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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Ground Rents Income Fund Plc | LSE:GRIO | London | Ordinary Share | GB00B715WG26 | ORD 50P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -0.30 | -0.95% | 31.40 | 30.20 | 32.60 | 32.10 | 31.40 | 32.10 | 58,000 | 10:16:33 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Real Estate Investment Trust | 5.6M | -7.52M | -0.0786 | -3.99 | 30.04M |
From Apr 2019 to Apr 2024
TIDMGRIO
RNS Number : 1999Y
Ground Rents Income Fund PLC
04 December 2017
4 December 2017
Ground Rents Income Fund plc
("GRIF" or the "Company)
FULL YEAR RESULTS
For the year to 30 September 2017
Ground Rents Income Fund plc (LSE: GRIO), a listed Real Estate Investment Trust (REIT) investing in UK ground rents, announces its audited results for the year ended 30 September 2017.
Highlights
-- Portfolio value of GBP139.1 million (30 September 2016: GBP125.7 million) -- Net assets of GBP127.4 million (30 September 2016: GBP123.1 million) -- NAV per ordinary share unchanged at 131.72 pence (30 September 2016: 131.83 pence) -- Diluted NAV per ordinary share of 130.24 pence (30 September 2016: 129.31 pence)
-- Profit before tax (including GBP1.3 million valuation gain) of GBP4.7 million (FY 2016: GBP20.2 million, including GBP16.6 million valuation gain)
-- Basic earnings per share of 4.98 pence (FY 2016: 21.66 pence) -- Diluted earnings per share of 4.90 pence (FY 2016: 21.34 pence)
-- Dividends paid of 3.964 pence per share, reflecting a gross yield (based on weighted average issue price) of 3.96%. (FY 2016: 3.964 pence; 3.96%)
-- Acquired GBP11.1 million of ground rent assets
Malcolm Naish, Chairman of GRIF, said:
"We strive to continue to maintain returns for our shareholders, while ensuring we operate in an open and socially-responsible manner. We recognise there are political and legislative hurdles facing the industry during the next financial year, but we continue to focus on growing the Group and, subject to market conditions, seek new acquisitions to increase the net asset value".
James Agar, Head of Specialist Funds for Brooks Macdonald Funds, Alternative Investment Fund Manager to GRIF, added:
"The results prove the resilience of the portfolio at a time of challenging macro-economic conditions and the government's desire to reform the leasehold system".
A copy of the Annual Report and financial statements for the year ended 30 September 2017 can be accessed at the Company's website, www.groundrentsincomefund.com and via the link:
http://www.rns-pdf.londonstockexchange.com/rns/1999Y_-2017-12-1.pdf
CONTACTS:
Ground Rents Income Fund plc
Simon Wombwell (Director) 020 7499 6424
Brooks Macdonald Funds Limited
James Agar (Director) 020 7659 3454
N+1 Singer (Broker)
James Maxwell / Liz Yong 020 7496 3000
Tavistock (Media/Analysts)
James Whitmore / Jeremy Carey 020 7920 3150
Appleby Securities (Channel Islands) Limited (Sponsor)
Kate Storey / Danielle Machon 01481 755 620
Registered number 8041022
Ground Rents Income Fund plc
Annual Report and Financial Statements
for the year ended 30 September 2017
Company Information
Directors
Robert Malcolm Naish - Chairman
Paul Anthony Craig
Simon Paul Wombwell
Company Secretary
William Martin Robinson
Alternative Investment Fund Manager
Brooks Macdonald Funds Limited
72 Welbeck Street London
W1G 0AY
Independent Auditors
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
1 Hardman Square
Manchester M3 3EB
Principal Bankers
Royal Bank of Scotland plc
Southern Corporate Office
PO Box 391
40 Islington High Street
London
N1 8JX
TISE Listing Sponsor
Appleby Securities (Channel Islands) Limited
PO Box 207
13-14 Esplanade
St Helier
Jersey
JE1 1BD
Depository
INDOS Financial Limited
St Clements House
27 Clements Lane
London
EC4N 7AE
Registrars
Link Market Services Limited
The Registry
34 Beckenham Road
Kent
BR3 4TU
Solicitors
CMS Cameron McKenna Nabarro Olswang LLP 1
The Avenue
Manchester
M3 3AP
Broker
N+1 Singer Capital Markets Limited
One Bartholomew Lane
London
EC2N 2AX
Registered office
72 Welbeck Street
London
W1G 0AY
Registered number 8041022
Chairman's Statement
Overview
I am pleased to present the annual audited results of Ground Rents Income Fund plc ('GRIF' or the 'Group') for the year ended 30 September 2017.
As uncertainty continues to surround the implications of the EU referendum result, market volatility and political events present an interesting and challenging macro-economic environment.
During the financial year, companies within the Group completed ground rent asset purchases for a total cost of GBP11.1 million. These were mainly development-based purchases, agreed historically at attractive pricing, with completion at practical completion of construction. I am pleased that the decision we took to implement a forward-funded strategy has delivered value and scale of operation for shareholders.
The value of the Group's investment property portfolio rose by 10.7% and the overall ground rent yield remained at 3.2%. This was in comparison to a 13 basis point increase in the UK 10-year government bond yield to 1.38% over the same period. Ground rents continue to demonstrate their defensive characteristics, providing stable quasi-inflation-linked, asset-backed income.
The resilience of the portfolio is encouraging in light of the government focus on improving standards, tackling unfair practices and protecting leaseholders within the leasehold system, which led to the recent consultation launched by the Department for Communities and Local Government ('DCLG').
In November 2016, the Group secured a larger and longer-term loan facility with Santander UK plc for GBP19.5 million, an increase of GBP11.5 million from the previous GBP8.0 million short-term facility. This new facility is held within a Group company and secured against a number of investment properties. It is for a period of up to five years and was fully drawn down at the year-end date. The proceeds have been utilised during the year to purchase new ground rents and will fund a pipeline of acquisitions during the new financial year.
Also during November 2016, the Group published a Supplementary Information Memorandum ('SIM'). This included a revised investment policy, borrowing restrictions under the Real Estate Investment Trust ('REIT') regime and the requirement for the Group to appoint a full scope Alternative Investment Fund Manager ('AIFM') under the AIFM Directive ('AIFMD').
Finally, from a capital perspective, the Group raised a further GBP3.3 million in September 2017 through the issuance of new Ordinary Shares, converted from warrants held by existing warrant holders.
Financial results
Our financial results reflect the continued application of our defensive investment policy against a backdrop of uncertain political and economic conditions, for both the UK and the ground rents sector.
Under International Financial Reporting Standards ('IFRS') our operating profit for the year to 30 September 2017 was GBP5.3 million (30 September 2016: GBP20.5 million), with total comprehensive income of GBP4.7 million (30 September 2016: GBP20.2 million), reflecting a lower level of revaluation gains in the current year. Revenue for the year to 30 September 2017 was GBP5.1 million (30 September 2016: GBP4.8 million). Basic earnings per share ('EPS') for the year were 4.98 pence (30 September 2016: 21.66 pence).
The audited basic net asset value ('NAV') per share as at 30 September 2017 was 131.72 pence (30 September 2016: 131.83 pence).
The Group had ongoing charges of 0.97% (30 September 2016: 0.90%) for the year. The drivers of the increase in ongoing charges during the current year were the rise in the management fee derived from the increased market capitalisation for a period of the year, in addition to a number of unexpected costs relating to the Group's DCLG consultation response and the implementation of the subsequent asset management programme. These costs are likely to impact Group profits going into the new financial year.
Financial results (continued)
The Group's property portfolio has been independently valued by Savills Advisory Services Limited ('Savills') in accordance with the RICS Valuation - Professional Standards (the 'Red Book'). As at 30 September 2017, the portfolio had a fair value of GBP139.1 million, compared with GBP125.7 million as at 30 September 2016 (excluding purchase costs), an increase of GBP13.4 million or 10.7%. On a like-for-like basis, the Group's investment property portfolio value remained broadly stable during the financial year.
Financing
On 14 November 2016, the Group amended the terms of its loan facility with Santander UK plc to increase the facility limit from 6.5% to 15.8% of NAV measured at drawdown.
There were two utilisation requests during the year: an initial GBP15 million in November 2016 and a further GBP4.5 million in March 2017.
The loan attracts interest on a fixed-rate basis at a composite rate of 3.371%, which includes a 2.3% margin.
As at 30 September 2017, the unexpired term of the facility was 4.1 years and the borrowing ratio was 13.7% of the value of the investment properties (gross assets).
Dividends
The Group continued to deliver its target of at least maintaining the dividend per Ordinary Share. During the financial year, the Group declared and paid four Property Income Distribution ('PID') dividends, totalling 3.964 pence per share.
On 16 November, the Board declared a PID dividend of 0.98 pence per Ordinary Share in respect of the period from 1 September to 31 December 2017.
See note 18 Dividends for further details.
Board and governance
As highlighted above, the shareholders approved a revised investment policy of the Group at an extraordinary general meeting on 26 October 2016. This was incorporated within the SIM, published in November 2016, along with borrowing restrictions under the REIT regime and AIFMD requirements.
Under the AIFMD the Investment Manager as AIFM has to ensure that the Group complies with the requirements in the AIFMD, including appointing a depositary, and the AIFM is subject to certain organisational, operational and transparency obligations.
Shareholder engagement
During the year, the Company continued to develop its relations with investors.
James Agar, the Head of Specialist Funds for the AIFM, met with the majority of institutional shareholders during June and July 2017 with the joint aims of improving communications and to seek their views and valuable input into the asset management programme.
It was important to be clear with shareholders regarding the options available to manage the media and political sentiment around the sector, the actions for which have subsequently been agreed.
Leaseholder engagement
In September 2017, we announced our intention to implement an asset management plan in response to the DCLG's launch of the aforementioned consultation on proposals to amend leasehold legislation.
In conjunction with the Investment Manager, the Board agreed to contact all residential leaseholders with doubling ground rents and offer them the opportunity to convert their existing review mechanism to the lesser of inflation, as measured by the Retail Prices Index ('RPI'), or doubling, while retaining their existing review cycle.
Outlook
The Board and the Investment Manager strive to continue to maintain returns for our shareholders, while ensuring we operate in an open and socially-responsible manner.
We recognise there are political and legislative hurdles facing the industry during the next financial year, but we continue to focus on growing the Group and, subject to market conditions, seek new acquisitions to increase the net asset value.
Malcolm Naish 1 December 2017
Chairman
Strategic Report
The Directors present their Strategic Report on the Group for the year ended 30 September 2017.
Our business
Ground Rents Income Fund plc is a closed-ended real estate investment trust ('REIT') incorporated in England and Wales on 23 April 2012, and tax resident in the United Kingdom. Its ordinary shares and warrants were admitted to the Official List of The International Stock Exchange ('TISE') (formerly the Channel Islands Stock Exchange (CISE)) and to trading on the SETSqx platform of the London Stock Exchange in August 2012.
Ground Rents Income Fund plc, together with its subsidiaries, operates a property investment and rental business. The Group invests in a diversified portfolio of ground rents.
A ground rent is the rent paid by the lessee of a property to the freeholder or a head leaseholder of the property. It represents the underlying interest in property, which is subject to a lease for a period of time usually between 99 and 999 years. Individual amounts payable as ground rents are usually nominal annual sums. Ground rents produce a secure, stable, low-risk and long-term income.
The Group's portfolio of ground rents includes freeholds and head leaseholds of well-located residential, retail and commercial properties located in the United Kingdom. The Group generates income primarily from the collection of such ground rents. It generates additional income from sources such as commissions on insurance policies.
Investment objective
The Group has been established to provide secure, long-term performance through investment in long-dated UK ground rents, which have historically had little correlation to traditional property asset classes regardless of the underlying state of the economy.
The Group gives investors the opportunity to invest in a portfolio of ground rents. The Group owns a portfolio of assets with the income generated from the collection of ground rents. These investments also have the potential for capital growth, linked to contractual increases in ground rents over the long term.
The Group seeks to generate consistent income returns for Shareholders by investing in a diversified portfolio of ground rents, including freeholds and head leases of residential, retail and commercial properties located in the United Kingdom.
Investment restrictions
The Group intends that no single ground rent property should represent more than 25 per cent of the gross asset value of the Group at the time of investment.
The Group does not expect to engage in any hedging transactions, although, at the sole discretion of the Directors, the Group may utilise hedging, financial and money market instruments in the management of its assets and risk.
The Group may reinvest both realised invested capital and any profits that have not been distributed, subject to distributing 90 per cent of distributable income profits arising from the Group's Qualifying Property Rental Business in each accounting year in order to comply with the Group's REIT obligations.
The Group may make use of structural or long-term debt facilities for investment purposes, and, if a portfolio of assets was available to be acquired in a corporate structure which had some existing borrowings within its corporate vehicles, these may be retained.
In all cases the borrowing anticipated would be limited in scale to no more than 25 per cent of the gross assets of the Group.
Our strategy
The Group has acquired and intends to continue to acquire portfolios of ground rents. These interests have and will have a pre-determined long-term income stream from the lease and, ultimately, when the lease comes to an end, a reversionary value.
The Group may also exploit other investment opportunities which provide the Group with ground rent income, but may not have the right to a reversionary value such as long-dated head leases. Collection of ground rents, as well as income from additional sources such as commissions on insurance premiums, is expected to provide predictable income streams.
The freehold interest in a ground rent is usually valued on a multiple of the ground rent receivable; the lower the multiple, the higher the yield. The multiples paid vary according to a number of factors, including the amount and timing of any contractual future increases in the ground rent, market sentiment, and the unexpired period of any leases.
Ground rents acquired
At 30 September 2017, the portfolio of ground rents was generally valued on multiples of between 18 and 40, which equates to gross yields of between 5.6% and 2.5%.
Values also reflect the quality of the income and the rent review profile. Ground rents that are flat and, therefore, have no reviews are the least desirable and produce the highest yields. At the other end of the scale are ground rents that are subject to frequent rent reviews that provide regular uplifts in the income stream. The most attractive of those investments are currently those linked to the Retail Prices Index (RPI), or those that have imminent rent reviews.
Most ground rents are subject to pre-determined rent reviews, which are documented in each lease granted by the freeholder or head leaseholder. Increases are linked to a variety of measures: they may be indexed to factors such as RPI, they may be subject to a periodic doubling or subject to fixed-sum increases. The review cycles vary between annual and 50 years, although 88% of the Group's ground rents are 20 years or less. The driver of movements in the valuation of a ground rent investment tends to be variations in yields, until the final few years before a review date.
As at 30 September 2017, the total net assets of the Group were GBP127.4 million (2016: GBP123.1 million), of which GBP139.1 million (2016: GBP125.7 million) was represented by investments in ground rents.
Current year activity
Acquisitions in the year ended 30 September 2017 included:
RPI-linked portfolio
A small site in Northumberland was purchased in October 2016, providing an additional GBP6,500 of ground rent linked to five year RPI at a cost of GBP0.2 million, giving an initial ground rent yield of 3.1%.
In November 2016, an additional student property in York was acquired on a forward-funding basis. The site is to be one of the highest-quality student accommodation schemes in the UK, consisting of 14 three and four-storey buildings and a converted convent in 6.3 acres of extensively-landscaped grounds within walking distance of both the University of York and York St John's University. The 643 beds across 527 flats generate GBP273,500 of total ground rent linked to five-year RPI. The Group paid GBP7.8 million for the freehold, giving an initial ground rent yield of 3.5%, or an initial total yield of 3.9% when forecast ancillary income is also included. It has, therefore, entered the portfolio as the largest single asset, and students have begun occupying the site from September 2017.
The acquisitions of two residential sites were completed in Bristol (November 2016) and Brentford (December 2016). Both sites are of high specification, and have been specially designed to be sympathetic to their surroundings and provide leaseholders with a sense of community. In total, the 263 units generate GBP84,400 of ground rent linked to 20-year RPI at a cost of GBP2.1 million, giving an initial ground rent yield of 4.1%.
In June 2017, the Group completed the acquisitions of a further two properties at the Millbay development in Plymouth, which is a site where the Group already owns investment properties. The acquisitions consisted of the leasehold interest in 150 units for GBP0.8 million, producing GBP31,700 of annual ground rent linked to 20-year review indices, giving an initial ground rent yield of 4.0%.
Finally, in August 2017, a further property was acquired in Salford, for GBP0.25 million. Another high-quality site forming part of Central Salford Urban Development Corporation's regeneration plans, it consisted of the freehold interest in 36 units, generating annual ground rents of GBP10,800 linked to 20-year RPI, giving an initial ground rent yield of 4.25%.
Asset management project
As a result of the DCLG consultation GRIF affirmed its commitment to being a socially-responsible and transparent landlord. With this in mind, the Directors and the AIFM Investment Committee approved an asset management project. The project will involve offering leaseholders with "onerous" doubling ground rents the opportunity to convert their existing review mechanism to RPI via a Deed of Variation, while retaining their present review cycle.
For assets with 20-year review cycles and more, leaseholders will be offered the option to have their ground rent review to "the lesser of 20/25/50 year doubling or 20/25/50 year RPI". This small but important variation removes any risk of the Group being seen to be transferring inflation risk to leaseholders through their review mechanisms.
There are three drivers for the project:
-- Reduce reputation risk and enhance investor sentiment
-- Manage the valuation risk regarding doubling ground rents, especially those on short-review cycles -- Protect long-term shareholder value by increasing the linkage of the Group's ground rents to RPI
It is expected that the project will enhance investor perception and lead to a recovery in the share price to its historic correlation to the Group's NAV.
Asset focus
The five most valuable assets and their respective locations as at 30 September 2017 are as follows:
Hot Features
Premium
Building
name Location Value
GBP8.2
Vita York York million
GBP4.4
Gateway Leeds million
One Park GBP4.1
West Liverpool million
Ladywell GBP3.3
Point Salford million
Vita First GBP3.2
Street Manchester million
----------- ----------- ---------
The largest asset represents 5.9% of the total portfolio.
Portfolio characteristics
The chart below shows the period of time before the next review date for the ground rents in the portfolio at 30 September 2017:
The chart demonstrates that 29% of the portfolio will be subject to a rent review within the next five years. Typically, the impact of a forthcoming rent review is recognised in the valuation over the three years leading up to the review date.
The chart below shows the type of rent review in the portfolio at 30 September 2017:
69% of the portfolio's income or gross rent roll is directly linked to inflation-based indices. The doubling and fixed rate increases also provide an inflation hedge for the portfolio but over different review cycles to index-linked assets.
The geographic spread of the portfolio at 30 September 2017 is shown in the chart below:
22% of the Group's portfolio is located in the North East and 21% in the North West, based on ground rents income.
Key Performance Indicators
Many of the Key Performance Indicators ('KPIs') are linked to the appraisal of acquisition opportunities and the amount of cash available for investment.
In order to ensure that the Group has identified investments which are appropriate for the Group and which will allow the Directors to achieve the strategic aims of the Group, the Investment Manager considers the following factors when reviewing acquisition opportunities:
-- Acquisition cost as a multiple of ground rent income, from which gross yield is imputed
-- Potential for additional income streams
-- Type of rent review
-- Rent review cycle
-- Number of years before next rent review
-- Location
-- Value relative to total portfolio
These factors are considered on an ad hoc basis at meetings of the AIFM Investment Committee when acquisition opportunities are considered for approval.
In order to monitor the performance of the Group against its stated income and capital growth objectives and its tax status, the Directors consider the following KPIs reported on and considered at the quarterly Directors' meetings.
-- Dividend yield
The dividend reflects the Group's ability to deliver a sustainable income stream from its portfolio.
In the year ended 30 September 2017, the dividend yield on the ordinary shares was 3.96% (year ended 30 September 2016: 3.96%) on the weighted average issue price.
-- Ongoing charges
The ongoing charges measure is the ratio of total administration and operating costs expressed as a percentage of average net asset value throughout the year. It represents a measure of total costs associated with managing and operating the Group, which includes the management fees due to the Investment Manager. It provides investors with a clear picture of operational costs involved in running the Group.
For the year ended 30 September 2017, the ratio was 0.97% (30 September 2016: 0.90%).
-- NAV
Net asset value (NAV) is the value of an entity's assets minus the value of its liabilities. It reflects the Group's ability to grow the portfolio and add value to it through its assets.
As at 30 September 2017 the NAV was GBP127.4 million (2016: GBP123.1 million).
-- Portfolio valuation
The Directors review analysis of the portfolio valuation and composition with reference to geographical location and timing of rent reviews.
The Directors cannot set a target figure for the portfolio valuation as it is influenced by external factors which are not under the control of the Directors. However, the AIFM Investment Committee prepare forecasts and consider the characteristics of each investment opportunity carefully before deciding on an appropriate offer as well as seeking independent confirmation of the value prior to purchase.
-- Compliance with REIT rules
The Directors review each of the REIT criteria and monitor compliance on a quarterly basis. If there were any indicators that the Group would cease to comply with the REIT regime, the Directors would ensure that appropriate steps were taken to ensure compliance. There has been no non-compliance noted during these reviews.
Alternative Investment Fund Manager ('AIFM')
Brooks Macdonald Funds Limited is authorised and regulated by the Financial Conduct Authority as a full-scope AIFM and provides its services to the Group.
The Group has appointed INDOS Financial Limited ('INDOS') to act as the depositary to the Group, responsible for cash monitoring, asset verification and oversight of the Group.
Under the AIFM Directive, the Group is required to make disclosures in relation to its leverage under the prescribed methodology of the Directive. These are set out in Note 11 of the notes to the Group consolidated financial statements.
During the year the parent company of the AIFM, Brooks Macdonald Group plc, announced the disposal of their property management business Braemar Estates (Residential) Limited ('Braemar Estates'). The ownership of Braemar Estates, who the AIFM delegates the majority of the Group's property management services to, will pass to Rendall & Rittner Limited on completion of the disposal.
Social, community and employee responsibility
The Group has no direct social, community or employee responsibilities. The Group has no employees and accordingly no requirement to separately report in this area as the management of the portfolio is the responsibility of the Investment Manager.
The Investment Manager is an equal opportunities employer, who encourages employee involvement in its financial performance, considers that regular employee training is extremely important and recognises the need for employees to have an appropriate work-life balance.
The Group is not within the scope of the Modern Slavery Act 2015 because it has not exceeded the turnover threshold and is therefore not obliged to make a slavery and human trafficking statement. The Directors are satisfied that, to the best of their knowledge, the Group's principal suppliers comply with the provisions of the UK Modern Slavery Act 2015.
Principal risks and uncertainties
The Group has identified the risks arising from its activities and has established policies and procedures as part of a formal structure of managing risk. The key risks and how these are managed are considered below:
-- Investment objective
The Directors are conscious that new investments must achieve the target return of the portfolio. An investment with a lower return profile would be detrimental to the performance of the portfolio as a whole. The AIFM Investment Committee reviews each transaction to ensure that any ground rents purchased will generate returns which are in line with the desired return level for the portfolio.
-- Compliance with laws and regulations
The Group must remain compliant with the REIT rules in order to take advantage of the potential efficiencies in its tax affairs, including exemption from UK corporation tax on profits and gains from its UK property rental business. The Group must also remain compliant with the prescribed requirements of the Listing Rules of the UK Listing Authority, Market Abuse Regulations ('MAR'), the Companies Act and other statutory requirements. The AIFM must also comply with the requirements of the AIFM Directive.
The Directors receive a quarterly report on the Group's compliance with the REIT rules and take independent advice on the conduct of its business to ensure that it remains compliant with the REIT regime. The Group Company Secretary monitors compliance and reports to the Directors on a quarterly basis. The Group's Depositary, responsible for cash monitoring, asset verification and oversight of the Group reports to the Directors also on a quarterly basis.
-- Dependence on the investment advice, key individuals and relationships
The Group's ability to achieve its investment objective is substantively dependent on the performance of the AIFM and its identification of suitable acquisitions and disposals and the management of such investments. Failure by these people to provide appropriate advice and support to the Group could have a materially adverse effect on the Group.
The Directors monitor the AIFM and review the Group performance on a quarterly basis. The Management Engagement Committee reviews the AIFM's performance on an annual basis. The Group engages with reputable advisers following appropriate due diligence undertaken by the AIFM and Directors.
-- Availability of equity and/or debt
The Group has forward commitments to complete transactions for which it has exchanged contracts and may in future take an option to acquire ground rents on property which has yet to be constructed. If insufficient cash exists, the Group will need to seek additional equity and/or debt within its self-imposed borrowing restrictions.
The Directors monitor liquidity and projected cash flows at each quarterly board meeting. The pipeline of acquisitions identifies capital requirements in good time for the Directors to consider the financing options available to them.
-- Investment market conditions
A systematic fall in the valuation of real estate could lead to a fall in the Group's NAV. Valuations are linked to multiples of the ground rent payable and ground rents payable are subject to pre-determined, contractual review dates and amounts. The multiples vary according to market sentiment, the nature of the rent review and the time until the next rent review.
The AIFM looks to invest in assets with pre-determined uplifts in ground rent receivable with pre-determined review cycles over the long-term.
-- Leaseholder payment of ground rents
Ground rent receivables form part of the Group's cash flow receipts and are managed tightly to ensure they do not become large enough to inhibit the Group's ability to manage its cash flows. The AIFM employs agreed collection procedures and timelines and, at the last resort, the right of forfeiture for non-payment of ground rent can be implemented.
-- Insurance cover
The Group has an insurable interest in the majority of the ground rents in its portfolio. If a property were to suffer an uninsured loss, due to a failure to insure the building or if a building was insured for an inadequate reinstatement value, the Group would incur costs to reinstate the property.
Insurances and the adequacy of insurance cover is monitored by the AIFM. Property reinstatement values are independently assessed every three years. Health & Safety reporting is reviewed by the Directors on a quarterly basis.
-- Working capital liquidity
Sufficient working capital liquidity is required to service payables including dividend distributions and committed property transactions when they fall due. The Directors manage and monitor short-term liquidity requirements to ensure the Group maintains a surplus of immediately realisable assets over its liabilities, such that all known and potential cash obligations can be met.
Future developments
The Group will continue to seek suitable ground rent acquisitions and employ its existing cash resources. The Directors intend to be highly selective in making any acquisitions. They may also consider the disposal of certain assets should suitable opportunities arise for sale and re-investment which would enhance shareholder value.
The Directors intend to maintain the dividend yield for the year ahead. For the year ended 30 September 2017, based on the weighted average issue price of shares in issue during the year, the dividend yield was approximately 3.96%.
The market for ground rents has remained strong since the year end. Any further movements in valuation will be reflected in the next independent valuation, which will be performed by Savills as at 31 March 2018.
On behalf of the board:
Simon Paul Wombwell 1 December 2017 Director
Directors' Report
The Directors present herewith their report in accordance with the requirements of the Companies Act 2006, together with the audited consolidated financial statements for the Group and Company for the year ended 30 September 2017.
Results and dividends
A summary of the Group's performance during the year is set out in the Chairman's Statement on pages 2 to 4.
The stated policy of the Group is to pay quarterly interim dividends and details of the interim dividends paid during the period are set out in Note 18 of the notes to the Group consolidated financial statements.
Total dividends of 3.964p per ordinary share were paid for the year ended 30 September 2017 (2016: 3.959p). These dividends amount to GBP3,702,456 (2016: GBP3,686,328). In accordance with the Directors' policy of paying all dividends as interim dividends, the Directors do not recommend payment of a final dividend.
Listing requirements
Throughout the accounting year ended 30 September 2017, the Group complied with the conditions set out in the TISE Rules for Companies. The Directors monitor the compliance at board meetings and take advice from the Group's TISE Listing sponsor where required.
Board of Directors
The following persons served as Directors during the year and up to the date of signing the financial statements:
Robert Malcolm Naish
Paul Anthony Craig
Simon Paul Wombwell
Third party indemnity provisions
The Company has made qualifying third-party indemnity provisions for the benefit of its Directors. These provisions were in force during the year and these remain in force at the date of this report.
Substantial shareholdings
At the quarterly board meetings, the Directors review the report of composition of shareholders to ensure compliance with the REIT rules (not be a close company).
As at 30 November 2017, the Group had been informed of the following notifiable interests in the voting
rights of the Group, in accordance with DTR5:
30 September 30 November
2017 2017
% of
% of total total
voting voting
rights rights
Schroders plc 14.52 no change
Brooks Macdonald 9.36 no change
Old Mutual plc 10.28 9.23
CG Asset Management 5.69 7.67
Integrated Financial Arrangements
Limited 7.00 no change
Architas Multi Manager 8.55 4.09
IntegraLife UK Limited 2.99 3.03
--------------------------------------- ------------- ------------
Political donations
Neither the Company nor its subsidiaries has made any political donation or incurred political expenditure during the year.
Financial instruments
Details of the Group's use of financial instruments, together with information on policies and exposure to risk, can be found within the Strategic Report on pages 5 to 12 and in note 12 of the notes to the Group consolidated financial statements. This information is incorporated into this Directors' Report by reference and is deemed to form part of this Directors' Report.
Events after the reporting period
In the period since the date of the financial statements, the Group has invested or contracted to invest in Ground Rent assets totalling GBP152,000 (note 23).
Going concern
At the year end date, the Group had a debt facility of GBP19.5 million, expiring on 15 November 2021, which was fully drawn down. The Directors continue to prepare the financial statements on a going concern basis.
Future developments
An indication of likely future developments in the Group can be found within the Strategic Report on pages 5 to 12. This information is incorporated into this Directors' Report by reference and is deemed to form part of this Directors' Report.
Directors' responsibilities
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulation.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the Group and parent company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group and Company for that period. In preparing these financial statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statements;
-- make judgments and accounting estimates that are reasonable and prudent; and
-- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the financial statements comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation.
The Directors are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors of the ultimate parent company are responsible for the maintenance and integrity of the ultimate parent company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Disclosure of information to auditors
PricewaterhouseCoopers LLP have expressed their willingness to continue in office as auditors and this will be considered at the next Annual General Meeting.
Each person who was a director at the time this report was approved confirms that:
-- so far as he is aware, there is no relevant audit information of which the Company's auditors are unaware; and
-- he has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the Company's auditors are aware of that information.
This report was approved by the board on 1 December 2017 and signed on its behalf by:
Simon Paul Wombwell Director
Company registered number: 8041022
Independent auditors' report to the members of Ground Rents Income Fund plc
Report on the audit of the financial statements
Opinion
In our opinion, Ground Rents Income Fund plc's Group financial statements and company financial statements (the "financial statements"):
-- give a true and fair view of the state of the Group's and of the company's affairs as at 30 September 2017 and of the Group's profit and the Group's and the company's cash flows for the year then ended;
-- have been properly prepared in accordance with IFRSs as adopted by the European Union and, as regards the company's financial statements, as applied in accordance with the provisions of the Companies Act 2006; and
-- have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report and Financial Statements (the "Annual Report"), which comprise: the consolidated and company statements of financial position as at 30 September 2017; the consolidated statement of comprehensive income, the consolidated and company statements of cash flows, and the consolidated and company statements of changes in equity for the year then ended; and the notes to the consolidated and company financial statements, which include a description of the significant accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors' responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, which includes the FRC's Ethical Standard, as applicable to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
Our audit approach Overview
-- Overall group materiality: GBP1,488,885 (2016: GBP1,331,480), and parent company materiality: GBP946,575 (2016: GBP906,498) based on 1% of total assets.
-- For income statement line items we applied a lower specific materiality of GBP165,536 (2016: GBP160,082) for the Group and GBP27,470 (2016: GBP23,822) for the parent company based on 5% of profit before tax (PBT).
-- We audited the complete financial information of each entity held within the Group.
-- The key audit matter that we identified in the current year was the valuation of the investment property portfolio.
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we looked at where the directors made subjective judgements, for example in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits we also addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias by the directors that represented a risk of material misstatement due to fraud.
The risk of material misstatement that had the greatest effect on our audit, including the allocation of our resources and effort, is identified as a "key audit matter" in the table below. We have also set out how we tailored our audit to address this specific area in order to provide an opinion on the financial statements as a whole, and any comments we make on the results of our procedures should be read in this context. This is not a complete list of all risks identified by our audit.
Key audit matters
Key audit matters are those matters that, in the auditors' professional judgement, were of most significance in the audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a whole and in forming our opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete list of all risks identified by our audit.
Key audit matter
Valuation of investment properties
The valuation of the investment property portfolio is inherently subjective and is underpinned by a number of assumptions. The valuation of the Group's investment properties is the key component of the net asset value and underpins the Group's result for the year. The result of the revaluation this year was a gain of GBP1,348k (2016: GBP16,618k), which is accounted for within "Net revaluation gain on investment properties" and is a significant component of the result for the year.
The Group's property portfolio has been independently valued by Savills Advisory Services Limited ('Savills' or the "Valuer") in accordance with the RICS Valuation - Professional Standard ("RICS").
In determining a property's valuation the Valuer takes into account property-specific information such as the current lease agreements and rental income. They apply assumptions for Years Purchase (YP) multiples and estimated market rent increases, which are influenced by prevailing market yields and comparable market transactions, to arrive at the final valuation.
Our audit paid particular focus to the relevant specific valuations impacted by the Governments' consultation paper "Tackling unfair practices in the leasehold market".
The existence of significant estimation uncertainty, coupled with the fact that only a small percentage difference in individual property valuations, when aggregated, could result in a material misstatement on the income statement and balance sheet, warrants specific audit focus in this area.
How our audit addressed the key audit matter
Experience of the Valuer and relevance of their work
We read the Valuer's report and held direct discussion with Savills valuation team. We confirmed that the approaches used were consistent with the RICS guidelines and suitable for use in determining the carrying value for the purpose of the financial statements.
We assessed the Valuer's qualifications and expertise and read their terms of engagement with the Group, to determine whether there were any matters that might have affected their objectivity or imposed scope limitations upon them. We found no evidence to suggest that the objectivity of the Valuer in their performance of the valuations was compromised.
Data provided to the Valuer
We performed testing, on a sample basis, to satisfy ourselves of the accuracy of the property information supplied to the Valuer by management. This data included annual rental income, the type of leases held and terms of future rent reviews to supporting evidence.
Assumptions and estimates used by the Valuer
We attended meetings with the Valuer independently of management, at which the valuations and the key assumptions therein were discussed. Our work covered the valuation of every property in the Group, but the discussions with the Valuer focused on the properties in the portfolio impacted by the Government's consultation paper and those with significant movements year on year.
The key assumptions used in the valuations, including the YP multiple, were agreed to recent transactions in the market and reflect the particular characteristics of each property.
Our testing which involved the use of our internal real estate valuation specialists, qualified chartered surveyors with deep market knowledge, indicated that the estimates and assumptions used were appropriate in the context of the Group's property portfolio and reflected the circumstances of the market in the year.
We determined that there were no key audit matters applicable to the parent company to communicate in our report.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the structure of the Group and the company, the accounting processes and controls, and the industry in which they operate.
The Group engagement team audited all entities within the Group and therefore all audit matters relevant to the Group were communicated on a frequent basis.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group and company Group and company specific
overall materiality materiality for income
statement account balances
------------------ -------------------------- -------------------------------
Materiality Group: GBP1,448,885 Group: GBP165,536 (2016:
(2016: GBP1,331,480) GBP160,082)
Company: GBP946,575 Company: GBP27,470
(2016: GBP906,498) (2016: GBP23,822)
How we determined 1% of total assets 5% of profit before
it tax
Rationale The key measure In addition to the
for benchmark of the Group and overall materiality,
applied parent's performance a specific materiality
is the valuation was applied to income
of investment properties statement account balances.
and the balance This was determined
sheet as a whole. on the basis of 5%
Given this, consistent PBT excluding the revaluation
with the prior year, gain. A specific materiality
we set an overall was considered as the
Group materiality most appropriate method
level based on total to ensure sufficient
assets. coverage across the
income statement.
-------------------- -------------------------- -------------------------------
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range of materiality allocated across components was between GBP482 and GBP432,860. Certain components were audited to a local statutory audit materiality that was also less than our overall Group materiality.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above GBP74,444 (Group audit) (2016: GBP66,574) and GBP47,329 (Company audit) (2016: GBP45,325) as well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which ISAs (UK) require us to report to you when:
-- the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
-- the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Group's and company's ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.
However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group's and company's ability to continue as a going concern.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors' report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based on these responsibilities.
With respect to the Strategic Report and Directors' Report, we also considered whether the disclosures required by the UK Companies Act 2006 have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, the Companies Act 2006 and ISAs (UK) require us also to report certain opinions and matters as described below.
Strategic Report and Directors' Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors' Report for the year ended 30 September 2017 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the Group and company and their environment obtained in the course of the audit, we did not identify any material misstatements in the Strategic Report and Directors' Report.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Directors' Responsibilities, the directors are responsible for the preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group's and the company's ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or the company or to cease operations, or have no realistic alternative but to do so.
Auditors' responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors' report.
Use of this report
This report, including the opinions, has been prepared for and only for the company's members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you, if, in our opinion:
-- we have not received all the information and explanations we require for our audit; or
-- adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received from branches not visited by us; or
-- certain disclosures of directors' remuneration specified by law are not made; or
-- the company financial statements are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Daniel Brydon (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors
Manchester 1 December 2017
Consolidated Statement of Comprehensive Income for the year ended 30 September 2017
Year ended Year ended
30 September 30 September
Note 2017 2016
GBP GBP
Continuing operations
Revenue 2 5,137,103 4,759,385
Administrative expenses 3 (1,232,615) (1,065,301)
Profit on sale of ground
rent assets 3,375 158,502
Net revaluation gain
on investment properties 8 1,347,518 16,617,598
Operating
profit 5,255,381 20,470,184
Finance
income 5 18,110 23,306
Finance
expenses 6 (615,248) (329,372)
Net finance expense (597,138) (306,066)
Profit before
tax 4,658,243 20,164,118
Taxation 7 - 3,320
Profit after tax and total
comprehensive income 4,658,243 20,167,438
------------- -------------
Earnings per share
Basic 13 4.98p 21.66p
Diluted 13 4.90p 21.34p
The accompanying notes on pages 25 to 40 form
an integral part of the consolidated financial
statements.
Consolidated Statement of Financial Position as at 30 September 2017
Note 2017 2016
GBP GBP
Assets
Non-current assets
Investment properties
- ground rents 8 139,088,000 125,699,100
139,088,000 125,699,100
Current assets
Trade and other receivables 9 2,571,888 2,291,812
Cash and cash equivalents 7,228,645 5,307,432
9,800,533 7,599,244
Total assets 148,888,533 133,298,344
------------- -------------
Liabilities
Non-current liabilities
Financial liabilities
measured at amortised
cost 11 (19,117,641) -
(19,117,641) -
Current liabilities
Trade and other payables 10 (2,381,414) (2,162,976)
Financial liabilities
measured at amortised
cost 11 - (8,000,000)
(2,381,414) (10,162,976)
Total liabilities (21,499,055) (10,162,976)
------------- -------------
Net assets 127,389,478 123,135,368
------------- -------------
Financed by:
Equity
Share capital 15 48,356,050 46,701,006
Share premium account 16 45,747,161 44,103,882
Retained earnings 17 28,628,024 12,163,042
Current year profit 17 4,658,243 20,167,438
Total equity 127,389,478 123,135,368
------------- -------------
Net asset value per ordinary
share
Basic 14 131.72p 131.83p
Diluted 14 130.24p 129.31p
The financial statements on pages 21 to 40 were
approved and authorised for issue by the board
of directors on and signed on its behalf by:
Simon Paul Wombwell
Director
Ground Rents Income
Fund plc
Company registered number 8041022
The accompanying notes on pages 25 to 40 form
an integral part of the consolidated financial
statements.
Ground Rents Income Fund plc Consolidated Statement of Cash Flows for the year ended 30 September 2017
Year ended Year ended
30 September 30 September
Note 2017 2016
GBP GBP
Cash flows from operating
activities
Cash generated from operations 19 3,751,965 5,167,583
Interest paid on bank loan
and bank charges (455,921) (200,040)
Taxation received - 1,719
Net cash generated from operating
activities 3,296,044 4,969,262
------------- -------------
Cash flow from investing
activities
Interest received 18,110 23,306
Receipts from the sale of
ground rent assets 15,000 164,025
Purchase of ground rent assets (12,053,007) (4,872,425)
Net cash used in investing
activities (12,019,897) (4,685,094)
------------- -------------
Cash flows from financing
activities
Net proceeds from issuance
of shares 19 3,298,323 414,565
Bank loan net proceeds 11,049,199 2,913,307
Dividends paid to shareholders 18 (3,702,456) (3,686,328)
Net cash generated from /
(used in) financing activities 10,645,066 (358,456)
------------- -------------
Net increase / (decrease)
in cash and cash equivalents 20 1,921,213 (74,288)
------------- -------------
Net cash and cash equivalents
at 1 October 5,307,432 5,381,720
Net cash and cash equivalents
at 30 September 7,228,645 5,307,432
------------- -------------
The accompanying notes on pages 25 to 40 form
an integral part of the consolidated financial
statements.
Consolidated Statement of Changes in Equity for the year ended 30 September 2017
Share
Share premium Retained
Total
capital account earnings equity
GBP GBP GBP GBP
Note 15 16 17
At 1 October 2015 46,482,856 43,907,467 15,849,370 106,239,693
Comprehensive income
Profit for the
year - - 20,167,438 20,167,438
Total comprehensive
income - - 20,167,438 20,167,438
Transactions with
owners
Issue of share
capital 218,150 218,150 - 436,300
Share issue costs - (21,735) - (21,735)
Dividends paid
(note 18) - - (3,686,328) (3,686,328)
At 30 September
2016 46,701,006 44,103,882 32,330,480 123,135,368
---------------- ------------------ ---------------- ----------------
At 1 October 2016 46,701,006 44,103,882 32,330,480 123,135,368
Comprehensive income
Profit for the
year - - 4,658,243 4,658,243
Total comprehensive
income - - 4,658,243 4,658,243
Transactions with
owners
Issue of share
capital 1,655,044 1,655,045 - 3,310,089
Share issue costs - (11,766) - (11,766)
Dividends paid
(note 18) - - (3,702,456) (3,702,456)
At 30 September
2017 48,356,050 45,747,161 33,286,267 127,389,478
---------------- ------------------ ---------------- ----------------
The accompanying notes on pages 25 to 40 form
an integral part of the consolidated financial
statements.
Notes to the Consolidated Financial Statements for the year ended 30 September 2017
1 Accounting policies
(a) Basis of preparation
Ground Rents Income Fund plc is a public limited company incorporated and domiciled in the United Kingdom. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union, IFRS IC interpretations, and the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of ground rent properties.
At the year end date, the Group had a debt facility fully drawn down of GBP19,500,000, expiring on 15 November 2021. The Directors continue to prepare the financial statements on a going concern basis.
The accounting policies, which have been applied consistently throughout the year, are set out below.
(b) Adoption of new and revised standards
The following new EU-endorsed standards, amendments to standards and interpretations are mandatory for the first time for the financial years ending 30 September 2017, but have not had an impact on the amounts reported in the Group financial statements:
IFRS 5 'Non-current assets held for sale and discontinued operations'
IFRS 7 'Financial instruments: disclosures'
IFRS 14 'Regulatory deferral accounts'
IAS 19 'Employee benefits'
IAS 34 'Interim financial reporting'
Amendment to IFRS 11 'Joint arrangements'
Amendment to IFRS 10 and IAS 28 on investment entities applying the consolidation exception
Amendment to IAS 1 'Presentation of financial statements'
Amendment to IAS 38 'Intangible assets'
Amendments to IAS 16 'Property, plant and equipment'
Amendments to IAS 27 'Separate financial statements'
Amendments to IAS 41'Agriculture'
In addition to the above, the following new EU-endorsed standards, amendments to standards and interpretations have been issued and are effective for the financial year beginning 1 October 2017, but have not been early adopted:
IFRS 9 'Financial instruments'
IFRS 15 'Revenue from contracts with customers'
IFRS 16 'Leases'
IFRS 17 'Insurance contracts'
IFRIC 23 'Uncertainty over income tax treatments'
Amendment to IFRS 4 'Insurance contracts' - regarding IFRS 9 'Financial instruments'
Amendments to IFRS 2 'Share based payments' - on transaction accounting clarification
Amendment to IAS 40 'Investment property'
Amendments to IAS 7 'Statement of cash flows' - on the disclosure initiative
Amendments to IAS 12'Income taxes' - on the recognition of deferred tax assets
The impact of these new standards and amendments will be assessed in detail prior to adoption; however, at this stage the Directors do not anticipate them to have a material impact on the amounts reported in the Group financial statements.
(c) Currency
The functional and presentation currency is pounds sterling.
(d) Dividend distribution
Dividend distribution to the Company's shareholders is recognised as a liability in the Group's financial statements in the period in which the Dividends are approved by the Company's directors.
(e) Critical accounting estimates and judgments
The preparation of financial information requires the use of assumptions, estimates and judgments about future conditions. Use of available information and application of judgment are inherent in the formation of estimates. Actual results in the future may differ from those reported. In this regard, management believes that the accounting policies where judgment is necessarily applied are those that relate to valuations. The estimation of the underlying assumptions are reviewed on an ongoing basis.
The valuation of investment properties is dependent on external factors such as the availability of fixed rate investments in the market as well as factors specific to the nature of the investment. While interest rates remain low, ground rents are viewed as attractive investments due to the secure, fixed income streams. The value is also dependent on the timing and amount of future rental uplifts, the most attractive being those linked to RPI with rental cycles of 10 years or less. The least attractive are those ground rents which are flat with no future uplifts.
Property valuations often refer to the YP multiple, otherwise known as Years Purchase (equivalent to the valuation divided by the current ground rent).
Valuations are provided by an independent third-party valuer and reviewed carefully by the Directors before inclusion in the financial statements. Further information about the qualifications of the independent third-party valuer and the valuation methods can be found in note 8.
(f) Basis of consolidation
The Group's financial statements comprise a consolidation of the financial statements of the parent company (Ground Rents Income Fund plc) and its subsidiaries. The financial statements of the subsidiaries are prepared using consistent accounting policies. Subsidiaries are entities controlled by the Group and control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefit from its activities. The financial statements of the subsidiaries are included from the date on which control is transferred to the Group. Financial statements of subsidiaries are deconsolidated from the date on which control ceases.
All intra-group transactions and balances are eliminated on consolidation.
(g) Revenue
Revenue represents the value of ground rent income due in the period together with any supplementary income earned in the year, including tenant notice fees and other income. Ground rent revenue is recognised on a straight line basis over the term receivable.
(h) Finance income and expenses
Finance income comprises interest receivable on bank deposits. Finance expenses comprise interest and other costs incurred in connection with the borrowing of funds. Finance income and expenses are recognised in the income statement in the period in which they are accrued.
(i) Taxation
Tax on the profit for the year comprises current tax. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the year end date.
(j) Deferred tax
Generally, the Group is not exposed to deferred tax because it is a REIT. REITs do not pay tax on property income and gains.
(k) Investment properties - ground rents
Ground rents are carried in the statement of financial position at their open market value. The Directors have applied the fair-value model in IAS 40 - Investment Property. Properties are revalued at the statement of financial position date by an independent valuer. Expenses that are directly attributable to the acquisition of a ground rent are capitalised into the cost of investment. Gains and losses on changes in fair value of ground rent assets are recognised in the income statement. The Directors instruct the independent valuers from time to time as the need arises. Gains and losses on changes in fair value are recognised at the time of each valuation.
(l) Cash and cash equivalents
Cash comprises of call deposits held with banks.
(m) Capital management
The capital managed by the Company consists of cash held across different bank accounts in several banking institutions. The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maximise the interest return on funds which have yet to be invested while ensuring there is enough free cash to meet day to day liabilities. In order to maintain or adjust the capital structure the Directors have the option to adjust the dividends paid to shareholders, return cash to shareholders, sell assets or delay purchase of individual assets. The Group monitors capital through cash and dividends which are prepared and reviewed on a quarterly basis. The Company had GBP7,228,645 of cash at the year end. The Directors intend to retain an amount for working capital at least equal to the next quarter's dividend payment. The Group has drawn down a GBP19,500,000 loan for up to a period of five years from 14 November 2016. See note 12 - Financial Instruments for further information on the loan. Associated costs are capitalised and amortised over the duration of the loan.
(n) Trade and other receivables
Trade and other receivables are recognised and carried at original invoice amount less an allowance for any uncollectable amounts. They are initially recognised at fair value and subsequently held at amortised cost.
(o) Trade and other payables
Trade and other payables are obligations to pay for services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classed as current liabilities if payment is due within one year or less. They are initially recognised at fair value and subsequently held at amortised cost.
(p) Deferred income
Deferred income arises because ground rents are usually billed annually in advance. Deferred income is held in the deferred income account within payables and released against the ground rent debtor balance over the period to which it relates.
(q) Amortisation of loan arrangement fees
Loan arrangement fees are capitalised and deducted from the amount outstanding on the loan. They are expensed to the profit and loss account over the period of the loan facility. This loan amortisation is included within finance expenses in the financial statements. The amount of the charge to the profit and loss accounts for loan arrangement fees in the year was GBP61,090 (2016: GBP129,332).
(r) Ordinary share capital
Ordinary share capital is classed as equity. Incremental costs directly attributable to the issue of new ordinary shares are shown in equity as a deduction from the share premium account.
(s) Warrants
Warrants were issued on a one for five basis with the issue of the Ordinary Share Capital in August 2012. Each warrant gives the holder the right to subscribe for an ordinary share for GBP1 on the anniversary of their issue for a period of ten years.
2 Segmental information
The Company is mainly concerned with the collection of ground rent. The company receives some ancillary income to which it is entitled as a result of its position as property freeholder or head leaseholder.
Year ended Year ended
30 September 30 September
2017 2016
GBP GBP
By activity:
Ground rent income accrued
in the year 4,519,624 4,107,896
Other income 617,479 651,489
5,137,103 4,759,385
All income of the Group is derived from activities carried out within the United Kingdom. The Group is not reliant on any one property or group of connected properties for the generation of its revenues. The board is the chief operating decision maker and runs the business as one segment.
3 Administrative expenses
Year ended Year ended
30 September 30 September
2017 2016
GBP GBP
This is stated after
charging:
Directors salaries 60,340 61,304
Auditors' remuneration
- see below 74,750 72,400
Management fees 449,430 364,714
Professional fees 292,401 294,258
Insurance 22,923 34,264
Sponsor fees 35,772 35,734
Valuation fees 67,428 47,682
Registrar fees 45,894 34,625
Listing fees 48,658 41,462
Advertising and
printing costs 14,689 13,975
Other operating
expenses 120,330 64,883
1,232,615 1,065,301
No direct operating expenses were incurred in relation to investment property in the year. Profits on sale of
ground rents were GBP3,375 (2016: GBP158,502).
Services provided by the Company's auditors:
Year ended Year ended
30 September 30 September
2017 2016
Group GBP GBP
Fees payable to the Group's auditors
for the audit of parent company
and consolidated financial statements 20,000 20,000
Fees payable to the Group's auditors and
its associates for other services:
- The audit of the Group's subsidiaries 54,750 52,400
74,750 72,400
-------------- --------------
4 Directors' emoluments
The Company does not have any employees other than the directors.
The services of Simon Paul Wombwell as a director of the Group are provided by Brooks Macdonald Funds Limited and invoiced on a monthly basis.
Year Year
ended ended
30 September 30 September
2017 2016
GBP GBP
Short term employee benefits paid
as directors' remuneration 60,340 61,304
Invoiced by Brooks Macdonald
Funds Limited 24,000 24,000
84,340 85,304
Highest paid director:
Emoluments 30,000 30,000
30,000 30,000
Monthly average number of employees
during the year Number Number
Administration 3 3
There were no post-employment benefits, other long-term benefits, termination benefits or share-based payments accrued or paid out in the year ended 30 September 2017 (2016: none).
5 Finance income
Year Year
ended ended
30 September 30 September
2017 2016
GBP GBP
Interest on bank
deposits 18,110 23,306
-------------- --------------
6 Finance expenses
Year Year
ended ended
30 September 30 September
2017 2016
GBP GBP
Loan interest 546,806 200,040
Amortisation of loan arrangement
fees and bank charges 68,442 129,332
615,248 329,372
-------------- --------------
7 Taxation
The Company applied to HMRC to join the Real Estate Investment Trust (REIT) taxation regime on 14 August 2012. The REIT regime affords the Company a number of potential efficiencies in its tax affairs including exemption from UK corporation tax on profits and gains from its UK property rental business. The Company intends to comply with the rules of the REIT regime in order to achieve these potential benefits.
Analysis of credit
in year
Year Year
ended ended
30 September 30 September
2017 2016
GBP GBP
Current tax:
UK corporation tax on profits
of the year - -
Adjustments in respect
of previous years - (3,320)
Total tax credit
for year - (3,320)
-------------- --------------
Factors affecting tax charge
for year
The differences between the tax assessed for the
year and the standard rate of corporation tax are
explained as follows:
Year Year
ended ended
30 September 30 September
2017 2016
GBP GBP
Profit before taxation 4,658,243 20,164,118
-------------- --------------
Standard rate of corporation
tax in the UK 19.5% 20.0%
GBP GBP
Profit on ordinary activities multiplied
by the standard rate of corporation
tax 908,357 4,032,824
Effects of:
Unrealised revaluation
surplus not taxable (262,766) (3,323,520)
Property profit not taxable
under the REIT regime (645,591) (709,304)
Adjustments in respect
of previous years - (3,320)
Total tax credit
for year - (3,320)
Deferred tax
No deferred tax arises on revaluation of investment properties due to the REIT status of the Company. UK REITs are exempt from Capital Gains Tax on property sales.
Factors affecting current and future tax charges
A change to the UK corporation tax rate was announced in the Chancellor's Budget on 16 March 2016. The change announced is to reduce the main rate to 17% from 1 April 2020. Changes to reduce the UK corporation tax rate to 19% from 1 April 2017 and to 18% from 1 April 2020 had already been substantively enacted on 26 October 2015.
As the change to 17% had not been substantively enacted at the date of the statement of financial position its effects are not included in these financial statements.
8 Investment properties - ground rents
Investment properties -
ground rents 30 September 30 September
2017 2016
Market value GBP GBP
At 1 October 125,699,100 104,213,000
Additions 12,053,007 4,872,425
Total unrealised gain recognised
in income statement 1,347,518 16,617,598
Disposals (11,625) (3,923)
At 30 September 139,088,000 125,699,100
------------- -------------
Fair value hierarchy
Non-financial assets carried at fair value, as is the case for investment property held by the Group, are required to be analysed by level depending on the valuation method adopted under IFRS 12 'Fair Value Measurement'.
The fair value hierarchy has the following levels:
Level I: Quoted prices (unadjusted) in active market for identical assets and liabilities.
Level II: Inputs other than quoted prices included within Level I that are observable for the asset or liability either directly (that is, as prices) or indirectly (that is, derived from prices).
Level III: Inputs for the asset or liability that are not based on observable market data (that is unobservable inputs).
There have been no transfers between Level II and Level III of the fair value hierarchy during the year.
All investment property held by the Group is classified as Level III.
Key assumptions within the basis of fair value are:
The value of each of the Properties has been assessed in accordance with the relevant parts of the Royal Institution of Chartered Surveyors Valuation - Professional Standards VPS 4 (1.5.1) (the Red Book), which is consistent with IFRS 13 measurement requirements. The Red Book provides two definitions of Fair Value (FV). The one appropriate for the IFRS basis of accounting is as follows:
"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 commentary under VPS 4 (1.5.3) of the Red Book states that, for most practical purposes, Fair Value is consistent with the concept of Market Value and there is no difference between the two.
The Group's investment in ground rents was revalued at 30 September 2017 by Savills Advisory Services Limited (Savills). The valuer has confirmed to the Directors that the fair value as set out in the valuation report has been primarily derived using comparable recent market transactions on an arm's length basis.
Savills have made reference to VPGA 10 (Valuation Practice Guidance Applications) of the RICS Valuation Global Standards 2017, under which they are required to bring to the attention of the Directors "Matters that may give rise to material valuation uncertainty". At the valuation date market uncertainty surrounds investments with aggressive review patterns, leasehold houses and those with ground rents which are high in comparison to the property's capital value. The Group's portfolio has only limited exposure to this type of asset and so the valuation uncertainty is reduced.
The valuer within Savills is a RICS Registered Valuer. Most of the properties have previously been valued by Savills when they were acquired and from time to time as requested by the Directors. The valuation of ground rents takes into account external factors such as interest rates and the availability of other fixed rate investments in the market. While interest rates remain low, ground rents are an attractive investment due to their secure, pre-determined income streams.
The valuation of a ground rent depends on the future rental uplift timing and nature. The most valuable ground rent assets are those which are RPI linked with reviews every 10 years or less. Other types of ground rents are doubling where the rent doubles at a fixed time interval and fixed increases where the uplifts are fixed and detailed in the lease. The least attractive ground rents are those which are flat with no future rental increases which attract the lowest Years Purchase (YP) multiple and the highest yield.
Information about fair value measurement using significant unobservable input (Level III):
Valuation Category - type of rent review
Fixed
30 September 2017 Indexed Doubling increases Flat
Cost (GBP) 68,798,174 20,551,149 6,829,192 5,477,949
Fair Value at 30
Sept 2017 (GBP) 102,227,000 22,849,000 8,424,000 5,588,000
Gross rent roll
(GBP) 3,165,438 786,010 323,086 307,164
Rental Yield on
purchase price 4.60% 3.82% 4.73% 5.61%
Rental Yield on
fair value 3.10% 3.44% 3.84% 5.50%
Fixed
30 September 2016 Indexed Doubling increases Flat
Cost (GBP) 57,696,143 20,551,149 6,829,192 5,477,949
Fair Value at 30
Sept 2016 (GBP) 86,484,944 25,745,894 7,847,213 5,621,048
Gross rent roll
(GBP) 2,758,601 786,010 323,086 307,164
Rental Yield on
purchase price 4.78% 3.82% 4.73% 5.61%
Rental Yield on
fair value 3.19% 3.05% 4.12% 5.46%
All categories of ground rent asset have been valued
by independent valuers using available market comparisons.
The table below shows the principal sensitivity
to the key valuation metrics and the resultant change
to the valuation.
+/- effect on valuation
Fixed
Indexed Doubling increases Flat
Impact on fair
value of 1 YP change 3,165,438 786,010 323,086 307,164
The average YP across the portfolio is 30.4 (2016:
30.1).
9 Trade and other receivables
30 September 30 September
2017 2016
GBP GBP
Trade receivables 1,810,539 1,340,897
Other taxes and social
security costs 18,794 -
Other receivables 710,209 931,487
Prepayments and
accrued income 32,346 19,428
2,571,888 2,291,812
Included in other receivables is GBP234,088 (2016: GBP387,671) held in a client account at the Company's solicitors which was for deals in progress to complete after the year end date. In addition to this there is GBP175,613 (2016: GBP54,085) of option payments that have been made and an GBP83,000 deposit (2016: GBP83,000). The fair value of trade and other receivables is equal to the book value.
The ageing analysis of trade receivables
is as follows: 30 September 30 September
2017 2016
GBP GBP
Up to 3 months 1,272,717 891,800
Over 3 months 537,822 449,097
1,810,539 1,340,897
Management consider the trade receivables to be fully collectable due to the secure nature of the asset. The Directors believe all financial assets that are neither past due nor impaired to be fully recoverable as the amounts are represented by either cash held at a secure client account at the Company's solicitors or other trading amounts which are considered fully recoverable and of good quality.
10 Trade and other payables
30 September 30 September
2017 2016
GBP GBP
Trade payables 103,968 91,887
Other taxes and
social security
costs - 7,681
Other payables 1,759 119,257
Accruals 446,876 263,157
Deferred income 1,828,811 1,680,994
2,381,414 2,162,976
Trade payables and other taxes and social security amounts fall due within the next three months.
11 Financial liabilities measured at amortised cost
30 September 30 September
2017 2016
GBP GBP
Bank loan repayable within one
year - 8,000,000
Bank loan repayable over one
year 19,500,000 -
Capitalised loan arrangement
fees net of amortisation (382,359) -
19,117,641 8,000,000
------------- -------------
The current loan facility is with Santander UK plc and has a termination date of 15 November 2021. The rate of interest payable on the loan is set in advance at 1.097% for the first tranche of GBP15,000,000 and 0.986% for the second tranche of GBP4,500,000. Both of these rates are to subject to an additional 2.300% margin, giving the fully drawn loan a composite rate of 3.371%.
The loan facility is secured over assets held in group companies, namely Admiral Ground Rents Limited, Clapham One Ground Rents Limited, Gateway (Leeds) Ground Rents Limited, GRIF040 Limited, GRIF041 Limited, GRIF044 Limited, GRIF048 Limited, Masshouse Ground Rents Limited, Masshouse Block HI Limited, Masshouse Residential Block HI Limited, North West Ground Rents Limited, Opw Ground Rents Limited, Postbox Ground Rents Limited, The Manchester Ground Rent Company Limited, Wiltshire Ground Rents Limited and Yorkshire Ground Rents Limited.
No security or guarantee exists in relation to the facility over any other group assets or assets within the parent company.
The loan facility includes loan-to-value of and interest cover covenants that are measured at a Group level and the Group has maintained significant headroom against all measures throughout the financial year. The Group is in full compliance with all loan covenants at 30 September 2017.
Borrowing restrictions
The Group has self-imposed borrowing restrictions of 25% of gross assets, these being the Group's investment properties - ground rents. At 30 September 2017, this was 13.7% (30 September 2016: 6.4%).
Leverage ratio
For the purposes of the AIFMD, leverage is any method which increases the Company's exposure, including the borrowing of cash and the use of derivatives.
It is expressed as a ratio between the Group's gross assets and its NAV and is calculated under the gross and commitment methods, in accordance with AIFMD. This differs to the Group's borrowing restriction which is expressed as an absolute measure as quoted above.
The Group is required to state its maximum and actual leverage levels, calculated as prescribed by the AIFMD as at 30 September 2017, and are as follows:
Leverage exposure
Maximum Actual
limit exposure
Gross method 175% 111%
Commitment method 175% 117%
-------- ----------
The gross method represents the sum of the Group's positions (total assets) after deducting cash balances. The commitment method represents the sum of the Group's positions without deducting cash balances.
12 Financial instruments
The Group's financial instruments comprise cash and various items such as trade and other receivables and trade and other payables which arise from its operations. The Group does not have any 'held to maturity' or 'available for sale financial assets' or 'held for trading financial assets and liabilities' as defined by IAS 39.
Financial assets carried at amortised cost
The book value, fair value and interest rate profile of the Group's financial assets, other than non-interest bearing short-term trade and other receivables, for which book value equates to fair value, were as follows:
30 September 2017 30 September 2016
Book value Fair value Book value Fair value
GBP GBP GBP GBP
Trade receivables 1,810,539 1,810,539 1,340,897 1,340,897
Other receivables 710,209 710,209 931,487 931,487
Cash at bank and
in hand 7,228,645 7,228,645 5,307,432 5,307,432
-------------------- ----------- ------------------ -------------
As of 30 September 2017 no trade receivables (2016:
GBPnil) were impaired or provided for.
Financial liabilities carried
at amortised cost
The book value, fair value and interest rate profile
of the Group's financial liabilities, other than
non-interest bearing short-term trade and other
payables, for which book value equates to fair value,
were as follows:
30 September 2017 30 September 2016
Book value Fair value Book value Fair value
GBP GBP GBP GBP
Trade payables 103,968 103,968 91,887 91,887
Other payables and
accruals 448,635 448,635 382,414 382,414
Bank loan 19,117,641 19,117,641 8,000,000 8,000,000
-------------------- ----------- ------------------ -----------
Financial risk management
The Group has identified the risks arising from its activities and has established policies and procedures as part of a formal structure of managing risk.
Capital risk management
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maximise the interest return on funds which have yet to be invested while ensuring there is enough free cash to meet day to day liabilities. In order to maintain or adjust the capital structure the Directors have the option to adjust the dividends paid to shareholders, return cash to shareholders, sell assets or delay purchase of additional assets. The Group monitors capital through cash and dividend forecasts which are prepared and reviewed on a quarterly basis.
A gearing ratio measures the proportion of a company's borrowed funds to its equity. The Group's gearing
ratio at 30 September was as follows:
30 September 30 September
2017 2016
GBP GBP
Cash and cash equivalents 7,228,645 5,307,432
Total borrowings (note 11) (19,117,641) (8,000,000)
------------- -------------
Net cash (11,888,996) (2,692,568)
Total equity 127,389,478 123,135,368
Total capital 115,500,482 120,442,800
Gearing ratio 15% 6%
Credit risk
Cash deposits are placed with a number of financial institutions whose financial strength and credit quality have been considered by the Directors based on advice received from the investment manager. The panel of suitable counterparties is subject to regular review by the board and its advisers.
Interest rate risk
The Company places excess cash of the Group on deposit in interest bearing accounts to maximise returns.
Liquidity risk
Liquidity risk is the risk that the Group is unable to meet its payment obligations associated with its financial liabilities when they fall due. The Directors manage and monitor short-term liquidity requirements to ensure that the Group maintains a surplus of immediately realisable assets over its liabilities, such that all known and potential cash obligations can be met.
13 Earnings per share
Basic earnings per share
Earnings used to calculate earnings per share in the financial statements were:
30 September 30 September
2017 2016
GBP GBP
Profit attributable to
owners of the Company 4,658,243 20,167,438
------------- -------------
Basic earnings per share have been calculated by
dividing earnings by the weighted average number
of ordinary shares in issue throughout the year.
Weighted average number of shares
in issue in the year 93,565,248 93,118,248
Basic earnings per
share 4.98p 21.66p
Diluted earnings per share
Diluted earnings per share is the basic earnings per share, adjusted for the effect of contingently issuable warrants in issue during the year, weighted for the relevant periods.
30 September 30 September
2017 2016
GBP GBP
Profit attributable to equity shareholders
of the Company 4,658,243 20,167,438
------------- -------------
2017 2016
Number Number
Weighted average number of shares
- basic 93,565,248 93,118,248
Potential dilutive impact
of warrants 1,565,659 1,365,831
Diluted total shares 95,130,907 94,484,079
-------------
Diluted earnings
per share 4.90p 21.34p
14 Net asset value per ordinary share
The NAV calculates the net asset value per share in the financial statements. The diluted NAV per ordinary share is calculated after assuming the exercise of all outstanding warrants.
30 September 30 September
2017 2016
GBP GBP
Net assets 127,389,478 123,135,368
------------- -------------
Number Number
Number of ordinary
shares in issue 96,712,100 93,402,011
Outstanding warrants
in issue 4,718,273 8,028,362
Diluted number of
shares in issue 101,430,373 101,430,373
------------- -------------
NAV per ordinary
share - basic 131.72p 131.83p
NAV per ordinary
share - dilutive 130.24p 129.31p
15 Share capital
30 September 30 September 30 September 30 September
2017 2017 2016 2016
Number GBP Number GBP
Allotted, called
up and fully paid:
Ordinary shares
of GBP0.50 each 96,712,100 48,356,050 93,402,011 46,701,006
------------- ------------- ------------- -------------
30 September 30 September 30 September 30 September
2017 2017 2016 2016
Number GBP Number GBP
Shares issued during
the year
Ordinary shares
of GBP0.50 each 3,310,089 1,655,044 436,300 218,150
------------- ------------- ------------- -------------
Resolutions were passed at an annual general meeting on 24 July 2012 to authorise the Directors to allot shares up to an aggregate nominal amount of GBP65,000,000.
In January 2015, the Company raised an additional GBP8,451,428, by way of a placing of ordinary shares at GBP1.07 per share.
Warrants were issued for GBPnil consideration on the basis of one warrant for every five subscription shares in August 2012. Warrant-holders have the right to subscribe GBP1 per share for the number of ordinary shares to which they are entitled on 31 August in each year following admission up to and including 31 August 2022. 277,700 warrants were exercised and issued in September 2016. 3,310,089 warrants were exercised and issued in September 2017. At 30 September 2017 there were 4,718,273 warrants in issue.
16 Share premium account
2017 2016
GBP GBP
At 1 October 44,103,882 43,907,467
Shares issued 1,655,045 218,150
Expenses of issue (11,766) (21,735)
At 30 September 45,747,161 44,103,882
----------- -----------
17 Retained earnings
2017 2016
GBP GBP
At 1 October 32,330,480 15,849,370
Profit for the financial
year 4,658,243 20,167,438
Dividends paid (3,702,456) (3,686,328)
At 30 September 33,286,267 32,330,480
------------ ------------
18 Dividends
It is the policy of the Group to pay quarterly dividends to ordinary shareholders.
2017 2016
GBP GBP
Dividends declared by the
Company during the year:
Dividends paid 3,702,456 3,686,328
3,702,456 3,686,328
Analysis of dividends
by type:
Interim PID dividend of
0.952p per share - 886,543
Interim PID dividend of
0.9646p per share - 898,277
Interim PID dividend of
1.0187p per share - 948,659
Interim PID dividend of
1.0232p per share - 952,849
Interim PID dividend of
1.024p per share 956,437 -
Interim PID dividend of
0.980p per share 915,339 -
Interim PID dividend of
0.980p per share 915,340 -
Interim PID dividend of
0.980p per share 915,340 -
3,702,456 3,686,328
Since the year end, the following
dividends have been announced:
Interim PID dividend of
1.024p per share - announced - 956,437
Interim PID dividend of
0.980p per share - announced 915,340 -
---------- ----------
19 Cash generated from operations
Reconciliation of operating profit to net cash inflow from operating activities
2017 2016
GBP GBP
Profit before income
tax 4,658,243 20,164,118
Adjustments for:
Non-cash revaluation
gain (1,347,518) (16,617,598)
Profit on sale of
fixed assets (3,375) (158,502)
Net finance expense 597,138 306,066
Operating cash flows before movements
in working capital 3,904,488 3,694,084
------------ -------------
Movements in working
capital:
Decrease / (increase) in
trade and other receivables (280,076) 752,790
Increase in trade
and other payables 127,553 720,709
Net cash generated
from operations 3,751,965 5,167,583
------------ -------------
Proceeds of share issue
The proceeds from issue of shares can be broken down as follows:
2017 2016
GBP GBP
Warrants issued
on 28 October 2015 - 158,600
Warrants issued on 23 September
2016 - 277,700
Warrants issued on 13 September
2017 3,310,089 -
Share issue costs associated with
issue of ordinary shares (11,766) (21,735)
3,298,323 414,565
---------- ---------
20 Analysis of changes in net cash
At 30
At 1 October Cash Non-cash September
2016 flows changes 2017
GBP GBP GBP GBP
Cash at bank and
in hand 5,307,432 1,921,213 - 7,228,645
Total 5,307,432 1,921,213 - 7,228,645
------------- ---------- --------- -----------
21 Related party transactions
Transactions between the Company and its subsidiaries which are related parties, are eliminated on consolidation. The Company's individual financial statements include the amounts attributable to subsidiaries. All amounts due to or from subsidiary companies are interest free and repayable on demand. These amounts are disclosed in aggregate in the relevant Company financial statements and in detail in the following tables:
Amounts owed by Amounts owed to
Company related parties related parties
2017 2016 2017 2016
GBP GBP GBP GBP
Admiral Ground
Rents Limited 2,035,983 2,077,926 - -
Azure House Ground
Rents Limited 74,899 80,112 - -
Banbury Ground
Rents Limited 93,494 91,707 - -
BH Ground Rents
Limited 1,285,210 1,326,562 - -
Clapham One Ground
Rents Limited 2,961,033 2,845,729 - -
D G Ground Rents
Limited 1,631,645 1,609,830 - -
East Anglia Ground
Rents Limited 489,627 524,407 - -
Ebony House Ground
Rents Limited 182,160 189,542 - -
Enclave Court Ground
Rents Limited 86,617 92,721 - -
Greenhouse Ground
Rents Limited 544,520 489,557 - -
GRIF Student Ground
Rents Limited 926,823 935,078 - -
GRIF033 Limited 648,824 595,529 - -
GRIF038 Limited 104,835 104,835 - -
GRIF039 Limited 744,594 756,349 - -
GRIF040 Limited 11,410,100 7,944,200 - -
GRIF041 Limited 2,858,129 2,753,065 - -
GRIF042 Limited 639,042 570,909 - -
GRIF043 Limited 988,782 911,236 - -
GRIF044 Limited 1,498,286 1,536,695 - -
GRIF045 Limited 829,010 572,529 - -
GRIF046 Limited 2,304,432 2,349,339 - -
GRIF047 Limited 123,049 132,625 - -
GRIF048 Limited - 1,905,413 416,226 -
All the above subsidiaries are registered at the
same UK address, being Richmond House, Heath Road,
Hale, Cheshire WA14 2XP.
Amounts owed
Amounts owed to related
Company by related parties parties
2017 2016 2017 2016
GBP GBP GBP GBP
Gateway (Leeds) Ground
Rents Limited 2,525,236 2,551,788 - -
Masshouse Ground Rents
Limited 950,106 1,003,642 - -
Midlands Ground Rents
Limited 819,035 790,060 - -
North West Ground Rents
Limited 953,141 985,241 - -
Postbox Ground Rents
Limited 1,414,546 1,352,488 - -
TMG003 Limited 137,029 42,254 - -
Yorkshire Ground Rents
Limited 1,165,156 1,129,950 - -
---------- ---------- ------- ------
All the above subsidiaries are registered at the
same Guernsey address, being Dorey Court, Admiral
Park, St Peter Port, Guernsey, GY1 2HT.
Simon Paul Wombwell is also a director of Brooks Macdonald Funds Limited (BMF) and of Brooks Macdonald Group plc, the parent company of BMF and Braemar Estates (Residential) Limited (BER), both of which companies provided services to Ground Rents Income Fund plc during the financial year.
BMF provides investment management and administration services to the Company, the fees for which are 0.55% per annum of the market capitalisation of the Company. In addition, BMF is entitled to an agency fee of 2% of the purchase price of any property acquired by the Company, where no other agency fee is payable, and 20% of any notice fee income. Where a third party agency fee is less than 2% of the purchase price, BMF is entitled to an agency fee of 50% of the difference between 2% of the purchase price and the third party agency fee.
Transactions between Brooks Macdonald Funds Limited and Ground Rents Income Fund plc during the financial year were as follows:
2017 2016
GBP GBP
Advisory fee paid to Brooks
Macdonald Funds Limited 515,316 429,281
Acquisition fees paid to Brooks
Macdonald Funds Limited 49,500 81,057
Other amounts paid to Brooks Macdonald
Funds Limited 123,171 109,543
Directors fees paid to Brooks
Macdonald Funds Limited 24,000 24,000
711,987 643,881
GBP92,400 was due from Ground Rents Income Fund plc to Brooks Macdonald Funds Limited at the year end date (2016: GBP59,300).
Braemar Estates (Residential) Limited is also a related party by virtue of being under common control with Brooks Macdonald Funds Limited. Transactions between Braemar Estates (Residential) Limited and Ground Rents Income Fund plc during the financial year were as follows:
2017 2016
GBP GBP
Other amounts paid to Braemar Estates
(Residential) Limited 26,895 18,825
26,895 18,825
GBPnil was due from Ground Rents Income Fund plc to Braemar Estates (Residential) Limited at the year end date (2016: GBP12,000). GBPnil was due to Ground Rents Income Fund plc from Braemar Estates (Residential Limited at the year end date (2016: GBPnil).
22 Other financial commitments and contingencies
The Group has a number of ground rent asset acquisitions in the pipeline. At 30 September 2017, the Group had GBP234,088 of cash held at solicitors for acquisitions which were in progress to complete after the year end date (note 9) (2016: GBP387,671). The ground rent deals are expected to cost GBP4,099,977 to complete.
A claim for damages was lodged post the financial year end by a leaseholder of an investment property held by a subsidiary of the Group. Legal advice obtained indicates that it is unlikely that any significant liability will arise. The subsidiary has disclaimed liability and will defend the action. The Directors are therefore of the view that no material losses will arise in respect of the legal claim at the date of these financial statements.
23 Events after the year end date
On 1 November 2017 the Group completed on the purchase of the head lease interest Beetham Tower, Birmingham, for GBP152,000. The investment consists of 152 units generating GBP10,138 ground rent linked to 21 year RPI, giving an initial ground rent yield of 6.7%.
Company Statement of Financial Position as at 30 September 2017
Note 2017 2016
GBP GBP
Assets
Non-current assets
Investments 5 1,665,010 1,665,010
1,665,010 1,665,010
Current assets
Trade and other receivables 6 85,763,862 84,191,013
Cash and cash equivalents 7,228,645 5,307,432
92,992,507 89,498,445
Total assets 94,657,517 91,163,455
Liabilities
Current liabilities
Trade and other payables 7 (453,352) (276,755)
(453,352) (276,755)
Total liabilities (453,352) (276,755)
Net assets 94,204,165 90,886,700
------------ ------------
Financed by:
Equity
Share capital 9 48,356,050 46,701,006
Share premium account 9 45,747,161 44,103,882
Profit for the financial
year 10 3,721,598 3,733,779
Retained earnings / (losses) 10 (3,620,644) (3,651,967)
Total equity 94,204,165 90,886,700
------------ ------------
The Company financial statements on pages 41 to
50 were approved and authorised for issue by the
board of directors on and signed on its behalf by:
Simon Paul Wombwell
Director
Ground Rents Income Fund
plc
Company registered number 8041022
The accompanying notes from pages 44 to 50 form
an integral part of the Company financial statements.
Company Statement of Cash Flows for the year ended 30 September 2017
Year ended Year ended
30 September 30 September
Note 2017 2016
GBP GBP
Cash flows from operating
activities
Cash generated from operations 12 2,318,247 8,324,185
Interest paid on bank loan
and bank charges (201) (108,476)
Net cash generated from operating
activities 2,318,046 8,215,709
------------- -------------
Cash flow from investing
activities
Interest received 7,300 23,306
Net cash generated from investing
activities 7,300 23,306
------------- -------------
Cash flows from financing
activities
Proceeds from issuance of
shares 12 3,298,323 414,565
Bank loan net payments - (5,041,540)
Dividends paid to shareholders (3,702,456) (3,686,328)
Net cash used in financing
activities (404,133) (8,313,303)
Net increase / (decrease)
in cash and cash equivalents 13 1,921,213 (74,288)
------------- -------------
Net cash and cash equivalents
at 1 October 5,307,432 5,381,720
Net cash and cash equivalents
at 30 September 7,228,645 5,307,432
------------- -------------
The accompanying notes from pages 44 to 50 form
an integral part of the Company financial statements.
Company Statement of Changes in Equity for the year ended 30 September 2017
Share
Share premium Retained
Total
capital account earnings equity
GBP GBP GBP GBP
Note 9 9 10
At 1 October 2015 46,482,856 43,907,467 34,361 90,424,684
Comprehensive income
Profit for the
year - - 3,733,779 3,733,779
Total comprehensive
income - - 3,733,779 3,733,779
Transactions with
owners
Issue of share
capital 218,150 218,150 - 436,300
Share issue costs - (21,735) - (21,735)
Dividends paid - - (3,686,328) (3,686,328)
At 30 September
2016 46,701,006 44,103,882 81,812 90,886,700
------------- --------------- -------------- ----------------
At 1 October 2016 46,701,006 44,103,882 81,812 90,886,700
Comprehensive income
Profit for the
year - - 3,721,598 3,721,598
Total comprehensive
income - - 3,721,598 3,721,598
Transactions with
owners
Issue of share
capital 1,655,044 1,655,045 - 3,310,089
Share issue costs - (11,766) - (11,766)
Dividends paid - - (3,702,456) (3,702,456)
At 30 September
2017 48,356,050 45,747,161 100,954 94,204,165
------------- --------------- -------------- ----------------
The accompanying notes from pages 44 to 50
form an integral part of the Company financial
statements.
Notes to the Company Financial Statements for the year ended 30 September 2017
1 General information
The Company is a private company limited by shares, incorporated, registered and domiciled in England and Wales. The address of its registered office is 72 Welbeck Street, London, United Kingdom, W1G 0AY.
The Company's principal activity during the year was to operate a property rental and investment business.
2 Accounting policies
(a) Basis of preparation
The financial statements have been prepared in accordance with International Financial Reporting Standards and applicable UK Law that applies to companies reporting under IFRS, and IFRS IC interpretations.
The Company has taken advantage of the exemption in section 408 of the Companies Act from disclosing its individual profit and loss account.
These financial statements are prepared on the going concern basis, under the historical cost convention and in accordance with the Companies Act 2006 and applicable accounting standards in the United Kingdom. The principal accounting policies of the Company, which have been applied consistently throughout the year, are set out below.
(b) Adoption of new and revised standards
The following new EU-endorsed standards, amendments to standards and interpretations are mandatory for the first time for the financial year ending 30 September 2017, but have not had an impact on the amounts reported in the Group financial statements:
IFRS 5 'Non-current assets held for sale and discontinued operations'
IFRS 7 'Financial instruments: disclosures'
IFRS 14 'Regulatory deferral accounts'
IAS 19 'Employee benefits'
IAS 34 'Interim financial reporting'
Amendment to IFRS 11 'Joint arrangements'
Amendment to IFRS 10 and IAS 28 on investment entities applying the consolidation exception
Amendment to IAS 1 'Presentation of financial statements'
Amendment to IAS 38 'Intangible assets'
Amendments to IAS 16 'Property, plant and equipment'
Amendments to IAS 27 'Separate financial statements'
Amendments to IAS 41 'Agriculture'
In addition to the above, the following new EU-endorsed standards, amendments to standards and interpretations have been issued and are effective for the financial year beginning 1 October 2017, but have not been early adopted:
IFRS 9 'Financial instruments'
IFRS 15 'Revenue from contracts with customers'
IFRS 16 'Leases'
IFRS 17 'Insurance contracts'
IFRIC 23 Uncertainty over income tax treatments'
Amendment to IFRS 4 'Insurance contracts' - regarding IFRS 9 'Financial instruments'
Amendments to IFRS 2 'Share based payments' - on transaction accounting clarification
Amendment to IAS 40 'Investment property'
Amendments to IAS 7 'Statement of cash flows' - on the disclosure initiative
Amendments to IAS 12'Income taxes' - on the recognition of deferred tax assets
The impact of these new standards and amendments will be assessed in detail prior to adoption; however, at this stage the Directors do not anticipate them to have a material impact on the amounts reported in the Group financial statements.
(c) Critical accounting estimates and judgments
The preparation of financial information requires the use of assumptions, estimates and judgments about future conditions. Use of available information and application of judgment are inherent in the formation of estimates. Actual results in the future may differ from those reported. In this regard, management believes that the accounting policies where judgment is necessarily applied are those that relate to valuations. The estimation of the underlying assumptions are reviewed on an ongoing basis.
(d) Going concern
The directors have prepared the financial statements on the going concern basis. Cash flow forecasts are prepared and reviewed at the quarterly board meetings. At the statement of financial position date, the Group had a loan facility of GBP19,500,000 in place for up to a further five years from 14 November 2016. For these reasons the Directors continue to prepare the financial statements on a going concern basis.
(e) Currency
The functional and presentation currency is pound sterling.
(f) Investments in subsidiary companies
Investments in subsidiary companies are carried at cost less any provision for impairment, which is reviewed on an annual basis.
(g) Cash and cash equivalents
Cash comprises of call deposits held with banks.
(h) Trade and other receivables
Trade and other receivables are recognised and carried at original invoice amount less an allowance for any uncollectable amounts. They are initially recognised at fair value and subsequently held at amortised cost.
(i) Capital management
The capital managed by the Company consists of cash held across different bank accounts in several banking institutions. The Company's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maximise the interest return on funds which have yet to be invested while ensuring there is enough free cash to meet day to day liabilities. In order to maintain or adjust the capital structure the Directors have the option to adjust the dividends paid to shareholders, return cash to shareholders, sell assets or delay purchase of individual assets. The Group monitors capital through cash and dividends which are prepared and reviewed on a quarterly basis. The Company had GBP7,228,645 of cash at the year end. The Directors intend to retain an amount for working capital at least equal to the next quarter's dividend payment. The Group has drawn down a GBP19,500,000 loan for up to a period of five years from 14 November 2016. See note 11 in the consolidated financial statements for further information on the loan. Associated costs are capitalised and amortised over the duration of the loan.
(j) Trade and other payables
Trade and other payables are obligations to pay for services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classed as current liabilities if payment is due within one year or less. They are initially recognised at fair value and subsequently held at amortised cost.
(k) Ordinary share capital
Ordinary share capital is classed as equity. Incremental costs of issue are deducted from the share premium account.
Warrants were issued on a one for five basis with the issue of the Ordinary Share Capital in August 2012. Each warrant gives the holder the right to subscribe for an ordinary share for GBP1 on the anniversary of their issue for a period of ten years.
(l) Dividend distribution
Dividend distribution to the Company's shareholders is recognised as a liability in the Company's financial statements in the period in which the dividends are approved by the Company's Directors.
3 Results for the year
As permitted by Section 408 of the Companies Act 2006 the Company has elected not to present its own profit and loss account for the financial year. Ground Rents Income Fund plc reported a profit after tax for the financial year of GBP3,721,598 (2016: GBP3,733,779). Auditors' remuneration for audit of the parent Company financial statements was GBP20,000 (2016: GBP20,000). The average monthly number of employees during the year was three (being the directors). Directors' emoluments are set out in note 4 of the Group financial statements.
4 Dividends
Details of the Company's dividends paid and proposed, are set out in note 18 of the Group financial statements.
5 Investments
Investments
in
subsidiary
undertakings
GBP
Cost
At 1 October 2016 and
30 September 2017 1,665,010
The Directors believe that the carrying value of
the investments is supported by their underlying
net assets.
Details of the subsidiary undertakings of the Company
at 30 September 2017 all of which are wholly owned
and included in the financial statements are given
below. All subsidiaries below are registered at
the same UK address, being Richmond House, Heath
Road, Hale, Cheshire WA14 2XP:
Type of Nature Country
Company Share of Business of Incorporation
Admiral Ground Rents Ordinary Ground
Limited GBP1 Rents UK
Azure House Ground Rents Ordinary Ground
Limited GBP1 Rents UK
Banbury Ground Rents Ordinary Ground
Limited GBP1 Rents UK
Ordinary Ground
BH Ground Rents Limited GBP1 Rents UK
Clapham One Ground Rents Ordinary Ground
Limited GBP1 Rents UK
Ordinary Ground
DG Ground Rents Limited GBP1 Rents UK
East Anglia Ground Rents Ordinary Ground
Limited GBP1 Rents UK
Ebony House Ground Rents Ordinary Ground
Limited GBP1 Rents UK
Enclave Court Ground Ordinary Ground
Rents Limited GBP1 Rents UK
Greenhouse Ground Rents Ordinary Ground
Limited GBP1 Rents UK
GRIF Student Ground Rents Ordinary Ground
Limited GBP1 Rents UK
Ordinary Ground
GRIF027 Limited GBP1 Rents UK
Ordinary Ground
GRIF028 Limited GBP1 Rents UK
Ordinary Ground
GRIF033 Limited GBP1 Rents UK
Ordinary Ground
GRIF034 Limited GBP1 Rents UK
Ordinary Ground
GRIF036 Limited GBP1 Rents UK
Ordinary Ground
GRIF037 Limited GBP1 Rents UK
Ordinary Ground
GRIF038 Limited GBP1 Rents UK
Ordinary Ground
GRIF039 Limited GBP1 Rents UK
Ordinary Ground
GRIF040 Limited GBP1 Rents UK
Ordinary Ground
GRIF041 Limited GBP1 Rents UK
Ordinary Ground
GRIF042 Limited GBP1 Rents UK
Ordinary Ground
GRIF043 Limited GBP1 Rents UK
Ordinary Ground
GRIF044 Limited GBP1 Rents UK
Ordinary Ground
GRIF045 Limited GBP1 Rents UK
Ordinary Ground
GRIF046 Limited GBP1 Rents UK
Ordinary Ground
GRIF047 Limited GBP1 Rents UK
Ordinary Ground
GRIF048 Limited GBP1 Rents UK
Ordinary Ground
GRIF049 Limited GBP1 Rents UK
Ordinary Ground
GRIF051 Limited GBP1 Rents UK
Ordinary Ground
GRIF052 Limited GBP1 Rents UK
Ordinary Ground
GRIF053 Limited GBP1 Rents UK
Halcyon Wharf Ground Ordinary Ground
Rents Limited GBP1 Rents UK
Hill Ground Rents Ordinary Ground
Limited GBP1 Rents UK
Invest Ground Ordinary Ground
Rents Limited GBP1 Rents UK
Ordinary Ground
Masshouse Block HI Limited GBP1 Rents UK
Masshouse Residential Ordinary Ground
Block HI Limited GBP1 Rents UK
Metropolitan Ground Rents Ordinary Ground
Limited GBP1 Rents UK
Nikal Humber Quay Residential Ordinary Ground
Limited GBP1 Rents UK
Northwest Houses Ground Ordinary Ground
Rents Limited GBP1 Rents UK
Ordinary Ground
OPW Ground Rents Limited GBP1 Rents UK
The Manchester Ground Ordinary Ground
Rent Company Limited GBP1 Rents UK
Trinity Land and Investments Ordinary Ground
No.2 Limited GBP1 Rents UK
Wiltshire Ground Rents Ordinary Ground
Limited GBP1 Rents UK
Ordinary Ground
XQ7 Ground Rents Limited GBP1 Rents UK
------------ --------------- ------------------
All subsidiaries below are registered at the same
Guernsey address, being Dorey House, Dorey Court,
Admiral Park, St Peter Port, Guernsey, GY1 2HT:
Type Nature Country
Company of Share of Business of Incorporation
Gateway (Leeds) Ground Ordinary Ground
Rents Limited GBP1 Rents Guernsey
Masshouse Ground Rents Ordinary Ground
Limited GBP1 Rents Guernsey
Midlands Ground Ordinary Holding
Rents Limited GBP1 Company Guernsey
North West Ground Rents Ordinary Ground
Limited GBP1 Rents Guernsey
Postbox Ground Rents Ordinary Ground
Limited GBP1 Rents Guernsey
Ordinary Ground
TMG003 Limited GBP1 Rents Guernsey
Yorkshire Ground Rents Ordinary Ground
Limited GBP1 Rents Guernsey
------------ --------------- ------------------
The following subsidiary is registered at 72 Welbeck
Street, London, W1G 0AY:
Type Nature Country
Company of Share of Business of Incorporation
Ordinary Corporate
GRIF Cosec Limited GBP1 Director UK
------------ --------------- ------------------
6 Trade and other receivables
30 September 30 September
2017 2016
GBP GBP
Trade receivables 10,155 27,237
Other receivables 180,617 317,111
Other taxes and social
security costs 28,933 -
Amounts owed by subsidiary
undertakings 85,522,134 83,828,735
Prepayments and accrued
income 22,023 17,930
85,763,862 84,191,013
Amounts owed by subsidiary undertakings are unsecured, interest free, have no fixed date of repayment
and are repayable on demand.
The ageing analysis of trade
receivables is as follows: 30 September 30 September
2017 2016
GBP GBP
Up to 3 months - -
Over 3 months 10,155 27,237
10,155 27,237
------------- -------------
7 Trade and other payables
30 September 30 September
2017 2016
GBP GBP
Trade payables 103,968 91,887
Accruals and deferred
income 349,384 184,868
453,352 276,755
-------------
8 Financial instruments
The Company's financial instruments comprise cash and various items such as trade and other receivables and trade and other payables which arise from its operations, which include amounts owed by subsidiary undertakings. The Company does not have any 'held to maturity' or 'available for sale financial assets' or 'held for trading financial assets and liabilities' as defined by IAS 39.
Financial assets carried at amortised cost
The book value, fair value and interest rate profile of the Company's financial assets, other than non-interest bearing short-term trade and other receivables, for which book value equates to fair value, were as follows:
30 September 2017 30 September 2016
Book value Fair value Book value Fair value
GBP GBP GBP GBP
Trade receivables 10,155 10,155 27,237 27,237
Other receivables 180,617 180,617 317,111 317,111
Cash at bank
and in hand 7,228,645 7,228,645 5,307,432 5,307,432
----------- ----------- ----------- -----------
As of 30 September 2017 no trade receivables
(2016: GBPnil) were impaired or provided for.
Financial liabilities carried at amortised cost
The book value, fair value and interest rate profile of the Company's financial liabilities, other than non-interest bearing short-term trade and other payables, for which book value equates to fair value, were as follows:
30 September 2017 30 September 2016
Book value Fair value Book value Fair value
GBP GBP GBP GBP
Trade payables 103,968 103,968 91,887 91,887
----------- ----------- ----------- -----------
Financial risk management
The financial risk management objectives and policies applied by the Company are in line with those of the Group as disclosed in note 12 to the consolidated financial statements.
9 Share capital and share premium account
The movements in share capital and share premium during the year were as follows:
Share
Number Share premium
of shares capital account
GBP GBP
At 1 October 2015 92,965,711 46,482,856 43,907,467
Shares issued 436,300 218,150 218,150
Expenses of issue - - (21,735)
At 30 September
2016 93,402,011 46,701,006 44,103,882
Shares issued 3,310,089 1,655,044 1,655,045
Expenses of issue - - (11,766)
At 30 September
2017 96,712,100 48,356,050 45,747,161
----------- ----------- -----------
The total number of ordinary shares, issued and fully paid at 30 September 2017, was 96,712,100 (2016: 93,402,011) with a par value of GBP0.50p per share. Details of the shares issued are given in notes 15 and 16 of the consolidated financial statements.
10 Retained earnings
2017 2016
GBP GBP
At 1 October 81,812 34,361
Profit for the
financial year 3,721,598 3,733,779
Dividends paid in the year (note
18 - consolidated financial statements) (3,702,456) (3,686,328)
At 30 September 100,954 81,812
------------ ------------
11 Reconciliation of movements in total equity
2017 2016
GBP GBP
At 1 October 90,886,700 90,424,684
Profit for the financial
year 3,721,598 3,733,779
Dividends paid in the year (note
18 - consolidated financial statements) (3,702,456) (3,686,328)
Shares issued 3,298,323 414,565
At 30 September 94,204,165 90,886,700
------------ ------------
12 Cash generated from operations
Reconciliation of operating profit to net cash inflow from operating activities
2017 2016
GBP GBP
Profit before
income tax 3,721,598 3,733,779
Adjustments for:
Net finance (income)
/ expense (7,099) 169,348
Operating cash flows before movements
in working capital 3,714,499 3,903,127
------------ ----------
Movements in working
capital:
Decrease / (increase) in trade
and other receivables 120,550 (128,349)
(Increase) / decrease in amounts
owed by group undertakings (1,693,399) 4,510,699
Increase in trade and
other payables 176,597 38,708
Net cash generated from
operations 2,318,247 8,324,185
Proceeds of share issue
The proceeds from issue of shares can be broken down as follows:
2017 2016
GBP GBP
Shares issued on exercise of warrants
on 28 October 2015 - 158,600
Shares issued on exercise of warrants
on 23 September 2016 - 277,700
Shares issued on exercise of warrants
on 13 September 2017 3,310,089 -
Share issue costs associated with
issue of ordinary shares (11,766) (21,735)
3,298,323 414,565
---------- ---------
13 Analysis of changes in net cash
At 30
At 1 October Non-cash September
2016 Cash flows changes 2017
GBP GBP GBP GBP
Cash at bank and
in hand 5,307,432 1,921,213 - 7,228,645
Total 5,307,432 1,921,213 - 7,228,645
------------- ----------- --------- -----------
14 Related party transactions
The Company's balances with fellow group companies at 30 September 2017 are set out in note 21 to the consolidated financial statements. All transactions with fellow group companies are carried out at arm's length and all outstanding balances are to be settled in cash. None of the balances are secured and no provisions have been made for doubtful debts in respect of any of the amounts due from fellow group companies.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FSDFMFFWSEEE
(END) Dow Jones Newswires
December 04, 2017 02:00 ET (07:00 GMT)
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