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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 : 3546Y
LXB Retail Properties Plc
05 December 2017
For immediate release 5 December 2017
LXB Retail Properties Plc
RESULTS FOR THE YEARED 30 SEPTEMBER 2017
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 2017.
Highlights
Hot Features
Premium
30 September 30 September
2017 2016
GBP7.98m GBP46.48m
* Cash deposits:
* NAV per share: 29.52p 56.70p
* EPRA* NAV per share: 29.58p 56.70p
* Loss per share: (9.18)p (8.89)p
-- November 2016: returned surplus funds of GBP30.3m to Shareholders
-- December 2016: further cash considerations released in relation to the forward funded investments at Banbury and Sutton, completed a further disposal of land at Gloucester for GBP0.4m, and completed the surrender of the agreement for lease with ASDA at Willow Green Farm, Truro realising total cash proceeds of GBP8.5m
-- January 2017: completed the disposal of Neats Court Retail Park, Sheppey to Lightstone Neatscourt LLP generating cash proceeds of GBP11.3m
-- February 2017: obtained planning consent (subject to referral to the Secretary of State for Communities and Local Government) for a revised and enhanced scheme at Rushden Lakes
-- March 2017: completed the sale of substantially all of the Group's remaining land interests at Corton, Ayr to Manse LLP generating cash proceeds of GBP3.4m
-- May 2017: completed two further lettings at London Road, Biggleswade generating a cash receipt of GBP3.2m under the terms of the sales agreement
-- May 2017: completed a further disposal of land at Gloucester for net proceeds of GBP0.45m
-- July 2017: a GBP6.4m development facility was agreed with Royal Bank of Scotland to fund construction of the cinema at Stafford
-- July 2017: practical completion of Phase 1 of Rushden Lakes -- July 2017: practical completion of Phase 2C at Sheppey -- August 2017: practical completion of Brocklebank Retail Park, Charlton
Post year end:
-- November 2017: following the satisfaction of the remaining criteria, GBP8.6m was received from the Crown Estate under the funding agreement in respect of phases 2 and 3 at Rushden Lakes
* 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 2017.
In my last Chairman's Statement, dated 5 June 2017, issued with the Interim Report in respect of the six months ended 31 March 2017, I set out the Board's thinking, following a period of consultation, as to how we could deliver on our mandate from Shareholders. The mandate, simply put, is to return as much of the value remaining in the portfolio as possible to Shareholders in the form of cash, whilst dealing with the significant assets, liabilities and contractual commitments which would exist beyond the conclusion of the mandate, which at that time was 30 November 2017.
The inherent difficulty in delivering the mandate was recognised recently by nearly all Shareholders when the date for the Board to put final proposals to you was extended to 28 February 2018 at an extraordinary general meeting which took place on 9 October 2017.
The strategy set out in my Letter to Shareholders on 5 April 2017 recognised the need for a NewCo to deal with matters beyond the mandate period and noted the Board's belief that this NewCo should be AIM listed. The intention was that NewCo would seek to develop out the Group's remaining longer-term investments including further phases of Rushden Lakes in partnership with The Crown Estate as owner of the retail and leisure scheme, the cinema and leisure development at Stafford, and a new Living Village on the edge of Truro.
Since that 5 April 2017 letter and my subsequent Chairman's Statement in June 2017, we have had to deal with an increasingly challenging operating environment in terms of the retail and lettings market with a mandate that gave limited flexibility both in terms of time and of action. Needless to say a lot has happened over that period and the Investment Manager's report notes that solicitors are currently instructed on sales of Riverside Retail Park and the cinema and leisure investments at Stafford. However, whilst the Board and Investment Manager have largely delivered in terms of the investments that the Group has been involved in, we have not been able to deliver on our expectations of value creation and the return of cash to Shareholders.
In my role as Chairman I, together with the rest of the Board, am continuously assessing how we can best deliver on the mandate, and maintain a constant dialogue with Shareholders to that end. However, since my last Chairman's Statement many things have changed, particularly in the external environment, which have caused us to reassess the deliverability of and therefore the rationale for the NewCo model.
The share price has seen a dramatic fall of nearly 50% to hover today at around 20p. The Trading Update issued on 19 October 2017 detailed the unforeseen losses on contracts at Rushden and at Stafford and the implications for ultimate value realisation arising from the difficulties in our core retail and leisure occupational markets which were feeding through into the investment market. The share price fall is partly a reflection of the Board's revised guidance as to the likely out-turn, but it also reflects the illiquidity of our shares with a market capitalisation of just over GBP30m. This is obviously very concerning for all Shareholders, including the Board, the Investment Manager, and former partners of the Investment Manager who have not sold any shares and together continue to be the largest shareholder in our company.
Continuing delays both in planning and construction at Stafford and Rushden mean that these large leisure projects are not due to reach practical completion until August 2018 and January 2019 respectively. If these contracts were to be carried forward into a new listed entity, the Board now considers that the inherent risks would place an unacceptable burden on the balance sheet and prospects of that vehicle.
Very significant progress has been made in simplifying the group and reducing the number and complexity of assets, liabilities and contractual commitments that would exist beyond the revised mandate period. To put that in context, at the start of this process the group consisted of 92 legal entities, that number has now been reduced to 41 entities. Now that the funding for phases 2 and 3 at Rushden Lakes is unconditional and assuming that the legal process to sell the retail at Stafford unconditionally and the leisure at practical completion is concluded, I anticipate a further significant reduction in the number of subsidiaries over the next few months as various contractual positions are closed out. We continue to work closely, in particular with The Crown Estate, to reduce the scale of those commitments given the limits that we are faced with, both in time and as regards the size of the Company's balance sheet.
It is clear from my ongoing dialogue with Shareholders, independent of the Investment Manager, that the overwhelming majority, including the Investment Manager, wish to see as much cash as possible returned to all shareholders in the short term, acknowledging the foregoing of profitable opportunities which that may entail. It is also clear from views expressed by Shareholders that, if a solution can be found to obviate the need for ongoing Shareholder involvement in a vehicle that could take significant time to realise value, then that is the preferred solution.
The Board met recently to consider how final proposals, to be put to Shareholders by 28 February 2018, could be framed in light of the current circumstances and in particular having regard to the aspirations of Shareholders and the mandate. The Board has come to the view that the most appropriate way forward is to proceed with a Scheme of Arrangement through the Jersey Courts which will ensure that:
-- where possible all remaining assets and liabilities will be realised into cash and returned to shareholders or be extinguished by a long stop date of 31 March 2019;
-- all remaining Group entities, again as far as possible, will be wound up or dissolved;
-- a small number of entities which will have actual or contingent net liabilities that cannot be extinguished by 31 March 2019, and which are likely to have a net value of, in aggregate, less than 1p per share will be transferred to an entity owned and controlled by the Investment Manager at fair value and on arms' length terms; and
-- after the long stop date of 31 March 2019, the Company, by that time having no value and with no liabilities or continuing commitments, will be dissolved.
A Scheme of Arrangement is currently being prepared by our legal advisers and it is anticipated that this will be presented to the Jersey Courts early in 2018. If it so determines, the Court will convene a meeting of Shareholders to vote on the Scheme of Arrangement. This meeting, together with an extraordinary general meeting convened by the Company in connection with the Scheme of Arrangement, is expected to be held by the end of February 2018 and will constitute proposals for the purposes of the Articles of Association of the Company.
It is necessary to commence the process shortly in order to comply with the mandate that the Board has been given, and adopting a structure that allows the scheme to complete with formal dissolution of the Company after the long stop date of 31 March 2019 ensures that the remaining exposure to construction and letting risk at both Rushden Lakes and Stafford remains with existing Shareholders, whilst providing the time to capture the potential value in Phase 4 at Rushden Lakes and turn that value into cash, again for the benefit of existing Shareholders. To that end a planning application for Phase 4 (the Garden Square) will be submitted next month.
I anticipate that, as part of these proposals, a return of cash, likely to be in excess of 10p per share, will be made in the first quarter of next year. Thereafter, your Board will look to return further amounts of cash as soon as it is realised, commensurate with our obligation to ensure that the Group's cash flow enables it to continue to fulfil its obligations. Any final distribution is proposed to be made prior to 31 March 2019 and the dissolution of the Company.
I appreciate that the final question, as always, goes to the ultimate value to be realised and considerable uncertainty remains as we continue to turn assets into cash and to remove liabilities. In particular, we retain a significant ongoing exposure to the occupational leisure market. The potential to capture the inherent value from the final phase at Rushden Lakes, the Garden Square, where we believe there is significant occupational demand, means that there is a reasonable prospect that we can meet our NAV guidance of between 30p and 35p in cash over the period to 31 March 2019.
We anticipate being able to post formal documentation concerning the proposed Scheme of Arrangement to Shareholders by early February so that the Shareholder meetings that will be required in connection with it and extraordinary general meeting convened by the Company can be held by the end of February 2018 in accordance with the requirements of the Articles of Association of the Company.
Finally a word of thanks to our advisers, the Investment Manager and my fellow Board members. They have worked very hard indeed in difficult circumstances. We have come a long way and are now in a position to deliver proposals which are, I believe, in line with the desired outcome of Shareholders. Whilst the final financial out-turn may not have met our expectations, we have already returned all of the money that was invested in the Plc, and we will have delivered real beneficial change to communities up and down the country.
Phil Wrigley
Chairman
5 December 2017
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 2017 and up to the date of this report.
We continue to work towards realising the remaining value in the portfolio, with the sale of Neats Court Retail Park, Sheppey and all of the Group's remaining land interests at Corton, Ayr completed in the 12 months to 30 September 2017. During that period, the Group also disposed of two plots of land at Gloucester and concluded an agreement whereby ASDA surrendered its leasehold interest at Willow Green Farm, Truro. The Group is also close to concluding the sale of the final plot of land at Gloucester, has approved an offer for the sale of the Group's remaining interests at Stafford with solicitors instructed, and is in advanced discussions with a potential purchaser for the Group's remaining interests at Sutton.
We provide more information on the individual investments in the Property details section of this report. However, 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.
Property details
The Group's most significant investments are discussed in greater detail below.
Biggleswade
Lettings to Cotswold Outdoor and Argos were secured in April 2017 and triggered a cash receipt of GBP3.2m. Discussions are ongoing regarding the remaining space, which is approximately 8,000 sq ft in total. Based on the proposed letting terms there is the potential for a further cash receipt if and when that space is let.
Gloucester
The Group's one remaining plot, comprising approximately 0.75 acres with planning consent for commercial, showroom or trade uses, is now under offer and the sale is expected to complete in the near future. The Group's NAV reflects the terms of the proposed 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, took place in August 2017.
All the leases have completed, with Mothercare and Aldi already open for trade and Primark and Next scheduled to open before Christmas. Following the lease completions, the Group is in the process of agreeing the final cash receipt due under the Institutional Funding Agreement, and expects this to be finalised shortly.
Rushden Lakes
This investment was sold to The Crown Estate 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.
The Group has recently announced that it has secured an enhanced planning consent for a further 215,000 sq ft of retail and leisure space to be delivered over three additional phases of development and that the revised agreement providing for The Crown Estate to fund the next two phases at Rushden Lakes is now unconditional.
Rushden Lakes is now planned in four phases with Phase 1, anchored by M&S, Primark and House of Fraser, now open and 96% let. Additionally, a 4,649 sq ft unit has been let to Superdry and a 2,729 sq ft has been let to Magazine Heaven (both subject to planning) and a further lease with Robert Goddard for the final 2,352 sq ft at Phase 1 is in solicitors' hands. The contractor is already on site with Phases 2 and 3, with the anticipated practical completion dates being January 2019 and June 2018 respectively. Work on Phase 4 is expected to start in May 2018.
90% of the Phase 2 space is pre-let, with a further 2% in solicitors' hands. Phase 3 is 63% pre-let and another 20% is currently in solicitors' hands.
The Group remains in discussion with Highways England concerning potential cost over-runs in connection with the highways improvements at Rushden Lakes and will update further when it is appropriate to do so.
Sheppey
In January 2017, the Group completed the sale of the Neats Court Retail Park investment to Lightstone Neatscourt LLP for GBP11.34m.
Practical completion of the Group's remaining interest which comprises 10,000 sq ft of A3 restaurant space, was achieved in July 2017. Four units are already let and the tenants are in occupation which equates to 72% by floor area. Discussions are ongoing with various retailers to take the remaining space which is currently configured as two units.
The Board intends to wait until the scheme is fully let before bringing this investment to market.
Stafford
The Riverside retail investment is fully open and the Group has completed lettings on two further units in the period, leaving some 6,000 sq ft (approximately 6% of floor space) to let. The Board has approved an offer to purchase the investment and both parties have instructed solicitors.
The Group commenced construction of the cinema and adjacent restaurant unit during the period and practical completion is expected in August 2018. The RBS development facility to support the construction of the cinema and the adjacent restaurant was also signed in the period. The Board has approved an offer for this investment to be sold on a forward commitment basis whereby the buyer commits to acquire the completed investment at practical completion.
The Group's NAV reflects the terms of both potential transactions. Further announcements will be made as and when they are contractually certain.
Sutton
The Group's remaining interest in Sutton is the long leasehold on the 27,000 sq ft ground floor retail units beneath the two residential towers. Four units are let and a further letting is in solicitors' hands which leaves one unit of 1,300 sq ft unit to let.
The Group is in advanced discussions with a potential purchaser which may lead to solicitors being instructed.
Living Villages - Truro, Higher Newham
The Group's land interests at Higher Newham Farm have consent for a Living Villages type scheme. As noted in the Chairman's Statement, the Board intends to explore all options to maximise the cash value of all remaining assets before 31 March 2019. Higher Newham Farm will be part of this review.
Revaluation deficit and loss on sale of investment properties
As described in note 12 to the Group Financial Statements, the investment properties held by the Group at 30 September 2017 were valued by the Group's external property valuers, JLL. In their opinion the fair value of these investment properties at that date was GBP54.7m, resulting in a revaluation deficit for the period of GBP13.3m. This deficit is largely down to a softening of yields on the Stafford and Sutton investments, cost increases at Stafford and reduced rent assumptions on vacant space at Sutton.
The Group recognised a loss on sale of investment properties of GBP0.8m in the year.
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 forward 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 Shareholder approval on 29 February 2016, the Directors are proceeding with the plans for an orderly realisation of the Group's remaining investments. As a result, the Directors have concluded that it continues to be appropriate not to adopt a going concern basis of preparation in these Group Financial Statements. Readers of the accounts should be aware that, as was the case at 30 September 2016 and 31 March 2017, the Group's investment properties are classified in the Group Balance Sheet as current assets "held for sale" rather than non-current assets. No other material adjustments arose as a result of ceasing to apply the going concern basis in either the current year or the prior periods.
Finance Act 2016
New rules introduced in Finance Act 2016 altered the UK tax position for non-UK entities with interests in UK land and specifically applied where land is acquired or developed with a main purpose of realising a profit on its disposal. The Group has historically been an investor in UK real estate but the position was altered by the shareholder vote on 29 February 2016, which in effect mandated the Board to realise all of the group's investments. The Finance Act 2016 provisions apply to any relevant disposals made on or after 5 July 2016 and appropriate provisions have been made in the accounts.
Group structure
As noted in the Chairman's Statement, significant progress has been made in simplifying the Group legal structure; this review is ongoing.
Cash position and expenditure
During the year to 30 September 2017, GBP10.5m of cash was deployed in the purchase of and capital expenditure on investment properties.
At the balance sheet date the Group had GBP8.0m of cash.
Tim Walton
On behalf of LXB Adviser LLP
5 December 2017
Group Income Statement
for the year ended 30 September 2017
Year ended Year ended
30 September 30 September
2017 2016
=================================== ===== =============== ===============
Note GBP GBP
=================================== ===== =============== ===============
Gross revenue 4 61,972,832 85,240,791
Direct costs 4 (60,081,862) (82,072,537)
==================================== ===== =============== ===============
Net revenue and gross
profit 1,890,970 3,168,254
Administrative expenses:
=================================== ===== =============== ===============
Corporate administrative
expenses (4,502,979) (8,225,838)
Cost of property activities - (73,081)
==================================== ===== =============== ===============
Total administrative
expenses (4,502,979) (8,298,919)
------------------------------------ ----- --------------- ---------------
Other property related
transactions: 5
---------------
Amounts receivable in respect
of the cancellation of
------------------------------------ ----- ---------------
certain contractual arrangements 4,834,117 23,919,222
------------------------------------ ----- ---------------
Impairment arising as a
result of the cancellation
of certain contractual
arrangements (2,773,213) (24,934,262)
---------------
Net surplus/(deficit) in respect
of the cancellation of certain
contractual arrangements 2,060,904 (1,015,040)
Investment property revaluation
deficit 12 (12,831,691) (6,816,643)
Loss on sale of investment
properties (782,614) (703,005)
Other income 15,078 183,368
==================================== ===== =============== ===============
Operating loss 6 (14,150,332) (13,481,985)
Finance income 8 11,435 56,492
Finance costs 8 (989,243) (1,719,202)
------------------------------------ ----- --------------- ---------------
Loss before tax (15,128,140) (15,144,695)
------------------------------------ ----- --------------- ---------------
Taxation charge 9 (330,059) (187,215)
==================================== ===== =============== ===============
Loss for the year (15,458,199) (15,331,910)
==================================== ===== =============== ===============
Pence Pence
Loss per share per share per share
=================== === =========== ===========
Basic and diluted 10 (9.18) (8.89)
===================== === =========== ===========
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 for the year also reflects the Group's total comprehensive loss for the year.
Group Statement of Changes in Equity
for the year ended 30 September 2017
Stated Retained
Year ended 30 capital earnings Total
September 2017
------------------------------------------------------ --- --- ------------- ------------- -------------
GBP GBP GBP
------------------------------------------------------ --- --- ------------- ------------- -------------
At 1 October 2016 71,766,495 23,698,642 95,465,137
Loss for the year - (15,458,199) (15,458,199)
Transactions with owners:
The Third Return of
Cash (see note 18) -
* Redemption of "B" shares inclusive of costs (19,877,139) - (19,877,139)
* Dividends - (10,437,898) (10,437,898)
At 30 September
2017 51,889,356 (2,197,455) 49,691,901
---------------------------------------------------------------- ------------- ------------- -------------
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 18) -
* 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
---------------------------------------------------------------- ------------- ------------- -------------
Group Balance Sheet
at 30 September 2017
As at As at
30 September 30 September
2017 2016
=========================== ===== =============== ===============
Note GBP GBP
=========================== ===== =============== ===============
Current assets
Business and other
receivables 13 32,969,884 44,910,099
Cash and cash equivalents 14 7,978,972 46,481,520
=========================== ===== =============== ===============
40,948,856 91,391,619
--------------------------- ----- --------------- ---------------
Investment properties
- held for sale 12 54,184,255 73,170,186
--------------------------- ----- --------------- ---------------
95,133,111 164,561,805
Total assets 95,133,111 164,561,805
=========================== ===== =============== ===============
Current liabilities
Business and other
payables 15 (19,316,822) (38,847,185)
Borrowings 16 (25,722,372) (30,098,071)
Income tax creditor (402,016) (151,412)
=========================== ===== =============== ===============
(45,441,210) (69,096,668)
=========================== ===== =============== ===============
Total liabilities (45,441,210) (69,096,668)
=========================== ===== =============== ===============
Net assets 49,691,901 95,465,137
=========================== ===== =============== ===============
Equity
Stated capital 18 51,889,356 71,766,495
Retained earnings (2,197,455) 23,698,642
=========================== ===== =============== ===============
Total equity 49,691,901 95,465,137
=========================== ===== =============== ===============
Pence Pence
Net asset value per per share per share
share
======================= === =========== ===========
Basic and diluted 20 29.52 56.70
======================= === =========== ===========
Adjusted (EPRA) 20 29.58 56.70
======================= === =========== ===========
The Group Financial Statements were approved and authorised for issue by the Board of Directors on 5 December 2017 and were signed on its behalf by:
Phil Wrigley Alastair
Irving
Director Director
Group Cash Flow Statement
for the year ended 30 September 2017
Year ended Year
30 September ended
2017 30 September
2016
===================================== ===== ============== ==============
Note GBP GBP
===================================== ===== ============== ==============
Cash flows from operating
activities
Loss before tax (15,128,140) (15,144,695)
Adjustments for non-cash
items:
Investment property revaluation
deficit 12 12,831,691 6,816,643
Amortisation of lease incentives 518,075 187,132
Impairment arising on the
cancellation of certain
contractual arrangements 2,773,213 24,934,262
Loss on sale of investment
properties 782,614 703,005
Net finance costs 8 977,808 1,662,710
===================================== ===== ============== ==============
Cash flows from operating
activities before
changes in working capital 2,755,261 19,159,057
Change in business and other
receivables 6,260,572 (12,182,318)
Change in business and other
payables (24,202,393) 20,515,144
Taxation paid (79,455) (36,015)
===================================== ===== ============== ==============
Cash flows from operating
activities (15,266,015) 27,455,868
===================================== ===== ============== ==============
Investing activities:
Interest received 11,435 56,492
Purchase of and capital expenditure
on investment properties (10,525,250) (42,036,267)
Proceeds on disposal of investment
properties 22,953,328 160,080,227
Cash flows from investing
activities 12,439,513 118,100,452
===================================== ===== ============== ==============
Financing activities:
Own shares purchased for
cancellation - (14,716,350)
Costs associated with own
shares purchased - (44,155)
Redemption of "B" shares (19,865,169) (45,648,424)
Costs associated with redeemed
"B" shares (11,970) (113,033)
Dividends paid (10,437,898) (18,324,718)
Bank borrowings drawn 513,000 20,771,555
Bank borrowings repaid (5,000,000) (44,865,683)
Finance costs paid (874,009) (1,167,406)
Cash flows from financing
activities (35,676,046) (104,108,214)
===================================== ===== ============== ==============
Net (decrease)/increase in
cash and cash equivalents (38,502,548) 41,448,106
Cash and cash equivalents
at the beginning of the year 46,481,520 5,033,414
Cash and cash equivalents
at the end of the year 7,978,972 46,481,520
------------------------------------- ----- -------------- --------------
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 2017 ("the 2017 accounts") or for the year ended 30 September 2016 ("the 2016 accounts"), but is derived from those audited statutory financial statements.
The 2017 accounts, included within the Company's Annual Report for the year ended 30 September 2017, have been prepared in accordance with International Financial Reporting Standards adopted for use in the European Union. The auditors have reported on the 2017 accounts and although their report was unqualified it drew attention to the Directors' decision not to apply the going concern basis of preparation. The 2017 accounts will be available from the Company's website today.
The 2016 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 2017 with comparative amounts relating to the year to 30 September 2016.
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 and the requirements of the Companies (Jersey) Law 1991.
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 - held for sale" (comprising completed investment properties and development properties) 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 21 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 2016.
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
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. Prior to the approval of the plans for an orderly realisation of the Group's assets in February 2016 these were held for capital appreciation, rental income or both, but 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 property related transactions
Other property related 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 or other assets 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.
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 2017, one tenant provided 31%, a second tenant provided 18% and a third tenant provided 13% of the Group's gross rental income (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).
4. Gross revenue and direct costs
Year ended Year ended
30 September 30 September
Gross revenue: 2017 2016
==================================== =============== ===============
GBP GBP
==================================== =============== ===============
Gross rental income 1,780,123 3,410,759
Revenue derived from Institutional
Funding Agreements 60,192,709 81,830,032
61,972,832 85,240,791
------------------------------------ --------------- ---------------
Year ended Year ended
30 September 30 September
Direct costs: 2017 2016
===================================== ============== ==============
GBP GBP
===================================== ============== ==============
Property outgoings 211,697 707,634
Costs associated with Institutional
Funding Agreements 59,870,165 81,364,903
60,081,862 82,072,537
------------------------------------- -------------- --------------
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 property related transactions
During the current and prior year, the Group accepted settlement payments in return for the cancellation of contractual arrangements relating to certain of its assets held for investment. The cancellation of these contractual arrangements had a direct and immediate detrimental effect on the value of the assets 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, and as the income and the resulting impairment does not necessarily relate to investment property assets, the income and the resulting impairment have been shown separately to other fair value movements of investment properties described in note 12.
6. Operating loss
Year Year ended
ended
30 September 30 September
2017 2016
============================================================= ============= =============
GBP GBP
============================================================= ============= =============
Operating loss is stated
after charging:
Investment Manager's fees 2,850,000 4,684,290
Directors' fees 305,000 305,000
Auditors' remuneration:
Audit services:
* audit of the Group and Company Financial Statements 65,350 87,000
* audit of subsidiary undertakings 9,500 10,500
Audit related assurance
services:
-review of the Group's
Interim Report 26,800 24,400
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
2017 2016
======================= ============= =============
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 2017 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 recognised in the year (2016: GBPnil).
As at As at
30 September 30 September
2017 2016
=========================== ============= =============
GBP GBP
=========================== ============= =============
Minimum rents receivable:
- within one year 2,642,505 2,610,359
- in two to five
years 11,964,476 12,543,924
- in more than five
years 33,111,743 28,998,997
47,718,724 44,153,280
=========================== ============= =============
8. Finance income and costs
Year ended Year ended
30 September 30 September
Recognised in the income 2017 2016
statement:
=================================== ============= =============
GBP GBP
=================================== ============= =============
Finance income:
Interest on cash deposits 11,435 56,492
Total finance income recognised
in the income statement 11,435 56,492
===================================== ============= =============
Finance costs:
Bank interest (849,585) (896,369)
Decrease in fair value of
the ineffective element of
derivative financial instruments - (227,800)
Amortisation of capitalised
finance costs (111,238) (526,364)
Other finance costs (28,420) (68,669)
===================================== ============= =============
Total finance costs recognised
in the income statement (989,243) (1,719,202)
Net finance costs recognised
in the income statement (977,808) (1,662,710)
===================================== ============= =============
Net finance costs recognised in the income statement, analysed by the categories of financial assets and liabilities shown in note 17a (where applicable), are as follows:
Year ended Year ended
30 September 30 September
2017 2016
=========================== ============= =============
GBP GBP
=========================== ============= =============
Cash and cash equivalents 11,435 56,492
Bank loans (secured) (989,243) (1,491,402)
Derivative financial
instruments - (227,800)
(977,808) (1,662,710)
=========================== ============= =============
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
2017 2016
======================= ============= =============
GBP GBP
======================= ============= =============
Effect on loss before
tax 6,800 209,133
Effect on equity 6,800 209,133
========================= ============= =============
The average interest rate incurred by the Group on its bank borrowings for the year ended 30 September 2017, including the effects of the lender's margin but excluding amortisation of capitalised finance costs 2.70% (30 September 2016: 2.86%).
9. Taxation
Year ended Year ended
30 September 30 September
2017 2016
========================== ============= =============
GBP GBP
========================== ============= =============
The tax charge for
the year recognised
in the income statement
comprises:
Current tax on results
for the year 218,696 187,215
Deferred tax in the 111,363 -
period
-------------------------- ------------- -------------
330,059 187,215
========================== ============= =============
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
2017 2016
---------------------------------- ------ -------------- --------------
GBP GBP
================================== ====== ============== ==============
Loss before tax (15,128,140) (15,144,695)
================================== ====== ============== ==============
Loss before tax at the standard
rate of income tax
in the UK of 20% (3,025,628) (3,028,939)
Items not subject
to UK income tax: 3,326,547 3,168,592
Other amounts: 29,140 47,562
Tax charge for the
year recognised in
the income statement 330,059 187,215
------------------------------------------- -------------- --------------
The Group has revenue related losses of GBP4,280,530 (30 September 2016: GBP4,240,888) 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 per share
Loss per share is calculated on 168,350,374 (30 September 2016: weighted average of 172,472,041) ordinary shares in issue for the year and is based on the loss attributable to Shareholders for the year of GBP15,458,199 (30 September 2016: earnings of GBP15,331,910). 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
2017 2016
=========================== === =========================== =======================
Pence Pence
GBP per share GBP per
share
=========================== ============= ============ ============= ========
Basic loss (15,458,199) (9.18) (15,331,910) (8.89)
Property revaluation
and disposal
--------------------------- ------------- ------------ ------------- --------
adjustments:
Investment property
revaluation
movements 12,831,691 7.62 6,816,643 3.95
Loss on sale of
investment
properties 782,614 0.46 703,005 0.41
Net deficit in
respect of cancellation
of
certain contractual
arrangements (2,060,904) (1.22) 1,015,040 0.59
Market value adjustments:
of interest rate
derivatives, net
of tax - - 227,800 0.12
EPRA loss (3,904,798) (2.32) (6,569,422) (3.82)
================================ ============= ============ ============= ========
11. Dividends
Year ended Year ended
------------------- --- ------------------------- ------------------------
30 September 30 September
2017 2016
=================== === ========================= ========================
Pence Pence
GBP per share GBP per share
=================== === =========== =========== =========== ===========
Interim dividends
paid 10,437,898 18.00 18,324,718 38.00
------------------------- ----------- ----------- ----------- -----------
Current year:
An interim dividend of 18p per ordinary share was declared on 22 September 2016 and paid on 3 November 2016. The dividend was payable on each of the 57,988,322 shares in issue for which a corresponding "B" share was not issued (see note 18).
The holders of the remaining 110,362,052 ordinary shares in issue received 18p per share (a total of GBP19,865,169) on the redemption of these "B" shares in November 2016 (see note 18).
Prior 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 18).
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 18).
12. Investment properties - held for sale
GBP
================================= ================
Carrying value as at
30 September 2016 73,170,186
Additions 8,777,448
Disposals (14,413,613)
Revaluation deficit (see
below) (13,349,766)
-------------------------------- ---- ----------------
Carrying value as at
30 September 2017 54,184,255
================================ ==== ================
Movements in investment properties - held for
sale in the prior year were as follows:
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 current and prior year revaluation movements
shown above includes GBP518,075 (2016: GBP187,132)
of amortisation in respect of capitalised lease
incentives that were released to rental income
in the year. A reconciliation is provided below:
------------------------------------------------------------
Year ended Year ended
30 September 30 September
2017 2016
------------------------- --------------- ---------------
GBP
------------------------- --------------- ---------------
Investment properties
revaluation deficit (13,349,766) (7,003,775)
Amounts attributable
to the amortisation of
lease
incentives released
to rental income 518,075 187,132
-------------------------- --------------- ---------------
Revaluation deficit in
the income statement (12,831,691) (6,816,643)
-------------------------- --------------- ---------------
A reconciliation of the carrying value of investment properties to their fair values at the current and prior year balance sheet date is provided below:
GBP
--------------------------------- -----------
Carrying value as at 30
September 2017 54,184,255
----------------------------------- -----------
Adjustment for rents recognised
in advance and lease
--------------------------------- -----------
incentives given to tenants 845,855
----------------------------------- -----------
Adjustment for accrued costs
to complete (292,110)
----------------------------------- -----------
Total property portfolio
valuation at 30 September
2017 54,738,000
----------------------------------- -----------
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
----------------------------------- ------------
At 30 September 2017, 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 2017 is GBP54,738,000 (30 September 2016: GBP71,403,000). The carrying value of these properties includes GBP292,110 (2016: GBP3,161,787) 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 GBP845,855 (2016: GBP1,394,601) 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 key unobservable inputs used in the valuation of the Group's investment properties at 30 September 2017 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 46,000,000 Investment 15.0 47.5 21.95 5.8 7.0 6.2
Development 7,338,000 Residual 10.0 27.0 17.97 5.25 7.0 5.79
Other* 1,400,000
------------- -----------
Total 54,738,000
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
*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 2017 was GBP69,326,834 (30 September 2016: GBP89,525,931).
Property outgoings (note 4) were split as follows:
Year ended Year ended
30 September 30 September
2017 2016
=== =============================== ================= =============
GBP GBP
=== =============================== ================= =============
Property outgoings that arose
from investment properties
that generated rental income
in the year 32,468 185,605
Property outgoings that arose
from investment properties
that did not generate rental
income in the year 179,229 522,029
==================================== === ============= =============
211,697 707,634
=================================== === ============= =============
13. Business and other receivables
As at As at
30 September 30 September
2017 2016
============================= ============== =============
GBP GBP
============================= ============== =============
Business receivables 1,244,826 17,719,776
Property sales receivables 17,087,460 13,315,713
Rents recognised in
advance 845,855 1,394,601
Amounts receivable
under Institutional
Funding Agreements 12,617,851 6,342,683
Prepayments and accrued
income 258,027 2,954,371
Other receivables 915,865 3,182,955
=================================== ============= =============
32,969,884 44,910,099
==== ============================ ============= =============
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 GBP789,988 (2016: GBP1,226,188) of rents recognised in advance that are due to be released to the income statement in more than one year.
GBP2,708,105 included in prepayments and accrued income at 30 September 2016 was impaired in the year (see note 5). No other 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 2017 is GBP124,052 (30 September 2016: GBP554,934) 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
2017 2016
======================= ====== ============= =============
GBP GBP
======================= ====== ============= =============
Business payables 3,979,539 23,019,718
Amounts payable
under Institutional
Funding Agreements 7,686,187 1,270,531
Other creditors 373,749 5,173,997
Accruals and other
amounts payable 7,277,347 9,382,939
================================ ============= =============
19,316,822 38,847,185
==== ========================= ============= =============
All of the above amounts are due within one year and none incur interest.
Amounts payable under Institutional Funding Agreements relate to certain of the forward funding arrangements referred to in note 4.
16. Borrowings: amounts repayable within one year
As at As at
30 September 30 September
2017 2016
======================== ====== ============= =============
GBP GBP
======================== ====== ============= =============
Bank loans (secured):
Investment facility 25,722,372 5,000,000
--------------------------------- ------------- -------------
Development facility - 25,098,071
--------------------------------- ------------- -------------
25,722,372 30,098,071
---- -------------------------- ------------- -------------
Investment facility:
In March 2017, the development facility that was entered into in December 2014 (see below) expired. Construction of the investment property on which the facility was secured completed in the prior year. On 13 April 2017, the loan was converted into an investment facility and extended until 5 June 2018.
On 30 March 2015, a group entity entered into an agreement with Barclays Bank Plc for a one year GBP5,000,000 debt facility which was extended to 31 March 2017 during the prior year. The loan was secured against an investment property held within a ring-fenced sub-group, beyond which the loan is non-recourse. In January 2017, the investment property to which the loan was secured was sold and the loan was repaid on the same date.
Development facility:
In July 2017, a group entity entered into an agreement with the Royal Bank of Scotland Plc for a GBP6.4m development finance facility to fund construction of the cinema at Stafford, upon which the facility is secured. No amounts had been drawn at the balance sheet date.
Development facility in the prior year:
In December 2014, a group entity entered into an agreement with the Royal Bank of Scotland Plc for a development finance facility. The loan is shown above (net of unamortised loan issue costs) and was drawn in several tranches. The loan was 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 any 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. Financial instruments and risk management
a) Categories of financial instruments
As at As at
30 September 30 September
2017 2016
============================= ====== ============= =============
GBP GBP
============================= ====== ============= =============
Financial assets
Loans and receivables:
Cash and cash equivalents 7,978,972 46,481,520
Business receivables 1,244,826 17,719,776
Property sales receivables 17,087,460 13,315,713
Rents recognised
in advance 845,855 1,394,601
Amounts receivable
under Institutional
Funding Agreements 12,617,851 6,342,683
Other receivables 915,865 3,182,955
-------------------------------------- ------------- -------------
40,690,829 88,437,248
==== =============================== ============= =============
As at As at
30 September 30 September
2017 2016
======================== ====== ============= =============
GBP GBP
======================== ====== ============= =============
Financial liabilities
Current liabilities:
Business payables 3,979,539 23,019,718
Amounts payable under
Institutional
Funding Agreements 7,686,187 1,270,531
Other creditors 373,749 5,173,997
Bank loans (secured) 25,722,372 30,098,871
Accruals and other
amounts payable 7,277,347 9,382,939
================================= ============= =============
45,039,194 68,946,056
==== ========================== ============= =============
All financial assets and liabilities are measured at amortised cost.
b) 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, the Group has previously utilised derivative financial instruments to mitigate interest rate risk. When used, such instruments were 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 was 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 regular 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 Board ensures appropriate refinancing terms are agreed well in advance of the expiry of debt instruments secured on the Group's investment properties.
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 2017
Effective Less than Between
one 1 and
Financial liabilities interest year 5 years Total
rate
------------------------ ---------- ----------- -------- -----------
% GBP GBP GBP
======================= ========== =========== ======== ===========
Business
payables 3,979,539 - 3,979,539
------------------------ ---------- ----------- -------- -----------
Amounts payable -
under Institutional
------------------------ ---------- ----------- -------- -----------
Funding
Agreements 7,686,187 - 7,686,187
Other creditors 373,749 - 373,749
Borrowings 2.84 25,722,372 - 25,722,372
Accruals and other
amounts payable 7,277,347 - 7,277,347
=========== ======== ===========
45,039,194 - 45,039,194
=========== ======== ===========
As at 30 September 2016
Effective Less than Between
one 1 and
Financial liabilities interest year 5 years Total
rate
------------------------ ---------- ----------- -------- -----------
% 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
=========== ======== ===========
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 3 (30 September 2016: 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 when it is considered appropriate to do so.
The Group has no derivative financial instruments in use at the balance sheet date. 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 Group's cash and cash equivalents) and equity attributable to Shareholders of the Company (stated capital and retained earnings). The Group monitors its capital with reference to committed expenditure and with the primary objective of returning capital to shareholders whilst ensuring that the Group is able to meet its liabilities as they fall due and complying with its banking covenants. Borrowings are secured on specific properties and, as referred to in note 16, are non-recourse to the Group as a whole.
The Group is not subject to any external capital requirements.
18. Stated capital
Analysis of stated capital:
As at As at
30 September 30 September
2017 2016
============================================================== ====== ============== ==============
Number Number
============================================================= === === ============== ==============
Authorised
Ordinary shares of no Unlimited Unlimited
par value - number
============================================================= === === ============== ==============
Issued and fully paid
Ordinary shares of no
par value - number 168,350,374 168,350,374
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 (99,309,458) (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 (19,865,169) (45,660,107)
- redemption for cancellation
in
prior years (96,832,807) (51,172,700)
Total issue and purchase
costs deducted to date (9,414,088) (9,402,118)
======================================================================= ============== ==============
Stated capital per the
balance sheet 51,889,356 71,766,495
======================================================================= ============== ==============
Transactions with Shareholders in the prior 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 November 2016, a return of cash of 18p per ordinary share was made to Shareholders (the Third Return of Cash). The total Third Return of Cash of GBP30.3m comprised the following two elements:
-- GBP19.9m paid to Shareholders holding 110,362,052 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 October 2016 as one of the options available to Shareholders under the mechanism of the Third Return of Cash.
-- An interim dividend amounting in total to GBP10.4m (see note 11). This was paid to Shareholders holding the remaining 57,988,322 of the Company's ordinary shares in issue at that date who elected to receive the Third Return of Cash by way of a cash dividend. The cash dividend was debited to retained earnings.
Issue and purchase costs of GBP11,970 in respect of the redeemable "B" shares were incurred in relation to the Third Return of Cash.
Transactions with Shareholders in prior years - "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.
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 at that date. 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. 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 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.
19. Reserves
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.
20. 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 18).
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.
As at As at
30 September 30 September
2017 2016
=======
Pence Pence
GBP per GBP per
share share
======================= =========== ======= ============= =======
Basic NAV 49,691,901 29.52 95,465,137 56.70
Adjustments:
Deferred tax balances 111,363 0.07 - -
EPRA NAV 49,803,264 29.58 95,465,137 56.70
============================ =========== ======= ============= =======
21. 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
2017 2016
============== ==============
Number Number
=============== ============== ==============
Phil Wrigley 447,748 447,748
Steve Webb 319,046 319,046
Danny Kitchen 622,927 622,927
Alastair
Irvine 6,195,306 6,195,306
================ ============== ==============
The interests disclosed above include both direct and indirect interests in shares. The Third Return of Cash to Shareholders in the current year resulted in the Directors receiving an aggregate amount of GBP1,365,305 (2016: GBP1,875,919 in respect of the Second 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 Sheppey GP Limited and LXB Riverside GP Limited act as the sole corporate general partners of LXB Retail Properties Fund LP, LXB Sheppey LP and LXB Riverside LP respectively, which are significant, indirectly controlled subsidiaries of the Company.
At 30 September 2017, the members of LXB(3) Partners LLP (and their spouses) held an aggregate total of 17,247,977 (30 September 2016: 19,645,344) shares in the Company. The Third Return of Cash to Shareholders resulted in the members of LXB(3) Partners LLP (and their spouses) receiving an aggregate amount of GBP3,536,162 (2016: GBP5,188,854 in respect of the Second 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 2017 and the date of this report.
Fees
Directors' fees of GBP305,000 (30 September 2016: GBP305,000) were payable for the year ended 30 September 2017. As at 30 September 2017, GBP76,250 (30 September 2016: GBP76,250) of fees remained outstanding and are included within business and other payables (note 15).
Management fees of GBP2,850,000 (30 September 2016: GBP4,684,290) were payable to the group headed by LXB(3) Partners LLP by the Group in respect of the year ended 30 September 2017. At 30 September 2017, GBP425,000 (30 September 2016: GBPnil) was outstanding and is included within business and other payables (note 15).
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 GBP87,303 (30 September 2016: GBP109,815) 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 Holdings Treasury operations
Limited Jersey and property investment
LXB Riverside Treasury operations
Borrower Limited Jersey and group finance
LXB Riverside Intermediate holding
LP*** Scotland entity
LXB RP (Ayr 2)
Limited Jersey Inactive
LXB RP (Banbury)
Limited Jersey Property investment
LXB RP (Biggleswade)
Limited Jersey Property investment
LXB RP (Biggleswade
2) Limited Jersey Property investment
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
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
Intermediate holding
LXB Sheppey LP*** Scotland entity
LXB Willow Green
Limited Jersey Inactive
* 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 Sheppey GP Limited and LXB Riverside GP Limited, (see the paragraph headed "Interests in shares" above) have partnership interests in LXB Sheppey LP and LXB Riverside LP, 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 prior year.
The cumulative hurdle amount is calculated by reference to the net proceeds base amount, which is 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 2017, the net proceeds base amount, to which the 12% per annum preferred return is applied, is GBP168.4m (30 September 2016: GBP168.4m).
The cumulative hurdle amount as at 30 September 2017 is GBP99.7m (30 September 2016: GBP119.0m).
As the net assets of the Group are less than the cumulative hurdle amount as at 30 September 2017, 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.
22. Post balance sheet events
On 16 and 17 November 2017, following the satisfaction of the remaining criteria, a total of GBP8.6m was received from the Crown Estate under the funding agreement in respect of phases 2 and 3 at Rushden Lakes.
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 KMMGZNDNGNZM
(END) Dow Jones Newswires
December 05, 2017 02:00 ET (07:00 GMT)
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