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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Lxb Retail Properties Plc | LSE:LXB | London | Ordinary Share | JE00B4MFKH73 | ORD NPV |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 1.54 | 1.10 | 1.98 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMLXB
RNS Number : 6251P
LXB Retail Properties Plc
21 November 2016
For immediate release 21 November 2016
LXB Retail Properties Plc
RESULTS FOR THE YEARED 30 SEPTEMBER 2016
LXB Retail Properties Plc, a Jersey resident closed-ended real estate investment company focused on edge of town and out of town retail assets, today announces results for the year ended 30 September 2016.
Highlights
Hot Features
Premium
30 September 30 September
2016 2015
GBP46.48m GBP5.0m
* Cash deposits:
* NAV per share: 56.70p 103.27p
* EPRA* NAV per share: 56.70p 103.15p
* (Loss)/earnings per share: (8.89)p 14.06p
-- November 2015: obtained a resolution to grant planning permission for 155 homes and associated community facilities under the Group's Living Villages concept at Higher Newham in Truro
-- December 2015: exchanged, and subsequently completed, the forward-funded sale of the Group's investment property at Brocklebank, Greenwich to The Charities Property Fund, generating initial cash proceeds of GBP22.8m
-- December 2015 and January 2016: returned surplus funds of GBP14.7m to Shareholders
-- January 2016: obtained confirmation that Greenwich B&Q has planning consent for open A1 non-food use
-- February 2016: Board proposals for an orderly realisation of all of the Group's investments by 31 March 2017 accepted by Shareholders
-- March 2016: completed the Stafford multi-storey car park and surrendered the lease thereon to Stafford Borough Council, and received from Stafford Borough Council a 250 year lease on the ground floor restaurant units
-- March 2016: extended the GBP5m investment facility with Barclays Plc for a further 12 months
-- May 2016: completed the sale of the Rushden Lakes investment to The Crown Estate, generating initial cash proceeds of GBP65.2m
-- June 2016: returned surplus funds of GBP64m to Shareholders
-- August 2016: completed the surrender of the agreement for lease with WM Morrison Supermarkets plc and the disposal of the remainder of the investment at Kingsmead Stafford, generating gross proceeds of GBP26m
-- September 2016: completed the sale of the B&Q, Greenwich investment for gross proceeds of GBP43.3m
-- September 2016: concluded an agreement to dispose of part of the Group's property interests in the Ayr scheme for a total consideration of GBP5.0m.
-- September 2016: announced a return of GBP30.3m cash to Shareholders utilising the net proceeds of the Kingsmead and B&Q disposals, which was completed in November 2016
* excluding fair values of financial instruments and deferred tax.
LXB Adviser LLP Tel: 020 7432 7900
Tim Walton, CEO Brendan O'Grady, FD
J.P. Morgan Cazenove (NOMAD) Tel: 020 7742 4000
Bronson Albery/Paul Hewlett
Buchanan Tel: 020 7466 5000
Charles Ryland/Victoria Hayns/Patrick Hanrahan
Forward looking statements
This document includes forward looking statements which are subject to risks and uncertainties. You are cautioned that forward looking statements are not guarantees of future performance and that if risks and uncertainties materialise, or if assumptions underlying any of these statements prove incorrect, the actual results of operations and financial condition of the Group may materially differ from those made in, or suggested by, forward looking statements. Other than in accordance with its legal or regulatory obligations, the Company undertakes no obligation to review, update or confirm expectations or estimates or to release publicly any revisions to any forward looking statements to reflect events that occur or circumstances that arise after the date of this document.
Chairman's Statement
Dear Shareholder,
I am pleased to present the Annual Report and Financial Statements for the year to 30 September 2016.
The Shareholder vote at the AGM and EGM on 29 February 2016 resulted in a major change in the strategy of the Group and I will concentrate my report on the period since my last Chairman's Statement issued with the interim results on 1 June 2016.
The remit of the Board and the Investment Manager is to realise value from the investment portfolio and return capital as quickly as possible to Shareholders in advance of the next AGM. As I noted in my previous report, there is an inevitable tension between the two objectives where speed of execution and market awareness can put pressure on the achievement of the best prices for assets. In taking a balanced approach it has been necessary to make some difficult decisions and compromises to ensure that we are able to deliver on the remit.
As I noted in the latest return of cash announcement on 22 September 2016, the 56p per share returned since my last report means that the Company has now returned to Shareholders all of the original proceeds raised net of costs, and over half of the value of the shares as at 1 June 2016 in under six months. A very creditable achievement in the circumstances.
During this period we disposed of the B&Q at Greenwich, albeit after a small hiatus post the Brexit vote, the Kingsmead investment at Stafford in two separate transactions, and a significant part of the investment at Ayr. In addition we are making good progress toward a sale of the remaining investment at Ayr, the sale of Neats Court Retail Park in Sheppey and realisation of our remaining interests at Gloucester and Willow Green in Truro. Two of these investments are already under offer and we would hope to conclude several of these sales in the coming months. In addition we expect to receive the final payment from the sale of the Sainsbury's in Sutton shortly, following practical completion.
The Board will, subject to the need to maintain adequate working capital to cover unforeseen events, continue to return capital to Shareholders as quickly as possible. In the period since the AGM and EGM on 29 February 2016, any surplus funds have been returned in the form of capital returns to all Shareholders and the Board is mindful that this is the preferred method of return for Shareholders; however, we are now entering a period where cash receipts are likely to be smaller and relatively numerous and therefore the Board is likely to exercise its authority to return small amounts of cash by way of share buybacks where this can be achieved for the benefit of all Shareholders.
Over and above the cash realisations from the investments referred to above, the Company retains a number of significant investments as well as interests in investments which have been forward funded.
At Greenwich Brocklebank we have suffered delays which are set out in more detail in the Investment Manager's Report and which mean that practical completion, and hence the final cash receipt, is now likely to be in July 2017.
At Biggleswade, the park is now open and trade is significantly ahead of expectations. We have three units still to let and are in discussions with retailers for all the remaining space, however the final cash receipt is dependent upon the completion of those lettings.
At Sutton we have 27,000 sq ft of space to let next to the new Sainsbury's and of this we have let 4,100 sq ft. Whilst there are on-going discussions with retailers, we cannot sell the investment until these lettings are substantially complete.
By far the largest remaining assets and interests that we hold, that can realise cash, are our investment at Stafford Riverside and our remaining interest in Rushden Lakes which we have forward funded to The Crown Estate.
After some delays caused by construction issues, Stafford Riverside is now open and trading ahead of expectations. We have a small amount of space still to let and progress is being made to let that space, ready for a sale of the investment by Q2 next year.
The delays on the retail element have had a knock-on impact on the leisure element which is now not scheduled to start on site until January and will not achieve practical completion until December 2017; consequently we are reviewing how best to realise cash from this investment given the time constraints upon us.
At Rushden Lakes the eventual outcome in cash terms is dependent upon final lettings where very substantial progress has been made on Phase 1, with 70% of space let and another 14% in solicitors' hands. The Phase 1 build has progressed well and has now been substantially completed. We expect to start handing over to the anchor retailers in February next year. Opening has been delayed until July 2017 from our original plan of April 2017 due to highways issues completely beyond our control.
On Phases 2 and 3, planning is now in for the final scheme and we expect a decision by January 2017. The timing of cash receipts from those phases will follow once we have received the go ahead from the Secretary of State and have gone through the judicial review period. It is intended that we will start on site on these phases in Q2 2017.
We therefore have a clear path to the realisation of cash from the Group's investments and interests in property but much remains to be done in a relatively short period. It is inevitable that some cash will need to remain in the Group following the next AGM to cover outstanding liabilities and awaiting practical completion of various investments and I will deal with this aspect later in my statement.
Whilst progress in terms of cash realisation has been good, the business continues to operate in a very difficult environment, where bricks and mortar retail remains under pressure, the construction industry is suffering from difficulties in its supply chain and where statutory bodies are often very under resourced. All of these issues make value realisation challenging. As noted by commentators elsewhere, retailers are having to deal with significant increases in their cost base from the falling pound against the dollar, the introduction of the Living Wage and the recent ratings review at a time when sales are largely static and there is significant over-supply of space.
In addition, the vote to leave the European Union, the so called Brexit, has led to considerable uncertainty in the investment market. This has already had a direct impact on the sale of the B&Q at Greenwich where the original sale was pulled by the purchaser and resulted in a lower sale price. It is likely that this uncertainty will continue to impact on the remaining assets of the Company as and when we come to sell, in what is now quite a short time frame.
Against this background, the Company has reported a fall in net asset value of 7.5p per share after adjusting for a return of capital of 38.0p per share in June 2016. The major constituents of this reduction are:
-- losses caused by delays in the programme; highways delays at Rushden Lakes, construction delays at Stafford Riverside and at Greenwich Brocklebank where the contractor ceased trading. These issues have impacted on delivery dates for the retailers and hence rent commencement;
-- losses caused by increased construction costs at Rushden Lakes, Stafford Riverside and Sutton; and
-- reduced expectations of sales values on the remaining portfolio.
On a more positive note, the Company was able to buy a further piece of land at Rushden Lakes which enabled an improved scheme to be designed for Phase 2. A planning application, as noted earlier, has now been submitted for this scheme alongside Phase 3. An agreement has been reached with The Crown Estate in principle in relation to these changes.
The amount of ultimate value realisation is heavily dependent on the grant of planning and a legal agreement with The Crown Estate at Rushden Lakes and a successful sale of Stafford Riverside, but your Board remains confident that the final figure will be in excess of the NAV reported today.
Finally, I would like to give you an update on the Board's thinking in relation to proposals to be put to Shareholders at the next AGM and subsequent EGM. Whilst progress has been made there is much to be done and it is clear that regardless of further progress there will need to be a continuing vehicle, however modest in scale, to take responsibility for the liabilities and commitments of the Group which simply cannot be dealt with by the spring of next year.
The timing of any proposals will depend upon the sale of Stafford Riverside and the completion of a revised deal with The Crown Estate in relation to Rushden Lakes Phases 2 and 3 and these are currently expected early in Q2 next year. These two transactions, together with a sale of Sutton and the sales outlined earlier, will realise all of the cash that can be delivered to Shareholders, within the timescales set by our remit.
Once these transactions have been completed, the Board intends to put proposals to Shareholders which will enable all Shareholders who wish to exit the Company to receive full value for their shares.
The value remaining within the Group at the time of the proposals is likely to be split into three components:
1. cash;
2. assets that, with reasonable certainty as to amount and time of receipt, are likely to release cash over the following 18 months. This will include collateral for bonds held with public bodies against the completion of works and residual receipts from forward funding transactions; and
3. assets and liabilities that do not fall into either of the other categories.
Although work is continuing with the Company's advisors as to the form and structure of any final transaction, this is likely to involve a scheme of arrangement for approval by the Jersey court; however, the principle will be that Shareholders will be offered the choice of receiving (i) full value for their shares in the form of cash and a loan note backed by the assets in the anticipated cash category above, or (ii) value in the form of shares in a Newco which will take on the assets and liabilities that do not fall as cash or anticipated cash, or (iii) to elect for a combination of both. It is intended that if possible, Newco's shares will be admitted to trading on AIM so as to give Shareholders a meaningful ability to participate alongside management in any remaining upside as well as providing liquidity to their investment.
Conclusion
Against the backdrop of an uncertain investment market, retailers and building contractors under pressure and under resourced local authorities and statutory bodies, the challenge of realising maximum value for the Group in a timely manner is a difficult one. However, substantial progress has been made towards this goal and the form of the exit for Shareholders, whether it be receiving full value in cash and loan notes or by choosing to participate in the Newco or a combination thereof. There is much still to be done and I look forward to notifying Shareholders as value is realised and Newco plans are developed over the coming months.
Phil Wrigley
Chairman
21 November 2016
Report of the Investment Manager, LXB Adviser LLP
LXB Adviser LLP advises LXB Retail Properties Plc ("LXB" or "the Group") and is pleased to report on the operations of the Group during the year ended 30 September 2016 and up to the date of this report.
Since the Board changed our mandate following the AGM and EGM in February 2016 we have been helping the Group to dispose of all completed investments and continue to support the completion of investments where work is ongoing. We provide further information on the individual investments in the Property Details section of this report, however, as mentioned in the last Interim Report, in order to protect Shareholders' interests, we do not comment on the status of discussions on potential sales of individual investments. The Group will, of course, report the outcome of those discussions as and when transactions conclude.
The sales of Brocklebank Retail Park and the B&Q in Greenwich, Stafford Kingsmead and Rushden Lakes completed during the year under review and the disposal of one plot of land at Gloucester became unconditional after the balance sheet date, with completion expected imminently. Furthermore, solicitors are instructed in connection with two other potential investment disposals, which it is hoped, will complete before the end of 2016.
The Company bought back 15.28m shares for GBP14.7m in late 2015 and early 2016, and returned a further GBP64.0m and GBP30.3m to Shareholders in June 2016 and November 2016 respectively. Together with previous returns of cash the Company has now returned virtually the whole of the capital raised by its IPO and subsequent share issues (net of issue costs and shares bought back for cancellation). The net equity raised was equivalent to 101.3p per share in issue and the aggregate capital returns have amounted to 101.0p per share.
Property details
The Group's most significant remaining investments are discussed in greater detail below;
Ayr
The Group concluded an agreement to dispose of part of its property interests at Ayr for total consideration of GBP5.0m in September 2016 and solicitors are instructed in connection with the sale of substantially all its remaining interests in Ayr which, it is hoped, will complete before the end of December 2016.
Banbury Gateway
The Group completed the letting of the final unit in September 2016 and the balancing payment of GBP0.25m is expected from The Crown Estate before the end of November 2016. This concludes the Group's major participation in this investment, although there will be minor involvement in the coming months as snagging items and landscaping are finalised.
Biggleswade
The final phase of this investment completed in June 2016 and the following month an additional payment of GBP9.1m was received from Aberdeen Property Trust who bought the property under an Institutional Funding Agreement in April 2015. Further payments will be due when the Group has secured tenants for the three remaining vacant units, the quantum depending on the terms of those lettings. The Group has recently secured planning permission for mezzanine floors in two of these to improve the appeal to retailers. This, along with very positive trading updates from those tenants who are already occupying and trading, has resulted in good interest being shown from a number of potential retailers for all the vacant units and it is hoped that the remaining space will be let in the near future.
Gloucester
Of the three plots that make up the Group's remaining interests, the sale of one for GBP425k became unconditional after the balance sheet date with completion expected imminently, but completion of another small disposal, also below GBP1m, is now in question because the buyer has recently claimed that the planning consent they obtained (which is a pre-condition for the sale) is unsatisfactory. The Group is disputing this but until this is resolved there is no certainty as to the likelihood of completion. The remaining plot, which comprises approximately 0.75 acres, is being marketed for sale.
Greenwich Brocklebank
Practical completion of the Group's Brocklebank investment, which was sold under an Institutional Funding Agreement to The Charities Property Fund in December 2015 was scheduled for October 2016. However, in August 2016 the main contractor, Cardy Construction Limited, went into administration. This caused a substantial delay in the delivery of the project and the Group is finalising terms with a new contractor to step into Cardy's shoes. Practical completion is now expected in summer 2017.
Previously, the Group had anticipated a further cash receipt of approximately GBP5.2m when the scheme reached practical completion and all of the leases had completed. Given the delays and increased costs associated with the contractor issues this receipt is now anticipated to be approximately GBP2.1m, albeit the Group is exploring ways to mitigate the extent of this loss.
Greenwich B&Q
The disposal of the Group's B&Q investment completed in September 2016 realising GBP20.3m after repayment of GBP23.0m of bank debt.
Rushden Lakes
This investment was sold to The Crown Estate under an Institutional Funding Agreement for initial cash proceeds of GBP65.2m in May 2016. The sale terms provided that The Crown Estate would fund the development costs, with the Group retaining responsibility for a number of project related matters as well as for letting the remaining vacant space.
Rushden Lakes is being developed in three phases; Construction of Phase 1, which includes three retail terraces, associated restaurants and a major trunk road upgrade, is progressing well and practical completion is expected in May 2017, albeit a number of the units will be handed over to tenants in advance of that date to enable them to start fitting out. Phase 1 is expected to open to the public in July 2017. This phase is anchored by M&S, House of Fraser and Primark and is 70% pre-let, with a further eight pre-lets in solicitors' hands.
A revised planning application has been submitted for amendments to Phases 2 and 3 which includes additional restaurant space, a redesigned leisure building to enhance the leisure offer and add two cinema screens to take the total number of screens to 14 and additional retail space and car-park spaces. A letting to Cineworld is in solicitors' hands (Cineworld have already signed a pre-let for the cinema in the original scheme) and a number of the restaurant lettings are in solicitors' hands. It is anticipated that planning will be granted for the amendments by January 2017 with construction planned to commence in Q2 2017.
Sheppey
Neats Court Retail Park is now fully let and the tenants are trading. The Group expects this investment will be sold shortly.
The Group also owns two adjacent plots. One of these has planning permission for 6,000 sq ft of A3 restaurants and pre-lets have been secured with Costa to take 1,200 sq ft and Burger King to take 2,750 sq ft with a further pre-let for 1,000 sq ft in solicitors' hands. During the year, the Group secured an enhanced planning permission for the adjacent plot which previously had consent for Employment Use. The new permission is for a further 4,000 sq ft of A3 restaurants and a pre-let for 2,400 sq ft has been secured since the balance sheet date. Construction of the A3 restaurants will start shortly and is scheduled to be finished in May 2017 at which point, if it has not already been sold with Neats Court Retail Park, the investment will be marketed for sale.
Stafford
The disposal of the Group's interests in Kingsmead completed in September 2016 realising GBP26.0m of gross proceeds.
The Riverside retail investment's eleven tenants, including the anchor tenants M&S and Primark, are mostly open and trading. There are four units still to let and it is anticipated that the offers that have been received on two of these will result in lettings in the near future. There is a good level of interest in the other two units from a number of national multiple retailers and it is expected that further lettings will occur in the early part of 2017.
The Group's Stafford Leisure scheme comprises six restaurant units on the ground and first floor of the multi-storey car park together with an 18,000 sq ft Odeon cinema and adjacent 4,600 sq ft restaurant unit. The six restaurants in the multi-storey car park were completed as part of the car park and five of those are pre-let, as is the cinema. The Group expects to sign a bank facility with RBS to support the construction of the cinema and the final restaurant development of the leisure scheme shortly. Construction is also expected to start shortly and the Group expects to complete the investment towards the end of 2017.
Sutton
The Sainsbury's foodstore, which was sold under an Institutional Funding Agreement to The Lime Property Fund in May 2015, reached practical completion in November 2016 and the Group is due to receive approximately GBP3.3m shortly once Sainsbury's (who are due to open in early December 2016) have signed their lease. The full consideration in respect of the residential development, which was sold to Linden Homes in June 2015, has now been received and the final payment from The Lime Property Fund will conclude the Group's material involvement in this part of the scheme.
The Group still owns a 999 year lease on the 27,000 sq ft ground floor retail units beneath the two residential towers and the first phase was handed over in October as expected. A further 13,200 sq ft should be handed over by the end of November with handover of the remaining space expected in early 2017. A pre-let is in solicitors' hands for a 5,000 sq ft unit which, along with the existing pre-lets to Costa and Magnet would mean 9,100 sq ft of space would be pre-let. The Group is in discussion with a number of retailers for pre-lets on the remaining space and once it is fully pre-let, the Group will market the investment for sale.
Truro Threemilestone
Outline planning permission for the investment was granted in July 2016. The scheme comprises 435 houses (of which 40% will be affordable homes), a 78,000 sq ft foodstore pre-let to ASDA, a pub, community centre, primary school and care home. Detailed planning consent was approved in November 2016 for Phase 1 which includes the foodstore, the pub site (although not the pub itself), the community centre and Phase 1 roads.
The Group is awaiting confirmation from ASDA that they regard the consent to be acceptable. A planning application has been lodged by the Group to remove an onerous condition requiring the provision of an underpass. The crystallisation of value is dependent upon these being finalised in the required time.
Truro Higher Newham
The Group is considering its options for this site, however there has been no substantive interest from housebuilders following the Brexit vote.
Revaluation surplus
As described in note 12 to the Group Financial Statements, the investment properties held by the Group at 30 September 2016 were valued by the Group's external property valuers, JLL. In their opinion the fair value of these investment properties at that date was GBP71.4m, resulting in a revaluation deficit for the year of GBP6.8m.
Accounting treatment of forward funded construction activities
Under the terms of the sale of a number of the Group's investments, the buyer funds the development with the Group overseeing the works. The Group recharges the costs associated with the relevant Institutional Funding Agreement plus a 1% fee on the main contractor's costs. As explained previously, following consultation with the Group's auditors, the appropriate accounting treatment for these arrangements is to include the amounts receivable from the buyer (in respect of each reporting period) in gross revenue and to include the costs incurred by the Group (in respect of each reporting period) in direct costs. The relevant amounts for the year are disclosed in note 4 to the Group Financial Statements.
Basis of preparation
Following the Shareholders' approval on 29 February 2016, the Directors are proceeding with the plans for an orderly realisation of the Group's remaining investments, with substantially the whole of the value to be returned to Shareholders in cash in the foreseeable future. As a result, the Directors have concluded that it is not appropriate to adopt a going concern basis of preparation in these financial statements. Readers of the accounts should be aware that investment properties have been reclassified on the Group Balance Sheet from non-current assets to current assets - held for sale. No other material adjustments arose as a result of ceasing to apply the going concern basis.
Cash position and future expenditure
During the year to 30 September 2016, GBP42.0m of cash was deployed in the purchase of and capital expenditure on investment properties. The vast majority of this spending was capital expenditure on investments in the course of construction with purchase of property being limited to the acquisition of some small plots of land to complement the Rushden Lakes development.
At the balance sheet date the Group had GBP46.5m of cash of which GBP30.3m has been returned to Shareholders since the balance sheet date. The remainder consists of working capital cash or is all allocated to existing projects.
Tim Walton
On behalf of LXB Adviser LLP
21 November 2016
Independent Auditors' Report
Independent Auditors' Report to the Members of LXB Retail Properties Plc
We have audited the Group and Parent Company Financial Statements ("the financial statements") of LXB Retail Properties Plc for the year ended 30 September 2016 which comprise the Group and Parent Company Income Statements, the Group and Parent Company Statements of Changes in Equity, the Group and Parent Company Balance Sheets, the Group and Parent Company Cash Flow Statements and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards ('IFRS') as adopted by the European Union.
This report is made solely to the Company's members, as a body, in accordance with Article 113A of the Companies (Jersey) Law 1991. 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 auditors' 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 auditors
As explained more fully in the Statement of Directors' Responsibilities, 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 Financial Reporting Council's Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the circumstances of the Group and the Company and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
Opinion on financial statements
In our opinion:
-- the Group Financial Statements give a true and fair view of the state of the Group's affairs as at 30 September 2016 and of the Group's loss for the year then ended;
-- the Parent Company Financial Statements give a true and fair view of the state of the Parent Company's affairs as at 30 September 2016 and of the Parent Company's loss for the year then ended;
-- the Group and Parent Company Financial Statements have been properly prepared in accordance with IFRSs as adopted by the European Union; and
-- the Group and Parent Company Financial Statements have been prepared in accordance with the requirements of the Companies (Jersey) Law 1991.
Emphasis of matter
In forming our opinion, which is not modified, we draw attention to the disclosure in note 2 to the Financial Statements concerning the basis on which the Financial Statements are prepared. It is the Directors' intention to bring the Group's activities to a close, realise the remainder of investments, and return the surplus cash to Shareholders. Accordingly, these financial statements have not been prepared on a going concern basis.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies (Jersey) Law 1991 requires us to report to you if, in our opinion:
-- proper accounting records have not been kept by the Parent Company, or proper returns adequate for our audit have not been received from branches not visited by us; or
-- the Parent Company Financial Statements are not in agreement with the accounting records and returns; or
-- we have not received all the information and explanations we require for our audit.
Anna Draper
For and on behalf of BDO LLP
Chartered Accountants
London
United Kingdom
21 November 2016
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
Group Income Statement
for the year ended 30 September 2016
Year ended Year ended
30 September 30 September
2016 2015
=================================== ===== =============== ===============
Note GBP GBP
=================================== ===== =============== =================
Gross revenue 4 85,240,791 46,101,649
Direct costs 4 (82,072,537) (44,991,831)
==================================== ===== =============== ===============
Net revenue and gross
profit 3,168,254 1,109,818
Administrative expenses:
=================================== ===== =============== ===============
Corporate administrative
expenses (8,225,838) (5,758,846)
Cost of property activities (73,081) (818,856)
==================================== ===== =============== ===============
Total administrative
expenses (8,298,919) (6,577,702)
------------------------------------ ----- --------------- ---------------
Other investment property
transactions: 5
Amounts receivable in respect
of the cancellation of
------------------------------------ ----- --------------- ---------------
certain contractual arrangements 23,919,222 -
------------------------------------ ----- --------------- ---------------
Impairment arising as a
result of the cancellation
of certain contractual (24,934,262) -
arrangements
Net deficit in respect of the
cancellation of certain
contractual arrangements (1,015,040) -
Investment property revaluation
(deficit)/surplus 12 (6,816,643) 18,181,385
(Loss)/profit on sale
of investment properties (703,005) 13,367,325
Other income 183,368 380,156
==================================== ===== =============== ===============
Operating (loss)/profit 6 (13,481,985) 26,460,982
Finance income 8 56,492 625,679
Finance costs 8 (1,719,202) (1,171,040)
------------------------------------ ----- --------------- ---------------
(Loss)/profit before
tax (15,144,695) 25,915,621
------------------------------------ ----- --------------- ---------------
Taxation charge 9 (187,215) (104,344)
==================================== ===== =============== ===============
(Loss)/profit for the
year (15,331,910) 25,811,277
==================================== ===== =============== ===============
Pence Pence
(Loss)/earnings per share per share
per share
=================== === =========== ===========
Basic and diluted 10 (8.89) 14.06
===================== === =========== ===========
As described in note 2, the Group is in the process of performing an orderly realisation of its investments.
There were no items of other comprehensive income or expense in the current or prior year and therefore the (loss)/profit for the year also reflects the Group's total comprehensive (loss)/income for the year.
Group Statement of Changes in Equity
for the year ended 30 September 2016
Stated Retained
Year ended 30 capital earnings Total
September 2016
------------------------------------------------------ --- --- ------------- ------------- -------------
GBP GBP GBP
------------------------------------------------------ --- --- ------------- ------------- -------------
At 1 October 2015 132,288,457 57,355,270 189,643,727
Loss for the year - (15,331,910) (15,331,910)
Transactions with owners:
Own shares purchased
for cancellation inclusive
of costs (14,760,505) - (14,760,505)
The Second Return of
Cash (see note 19) -
* Redemption of "B" shares inclusive of costs (45,761,457) - (45,761,457)
* Dividends - (18,324,718) (18,324,718)
At 30 September
2016 71,766,495 23,698,642 95,465,137
---------------------------------------------------------------- ------------- ------------- -------------
Stated Retained
Year ended 30 capital earnings Total
September 2015
------------------------------------------------------ --- --- ------------- ------------- -------------
GBP GBP GBP
------------------------------------------------------ --- --- ------------- ------------- -------------
At 1 October 2014 183,606,213 63,004,961 246,611,174
Profit for the year - 25,811,277 25,811,277
Transactions with owners:
The First Return of
Cash (see note 19) -
* Redemption of "B" shares inclusive of costs (51,317,756) - (51,317,756)
* Dividends - (31,460,968) (31,460,968)
At 30 September
2015 132,288,457 57,355,270 189,643,727
---------------------------------------------------------------- ------------- ------------- -------------
Group Balance Sheet
at 30 September 2016
As at As at
30 September 30 September
2016 2015
=========================== ===== =============== ===============
Note GBP GBP
=========================== ===== =============== ===============
Non-current assets
Investment properties 12 - 208,370,000
Derivative financial
assets 18 - 227,800
- 208,597,800
=========================== ===== =============== ===============
Current assets
Business and other
receivables 13 44,910,099 48,737,363
Cash and cash equivalents 14 46,481,520 5,033,414
=========================== ===== =============== ===============
91,391,619 53,770,777
--------------------------- ----- --------------- ---------------
Investment properties
- held for sale 12 73,170,186 -
--------------------------- ----- --------------- ---------------
164,561,805 53,770,777
Total assets 164,561,805 262,368,577
=========================== ===== =============== ===============
Current liabilities
Business and other
payables 15 (38,847,185) (19,548,249)
Borrowings 16 (30,098,071) (4,928,109)
Income tax creditor (151,412) -
=========================== ===== =============== ===============
(69,096,668) (24,476,358)
=========================== ===== =============== ===============
Non-current liabilities
Borrowings 17 - (48,248,492)
- (48,248,492)
=========================== ===== =============== ===============
Total liabilities (69,096,668) (72,724,850)
=========================== ===== =============== ===============
Net assets 95,465,137 189,643,727
=========================== ===== =============== ===============
Equity
Stated capital 19 71,766,495 132,288,457
Retained earnings 23,698,642 57,355,270
=========================== ===== =============== ===============
Total equity 95,465,137 189,643,727
=========================== ===== =============== ===============
Pence Pence
Net asset value per per share per share
share
======================= === =========== ===========
Basic and diluted 21 56.70 103.27
======================= === =========== ===========
Adjusted (EPRA) 21 56.70 103.15
======================= === =========== ===========
Group Cash Flow Statement
for the year ended 30 September 2016
Year ended Year
30 September ended
2016 30 September
2015
====================================== ===== ============== ==============
Note GBP GBP
====================================== ===== ============== ==============
Cash flows from operating
activities
(Loss)/profit before tax (15,144,695) 25,915,621
Adjustments for non-cash
items:
Investment property revaluation
deficit/(surplus) 12 6,816,643 (18,181,385)
Amortisation of lease incentives 187,132 -
Impairment arising on the
cancellation of certain
contractual arrangements 24,934,262 -
Loss/(profit) on sale of
investment properties 703,005 (13,367,325)
Net finance costs 8 1,662,710 545,361
====================================== ===== ============== ==============
Cash flows from operating
activities before
changes in working capital 19,159,057 (5,087,728)
Change in business and other
receivables (12,182,318) (5,695,854)
Change in business and other
payables 20,515,144 6,887,532
Taxation paid (36,015) (52,129)
====================================== ===== ============== ==============
Cash flows from operating
activities 27,455,868 (3,948,179)
====================================== ===== ============== ==============
Investing activities:
Interest received 56,492 175,524
Purchase of and capital expenditure
on investment properties (42,036,267) (147,923,596)
Proceeds on disposal of investment
properties 160,080,227 184,517,906
Cash flows from investing
activities 118,100,452 36,769,834
====================================== ===== ============== ==============
Financing activities:
Own shares purchased for (14,716,350) -
cancellation
Costs associated with own (44,155) -
shares purchased
Redemption of "B" shares (45,660,107) (51,172,700)
Costs associated with redeemed
"B" shares (101,350) (145,056)
Dividends paid (18,324,718) (31,460,968)
Bank borrowings drawn 20,771,555 54,303,495
Loan issue costs paid - (1,644,448)
Bank borrowings repaid (44,865,683) (4,500,000)
Premium paid on purchase
of derivative financial instruments - (647,500)
Collateral repaid from hedging
counterparty - 457,283
Finance costs paid (1,167,406) (680,925)
Cash flows from financing
activities (104,108,214) (35,490,819)
====================================== ===== ============== ==============
Net increase/(decrease) in
cash and cash equivalents 41,448,106 (2,669,164)
Cash and cash equivalents
at the beginning of the year 5,033,414 7,702,578
Cash and cash equivalents
at the end of the year 46,481,520 5,033,414
-------------------------------------- ----- -------------- --------------
Notes to the Preliminary Announcement
The financial information set out in this preliminary announcement, which has been approved by the Board, does not constitute the Group's statutory financial statements for the year ended 30 September 2016 ("the 2016 accounts") or for the year ended 30 September 2015 ("the 2015 accounts"), but is derived from those audited statutory financial statements.
The 2016 accounts, included within the Company's Annual Report for the year ended 30 September 2016, have been prepared in accordance with International Financial Reporting Standards adopted for use in the European Union. The auditors have reported on the 2016 accounts and although their report was unqualified it drew attention the Company's going concern status by way of an emphasis of matter and is therefore included herewith. The 2016 accounts will be available from the Company's website today.
The 2015 accounts, which also included an unqualified audit report, have been filed with the Registrar of Companies in Jersey.
1. General information about the Group
LXB Retail Properties Plc was listed on the AIM and CISE markets on 23 October 2009. It is a closed-ended real estate investment company that was incorporated in Jersey on 27 August 2009.
The financial information set out in this report covers the year to 30 September 2016 with comparative amounts relating to the year to 30 September 2015.
The Group Financial Statements include the results and net assets of the Company and its subsidiaries, together referred to as the Group, on a consolidated basis.
Further general information about the Group can be found on its website: www.lxbretailproperties.com.
2. Accounting policies
Statement of compliance
The Group Financial Statements have been prepared in accordance with the International Financial Reporting Standards ('IFRS') adopted for use in the European Union.
Basis of preparation
As described more fully in the Chairman's Statement and following the Shareholders' approval on 29 February 2016, the Directors are proceeding with the plans for an orderly realisation of the Group's remaining investments, with substantially the whole of the value to be returned to Shareholders in cash in the foreseeable future. As a result, the Directors have concluded that it is not appropriate to adopt a going concern basis of preparation in these financial statements. Other than the reclassification of investment properties from non-current assets to held for sale, no material adjustments arose as a result of ceasing to apply the going concern basis.
The financial statements have been prepared on the historical cost basis except that investment properties (defined below) and derivative financial instruments are stated at fair value.
The accounting policies have been applied consistently to the results, other gains and losses, assets, liabilities and cash flows of entities included in the consolidated financial statements.
Any revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period. If the revision affects both current and future periods, the change is recognised over these periods.
The preparation of financial statements often requires the Directors to make judgements, estimates and assumptions that may affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The most significant balances at the balance sheet date requiring the Directors to make such judgements and estimates are those concerning the receivables in relation to investment properties sold under forward-funded arrangements and held within property sales receivables (note 13). The ultimate value of these receivables is affected to varying degrees by a number of factors, including the details of the lease packages to be agreed with prospective tenants and the time taken for the relevant property to reach practical completion. Otherwise, there has been a limited requirement for the Directors to make such judgements or estimates in the period since the Company's listing to date. For example, the single most significant item on the balance sheet, "Investment Properties" (comprising completed investment properties and development properties held for sale at 30 September 2016 and held in non-current assets at 30 September 2015) have been supported by external valuations. Details of the overall approach to the valuation of these assets are set out in note 12. Details of the current status of the Group's carried interest arrangements are set out in note 22 and show that no judgements or estimates have been required to be made in this area to date.
The Group's accounting policies for these matters together with other policies material to the Group, are set out below.
Adoption of new standards, interpretations and amendments
There were no new standards or interpretations effective for the first time for periods beginning on or after 1 October 2015.
Standards and interpretations in issue not yet adopted
The IASB have issued or amended the following standards and interpretations that are mandatory for later accounting periods and which are or may be relevant to the Group and have not been adopted early. These are:
Effective under
IFRS (EU)
Standard Subject matter for periods commencing
Revenue from contracts
IFRS 15* with customers 1 January 2018
IFRS 9* Financial instruments 1 January 2018
IFRS 16* Leases 1 January 2019
*subject to EU endorsement
The potential impact on the Group's financial statements of the future adoption of these standards is still under review.
Basis of consolidation
Subsidiaries
Subsidiaries are those entities controlled by the Group. Control by the Group over an investee is assumed when all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect these variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. All intra-group transactions, balances, income and expenses are eliminated on consolidation.
Property portfolio
Investment properties
Investment properties are properties owned or held leasehold by the Group. These were formerly held for capital appreciation, rental income or both. However, subsequent to the approval of the plans for an orderly realisation of the Group's assets in February 2016 and the commencement of the implementation of these plans after the interim reporting date, these assets are now classified as held for sale on the balance sheet. Investment properties include property that is being constructed, developed or redeveloped for future use as an investment property. Investment properties are initially recorded at cost, including related transaction costs. They are subsequently carried at each published balance sheet date at fair value as determined by professionally qualified independent external valuers.
Investment properties are reclassified to assets held for sale when they meet the relevant criteria set out in IFRS 5 'Non-current Assets Held for Sale and Discontinued Operations' which requires that they are available for immediate sale and that the sale is expected to complete within one year of being reclassified. They continue to be measured at fair value.
The determination of the fair value of each property requires, to the extent applicable, the use of estimates and assumptions in relation to factors such as future rental income, current market rental yields, future development costs and the appropriate discount rate. In addition, to the extent possible, the valuers make reference to market evidence of transaction prices for similar properties.
Gains or losses arising from changes in the fair value of investment properties are recognised in the income statement in the period in which they arise.
In accordance with IAS 40 "Investment Property", no depreciation is provided in respect of investment properties.
Investment property is recognised as an asset when:
-- it is probable that the future economic benefits that are associated with the investment property will flow to the Group;
-- there are no material conditions precedent which could prevent completion; and -- the cost of the investment property can be measured reliably.
All costs directly associated with the purchase of an investment property are capitalised. Capital expenditure that is directly attributable to the redevelopment or refurbishment of investment property, up to the point of it being completed for its intended use, is capitalised in the carrying value of the property.
Acquisitions and disposals of investment properties are usually recognised when unconditional exchange of legally binding and irrevocable contracts occurs and where it is reasonable to assume at the balance sheet date that completion of the acquisition or disposal will occur.
Occupational leases
The Board considers the potential transfer of the risks and rewards of ownership in accordance with IAS 17 "Leases", for all investment properties that are leased to tenants by the Group and determines whether such leases are operating leases or finance leases. Where the Group substantially retains all the risks and rewards of ownership the lease is classified as an operating lease. In the event that substantially all of the risks and rewards of ownership are transferred to the lessee under the terms of a lease then such a lease would be classified as a finance lease. All tenant leases that have been entered into by the Group to date have met the criteria for classification as operating leases.
Net rental income
Rental income from investment properties leased out under operating leases is recognised in the income statement on a straight-line basis over the lease term.
Contingent rents, such as turnover rents, rent reviews, and indexation, are recorded as income in the periods in which they are earned. Rent reviews are recognised when such reviews have been agreed with tenants.
Rent free periods, other lease incentives and any costs associated with entering into tenant leases are amortised evenly over the period from lease commencement to the first break option or, if the probability that the break option will be exercised is considered sufficiently low, over the full lease term.
Rental income from fixed and minimum guaranteed rent reviews is recognised on a straight-line basis over the shorter of the entire lease term or the period to the first tenant break option.
Where such income or costs are recognised ahead of the related cash flow, an adjustment is made to ensure the carrying value of the related investment property including the accrued rent does not exceed the external valuation.
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.
Income derived from Institutional Funding Agreements
Where the Group remains responsible for overseeing the development of incomplete investment properties that have been sold to third parties who have contracted to fund the construction works, the income which arises from such arrangements is recognised in the income statement over the course of the development work through to the time of practical completion.
Revenue from these arrangements is recognised in the income statement so as to match to the proportion of the relevant development works performed up to the balance sheet date and associated costs incurred to that date.
Other investment property transactions
Other investment property transactions in the year comprise income related to the cancellation of certain contractual arrangements, and the impairment effect of such cancellations on the investment properties to which they relate. These transactions are recognised at the point that the cancellation becomes contractually binding.
Profits on sale of investment properties
Profits on sale of investment properties are calculated by reference to the carrying value at the previous published balance sheet date, adjusted for subsequent capital expenditure.
Financial instruments
Financial assets and liabilities are recognised in the balance sheet when a member of the Group becomes a party to the contractual terms of the relevant instrument. Unless otherwise indicated, the carrying values of the Group's financial assets and liabilities are a reasonable estimate of their fair values.
Business receivables and payables
Business receivables and payables are initially measured at fair value, subsequently measured at amortised cost and, where material, discounted to reflect the time value of money. If there is objective evidence that the recoverability of an asset is at risk, appropriate allowances for any estimated irrecoverable amounts are recognised in the income statement.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, deposits held at call with banks and financial institutions and other highly liquid investments with original maturities of three months or less.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
Finance income
Finance income includes interest receivable on funds invested.
Borrowings and finance charges
Borrowings are initially recognised at their fair value, net of any transaction costs directly attributable to their issue. Subsequently, loans are carried at their amortised value using the 'effective interest method', which spreads the interest expense over the period to maturity at a constant rate on the balance of the liability carried in the balance sheet for the relevant period.
Finance charges are accounted for on an accruals basis using the effective interest method and are added to or offset against the carrying amount of the loan instrument to the extent that they are not settled in the period in which they arise.
Derivative financial instruments
Derivative financial instruments are used to minimise the exposure of the Group to cash flow risks arising from interest rate fluctuations. Derivatives are initially recognised at fair value on the date on which the derivative contract is entered into. Derivatives are re-measured to fair value at each published balance sheet date. Hedge accounting is not currently applied by the Group.
The gains or losses on the re-measurement to fair value of all derivative financial instruments are recognised in the income statement.
Provisions
A provision is recognised when a legal or constructive obligation exists as a result of an event that has occurred prior to the balance sheet date and where it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions will be measured at the Board's best estimate of the expenditure required to settle that obligation as at the balance sheet date, and will be discounted to present value if the effect is material.
Distributions
Distributions on equity shares are recognised when they become legally payable.
Management fees and incentive arrangement payments
Management fees and incentive arrangement payments are recognised in the income statement in the period to which they relate. Any amounts relating to incentive arrangements that have been earned and are reasonably likely to become payable in the future will be provided for in the financial statements and balances will be discounted to reflect the deferred nature of the payment.
Tax
Tax is included in the income statement except to the extent that it relates to items recognised directly in equity, in which case the related tax is recognised in other comprehensive income.
Current tax is the expected tax payable on taxable income for the reporting period, using tax rates enacted or substantively enacted at the balance sheet date, together with any adjustment in respect of previous periods.
Deferred tax is provided for using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. If applicable to any financial period, the tax effect of the following differences will not be provided for:
-- the initial recognition of goodwill;
-- the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit; and
-- investments in subsidiaries, associates and jointly controlled entities where the Group is expected to be able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.
The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.
3. Segmental information
During the current year and prior year, the Group operated in and was managed as one operating segment, being property investment, with all investment properties located in the United Kingdom.
The Board, which is considered to be the chief operating decision maker of the Group for IFRS 8 purposes, receives quarterly management accounts that are prepared on an IFRS (EU) basis and which aggregate the performance of all the Group's investment properties and focus on total returns on Shareholders' equity.
For the year ended 30 September 2016, one tenant provided 62%, a second tenant provided 8% and a third tenant provided 6% of the Group's gross rental income (year ended 30 September 2015: two tenants each provided 18% and one tenant provided 12% of the Group's gross rental income).
4. Gross revenue and direct costs
Year ended Year ended
30 September 30 September
Gross revenue: 2016 2015
==================================== =============== ===============
GBP GBP
==================================== =============== ===============
Gross rental income 3,410,759 1,492,038
Revenue derived from Institutional
Funding Agreements 81,830,032 44,609,611
85,240,791 46,101,649
------------------------------------ --------------- ---------------
Year ended Year ended
30 September 30 September
Direct costs: 2016 2015
===================================== ============== ==============
GBP GBP
===================================== ============== ==============
Property outgoings 707,634 733,741
Costs associated with Institutional
Funding Agreements 81,364,903 44,258,090
82,072,537 44,991,831
------------------------------------- -------------- --------------
The Group's revenue and costs in connection with Forward Funding Agreements relate to:
-- Sutton foodstore -- London Road Retail Park in Biggleswade -- the retail scheme at Brocklebank Road in Greenwich -- the Gateway Retail Park in Banbury -- the Sainsbury's/M&S development in Greenwich -- the Rushden Lakes Retail Park in Rushden, Northamptonshire 5. Other investment property transactions
During the year, the Group accepted settlement payments in return for the cancellation of contractual arrangements relating to certain of its investment properties. The cancellation of these contractual arrangements had a direct and immediate detrimental effect on the value of the investment properties to which the contracts related, and as a result, an impairment charge has been applied to these assets. As these transactions are considered to be relevant to an understanding of the performance of the Group, the income and the resulting impairment has been recognised separately to the fair value movements of investment properties described in note 12.
6. Operating (loss)/profit
Year Year ended
ended
30 September 30 September
2016 2015
============================================================= ============= =============
GBP GBP
============================================================= ============= =============
Operating (loss)/profit
is stated after charging:
Investment Manager's fees 4,684,290 4,394,995
Directors' fees 305,000 305,000
Auditors' remuneration:
Audit services:
* audit of the Group and Company Financial Statements 87,000 85,600
* audit of subsidiary undertakings 10,500 10,400
Audit related assurance
services:
-review of the Group's
Interim Report 24,400 23,500
Other non-audit services:
-total fees for other non-audit
services 1,500 1,500
The Group has no employees.
Fees payable to the Directors in the year were as follows:
Year ended Year ended
30 September 30 September
2016 2015
======================= ============= =============
GBP GBP
======================= ============= =============
Phil Wrigley 85,000 85,000
Steve Webb 50,000 50,000
Danny Kitchen 60,000 60,000
Alastair Irvine 50,000 50,000
George Baird 60,000 60,000
========================= ============= =============
Total charged to
the income statement 305,000 305,000
========================= ============= =============
7. Operating leases
The Group enters into operating leases with tenants on its investment properties.
Future minimum rents receivable under non-cancellable operating leases as at 30 September 2016 are set out in the table below. The rents receivable shown in the table are calculated on the assumption that any tenant with a break option chooses to exercise that option.
New leases are generally entered into for fixed terms of between 5 and 20 years and include periodic rent reviews and may include tenant and/or landlord break options.
There was no contingent rental income in the year (2015: GBPnil).
As at As at
30 September 30 September
2016 2015
=========================== ============= =============
GBP GBP
=========================== ============= =============
Minimum rents receivable:
- within one year 2,610,359 2,716,748
- in two to five
years 12,543,924 8,401,750
- in more than five
years 28,998,997 14,908,259
44,153,280 26,026,757
=========================== ============= =============
8. Finance income and costs
Year ended Year ended
30 September 30 September
Recognised in the income 2016 2015
statement:
=================================== ============= =============
GBP GBP
=================================== ============= =============
Finance income:
Interest on cash deposits 56,492 175,524
Increase in fair value of
the ineffective element of
derivative financial instruments - 450,155
Total finance income recognised
in the income statement 56,492 625,679
===================================== ============= =============
Finance costs:
Bank interest (896,369) (645,638)
Decrease in fair value of
the ineffective element of
derivative financial instruments (227,800) (242,408)
Amortisation of capitalised
finance costs (526,364) (252,818)
Other finance costs (68,669) (30,176)
===================================== ============= =============
Total finance costs recognised
in the income statement (1,719,202) (1,171,040)
Net finance costs recognised
in the income statement (1,662,710) (545,361)
===================================== ============= =============
Net finance costs recognised in the income statement, analysed by the categories of financial assets and liabilities shown in note 18b, are as follows:
Year ended Year ended
30 September 30 September
2016 2015
=========================== ============= =============
GBP GBP
=========================== ============= =============
Cash and cash equivalents 56,492 145,348
Bank loans (secured) (1,491,402) (721,164)
Derivative financial
instruments (227,800) 30,455
(1,662,710) (545,361)
=========================== ============= =============
Sensitivity to changes in interest rates:
Movements in LIBOR impact the Group's cost of borrowings and the returns on its cash deposits. A 1% increase or decrease in LIBOR would have the following effects on the Group's results:
Year ended Year ended
30 September 30 September
2016 2015
========================= ============= =============
GBP GBP
========================= ============= =============
Effect on (loss)/profit
before tax 209,133 1,536,869
Effect on equity 209,133 1,536,869
=========================== ============= =============
The average interest rate incurred by the Group on its bank borrowings for the year ended 30 September 2016, including the effects of the lender's margin but excluding amortisation of capitalised finance costs and effects of derivative instruments was 2.86% (30 September 2015: 2.88%).
Further information about the derivative financial instruments is included in note 18a.
9. Taxation
Year ended Year ended
30 September 30 September
2016 2015
========================== ============= =============
GBP GBP
========================== ============= =============
The tax charge for
the year recognised
in the income statement
comprises:
Current tax on results
for the year 187,215 104,344
============================ ============= =============
The tax assessed for the year varies from the standard rate of income tax in the UK of 20%. The differences are explained below:
Year ended Year ended
30 September 30 September
2016 2015
--------------------------------------- ------ -------------- --------------
GBP GBP
======================================= ====== ============== ==============
(Loss)/profit before
tax (15,144,695) 25,915,621
======================================= ====== ============== ==============
(Loss)/profit before tax at the
standard rate of income tax
in the UK of 20% (3,028,939) 5,183,124
Items not subject
to UK income tax:
Income (16,492,779) (9,049,344)
Expenses 17,918,069 10,079,027
Reclassified and other changes
in fair value of derivatives - (6,091)
Investment property revaluation
deficit/(surplus) 1,363,328 (3,636,277)
Deficit on other investment property 203,008 -
transactions
Capital deficit/(surplus) on disposal of investment properties 140,601 (2,673,465) Net financing costs 36,365 154,245 Other amounts: Capital allowances claimed (70,000) (41,355) Losses carried forward 117,562 94,480 Tax charge for the year recognised in the income statement 187,215 104,344 ------------------------------------------------ -------------- --------------
The Group has revenue related losses of GBP4,240,888 (30 September 2015: GBP3,653,084) available to carry forward to utilise against applicable future revenue profits, for which no deferred tax asset is currently recognised.
Tax status of the Company and its subsidiaries
All group undertakings are either tax resident in Jersey or are tax transparent entities owned by Jersey resident entities. Jersey has a corporate tax rate of zero, so the Company and its subsidiaries have no liability to taxation on their income or gains in Jersey. The Company is not subject to UK Corporation tax on any dividend or interest income it receives.
The Group's investment properties are located in the United Kingdom and therefore the net rental income earned less deductible items is subject to UK income tax, currently at a rate applicable to the relevant group undertakings of 20%.
10. (Loss)/earnings per share
(Loss)/earnings per share is calculated on a weighted average of 172,472,041 (30 September 2015: 183,630,374) ordinary shares in issue for the year and is based on the loss attributable to Shareholders for the year of GBP15,331,910 (30 September 2015: earnings of GBP25,811,277). No losses or earnings were attributable to the "B" shares issued and redeemed in the current or prior year.
There are no share options or other equity instruments in issue and therefore no adjustments need to be made for dilutive or potentially dilutive equity arrangements.
The European Public Real Estate Association ("EPRA") issues guidelines aimed at providing a measure of earnings per share designed to present underlying earnings from core operating activities only. The adjusted EPRA earnings per share figure is calculated as follows:
Year ended Year ended
30 September 30 September
2016 2015
=========================== === ========================== ======================
Pence Pence
per share per
GBP GBP GBP share
GBP
=========================== ============= =========== ============= =======
Basic (loss)/earnings (15,331,910) (8.89) 25,811,277 14.06
Property revaluation
and disposal
--------------------------- ------------- ----------- ------------- -------
adjustments:
Investment property
revaluation
movements 6,816,643 3.95 (18,181,385) (9.90)
(Loss)/profit on
sale of investment
properties 703,005 0.41 (13,367,325) (7.28)
Net deficit in
respect of cancellation
of
certain contractual
arrangements 1,015,040 0.59 - -
Market value adjustments:
of interest rate
derivatives, net
of tax 227,800 0.12 (207,747) (0.12)
EPRA loss (6,569,422) (3.82) (5,945,180) (3.24)
================================ ============= =========== ============= =======
11. Dividends
Year ended Year ended
------------------- --- ------------------------- ------------------------
30 September 30 September
2016 2015
=================== === ========================= ========================
Pence Pence
GBP per share GBP per share
=================== === =========== =========== =========== ===========
Interim dividends
paid 18,324,718 38.00 31,460,968 45.00
------------------------- ----------- ----------- ----------- -----------
Current year:
An interim dividend of 38p per ordinary share was declared on 31 May 2016 and paid on 9 June 2016. The dividend was payable on each of the 48,222,942 ordinary shares in issue for which a corresponding "B" share was not issued (see note 19).
The holders of the remaining 120,127,432 ordinary shares in issue received 38p per share (a total of GBP45,648,424) on the redemption of these "B" shares in June 2016 (see note 19).
Prior year:
An interim dividend of 45p per ordinary share was declared on 29 May 2015 and paid on 9 June 2015. The dividend was payable on each of the 69,913,263 ordinary shares in issue for which a corresponding "B" share was not issued (see note 19).
The holders of the remaining 113,717,111 ordinary shares in issue received 45p per share (a total of GBP51,172,700) on the redemption of these "B" shares in June 2015 (see note 19).
12. Investment properties
As described in note 2, the Group's investment properties are now all 'held for sale' at 30 September 2016 and have accordingly been reclassified on the face of the balance sheet.
GBP
================================== =================
Carrying value as at
30 September 2015 208,370,000
Additions 41,544,248
Disposals (144,806,025)
Impairments in relation
to the cancellation of
certain contractual
arrangements (24,934,262)
Revaluation deficit (see
below) (7,003,775)
--------------------------------- ---- -----------------
Carrying value as at
30 September 2016 73,170,186
================================= ==== =================
The revaluation deficit shown above includes
GBP187,132 (2015: GBPnil) of amortisation in
respect of capitalised lease incentives that
have been released to rental income in the
year. A reconciliation is
provided below:
-----------------------------------------------------------
GBP
--------------------------------- ---- -----------------
Investment properties
revaluation deficit (7,003,775)
Amounts attributable
to the amortisation of
lease
incentives released
to rental income 187,132
--------------------------------- ---- -----------------
Revaluation deficit in
the income statement (6,816,643)
--------------------------------- ---- -----------------
Movements in investment properties in the prior
year were as follows:
GBP
Carrying value as at
30 September 2014 245,515,000
Additions 143,867,116
Disposals (199,193,501)
Revaluation surplus 18,181,385
--------------------------------- ---- -----------------
Carrying value as at
30 September 2015 208,370,000
================================= ==== =================
A reconciliation of the carrying value of investment
properties to their fair values at 30 September
2016 is provided below:
----------------------------------------------------------
GBP
---------------------------------------- --------------
Carrying value as at 30
September 2016 73,170,186
------------------------------------------ --------------
Adjustment for rents recognised
in advance and lease
---------------------------------------- --------------
incentives given to tenants 1,394,601
------------------------------------------ --------------
Adjustment for accrued costs
to complete (3,161,787)
------------------------------------------ --------------
Total property portfolio
valuation at 30 September
2016 71,403,000
------------------------------------------ --------------
There were no differences between the carrying value and fair value of investment properties at 30 September 2015.
At 30 September 2016, the Group's investment properties were valued by JLL, Chartered Surveyors, on a fixed fee basis, in their capacity as independent external valuers. The aggregate fair value of these properties at 30 September 2016 is GBP71,403,000 (30 September 2015: GBP208,370,000). The carrying value of these properties includes GBP3,161,787 (2015: GBPnil) of accrued costs that were not treated as part of the historical cost of the relevant properties in determining the external valuation. The fair value includes GBP1,394,601 (2015: GBPnil) of rents recognised in advance that are included in business and other receivables at the balance sheet date.
The external valuers' valuation was undertaken in accordance with the Royal Institution of Chartered Surveyors' Valuation Standards Professional Standards (January 2014) on the basis of fair value. Fair value is defined in IFRS 13 as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date.
The Board determines the Group's valuation policies and procedures and is responsible for appointing the Group's independent external valuer. The Audit Committee considers the valuation process as part of its overall responsibilities.
The fair value of completed investment properties is determined using the 'investment method' whereby capitalisation yields derived from market transactions involving comparable investment properties are applied to the estimated net current and future cash flows expected to be generated by the investment property, which the valuer calculates using comparable market information, to obtain a market rent. The fair value of an investment property undergoing development is derived using the 'residual method' whereby the costs required to complete the development, including a notional cost of finance and an estimated risk factor or "profit on cost", are deducted from the net development value arrived at under the 'investment method'.
As part of each half-yearly valuation exercise, the valuations performed by the external valuers are reviewed by appropriately qualified members of the Investment Manager's team. This includes discussion of the assumptions used and judgements made by the external valuers as well as detailed consideration of the resulting valuations. Discussion of the valuation process and results then takes place at a meeting between the external valuers and the auditors at which the key assumptions and estimates are reviewed together with consideration of the valuers' reasons for significant valuation movements on individual properties. The reasons for significant revaluation movements attributable to individual properties are explained in the auditor's report to the Audit Committee.
The key unobservable inputs used in the valuation of the Group's investment properties at 30 September 2016 are as follows:
ERV per square Equivalent
foot (GBP) yield (%)
-------------------------
Investment Fair Valuation Weighted Weighted
property value method Min Max average Min Max average
type
------------- ----------- ----------- ------ ------ --------- ------ ------ ---------
Completed 50,350,000 Investment 10.0 40.0 20.41 5.5 7.0 5.9
Development 16,353,000 Residual 10.0 30.1 22.23 5.5 7.0 6.0
Other* 4,700,000
------------- -----------
Total 71,403,000
The key unobservable inputs used in the valuation of the Group's investment properties at 30 September 2015 are as follows:
ERV per square Equivalent
foot (GBP) yield (%)
-------------------------
Investment Fair Valuation Weighted Weighted
property value method Min Max average Min Max average
type
------------- ------------ ----------- ------ ------ --------- ------ ------ ---------
Completed 53,550,000 Investment 10.0 24.0 19.4 5.3 6.5 5.6
Development 153,020,000 Residual 10.0 50.0 25.0 4.5 10.0 5.0
Other* 1,800,000
------------- ------------
Total 208,370,000
*Comprises land assets that are held at their estimated open market value.
All other factors remaining constant, an increase in rental income would increase a valuation whilst increases in nominal equivalent yield and discount rate would result in a fall in value and vice versa. However, there are interrelationships between unobservable inputs as they are determined by market conditions. Corresponding movements in more than one unobservable input may have a complementary effect on a valuation whereas unobservable inputs moving in opposite directions may compensate each other. For example, where market rents and nominal equivalent yields increase simultaneously, the overall impact on a valuation may be minimal.
For investment properties undergoing development, a reduction in the cost and time to complete a scheme will have a positive impact on value, assuming all other factors remain constant. Conversely, if the anticipated cost or time to complete a scheme increased then this would negatively impact value, assuming all other factors remain constant.
All of the Group's investment properties are considered to be 'Level 3' in the fair value hierarchy described by IFRS 13. There have been no transfers of property between hierarchical levels in the year.
The historic cost of the Group's investment properties as at 30 September 2016 was GBP89,525,931 (30 September 2015: GBP169,139,608).
Property outgoings (note 4) were split as follows:
Year ended Year ended
30 September 30 September
2016 2015
=== =============================== === ============== =============
GBP GBP
=== =============================== === ============== =============
Property outgoings that arose
from investment properties
that generated rental income
in the year 185,605 241,165
Property outgoings that arose
from investment properties
that did not generate rental
income in the year 522,029 492,576
==================================== === ============= =============
707,634 733,741
==================================== === ============= =============
13. Business and other receivables
As at As at
30 September 30 September
2016 2015
============================= ============== =============
GBP GBP
============================= ============== =============
Business receivables 17,719,776 3,542,809
Property sales receivables 13,315,713 29,292,920
Rents recognised in 1,394,601 -
advance
Amounts receivable
under Institutional
Funding Agreements 6,342,683 4,582,638
Prepayments and accrued
income 2,954,371 2,671,461
Other receivables 3,182,955 8,647,535
=================================== ============= =============
44,910,099 48,737,363
==== ============================ ============= =============
Property sales receivables comprise relevant amounts receivable in respect of investment property sales that had unconditionally exchanged prior to the balance sheet date.
Amounts receivable under Institutional Funding Agreements relate to the income referred to in note 4.
All of the above amounts are either receivable within one year or will be released to the income statement within one year except for GBP1,226,188 (2015: GBPnil) of rents recognised in advance that are due to be released to the income statement in more than one year.
No business receivables were overdue or impaired at the end of either of the above years.
14. Cash and cash equivalents
Included within the Group's cash and cash equivalents balance as at 30 September 2016 is GBP554,934 (30 September 2015: GBP277,013) in bank accounts held as security by the providers of the Group's secured bank debt facilities.
15. Business and other payables
As at As at
30 September 30 September
2016 2015
======================== ====== ============= =============
GBP GBP
======================== ====== ============= =============
Business payables 23,019,718 5,233,537
Rents received in
advance - 553,247
Amounts payable under
Institutional
Funding Agreements 1,270,531 -
Other creditors 5,173,997 3,172,783
Accruals and other
amounts payable 9,382,939 10,588,682
================================= ============= =============
38,847,185 19,548,249
==== ========================== ============= =============
All of the above amounts are due within one year and none incur interest.
Amounts payable under Institutional Funding Agreements relate to the Sainsbury's/M&S forward funding arrangements referred to in note 4.
16. Borrowings: amounts repayable within one year
As at As at
30 September 30 September
2016 2015
======================== ====== ============= =============
GBP GBP
======================== ====== ============= =============
Bank loans (secured):
Investment facility 5,000,000 4,928,109
--------------------------------- ------------- -------------
Development facility 25,098,071 -
----------------------- ---- ------------- -------------
30,098,071 4,928,109
---- -------------------------- ------------- -------------
Investment facility:
In March 2015 a group entity entered into an agreement with Barclays Plc for a 12-month investment finance facility. A loan amounting to GBP5,000,000 (shown in the prior year above net of loan issue costs which are now fully amortised) was drawn in March 2015 and is secured against an investment property held within a ring-fenced sub-group beyond which the loan is non-recourse. The facility was extended to March 2017 during the year.
Development facility:
In December 2014, a group entity entered into an agreement with the Royal Bank of Scotland Plc for a development finance facility. The loan, which was held in borrowings payable in more than one year at the prior balance sheet date (see note 17) is shown above (net of unamortised loan issue costs) and was drawn during the current and prior year in several tranches totalling GBP25,209,367. The loan is secured against one of the Group's investment properties which is held within a ring-fenced sub-group beyond which the loan is non-recourse.
There have been no defaults or other breaches of financial covenants under the terms of either of the loan agreements described above during the current or prior periods, or in the period since the balance sheet date.
There was no difference between the book value and the fair value of the borrowings disclosed above at either balance sheet date.
17. Borrowings: amounts repayable after more than one year
As at As at
30 September 30 September
2016 2015
========================= ====== ============== =============
GBP GBP
========================= ====== ============== =============
Bank loans (secured):
Investment facilities - 22,661,669
Development facilities - 25,586,823
---------------------------------- ------------- -------------
- 48,248,492
---- ------------------------------------------ -------------
Investment facilities in the prior year:
In September 2015 a group entity entered into an agreement with Royal Bank of Scotland Plc for a three year debt facility. A loan amounting to GBP23,000,000 (shown above net of unamortised loan issue costs) was drawn in September 2015 and was secured against an investment property held within a ring-fenced sub-group beyond which the loan is non-recourse. The investment property was sold in September 2016 and the loan was repaid on the same date.
Development facilities in the prior year:
In November 2014 and December 2014, two group entities entered into agreements with the Royal Bank of Scotland Plc for development finance facilities. The loans shown above (net of unamortised loan issue costs) were drawn during the year to 30 September 2015 in several tranches totalling GBP26,303,495. At 30 September 2015, the loans were secured against certain of the Group's investment properties held within ring-fenced sub-groups beyond which the loans were non-recourse. The property to which the facility entered into in November 2014 related was sold in September 2016 and the loan was repaid on the same date. The facility entered into in December 2014 is due for repayment in less than one year at the balance sheet date and is described in note 16.
There were no defaults or other breaches of financial covenants under the terms of any of the loan agreements described above during the current or prior periods.
18. Financial instruments and risk management a) Derivative financial instruments
The Group enters into hedging arrangements to provide protection against interest rate fluctuations in respect of its current and projected bank borrowings.
i) Derivative financial assets:
On 15 May 2015, in anticipation of future hedging needs, the Group entered into a cash-settled swaption with the Royal Bank of Scotland Plc. The instrument referenced a theoretical derivative which was to be effective for three years from 30 September 2016 on a notional amount of GBP50m at a fixed rate of 1.64%. Under the terms of the cash-settled swaption contract, if at the effective date the equivalent market swap rate had been in excess of the effective rate, the Group would have received a cash payment of the difference. At 30 September 2016, the equivalent market swap rate was below the effective rate and therefore nothing was receivable. The premium paid on entering into the swaption was GBP647,500 and the fair value at the previous balance sheet date was GBP227,800. No actual derivative instrument was entered into on 30 September 2016, and the remaining GBP227,800 has now been included in finance costs (see note 8).
In December 2014, the Group entered into two 1.6675% interest rate caps in order to protect itself against interest rate increases on the development facilities referred to in notes 16 and 17. The caps expire on 31 December 2016 and mirror the projected borrowings under the facilities up to a maximum total of GBP51.85m. The fair value of these instruments at 30 September 2016, and at previous balance sheet dates, was insignificant.
b) Categories of financial instruments
As at As at
30 September 30 September
2016 2015
============================= ====== ============= =============
GBP GBP
============================= ====== ============= =============
Financial assets
Loans and receivables:
Cash and cash equivalents 46,481,520 5,033,414
Business receivables 17,719,776 3,542,809
Property sales receivables 13,315,713 29,292,920
Rents recognised 1,394,601 -
in advance
Amounts receivable
under Institutional
Funding Agreements 6,342,683 4,582,638
Other receivables 3,182,955 8,647,535
-------------------------------------- ------------- -------------
88,437,248 51,099,316
Non-current assets:
Derivative financial
assets - 227,800
====================================== ============= =============
88,437,248 51,327,116
==== =============================== ============= =============
As at As at
30 September 30 September
2016 2015
=========================== ====== ============= =============
GBP GBP
=========================== ====== ============= =============
Financial liabilities
Current liabilities:
Business payables 23,019,718 5,233,537
Amounts payable under
Institutional
Funding Agreements 1,270,531 -
Other creditors 5,173,997 3,172,783
Bank loans (secured) 30,098,871 4,928,109
Accruals and other
amounts payable 9,382,939 10,588,682
==================================== ============= =============
68,946,056 23,923,111
Non-current liabilities:
Bank loans (secured) - 48,248,492
68,946,056 72,171,603
==== ============================= ============= =============
All financial assets and liabilities are measured at amortised cost, except for derivative financial instruments, which are measured at fair value.
c) Financial risk management
Through the Group's operations and use of debt financing it is exposed to a variety of risks. The Group's financial risk management objectives are to minimise the effect of these risks by, for example, using derivative financial instruments to mitigate interest rate risk. Such instruments are not utilised for speculative purposes. The Board provides guidelines on the acceptable levels of interest rate risk, credit risk and liquidity risk and the use of any derivatives is pre-approved by the Board.
The principal financial risks that are considered to be potentially material to the Group and the policies that it has in place to manage these risks are summarised below:
i) Liquidity risk
Liquidity risk arises from the Group's management of working capital and the finance charges and principal repayments on its debt instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.
The Board utilises quarterly budgets and forecasts to make an assessment of the resources that are expected to be available to the Group to meet its liabilities when they fall due.
The Group ensures that surplus cash is managed with the following objectives: (i) to ensure efficient cash and liquidity management; (ii) to deliver appropriate returns on all surplus funds having regard to the Group's policy not to expose cash to significant risk; and (iii) to limit exposures through counterparty diversification.
Generally returns on cash deposits reflect the notice period required to release the deposit back to the Group.
The following table shows the maturity analysis for financial liabilities and their effective interest rates, where applicable. The table has been drawn up based on undiscounted cash flows, including future interest payments, based on the earliest repayment date.
As at 30 September 2016
Effective
interest Less than Between
one 1 and
Financial liabilities rate year 5 years Total
------------------------ ---------- ----------- -------- -----------
% GBP GBP GBP
======================= ========== =========== ======== ===========
Business
payables 23,019,718 - 23,019,718
------------------------ ---------- ----------- -------- -----------
Amounts payable
under Institutional
------------------------ ---------- ----------- -------- -----------
Funding
Agreements 1,270,531 - 1,270,531
Other creditors 5,173,997 - 5,173,997
Borrowings 2.78 30,462,643 - 30,462,643
Accruals and other
amounts payable 9,382,939 - 9,382,939
=========== ======== ===========
69,309,828 - 69,309,828
=========== ======== ===========
As at 30 September 2015
Effective
interest Less than Between
one 1 and
Financial liabilities rate year 5 years Total
------------------------ ---------- ----------- ----------- -----------
% GBP GBP GBP
======================= ========== =========== =========== ===========
Business
payables 5,233,537 - 5,233,537
Other creditors 3,172,783 - 3,172,783
Borrowings 2.77 5,627,028 51,577,649 57,204,677
Accruals and other
amounts payable 10,588,682 - 10,588,682
=========== =========== ===========
24,622,030 51,577,649 76,199,679
=========== =========== ===========
ii) Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its investment property activities and from its financing activities, including deposits with banks and other financial institutions and derivatives.
The credit risk on cash balances and short-term deposits is limited because the Group does not retain large cash balances for extended periods and counterparties are typically banks with credit ratings of AA- or higher or that have substantial UK government backing. As at the year end, deposits were spread across 4 (30 September 2015: 4) different banks. The credit ratings of the banks are monitored and changes made as necessary to manage risk. The Board does not consider that there is a significant concentration of counterparty risk.
Rigorous credit control procedures are applied to facilitate recovery of business receivables. Tenant leases are long-term contracts with rents payable either monthly or quarterly in advance. Prospective tenants are assessed according to the Group's credit criteria prior to entering into lease agreements. Penal interest is charged on outstanding rents in accordance with the applicable lease terms and legal action would be taken to recover any substantial arrears.
The credit risk relating to counterparties transacting with the Group in relation to property acquisitions, disposals and Institutional Funding Agreements is managed through appropriate due diligence and contractual protection in the relevant agreements.
iii) Market risk - interest rate risk
Market risk arises from the Group's use of debt financing. It is the risk that the future cash flows of a financial instrument will fluctuate because of changes in interest rates.
The Group is exposed to cash flow interest rate risk from its variable rate borrowings. As described above, the Group typically uses interest rate hedging products in order to mitigate this risk.
The Group's derivative financial instruments in use at the balance sheet date are described in section a) of this note and the Group's sensitivity to changes in interest rates is considered in note 8.
iv) Capital risk management
The Group's total capital at each balance sheet date comprises net debt (which principally consists of the borrowings disclosed in note 16 less the cash and cash equivalents disclosed in note 14) and equity attributable to Shareholders of the Company (stated capital and retained earnings). The Group monitors its capital with reference to committed expenditure with the primary objective of safeguarding its ability to continue to operate as a going concern whilst complying with its banking covenants. Borrowings are secured on specific properties and, as referred to in notes 16 and 17, are non-recourse to the Group as a whole.
The Group's ongoing monitoring of its capital structure and in particular the specific financing required for each of its individual capital projects allows it to quickly identify funding needs and thereby facilitates in the securing of any necessary further debt finance.
The Group is not subject to any external capital requirements.
19. Stated capital
Analysis of stated capital:
As at As at
30 September 30 September
2016 2015
============================================================== ====== ============== ==============
Number Number
============================================================= === === ============== ==============
Authorised
Ordinary shares of no Unlimited Unlimited
par value - number
============================================================= === === ============== ==============
Issued and fully paid
Ordinary shares of no
par value - number 168,350,374 183,630,374
Summary of movements in GBP GBP
stated capital
============================================================= === === ============== ==============
Ordinary shares of no
par value
- total paid on issues
to date 266,359,124 266,359,124
* purchased for cancellation:
- in the year (14,716,350) -
- in prior years (84,593,108) (84,593,108)
* reclassification of the attributed retained earnings
element of ordinary share
buybacks undertaken:
- in prior years 10,951,754 10,951,754
Redeemable "B" shares
of no par value (see below)
- total paid on issue - -
in the current year
- redemption for cancellation
in the
current year (45,660,107) -
- redemption for cancellation
in the
prior year (51,172,700) (51,172,700)
Total issue and purchase
costs deducted to date (9,402,118) (9,256,613)
======================================================================= ============== ==============
Stated capital per the
balance sheet 71,766,495 132,288,457
======================================================================= ============== ==============
In an earlier period the Group transferred to retained earnings GBP10,951,754 in respect of amounts that it considered attributable to that reserve in relation to share buybacks undertaken up to 30 September 2014.
Transactions with Shareholders in the current year - ordinary shares:
In December 2015 and January 2016, the Company purchased a total of 15,280,000 of its own shares for cancellation for cash at an average price of 96.3p per share, including costs.
Transactions with Shareholders in the current year - "B" shares and dividends:
In June 2016, a return of cash of 38p per ordinary share was made to Shareholders (the Second Return of Cash). The total Second Return of Cash of GBP64m comprised the following two elements:
-- GBP45.7m paid to Shareholders holding 120,127,432 of the Company's ordinary shares. This was paid through the redemption of an identical amount of redeemable "B" shares which had been allotted and issued to the holders of these shares at nil pence per share earlier in June as one of the options available to Shareholders under the mechanism of the Second Return of Cash.
-- An interim dividend amounting in total to GBP18.3m (see note 11). This was paid to Shareholders holding the remaining 48,222,942 of the Company's ordinary shares in issue at that date who elected to receive the Second Return of Cash by way of a cash dividend. The cash dividend was debited to retained earnings.
Issue and purchase costs of GBP101,350 in respect of the redeemable "B" shares were incurred in relation to the Second Return of Cash.
Transactions with Shareholders in prior years - "B" shares and dividends:
In June 2015, a return of cash of 45p per ordinary share was made to Shareholders (the First Return of Cash). The total First Return of Cash of GBP82.6m comprised the following two elements:
-- GBP51.2m paid to Shareholders holding 113,717,111 of the Company's ordinary shares. This was paid through the redemption of an identical amount of redeemable "B" shares which had been allotted and issued to the holders of these shares at nil pence per share earlier in June as one of the options available to Shareholders under the mechanism of the First Return of Cash.
-- An interim dividend amounting in total to GBP31.5m (see note 11). This was paid to Shareholders holding the remaining 69,913,263 of the Company's ordinary shares in issue at that date who elected to receive the First Return of Cash by way of a cash dividend. The cash dividend was debited to retained earnings.
Issue and purchase costs of GBP145,056 in respect of the redeemable "B" shares were incurred in relation to the First Return of Cash.
In December 2013, the Company purchased a total of 32,379,947 of its own shares for cancellation for cash at a price of 123p per share.
In March 2013, the Company purchased a total of 21,050,043 of its own shares for cancellation for cash at an average price of 118.76p per share. In June and July 2013, the Company purchased a further 17,039,121 of its own shares for cancellation for cash at an average price of 116.79 per share.
20. Reserves
The Group statement of changes in equity is shown as a primary financial statement.
The nature and purpose of each reserve within equity is as follows:
Stated capital: This represents the proceeds on the issue of ordinary shares, net of issue costs, less the amounts considered attributable to this reserve in relation to purchasing ordinary shares for cancellation, inclusive of associated costs.
Retained earnings: This represents the cumulative profits and losses recognised in the income statement, less dividends paid to Shareholders and the amounts considered attributable to this reserve in relation to purchasing certain shares for cancellation, inclusive of associated costs.
21. Net asset value per share
Net asset value per share is calculated as the net assets of the Group attributable to Shareholders at each balance sheet date, divided by the number of ordinary shares in issue at that date (see note 19).
There are no share options or other equity instruments in issue and therefore no adjustments need to be made for dilutive or potentially dilutive equity arrangements.
The European Public Real Estate Association ("EPRA") has issued guidelines aimed at providing a measure of net asset value ("NAV") on the basis of long term fair values. The EPRA measure excludes items that it considers have no impact in the long term, such as the fair value of derivative financial instruments and deferred tax balances. The Group's EPRA NAV is calculated as follows:
As at As at
30 September 30 September
2016 2015
=======
Pence Pence
GBP per GBP per
share share
========================== =========== ======= ============= =======
Basic NAV 95,465,137 56.70 189,643,727 103.27
Adjustments:
Fair value of derivative
financial instruments - - (227,800) (0.12)
EPRA NAV 95,465,137 56.70 189,415,927 103.15
=============================== =========== ======= ============= =======
22. Related party transactions and balances
Interests in shares
The interests of the Directors and their families in the share capital of the Company are set out below:
Ordinary shares
As at As at
30 September 30 September
2016 2015
============== ==============
Number Number
=============== ============== ==============
Phil Wrigley 447,748 447,748
Steve Webb 319,046 243,385
Danny Kitchen 622,927 467,927
Alastair
Irvine 6,195,306 3,777,569
================ ============== ==============
The interests disclosed above include both direct and indirect interests in shares. The Second Return of Cash to Shareholders in the current year resulted in the Directors receiving an aggregate amount of GBP1,875,919 (2015: GBP1,646,577 in respect of the First Return of Cash) on the same terms as the other Shareholders of the Company.
The group headed by LXB(3) Partners LLP, which includes LXB Adviser LLP, the Group's Investment Manager, is a related party of the Company.
LXB Adviser LLP's wholly owned subsidiaries, LXBRP GP Limited, LXB Gloucester GP Limited, LXB Sheppey GP Limited, LXB Kingsmead GP Limited, LXB Riverside GP Limited, LXB Sheppey 2 GP Limited and LXB Greenwich GP Limited act as the sole corporate general partners of LXB Retail Properties Fund LP, LXB Gloucester LP, LXB Sheppey LP, LXB Kingsmead LP, LXB Riverside LP, LXB Sheppey 2 LP and LXB Greenwich LP respectively, which are significant, indirectly controlled subsidiaries of the Company.
At 30 September 2016, the members of LXB(3) Partners LLP (and their spouses) held an aggregate total of 19,645,344 (30 September 2015: 15,679,847) shares in the Company. The Second Return of Cash to Shareholders resulted in the members of LXB(3) Partners LLP (and their spouses) receiving an aggregate amount of GBP5,188,854 (2015: GBP5,622,907 in respect of the First Return of Cash) on the same terms as the other Shareholders of the Company.
There have been no changes to any of the above shareholdings between 30 September 2016 and the date of this report.
Fees
Directors' fees of GBP305,000 (30 September 2015: GBP305,000) were payable for the year ended 30 September 2016. As at 30 September 2016, GBP76,250 (30 September 2015: GBP76,250) of fees remained outstanding and are included within business and other payables (note 15).
Management fees of GBP4,684,290 (30 September 2015: GBP4,394,995) were payable to the group headed by LXB(3) Partners LLP by the Group in respect of the year ended 30 September 2016. No amounts were outstanding at the respective balance sheet dates.
LXB Adviser LLP is permitted, under the terms of the Investment Advisory Agreement, to recharge certain costs and expenses incurred in the discharge of its duties. During the year it has recharged costs totalling GBP109,815 (30 September 2015: GBP84,937) to the Group.
Subsidiary entities
LXB Retail Properties Plc is the ultimate controlling party of its subsidiary entities.
All of the Group's investment properties are held by entities that are either direct or indirect subsidiary undertakings of LXB Retail Properties Fund LP ("the Fund").
The consolidated financial statements include the financial statements of the Company and the following principal subsidiary entities, all of which are wholly-owned unless otherwise stated:
Entity Country of incorporation Nature of business
Appointment and removal
of members
LXBRP Commco of the investment
Limited* Jersey committee
LXBRP LP Limited* Jersey Limited partner
LXB Retail Properties Intermediate holding
Fund LP** Jersey entity
LXBRP Treasury Treasury operations
Co Limited Jersey and group finance
LXB Gloucester Intermediate holding
LP*** Scotland entity
LXB Greenwich
Borrower Limited Jersey Inactive
LXB Greenwich Intermediate holding
LP*** Scotland entity
LXB Kingsmead Treasury operations
Borrower Limited Jersey and group finance
LXB Kingsmead Intermediate holding
LP*** Scotland entity
LXB Riverside Treasury operations
Borrower Limited Jersey and group finance
LXB Riverside Intermediate holding
LP*** Scotland entity
LXB RP (Acquisitions)
Limited Jersey Inactive
LXB RP (Ayr 1)
Limited Jersey Property investment
LXB RP (Ayr 2)
Limited Jersey Property investment
LXB RP (Ayr BP)
Limited Jersey Property investment
LXB RP (Ayr Holdings) Intermediate holding
Limited Jersey entity
LXB RP (Ayr Retail)
Limited Jersey Property investment
LXB RP (Banbury)
Limited Jersey Property investment
LXB RP (Biggleswade)
Limited Jersey Property investment
LXB RP (Biggleswade
2) Limited Jersey Property investment
LXB RP (Biggleswade
3) Limited Jersey Inactive
LXB RP (Bridge
Street) Limited Jersey Property development
LXB RP (Brocklebank
Road) Limited Jersey Property development
LXB RP (Crown
Road) Limited Jersey Property development
LXB RP (Gallions
Road) Limited Jersey Property development
LXB RP (Gloucester)
Limited Jersey Inactive
LXB RP (Gloucester
2) Limited Jersey Property investment
LXB RP (Gloucester
3) Limited Jersey Property investment
LXB RP (Gloucester
4) Limited Jersey Inactive
LXB RP (Greenwich
3) Limited Jersey Property investment
LXB RP (Greenwich
4) Limited Jersey Inactive
LXB RP (Greenwich
8) Limited Jersey Property investment
LXB RP (Kingsmead)
Limited Jersey Property development
LXB RP (London
Road) Limited Jersey Property development
LXB (Newham Farm) Property investment
Limited Jersey - Living Villages
LXB RP (No.20)
Limited Jersey Property investment
LXB RP (Queenborough)
Limited Jersey Property development
LXB RP (Riverside)
Limited Jersey Property development
LXB RP (Rushden)
Limited Jersey Property investment
LXB RP (Sheppey
2) Limited Jersey Property investment
LXB RP (Skew
Bridge) Limited Jersey Property development
LXB RP (Stafford)
Limited Jersey Property investment
LXB RP (Sutton) Jersey Property investment
Limited
LXB RP (Wildmere Jersey Property development
Road) Limited
LXB RP (Sutton)
Limited Jersey Property investment
LXB RP (Wildmere
Road) Limited Jersey Property development
LXB Sheppey 2 Treasury operations
Borrower Limited Jersey and group finance
LXB Sheppey 2 Intermediate holding
LP*** Scotland entity
Intermediate holding
LXB Sheppey LP*** Scotland entity
LXB Willow Green
Limited Jersey Property investment
ThreeJack Properties
Limited Jersey Property investment
* LXBRP CommCo Limited and LXBRP LP Limited are directly owned by the Company. All other entities are indirectly owned by the Company.
** LXB(3) Partners LLP and LXBRP GP Limited (see the paragraph headed "Interests in shares" above) have partnership interests in LXB Retail Properties Fund LP ("the Fund") with LXB(3) Partners LLP being entitled to certain incentives that may become payable, as described below. The Group has the power, indirectly, to govern the financial and operating policies of the Fund so as to benefit from its activities as a result of having the authority to appoint and remove members of the Investment Committee. The Investment Committee, which has approval rights over all significant matters pertaining to the business of the Fund, was originally constituted as a committee of LXBRP GP Limited and later reconstituted as a committee of the Fund. The registered office of the Fund is 15 Atholl Crescent, Edinburgh, EH3 8HA.
*** LXB Gloucester GP Limited, LXB Sheppey GP Limited, LXB Kingsmead GP Limited, LXB Riverside GP Limited, LXB Sheppey 2 GP Limited and LXB Greenwich GP Limited (see the paragraph headed "Interests in shares" above) have partnership interests in LXB Gloucester LP, LXB Sheppey LP, LXB Kingsmead LP, LXB Riverside LP, LXB Sheppey 2 LP and LXB Greenwich LP respectively, but are not entitled to any profit shares.
Incentives - carried interest arrangements with LXB(3) Partners LLP
At a future date, when a cumulative hurdle amount has been returned to Shareholders, the carried incentive arrangements with LXB(3) Partners LLP are activated. The carried interest arrangements with LXB(3) Partners LLP were varied in the year.
The cumulative hurdle amount is calculated by reference to the net proceeds base amount, which is now defined as the NAV of the Group at 1 January 2016, being GBP177.1m, and a 12% per annum preferred return thereon (as adjusted for any ordinary shares cancelled as a consequence of any share buyback programmes undertaken since that date). Previously, the net proceeds base amount was defined as the net funds raised from the issue of all ordinary shares (as adjusted for the ordinary shares cancelled as a consequence of any share buyback programmes undertaken) and a 12% per annum preferred return thereon.
Cash returns over and above the cumulative hurdle amount are shared between Shareholders (50%) and LXB(3) Partners LLP (50%) until amounts returned to Shareholders are 80% of the total amount returned. Returns above this level are shared between Shareholders (80%) and LXB(3) Partners LLP (20%).
As at 30 September 2016, the net proceeds base amount, to which the 12% per annum preferred return is applied, is GBP168.4m (30 September 2015: GBP186.0m, under the former definition described above).
The cumulative hurdle amount as at 30 September 2016 is GBP119.0m (30 September 2015: GBP297.8m).
As the net assets of the Group are less than the cumulative hurdle amount as at 30 September 2016, no provision for future incentive payments has been recognised.
Other transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation.
23. Post balance sheet events
The return of GBP30.3m cash to shareholders announced in September 2016 completed in November 2016.
Glossary
AIM A sub-market of the London Stock
Exchange.
CISE The Daily Official List of the Channel
Islands Securities Exchange.
EPRA European Public Real Estate Association.
EPRA EPS An adjusted measure of earnings per
share designed by EPRA to present
underlying earnings from core operating
activities only.
EPRA NAV An adjusted measure of net asset
value designed by EPRA to present
net asset value excluding the effects
of changes in value of financial
instruments held for long term benefit
and the deferred tax effects of those
changes.
EPS Earnings per share, calculated as
earnings after tax divided by the
weighted average number of shares
in issue in the year.
Investment LXB Adviser LLP.
Manager
Investment The agreement between LXBRP GP Limited,
Advisory the General Partner of LXB Retail
Agreement Properties Fund LP, and LXB Adviser
LLP under which LXB Adviser LLP provides
investment advice to the Group.
LIBOR The London Interbank Offered Rate,
being the interest rate charged by
one bank to another for lending money.
NAV Net asset value.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR MMMMMNRLGVZM
(END) Dow Jones Newswires
November 21, 2016 02:00 ET (07:00 GMT)
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