to joint venture (0.63) (0.61) (0.52) (0.52) (0.27)
partners
Group rental income 15.17 16.38 15.98 16.55 16.50
Profit/(loss) before interest and tax 18.93 10.89 11.97 20.49 (24.91)
Profit/(loss) before tax 7.62 (18.56) (10.69) 21.41 (57.27)
Taxation (0.35) 3.74 7.19 (2.36) 9.81
Profit/(loss) attributable to shareholders 7.27 (14.82) (3.50) 19.05 (47.46)
Earnings/(loss) per share - basic 8.65p (17.63) (4.24)p 24.32p (62.30)
p p
Earnings/(loss) per share - fully diluted 8.65p (17.63) (4.24)p 24.32p (62.30)
p p
Dividend per share - 0.75p 1.15p 1.15p 1.15p
Consolidated balance sheet £m £m £m £m £m
Shareholders' funds 46.46 39.93 55.76 59.10 40.30
Net borrowings 131.27 133.03 130.77 145.65 157.17
Net assets per share - basic 55.30p 47.53p 66.71p 74.22p 52.73p
- fully diluted 55.29p 47.53p 66.69p 74.19p 52.70p
Consolidated cash flow statement £m £m £m £m £m
Cash generated from operations 12.72 10.89 9.58 12.18 12.02
Capital investment and financial (0.87) (0.50) 20.42 13.94 (6.09)
investment
Note: ^Excluding the present value of head leases