TIDMWNER
RNS Number : 3275L
Warner Estate Holdings PLC
29 July 2011
Warner Estate Holdings PLC
PROTECTING INCOME AND CONTROLLING COSTS
Warner Estate Holdings PLC ("Warner Estate" or "Group"), the
property investment and management company has today announced its
final results for the year ended 31 March 2011.
Financial Summary
-- Revenue GBP30.5million (2010: GBP32.8million)
-- Recurring operating profit before net movements on
investments GBP12.7million (2010: GBP11.3million)(i)
-- Loss before income tax GBP7.1million (2010: GBP9.7million
loss)
-- Net liabilities per share 20p (2010: 7p net liabilities)
-- Loss per share 12.9p (2010: 16.1p loss)
(i) Adjusted for non-recurring management fee income of
GBP1.1million and net property expenses of GBP0.4million (2010:
adjusted for non-recurring property expenses of GBP4.5million and
non-recurring performance fee income of 1.1million)
Key Business Events
-- Sovereign Gate, Richmond and 24-26 The Minories, London were
sold in April 2010 and June 2010 respectively, for a combined
amount of GBP10.7million which was in line with valuation.
-- Disposal of 50% equity interest in Radial Distribution
Limited for GBP0.5million and receipt of transaction based fees and
foregone management fees of GBP4.1million.(i)
-- Substantial reduction in voids across the Wholly Owned
portfolio to 10.1% (2010: 19.4%)
-- Group's flagship City of London office refurbishment, 60 New
Broad Street fully let.
(i) GBP1.1million one-off fees and GBP3.0million on termination
of asset management contract
Philip Warner, Chairman of Warner Estate commented
"The Group has performed well at an operational level but it is
the outcome of discussions with our Lenders that will determine our
future.
Meantime, in a climate of uncertainty created by indecision in
Europe and austerity measures in the UK, our asset managers and
their support teams will continue to protect income and control
costs. It is these skills which have maintained the Group through
this difficult era."
Date: 29 July 2011
For further information contact:
Warner Estate Holdings PLC City Profile
Philip Warner, Chairman Jonathan Gillen
Mark Keogh, Group Managing Director Simon Courtenay
Robert Game, Group Managing Tel: 020 7448 3244
Director, Property
Tel: 020 7907 5100 warner@city-profile.com
Web: www.warnerestate.co.uk
Chairman's Statement
Following the refinancing of the Group's wholly owned portfolio,
which was achieved at the end of March 2010, further discussions
have been conducted over the course of this year with the Group's
three Lenders to explore options to strengthen the Group's balance
sheet. These continue and more detail is given below.
On the ground, progress has been made, with an improvement in
operating profit and a substantial reduction in the void rate. Net
asset value per share has decreased during the year from negative
7p to negative 20p. This is largely due to the impairment of
goodwill, explained further below, which reduced net assets per
share by 15p more than offsetting the 4.2% increase in the value of
our portfolio and the gain from the sale in May 2010 of our Radial
Distribution joint venture.
Refinancing discussions
The Group has debt facilities with each of Royal Bank of
Scotland, Barclays and Lloyds Banking Group (together the
"Lenders") that are secured on its wholly owned assets, details of
which are set out in Notes 20 and 22 of the Accounts. The Group is
currently in compliance with the terms of its facilities. However,
in anticipation of the maturity of two of the facilities on 27
April 2012 and the likely inability of the Company to meet
repayment obligations at that date, the Group commenced discussions
in the second half of 2010 with its Lenders to consider potential
solutions. Discussions with the Lenders remain ongoing and there
can be no certainty as to the terms of any agreement, whether any
agreement will be reached or the viability of any equity raise or
other potential solution. The Board believes that in the absence of
a very significant rise in the value of the Group's properties in
the near term, it is likely that any solution would deliver very
little, if any value to existing shareholders, other than the
opportunity to participate in an equity raise were that solution to
be pursued. With these discussions continuing, the two facilities
originally maturing in April 2012 have been extended to 31 December
2012 in line with the third facility. In addition, there has been a
relaxation of certain financial covenants including, in relation to
one facility, the loan to value ("LTV") covenant remaining at
117.5% and not stepping down in March 2012. As a condition of these
extensions and covenant relaxations the Group has agreed to market
certain properties thereby continuing its current strategy of
realising value in order to reduce total outstanding debt. Details
of the Group's recent disposals are set out in the Property Review
below.
Results Overview
Operating profit before net movements on investments for the
year has increased to GBP13.4million (2010: GBP7.9million).
Recurring operating profit before net movements on investments for
the year was GBP12.7million compared to GBP11.3million last year
due to further reductions in operating costs. Recurring operating
profit excludes one-off fees received on the disposal of Radial
Distribution of GBP1.1million offset by the movement in other
accruals of GBP0.4million (2010: excludes non-recurring property
expenses of GBP4.5million and non-recurring performance fee income
of GBP1.1million). Overall the Group made a post tax loss of
GBP7.2million (2010: GBP8.9million loss). The carrying value of
goodwill, relating to the asset management business originally
acquired by Industrial Funds Limited as part of the acquisition of
Ashtenne Holdings, has been reduced to GBP2.8million. This
impairment of goodwill of GBP8.4million arises from the Group
reassessing a number of factors including the maturity of the
contract in 2016 and the potential impact on management fees of
uncertain capital values given that the fees generated by this
business are based on the gross asset values ("GAV") within the
funds under management.
The net finance expense for the period has increased to
GBP19.3million (2010: GBP10.4million) as a result of the March 2010
refinancing which included an increase in margin, interest rate
hedging as required by the Lenders, exit fees and the amortisation
of related costs. The Group has hedged 52% of its gross debt as at
31 March 2011. The headline cost of debt (before exit fees) is
6.19% of which the cash cost is 3.09%. Group net debt has been
reduced to GBP244.9million as at 31 March 2011 from GBP253.3million
as at 31 March 2010 as a result of the completion of the disposal
of three substantially non-income producing assets. The net cash
inflow for the year was GBP2.7million mainly due to the proceeds
from the sale of the Radial Distribution joint venture and the fee
on termination of the associated asset management contract as
property disposal proceeds were used to repay debt. Two of the
Group's three facilities have LTV covenants, of which one has been
tested and is compliant and the other is due to be tested in
September 2011. The Board has discussed with its advisers, at some
length, the likely future headroom under these LTV covenants and
concluded that, based on best current estimates, the Group will,
for the foreseeable future, have adequate headroom. The Group's
positive income and cash generation provide adequate headroom for
other financial covenants, in particular income cover ratios and
debt service cover ratios.
As previously reported, the exit fees payable when these
facilities mature would not be covered on current cash flow
projections without a considerable rise in property values. The
Board continues to address this issue as part of its current
discussions with its Lenders. GBP2.7million has been accrued in
respect of exit fees as at 31 March 2011.
Although the Group has net liabilities, mainly due to unrealised
valuation movements, the Board is satisfied that, following a
review of appropriately stress tested cash flow projections, the
Group will continue to meet its liabilities as and when they fall
due for the foreseeable future.
The fortunes of the Group's joint ventures, all of which are
non-recourse and carried at nil value on the balance sheet, have
varied. The refinancing of Agora Shopping Centres is nearing
completion and the two shopping centres, which are the only assets
of the Agora Max joint venture, are being marketed for sale. The
Group continues as asset manager to these joint ventures and the
Directors will provide further updates as and when appropriate. As
announced in May 2011, fixed charge receivers have been appointed
to the two subsidiaries of the Greater London Offices joint venture
("GLO") which is expected to result in a relatively minimal loss of
recurring asset management fee income. The Group is disappointed at
the action taken, having maintained the assets at full occupancy
and overseen a substantial increase in value since September
2009.
The Board regrets very much that it cannot recommend payment of
a dividend for this financial year.
Property Review
Intensive asset management of the Group's wholly owned
portfolio, which is predominantly located in London and the South
East (88% by value), led to a gain in value of 4.2%, on a like for
like basis, over the last 12 months compared with the IPD Monthly
Index benchmark increase of 3.5%. One of the Group's flagship
assets, 60 New Broad Street, London EC2, is now close to becoming
fully income producing (74% of total contracted income of
GBP2.0million by December 2011) following expiry of rent free
incentives. Wholly owned income longevity and voids also moved
favourably during the second half of the financial year, the former
enhanced by a number of lease extensions.
The wholly owned portfolio void rate has improved to 10.1% by
estimated rental value as at 31 March 2011 (March 2010: 19.4%).
During the year, the Group repaid debt of GBP10.8million through
the sale of three substantially vacant assets. Post year end, two
vacant former Focus DIY stores in Luton and Sheffield have been
sold with net proceeds of GBP3.9million part repaying debt. A
further property is currently under offer (31 March 2011valuation:
GBP19.3million).
On a like for like basis, core asset management fees (based on
GAV) generated by the Group's Ashtenne asset management business
have, as a consequence of stable asset valuations, held broadly
constant.
Recent activity within the Apia Regional Office Fund (Apia) and
GLO will impact total assets under management, see table below,
which had remained broadly constant over the period at
GBP1.4billion. The sale by Apia of four regional office buildings
and the expected loss of GLO, referred to above, will, on a like
for like basis, see total assets under management decline by
GBP143.6million.
Net Estimated Net
As at 31 Number of Capital Rental Rental Initial Equivalent Void
March 2011 Properties Value Income Value Yield Yield Rate
GBPm GBPm GBPm % % %
Wholly
Owned 45 211.2 13.4 17.9 5.9 7.4 10.1
------------ ----------- -------- ------- ---------- -------- ----------- -----
Agora
Shopping
Centres
JV 8 151.9 12.8 16.9 7.9 9.1 10.1
Agora Max
Shopping
Centres
JV 2 84.4 7.7 10.6 8.6 9.7 7.3
Greater
London
Offices
JV(1) 2 74.5 5.8 5.5 7.4 6.3 0.0
Apia
Regional
Office
Fund (2) 17 210.4 15.8 23.8 6.6 8.7 28.1
Ashtenne
Industrial
Fund 362 658.6 53.1 74.8 7.8 10.1 16.7
Total 436 1,391.0 108.6 149.5 7.4 9.1 15.7
------------ ----------- -------- ------- ---------- -------- ----------- -----
(1) post year end the Greater London Offices JV was subject to
the appointment of a LPA receiver
(2) post year end Apia has disposed of 4 assets at a combined
value (March 2011) of GBP69.1million
Outlook
The Group has performed well at an operational level but it is
the outcome of discussions with our Lenders that will determine our
future.
Meantime, in a climate of uncertainty created by indecision in
Europe and austerity measures in the UK, our asset managers and
their support teams will continue to protect income and control
costs. It is these skills which have maintained the Group through
this difficult era.
Philip Warner
Chairman
Consolidated Income Statement
For the year ended 31 March 2011
Notes 2011 2010
GBPm GBPm
--------------------------------------- ------ ------- -------
Revenue 30.5 32.8
--------------------------------------- ------ ------- -------
Rental and similar income 16.5 18.7
Property management expenses (3.0) (5.6)
Movement in provision for onerous
contracts - (4.2)
Service charge and similar income 3.8 3.1
Service charge expense and similar
charges (5.0) (4.4)
------- -------
Net rental income 2 12.3 7.6
------- -------
Revenue from asset management
activities 10.2 11.0
Asset management expenses (7.9) (9.2)
--------------------------------------- ------ ------- -------
Net income/ (expenditure) from
asset management activities 2 2.3 1.8
------- -------
Other operating expenses (1.2) (1.5)
------- -------
Operating profit before net movements
on investments 2 13.4 7.9
------- -------
Net gain / (loss) from fair value
adjustments on investment properties 13/19 6.9 (2.8)
Net loss from fair value adjustment
on investments 16/17 (3.3) (6.2)
Profit / (loss) on sale of investment
properties 5 0.2 (0.1)
Profit on sale of investment in
joint ventures 15 0.5 -
Profit on termination of asset
management contract 15 3.0 -
Impairment of goodwill 12 (8.4) -
Operating profit / (loss) 12.3 (1.2)
------- -------
Finance income 6 1.7 1.8
Finance expense 7 (21.0) (12.2)
Change in fair value of derivative
financial instruments 22 (0.1) 2.9
Share of joint ventures' post
tax losses 15 - (1.0)
--------------------------------------- ------ ------- -------
Loss before income tax (7.1) (9.7)
------- -------
Taxation - current 8 (0.1) 0.8
Taxation - deferred 8 - -
Loss for the year (7.2) (8.9)
--------------------------------------- ------ ------- -------
p p
Loss per share 11 (12.93) (16.09)
------------------------------ --- -------- --------
Fully diluted loss per share 11 (11.96) (15.20)
------------------------------ --- -------- --------
Consolidated Statement of Comprehensive Income
For the year ended 31 March 2011
2011 2010
GBPm GBPm
----------------------------------------- ------ ------
Loss for the year (7.2) (8.9)
Other comprehensive income / (expense):
Actuarial losses on retirement
benefit obligations - (0.1)
Deferred tax arising on retirement
benefit obligations - -
----------------------------------------- ------ ------
Total comprehensive expense for
the year (7.2) (9.0)
----------------------------------------- ------ ------
Statement of Financial Position
Group Company
Notes 2011 2010 2011 2010
GBPm GBPm GBPm GBPm
------------------------------ ------ -------- -------- -------- --------
ASSETS
Non-current assets
Goodwill 12 2.8 11.2 - -
Investment properties 13 212.2 212.2 - -
Plant and equipment 14 0.1 0.2 - -
Investments in joint ventures 15 - - - -
Investments in funds 16 38.0 41.3 - -
Investments in listed and
unlisted shares 17 0.3 0.3 62.4 70.6
Net investment in finance
leases 19 - 2.4 - -
Deferred income tax assets 23 0.2 0.2 - -
Trade and other receivables 18 3.0 2.2 - -
------------------------------ ------ -------- -------- -------- --------
256.6 270.0 62.4 70.6
------------------------------ ------ -------- -------- -------- --------
Current assets
Trade and other receivables 18 6.1 6.5 65.8 68.5
Cash and cash equivalents 7.2 4.5 - 0.1
------------------------------ ------ -------- -------- -------- --------
13.3 11.0 65.8 68.6
------------------------------ ------ -------- -------- -------- --------
Total assets 269.9 281.0 128.2 139.2
------------------------------ ------ -------- -------- -------- --------
LIABILITIES
Non-current liabilities
Borrowings, including finance
leases 20/21 (252.4) (255.1) - -
Trade and other payables 25 (7.1) (2.1) - (0.2)
Derivative financial
liabilities 22 (2.6) (2.5) - -
Retirement benefit
obligations 3 (0.6) (0.8) - -
Provisions for other
liabilities and charges 24 (3.2) (4.4) - -
------------------------------ ------ -------- -------- -------- --------
(265.9) (264.9) - (0.2)
------------------------------ ------ -------- -------- -------- --------
Current liabilities
Borrowings, including finance
leases 20/21 (1.0) (0.9) - -
Trade and other payables 25 (12.3) (15.8) (139.4) (143.0)
Current income tax
liabilities - (0.3) - -
Provisions for other
liabilities and charges 24 (1.9) (3.1) - -
------------------------------ ------ -------- -------- -------- --------
(15.2) (20.1) (139.4) (143.0)
------------------------------ ------ -------- -------- -------- --------
Total liabilities (281.1) (285.0) (139.4) (143.2)
------------------------------ ------ -------- -------- -------- --------
Net liabilities (11.2) (4.0) (11.2) (4.0)
------------------------------ ------ -------- -------- -------- --------
EQUITY
Capital and reserves
attributable to the owners of
the Parent Company
Share capital 26 2.8 2.8 2.8 2.8
Other Reserves 27 (13.2) (5.8) (13.2) (5.8)
Investment in own shares 28 (0.8) (1.0) (0.8) (1.0)
------------------------------ ------ -------- -------- -------- --------
Total deficit (11.2) (4.0) (11.2) (4.0)
------------------------------ ------ -------- -------- -------- --------
Statement of Changes in Equity
For the year ended 31 March 2011
Share Investment
Share Share Based Revaluation Other Treasury Retained Warrant in own
Group Capital Premium Payments Reserve Reserve Shares Earnings Reserve shares Total
--------------- -------- -------- --------- ------------ -------- --------- --------- -------- ----------- -------
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 31 March
2009 2.8 40.7 1.8 (234.5) 8.0 (1.5) 188.0 - (1.1) 4.2
Total
comprehensive
expense - - - - - - (9.0) - (9.0)
Movement on
revaluation - - - 6.8 - - (6.8) - - -
--------------- -------- -------- --------- ------------ -------- --------- --------- -------- ----------- -------
Transactions
with owners:
Disposal
of investment
in own shares - - - - - - - - 0.1 0.1
Cost of share
based
payments - - (0.3) - - - 0.2 - - (0.1)
Warrants
issued - - - - - - - 0.8 - 0.8
--------------- -------- -------- --------- ------------ -------- --------- --------- -------- ----------- -------
At 31 March
2010 2.8 40.7 1.5 (227.7) 8.0 (1.5) 172.4 0.8 (1.0) (4.0)
--------------- -------- -------- --------- ------------ -------- --------- --------- -------- ----------- -------
Total
comprehensive
expense - - - - - - (7.2) - - (7.2)
Movement on
revaluation - - - 39.0 - - (39.0) - - -
--------------- -------- -------- --------- ------------ -------- --------- --------- -------- ----------- -------
Transactions
with owners:
Disposal
of investment
in own shares - - - - - - - - 0.2 0.2
Cost of share
based
payments - - (0.5) - - - 0.3 - - (0.2)
At 31 March
2011 2.8 40.7 1.0 (188.7) 8.0 (1.5) 126.5 0.8 (0.8) (11.2)
--------------- -------- -------- --------- ------------ -------- --------- --------- -------- ----------- -------
Share Investment
Share Share Based Other Treasury Retained Warrant in own
Company Capital Premium Payments Reserve Shares Earnings Reserve shares Total
--------------- -------- -------- --------- -------- --------- --------- -------- ----------- -------
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 31 March
2009 2.8 40.7 1.8 7.0 (1.5) (45.5) - (1.1) 4.2
Total
comprehensive
expense - - - - - (9.0) - (9.0)
Transactions
with owners:
Disposal
of investment
in own shares - - - - - - - 0.1 0.1
Cost of share
based
payments - - (0.3) - - 0.2 - - (0.1)
Warrants
issued - - - - - - 0.8 - 0.8
--------------- -------- -------- --------- -------- --------- --------- -------- ----------- -------
At 31 March
2010 2.8 40.7 1.5 7.0 (1.5) (54.3) 0.8 (1.0) (4.0)
--------------- -------- -------- --------- -------- --------- --------- -------- ----------- -------
Total
comprehensive
expense - - - - - (7.2) - - (7.2)
Transactions
with owners:
Disposal
of investment
in own shares - - - - - - - 0.2 0.2
Cost of share
based
payments - - (0.5) - - 0.3 - - (0.2)
At 31 March
2011 2.8 40.7 1.0 7.0 (1.5) (61.2) 0.8 (0.8) (11.2)
--------------- -------- -------- --------- -------- --------- --------- -------- ----------- -------
Cash Flow Statements
For the year ended 31 March 2011
Group Company
Notes 2011 2010 2011 2010
GBPm GBPm GBPm GBPm
----------------------------------- ------ ------- -------- ------ ------
Cash flows from operating
activities
Cash generated from operations 30 5.0 7.7 (0.1) (1.8)
Interest paid (7.6) (11.1) - -
Interest received 0.2 0.1 - -
UK Corporation tax (paid) /
received (0.4) 1.0 - 0.4
----------------------------------- ------ ------- -------- ------ ------
Net cash (outflow) / inflow from
operating activities (2.8) (2.3) (0.1) (1.4)
----------------------------------- ------ ------- -------- ------ ------
Cash flows from investing
activities
Purchase of investment properties
and capital expenditure (0.4) (1.2) - -
Sale of investment properties 10.7 14.5 - -
Net cash acquired from disposal
of shares in subsidiary companies - 36.9 - -
Sale of investments in joint
ventures 0.5 - - -
Termination of asset management
contract 3.0 - - -
Distributions received from funds 1.1 1.3 - -
Dividends received from
subsidiaries - - - 0.3
Net cash inflow from investing
activities 14.9 51.5 - 0.3
----------------------------------- ------ ------- -------- ------ ------
Cash flows from financing
activities
Dividends paid - - - -
Increase in bank loans 2.0 15.7 - -
Repayment of bank loans (10.8) (53.2) - -
Finance fees paid(1) (0.6) (16.2) - -
Net cash outflow from financing
activities (9.4) (53.7) - -
----------------------------------- ------ ------- -------- ------ ------
Net increase / (decrease) in cash
and cash equivalents 2.7 (4.5) (0.1) (1.1)
Cash and cash equivalents at
beginning of year 4.5 (286.3) 0.1 1.2
Less: overdraft facility balances - 295.3 - -
----------------------------------- ------ ------- -------- ------ ------
Cash and cash equivalents at end
of year 7.2 4.5 - 0.1
----------------------------------- ------ ------- -------- ------ ------
(1) Finance fees paid in 2010 include derivative break
costs.
Notes to the financial statements
1. Accounting Policies
Basis of preparation
The Financial Statements comprise the consolidated financial
statements of Warner Estate Holdings PLC ("the Group") for the year
ended 31 March 2011 and have been prepared in accordance with
International Financial Reporting Standards ("IFRS") and
International Financial Reporting Interpretation Committee
("IFRIC") interpretations endorsed by the European Union ("EU") and
with those parts of the Companies Act 2006 applicable to companies
reporting under IFRS.
The basis of accounting and format of presentation is subject to
change following any further interpretative guidance that may be
issued by the International Accounting Standards Board ("IASB") and
IFRIC from time to time.
The consolidated financial statements have been prepared under
the historical cost convention, as modified by the revaluation of
certain assets and liabilities, which are carried at fair value,
and in accordance with those IFRS standards and IFRIC
interpretations issued and effective or issued and early adopted as
at the time of preparing these accounts.
The parent company's financial statements have also been
prepared in accordance with IFRS, as applied in accordance with the
provisions of the Companies Act 2006. The Directors' have taken
advantage of the exemption offered by Section 408 of the Companies
Act not to present a separate statement of comprehensive income for
the parent company.
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise judgement in the process of
applying the Group's accounting policies. Although these estimates
are based on management's best knowledge of the amount, events or
actions, actual results ultimately may differ from those
estimates.
These financial statements have been prepared on a going concern
basis, which assumes the Group will continue to be able to meet its
liabilities when they fall due, for the foreseeable future.
Although the Group has net liabilities, this is due to non-cash
unrealised losses on investment property and investments in joint
ventures and funds.
The current economic conditions continue to give rise to a
number of uncertainties with regards to future income and market
valuation movements. However, the Directors believe the Group is
well placed to manage its business risks satisfactorily. The
Directors' continue to monitor working capital levels on a regular
basis.
Accordingly, after making enquiries, the Directors have a
reasonable expectation that the Group and the Company have adequate
resources to continue in operational existence for the foreseeable
future. Therefore the Directors continue to adopt the going concern
basis in preparing the annual report and accounts.
Standards, interpretations and amendments to published standards
that became effective during the year
There are no new accounting standards or interpretations that
are effective for the financial year ended 31 March 2011 that have
a material impact on the Group's financial statements.
The following accounting standards or interpretations were
effective for the financial year beginning 1 April 2010 but have
not had a material impact on the Group:
-- IFRS 1 (revised) 'First time adoption'
-- IFRS 1 (amendment) 'First time adoption'
-- IFRS 2 (amendment) 'Share-based Payment - Group cash-settled
share-based payment transactions'
-- IFRS 3 (revised) 'Business combinations'
-- IAS 27 (revised) 'Consolidated and separate financial
statements'
-- IAS 32 (amendment) 'Financial instruments: Presentation'
-- IAS 39 (amendment) 'Financial instruments: Recognition and
measurement'
-- IFRIC 17 'Distributions of non-cash assets to owners'
-- IFRIC 18 'Transfer of assets from customers'
Standards, interpretations and amendments to published standards
that are not yet effective
The accounting policies are consistent with those applied in the
year ended 31 March 2010, as amended to reflect the adoption of the
new Standards, Amendments to Standards and Interpretations which
are mandatory for the year ended 31 March 2011. In most cases,
these new requirements are not relevant for the Group.
The following accounting standards or interpretations are not
yet effective and are not expected to have a material impact on the
Group. None of these accounting standards or interpretations has
been early adopted by the Group.
IAS 24 (revised) 'Related party disclosures'
IFRIC 14 (amendment) 'Prepayments of a Minimum Funding
Requirement'
IFRIC 19 'Extinguishing Financial Liabilities with Equity
Instruments'
In addition, there are a number of changes to standards as a
result of the IASB's 2009 and 2010 Annual Improvements programme.
None of these are expected to have a material impact on the
Group.
Consolidation
(a) Subsidiary undertakings
Subsidiaries are all entities over which the Group has the power
to govern the financial and operating policies generally
accompanying a shareholding of more than one half of the voting
rights.
The existence and effect of potential voting rights that are
currently exercisable or convertible are considered when assessing
whether the Group controls another entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the
Group. They are de-consolidated from the date control ceases. All
inter-company transactions, balances and unrealised gains on
transactions between Group companies are eliminated upon
consolidation. Uniform accounting policies have been adopted across
the Group.
(b) Interests in joint ventures
Interests in jointly controlled entities are accounted for using
the equity method. Unrealised gains and losses on transactions
between the Group and its joint ventures are eliminated to the
extent of the Group's interest in the joint ventures. The Group's
share of profit of joint ventures represents the Group's share of
the joint venture's profit after tax. Joint ventures with net
liabilities are carried at nil value in the statement of financial
position where there is no commitment to fund the deficit and any
distributions are included in the consolidated statement of income
for the year.
Segment reporting
Segmental information is disclosed in the notes to the financial
statements reflecting management reporting of financial performance
and position as used in operational decision making.
Plant and equipment
Plant and equipment is initially measured at cost. After initial
recognition, it is carried at cost less subsequent depreciation and
impairment. Cost includes expenditure that is directly attributable
to the acquisition of the items.
Subsequent costs are included in the asset's carrying amount or
recognised as a separate asset, as appropriate, only when it is
probable that the future economic benefits associated with the item
will flow to the Group and the cost of the item can be measured
reliably. All other repairs and maintenance are charged to the
consolidated statement of income during the financial period in
which they are incurred.
Plant and equipment is depreciated by equal annual instalments
over their estimated useful lives and are carried at historic cost
less accumulated depreciation. The Group estimates a useful life of
3 years for computer equipment and 8 years for other fixtures and
fittings.
Where the carrying amount of an item of plant and equipment is
greater than its estimated recoverable amount, it is written down
immediately to its recoverable amount. Recoverable amount is the
higher of fair value less costs to sell and value in use and is
determined for an individual asset. After initial recognition, the
item is carried at its cost less any accumulated depreciation and
any accumulated impairment losses.
Goodwill
Business combinations are accounted for by applying the purchase
method. The excess of the cost of the business combination over the
acquirer's interest in the net fair value of the identifiable
assets, liabilities and contingent liabilities, recognised in
accordance with IFRS 3, Business Combinations, constitutes
goodwill, and is recognised as an asset. After initial recognition,
goodwill is measured at cost less any accumulated impairment
losses, until disposal or termination of the previously acquired
business (including planned disposal or termination where there are
indications that the value of the goodwill has been permanently
impaired), when the profit or loss on disposal or termination will
be calculated after charging the book amount of any such goodwill
through the consolidated income statement.
Assets that have an indefinite useful life are not subject to
amortisation and are tested annually for impairment. Assets that
are subject to amortisation are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying
amount may not be recoverable. To the extent that the carrying
amount exceeds the recoverable amount, which is the higher of net
realisable value and value in use, the asset is written down to its
recoverable amount. Any impairment is recognisedin the consolidated
income statement and is not subsequently reversed. Net realisable
value is the estimated amount at which an asset can be disposed of,
less any direct selling costs.
Value in use is the estimate of the discounted future cash flows
generated from the asset's continued use, including those resulting
from its ultimate disposal. For the purposes of assessing value in
use, assets are grouped into cash generating units which represent
the lowest levels for which there are separately identifiable cash
flows.
The assets' residual values and useful lives are reviewed, and
adjusted if appropriate, at each statement of financial position
date.
Investment property
(a) Initial recognition
Property that is held for long-term rental yields or for capital
appreciation or both, and that is not occupied by the Group, is
classified as investment property.
Investment property comprises freehold land, freehold buildings,
land held under operating leases and buildings held under finance
leases. When the Group begins to redevelop an existing investment
property for continued future use as an investment property, the
property remains an investment property and is accounted for as
such.
Property that is being constructed or developed for future use
as investment property, but which has not previously been
classified as such, is classified as property under the course of
development. This is recognised at fair value. Interest is
capitalised (before tax relief) on the basis of the average rate of
interest paid on the relevant debt outstanding until the date of
practical completion. On completion the property is transferred to
investment property.
Land held under operating leases is classified and accounted for
as investment property when the rest of the definition of
investment property is met. In such cases, the operating lease is
accounted for as if it were a finance lease.
Investment property is measured initially at its cost, including
related transaction costs.
(b) Fair value
After initial recognition, investment property is carried at
fair value. Fair value is based on active market prices, adjusted,
if necessary, for any difference in the nature, location or
condition of the specified asset. The Group uses external valuers
to determine the fair values of investment properties. These
valuations are performed in accordance with the guidance issued by
the Royal Institution of Chartered Surveyors. These valuations are
reviewed at each financial reporting period end by independent
external valuers who hold recognised and relevant professional
qualifications and have recent experience in the location and
category of the investment property being valued. Investment
property that is being redeveloped for continuing use as investment
property, or for which the market has become less active, continues
to be measured at fair value.
The fair value of investment property reflects, among other
things, rental income from current leases and assumptions about
rental income from future leases in the light of current market
conditions.
The fair value also reflects, on a similar basis, any cash
outflows that could be expected in respect of the property.
Some of those outflows are recognised as a liability, including
finance lease liabilities in respect of land classified as
investment property; others, including contingent rent payments,
are not recognised in the financial statements, unless they qualify
as a provision.
(c) Subsequent expenditure
Subsequent expenditure is charged to the asset's carrying amount
only when it is directly attributable to bringing the asset to the
location and condition necessary for it to be capable of operating
in the manner intended by management and the cost of the item can
be measured reliably. All repairs and maintenance costs are charged
to the consolidated income statement during the financial period in
which they are incurred. Gross borrowing costs associated with
direct expenditure on properties under development or undergoing
major refurbishment are capitalised. With specific developments,
the amount capitalised is the gross interest incurred on those
borrowings less any investment income arising on their temporary
investment. Interest is capitalised as from the commencement of the
development work until the date of practical completion. The
capitalisation of finance costs is suspended if there are prolonged
periods when development activity is interrupted. Interest is also
capitalised on the purchase cost of a site or property acquired
specifically for redevelopment in the short term but only where
activities necessary to prepare the asset for redevelopment are in
progress.
(d) Changes in fair value and transfers
Changes in fair values are recorded in the consolidated income
statement for investment properties.
If an investment property becomes owner-occupied, it is
reclassified as property, plant and equipment, and its fair value
at the date of reclassification becomes its cost for accounting
purposes. Property that is being constructed or developed for
future use as investment property is classified as properties under
the course of development and stated at fair value until
construction or development is complete, at which time it is
reclassified and subsequently accounted for as investment
property.
Cash and cash equivalents
Cash and cash equivalents comprises cash balances, deposits held
at call with banks and other short-term highly liquid investments
with original maturities of three months or less. Cash and cash
equivalents are categorised as loans and receivables. Bank
overdrafts that are repayable on demand and form an integral part
of the Group's cash management are included as a component of cash
and cash equivalents for the purpose of the statement of cash
flows. Bank overdrafts are disclosed in current and non-current
liabilities.
Employee benefits
The Group accounts for pensions under IAS 19 'Employee
Benefits'. In respect of the defined benefit pension scheme,
obligations are measured at discounted present value while scheme
assets are measured at their fair value.
The operating and financing costs of this plan are recognised
separately in the consolidated statement of comprehensive income.
Service costs are spread systematically over the working lives of
the employees concerned with the charge for the period included in
operating costs in the consolidated statement of comprehensive
income.
Financing costs are recognised in the periods in which they
arise and are included in interest expense. Actuarial gains and
losses arising from either experience differing from previous
actuarial assumptions or changes to those assumptions are
recognised immediately in the consolidated statement of
comprehensive income.
Contributions to defined contribution schemes are expensed as
incurred.
Income taxes
The investment property segment of the Group's business
converted to a REIT as stated below and is therefore exempt from
tax. The asset management segment of the business continues to be
subject to tax.
The charge for current taxation is based on the results for the
year as adjusted for items which are non-assessable or disallowed.
It is calculated using rates that have been enacted or
substantively enacted by the statement of financial position date.
Tax payable upon realisation of fair value gains recognised in
prior periods is recorded as a current tax charge with a release of
the associated deferred tax.
Deferred tax is provided using the statement of financial
position liability method in respect of temporary differences
between the carrying amount of assets and liabilities in the
financial statements and the corresponding tax bases used in
computation of taxable profit with the exception of deferred tax on
fair value gains where the tax basis used is the historic cost.
Provision is made for temporary differences between the carrying
value of assets and liabilities in the consolidated financial
statements and the values used for tax purposes. Temporary
differences are not provided for when they arise from initial
recognition of assets and liabilities that do not affect accounting
or taxable profit.
When distributions are controlled by the Group, and it is
probable the temporary difference will not reverse in the
foreseeable future, deferred tax which would arise on the
distribution of profits realised in subsidiaries, associates and
joint ventures is provided in the same period as the liability to
pay the distribution is recognised in the financial statements.
Deferred tax is determined using tax rates that have been
enacted or substantially enacted by the statement of financial
position date and are expected to apply when the related deferred
tax asset is realised or the deferred tax liability is settled. It
is recognised in the consolidated income statement except when it
relates to items credited or charged directly to equity, in which
case the deferred tax is also dealt with in equity.
Deferred tax assets are recognised to the extent that it is
probable that future taxable profit will be available against which
the temporary differences can be utilised.
Deferred tax assets and liabilities are offset only when they
relate to taxes levied by the same authority, with a legal right to
set off and when the Group intends to settle them on a net
basis.
Compliance with the Real Estate Investment Trust ("REIT")
taxation regime
On 1 April 2007 the investment property segment of the Group
converted to a group REIT. In order to achieve and retain group
REIT status, several entrance tests had to be met and certain
ongoing criteria must be maintained. The main criteria are as
follows:
-- at the start of each accounting period, the assets of the tax
exempt business must be at least 75% of the total value of the
Group's assets;
-- at least 75% of the Group's total profits must arise from the
tax exempt business; and
-- at least 90% of the profit of the property rental business
must be distributed.
The Directors intend that the Group should continue as a group
REIT for the foreseeable future, with the result that deferred tax
is no longer recognised on temporary differences relating to the
property rental business.
Provisions
Provisions are recognised when the Group has a present legal or
constructive obligation as a result of past events, it is more
likely than not that an outflow of resources will be required to
settle the obligation, and the amount has been reliably
estimated.
(a) Onerous contracts
Provision is made in respect of costs incurred on vacant
leasehold properties or for leasehold properties sublet at a level
which renders the properties loss-making over the length of the
lease, being the net cash outflow committed to be incurred over the
lives of the leases. Any increase or decrease in the provision is
taken to the consolidated income statement each financial period.
The provision is assessed on a property by property basis taking
account of individual cash flows. Cash flows are discounted using
the risk free rate.
(b) Share-based payments
The cost of granting share options and other share based
remuneration to employees and directors is recognised through the
consolidated income statement with reference to the fair value at
the date of the grant. The Group has used the Black-Scholes option
valuation model and a stochastic model to establish the relevant
costs. The resulting values are amortised through the consolidated
income statement over the vesting period of the options and other
grants. The charge is reversed if it appears probable that
applicable performance criteria will not be met.
Own shares held in connection with employee share plans or other
share based payment arrangements are treated as treasury shares and
deducted from equity. No profit or loss is recognised in the
consolidated income statement on their sale, re-issue or
cancellation.
(c) Dilapidations
Where the Group, as lessee, is contractually required to restore
a leased property to an agreed condition, prior to release by a
lessor, provision is made for such dilapidation costs as they are
identified.
Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable and is stated net of sales taxes and value
added taxes. Revenue includes 'Rental and similar income', 'Service
charge and similar income' and 'Turnover from asset management
activities'. Revenue is recognised as follows:
(a) Rental and similar income
Rental income from operating lease income is recognised on a
straight-line basis over the lease term.
When the Group provides incentives to its customers, the cost of
incentives are recognised over the lease term, on a straight-line
basis, as a reduction of rental income.
(b) Service charge and similar income
Service and management charge income is recognised on a gross
basis in the accounting period in which the services are rendered.
Where the Group is acting as an agent, the commission rather than
gross income is recorded as revenue.
(c) Income from asset management activities
Management fees earned are calculated on an accruals basis.
Asset management income is recognised in the accounting period in
which the services are rendered.
Performance fees are recognised, in line with the asset
management contracts, at the end of the performance period to which
they relate, based on the outperformance of relevant benchmarks.
The performance period is normally three years. Where performance
subsequently falls short of these benchmarks, fees are repayable,
up to the amount received for the previous two years. Where there
is a reasonable likelihood that part of a performance fee will be
repaid the estimated repayment will not be recognised until the
outcome can be reliably estimated.
Other income
(a) Income from investments
Dividend income from investments is recognised when the
shareholders' rights to receive payment have been established.
Distribution income from funds is recognised on an accruals
basis.
(b) Income from property disposals
Profits or losses arising from the sale of trading and
investment properties are included in the consolidated income
statement of the Group where an exchange of contracts has taken
place under which any minor outstanding conditions not affecting
the transfer of risks and rewards are entirely within the control
of the Group. Profits or losses arising from the sale of trading
and investment properties are calculated by reference to their
carrying value and are included in operating profit.
(c) Other interest income
Other interest income is accrued on a time basis, by reference
to the principal outstanding and the effective interest rate.
Leases
(a) A Group company is the lessee
(i) Operating lease - leases in which substantially all risks
and rewards of ownership are retained by another party, the lessor,
are classified as operating leases. Payments, including
prepayments, made under operating leases (net of any incentives
received from the lessor) are charged to the consolidated income
statement on a straight-line basis over the period of the
lease.
(ii) Finance lease - leases of assets where the Group has
substantially all the risks and rewards of ownership are classified
as finance leases. Finance leases are capitalised at the lease
commencement date at the lower of the fair value of the leased
property and the present value of the minimum lease payments. The
investment properties acquired under finance leases are carried at
their fair value.
The corresponding rental obligations, net of finance charges,
are included in current and non-current borrowings. The interest
element of the finance cost is charged to the consolidated income
statement over the lease period so as to produce a constant
periodic rate of interest on the remaining balance of the liability
for each period.
(b) A Group company is the lessor
(i) Operating lease - properties leased out under operating
leases are included in investment property in the consolidated
statement of financial position.
(ii) Finance lease - when assets are leased out under a finance
lease, the present value of the lease payments is recognised as a
receivable. The difference between the gross receivable and the
present value of the receivable accrues as finance income. Lease
income is recognised over the term of the lease using the net
investment method before tax, which reflects a constant periodic
rate of return.
Financial instruments and hedging activities
Derivatives
The Group uses derivatives to help manage its interest rate
risk. In accordance with its treasury policy, the Group does not
hold or issue derivatives for trading purposes.
Derivatives are initially recognised at fair value on the date a
derivative contract is entered into and are subsequently remeasured
at their fair value. The method of recognising the resulting gain
or loss depends on whether the derivative is designated as a
hedging instrument, and if so, the nature of the item being hedged.
None of the derivatives currently held are designated as hedging
instruments and accordingly any gain or loss is recognised in the
consolidated income statement in the period in which it arises.
Hedge accounting
The Group's derivative financial instruments do not qualify for
hedge accounting and changes in the fair value of derivative
financial instruments are recognised in the consolidated income
statement as they arise.
Financial assets
The Group classifies its financial assets in the following
categories: financial assets at fair value through the consolidated
income statement, loans and receivables, held-to-maturity
investments and available-for-sale financial assets. The
classification depends on the purpose for which the investments
were acquired. Management determines the classification of its
investments at initial recognition and reviews this designation at
each reporting date.
Purchases and sales of investments are recognised on the trade
date; the date on which the Group commits to purchase or sell the
asset. Investments are initially recognised at fair value plus
transaction costs for all financial assets not carried at fair
value through profit or loss. Investments are derecognised when the
rights to receive cash flows from the investments have expired or
have been transferred and the Group has transferred substantially
all risks and rewards of ownership.
(a) Financial assets at fair value through the consolidated
statement of income
This category has two sub-categories: financial assets held for
trading, and those designated at fair value through the
consolidated income statement at inception. A financial asset is
classified in the first category if acquired principally for the
purpose of selling in the short term or if so designated by
management. Derivatives are also classified as held for trading
unless they are designated as hedges. Assets in the second category
are classified as current assets if they are expected to be
realised within 12 months of the statement of financial position
date.
Realised and unrealised gains and losses arising from changes in
the fair value of the 'financial assets at fair value through the
consolidated income statement' category are included in the
consolidated income statement in the period in which they
arise.
The fair values of listed investments are based on current bid
prices. If the market for a financial asset is not active (and for
unlisted securities), the Group establishes fair value by using
valuation techniques. These include the use of recent arm's length
transactions, reference to other instruments that are substantially
the same, discounted cash flow analysis and option pricing models
refined to reflect the issuer's specific circumstances. For
unlisted investments in shares, fair value is based on an average
spread of price/earnings ratios from comparable companies,
discounted for non-marketability. Changing the assumptions to other
reasonably possible alternative assumptions would not change the
fair value significantly. For investments in funds, fair value is
measured as the unit price of the holding at the statement of
financial position date.
(b) Loans and receivables
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. They arise when the Group provides money, goods or services
directly to a debtor with no intention of trading the receivable.
They are included in current assets, except for maturities greater
than 12 months after the statement of financial position date.
These are classified as non-current assets. Loans and receivables
are included in trade and other receivables in the statement of
financial position.
The Group assesses at each statement of financial position date
whether there is objective evidence that a financial asset or a
group of financial assets is impaired.
Trade and other receivables
Trade receivables are recognised initially at fair value and
subsequently measured at amortised cost, less provision for
impairment. A provision for impairment in trade receivables is
established when there is objective evidence that the Group will
not be able to collect all amounts due according to the original
terms of receivables. The amount of the provision is the difference
between the asset's carrying amount and the present value of
estimated future cash flows, discounted at the effective interest
rate. The changes to the provision are recognised in the
consolidated income statement.
Investments in subsidiary undertakings
Investments in subsidiary undertakings are carried in the
company's statement of financial position at cost less any
provision for impairment.
Impairment
The carrying amounts of the Group's and Company's financial
assets (where applicable) and non-financial assets, other than
investment properties, are reviewed at each reporting date to
determine whether there is any indication of impairment. If any
such indication exists, the asset's recoverable amount is
estimated. An impairment loss is recognised in the consolidated
income statement whenever the carrying amount of an asset exceeds
its recoverable amount. The recoverable amount of an asset is the
greater of its fair value less costs to sell and its value in use.
The value in use is determined as the net present value of the
future cash flows expected to be derived from the asset, discounted
using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to
the asset
An impairment loss is reversed if there has been a change in the
estimates used to determine the recoverable amount. An impairment
loss is reversedonly to the extent that the asset's carrying amount
after the reversal does not exceed the amount that would have been
determined, net of applicable depreciation, if no impairment loss
had been recognised.
Borrowings
Borrowings are initially recognised at the fair value of
consideration received, net of transaction costs incurred.
Borrowings are subsequently stated at amortised cost; any
difference between the proceeds (net of transaction costs) and the
redemption value is recognised in the consolidated income statement
over the period of the borrowings using the effective interest
method.
Transaction costs are capitalised on the statement of financial
position and are amortised over the life of the associated
borrowing instrument through the effective rate of interest.
Borrowings are classified as current liabilities unless the
Group has an unconditional right to defer settlement of the
liability for at least 12 months after the statement of financial
position date.
Exit fees are accrued and recognised in the consolidated income
statement over the period of borrowing based on the position at the
balance sheet date.
Share capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new
shares or options are shown in equity as a deduction, net of tax,
from the proceeds. Incremental costs directly attributable to the
issue of new shares or options, or for the acquisition of a
business, are included in the cost of acquisition as part of the
purchase consideration.
Where any Group company purchases the Company's equity share
capital (treasury shares), the consideration paid, including any
directly attributable incremental costs, (net of tax) is deducted
from equity attributable to the Company's equity holders until the
shares are cancelled, reissued or disposed of. Where such shares
are subsequently sold or reissued, any consideration received, net
of any directly attributable incremental transaction costs and the
related income tax effects, are included in equity attributable to
the Company's equity holders.
Warrants reserve
Warrants issued are classified as non-distributable
reserves.
The Group issued warrants to two of its lenders in conjunction
with the refinancing entitling them to subscribe for ordinary
shares in the Group. These have been accounted for at fair value on
the date of issue. As these warrants are related to the
refinancing, the have been capitalised as transaction costs and
amortised over the life of the associated borrowing as set out in
the borrowing accounting policy.
Critical accounting policies and judgements
The preparation of the Consolidated Financial Statements
requires management to make estimates and assumptions that affect
the reported amounts of revenues, expenses, assets and liabilities,
and disclosure of contingencies at the date of the Consolidated
Financial Statements. If in the future such estimates and
assumptions, which are based on management's best judgement at the
date of the Consolidated Financial Statements, deviate from the
actual circumstances, the original estimates and assumptions will
be modified, as appropriate, in the period in which the
circumstances change. The following policies are considered to be
of greater complexity and / or particularly subject to the exercise
of judgement. These judgements involve assumptions or estimates in
respect of future events. Actual results may differ from
estimates.
(a) Goodwill
As required by IAS 36, Impairment of Assets, the Group regularly
monitors the carrying value of its assets, including goodwill.
Impairment reviews compare the carrying values to the present value
of future cash flows that are derived from the relevant asset or
cash-generating unit. These reviews therefore depend on management
estimates and judgements, in particular in relation to the
forecasting of future cash flows and the discount rate applied to
the cash flows.
(b) Post-employment benefits
Application of IAS 19, Employee Benefits, requires the exercise
of judgement in relation to setting the assumptions used by the
actuaries in assessing the financial position of each scheme. The
Group determines the assumptions to be adopted in discussion with
its actuaries, and believe these assumptions to be in line with IAS
generally accepted practice.
(c) Provisions
The Group carries statement of financial position provisions in
respect of onerous contracts and dilapidations amongst other
exposures. Judgement is involved in assessing the exposure in these
areas and hence in setting the level of the required
provisions.
(d) Estimate of fair value of investment properties
The best evidence of fair value is current prices in an active
market for similar lease and other contracts. In the absence of
such information, the Group, using third party independent experts,
determines the amount within a range of reasonable fair value
estimates. In making its judgement, the Group and its third party
independent experts consider information from a variety of sources
including:
i) current prices in an active market for properties of a
different nature, condition or location (or subject to different
lease or other contracts), adjusted to reflect those
differences;
ii) recent prices of similar properties in less active markets,
with adjustments to reflect any changes in economic conditions
since the date of the transactions that occurred at those prices;
and
iii) discounted cash flow projections based on reliable
estimates of future cash flows, derived from the terms of any
existing lease and other contracts, and (where possible) from
external evidence such as current market rents for similar
properties in the same location and condition, and using discount
rates that reflect current market assessments of the uncertainty in
the amount and timing of the cash flows.
(e) Principal assumptions for management's estimation of fair
value of investment properties
If information on current or recent prices of assumptions
underlying the discounted cash flow approach investment properties
is not available, the fair values of investment properties are
determined using discounted cash flow valuation techniques. The
Group and its third party independent experts use assumptions that
are mainly based on market conditions existing at each balance
sheet date.
The principal assumptions underlying management's estimation of
fair value are those related to: the receipt of contractual
rentals; expected future market rentals; void periods; maintenance
requirements; and appropriate discount rates. These valuations are
regularly compared to actual market yield data and actual
transactions by the company and those reported by the market.
The expected future market rentals are determined on the basis
of current market rentals for similar properties in the same
location and condition.
The fair value of investment properties is disclosed in note
13.
(f) Investments in unlisted shares
The valuation technique is disclosed in the financial assets
accounting policy note. These valuations depend on management
estimates and judgements, in particular in relation to the
forecasting of future cash flows and the discount rate applied to
the cash flows.
(g) Derivative financial assets and liabilities
The IASB published amendments to IFRS 7 in March 2009. The
amendment requires enhancing existing disclosures about fair value
measurements and liquidity risk. The amendment requires disclosure
of fair value measurements by level of a three-level fair value
measurement hierarchy. The adoption of the amendment results in
additional disclosures but does not have an impact on profit or
earnings per share.
2. Segmental Reporting
Business Segments
Operating segments are determined based on the internal
reporting and operational management of the Group. The Group is
organised into two operating divisions, Property Investment and
Asset Management.
Property investment principally involves engaging in acquiring
freehold or leasehold properties, including shopping centres, in
the UK. Properties are held for capital appreciation and the
revenue relates to rental income and is measured in a manner
consistent with that in the consolidated income statement. Asset
management involves managing property assets and receiving a
contractual fee for the service.
The operating segments derive their revenue primarily from
rental income and management fees.
Unallocated and other activity costs which include the Group's
holdings in joint ventures and investments in funds are incurred
centrally which are neither directly nor reasonably attributable to
the individual segments.
Unallocated
Property and other Group
Investment Asset Management activities Total
GBPm GBPm GBPm GBPm
--------------------- ------------ ----------------- ------------ --------
Year ended 31 March
2011
Rental and similar
income 16.5 - - 16.5
Property management
expenses (3.0) - - (3.0)
Movement in
provision for
onerous contracts - - - -
Service charge and
similar income 3.8 - - 3.8
Service charge
expense and similar
charges (5.0) - - (5.0)
--------------------- ------------ ----------------- ------------ --------
Net rental income 12.3 - - 12.3
Revenue from asset
management
activities
------------ ----------------- ------------ --------
Management fee
income - 10.2 - 10.2
Performance
fee income - - - -
- 10.2 - 10.2
Asset management
expenses - (7.9) - (7.9)
Other operating
expenses (0.2) (1.0) - (1.2)
--------------------- ------------ ----------------- ------------ --------
Operating profit
before net gain on
investments 12.1 1.3 - 13.4
Net gain from fair
value adjustments
on investment
properties 6.9 - - 6.9
Net loss from fair
value adjustments
on investments - - (3.3) (3.3)
Profit on sale of
investment
properties 0.2 - - 0.2
Profit on sale of
investment in joint
ventures - - 0.5 0.5
Profit on
termination of
asset management
contract - 3.0 - 3.0
Impairment of
goodwill - (8.4) - (8.4)
Operating profit / (
loss) 19.2 (4.1) (2.8) 12.3
--------------------- ------------ ----------------- ------------ --------
Net interest expense - - (19.4) (19.4)
Share of joint
ventures' post tax
losses - - - -
--------------------- ------------ ----------------- ------------ --------
Profit / (loss)
before income tax 19.2 (4.1) (22.2) (7.1)
--------------------- ------------ ----------------- ------------ --------
Taxation - current - - (0.1) (0.1)
Taxation - deferred - - - -
--------------------- ------------ ----------------- ------------ --------
Profit / (loss) for
the year 19.2 (4.1) (22.3) (7.2)
--------------------- ------------ ----------------- ------------ --------
Total assets 217.9 5.0 47.0 269.9
Total liabilities
excluding
borrowings and
finance leases (19.2) (1.1) (7.4) (27.7)
Borrowing, including
finance leases (4.3) - (249.1) (253.4)
--------------------- ------------ ----------------- ------------ --------
Net (liabilities) /
assets 194.4 3.9 (209.5) (11.2)
--------------------- ------------ ----------------- ------------ --------
Other segment items:
Capital expenditure 0.4 - - 0.4
Depreciation - 0.1 - 0.1
--------------------- ------------ ----------------- ------------ --------
Unallocated
Property and other Group
Investment Asset Management activities Total
GBPm GBPm GBPm GBPm
--------------------- ------------ ----------------- ------------ --------
Year ended 31 March
2010
Rental and similar
income 18.7 - - 18.7
Property management
expenses (5.6) - - (5.6)
Movement in
provision for
onerous contracts (4.2) - - (4.2)
Service charge and
similar income 3.1 - - 3.1
Service charge
expense and similar
charges (4.4) - - (4.4)
--------------------- ------------ ----------------- ------------ --------
Net rental income 7.6 - - 7.6
Revenue from asset
management
activities
------------ ----------------- ------------ --------
Management fee
income
Performance
fee income - 9.9 - 9.9
Performance fee
provision - 1.1 - 1.1
------------ ----------------- ------------ --------
- 11.0 - 11.0
Asset management
expenses - (9.2) - (9.2)
Other operating
expenses (0.5) (1.0) - (1.5)
--------------------- ------------ ----------------- ------------ --------
Operating profit
before net loss on
investments 7.1 0.8 - 7.9
Net loss from fair
value adjustments
on investment
properties (2.8) - - (2.8)
Net loss from fair
value adjustments
on investments - - (6.2) (6.2)
Loss on sale of
investment
properties (0.1) - - (0.1)
Operating loss 4.2 0.8 (6.2) (1.2)
--------------------- ------------ ----------------- ------------ --------
Net interest expense - - (7.5) (7.5)
Share of joint
ventures' post tax
losses - - (1.0) (1.0)
--------------------- ------------ ----------------- ------------ --------
Profit / (loss)
before income tax 4.2 0.8 (14.7) (9.7)
--------------------- ------------ ----------------- ------------ --------
Taxation - current 0.8 - - 0.8
Taxation - deferred - - - -
--------------------- ------------ ----------------- ------------ --------
Profit / (loss) for
the year 5.0 0.8 (14.7) (8.9)
--------------------- ------------ ----------------- ------------ --------
Total assets 219.6 13.9 47.5 281.0
Total liabilities
excluding
borrowings and
finance leases (19.1) (0.7) (9.2) (29.0)
Borrowing, including
finance leases (3.3) - (252.7) (256.0)
--------------------- ------------ ----------------- ------------ --------
Net assets /
(liabilities) 197.2 13.2 (214.4) (4.0)
--------------------- ------------ ----------------- ------------ --------
Other segment items:
Capital expenditure 1.2 - - 1.2
Depreciation - 0.2 - 0.2
--------------------- ------------ ----------------- ------------ --------
All turnover and operating profit has arisen from continuing
operations.
(a) Rents receivable includes GBP1.2million (2010:
GBP0.3million) which represents rent allocated to rent free
periods.
(b) Service charge and similar income includes monies received
from tenants in respect of service charge costs the tenants bear on
their properties. Service charge costs not recovered ("void costs")
are included within service charge expense and similar charges of
GBP1.2million (2010: GBP1.3million).
Reportable segments' profits after tax are reconciled to total
loss for the year as follows:
2011 2010
GBPm GBPm
-------------------------------------- ------- -------
Segments' profit after tax for
reportable segments 15.1 5.8
Unallocated:
Net loss from fair value adjustments
on investments (3.3) (6.2)
Profit on sale of joint ventures 0.5 -
Finance income 1.7 1.8
Finance expense (21.0) (12.2)
Change in fair value of derivative
financial instruments (0.1) 2.9
Share of joint ventures' post
tax losses - (1.0)
Taxation - current (0.1) -
Total losses per consolidated
statement of income (7.2) (8.9)
-------------------------------------- ------- -------
Reportable segments' assets are reconciled to total assets as
follows:
2011 2010
GBPm GBPm
--------------------------------- ------ ------
Segments' assets for reportable
segments 222.9 233.5
Unallocated:
Investments in funds 38.0 41.3
Investments in listed and unlisted
shares 0.3 0.3
Receivables 1.2 1.0
Plant and equipment 0.1 0.2
Deferred income tax assets 0.2 0.2
Cash and cash equivalents 7.2 4.5
------------------------------------ ------ ------
Total assets per statement of
financial position 269.9 281.0
------------------------------------ ------ ------
Reportable segments' liabilities are reconciled to total
liabilities as follows:
2011 2010
GBPm GBPm
-------------------------------------- ----- -----
Segments' liabilities for reportable
segments 24.6 23.1
Unallocated:
Bank loans and overdrafts 249.1 252.7
Derivative financial liabilities 2.6 2.5
Retirement benefit obligations 0.6 0.8
Current income tax liabilities - 0.3
Trade and other payables 4.2 5.6
Total liabilities per statement
of financial position 281.1 285.0
---------------------------------- ------ ------
The Group is domiciled in the United Kingdom where revenue is
generated from property assets and management fee income. All
revenue derived from external customers is listed above. All of the
Group's non-current assets, current assets and all liabilities are
domiciled in the United Kingdom.
The parent company is a holding company and does not operate in
any segments.
2011 2010
GBPm GBPm
------------------------------------ ----- -----
Operating profit is stated after
charging:
Depreciation - owned assets 0.1 0.2
Operating lease charges - occupied
properties 1.3 0.9
During the year the following amounts were charged to the
consolidated statement of income in respect of auditors'
remuneration:
2011 2010
GBPm GBPm
------------------------------------------------- ----- -----
Remuneration to the principal auditor
in respect of audit fees:
Statutory audit of the company and consolidated
accounts 0.3 0.2
Remuneration to the principal auditor
in respect of other services:
Statutory audit of subsidiary accounts 0.1 0.1
Non-audit services: Taxation 0.1 0.1
------------------------------------------------- ----- -----
0.5 0.4
------------------------------------------------- ----- -----
In addition GBP0.1million was charged by the Auditors for audit
services to the joint ventures (2010: GBP0.1million) and nil for
tax work (2010: GBP0.1million).
3. Employees
2011 2010
GBPm GBPm
--------------------------- ----- -----
Staff costs
Wages and salaries 4.7 6.1
Social security costs 0.5 0.7
Other pension costs 0.4 0.6
Other staff costs 0.2 0.4
Share based payment costs - 0.1
--------------------------- ----- -----
5.8 7.9
--------------------------- ----- -----
The amounts above are net of GBP0.9million (2010: GBP0.9million)
relating to staff costs recharged to certain joint ventures and
funds.
2011 2010
Number Number
---------------------------------------- ------- -------
The average number of persons employed
during the year was:
Directors 2 3
Management and administrative 119 135
Repairs and service 29 29
---------------------------------------- ------- -------
150 167
---------------------------------------- ------- -------
The parent company had no employees during the year (2010:
Nil).
Retirement Benefit Obligations
The Group operates and contributes to pension schemes for
certain Directors and employees and makes some discretionary
allowances. The costs charged to the consolidated income statement
for the year to 31 March 2011 in respect of these amounted to
GBP0.4million (2010: GBP0.3million). Pension premiums paid in
advance were GBPnil (2010: GBPnil).
The Group operates a funded defined benefit scheme in the UK,
The Warner Estate Group Retirement Benefits Scheme. The costs
charged to the consolidated income statement for the year to 31
March 2011 in respect of these amounted to GBPnil (2010:
GBP0.3million). A full valuation was carried out at 1 April 2009.
The values at 31 March 2011 were updates of the 1 April 2009
valuation carried out by a qualified independent actuary.
It has been agreed with the Trustees that the Group contributes
37.7% of pensionable salary plus GBP0.2million per annum.
The discount rate used to calculate the funding target is equal
to the yield on fixed interest gilts of appropriate term at the
valuation date plus 2% per annum for active and deferred members
over the period to retirement. The inflation assumption is derived
from the difference between the yield on fixed interest gilts and
the yield on indexed-linked gilts at the valuation date.
Warner Estate Holdings PLC employs a building block approach in
determining the long term rate of return on pension plan assets.
Historical markets are studied and assets with higher volatility
are assumed to generate higher returns consistent with widely
accepted capital market principles. The assumed long-term rate of
return on each asset class is set out within this note. The overall
expected rate of return on assets is then derived by aggregating
the expected return for each asset class over the actual asset
allocation for the Scheme at the 31 March 2011.
Actuarial gains and losses are recognisedthrough the
Consolidated Statement of Changes in Equity.
The following assumptions were made by the Group:
2011 2010
% per
annum % per annum
------------------------------------------ ------- ------------
Discount rate 5.55 5.55
Rate of increase in pensionable salaries 3.70 3.95
Rate of increases to pensions in payment 3.45 3.65
Price inflation 3.70 3.95
Mortality assumptions are based on standard mortality tables
which allow for future mortality improvements. The assumptions are
that a member currently aged 60 will live on average for a further
29 years if they are male and for a further 30 years if they are
female. For a member who retires in future at age 60 the
assumptions are that they will live on average for a further 31
years after retirement if they are male and for a further 32 years
after retirement if they are female.
The market value of the assets of the Scheme together with the
expected rates of return at the beginning and end of the year were
as follows:
Long-term Long-term
rate of rate of
return return
expected Value expected
at 31 at 31 at 31 Value at
March March March 31 March
2011 2011 2010 2010
% GBPm % GBPm
--------------------------------- ---------- ------- ---------- ----------
Equities 7.60 0.6 8.40 0.7
Fixed interest government bonds 4.40 - 5.55 0.1
Fixed interest corporate bonds 5.20 0.1 - -
Insured assets 5.55 5.2 5.55 5.0
Cash 1.50 0.1 0.65 0.1
--------------------------------- ---------- ------- ---------- ----------
Total 6.60 6.0 7.30 5.9
--------------------------------- ---------- ------- ---------- ----------
None of the scheme assets are property related.
Reconciliation of Funded Status to Statement of Financial
Position
Value at Value at
31 March 31 March
2011 2010
GBPm GBPm
--------------------------------------- ---------- ----------
Fair value of Scheme assets 6.0 5.9
Present value of non-insured defined
benefit of obligations (1.4) (1.7)
Liability in respect of insured
pensioners (5.2) (5.0)
--------------------------------------- ---------- ----------
Liability recognised in the statement
of financial position (0.6) (0.8)
Related deferred tax asset 0.2 0.2
--------------------------------------- ---------- ----------
Net pension liability (0.4) (0.6)
--------------------------------------- ---------- ----------
Changes to the Present Value of the Defined Benefit
Obligation
2011 2010
GBPm GBPm
--------------------------------------------------- ------ ------
Opening defined benefit obligation 6.7 6.0
Current service cost - -
Interest cost 0.4 0.4
Actuarial (gains) / losses on Scheme liabilities* (0.1) 0.7
Contributions by plan participants - -
Net benefits paid out (0.4) (0.4)
--------------------------------------------------- ------ ------
Closing defined benefit obligation 6.6 6.7
--------------------------------------------------- ------ ------
*Includes changes to the actuarial assumptions.
Changes to the Fair Value of Scheme Assets
2011 2010
GBPm GBPm
--------------------------------------------- ------ ------
Opening fair value of Scheme assets 5.9 5.1
Expected return on assets 0.4 0.4
Actuarial (losses) / gains on Scheme assets (0.1) 0.6
Contributions by the employer 0.2 0.2
Contributions by plan participants - -
Net benefits paid out (0.4) (0.4)
--------------------------------------------- ------ ------
Closing fair value of Scheme assets 6.0 5.9
--------------------------------------------- ------ ------
Actual Return on Scheme Assets
2011 2010
GBPm GBPm
--------------------------------------------- ------ -----
Expected return on Scheme assets 0.4 0.4
Actuarial (losses) / gains on Scheme assets (0.1) 0.6
--------------------------------------------- ------ -----
Actual return on Scheme assets 0.3 1.0
--------------------------------------------- ------ -----
Analysis of Consolidated Income Statement Charge
2011 2010
GBPm GBPm
------------------------------------------------------ ------ ------
Current service cost - -
Interest cost 0.4 0.4
Expected return on scheme assets (0.4) (0.3)
------------------------------------------------------ ------ ------
Expense / (income) recognised in consolidated income
statement - 0.1
------------------------------------------------------ ------ ------
Current service cost is recognised within property management
and asset management expenses. Interest cost and expected return on
plan assets are recognised in finance income.
Analysis of Amounts Recognised in Consolidated Statement of
Comprehensive Income
2011 2010
GBPm GBPm
-------------------------------------------------------- ------ ------
Total actuarial losses - (0.1)
Related deferred tax - -
-------------------------------------------------------- ------ ------
Total loss in consolidated statement of comprehensive
income - (0.1)
-------------------------------------------------------- ------ ------
Cumulative amount of losses recognised in consolidated
statement of comprehensive income (1.2) (1.2)
-------------------------------------------------------- ------ ------
History of Asset Values, Defined Benefit Obligation, Surplus /
(Deficit) in Scheme and Experience Gains and Losses
2011 2010 2009 2008 2007
GBPm GBPm GBPm GBPm GBPm
----------------------------- ------ ------ ------ ------ ------
Fair value of Scheme
assets 6.0 5.9 5.1 5.5 5.8
Defined benefit obligation (6.6) (6.7) (6.0) (5.6) (6.2)
Deficit in Scheme (0.6) (0.8) (0.9) (0.1) (0.4)
Experience (losses) /
gains on Scheme assets (0.1) 0.6 (0.3) (0.5) (0.1)
Experience gains / (losses)
on Scheme liabilities (0.1) 0.1 (0.2) 0.1 0.1
----------------------------- ------ ------ ------ ------ ------
The estimated amounts of contributions expected to be paid to
the Scheme during the year to March 2012 are GBP0.2million.
4. Directors' Remuneration
A summary of Directors' remuneration, including disclosures
required by the Companies Act 2006 and those specified by the
Financial Services Authority, is contained in the Directors'
Remuneration Report on pages 13 to 18.
5. Profit / (Loss)on Sale of Investment Properties
2011 2010
GBPm GBPm
----------------------------------- ----- ------
Net surplus / (deficit) over book
value and fair value gains 0.2 (0.1)
----------------------------------- ----- ------
6. Finance Income
2011 2010
GBPm GBPm
---------------------------------------- ------ ------
Income from investments
Distributions from funds (see note
16) 1.5 0.7
Interest receivable and similar
income:
------ ------
From joint ventures - (0.3)
Provision against interest receivable
from joint ventures - 1.3
------ ------
- 1.0
Other interest 0.2 0.2
Other finance income
------ ------
Expected return on pension scheme
assets 0.4 0.3
Interest on pension scheme liabilities (0.4) (0.4)
------ ------
- (0.1)
---------------------------------------- ------ ------
1.7 1.8
---------------------------------------- ------ ------
Dividends from listed investments, unlisted investments and
distributions from funds represent income from financial assets at
fair value through the consolidated income statement.
In 2009 a provision was made against interest receivable on loan
notes from Greater London Offices Limited. This provision was
reversed in 2010 as the interest was repaid in full.
Other interest represents income from financial assets
categorised as loans and receivables.
7. Finance Expense
2011 2010
GBPm GBPm
------------------------------------------ ----- -----
Interest payable on loans and overdrafts 14.8 9.9
Accrued exit fees 2.7 -
Charges in respect of cost of raising
finance 2.7 1.9
------------------------------------------ ----- -----
20.2 11.8
Other interest payable 0.4 0.2
------------------------------------------ ----- -----
20.6 12.0
Interest payable under finance leases 0.4 0.2
------------------------------------------ ----- -----
21.0 12.2
------------------------------------------ ----- -----
Interest payable on loans and overdrafts and charges in respect
of raising finance represent expenses on financial liabilities at
amortised cost.
8. Taxation
2011 2010
GBPm GBPm
------------------------------ ----- ------
Current tax
UK corporation tax:
Current at 28% (2010: 28%) - -
Under / (over) provision in
respect of prior year's tax
charge 0.1 (0.8)
------------------------------ ----- ------
0.1 (0.8)
Deferred taxation - -
0.1 (0.8)
------------------------------ ----- ------
The tax on the group's loss before
income tax differs from the theoretical
amount that would arise using the weighted
average tax rate applicable to profits
or losses of the consolidated entities
as follows: 2011 2010
GBPm GBPm
--------------------------------------------- ------ ------
Loss on ordinary activities before
income tax (7.1) (9.7)
------ ------
Tax @ 28% (2010: 28%) (2.0) (2.7)
Effect of REIT exemption
------ ------
Net operating losses / (profits) after
net finance costs 2.1 0.4
Realised profit on disposal of investment
properties (0.1) -
Fair value (gains) / losses on investment
properties (1.9) 0.8
Tax (release) / charge on finance cost
ratio - (0.8)
0.1 0.4
Share of joint ventures' post tax losses - 0.3
Losses utilised (1.0) -
Losses carried forward, no deferred
tax asset provided 0.2 0.2
Non-taxable expenditure /( income) - (0.7)
Disallowable expenses - 0.8
Gains not subject to tax (0.6) -
Impairment of goodwill not subject
to tax 2.4 -
Fair value gains on derivative financial
instruments - (0.8)
Fair value losses on investments 0.9 1.7
Underprovision in respect of prior
years 0.1 -
0.1 (0.8)
--------------------------------------------- ------ ------
9. Loss of Warner Estate Holdings PLC
The Company has taken advantage of the exemption provided by
Section 408 of the Companies Act 2006 from presenting its own
income statement. Loss attributable to members includes
GBP7.2million (2010: GBP9.0million loss) which has been dealt with
in the accounts of the Company.
10. Dividends
Group and Company 2011 2010
GBPm GBPm
----------------------- ----- -----
On Ordinary 5p shares - -
- -
----------------------- ----- -----
No final dividend is proposed by the Board.
11. Earnings Per Share
Losses per share of 12.93p (2010: 16.09p) are calculated on the
losses for the year of GBP7.2million (2010: GBP8.9million) and the
weighted average of 55,146,172 (2010: 55,332,560) shares in issue
throughout the year.
Diluted losses per share of 11.96p (2010: 15.20p) are calculated
on the loss for the year as above divided by the weighted average
number of shares in issue, being 59,534,067 (2010: 58,534,466)
after the dilutive impact of share options granted.
A reconciliation of the weighted average number of shares used
to calculate earnings per share and to that used to calculate
diluted earnings per share is shown below:
2011 2010
----------------------------------------------- ----------- -----------
Earnings per share: weighted average
number of shares 55,146,172 55,332,560
Weighted average ordinary shares to be
issued under employee incentive arrangements 2,239,078 770,027
Weighted average warrants for ordinary
shares to be issued 2,148,817 2,431,879
----------------------------------------------- ----------- -----------
Diluted earnings per share: weighted
average number of shares 59,534,067 58,534,466
----------------------------------------------- ----------- -----------
12. Goodwill
GBPm
--------------------------------- ------
Group
Cost
At 31 March 2010 11.2
Additions -
--------------------------------- ------
At 31 March 2011 11.2
--------------------------------- ------
Impairment -
At 31 March 2010 -
Charge for the year (8.4)
--------------------------------- ------
At 31 March 2011 (8.4)
--------------------------------- ------
Net book value at 31 March 2011 2.8
--------------------------------- ------
Net book value at 31 March 2010 11.2
--------------------------------- ------
Goodwill is not amortised but is subject to an annual impairment
test. Goodwill of GBP2.8million is allocated to the cash generating
unit ("CGU") defined as the asset management business owned by
Industrial Funds Limited. The recoverable amount of the asset
management business has been used to assess whether the goodwill is
impaired. The recoverable amount of the CGUs has been calculated
based on the value-in-use calculations. These calculations use cash
flow projections based on financial projections approved by
management covering the period to the termination of the asset
management contract. Year 1 is based on the budget as approved by
management. This is determined by past experience and management's
expectations of the current market conditions. Cash flows beyond
year 1 are based on the assumption of nil growth in management fee
income and no increase or decrease in associated administrative
costs. A discount rate of 3.09% has been used to calculate the
recoverable amount. The impairment arises from the Group
reassessing a number of factors including the maturity of the
contract in 2016 and the potential impact on management fees of
uncertain capital values given that the fees of this business are
based on gross asset values.
13. Investment Properties
Leasehold
with
over Total
50 years Investment
Freehold unexpired Properties
GBPm GBPm GBPm
----------------------------- --------- ----------- ------------
Group
At 31 March 2010 139.2 73.0 212.2
Capital expenditure - 0.4 0.4
Disposals (10.5) - (10.5)
Net gains from fair value
adjustments on investment
property 2.9 4.0 6.9
Adjustment to finance lease
liabilities - 0.9 0.9
Reclassification of finance
lease assets 2.3 - 2.3
----------------------------- --------- ----------- ------------
At 31 March 2011 133.9 78.3 212.2
----------------------------- --------- ----------- ------------
The Group's investment portfolio was valued externally
principally by Cushman & Wakefield LLP and CB Richard Ellis on
an open market basis in accordance with the recommended guidelines
of the Royal Institution of Chartered Surveyors as at 31 March
2011.
Investment properties were valued as follows:
GBPm
------------------------- ------
Cushman & Wakefield LLP 141.3
CB Richard Ellis 69.9
211.2
------------------------- ------
A reconciliation of investment property valuations to the
statement of financial position carrying value of property is shown
below:
2011 2010
GBPm GBPm
------------------------------------------------------ ------ ------
Investment property at market value as determined
by external valuers 211.2 213.1
Add minimum payment under head leases separately
included as a payable in the statement of financial
position 4.2 3.3
Less accrued lease incentives separately accrued
as a receivable in the statement of financial
position (3.2) (1.9)
Less properties treated as finance lease assets - (2.3)
------------------------------------------------------ ------ ------
Statement of financial position carrying value
of investment property 212.2 212.2
------------------------------------------------------ ------ ------
All repairs and maintenance costs are charged to the
consolidated income statement during the financial period in which
they are incurred. Therefore, no costs in respect of repairs and
maintenance are included within the above figures (2010:
GBPnil)
On an historical cost basis the investment properties which have
been included above at valuation would have been shown at cost as
GBP292.6million (2010: GBP309.2million).
Investment properties valued at GBP211.2million are used as
security for Group loans.
14. Plant and Equipment
2011 2010
GBPm GBPm
----------------------------- ----- ------
Group
Cost
Opening balance at 1 April 0.5 1.5
Additions - -
Disposals - (1.0)
----------------------------- ----- ------
Closing balance at 31 March 0.5 0.5
----------------------------- ----- ------
Accumulated depreciation
Opening balance at 1 April 0.3 1.1
Charge for year 0.1 0.2
Disposals - (1.0)
----------------------------- ----- ------
Closing balance at 31 March 0.4 0.3
----------------------------- ----- ------
Net book value at 31 March 0.1 0.2
----------------------------- ----- ------
Plant and equipment include fixtures, fittings and
equipment.
15. Investments in Joint Ventures
Group GBPm
--------------------------------- -----
Share of joint ventures
At 31 March 2010 -
Share of post-tax losses for the -
year
Net equity movements -
At 31 March 2011 -
--------------------------------- -----
2011 2010
Group share GBPm GBPm
------------------------------------------------- ------- --------
Unlisted shares at cost 73.4 99.3
Group's share of post acquisition
retained losses and reserves (73.4) (99.3)
------------------------------------------------- ------- --------
- -
------------------------------------------------- ------- --------
Included in investments in joint
ventures:
2011 2010
GBPm GBPm
----------------------------------- -------- ----------
Year to 31 March 2011
Group share of results
Revenue 19.8 23.8
Expenses (21.3) (17.6)
Adjustments due to net
liabilities 1.5 (10.8)
----------------------------------- -------- ----------
Loss for the year - (4.6)
----------------------------------- -------- ----------
Group share of
Non-current assets 157.8 260.6
Current assets 9.7 18.7
----------------------------------- -------- ----------
Total assets 167.5 279.3
----------------------------------- -------- ----------
Non-current liabilities (18.8) (237.5)
Current liabilities (206.7) (106.5)
----------------------------------- -------- ----------
Total liabilities (225.5) (334.0)
----------------------------------- -------- ----------
Adjustment due to net liabilities 58.0 64.7
----------------------------------- -------- ----------
Share of net assets - -
----------------------------------- -------- ----------
Agora Greater
Shopping Agora London
Centres Radial Max Offices
Limited Distribution Limited Limited Others
(a) Limited (b) (c) (d) (e) Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------ ---------- ------------- --------- --------- ------- ------
Amounts
receivable
by Group
2011
Asset
management
fees 0.7 1.3 0.5 0.3 - 2.8
Interest
receivable - - - - - -
2010
Asset
management
fees 0.9 0.6 0.4 0.3 0.1 2.3
Interest
receivable - - - 0.4 - 0.4
(a) Agora Shopping Centres Limited was set up on 5 March 2003
and subsequently acquired the Pyramids, Birkenhead on 25 June 2003
and The Grange, Birkenhead on 30 September 2004. On 7 March 2006,
The Pyramids, Birkenhead and The Grange, Birkenhead were disposed
of into the Agora Max Limited joint venture group.
(b) Fairway Industrial Limited was set up on 29 August 2003 and
changed its name to Radial Distribution Limited on 14 October 2004.
On 17 May 2010 the Group sold its investment in Radial Distribution
Limited which had a book value of GBPnil. The net proceeds were
GBP0.5million. The Group's share of results has been included to
the disposal date. On this date, the Group's associated asset
management agreement was terminated and the Group received
consideration of GBP3.0million.
(c) Agora Max Limited was set up on 16 September 2005 and
subsequently acquired The Pallasades, Birmingham on 25 October
2005. The Pyramids and The Grange, both in Birkenhead, were
acquired from Agora Shopping Centres on 7 March 2006. The
Pallasades, Birmingham was disposed of on 31 March 2009.
(d) Greater London Offices Limited was set up on 28 September
2006 and subsequently acquired Old Broad Street and Central House,
London. On 20 August 2009, GBP3.6million loan notes issued to the
Group by Greater London Offices Limited were repaid in full and the
proceeds used to subscribe to additional equity.
(e) Net assets relate to investments in smaller joint ventures
acquired through Ashtenne.
There are no outstanding loan balances between the Group and its
joint ventures.
Joint venture investment properties are valued by DTZ Debenham
Tie Leung, CB Richard Ellis and King Sturge.
All joint ventures are incorporated in the United Kingdom (refer
to note 34 for further information).
16. Investments in Funds
Group
GBPm
-------------------------------------- ------
As at 1 April 2010 41.3
Net loss from fair value adjustments (3.3)
-------------------------------------- ------
At 31 March 2011 38.0
-------------------------------------- ------
Fund Information:
------------------------------ ------ ------- ------- ------
AIF Apia Others
(a) (b) (c) Total
GBPm GBPm GBPm GBPm
------------------------------ ------ ------- ------- ------
Year to 31 March 2011
Distributions receivable 0.3 1.2 - 1.5
------------------------------ ------ ------- ------- ------
Net assets at 31 March 2011 234.7 105.2 -
Percentage share at 31 March
2011 6.52% 21.57% -
Group share of net assets 15.3 22.7 - 38.0
Fund Information:
------------------------------ ------ ------- ------- ------
AIF Apia Others
(a) (b) (c) Total
GBPm GBPm GBPm GBPm
------------------------------ ------ ------- ------- ------
Year to 31 March 2010
Distributions receivable 0.3 0.4 - 0.7
------------------------------ ------ ------- ------- ------
Net assets at 31 March 2010 240.0 93.1 -
Percentage share at 31 March
2010 6.52% 27.43% -
Group share of net assets 15.7 25.6 - 41.3
(a) The Group invested GBP12million in the Ashtenne Industrial
Fund in August 2005 and a GBP23.1million investment was acquired on
the purchase of the remaining 50% of Industrial Funds Limited.
(b) Apia was set-up on 7 June 2005 and the Group invested an
initial GBP44.1million. A further GBP10.0million was invested in
December 2005, of which GBP0.9million was disposed of in March
2006, and GBP0.4million in May 2006. It is treated as an investment
rather than an associate as the Group does not have the power to
exert significant control as a Trustee which is independent of the
Group is responsible for the strategic decisions of the unit
trust.
(c) This relates to minority interest holdings in Agora Max Unit
Trust, Agora Max Birkenhead Unit Trust and The Pallasades
Birmingham Unit Trust.
Units held in AIF valued at GBP8.8million and the units in Apia
valued at GBP22.7million are used as security for Group loans.
17. Investments in Listed and Unlisted Shares
Group Company
2011 2010 2011 2010
GBPm GBPm GBPm GBPm
----------------------------- ----- ----- ----- -----
Subsidiary undertakings (a) - - 62.4 70.6
Unlisted investments (b) 0.3 0.3 - -
----------------------------- ----- ----- ----- -----
0.3 0.3 62.4 70.6
----------------------------- ----- ----- ----- -----
(a) Subsidiary Undertakings
Shares in subsidiary
undertakings
GBPm
------------- ---------------------
Cost
At 31 March
2010 70.6
Additions -
Disposals -
Impairments (8.2)
At 31 March
2011 62.4
------------- ---------------------
Investments are reviewed at least annually for impairment. Where
there exists an indication of impairment an assessment of the
recoverable amount is performed. The recoverable amount is based on
the higher of the investments continued value in use or its fair
value less cost to sell. The impairment charge taken above arose
due to the carrying value of the asset exceeding its recoverable
amount. This was determined based on the assets' fair value less
cost to sell. Fair value is derived from the subsidiaries' net
asset value at the statement of financial position date. Please
refer to note 34 for further information on subsidiary
undertakings.
(b) Unlisted Investments
Group Company
GBPm GBPm
----------------- ------ --------
At 31 March 2010 0.3 -
Net movements - -
----------------- ------ --------
At 31 March 2011 0.3 -
----------------- ------ --------
18. Trade and Other Receivables
Group Company
------------------------- ------------ ------------
2011 2010 2011 2010
GBPm GBPm GBPm GBPm
------------------------- ----- ----- ----- -----
Current assets:
Trade receivables 2.0 2.3 - -
Amounts owed by Group
undertakings - - 65.5 67.5
Other receivables 1.2 1.4 - -
Prepayments and accrued
income 2.9 2.8 0.3 1.0
------------------------- ----- ----- ----- -----
6.1 6.5 65.8 68.5
------------------------- ----- ----- ----- -----
Non-current assets:
Other receivables 3.0 2.2 - -
------------------------- ----- ----- ----- -----
Total trade and other
receivables 9.1 8.7 65.8 68.5
------------------------- ----- ----- ----- -----
Other receivables include rent deposits from tenants of
GBP0.4million used as collateral. In the event of tenant default,
these rent deposits can be offset against any outstanding
debts.
Amounts owed by Group undertakings are unsecured and have no
fixed date of repayment. They are interest free except for interest
recharges for REIT compliance purposes; to ensure the interest
charge is in the correct group entity.
Amounts owed byGroup undertakings are reviewed at least annually
for impairment. Where there exists an indication of impairment an
assessment of the recoverable amount is performed. The recoverable
amount is based on the fair value which is derived from the Group
undertakings' net asset value and their ability to repay their
debts. A write back of impairment of GBP2.3million (2010:
GBP3.1million write back) has been taken to the Company's
consolidated income statement during the year against amounts owed
by Group undertakings.
19. Net Investment in Finance Leases
Group
2011 2010
Gross Net Gross Net
investment Unearned investment investment Unearned investment
in finance finance in finance in finance finance in finance
lease income lease lease income lease
GBPm GBPm GBPm GBPm GBPm GBPm
------------ ----------- --------- ----------- ----------- --------- -----------
Within one
year - - - 0.2 (0.2) -
Between
two
and five
years - - - 0.8 (0.8) -
Later than
five years - - - 13.9 (10.1) 3.8
Impairment - - - - - (1.4)
------------ ----------- --------- ----------- ----------- --------- -----------
Total - - - 14.9 (11.1) 2.4
------------ ----------- --------- ----------- ----------- --------- -----------
The Group had leased out an investment property under a finance
lease of 61 years in duration. In the prior year, this was
accounted for as a finance lease receivable rather than an
investment property and was equal to the total of the discounted
future lease payments and the discounted unguaranteed residual
value of the property. The lease has now been terminated and the
property has been reclassified as an investment property in the
Statement of Financial Position.
20. Borrowings, Including Finance Leases
Group Company
--------------------------- -------------- -------------
2011 2010 2011 2010
GBPm GBPm GBPm GBPm
--------------------------- ------ ------ ----- ------
Amounts falling due
after more than one
year:
Bank loans 248.1 251.9 - -
Finance lease obligations
(see note 21) 4.3 3.2 - -
--------------------------- ------ ------ ----- ------
252.4 255.1 - -
--------------------------- ------ ------ ----- ------
Amounts falling due
within one year:
Bank loans 1.0 0.8 - -
Finance lease obligations
(see note 21) - 0.1 - -
--------------------------- ------ ------ ----- ------
1.0 0.9 - -
--------------------------- ------ ------ ----- ------
Total borrowings,
including finance
leases 253.4 256.0 - -
Cash and cash equivalents (7.2) (4.5) - (0.1)
--------------------------- ------ ------ ----- ------
Net borrowings 246.2 251.5 - (0.1)
--------------------------- ------ ------ ----- ------
Bank loans and overdrafts are secured on all properties valued
at GBP211.2million as detailed in note 13 and by floating charges
on unit holdings in the Apia Regional Office Fund and the Ashtenne
Industrial Fund, valued at GBP22.7million and GBP8.8million
respectively, as set out in note 16.
Bank loans and
overdrafts 2011 2010
GBPm GBPm
----------------- ------ ------
Group
Within one year
or on demand 1.0 0.8
Between one and
two years 251.1 1.0
Between two and
five years - 256.0
----------------- ------ ------
252.1 257.8
Future finance
costs (3.0) (5.1)
----------------- ------ ------
249.1 252.7
----------------- ------ ------
Company
Within one year - -
on demand
Between two and - -
five years
----------------- ------ ------
- -
----------------- ------ ------
As stated in note 22, the Group's operations are predominantly
in the UK and therefore bank borrowings are denominated in
Sterling. The Group's average cost of debt at the year end was
6.19% including PIK interest (2010: 5.67%). This excludes exit fees
which are accrued as at 31 March 2011 and calculated as disclosed
in note 22. The proportions of debt held on fixed or floating rate
debt, together with the hedging in place at 31 March 2011, are set
out in note 22. A comparison of the fair values to carrying values
of financial assets and liabilities is also set out in note 22.
21. Finance Lease Obligations
Group
2011 2010
Minimum Future Present Minimum Future Present
lease finance value of lease finance value of
payments charges minimum payments charges minimum
under on finance under on finance
finance finance lease finance finance lease
leases leases obligations leases leases obligations
GBPm GBPm GBPm GBPm GBPm GBPm
--------- --------- -------- ------------ --------- -------- ------------
Within
one
year 0.3 (0.3) - 0.3 (0.2) 0.1
Between
two and
five
years 1.2 (1.2) - 1.2 (0.9) 0.3
Later
than
five
years 29.3 (25.0) 4.3 10.4 (7.5) 2.9
Total 30.8 (26.5) 4.3 11.9 (8.6) 3.3
--------- --------- -------- ------------ --------- -------- ------------
The fair value of the Group's finance lease obligations
approximate to the carrying value.
Finance lease obligations are in respect of leased investment
properties.
Finance lease liabilities are effectively secured as the rights
to the leased asset revert to the lessor in the event of
default.
22. Financial Risk Management
On 26 March 2010 the Group entered into new debt facilities with
two lenders and extended and amended its existing facility with a
third lender.
In respect of one facility the Group will pay an exit fee equal
to 5.0% of the outstanding loan on the maturity date. In respect of
another facility the Group will pay an exit fee at maturity that
approximates to 20% of the excess of the value of properties
secured against the facility over the debt at that time. The Group
is obliged to amortise one of the facilities at GBP0.3million per
quarter.
As at 31 March 2011, one facility has no loan to value ('LTV')
covenant. The second and third facilities have an initial LTV
covenant of 117.5% and 113% respectively. The LTV covenant on the
second facility will reduce to 107.5% from March 2012, and on the
third facility will reduce to 97.5% from September 2011. One
facility has two interest cover covenants set at 125%, based on
rental income, and 175%, based on total income. Another facility
has an initial facility debt service cover ratio covenant of 135%
and an initial Group debt service cover ratio covenant of 108%;
each of the two debt service cover ratio covenants will vary over
time.
Subsequent to the balance sheet date, the LTV covenant on the
second facility has been amended and will remain at 117.5% to the
end of the facility agreement. The debt maturity on the first and
second facilities has been extended to December 2012, bringing them
in line with the third facility.
The Group was compliant with all covenants during the year.
Treasury Policy
The Group enters into derivative transactions such as interest
rate swaps and caps in order to manage the financial risks arising
from the Group's activities. The main financial risks arising from
the Group's financing structure are liquidity risk and interest
rate risk. The policies for managing each of these risks and the
principal effects of these policies on the results for the year are
set out below.
Liquidity Risk
The Group's policy is to ensure that there are always sufficient
working capital facilities available to meet the requirements of
the business, through efficient treasury and cash management and
strict credit control. The Group's earliest scheduled debt maturity
is December 2012.
Capital expenditure to be incurred by the Group is funded on a
case by case basis.
The tables below set out the maturity analysis of the Group's
financial liabilities based on undiscounted contractual
obligations.
Group
Less than 1 to 2 2 to 5 Over 5
2011 1 year years years years Total
GBPm GBPm GBPm GBPm GBPm
------------------------- ----------- -------- -------- ------- ------
Bank loans and
overdrafts 1.0 251.1 - - 252.1
Trade and other
payables(1) 9.0 6.2 1.0 - 16.2
Finance lease
liabilities 0.3 0.3 0.9 29.3 30.8
Other provisions(2) 1.9 0.9 2.2 0.5 5.5
12.2 258.5 4.1 29.8 304.6
Interest on bank
loans and overdrafts 5.9 11.1 - - 17.0
Cash outflows
from gross settled
derivatives 2.0 3.5 - - 5.5
------------------------- ----------- -------- -------- ------- ------
20.1 273.1 4.1 29.8 327.1
------------------------- ----------- -------- -------- ------- ------
(1) Excludes deferred income of GBP3.2million
(2) Includes future finance charges of GBP0.4million
Exit fees and accrued PIK interest are included in Trade and
other payables.
Group
Less than 1 to 2 2 to 5 Over 5
2010 1 year years years years Total
GBPm GBPm GBPm GBPm GBPm
------------------------- ----------- -------- -------- ------- ------
Bank loans and
overdrafts 0.7 1.0 256.1 - 257.8
Trade and other
payables(1) 12.2 1.4 0.7 - 14.3
Finance lease
liabilities 0.3 0.3 0.9 10.4 11.9
Current income
tax liabilities 0.3 - - - 0.3
Other provisions(2) 3.2 1.2 2.6 1.1 8.1
16.7 3.9 260.3 11.5 292.4
Interest on bank
loans and overdrafts 5.7 5.8 16.6 - 28.1
Cash outflows
from gross settled
derivatives 1.5 1.6 3.3 - 6.4
------------------------- ----------- -------- -------- ------- ------
23.9 11.3 280.2 11.5 326.9
------------------------- ----------- -------- -------- ------- ------
(1) Excludes deferred income of GBP3.6million
(2) Includes future finance charges of GBP0.6million
Company
Less than 1 to 2 2 to 5 Over 5
2011 1 year years years years Total
GBPm GBPm GBPm GBPm GBPm
Trade and other
payables 139.3 - - - 139.3
-------------------------
Interest on bank
loans and overdrafts - - - - -
Cash inflows
from gross settled
derivatives - - - - -
------------------------- ----------- -------- -------- ------- ------
139.3 - - - 139.3
------------------------- ----------- -------- -------- ------- ------
Company
Less than 1 to 2 2 to 5 Over 5
2010 1 year years years years Total
GBPm GBPm GBPm GBPm GBPm
----------------------- ---------- ------- ------- ------- ------
Trade and other
payables 143.0 0.2 - - 143.2
-----------------------
143.0 0.2 - - 143.2
Interest on bank
loans and overdrafts - - - - -
Cash inflows
from gross settled
derivatives - - - - -
----------------------- ---------- ------- ------- ------- ------
143.0 0.2 - - 143.2
----------------------- ---------- ------- ------- ------- ------
Interest Rate Risk
The Group is exposed to market price risk through interest rate
movements. The Group's policy is to manage the risk arising from
changes in interest rates by hedging a proportion of the floating
rate debt to provide certainty as to how much the interest cost
will be, such that in the long term any fluctuations in interest
rates will have little or no impact on reported profits. The Group
monitors the level of floating debt on a regular basis together
with interest rate expectations in order to form a view as to when
it may be appropriate to enter into further hedging. The Group is,
however, exposed to market price risk in respect of the fair value
of its fixed rate financial instruments. The Group has two swaps of
GBP25million and two of GBP40million. One swap of GBP40million
expired on 12 April 2011. In addition the Group had a GBP40million
swaption which was exercisable on 12 April 2011 and a GBP25million
swaption exercisable on 10 April 2012.
The amount of debt fixed through swaps effective as at 31 March
2011, equates to 52% (2010: 19%) of Group debt, and the remainder
is floating. The floating debt is linked to LIBOR. Post 31 March
2011 the amount of debt fixed through swaps reduced to 36%.
The Group is exposed to fair value interest rate risk on its
derivative financial instruments and cash flow interest rate risk
on floating rate bank loans and revolving credit facilities. The
forecast cash and borrowings profile of the Group is monitored
regularly to assess the mix of fixed and floating rate debt and the
Group uses interest rate derivatives where appropriate to reduce
its exposure to changes in interest rates and the economic
environment.
At 31 March 2011, the Group's floating rate debt was
GBP252.1million (2010: GBP257.8million). Of this, GBP130million
(2010: GBP50.0million) has been hedged with derivative instruments.
The total amount of GBP130million (2010: GBP50.0million) is hedged
by swaps and callable swaps.
The derivative instruments are used to hedge the variability of
cash flows from debt instruments. The fair values of derivatives
are determined by discounting the future cash flows using the mid
point of the relevant yields curves prevailing on the reporting
dates. The derivatives are held for hedging purposes and provide
protection against the effects of the rising short term interest
rates. None of the total hedging in place at 31 March 2011 (2010:
GBPnil), may be called at the Bank's discretion within the next
five years.
The Group has elected not to designate the hedge contracts as
being effective hedges for accounting purposes and therefore
changes in the fair value of the hedge contracts are taken to the
consolidated statement of income.
Interest Rate Sensitivity
The table below shows the Group's sensitivity to movements in
interest rates. The Group has considered the movements in interest
rates over the last two years and has concluded that a 0.5%
increase or decrease is a reasonable benchmark.
Interest Group
Rate Callable Residual Company
2011 Swaps Swaps Debt Total Total
------------- ---------- ---------- --------- ---------- ---------- --------
Net debt GBP130.0m - GBP122.1m GBP252.1m -
Average
Rate 2.04% - 6.08% 3.59% -
GBPm GBPm GBPm GBPm GBPm
Fair Value (2.6) - - (2.6) -
Rise of
Sensitivity 50bps 1.0 - - 1.0 -
Fall of
50bps (1.0) - - (1.0) -
Interest
Rate
Rise of
Sensitivity 50bps - - (0.6) (0.6) -
Fall of
50bps - - 0.6 0.6 -
Interest Group
Rate Callable Residual Company
2010 Swaps Swaps Debt Total Total
------------- ---------- --------- --------- ---------- ---------- --------
Net debt GBP50.0m - GBP207.8m GBP257.8m -
Average
Rate 3.24% - 4.82% 4.51% -
GBPm GBPm GBPm GBPm GBPm
Fair Value (2.5) - - (2.5) -
Rise of
Sensitivity 50bps 0.8 - - 0.8 -
Fall of
50bps (0.8) - - (0.8) -
Interest
Rate
Rise of
Sensitivity 50bps - - (1.0) (1.0) -
Fall of
50bps - - 1.0 1.0 -
The total sensitivity to interest rate increases and decreases
is the total impact on both the consolidated income statement and
consolidated statement of changes in equity. This is based on debt
balances and prevailing interest rates at the year end.
At 31 March 2011 the fair value of the Group's derivative
instruments resulted in a GBP2.6million net liability (2010:
GBP2.5million net liability). Had LIBOR been 0.5% higher, the fair
value would have been reduced by GBP1.0million (2010:
GBP0.8million). Had LIBOR been 0.5% lower, the fair value would
have been increased by GBP1.0million (2010: GBP0.8million).
At 31 March 2011, the residual floating rate debt amounted to
GBP122.1million (2010: GBP207.8million). If short term interest
rates had been 0.5% higher the annualised cost to the Group would
have been GBP0.6million higher (2010: GBP1.0million). Had short
term rates been 0.5% lower the Group would have benefited by the
same amount.
Foreign Currency Risk
The Group has no material foreign currency exposure as the
Group's operations are all in the UK and therefore virtually all
revenue and costs are denominated in Sterling.
Credit Risk
The Group has no significant concentration of credit risk as
exposure is spread over a large number of counterparties.
The credit risk in liquid funds and derivative financial
instruments is limited due to the counterparties being banks with
high credit ratings assigned by international credit rating
agencies. As at the statement of financial position date, the
carrying value of loans, cash and the fair values of swaps and caps
approximates to this credit risk exposure.
The maximum amount the Group is exposed to on investments in
funds and unlisted investments is the carrying values in the
statement of financial position. Investments in funds are with
reputable counterparties. Financial information is issued by all
investments on a regular basis which is reviewed by management.
The Group is exposed to credit risk in respect of its trade
receivables. Potential customers are evaluated for creditworthiness
and, where necessary, collateral is secured in the form of rent
deposits. There is no concentration of credit risk within the lease
portfolio to either business sector or individual company as the
Group has a well spread and diverse customer base.
At 31 March 2011, trade and other receivables consisting of
rents and asset management fees receivable, of GBP2.0million (2010:
GBP3.7million) were past due but not impaired. These relate to
customers for whom there is no recent history or indication of
default. The amounts presented in the statement of financial
position are net of allowances for doubtful receivables of
GBP0.2million (2010: GBP0.3million).
The ageing analysis of these trade receivables is as
follows:
Group 2011 2010
--------------------- ----- -----
GBPm GBPm
Up to three months 1.9 3.6
Three to six months 0.1 0.1
--------------------- ----- -----
2.0 3.7
--------------------- ----- -----
The credit risk relating to cash, deposits and derivative
financial instruments is actively managed by Group Treasury.
Credit Group
Counterparty rating 2011
-------------- --------- ------
GBPm
Bank #1 A+ 1.9
Bank #2 A+ 1.7
Bank#3 A+ 3.6
-------------- --------- ------
7.2
------------------------ ------
Capital Risk Management
The current capital structure of the Group is considered
appropriate and consists of a mix of equity and net debt. Equity
comprises issued capital, reserves and retained earnings as
disclosed in notes 26 and 27. Debt primarily comprises long-term
bank loans and overdrafts from banks as disclosed in Note 20.
The Group manages its capital to ensure that entities in the
Group will be able to continue as a going concern in order to
optimise return to shareholders, and it aims to maintain a prudent
mix between debt and equity financing. The Group is not subject to
any externally imposed capital requirements. There have been no
changes in the capital structure since the prior period.
Derivative Financial Instruments
Gains and Losses on Derivatives held to Manage Debt
The Group uses interest rate derivatives to manage its interest
rate profile. Changes in the fair value of these derivatives are
recognised in the consolidated statement of income. An analysis of
these derivatives and gains / (losses) thereon is as follows:
Group
Derivative Derivative
financial financial
assets liabilities Total
GBPm GBPm GBPm
------------------------------------ ------------ ------------- ------
Fair value at 31 March 2010 - 2.5 2.5
Change in fair value of derivative
financial instruments - 0.1 0.1
Fair value at 31 March 2011 - 2.6 2.6
------------------------------------ ------------ ------------- ------
Financial Instruments - Categories Group
2011 2010
------------------------------------- ----------------------- -------------------
Carrying Fair Carrying Fair
value value value value
GBPm GBPm GBPm GBPm
------------------------------------- ----------- ---------- --------- --------
Financial assets
Fair value through profit or loss
- held for trading
Derivative financial assets - - - -
Fair value through profit or loss
- designated on inception
Investments in funds 38.0 38.0 41.3 41.3
Investments in listed and unlisted
shares 0.3 0.3 0.3 0.3
Net investment in finance leases - - 2.4 2.4
Loans and receivables
Trade and other receivables(1) 7.3 7.3 7.5 7.5
Cash and cash equivalents 7.2 7.2 4.5 4.5
Financial liabilities
Fair value through profit or loss
- held for trading
Derivative financial liabilities (2.6) (2.6) (2.5) (2.5)
Amortised cost
Borrowings (252.1) (252.1) (257.8) (257.8)
Trade and other payables(2) (16.2) (16.2) (14.3) (14.3)
Finance lease obligations (4.3) (4.3) (3.3) (3.3)
(1) Excludes prepayments of GBP1.8million (2010: GBP1.2million)
(2) Excludes deferred income of GBP3.2million (2010: GBP3.6million)
Company
2011 2010
------------------------------------- ----------------------- -------------------
Carrying Fair Carrying Fair
value value value value
GBPm GBPm GBPm GBPm
------------------------------------- ----------- ---------- --------- --------
Financial assets
Loans and receivables
Trade and other receivables(1) 65.4 65.4 67.5 67.5
Cash and cash equivalents - - 0.1 0.1
Financial liabilities
Amortised cost
Borrowings - - - -
Trade and other payables 139.3 139.3 143.2 143.2
(1) Excludes prepayments of GBP0.3million (2010: GBP1.0million)
The table below presents the Group's assets and liabilities
recognised at fair value.
Level Level Level
2011 1 2 3 Total
GBPm GBPm GBPm GBPm
------------------------------------ ------- ------ ------ ------
Investments
Investments in funds - - 38.0 38.0
Investments in unlisted shares - - 0.3 0.3
Total assets - - 38.3 38.3
------------------------------------ ------- ------ ------ ------
Derivative financial liabilities
Fair value through profit or loss - (2.6) - (2.6)
------------------------------------ ------- ------ ------ ------
Total liabilities - (2.6) - (2.6)
------------------------------------ ------- ------ ------ ------
Level Level Level
2010 1 2 3 Total
GBPm GBPm GBPm GBPm
------------------------------------ ------- ------ ------ ------
Investments
Investments in funds - - 41.3 41.3
Investments in unlisted shares - - 0.3 0.3
Total assets - - 41.6 41.6
------------------------------------ ------- ------ ------ ------
Derivative financial liabilities
Fair value through profit or loss - (2.5) - (2.5)
------------------------------------ ------- ------ ------ ------
Total liabilities - (2.5) - (2.5)
------------------------------------ ------- ------ ------ ------
Fair value hierarchy
Level 1: valuation based on quoted market prices traded in
active markets.
Level 2: valuation techniques are used, maximising the use of
observable market data, either directly from market prices or
derived from market prices.
Level 3: where one or more inputs to valuation are not based on
observable market data. Valuations at this level are more
subjective and therefore more closely managed, including
sensitivity analysis of inputs to valuation models. Such testing
has not indicated that any material difference would arise due to a
change in input variables.
The table below presents a reconciliation of level 3 fair value
measurements for the year:
Investments
Investments in unlisted
in funds shares Total
GBPm GBPm GBPm
---------------------- ------------ ------------- ------
At 1 April 2010 41.3 0.3 41.6
Unrealised losses(1) (3.3) - (3.3)
At 31 March 2011 38.0 0.3 38.3
---------------------- ------------ ------------- ------
(1) Unrealised losses of GBP3.3million are included in net loss
from fair value adjustment on investments in the consolidated
statement of income.
23. Deferred Income Tax
Group Company
2011 2010 2011 2010
GBPm GBPm GBPm GBPm
------------------------------------------------ ----- ----- ----- -----
Deferred taxation assets
Deferred taxation arising from unrealised
derivative financial instruments valuations - - - -
Deferred taxation arising from retirement
benefit obligations 0.2 0.2 - -
Deferred taxation arising from share based
payments - - - -
Unrealised property and investment valuations - - - -
------------------------------------------------ ----- ----- ----- -----
0.2 0.2 - -
------------------------------------------------ ----- ----- ----- -----
Deferred taxation liabilities
Deferred taxation arising from the temporary
differences noted below:
Unrealised property and investment valuations - - - -
------------------------------------------------ ----- ----- ----- -----
- - - -
------------------------------------------------ ----- ----- ----- -----
The movement in deferred tax assets and liabilities during the
year is as follows:
Group Company
--------------- ------------ ---------------------------------------------- -----------------
Unrealised Derivative Retirement Share Share
fair value financial benefit Based Based
gains instruments obligations Payments Total Payments Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- ------------ ------------- ------------ --------- ------ --------- ------
Deferred tax
assets at 31
March 2010 - - 0.2 - 0.2 - -
Charged to
consolidated
statement of
comprehensive
income - - - - - - -
Charged to
reserves - - - - - - -
------------ ------------- ------------ --------- ------ --------- ------
Total impact - - - - - - -
--------------- ------------ ------------- ------------ --------- ------ --------- ------
Deferred tax
assets at 31
March 2011 - - 0.2 - 0.2 - -
--------------- ------------ ------------- ------------ --------- ------ --------- ------
Unrealised Group
fair Total
value
gains
GBPm GBPm
----------------------------------- ----------- -------
Deferred tax liabilities at - -
31 March 2010
----------- -------
Credited to consolidated statement - -
of comprehensive income
Total impact - -
----------------------------------- ----------- -------
Deferred tax liabilities at - -
31 March 2011
----------------------------------- ----------- -------
24. Provisions for Other Liabilities and Charges
Onerous Performance
contracts fees Total
GBPm GBPm GBPm
-------------------------------- ----------- ------------ ------
Group
At 31 March 2010 5.8 1.7 7.5
Charged to consolidated income
statement - - -
Utilised during the year (1.5) (0.9) (2.4)
-------------------------------- ----------- ------------ ------
At 31 March 2011 4.3 0.8 5.1
-------------------------------- ----------- ------------ ------
Provisions have been analysed between current and non-current as
follows:
Group
------------- ------------
2011 2010
GBPm GBPm
Non-current 3.2 4.4
Current 1.9 3.1
------------- ----- -----
5.1 7.5
------------- ----- -----
The onerous contracts provision is made in relation to onerous
leases on properties which are vacant or sublet at a level which
renders the properties loss-making over the remaining life of the
lease. The remaining lease lengths range between 1 and 11
years.
The provision represents the net cash flows on the properties as
calculated by DTZ Debenham Tie Leung.
The key assumptions
used are:
Rental growth 0.00% per
rate annum
0.00% per
Inflation rate annum
Discount rate 3.09%
The performance fee provision is repayable on demand.
GBP0.9million (2010: GBP0.8million) was repaid during the year; the
remaining balance is expected to be repaid within the next 12
months.
25. Trade And Other Payables
Group Company
--------------------------- ------------ --------------
2011 2010 2011 2010
GBPm GBPm GBPm GBPm
Current liabilities:
Trade payables 0.4 0.9 - 0.1
Amounts owed to Group
undertakings - - 138.6 141.5
Other taxation and social
security 1.2 1.7 0.1 -
Other payables 3.6 6.0 0.5 0.9
Accruals and deferred
income 7.1 7.2 0.2 0.5
--------------------------- ----- ----- ------ ------
12.3 15.8 139.4 143.0
--------------------------- ----- ----- ------ ------
Non-current liabilities:
Other payables 1.0 2.1 - 0.2
Accrued PIK interest
& exit fees 6.1 2.1 - 0.2
--------------------------- ----- ----- ------ ------
Total trade and other
payables 19.4 17.9 139.4 143.2
--------------------------- ----- ----- ------ ------
Amounts owed to Group undertakings are unsecured and have no
fixed date of repayment. They are interest free except for interest
recharges for REIT compliance purposes; to ensure the interest
charge is in the correct group entity.
26. Share Capital
2011 2010
------------------------------------- ----- -----
Group and Company GBPm GBPm
Authorised
80,000,000 Ordinary shares of 5p 4.0 4.0
------------------------------------- ----- -----
Issued and fully paid
Ordinary shares of 5p
At 1 April and 31 March (56,170,865
shares) 2.8 2.8
------------------------------------- ----- -----
Warner Estate Holdings PLC 1995 Share Option Scheme
At 31 March 2011 there were share options to subscribe for
Ordinary shares under the Warner Estate Holdings Plc 1995 Share
Option Scheme as follows:
At 303.5p per share exercisable between 65,899 shares
16 August 2004 and 15 August 2011
At 319p per share exercisable between 65,831 shares
17 July 2005 and 16 July 2012
At 367.5p per share exercisable between 67,956 shares
27 June 2006 and 26 June 2013
At 495p per share exercisable between 87,605 shares
8 July 2007 and 7 July 2014
---------------------------------------- --------------
287,291
shares
---------------------------------------- --------------
2011 2010
Average Average
exercise exercise
Number price Number price
p p
At 1 April 457,796 389.2 457,796 389.2
Options expired/lapsed (170,505) 403.8 - -
At 31 March 287,291 380.6 457,796 389.2
---------- ---------- -------- ----------
All of the options outstanding at 31 March 2011 (2010: 457,796)
were exercisable.
Warner Estate Holdings PLC Performance Share Plan
At 31 March 2011 there were share options to subscribe for
Ordinary shares at nil cost under the Warner Estate Holdings Plc
Performance Share Plan as follows:
Exercisable between 14 July 2011 and 514,078
13 January 2012 shares
Exercisable between 4 August 2013 and 1,725,000
4 February 2014 shares
-------------------------------------- ----------
2,239,078
shares
-------------------------------------- ----------
2011 2010
Average Average
exercise exercise
Number price Number price
p p
At 1 April 770,027 - 1,035,884 -
Options granted 1,770,000 - - -
Options exercised - - (5,248) -
Options expired/lapsed (185,921) - (138,732) -
Options forfeited (115,028) - (121,877) -
At 31 March 2,239,078 - 770,027 -
---------- ---------- ---------- ----------
None of the options outstanding at 31 March 2011 were
exercisable (2010: nil).
The average share price during the year was 21.2p (2010:
37.3p).
The key assumptions used in valuing the fair value of share
based payments are as follows (also see directors' remuneration
report):
Exercise price GBPnil
Share price Price at date of grant
Expected term 3 years
Expected volatility(1) 38.5% for awards granted on 14 July 2008, 24% for
awards granted on 4 August 2010
Expected dividend Dividends paid in the 12 months prior to grant
yield calculated as a percentage of the share price on the
date of grant
Risk free Not applicable as exercise price is GBPnil
interest rate
Model used Black-Scholes
( )
(1) Volatility is calculated by looking at the historical share
price movements prior to the date of grant over a period of time
commensurate with the expected term for each award (i.e. 3 years).
The formula calculates the ratio of each day's price to the
preceding value, which gives a "dimensionless" figure. The final
step is to calculate the standard deviation of the logs of these
ratios and to annualise this figure.
27. Other Reserves
Share
Share Based Warrants(1) Revaluation Other(2) Treasury Retained(3)
Premium Payments Reserve Reserve Reserve Shares Earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Group
At 31 March
2010 40.7 1.5 0.8 (227.7) 8.0 (1.5) 172.4 (5.8)
Retained
loss for
the year - - - - - - (7.2) (7.2)
Realised on
disposal of
investment
properties - - - 8.3 - - (8.3) -
Realised on
disposal of
investment
in joint
ventures - - - 25.3 - - (25.3) -
Net gain
from fair
value
adjustment
on
investment
properties - - - 6.8 - - (6.8) -
Share of
joint
ventures'
net loss
from fair
value
adjustment
on
investment
properties - - - (0.5) - - 0.5 -
Net loss
from fair
value
adjustment
on unlisted
investments - - - (3.3) - - 3.3 -
Change in
fair value
of
derivative
financial
instruments - - - (0.2) - - 0.2 -
Change in
fair value
of joint
ventures'
derivative
financial
instruments - - - 2.6 - - (2.6) -
Actuarial
losses on
pension
scheme
assets - - - - - - - -
Cost of
share based
payments - (0.5) - - - - 0.3 (0.2)
At 31 March
2011 40.7 1.0 0.8 (188.7) 8.0 (1.5) 126.5 (13.2)
------------- -------- --------- ------------ ------------ --------- --------- ------------ -------
(1) 2,808,713 share warrants were issued on 26 March 2010 and have been accounted for at fair value on
that date. (2) Other reserves consist of a capital redemption reserve and a merger reserve. (3) The
closing balance on retained earnings reserve includes GBP0.4million liability (2010: GBP0.6million) stated
after a deferred tax asset of GBP0.2million (2010: GBP0.2million) in respect of the Group's defined
benefit pension scheme as set out in note 3 to the accounts.
Non-distributable Reserves Distributable Reserves
------------------------------ -------------------------------
Share
Share Based Warrants Other Treasury Retained
Premium Payments Reserve Reserve Shares Earnings Total
Company GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 31
March
2010 40.7 1.5 0.8 7.0 (1.5) (54.3) (5.8)
Retained
loss for
the year - - - - - (7.2) (7.2)
Dividends
paid - - - - - - -
Cost of
share
based
payments - (0.5) - - - 0.3 (0.2)
At 31
March
2011 40.7 1.0 0.8 7.0 (1.5) (61.2) (13.2)
----------- -------- --------- --------- -------- --------- ---------- -------
28. Investment in Own Shares
Group and Company
------------------- ----------------
Number Cost
'000 GBPm
At 31 March 2010 744.8 1.0
Additions 343.2 -
Disposals (149.8) (0.2)
------------------- -------- ------
At 31 March 2011 938.2 0.8
------------------- -------- ------
Additions relate to the Inland Revenue Approved All-Employee
Share Ownership Plan.
Included in investment in own shares are shares relating to the
Inland Revenue Approved All-Employee Share Ownership Plan, as
follows:
2011 2010
Market Market
Number Cost value Number Cost value
'000 GBPm GBPm '000 GBPm GBPm
---------------------------- ------- ----- ------- ------- ----- -------
Partnership shares
purchased by employees
held in Trust 428.6 - 0.1 322.9 - 0.1
Matching and Free shares
not yet vested 490.2 0.7 0.1 393.5 0.8 0.1
---------------------------- ------- ----- ------- ------- ----- -------
918.8 0.7 0.2 716.4 0.8 0.2
---------------------------- ------- ----- ------- ------- ----- -------
The vesting of Matching and Free shares is conditional on
meeting the conditions of the scheme which are summarised in the
Report and Accounts which will be published in due course.
29. Directors' Interests and Related Party Transactions
Transactions between the company and subsidiaries, which are
related parties, have been eliminated on consolidation for the
Group.
Compensation of key management personnel is disclosed in the
Report and Accounts which will be published in due course.
Transactions between the parent company and its subsidiaries are
shown below:
2011 2010
Nature of
Subsidiary transaction GBPm GBPm
------------------------- -------------- ----- -----
JS Real Estate Limited Dividend - 45.5
Vere Street Investments
Limited Dividend - 3.0
Balances outstanding between the parent company and its
subsidiaries are shown below:
Amounts owed Amounts owed
by subsidiaries to subsidiaries
2011 2010 2011 2010
Subsidiary GBPm GBPm GBPm GBPm
-------------------------------- --------- -------- --------- --------
Ashtenne Holdings Limited - - - (0.1)
Cardiff and Provincial
Properties Limited - - (12.1) (12.1)
Clay Estates Limited - - (79.6) (79.6)
Industrial Funds Limited - - (4.1) (4.6)
Lancaster Holdings Limited 0.1 - - (0.1)
Lancaster Investments
Limited 2.8 - - -
Warner Estate (AIF) Limited - - - (2.1)
Warner Estate Asset Management
Limited - - (3.5) (2.9)
Warner Estate Development
(Folkestone) Limited 23.0 21.8 - -
Warner Estate Investments
Limited - (16.1) (15.2)
Warner Estate (Jersey)
Limited 12.1 13.6 - -
Warner Estate, Limited 21.1 23.1 - -
Warner Estate Management
Limited 6.4 9.0 - -
Warner Estate Property
Management Limited - - (23.2) (24.8)
65.5 67.5 (138.6) (141.5)
-------------------------------- --------- -------- --------- --------
No fees were paid in respect of contracts, which provided
services in the ordinary course of business to the Group, and in
which Directors have or had interests.
During the year there were loan transactions between the Group
and joint ventures, as set out in note 15. Interest payable on
these loans and management charges, payable by the joint ventures,
are also set out in note 15.
30. Reconciliation of Operating Profit to Net Cash Flow
Group Company
------------------------------------- -------------- --------------
2011 2010 2011 2010
GBPm GBPm GBPm GBPm
------------------------------------- ------ ------ ------ ------
Operating profit / (loss) before
net gains on investments 13.4 7.9 (0.9) 0.5
Depreciation of plant and equipment 0.1 0.2 - -
De-recognition of goodwill - 0.1 - -
Decrease in retirement benefit
obligations (0.2) - - -
Decrease / (increase) in trade
and other receivables - 1.1 2.8 (4.9)
(Decrease) / increase trade and
other payables (8.3) (1.6) (2.0) 2.6
------------------------------------- ------ ------ ------ ------
Cash generated from operations 5.0 7.7 (0.1) (1.8)
------------------------------------- ------ ------ ------ ------
31. Contingent Liabilities
2011 2010
GBPm GBPm
------------------------------------- ------ ------
Contingent liabilities in respect
of guarantees given by the Company
in respect of borrowings of its
subsidiaries as follows:
Bank overdrafts 168.6 176.3
------------------------------------- ------ ------
168.6 176.3
------------------------------------- ------ ------
These liabilities have not been recognised on the statement of
financial position. The Company has given letters of support to
various subsidiary undertakings.
32. Operating Lease Commitments
2011 2010
GBPm GBPm
----------------------------------------- ----- -----
Group
Total future minimum lease payments
under non-cancellable operating leases
are as follows:
Within one year 0.2 0.2
Expiring between two and five years 1.2 0.6
Expiring after five years 0.3 1.2
----------------------------------------- ----- -----
1.7 2.0
----------------------------------------- ----- -----
33. Operating Leases Granted
The Group earns rental income by leasing its investment
properties to tenants under operating leases.
At the statement of financial position date, the Group had
contracted with tenants to receive the following future minimum
lease payments:
2011 2010
GBPm GBPm
------------------------------------- ------ ------
Group
Within one year 15.0 13.9
Expiring between two and five years 50.8 48.0
Expiring after five years 45.4 57.3
------------------------------------- ------ ------
111.2 119.2
------------------------------------- ------ ------
34. Fixed Asset Investments
Issued Percentage
Share Capital Held
Principal Subsidiary
Companies GBP %
Holding and Services
*Apia Asset Management
Limited: GBP1 Ordinary Shares 1 100
*Ashtenne Asset Management
Limited: 10p Ordinary Shares 100 100
*Ashtenne Holdings Limited: 20p Ordinary Shares 7,220,942 100
GBP1 A Ordinary
Industrial Funds Limited: Shares 250,000 100
GBP1 B Ordinary
Shares 250,000 100
Warner Estate Management
Limited: GBP1 Ordinary Shares 2 100
*Warner Active Management
No 2 Limited: GBP1 Ordinary Shares 1 100
*Warner Active Management
No 4 Limited: GBP1 Ordinary Shares 1 100
*Warner Advisors (Jersey)
Limited (Jersey): GBP1 Ordinary Shares 1 100
Warner Estate Asset
Management Limited: 10p Ordinary Shares 1,636,000 100
Warner Estate Property
Management Limited: 10p Ordinary Shares 3,987,000 100
*Warner Estate (AM:PM)
Limited: GBP1 Ordinary Shares 1 100
Property Investment
Lancaster Holdings Limited: GBP1 Ordinary Shares 100 100
GBP1 Deferred Shares 100 100
Lancaster Investments
Limited: GBP1 Shares 1,000 100
Warner Estate Development
(Folkestone) Limited: GBP1 Ordinary Shares 1 100
Warner Estate Investments
Limited: GBP1 Ordinary Shares 1 100
Warner Estate Property
Limited: GBP1 Ordinary Shares 40,000,000 100
Other Investment
Cardiff and Provincial
Properties Limited: 25p Ordinary Shares 162,000 100
Warner Estate, Limited: GBP1 Ordinary Shares 1 100
*Warner Estate (AIF)
Limited (Jersey): GBP1 Ordinary Shares 1 100
GBP1 Redeemable
Preference Shares 12,000,000 100
*Warner Estate (GLO)
Limited (Jersey): GBP1 Ordinary Shares 1 100
Warner Estate Joint
Ventures Limited: GBP1 Ordinary Shares 1 100
Joint Ventures
Property Investment
GBP1 A Ordinary
*Agora Shopping Centres Limited: Shares 7,323,013 100
GBP1 B Ordinary
Shares 7,323,013 -
GBP1 A Ordinary
*Agora Max Limited: Shares 32,538,535 100
GBP1 B Ordinary
Shares 32,538,535 -
*Apia Regional Office Fund (General GBP1 A Ordinary
Partner) Limited: Shares 25,000 -
GBP1 B Ordinary
Shares 25,000 100
GBP1 A Ordinary
*Greater London Offices Limited: Shares 5,091,332 100
GBP1 B Ordinary
Shares 5,091,332 -
Principal Other Investments
Investment in Shares
*Ashtenne Industrial (General GBP1 A Ordinary
Partner) Limited: Shares 120 -
GBP1 B Ordinary
Shares 60 100
Investment in Funds
*Apia Regional Office Fund Unit
Trust (Jersey): GBP1 Units 242,366,433 21.57
*Ashtenne Industrial Fund Unit
Trust (Jersey): GBP1 Units 358,695,267 6.52
* Held through a subsidiary
company
All companies are incorporated in the UK and registered in
England unless otherwise indicated.
The companies listed above are those subsidiary undertakings
whose results or financial position, in the opinion of the
Directors principally affected the figures in the Group's financial
statements. The Company has taken advantage of s410(2) and (3)
Companies Act 2006 in not listing all its subsidiary and joint
venture undertakings. All of the subsidiaries have been
consolidated in the Group financial statements.
Full listings of all the subsidiaries are available from the
Company Secretary at the registered office.
35. Post Balance Sheet Events
On 28 July 2011, the debt maturity on two of the Group's debt
facilities was extended to December 2012, bringing them in line
with the third facility. In addition the LTV covenant on one
facility, which was due to reduce to 107.5% from March 2012, has
been amended and will remain at 117.5% to the end of the facility
agreement.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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