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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Lxb Retail Properties Plc | LSE:LXB | London | Ordinary Share | JE00B4MFKH73 | ORD NPV |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 1.54 | 1.10 | 1.98 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMLXB
RNS Number : 0675R
LXB Retail Properties Plc
26 February 2019
For immediate release 26 February 2019
LXB Retail Properties Plc
RESULTS FOR THE YEARED 30 SEPTEMBER 2018
LXB Retail Properties Plc, a Jersey resident closed-ended real estate investment company focused on edge of town and out of town retail assets, today announces results for the year ended 30 September 2018.
Highlights
Hot Features
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30 September 30 September
2018 2017
GBP11.16m GBP7.98m
* Cash deposits:
* NAV per share: 11.12p 29.52p
* Loss per share: (6.88)p (9.18)p
-- November 2017: following the satisfaction of the remaining criteria, GBP8.6m was received from the Crown Estate under the funding agreement in respect of phases 2 and 3 at Rushden Lakes
-- December 2017: exchanged contracts for the sale of the Riverside scheme at Stafford for net cash proceeds of GBP35.9m, which completed in January 2018
-- March 2018: a Jersey Scheme of Arrangement, enabling the transfer of certain longer term assets and liabilities to a third party, and therefore allowing a more expedient winding up of the Group's remaining affairs, was sanctioned by the Royal Court of Jersey and became effective on 31 March (see note 22)
-- May 2018: completed the disposal of the final phase of Neats Court Retail Park, Sheppey to Lightstone Neatscourt LLP generating net initial cash proceeds of GBP2.45m
-- July 2018: completed the letting of the final unit at Sheppey generating a further receipt of GBP0.42m
-- August 2018: the Group returned GBP12.6m cash to Shareholders
-- August 2018: completed the sale of the Group's remaining land interests at Rushden for just over GBP7.5m
-- September 2018: the Group returned a further GBP6.7m cash to Shareholders
-- September 2018: completed the sale of the Group's leisure investment at Stafford for net proceeds of GBP8.0m
Post year end:
-- December 2018: received the final amounts due under the Biggleswade forward funding agreement generating further receipts of GBP3.2m
-- December 2018: settlement of both the final balancing payments for phases 1 and 3 at Rushden- generating a net receipt of GBP2.9m
-- December 2018: the Group announced plans to return GBP10.1m cash to Shareholders
-- December 2018: completion of the sale of the Ground Floor retail units at Sutton for net proceeds of GBP5.3m
-- January 2019: completion of the sale of Higher Newham Farm, Truro, the last remaining investment property asset of the Group, for net proceeds of GBP1.3m
-- February 2019: announced plans to return a further GBP5.1m cash to Shareholders
LXB3 Partners LLP Tel: 020 7432 7900
Tim Walton, CEO
J.P. Morgan Cazenove (NOMAD) Tel: 020 7742 4000
Bronson Albery/Paul Hewlett
Buchanan Tel: 020 7466 5000
Charles Ryland/Henry Wilson
Forward looking statements
This document includes forward looking statements which are subject to risks and uncertainties. You are cautioned that forward looking statements are not guarantees of future performance and that if risks and uncertainties materialise, or if assumptions underlying any of these statements prove incorrect, the actual results of operations and financial condition of the Group may materially differ from those made in, or suggested by, forward looking statements. Other than in accordance with its legal or regulatory obligations, the Company undertakes no obligation to review, update or confirm expectations or estimates or to release publicly any revisions to any forward looking statements to reflect events that occur or circumstances that arise after the date of this document.
Chairman's Statement
Dear Shareholder,
I am pleased to present the Annual Report and Financial Statements of LXB Retail Properties Plc (the 'Company') for the year ended 30 September 2018.
The Group has only a few weeks left until the anticipated de-listing and dissolution of the Company, assuming of course that Shareholders approve the necessary resolutions at an Extraordinary General meeting (EGM) expected to be convened for late March, and that the Jersey Court subsequently sanctions the dissolution of the Company.
The business of the EGM will be described fully in a circular expected to be released shortly which will convene the EGM and the Company's 2019 Annual General Meeting and which will set out the proposed transfer of the remaining subsidiaries of the Group that have liabilities or obligations that cannot be satisfied in the remaining weeks of this business, to entities controlled by current and prior members of the Investment Adviser team.
All of the land investments of the Group have now been disposed of and the remaining business of the Group consists of its interest in Phase 2 of Rushden Lakes. This reached practical completion at the end of January and the anchor tenant Cine UK and a number of other key tenants have taken occupation. Two of the restaurants took access and opened prior to the end of 2018. At present, four units including one previously let to Gourmet Burger Kitchen, remain unlet. Two of these unlet units have been split to increase their marketability resulting in the Group currently being in final legal discussions with Greggs and Blue Mountain Yard, subject to planning consents. We expect to recognise the value attributable to these lettings prior to the dissolution of the Group. We have not been able to make progress on the other units, a situation reflecting the state of the occupier market, compounded by the uncertainty surrounding the Patisserie Valerie unit.
It has not yet been possible to conclude a final settlement with Highways England covering the road works completed in June 2017 and neither do we currently have an agreed final contract sum for the works required following the recent road safety audit. The delay is compounded by the public difficulties of the contractor, Interserve. As a consequence, the highways performance bond will need to be cash collateralised beyond the anticipated life of the Group, in accordance with the scheme of arrangement approved by Shareholders in February 2018.
As recently announced, the Board has agreed a further return of cash of 3p per share and this is expected to be the last cash distribution prior to any final distribution as part of the dissolution.
The total cash returned to Shareholders during the life of the group will, following the 3p return referred to above, be 121.5p per share and we estimate that the final return of capital will now be approximately 2p per share.
All that remains is for me to express my gratitude to my fellow board members, the remaining members of the Investment Adviser and our external advisers for the hard work, skill and diligence during this difficult final period. It has been an extremely challenging task to fulfil our mandate to sell the assets of the Group given the difficult investment and occupational markets for retail assets, however subject to Shareholders ratifying the final arrangements, that task is now complete.
And finally, I would like to thank you, our Shareholders, for your continued patience and support during this time as we have sought to deliver an efficient and orderly return of capital from a diverse portfolio of assets to maximise the value of your investment.
Phil Wrigley
Chairman
26 February 2019
Report of the Investment Manager, LXB Partners LLP
LXB Partners LLP advises LXB Retail Properties Plc ("LXB" or "the Group") and is pleased to report on the operations of the Group during the year ended 30 September 2018 and up to the date of this final report.
As detailed in the March 2018 Interim Report, the Company's scheme of arrangement (sanction of which by the Royal Court of Jersey was announced on 16 March 2018) was implemented as planned on 31 March 2018 with the relevant transfers to the IW Topco Limited group of companies. The Group incurred costs of GBP1.692m in connection with the scheme of arrangement, of which GBP766k was provision for future running costs of the IW Group and the balance related to legal and professional costs.
Since the year end, the Group has disposed of the last of its investment property assets and there now remains a small number of subsidiary companies with certain relatively low value assets, liabilities and obligations that cannot be satisfied in the remaining life of this business. The intention is that these entities will pass to one of the two run-off vehicles which will be explained in the circular expected to be released shortly which will convene an Extraordinary General Meeting and the Company's 2019 Annual General Meeting and are discussed below.
Banbury
There remains one subsidiary connected with this investment which cannot be wound up during the remaining life of the Group.
Biggleswade
During the year, the Group arranged for the subdivision of the remaining unlet unit and concluded the letting of the two resulting units during the year. This entitled the Group to the final payment due under the forward funding agreement and this was received in December 2018. A further subsidiary company will be struck off as a result but one subsidiary must remain in existence beyond the life of this business.
Greenwich
The Group concluded its responsibilities in respect of the Sainsbury's/M&S led Gallions Road development and agreed the balancing settlement under the forward funding agreement. One subsidiary company connected with this development will remain in existence beyond the conclusion of the Plc.
The defects period in respect of Brocklebank Retail Park expired satisfactorily in January 2019 and the final accounting and other administrative aspects have been concluded allowing both subsidiaries connected to this development to be prepared for striking off.
Rushden
Three of the Group's subsidiaries have been involved with the Rushden Lakes investment during the year and there has been significant progress in the period covered by this report and subsequently.
Phase 1
As noted in the Interim Report, the last two units at Phase 1 were let and the GBP15m performance bond was released which enabled a return of cash to Shareholders to be made in the summer of last year. Additionally, the final balancing payment in respect of Phase 1 was agreed after the year end and this cash was received in December.
The Group has an additional performance bond in favour of Highways England relating to the highways works being carried out around the Rushden Lakes development. Originally this bond was for GBP5m but it has been reduced to GBP1.029m during the year and does not expire until after the expected conclusion of the Group.
Highways England have not yet fully quantified the cost of the highways works, which are anticipated to complete at the end of this month. The Group has provided for the estimated final value of the works and also a provision making good the outstanding bond noted above.
Phase 2
Practical completion of Phase 2 was achieved in January 2019, although the scheme had been completed in sections and so two tenants had already taken access and commenced trading. Most of the remaining tenants have now taken access and begun fitting out their units.
Phase 2 is 92% let with a further 4% being in solicitors' hands. Seven of the agreements for lease have completed, representing 31% of the available space and it is expected that more will complete in the coming weeks.
Phase 3
Phase 3 achieved practical completion in July 2018 and was fully let in the year with all leases completed. The GBP2.7m final balancing payment due under the development funding agreement was received in January 2019.
As noted in the Interim Report, because there was insufficient time remaining in the life of this business to meet the terms of the agreement with The Crown Estate concerning the Phase 4 'Garden Square' scheme, the Group agreed a variation in its contract with the Crown Estate to sell its remaining land interests at Rushden and to be freed from its obligations in relation to the build-out and letting of that phase. A cash receipt of GBP7.5m was received in August 2018.
The two members of the Investment Adviser's team who had been closely involved with Rushden Lakes have been retained by the Crown Estate to assist with the Garden Square development following completion of the contract variation. LXB(3) Partners LLP has agreed a commensurate reduction to the Investment Adviser's fee to reflect this.
Included within the variation above was the disposal of several small parcels of land adjacent to the Rushden Lakes development that were held in a Group subsidiary. The disposal of this land has enabled this subsidiary to be prepared for striking off but the remaining two subsidiaries connected to this development will exist beyond the life of the Plc.
Sheppey
The Group disposed of its remaining property interests on the Isle of Sheppey during the year achieving a headline price of GBP2.51 million.
One of the two subsidiary companies connected with this investment has been struck off since the year end and the other is anticipated to be struck off imminently.
Stafford
The interaction of the Group's various investments at Stafford necessitated a complex legal structure and six Stafford related subsidiaries remain in existence.
The Group disposed of its Riverside retail investment to entities managed by Legal & General in January 2018 realising cash proceeds of GBP35.9m and releasing cash of GBP10.2m after repayment of the GBP25.7m of bank borrowings secured on the investment.
Construction of the cinema and adjacent restaurant unit was concluded in the year and the previously announced sale to Legal & General Leisure Fund Trustee Limited and Legal & General Property Partners (Leisure) Limited completed in September 2018. Two of the remaining subsidiaries are expected to be struck off imminently, however four subsidiaries continue to have ongoing obligations that cannot be satisfied in the immediate future.
Sutton
As referred to in the Interim Report, in the absence of a committed purchaser the Board took the decision to sell the ground floor retail investment at Sutton through an auction process. In December 2018, the sale concluded achieving a headline price of GBP5.4m.
Of the two Sutton related subsidiaries, one has been struck off since the year end and one will remain in existence.
Higher Newham Farm
In January 2019, the Group concluded the sale of this investment generating net cash proceeds of GBP1.3m.
Returns of Cash
As noted in today's Chairman's Statement, the Board has recently approved a further return of cash of 3 pence per share (equivalent to GBP5.05m) and estimates a final return of approximately 2 pence per share following the dissolution of the Group.
Revaluation deficit and profit on sale of investment properties
As described in note 10 to the Annual Report, the investment properties held by the Group at 30 September 2018 were valued by the Group's external property valuers, JLL. In their opinion the fair value of these investment properties at that date was GBP6.5m, resulting in a revaluation deficit for the year of GBP7.8m. The principal components of this were the write-down of the unlet units at Stafford and the reduction in value of the ground floor retail investment at Sutton to reflect the actual selling price achieved at auction in December.
Accounting treatment of forward funded construction activities
Under the terms of the sale of a number of the Group's investments, the buyer funds the development with the Group overseeing the works. The Group recharges the costs associated with the relevant forward funding agreement plus a 1% fee on the main contractor's costs. As explained previously, following consultation with the Group's auditors, the appropriate accounting treatment for these arrangements is to include the amounts receivable from the buyer (in respect of each reporting period) in gross revenue and to include the costs incurred by the Group (in respect of each reporting period) in direct costs. The relevant amounts for the period are disclosed in note 4 to the Interim Report.
Basis of preparation
The Directors have continued to proceed with the plans for an orderly realisation of the Group's remaining investments and therefore have continued to consider it appropriate not to adopt a going concern basis of preparation in these Group Financial Statements. Readers of the accounts should be aware that, since September 2016, the Group's investment properties are classified in the Group Balance Sheet as current assets "held for sale" rather than non-current assets.
Finance Act 2016
New rules introduced in Finance Act 2016 altered the UK tax position for non-UK entities with interests in UK land and specifically applied where land is acquired or developed with a main purpose of realising a profit on its disposal. The Group has historically been an investor in UK real estate but the position was altered by the shareholder vote on 29 February 2016, which in effect mandated the Board to realise all of the Group's investments. The Finance Act 2016 provisions apply to any relevant disposals made on or after 5 July 2016 and appropriate provisions have been made in the accounts.
Tim Walton
On behalf of LXB Partners LLP
26 February 2019
Independent Auditors' Report
Opinion
We have audited the financial statements of LXB Retail Properties plc (the 'parent company') and its subsidiaries (the 'group') for the year ended 30 September 2018 which comprise the Group and Company Income Statements, the Group and Company Statements of Changes in Equity, the Group and Company Balance Sheets, the Group and Company Cash Flow Statements and notes to the financial statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
In our opinion:
-- the financial statements give a true and fair view of the state of the Group's and of the Parent Company's affairs as at 30 September 2018 and of the Group's and Parent Company's profit or loss for the year then ended;
-- the Group and Parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; and
-- the financial statements have been prepared in accordance with the requirements of the Companies (Jersey) Law 1991.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Emphasis of matter - Financial Statements prepared on a basis other than going concern
We draw attention to note 2 to the Group Financial Statements concerning the basis on which the financial statements are prepared. It is the Directors' intention to bring the Group's and Parent Company's activities to a close, realise the remainder of investments, and return the surplus cash to members. Accordingly, these financial statements have not been prepared on a going concern basis. Our opinion is not modified in respect of this matter.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our 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) we identified, 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 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.
Key audit matter How we addressed the key audit matter
in the audit
------------------------------- -----------------------------------------------------------------
Valuation of investment Our audit work included, but was not restricted
properties to, the following:
As detailed in notes 2 * Obtained and read the valuation schedules prepared by
and 12, the Group owns the external valuer and, where relevant, the
a portfolio of properties reconciliations to the amounts reflected in the
which are held as investment financial statements.
properties - held for sale.
Investment properties owned
directly by the Group, * Confirmed that the basis of the valuations were in
including those in the accordance with IFRS.
course of development,
are held at fair value
in the Group financial * Assessed the competency, qualifications, independence
statements. and objectivity of the external valuer, JLL, engaged
Determination of the fair by the group and reviewed the terms of their
value of investment properties engagements for any unusual arrangements.
requires significant judgement
and we therefore considered
this to be a key audit * The senior members of our team met with the Group's
matter. external valuer independently of management to
discuss and challenge the valuation methodology and
key assumptions.
* Tested the accuracy of the key observable valuation
inputs supplied to and used by the external valuer.
* We compared the key valuation assumptions against our
independently formed market expectations and
challenged the valuer where significant variances
from these expectations were identified. We then
verified their responses to supporting documentation
where appropriate.
* Where relevant we obtained any post year end
supporting sales evidence to support the carrying
value at the year end.
------------------------------- -----------------------------------------------------------------
Key audit matter How we addressed the key audit matter
in the audit
Revenue and profit recognition Our audit work included, but was not restricted
- profit/(loss) on disposal to, the following:
of investment properties * We examined the Investment Adviser's workings for the
As detailed in note 2, balancing payments due/(payable) relating to
the Group's revenues include investment properties sold under FFAs.
deferred consideration
from a number of forward
funded development agreements * We obtained project appraisals prepared by the
("FFAs"). Investment Adviser for each development sold under an
The consideration and FFA and reviewed and assessed costs to complete and
resultant profit/(loss) compared these to the previous appraisal undertaken
on disposal is determined for the interim review.
from these agreements
which can be subject to
variations, dependent * We assessed the key judgements made in relation to
on the outcome of future each FFA which remained open as 30 September 2018,
events being managed by including lettings, cost and provisioning
the group i.e. the level assumptions.
of rents achieved on lettings
of the development or
the date that the development * We considered key appraisal components to post year
is completed. end receipts from the other party to the FFA.
We consider these key
judgements are at risk
of management bias as
they reflect the Investment
Adviser's expectation
of the outcome of future
events which can be subjective
and which could have a
material impact on the
accuracy of profit or
loss recognised on that
investment property disposal.
--------------------------------- ------------------------------------------------------------------------
Revenue and profit recognition Our audit work included, but was not restricted
- Rental income including to, the following:
lease incentives * We performed a proof in total calculation adopting
As detailed in note 2, the key terms from each investment property tenancy
the Group's revenues include schedule.
rental income on investment
properties which are let
out to tenants. Lettings * We verified a sample of the leases entered into
of units within these during the year included on each of the tenancy
investment properties schedules considering the lease incentives contained
can include lease incentives therein and recalculated the lease incentive granted.
which when combined with
the rental income should
be reflected on a straight * We checked the accuracy of the calculations for lease
line basis over the lease incentive adjustments.
term in accordance with
IAS 17 - Leases.
We consider the principal * We verified a sample of deferred income balances to
risk in connection with the respective deferral calculations and lease terms.
revenue recognition relating
to lease incentives to
be the omission of or
incorrect calculation
of lease incentives adjustments.
In addition, rental income
is subject to deferral
due to it being invoiced
in advance and a risk
exists in relation to
the completeness and accuracy
of the deferred income
calculations.
--------------------------------- ------------------------------------------------------------------------
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. For planning, we consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial statements. In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole.
The materiality for the Group financial statements as a whole was set at GBP560,000 (2017: GBP1,280,000). This was determined with reference to a benchmark of total assets and represents 3% of net assets (2017: 1.35% of total assets). This was considered to be the most appropriate measurement given the investment nature of the business and its remit of realising its assets and returning cash to investors. International Standards on Auditing (UK) also allow the auditor to set a lower materiality for particular classes of transactions, balances or disclosures for which misstatements of lesser amounts than materiality for the financial statements as a whole could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. In this context, we set a lower level of materiality of GBP395,000 (2017: GBP465,000) to apply to those classes of transactions and balances which impact on the Group's earnings before tax, excluding revaluation movements. The materiality for the Parent Company was set at GBP365,000 (2017: GBP55,000) which was calculated at 3% of net assets (2017: 5% of the loss before tax). This was considered the most appropriate measure given that the nature of the entity is as a holding company and its remit of
realising its assets and returning cash to investors. Performance materiality was set at 75% (2017: 75%) of materiality taking into account various factors including the expected total value of known and likely misstatements, brought forward misstatements, management's attitude towards adjustments, the number of material estimates, how homogeneous processes are within the Group, and the expected use of sample testing. We agreed with the Audit Committee that we would report to them all individual audit differences in excess of GBP25,000. We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.
An overview of the scope of our audit
Our audit of the Group and Parent entity financial statements was scoped by obtaining an understanding of the Group and its environment, including the Group's system of internal control, and assessing the risks of material misstatement at the Group level. Audit work to respond to the assessed risks was performed directly by the Group audit engagement team who performed full scope audit procedures on the Group's subsidiary undertakings. Our audit work on each of these components was executed at levels of materiality applicable to the Group.
Other information
The Directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion 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 such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in 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 in this regard.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies (Jersey) Law 1991 requires us to report to you if, in our opinion:
-- proper accounting records have not been kept by the Parent Company, or proper returns adequate for our audit have not been received from branches not visited by us; or
-- we have not received all the information and explanations we require for our audit; or
-- the Parent Company financial statements are not in agreement with the accounting records and returns.
Responsibilities of directors
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors 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 parent 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 parent company or to cease operations, or have no realistic alternative but to do so.
Auditor's 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 auditor's 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 Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the Parent Company's members, as a body, in accordance with Article 113A of the Companies (Jersey) Law 1991. Our audit work has been undertaken so that we might state to the parent company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the parent company and the parent company's members as a body, for our audit work, for this report, or for the opinions we have formed.
Anna Draper
For and on behalf of BDO LLP
Chartered Accountants
London
United Kingdom
26 February 2019
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
Group Income Statement
for the year ended 30 September 2018
Year ended Year ended
30 September 30 September
2018 2017
======================================= ================ ========================== ==========================
Note GBP GBP
======================================= ================ ==========================
Gross revenue 4 39,666,384 61,972,832
Direct costs 4 (38,327,632) (60,081,862)
======================================== ================ ========================== ==========================
Net revenue and gross profit 1,338,752 1,890,970
Administrative expenses
--------------------------------------- ---------------- -------------------------- --------------------------
Corporate administrative
expenses (2,807,839) (4,502,979
---------------------------------------- ---------------- -------------------------- --------------------------
Scheme of arrangement costs (1,691,783) -
(note 22)
--------------------------------------- ---------------- -------------------------- --------------------------
(4,499,622) (4,502,979)
--------------------------------------- ---------------- -------------------------- --------------------------
Other property related
transactions: 5
--------------------------
Amounts receivable in
respect
of the cancellation of
---------------------------------------- ---------------- --------------------------
certain contractual
arrangements - 4,834,117
---------------------------------------- ---------------- --------------------------
Impairment arising as a
result
of the cancellation
of certain contractual
arrangements - (2,773,213)
--------------------------
Net surplus in respect of the cancellation
of certain
contractual arrangements - 2,060,904
Investment property
revaluation
deficit 12 (7,832,665) (12,831,691)
Loss on sale of investment
properties (431,254) (782,614)
Other income - 15,078
======================================== ================ ========================== ==========================
Operating loss 6 (11,424,789) (14,150,332)
Finance income 8 4,000 11,435
Finance costs 8 (248,326) (989,243)
---------------------------------------- ---------------- -------------------------- --------------------------
Loss before tax (11,669,115) (15,128,140)
---------------------------------------- ---------------- -------------------------- --------------------------
Taxation credits/(charges) 9 79,939 (330,059)
======================================== ================ ========================== ==========================
Loss for the year (11,589,176) (15,458,199)
======================================== ================ ========================== ==========================
Pence Pence
Loss per share per share per share
============================== ============== ====================== ==================
Basic and diluted 10 (6.88) (9.18)
================================ ============== ====================== ==================
As described in note 2, the Group is in the process of performing an orderly realisation of its investments.
There were no items of other comprehensive income or expense in the current or prior year and therefore the loss for the year also reflects the Group's total comprehensive loss for the year.
Group Statement of Changes in Equity
for the year ended 30 September 2018
Stated Retained
Year ended 30 September capital earnings Total
2018
------------------------------------- -------------------- ---------- ------------- ------------- ---------------
GBP GBP GBP
------------------------------------- -------------------- ---------- ------------- -------------
At 1 October 2017 51,889,356 (2,197,455) 49,691,901
Loss for the year - (11,589,176) (11,589,176)
Transactions with owners:
The Fourth and Fifth Returns
of Cash (see note 18)
* Redemption of "B" shares inclusive of costs (12,416,546) - (12,416,546)
* Dividends - (6,962,746) (6,962,746)
-
At 30 September 2018 39,472,810 (20,749,377) 18,723,433
----------------------------------------------------------------------- ------------- ------------- ---------------
Stated Retained
Year ended 30 September capital earnings Total
2017
------------------------------------- -------------------- ---------- ------------- ------------- ---------------
GBP GBP GBP
------------------------------------- -------------------- ---------- ------------- -------------
At 1 October 2016 71,766,495 23,698,642 95,465,137
Loss for the year - (15,458,199) (15,458,199)
Transactions with owners:
The Third Return of Cash (see
note 18)
* Redemption of "B" shares inclusive of costs (19,877,139) - (19,877,139)
* Dividends - (10,437,898) (10,437,898)
----------------------------------------------------------- ---------- ------------- ------------- ---------------
At 30 September 2017 51,889,356 (2,197,455) 49,691,901
----------------------------------------------------------------------- ------------- ------------- ---------------
Group Balance Sheet
at 30 September 2018
As at As at
30 September 30 September
2018 2017
========================================== ================ ========================== ==========================
Note GBP GBP
========================================== ================ ========================== ==========================
Current assets
Business and other receivables 13 12,199,563 32,969,884
Cash and cash equivalents 14 11,163,838 7,978,972
========================================== ================ ========================== ==========================
23,363,401 40,948,856
------------------------------------------ ---------------- -------------------------- --------------------------
Investment properties
- held for sale 12 6,343,059 54,184,255
------------------------------------------ ---------------- -------------------------- --------------------------
29,706,460 95,133,111
Total assets 29,706,460 95,133,111
========================================== ================ ========================== ==========================
Current liabilities
Business and other payables 15 (10,806,377) (19,316,822)
Borrowings 16 - (25,722,372)
Tax creditor (176,650) (402,016)
========================================== ================ ========================== ==========================
(10,983,027) (45,441,210)
========================================== ================ ========================== ==========================
Total liabilities (10,983,027) (45,441,210)
========================================== ================ ========================== ==========================
Net assets 18,723,433 49,691,901
========================================== ================ ========================== ==========================
Equity
Stated capital 18 39,472,810 51,889,356
Retained earnings (20,749,377) (2,197,455)
========================================== ================ ========================== ==========================
Total equity 18,723,433 49,691,901
========================================== ================ ========================== ==========================
Pence Pence
Net asset value per share per share per share
==================================================== ============ ========== ====================== ======================
Basic and diluted 20 11.12 29.52
==================================== ============== ======================== ====================== ======================
The Group Financial Statements were approved and authorised for issue by the Board of Directors on 26 February 2019 and were signed on its behalf by:
Phil Wrigley George Baird
Director Director
Group Cash Flow Statement
for the year ended 30 September 2018
Year ended Year ended
30 September 30 September
2018 2017
============================================ ================ ========================= =========================
Note GBP GBP
============================================ ================ ========================= =========================
Cash flows from operating
activities
Loss before tax (11,669,115) (15,128,140)
Adjustments for non-cash items:
Investment property revaluation
deficit 12 7,832,665 12,831,691
Amortisation of lease incentives 11,304 518,075
Impairment arising on the
cancellation
of certain
contractual arrangements - 2,773,213
Loss on sale of investment
properties 431,254 782,614
Net finance costs 8 244,326 977,808
============================================ ================ ========================= =========================
Cash flows from operating activities
before
changes in working capital (3,149,566) 2,755,261
Change in business and other
receivables 5,265,627 6,260,572
Change in business and other
payables (4,567,974) (24,202,393)
Taxation paid (141,433) (79,455)
============================================ ================ ========================= =========================
Cash flows from operating
activities (2,593,346) (15,266,015)
============================================ ================ ========================= =========================
Investing activities:
Interest received 4,000 11,435
Transfer of subsidiary (1,477,507) -
undertakings
to IW Group
Purchase of and capital
expenditure
on investment properties (9,924,784) (10,525,250)
Proceeds on disposal of
investment
properties 62,534,493 22,953,328
Cash flows from investing
activities 51,136,202 12,439,513
============================================ ================ ========================= =========================
Financing activities:
Redemption of "B" shares (12,397,546) (19,865,169)
Costs associated with redeemed
"B"
shares (19,000) (11,970)
Dividends paid (6,962,746) (10,437,898)
Bank borrowings drawn - 513,000
Bank borrowings repaid (25,722,372) (5,000,000)
Finance costs paid (256,326) (874,009)
Cash flows from financing
activities (45,357,990) (35,676,046)
============================================ ================ ========================= =========================
Net increase/(decrease) in cash
and
cash equivalents 3,184,866 (38,502,548)
Cash and cash equivalents at the
beginning
of the year 7,978,972 46,481,520
Cash and cash equivalents at the
end
of the year 11,163,838 7,978,972
-------------------------------------------- ---------------- ------------------------- -------------------------
Notes to the Preliminary Announcement
The financial information set out in this preliminary announcement, which has been approved by the Board, does not constitute the Group's statutory financial statements for the year ended 30 September 2018 ("the 2018 accounts") or for the year ended 30 September 2017 ("the 2017 accounts"), but is derived from those audited statutory financial statements.
The 2018 accounts, included within the Company's Annual Report for the year ended 30 September 2018, have been prepared in accordance with International Financial Reporting Standards adopted for use in the European Union. The auditors have reported on the 2018 accounts and although their report was unqualified it drew attention to the Directors' decision not to apply the going concern basis of preparation. The 2018 accounts will be available from the Company's website today.
The 2017 accounts, which also included an unqualified audit report, have been filed with the Registrar of Companies in Jersey.
1. General information about the Group
LXB Retail Properties Plc was listed on the AIM and CISE markets on 23 October 2009. It is a closed-ended real estate investment company that was incorporated in Jersey on 27 August 2009.
The financial information set out in this report covers the year to 30 September 2018 with comparative amounts relating to the year to 30 September 2017.
The Group Financial Statements include the results and net assets of the Company and its subsidiaries, together referred to as the Group, on a consolidated basis.
Further general information about the Group can be found on its website: www.lxbretailproperties.com.
2. Accounting policies
Statement of compliance
The Group Financial Statements have been prepared in accordance with the International Financial Reporting Standards ('IFRS') adopted for use in the European Union and the requirements of the Companies (Jersey) Law 1991.
Basis of preparation
As described more fully in the Chairman's Statement and following the Shareholders' approval on 29 February 2016, the Directors are in the final stages of an orderly realisation of the Group's remaining investments, with the remaining value to be returned to Shareholders in cash on or around 31 March 2019. As a result, and in line with the prior year financial statements, the Directors have concluded that it is not appropriate to adopt a going concern basis of preparation in these financial statements. Other than the reclassification of investment properties from non-current assets to held for sale, no material adjustments arose as a result of ceasing to apply the going concern basis.
The financial statements have been prepared on the historical cost basis except that investment properties (defined below) are stated at fair value.
The accounting policies have been applied consistently to the results, other gains and losses, assets, liabilities and cash flows of entities included in the consolidated financial statements.
Any revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period. If the revision affects both current and future periods, the change is recognised over these periods.
The preparation of financial statements often requires the Directors to make judgements, estimates and assumptions that may affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The most significant balances at the balance sheet date requiring the Directors to make such judgements and estimates are those concerning the receivables in relation to investment properties sold under forward-funded arrangements and held within property sales receivables (note 13). The ultimate value of these receivables is affected to varying degrees by a number of factors, including the details of the lease packages to be agreed with prospective tenants and the time taken for the relevant property to reach practical completion. Otherwise, there has been a limited requirement for the Directors to make such judgements or estimates in the period since the Company's listing to date. For example, "Investment Properties - held for sale" (comprising completed investment properties and development properties) have been supported by external valuations. Details of the overall approach to the valuation of these assets are set out in note 12.
The Group's accounting policies for these matters together with other policies material to the Group, are set out below.
Adoption of new standards, interpretations and amendments
There were no new standards or interpretations effective for the first time for periods beginning on or after 1 October 2017.
Standards and interpretations in issue not yet adopted
The directors consider that, in view of the expected dissolution of the company on or shortly after 31 March 2019, there are no new standards or interpretations in issue that will be adopted in future periods.
Basis of consolidation
Subsidiaries
Subsidiaries are those entities controlled by the Group. Control by the Group over an investee is assumed when all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect these variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. All intra-group transactions, balances, income and expenses are eliminated on consolidation.
Property portfolio
Investment properties
Investment properties are properties owned or held leasehold by the Group. Prior to the approval of the plans for an orderly realisation of the Group's assets in February 2016 these were held for capital appreciation, rental income or both, but are now classified as held for sale on the balance sheet. Investment properties include property that is being constructed, developed or redeveloped for future use as an investment property. Investment properties are initially recorded at cost, including related transaction costs. They are subsequently carried at each published balance sheet date at fair value as determined by professionally qualified independent external valuers.
Investment properties are reclassified to assets held for sale when they meet the relevant criteria set out in IFRS 5 'Non-current Assets Held for Sale and Discontinued Operations' which requires that they are available for immediate sale and that the sale is expected to complete within one year of being reclassified. They continue to be measured at fair value.
The determination of the fair value of each property requires, to the extent applicable, the use of estimates and assumptions in relation to factors such as future rental income, current market rental yields, future development costs and the appropriate discount rate. In addition, to the extent possible, the valuers make reference to market evidence of transaction prices for similar properties and the value achieved by properties sold since the balance sheet date.
Gains or losses arising from changes in the fair value of investment properties are recognised in the income statement in the period in which they arise.
In accordance with IAS 40 "Investment Property", no depreciation is provided in respect of investment properties.
An Investment property is recognised as an asset when:
-- it is probable that the future economic benefits that are associated with the investment property will flow to the Group;
-- there are no material conditions precedent which could prevent completion; and -- the cost of the investment property can be measured reliably.
All costs directly associated with the purchase of an investment property are capitalised. Capital expenditure that is directly attributable to the redevelopment or refurbishment of investment property, up to the point of it being completed for its intended use, is capitalised in the carrying value of the property.
Acquisitions and disposals of investment properties are usually recognised when unconditional exchange of legally binding and irrevocable contracts occurs and where it is reasonable to assume at the balance sheet date that completion of the acquisition or disposal will occur.
Occupational leases
The Board considers the potential transfer of the risks and rewards of ownership in accordance with IAS 17 "Leases", for all investment properties that are leased to tenants by the Group and determines whether such leases are operating leases or finance leases. Where the Group substantially retains all the risks and rewards of ownership the lease is classified as an operating lease. In the event that substantially all of the risks and rewards of ownership are transferred to the lessee under the terms of a lease then such a lease would be classified as a finance lease. All tenant leases that have been entered into by the Group to date have met the criteria for classification as operating leases.
Net rental income
Rental income from investment properties leased out under operating leases is recognised in the income statement on a straight-line basis over the lease term.
Contingent rents, such as turnover rents, rent reviews, and indexation, are recorded as income in the periods in which they are earned. Rent reviews are recognised when such reviews have been agreed with tenants.
Rent free periods, other lease incentives and any costs associated with entering into tenant leases are amortised evenly over the period from lease commencement to the first break option or, if the probability that the break option will be exercised is considered sufficiently low, over the full lease term.
Rental income from fixed and minimum guaranteed rent reviews is recognised on a straight-line basis over the shorter of the entire lease term or the period to the first tenant break option.
Where such income or costs are recognised ahead of the related cash flow, an adjustment is made to ensure the carrying value of the related investment property including the accrued rent does not exceed the external valuation.
Property operating expenses are expensed as incurred and any property operating expenditure not recovered from tenants through service charges is charged to the income statement.
Income derived from Institutional Funding Agreements
Where the Group remains responsible for overseeing the development of incomplete investment properties that have been sold to third parties who have contracted to fund the construction works, the income which arises from such arrangements is recognised in the income statement over the course of the development work through to the time of practical completion.
Revenue from these arrangements is recognised in the income statement so as to match to the proportion of the relevant development works performed up to the balance sheet date and associated costs incurred to that date.
Other property related transactions
Other property related transactions in the year comprise income related to the cancellation of certain contractual arrangements, and the impairment effect of such cancellations on the investment properties or other assets to which they relate. These transactions are recognised at the point that the cancellation becomes contractually binding.
Profits on sale of investment properties
Profits on sale of investment properties are calculated by reference to the carrying value at the previous published balance sheet date, adjusted for subsequent capital expenditure.
Financial instruments
Financial assets and liabilities are recognised in the balance sheet when a member of the Group becomes a party to the contractual terms of the relevant instrument. Unless otherwise indicated, the carrying values of the Group's financial assets and liabilities are a reasonable estimate of their fair values.
Business receivables and payables
Business receivables and payables are initially measured at fair value, subsequently measured at amortised cost and, where material, discounted to reflect the time value of money. If there is objective evidence that the recoverability of an asset is at risk, appropriate allowances for any estimated irrecoverable amounts are recognised in the income statement.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, deposits held at call with banks and financial institutions and other highly liquid investments with original maturities of three months or less.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
Finance income
Finance income includes interest receivable on funds invested.
Borrowings and finance charges
Borrowings are initially recognised at their fair value, net of any transaction costs directly attributable to their issue. Subsequently, loans are carried at their amortised value using the 'effective interest method', which spreads the interest expense over the period to maturity at a constant rate on the balance of the liability carried in the balance sheet for the relevant period.
Finance charges are accounted for on an accruals basis using the effective interest method and are added to or offset against the carrying amount of the loan instrument to the extent that they are not settled in the period in which they arise.
Distributions
Distributions on equity shares are recognised when they become legally payable.
Management fees
Management fees are recognised in the income statement in the period to which they relate.
Tax
Tax is included in the income statement except to the extent that it relates to items recognised directly in equity, in which case the related tax is recognised in other comprehensive income.
Current tax is the expected tax payable on taxable income for the reporting period, using tax rates enacted or substantively enacted at the balance sheet date, together with any adjustment in respect of previous periods.
Deferred tax is provided for using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. If applicable to any financial period, the tax effect of the following differences will not be provided for:
-- the initial recognition of goodwill;
-- the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit; and
-- investments in subsidiaries, associates and jointly controlled entities where the Group is expected to be able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.
The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.
3. Segmental information
During the current year and prior year, the Group operated in and was managed as one operating segment, being property investment, with all investment properties located in the United Kingdom.
The Board, which is considered to be the chief operating decision maker of the Group for IFRS 8 purposes, receives quarterly management accounts that are prepared on an IFRS (EU) basis and which aggregate the performance of all the Group's investment properties and focus on total returns on Shareholders' equity.
For the year ended 30 September 2018, one tenant provided 16%, a second tenant provided 14% and a third tenant provided 13% of the Group's gross rental income (year ended 30 September 2017: one tenant provided 31%, a second tenant provided 18% and a third tenant provided 13% of the Group's gross rental income).
4. Gross revenue and direct costs
Year ended Year ended
30 September 30 September
Gross revenue: 2018 2017
=============================================== ========================== ==========================
GBP GBP
=============================================== ========================== ==========================
Gross rental income 1,286,019 1,780,123
Revenue derived from Institutional
Funding Agreements 38,380,365 60,192,709
39,666,384 61,972,832
----------------------------------------------- -------------------------- --------------------------
Year ended Year ended
30 September 30 September
Direct costs: 2018 2017
======================================================== ========================= =========================
GBP GBP
======================================================== ========================= =========================
Property outgoings 197,994 211,697
Costs associated with Institutional Funding
Agreements 38,129,638 59,870,165
38,327,632 60,081,862
-------------------------------------------------------- ------------------------- -------------------------
Revenue and costs in connection with Institutional Funding Agreements relate to incomplete investment properties disposed of under forward-funded agreements.
5. Other property related transactions
During the prior year, the Group accepted settlement payments in return for the cancellation of contractual arrangements relating to certain of its assets held for investment. The cancellation of these contractual arrangements had a direct and immediate detrimental effect on the value of the assets to which the contracts related, and as a result, an impairment charge was applied to those assets. As those transactions were considered to be relevant to an understanding of the performance of the Group, and as the resulting impairment did not necessarily relate to investment property assets, the income and the resulting impairment was shown separately to other fair value movements of investment properties described in note 12.
6. Operating loss
Year ended Year ended
30 September 30 September
2018 2017
============================================================ ======================== ========================
GBP GBP
============================================================ ======================== ========================
Operating loss is stated after
charging:
Investment Manager's fees 1,395,910 2,850,000
Directors' fees 305,000 305,000
Auditors' remuneration:
Audit services:
* audit of the Group and Company Financial Statements 42,750 87,000
* audit of subsidiary undertakings - 9,500
Audit related assurance services:
-review of the Group's Interim
Report 22,000 26,800
Other non-audit services:
-other services 2,500 1,500
-corporate finance services 152,500 -
The Group has no employees.
Fees payable to the Directors in the year were as follows:
Year ended Year ended
30 September 30 September
2018 2017
======================================== ======================== ========================
GBP GBP
======================================== ======================== ========================
Phil Wrigley 85,000 85,000
Steve Webb 50,000 50,000
Danny Kitchen 60,000 60,000
Alastair Irvine 50,000 50,000
George Baird 60,000 60,000
========================================== ======================== ========================
Total charged to the income
statement 305,000 305,000
========================================== ======================== ========================
7. Operating leases
The Group enters into operating leases with tenants on its investment properties.
Future minimum rents receivable under non-cancellable operating leases as at 30 September 2018 are set out in the table below. The rents receivable shown in the table are calculated on the assumption that any tenant with a break option chooses to exercise that option.
New leases are generally entered into for fixed terms of between 5 and 20 years and include periodic rent reviews and may include tenant and/or landlord break options.
There was no contingent rental income recognised in the year (2017: GBPnil).
As at As at
30 September 30 September
2018 2017
======================================= ======================== ========================
GBP GBP
======================================= ======================== ========================
Minimum rents receivable:
- within one year 339,273 2,642,505
- in two to five years 2,031,930 11,964,476
- in more than five years 2,086,968 33,111,743
4,458,171 47,718,724
======================================= ======================== ========================
8. Finance income and costs
Year ended Year ended
30 September 30 September
Recognised in the income statement: 2018 2017
================================================ ======================== ========================
GBP GBP
================================================ ======================== ========================
Finance income:
Interest on cash deposits 4,000 11,435
Total finance income recognised in
the income statement 4,000 11,435
================================================== ======================== ========================
Finance costs:
Bank interest (233,166) (849,585)
Amortisation of capitalised finance
costs - (111,238)
Other finance costs (15,160) (28,420)
================================================== ======================== ========================
Total finance costs recognised in
the income statement (248,326) (989,243)
Net finance costs recognised in the
income statement (244,326) (977,808)
================================================== ======================== ========================
Net finance costs recognised in the income statement, analysed by the categories of financial assets and liabilities shown in note 17a (where applicable), are as follows:
Year ended Year ended
30 September 30 September
2018 2017
====================================== ======================== ========================
GBP GBP
====================================== ======================== ========================
Cash and cash equivalents 4,000 11,435
Bank loans (secured) (248,326) (989,243)
(244,326) (977,808)
====================================== ======================== ========================
Sensitivity to changes in interest rates:
Movements in LIBOR impact the Group's cost of borrowings and the returns on its cash deposits. A 1% increase or decrease in LIBOR would have the following effects on the Group's results:
Year ended Year ended
30 September 30 September
2018 2017
====================================== ======================== ========================
GBP GBP
====================================== ======================== ========================
Effect on loss before tax 84,015 6,800
Effect on equity 84,015 6,800
======================================== ======================== ========================
The average interest rate incurred by the Group on its bank borrowings for the year ended 30 September 2018, including the effects of the lender's margin but excluding amortisation of capitalised finance costs is 2.88% (30 September 2017: 2.7%).
9. Taxation
Year ended Year ended
30 September 30 September
2018 2017
================================================ ======================== ========================
GBP GBP
================================================ ======================== ========================
The tax (credit)/charge for
the year recognised
in the income statement comprises:
Current tax (credit)/charge
on results for the year (79,939) 218,696
Deferred tax in the period - 111,363
-------------------------------------------------- ------------------------ ------------------------
(79,939) 330,059
================================================ ======================== ========================
The tax assessed for the year varies from the standard rate of income tax in the UK of 20%. The differences are explained below:
Year ended Year ended
30 September 30 September
2018 2017
------------------------------------------------ ---- ------------------ ------------------------- -------------------------
GBP GBP
================================================ ==== ================== ========================= =========================
Loss before tax (11,669,115) (15,128,140)
================================================ ================== ========================= =========================
Loss before tax at the standard rate
of income tax
in the UK of 20% (2,333,823) (3,025,628)
Items not subject to UK income
tax: 2,132,030 3,326,547
UK corporation tax charges
in corporate
subsidiaries 168,793 -
Other amounts (46,939) 29,140
Tax (credit)/charge for the
year recognised in
the income statement (79,939) 330,059
-------------------------------------------------------------------------- ------------------------- -------------------------
Tax status of the Company and its subsidiaries
All group undertakings are either tax resident in Jersey or are tax transparent entities owned by Jersey resident entities. Jersey has a corporate tax rate of zero, so, except where certain investment properties were disposed of after 5 July 2016 when the provisions of Finance Act 2016 became effective, the Company and its subsidiaries have no liability to taxation on their income or gains in Jersey. The Company is not subject to UK Corporation tax on any dividend or interest income it receives.
The Group's investment properties are located in the United Kingdom and therefore the net rental income earned less deductible items is subject to UK income tax, currently at a rate applicable to the relevant group undertakings of 20%.
10. Loss per share
Loss per share is calculated on 168,350,374 (30 September 2017: 168,350,374) ordinary shares in issue for the year and is based on the loss attributable to Shareholders for the year of GBP11,589,176 (30 September 2017: GBP15,458,199). No losses or earnings were attributable to the "B" shares issued and redeemed in the current or prior year.
There are no share options or other equity instruments in issue and therefore no adjustments need to be made for dilutive or potentially dilutive equity arrangements.
11. Dividends
Year ended Year ended
---------------------- ------------ ----------------------------------------------- -----------------------------------------
30 September 2018 30 September 2017
====================== ============ =============================================== =========================================
Average Pence per
GBP pence per GBP share
share
====================== ================ ===================== ================ ====================== =================
Interim dividends
paid 6,962,746 5.59 10,437,898 18.00
-------------------------------------------- --------------------- ---------------- ---------------------- -----------------
Current year:
An interim dividend of 7.5p per ordinary share was declared on 3 July 2018 and paid on 8 August 2018. The dividend was payable on each of the 56,465,968 shares in issue for which a corresponding "B" share was not issued (see note 18).
The holders of the remaining 111,884,406 ordinary shares in issue received 7.5p per share (a total of GBP8,391,330) on the redemption of these "B" shares in August 2018 (see note 18).
An interim dividend of 4p per ordinary share was declared on 17 August 2018 and paid on 24 September 2018. The dividend was payable on each of the 68,194,991 shares in issue for which a corresponding "B" share was not issued (see note 18).
The holders of the remaining 100,155,383 ordinary shares in issue received 4p per share (a total of GBP4,006,215) on the redemption of these "B" shares in September 2018 (see note 18).
Prior year:
An interim dividend of 18p per ordinary share was declared on 22 September 2016 and paid on 3 November 2016. The dividend was payable on each of the 57,988,322 shares in issue for which a corresponding "B" share was not issued (see note 18).
The holders of the remaining 110,362,052 ordinary shares in issue received 18p per share (a total of GBP19,865,169) on the redemption of these "B" shares in November 2016 (see note 18).
12. Investment properties - held for sale
GBP
=================================== ================= ==== ========== ========================
Carrying value as at 30 September
2017 54,184,255
Additions 8,516,303
Disposals (48,513,820)
Revaluation deficit (see below) (7,843,679)
------------------------------------------------- ----------------- ------------------------
Carrying value as at 30 September
2018 6,343,059
================================================= ================= ========================
Movements in investment properties - held for sale in the
prior year were as follows:
GBP
=================================== ================= ==== ========== ========================
Carrying value as at 30 September
2016 73,170,186
Additions 8,777,448
Disposals (14,413,613)
Revaluation deficit (see below) (13,349,766)
------------------------------------------------- ----------------- ------------------------
Carrying value as at 30 September
2017 54,184,255
------------------------------------------------- ----------------- ------------------------
The current and prior year revaluation movements shown above
includes GBPnil (2017: GBP518,075 of amortisation in respect
of capitalised lease incentives that were released to rental
income in the year. A reconciliation is provided below:
-------------------------------------------------------------------------------------------------------
Year ended Year ended
30 September 30 September
2018 2017
---------------------------------------------- -------------------------- --------------------------
GBP
---------------------------------------------- -------------------------- --------------------------
Investment properties revaluation
deficit (7,843,969) (13,349,766)
Amounts attributable to the
amortisation of lease
incentives released to rental
income 11,304 518,075
----------------------------------------------- -------------------------- --------------------------
Revaluation deficit in the income
statement (7,832,665) (12,831,691)
----------------------------------------------- -------------------------- --------------------------
A reconciliation of the carrying value of investment properties to their fair values at the current and prior year balance sheet date is provided below:
GBP
----------------------------------------------- ---------------------
Carrying value as at 30 September
2018 6,343,059
------------------------------------------------- ---------------------
Adjustment for rents recognised in
advance and lease
----------------------------------------------- ---------------------
incentives given to tenants 156,941
------------------------------------------------- ---------------------
Total property portfolio valuation
at 30 September 2018 6,500,000
------------------------------------------------- ---------------------
GBP
----------------------------------------------------- ----------------------
Carrying value as at 30 September
2017 54,184,255
------------------------------------------------------- ----------------------
Adjustment for rents recognised in
advance and lease
----------------------------------------------------- ----------------------
incentives given to tenants 845,855
------------------------------------------------------- ----------------------
Adjustment for accrued costs to complete (292,110)
------------------------------------------------------- ----------------------
Total property portfolio valuation
at 30 September 2017 54,738,000
------------------------------------------------------- ----------------------
At 30 September 2018, the Group's investment properties were valued by JLL, Chartered Surveyors, on a fixed fee basis, in their capacity as independent external valuers. The aggregate fair value of these properties at 30 September 2018 is GBP6,500,000 (30 September 2017: GBP54,738,000). The carrying value of these properties includes GBPnil (2017: GBP292,110) of accrued costs that were not treated as part of the historical cost of the relevant properties in determining the external valuation. The fair value includes GBP156,941 (2017: GBP845,855) of rents recognised in advance that are included in business and other receivables at the balance sheet date.
The external valuers' valuation was undertaken in accordance with the Royal Institution of Chartered Surveyors' Valuation Standards Professional Standards (January 2014) on the basis of fair value. Fair value is defined in IFRS 13 as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date.
The Board determines the Group's valuation policies and procedures and is responsible for appointing the Group's independent external valuer. The Audit Committee considers the valuation process as part of its overall responsibilities.
The fair value of completed investment properties is determined using the 'investment method' whereby capitalisation yields derived from market transactions involving comparable investment properties are applied to the estimated net current and future cash flows expected to be generated by the investment property, which the valuer calculates using comparable market information, to obtain a market rent. The fair value of an investment property undergoing development is derived using the 'residual method' whereby the costs required to complete the development, including a notional cost of finance and an estimated risk factor or "profit on cost", are deducted from the net development value arrived at under the 'investment method'.
As part of each half-yearly valuation exercise, the valuations performed by the external valuers are reviewed by appropriately qualified members of the Investment Manager's team. This includes discussion of the assumptions used and judgements made by the external valuers as well as detailed consideration of the resulting valuations. Discussion of the valuation process and results then takes place at a meeting between the external valuers and the auditors at which the key assumptions and estimates are reviewed together with consideration of the valuers' reasons for significant valuation movements on individual properties.
The key unobservable inputs used in the valuation of the Group's investment properties at 30 September 2018 are as follows:
ERV per square Equivalent yield
foot (GBP) (%)
-------------------------
Investment Fair Valuation Weighted Weighted
property value method Min Max average Min Max average
type
------------ ---------- ----------- ------ ------ --------- ------ ------ ---------
Completed 5,200,000 Investment 15.0 30.06 18.44 8.9 8.9 8.9
Other* 1,300,000
------------ ----------
Total 6,500,000
The key unobservable inputs used in the valuation of the Group's investment properties at 30 September 2017 are as follows:
ERV per square Equivalent yield
foot (GBP) (%)
-------------------------
Investment Fair Valuation Weighted Weighted
property value method Min Max average Min Max average
type
------------- ----------- ----------- ------ ------ --------- ------ ------ ---------
Completed 46,000,000 Investment 15.0 47.5 21.95 5.8 7.0 6.2
Development 7,338,000 Residual 10.0 27.0 17.97 5.25 7.0 5.79
Other* 1,400,000
------------- -----------
Total 54,738,000
*Comprises land assets that are held at their estimated open market value.
All other factors remaining constant, an increase in rental income would increase a valuation whilst increases in nominal equivalent yield and discount rate would result in a fall in value and vice versa. However, there are interrelationships between unobservable inputs as they are determined by market conditions. Corresponding movements in more than one unobservable input may have a complementary effect on a valuation whereas unobservable inputs moving in opposite directions may compensate each other. For example, where market rents and nominal equivalent yields increase simultaneously, the overall impact on a valuation may be minimal.
For investment properties undergoing development, a reduction in the cost and time to complete a scheme will have a positive impact on value, assuming all other factors remain constant. Conversely, if the anticipated cost or time to complete a scheme increased then this would negatively impact value, assuming all other factors remain constant.
All of the Group's investment properties are considered to be 'Level 3' in the fair value hierarchy described by IFRS 13. There have been no transfers of property between hierarchical levels in the year.
The historic cost of the Group's investment properties as at 30 September 2018 was GBP11,725,118 (30 September 2017: GBP69,326,834).
Property outgoings (note 4) were split as follows:
Year ended Year ended
30 September 30 September
2018 2017
=================================================== ====================== ========================= ========================
GBP GBP
=================================================== ====================== ========================= ========================
Property outgoings that arose from
investment properties that generated
rental income in the year 183,079 32,468
Property outgoings that arose from
investment properties that did not
generate rental income in the year 14,915 179,229
======================================================= ============== ======================== ========================
197,994 211,697
====================== ============== ======================== ========================
13. Business and other receivables
As at As at
30 September 30 September
2018 2017
======================================================== === ==== =========================== ========================
GBP GBP
======================================================== === ==== =========================== ========================
Business receivables 133,428 1,244,826
Property sales receivables 6,093,808 17,087,460
Rents recognised in advance 156,941 845,855
Amounts receivable under
Institutional
Funding Agreements 1,514,009 12,617,851
Prepayments and accrued income 38,374 258,027
Other receivables 4,263,003 915,865
======================================================================== ====================== ========================
12,199,563 32,969,884
=================== ================================================== ====================== ========================
Property sales receivables comprise relevant amounts receivable in respect of investment property sales that had unconditionally exchanged prior to the balance sheet date.
Amounts receivable under Institutional Funding Agreements relate to the income referred to in note 4.
All of the above amounts are either receivable within one year or will be released to the income statement within one year except for GBP137,042 (2017: GBP789,988) of rents recognised in advance that are due to be released to the income statement in more than one year.
14. Cash and cash equivalents
Included within the Group's cash and cash equivalents balance as at 30 September 2018 is GBPnil (30 September 2017: GBP124,052) in bank accounts held as security by the providers of the Group's secured bank debt facilities.
15. Business and other payables
As at As at
30 September 30
September
2018 2017
=========================== ============= ============== =========================================================================== ======================
GBP GBP
=========================== ============= ============== =========================================================================== ======================
Business payables 1,268,793 3,979,539
Amounts
payable under
Institutional
Funding Agreements 2,377,561 7,686,187
Other creditors 2,704,085 373,749
Accruals and other amounts
payable 4,455,938 7,277,347
========================================================== =========================================================================== ======================
10,806,377 19,316,822
=============== ======================================== =========================================================================== ======================
All of the above amounts are due within one year and none incur interest.
Amounts payable under Institutional Funding Agreements relate to certain of the forward funding arrangements referred to in note 4.
16. Borrowings: amounts repayable within one year
As at As at
30 September 30 September
2018 2017
========================================= ==== ================== ========================= ========================
GBP GBP
========================================= ==== ================== ========================= ========================
Bank loans (secured):
Investment facility - 25,722,372
------------------------------------------------------------------- ------------------------ ------------------------
- 25,722,372
------------------- ----------------------------------------------------------------------- ------------------------
Investment facility in the prior year:
In January 2018, the investment property on which the above loan was secured was sold and the loan was repaid on the same date.
17. Financial instruments and risk management
a) Categories of financial instruments
As at As at
30 September 30 September
2018 2017
=============================================== ==== =================== ======================== ========================
GBP GBP
=============================================== ==== =================== ======================== ========================
Financial assets
Loans and receivables:
Cash and cash equivalents 11,163,838 7,978,972
Business receivables 133,428 1,244,826
Property sales receivables 6,093,808 17,087,460
Rents recognised in advance 156,941 845,855
Amounts receivable under
Institutional
Funding Agreements 1,514,009 12,617,851
Other receivables 1,066,145 915,865
-------------------------------------------------------------------------- ------------------------ ------------------------
20,128,169 40,690,829
=================== ==================================================== ======================== ========================
As at As at
30 September 30 September
2018 2017
=============================================== ==== =================== ======================== ========================
GBP GBP
=============================================== ==== =================== ======================== ========================
Financial liabilities
Current liabilities:
Business payables 1,268,793 3,979,539
Amounts payable under
Institutional
Funding Agreements 2,377,561 7,686,187
Other creditors 2,057 373,749
Bank loans (secured) - 25,722,372
Accruals and other amounts
payable 4,399,174 7,277,347
========================================================================== ======================== ========================
8,047,585 45,039,194
=================== ==================================================== ======================== ========================
All financial assets and liabilities are measured at amortised cost and in the opinion of the directors approximate to fair value.
b) Financial risk management
The Group is entering the final stages of its orderly realisation of investments and continues to be exposed to a variety of risks. The Group's financial risk management objectives are to minimise the effect of these risks. The Board provides guidelines on the acceptable levels of interest rate risk, credit risk and liquidity risk.
The principal financial risks that are considered to be potentially material to the Group and the policies that it has in place to manage these risks are summarised below:
i) Liquidity risk
Liquidity risk arises from the Group's management of working capital and previously, the finance charges and principal repayments on its debt instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.
The Board utilises regular budgets and forecasts to make an assessment of the resources that are expected to be available to the Group to meet its liabilities when they fall due.
The Group ensures that surplus cash is managed with the following objectives: (i) to ensure efficient cash and liquidity management; (ii) to deliver appropriate returns on all surplus funds having regard to the Group's policy not to expose cash to significant risk; and (iii) to limit exposures through counterparty diversification.
Generally returns on cash deposits reflect the notice period required to release the deposit back to the Group.
The following table shows the maturity analysis for financial liabilities and their effective interest rates, where applicable. The table has been drawn up based on undiscounted cash flows, including future interest payments, based on the earliest repayment date.
As at 30 September 2018
Effective Less than Between
one 1 and
Financial liabilities interest year 5 years Total
rate
----------------------------- ----------- --------------------- ------------- ----------
% GBP GBP GBP
============================ =========== ===================== ============= ==========
Business payables 1,268,793 - 1,268,793
------------------------------------------ --------------------- ------------- ----------
Amounts payable under
Institutional
----------------------------- ----------- --------------------- ------------- ----------
Funding Agreements 2,377,561 - 2,377,561
Other creditors 2,057 - 2,057
Accruals and other amounts
payable 4,399,174 - 4,399,174
===================== ============= ==========
8,047,585 8,047,585
===================== ============= ==========
As at 30 September 2017
Effective Less than Between
one 1 and
Financial liabilities interest year 5 years Total
rate
----------------------------- ---------- ---------------------- ------------- -----------
% GBP GBP GBP
============================ ========== ====================== ============= ===========
Business payables 3,979,539 - 3,979,539
----------------------------- ---------- ---------------------- ------------- -----------
Amounts payable under -
Institutional
----------------------------- ---------- ---------------------- ------------- -----------
Funding Agreements 7,686,187 - 7,686,187
Other creditors 373,749 - 373,749
Borrowings 2.84 25,722,372 - 25,722,372
Accruals and other amounts
payable 7,277,347 - 7,277,347
====================== ============= ===========
45,039,194 - 45,039,194
====================== ============= ===========
ii) Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its investment property activities and from its financing activities, including deposits with banks and other financial institutions and derivatives.
The credit risk on cash balances and short-term deposits is limited because the Group does not retain large cash balances for extended periods and counterparties are typically banks with credit ratings of AA- or higher or that have substantial UK government backing. As at the year end, deposits were spread across 3 (30 September 2017: 3) different banks. The credit ratings of the banks are monitored and changes made as necessary to manage risk. The Board does not consider that there is a significant concentration of counterparty risk.
Rigorous credit control procedures are applied to facilitate recovery of business receivables. Tenant leases are long-term contracts with rents payable either monthly or quarterly in advance. Prospective tenants are assessed according to the Group's credit criteria prior to entering into lease agreements. Penal interest is charged on outstanding rents in accordance with the applicable lease terms and legal action would be taken to recover any substantial arrears.
The credit risk relating to counterparties transacting with the Group in relation to property acquisitions, disposals and Institutional Funding Agreements is managed through appropriate due diligence and contractual protection in the relevant agreements.
iii) Market risk - interest rate risk
The Group no longer makes use of debt financing given its realisation remit and forthcoming dissolution and therefore no longer considers interest rate risk to be applicable to its financial risk management objectives.
iv) Capital risk management
The Group's total capital at each balance sheet date comprises equity attributable to Shareholders of the Company (stated capital and retained earnings and previously, net debt (which principally consists of the borrowings disclosed in note 16 less the Group's cash and cash equivalents)). The Group monitors its capital with reference to committed expenditure and with the primary objective of returning capital to shareholders whilst ensuring that the Group is able to meet its liabilities as they fall due.
The Group is not subject to any external capital requirements.
18. Stated capital
Analysis of stated capital:
As at As at
30 September 30 September
2018 2017
============================================================= ======================== ===== ========================= ========================
Number Number
============================================================ ============== ================ ========================= ========================
Authorised
Ordinary shares of no par value Unlimited Unlimited
- number
============================================================ ============== ================ ========================= ========================
Issued and fully paid
Ordinary shares of no par value
- number 168,350,374 168,350,374
Summary of movements in stated GBP GBP
capital
============================================================ ============== ================ ========================= ========================
Ordinary shares of no par value
- total paid on issues to date 266,359,124 266,359,124
* purchased for cancellation:
- in the year - -
- in prior years (99,309,458) (99,309,458)
* reclassification of the attributed retained earnings
element of ordinary share buybacks
undertaken:
- in prior years 10,951,754 10,951,754
Redeemable "B" shares of no par
value (see below)
- total paid on issue in the - -
current year
- redemption for cancellation
in the
current year (12,397,546) (19,865,169)
- redemption for cancellation
in
prior years (116,697,976) (96,832,807)
Total issue and purchase costs
deducted to date (9,433,088) (9,414,088)
============================================================================================== ========================= ========================
Stated capital per the balance
sheet 39,472,810 51,889,356
============================================================================================== ========================= ========================
Transactions with Shareholders in the current year - "B" shares and dividends:
In August 2018, a return of cash of 7.5p per ordinary share was made to Shareholders (the Fourth Return of Cash). The total Fourth Return of Cash of GBP12.6m comprised the following two elements:
-- GBP8.4m paid to Shareholders holding 111,884,406 of the Company's ordinary shares. This was paid through the redemption of an identical amount of redeemable "B" shares which had been allotted and issued to the holders of these shares at nil pence per share earlier in August 2018 as one of the options available to Shareholders under the mechanism of the Fourth Return of Cash.
-- An interim dividend amounting in total to GBP4.2m (see note 11). This was paid to Shareholders holding the remaining 56,465,968 of the Company's ordinary shares in issue at that date who elected to receive the Fourth Return of Cash by way of a cash dividend. The cash dividend was debited to retained earnings.
Issue and purchase costs of GBP11,400 in respect of the redeemable "B" shares were incurred in relation to the Fourth Return of Cash.
In September 2018, a return of cash of 4p per ordinary share was made to Shareholders (the Fifth Return of Cash). The total Fifth Return of Cash of GBP6.7m comprised the following two elements:
-- GBP4.0m paid to Shareholders holding 100,155,383 of the Company's ordinary shares. This was paid through the redemption of an identical amount of redeemable "B" shares which had been allotted and issued to the holders of these shares at nil pence per share earlier in September 2018 as one of the options available to Shareholders under the mechanism of the Fifth Return of Cash.
-- An interim dividend amounting in total to GBP2.7m (see note 11). This was paid to Shareholders holding the remaining 68,194,991 of the Company's ordinary shares in issue at that date who elected to receive the Fifth Return of Cash by way of a cash dividend. The cash dividend was debited to retained earnings.
Issue and purchase costs of GBP7,600 in respect of the redeemable "B" shares were incurred in relation to the Fifth Return of Cash.
Transactions with Shareholders in the prior year - "B" shares and dividends:
In November 2016, a return of cash of 18p per ordinary share was made to Shareholders (the Third Return of Cash). The total Third Return of Cash of GBP30.3m comprised the following two elements:
-- GBP19.9m paid to Shareholders holding 110,362,052 of the Company's ordinary shares. This was paid through the redemption of an identical amount of redeemable "B" shares which had been allotted and issued to the holders of these shares at nil pence per share earlier in October 2016 as one of the options available to Shareholders under the mechanism of the Third Return of Cash.
-- An interim dividend amounting in total to GBP10.4m (see note 11). This was paid to Shareholders holding the remaining 57,988,322 of the Company's ordinary shares in issue at that date who elected to receive the Third Return of Cash by way of a cash dividend. The cash dividend was debited to retained earnings.
Issue and purchase costs of GBP11,970 in respect of the redeemable "B" shares were incurred in relation to the Third Return of Cash.
19. Reserves
The nature and purpose of each reserve within equity is as follows:
Stated capital: This represents the proceeds on the issue of ordinary shares, net of issue costs, less the amounts considered attributable to this reserve in relation to purchasing ordinary shares for cancellation, inclusive of associated costs.
Retained earnings: This represents the cumulative profits and losses recognised in the income statement, less dividends paid to Shareholders and the amounts considered attributable to this reserve in relation to purchasing certain shares for cancellation, inclusive of associated costs.
20. Net asset value per share
Net asset value per share is calculated as the net assets of the Group attributable to Shareholders at each balance sheet date, divided by the number of ordinary shares in issue at that date (see note 18).
There are no share options or other equity instruments in issue and therefore no adjustments need to be made for dilutive or potentially dilutive equity arrangements.
21. Notes supporting the statement of cash flows
Changes in liabilities arising from financing activities
Non-current
loans and
borrowings
=============
GBP
================= =============
At 1 October
2017 25,722,372
Cash flows (25,722,372)
------------------- -------------
At 30 September -
2018
=================== =============
Non-current
loans and
borrowings
============
GBP
=========================================== ============
At 1 October
2016 30,098,134
Cash flows (4,487,000)
Non cash movements:
Amortisation of capitalised finance costs 111,238
At 30 September
2017 25,722,372
============================================= ============
22. Related party transactions and balances
Interests in shares
The interests of the Directors and their families in the share capital of the Company are set out below:
Ordinary shares
As at As at
30 September 30 September
2018 2017
============== ==============
Number Number
================= ============== ==============
Phil Wrigley 447,748 447,748
Steve Webb 319,046 319,046
Danny Kitchen 622,927 622,927
Alastair Irvine 6,195,306 6,195,306
================== ============== ==============
The interests disclosed above include both direct and indirect interests in shares. The Fourth and Fifth Returns of Cash to Shareholders in the current year (note 18) resulted in the Directors receiving an aggregate amount of GBP872,278 (2017: GBP1,365,305 in respect of the Third Return of Cash) on the same terms as the other Shareholders of the Company.
LXB(3) Partners LLP and its subsidiary undertakings are related parties of the Company. LXB(3) Partners LLP is the Investment Manager to the Group and is the parent undertaking of LXB Adviser LLP which was the Investment Manager to the Group during the year until 31 March 2018. At 30 September 2018, the members of LXB(3) Partners LLP (and their spouses) held an aggregate total of 15,760,278 (30 September 2017: 17,247,977) shares in the Company. The Fourth and Fifth Returns of Cash to Shareholders in the prior year resulted in the members of LXB(3) Partners LLP (and their spouses) receiving an aggregate amount of GBP1,812,432 (2017: GBP3,536,162 in respect of the Third Return of Cash) on the same terms as the other Shareholders of the Company.
The Scheme of Arrangement
On 3 February 2018, the Company announced a proposed reorganisation by way of a Jersey Scheme of Arrangement (the Scheme) which was passed by Shareholders on 27 February 2018 and sanctioned by the Royal Court of Jersey on 16 March 2018.
As described in more detail in the Scheme Circular which can be found on the Company's website, in order to meet the Shareholders' expectations of winding up the Company on or around 31 March 2019, the Scheme allowed, under the court-sanctioned Framework Agreement, for the transfer of certain longer term assets and liabilities that are expected to endure beyond 31 March 2019, to IW Midco Limited, a subsidiary undertaking of the group of companies headed by IW Topco Limited (the IW Group).
Pursuant to the Framework Agreement:
-- On 31 March 2018, the effective time of the Scheme, the Group sold LXB Retail Properties Fund LP and its two subsidiary undertakings, LXB Holdings Limited and LXB RP (London Road) Limited (the Transferring SPVs) to IW Midco Limited for GBP5,004, being the total value of the net assets of the Transferring SPVs at the effective time.
-- Prior to the effective time, the Group had paid an amount of GBP1.395m to the Transferring SPVs in order to fully fund the net liabilities of those entities prior to their sale to IW Midco Limited.
-- On 4 April 2018, the Group paid IW Topco Limited GBP98,612 in order to fund the running costs of the IW Group for the forthcoming year. Also on 4 April 2018, the Group paid to an escrow account of Jersey lawyers, Carey Olsen an amount of GBP667,822 in order to fund the running costs of the IW Group in future years. The future running costs are to be released to the IW Group in annual instalments.
The IW Group is owned and controlled by Brendan O Grady, who is a former designated member of LXB(3) Partners LLP.
Fees
Directors' fees of GBP305,000 (30 September 2017: GBP305,000) were payable for the year ended 30 September 2018. As at 30 September 2018, GBP76,250 (30 September 2017: GBP76,250) of fees remained outstanding and are included within business and other payables (note 15).
Management fees of GBP1,395,910 (30 September 2017: GBP2,850,000) were payable to the group headed by LXB(3) Partners LLP by the Group in respect of the year ended 30 September 2018. No amounts were outstanding at the respective balance sheet dates.
LXB(3) Partners LLP (until 31 March 2018: LXB Adviser LLP) is permitted, under the terms of the Investment Advisory Agreement, to recharge certain costs and expenses incurred in the discharge of its duties. During the year it has recharged costs totalling GBP34,983 (30 September 2017: GBP87,303) to the Group.
Subsidiary entities
LXB Retail Properties Plc (the Company) is the ultimate controlling party of its subsidiary entities.
All of the Group's investment properties are held by entities that are direct subsidiary undertakings of the Company.
The consolidated financial statements include the financial statements of the Company and the following subsidiary entities, all of which are wholly-owned:
Entity Country of Nature of business
incorporation
Appointment and removal of
members
LXBRP CommCo Limited Jersey of the investment committee
LXBRP LP Limited Jersey Former Limited partner
Treasury operations and group
LXB Holdings 2 Limited* Jersey finance
Formerly Treasury operations
LXBRP Treasury Co Limited Jersey and group finance
LXB RP (Biggleswade)
Limited Jersey Property investment
LXB RP (Bridge Street)
Limited* Jersey Property development
LXB RP (Brocklebank Road)
Limited Jersey Property development
LXB RP (Crown Road) Limited Jersey Property development
LXB RP (Gallions Road)
Limited* Jersey Property development
LXB RP (Gloucester 2)
Limited Jersey Property investment
LXB RP (Gloucester 3)
Limited Jersey Property investment
LXB RP (Greenwich 3)
Limited Jersey Property investment
LXB RP (Greenwich 8)
Limited Jersey Property investment
LXB RP (Kingsmead) Limited Jersey Property development
LXB RP (Metz Way) Limited Jersey Property development
Living Villages (Newham
Farm) Limited Jersey Property investment
LXB RP (No.20) Limited Jersey Property investment
LXB RP (Queenborough)
Limited Jersey Property development
LXB RP (Riverside) Limited* Jersey Property development
LXB RP (Rushden) Limited* Jersey Property investment
LXB RP (Sheppey 2) Limited Jersey Property investment
LXB RP (Skew Bridge)
Limited* Jersey Property development
LXB RP (Stafford) Limited* Jersey Property investment
LXB RP (Stafford 2) Limited* Jersey Property investment
LXB RP (Stafford 3) Limited Jersey Property investment
LXB RP (Wildmere Road) Jersey Property development
Limited*
LXB RP (Sutton) Limited* Jersey Property investment
Tedbin Limited Jersey Property investment
All entities are directly owned by the Company
*these entities are anticipated to transfer to a run off vehicle prior to the dissolution of the Plc.
The other entities above have been struck off, are in the process of being struck off, or are anticipated to be struck off prior to the dissolution of the Plc.
Incentives - carried interest arrangements with LXB(3) Partners LLP
The carried interest arrangements with LXB(3) Partners LLP were cancelled as a result of the Scheme. No amounts were payable to LXB(3) Partners LLP at cancellation.
Other transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation.
23. Post balance sheet events
On 21 December 2018, the Group disposed of its remaining investment at Sutton for GBP5.4m.
On 7 January 2019 the Group returned GBP10.1m (6p per share) to Shareholders
On 10 January 2019, the Group disposed of its remaining investment at Higher Newham Farm, Truro for GBP1.3m.
On 19 February 2019 the Group announced plans to return a further GBP5.1m (3p per share) to Shareholders.
Glossary
AIM A sub-market of the London Stock Exchange.
CISE The Daily Official List of the Channel Islands
Securities Exchange.
EPS Earnings per share, calculated as earnings after
tax divided by the weighted average number of
shares in issue in the year.
Investment Manager LXB(3) Partners LLP.
Investment Advisory The agreement between LXB(3) Partners LLP and
Agreement the Company (formerly between LXBRP GP Limited,
the General Partner of LXB Retail Properties
Fund LP, and LXB Adviser LLP) under which LXB(3)
Partners LLP provides investment advice to the
Group.
LIBOR The London Interbank Offered Rate, being the
interest rate charged by one bank to another
for lending money.
NAV Net asset value.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
FR KMGZZNKZGLZM
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February 26, 2019 02:01 ET (07:01 GMT)
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