At 28th February 2015, the Group held interest rate swaps, caps
and collars designated as economic hedges and not qualifying as
effective hedges under IAS 39. The derivatives are used to mitigate
the Group's interest rate exposure to variable rate loans of
GBP63,148,000 (2014: GBP59,230,000). The fair value of the
derivatives amounting to GBP189,000 and GBP438,000 are recorded as
financial assets and liabilities respectively at 28th February 2015
(2014: GBP23,000 asset and GBP474,000 liability) with the fair
value loss taken to finance costs.
At 28th February 2014, the Group held one cross-currency
interest rate swap designated as a hedge of expected future cash
flows arising from EUR47,000,000 variable rate loan notes issued in
September 2007. This cash flow hedge was cancelled in March 2014
following the renegotiation of the loan notes. On cancellation of
the hedging arrangements, the Group incurred a foreign currency
translation loss of GBP6,012,000, and paid a termination fee of
GBP1,035,000. The Group was also required to write off transaction
costs of GBP870,000. The total of GBP7,917,000 is shown as an
exceptional item in the Consolidated income statement. The
unwinding of the hedging arrangements also generated a
corresponding credit to Other comprehensive income of
GBP7,647,000.
12 Note to the cash flow statement
Reconciliation of profit before income tax to net cash outflow
from operating activities:
2015 2014
GBP'000 GBP'000
========================================================================= ======== ========
Profit before income tax 34,757 19,527
Adjustments for:
Gain on disposal of investment properties (3,843) (539)
Gain on revaluation of property portfolio (7,824) (3,109)
Other income (175) (471)
Share of post-tax profits of joint ventures and associates (2,875) (12,834)
Loss from sale of investment 86 250
Profit from sale of joint venture (521) -
Loss/(profit) on sale of other plant and equipment 20 (34)
Finance income (7,914) (2,552)
Finance cost 12,751 13,532
Exceptional item: Acquisition costs associated with business combination 2,724 -
Exceptional item: Termination of cross currency interest rate swap 7,917 -
Depreciation of property, plant and equipment 875 768
Amortisation of goodwill 238 -
========================================================================= ======== ========
Operating cash flows before movements in working capital 36,216 14,538
Decrease/(increase) in development and trading properties 37,951 (38,930)
Increase in receivables (10,137) (16,018)
Increase in payables 16,575 7,911
Decrease in provisions (450) (28)
========================================================================= ======== ========
Cash flows generated from/(used in) operating activities 80,155 (32,527)
========================================================================= ======== ========
13 Contingent liabilities
In the normal course of its development activity, the Group is
required to guarantee performance bonds provided by banks in
respect of certain obligations of Group companies. At 28th February
2015, such guarantees amounted to GBP10,129,000 (2014:
GBP4,708,000).
The Group has provided guarantees for rent liabilities in
respect of properties previously occupied by Group companies. In
the event that the current tenants ceased to pay rent, the Group
would be liable to cover any shortfall until the building could be
re-let. The Group has made provision against crystallised
liabilities in this regard. In respect of potential liabilities
where no provision has been made, the annual rent-roll of the
buildings benefiting from such guarantees is GBP279,000 (2014:
GBP279,000) with an average unexpired lease period of 3.1 years
(2014: 4.1 years).
The Group has guaranteed its 50.0 per cent share of the capital
and interest payable by Curzon Park Limited, a joint venture, in
respect of the company's borrowings of GBP4,110,000 (refer note
11(a)).
The Group has guaranteed its share of interest up to a maximum
of GBP575,000 in respect of the GBP26,000,000 loan in Notting Hill
(Guernsey Holdco) Limited.
14 Business combinations
On 19th May 2014, the Group acquired 100 per cent of the issued
shares in Cathedral Group (Holdings) Limited, Cathedral Special
Projects (Holdings) Limited and Cathedral (ESCO) Limited and 95.0
percent of the shares issued in Deadhare Limited (Cathedral Group),
a property development group specialising in mixed-use regeneration
schemes in the South East.
As at 28th February 2014, the balance sheet value of the Group's
interest in the Cathedral Group was GBP13,765,000, analysed as
Investment in joint venture GBP9,332,000 and Available-for-sale
financial assets of GBP4,433,000.
Details of the purchase consideration, the identifiable net
assets acquired and goodwill are as follows:
GBP'000
=============================================== =======
Purchase consideration
- Cash paid 11,005
- Shares 6,013
- Contingent consideration 2,500
- Deferred consideration 3,373
=============================================== =======
Total consideration transferred 22,891
Fair value of equity interest in joint venture 10,345
Fair value of interest in financial asset 4,778
=============================================== =======
Total consideration 38,014
=============================================== =======
Recognised amounts of identifiable assets acquired and
liabilities assumed:
Provisional
fair value
GBP'000
================================================ ===========
Cash and cash equivalents 4,080
Monies held in restricted accounts and deposits 6,529
Inventory - development and trading properties 64,969
Interest in joint ventures 3,959
Trade and other receivables 1,585
Trade and other payables (21,323)
Borrowings (20,687)
Net deferred tax liabilities (3,131)
================================================ ===========
Total identifiable assets acquired 35,981
Non-controlling interest (26)
Goodwill 2,059
================================================ ===========
Total consideration 38,014
================================================ ===========
The goodwill of GBP2,059,000 is attributable to Cathedral Group
Holdings Limited's expertise and reputation and expected future
profits of development projects that were acquired. None of the
goodwill is expected to be deductible for tax purposes.
Acquisition-related costs of GBP2,724,000 have been charged to
exceptional items in the Consolidated income statement for the year
ended 28th February 2015.
The fair value adjustments in respect of inventory relate to
specific projects that have been independently valued at the date
of acquisition. The fair value has been adjusted for project
specific risks and uncertainties that may impact the profit level.
These adjustments are provisional and are based on management's
best estimates.
The contingent consideration requirement requires the Group to
pay the former owners of Cathedral Group Holdings Limited
GBP2,500,000 on securing a named development scheme. The contingent
consideration was paid in full in July 2014.
A further GBP4,000,000 deferred consideration is payable on
completion of the Morden Wharf and Preston Barracks developments
should the performance of these schemes significantly exceed the
Board's expectations and overall returns from Cathedral schemes
surpass pre- determined levels. No provision has currently been
made for this consideration. The Board will continue to monitor the
Cathedral schemes.
GBP1,187,000 of consideration has been deferred for one year and
GBP2,186,000 for two years. No performance conditions are
associated with payment of this consideration
The acquired business contributed revenues of GBP31,032,000 and
a net profit of GBP3,551,000 to the Group for the period from 19th
May 2014 to 28th February 2015. If the acquisition had occurred on
1st March 2014, consolidated revenue and consolidated loss for the
year ended 28th February 2015 would have been GBP33,667,000 and
GBP1,205,000 respectively.
15 Projects in partnership
The following is a summary of the Group's projects in
partnership and the Balance Sheet classification of
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