Caledonian Tst. Regulatory News (CNN)

28 Mar 2008 07:01

Caledonian Trust PLC28 March 2008 Caledonian Trust plc ('Caledonian Trust' or the 'Group') Interim results for the six months ended 31 December 2007 CHAIRMAN'S STATEMENT Introduction The Group made a pre-tax loss of £361,000 in the six months to 31 December 2007compared with a loss of £399,000 for the same period last year. The loss pershare after tax was 2.40p and the NAV per share was 214.5p compared with a lossof 2.39p and a NAV of 213.1p last year and earnings, as restated under IFRS of4.40p and a NAV of 217.1p at the 30 June 2007 year end. A property was sold atArdpatrick, Argyll, for a trading profit of £105,000, but there were no sales inthe comparable period last year. Revenue from properties was little changed at£355,000 but property charges fell by £123,000 due to lower costs on unoccupiedproperties but administrative expenses rose by £70,000 while other expenses fellby £45,000. Net financing costs rose by £98,000 as weighted base rates werealmost 1.0 percentage point higher than last year, and LIBOR rates considerablyhigher, due to current financial stress, and because last year benefited from anone-off £55,000 credit from our joint venture at Herne Bay, Kent. No interimdividend will be paid. Review of Activities The Group's recent major strategy has been the acquisition and creation ofdevelopment opportunities, particularly those with a reasonable probability ofachieving high returns and a small probability of a nil or, at worst, a negativereturn. Since June 2007 we have bought another rural development comprising afarmhouse with a one-acre garden within the settlement and a three-acre fieldjust outside it at Carnbo, four miles east of the M90 at Kinross. The Group'sdevelopment sites now include fifteen rural development opportunities inaddition to four large city centre sites, two sites in or near suburbanEdinburgh and a consented scheme for at least seventy-three large house plotsnear Dunbar, East Lothian. The Group's main emphasis has now switched to the exploitation of developmentopportunities where the realisation of many excellent prospects is oftenfrustrated by the increasingly ponderous planning process. After a long delay work on two local sites should start in 2008. Eightdetached houses will be built at Wallyford, a settlement near the city bypass/A1junction with a rail station on the east coast line, and ten varied houses,including some new build, totalling 18,000ft(2), will be fashioned from anexisting B- listed stone steading at Brunstane Farm, in east Edinburgh, near theA1 and the Brunstane railway halt. Planning proposals are under considerationor shortly will be further submitted for six separate rural developmentstotalling over 100,000ft(2) and two applications will be submitted shortly. Allthese developments require intensive individual design and are subject to avariety of delays and constraints, usually absent from "new build".Development work continues and our city centre sites and the development brieffor St Margaret's, Edinburgh, should be published in the summer and, ifacceptable, approved this year. Our investment portfolio is subject to minor changes. The rent review at SouthCharlotte Street was settled by arbiters at £94,850, a rise of 46% and inAberdeen our small industrial unit at Dyce was re-let in December at £70,000 anincrease of 27% Recently the existing tenants at both 17 Young Street and at57 North Castle Street exercised their break options. Fortunately, the marketfor such properties continues to be resilient. We expect also to market thevacant ground and first floors of 61 North Castle Street shortly. Quitedifferent summer sales will be of the refurbished "Old Post Office", a detachedstone and slate cottage set back from the Kilberry road on the northern march ofArdpatrick Estate, and of Carnbo farmhouse, Perthshire. Economic Prospects Chaos theory propounds that over the Amazon randomly a butterfly flutters itswings and in far-off lands a typhoon results. The current turmoil in westernfinancial markets has been ascribed to the distant flutter of the sub-primemarket in "Hicksville" USA: a present manifestation of a remote ephemeralmalady. This malady is proving to be a plague that is enduring, epidemic and systemic.The remedy prescribed was liquidity delivered in larger and larger doses andwithout effecting a cure, culminating in the recent $230bn Fed boost. The presenting symptom may be illiquidity but the disease, the systemic cause ofthe symptom, is solvency. A Financial Times leader puts in succinctly:"subprime mortgage-backed bonds have fallen to new lows, but that is the leastof it ..... in contrast to last year, it is clear that it is not primarily aproblem of bank liquidity: it is a widespread problem of solvency at leveragedinstitutions". The disease has been highly contagious spreading from subprime tomortgages and their manifold securitized manifestations, municipal debt,corporate debt and now to many other obscure sectors. There are three separate but interlocking vicious spirals: solvency, liquidityand economic activity. The solvency part of a chain affects the whole; thefear of insolvency affects liquidity and liquidity affects solvency; andsolvency and liquidity via financial intermediaries affect economic activity,which economic activity affects solvency and liquidity, all of which areself-reinforcing. The focus of the disease is the USA. House prices fell 9% in 2007 and futurescontracts reflect a further 18% fall in 2008. Goldman Sachs estimate presenttotal losses at $1.165bn but Professor Roubini's analysis, based on furtherlarge house price falls and the consequent effects on economic activity,projects further losses of $1.0bn to $2.0bn. Financial losses result in creditshrinkage which reduces GDP by an estimated 1.25% per $1.0bn loss. GDP isfurther reduced by the direct effect of falling house prices estimated at about0.65% of GNP per 10% fall. Any extrapolation of recent trends indicates a severeUS downturn which monetary policy alone is unlikely to reverse, due to thesolvency crisis. The solvency crisis will end if nominal prices fallsufficiently, giving mass bankruptcy, or, if incomes are inflated, reducing realdebts. The Fed's mandate encompasses financial stability and so, in extremis, isunlikely to eschew policies that are inflationary: let us hope so. In the UK the Chancellor is re-arranging the "non-doms" on the deck of theTreasury Titanic whose future speed is forecast at 2% while the boilermencompute the narrow margin, 0.2%, by which public sector debt will now meet thegolden rule by 2010-11, excluding Northern Rock - and, one may ask, how manyangels can dance on the head of a pin? The Treasury view is that the effect of the "credit crunch" will be minimal. Thealternative view is that the UK economy, closely integrated in the US and worldfinancial markets, still has to experience the consequences of a readjustmentwhich is only partially complete. The extent to which the real economy willsuffer will depend on regulatory assistance, and, if a recession, possibly adeep one, is to be avoided, interest rates may have to be reduced to a levelwhich may prejudice the short-term inflation target: a sacred cow slaughtered!Capital Economics do "not rule out" an all time repo low of 2%. I suspect manycommentators will reduce their estimates of UK growth in 2008 to c1% with asignificant chance of a recession. Property Prospects Commercial property returned -5.5% in 2007, due principally to capital valuesfalling about 10% in the last quarter. In January 2008 capital values fell afurther 2% and IPF forecast a further capital fall of 7.6% in 2008. Thederivatives market implies an incredible capital fall of 16.9% in 2008. Residential Property values rose in 2007, although almost all sources monitoredby the FT House Price Index showed falls in December 2007. In February 2008surveys were equally divided between rises and falls, but the February RICSsurvey of UK prices, a lead indicator, showed a continuing rise in the % balanceof surveyors reporting price falls and a continuing rise - to its highest levelsince 1996 - in the ratio of unsold houses to new enquiries. The reducedavailability of mortgages and their increased cost is likely to be adverselyaffecting the retail market and any contraction in the economy will exacerbatethis trend. The market in Scotland has risen 14% over the last year and,although now slowing, is likely to be less affected than the UK because of lowerprices, lower prices-to-earnings ratios and the higher proportion of economiccontributions of the government and the oil sector. Conclusion The economic background of and the immediate prospects for the UK are very muchpoorer than for many years. However, the Group's first developments, ifcommenced in the autumn, are not expected to be marketed before next spring bywhich time the worst of any downturn should be passing. The Group's investmentassets generally have development or rental growth prospects and are protectedfrom significant changes in yields. Most development properties are valued atcost, usually based on existing use and these values substantially understatethe realisable value if and when planning consent is gained. We will advance asmany of our developments to the consented stage as quickly as we can, so addingvalue which can be released by development or by disposal. I see no diminutionin the long-term prospects for the Group. I D LoweChairman27 March 2008 For further information please contact: Douglas Lowe, Chairman and Chief Executive Officer Tel: 0131 220 0416 Michael Baynham, Finance Director Tel: 0131 220 0416 David Ovens, Noble & Company Limited Tel: 0131 225 9677 Consolidated income statement for the six months ended 31 December 2007 Unaudited Unaudited Unaudited 6 months ended 6 months ended Year ended 31 Dec 31 Dec 30 June 2007 2006 2007 Note £000 £000 £000 Revenue from properties 355 375 684 Property charges - occupied properties (80) (77) (145)Property charges - unoccupied properties (30) (156) (196) ____ ____ _____Net rental and related income 245 142 343 ____ ____ _____ Proceeds from sale of trading properties 175 - 1,477Carrying value of trading properties sold (70) - (1,074) ____ ____ _____Profit from disposal of trading properties 105 - 403 ____ ____ _____ Other income 31 78 163Other expenses - (45) (51) ____ ____ _____Net other income 31 33 112 ____ ____ _____ Administrative expenses (415) (345) (807) ____ ____ _____Operating (loss)/profit before investmentproperty disposals and valuation movements (34) (170) 51 Profit on disposal of investment properties - - 15 Valuation gains on investment properties - - 867Valuation losses on investment properties - - (225) ____ ____ ____Operating (loss)/profit before net financingcosts (34) (170) 708Finance income 13 92 257Finance expenses (340) (321) (567) ____ ____ ____(Loss)/profit before taxation (361) (399) 398 Taxation 5 76 115 125 ____ ____ ____(Loss)/profit for the financial periodattributable to equity holders of the company (285) (284) 523 === === === (Loss)/earnings per shareBasic (loss)/earnings per share (pence) 4 (2.40p) (2.39p) 4.40pDiluted (loss)/earnings per share (pence) 4 (2.40p) (2.39p) 4.40p Consolidated statement of recognised income and expenditure for the six monthsended 31 December 2007 Unaudited Unaudited Unaudited 6 months ended 6 months ended Year ended 31 Dec 31 Dec 30 June 2007 2006 2007 £000 £000 £000 Change in the fair value of equity securitiesavailable for sale (19) - (2) ____ ____ _____Net loss recognised directly in equity (19) - (2) (Loss)/profit for the period (285) (284) 523 ____ ____ _____Total recognised income and expense for theperiod attributable to equity holders of theparent (304) (284) 521 ==== === ==== Consolidated balance sheet as at 31 December 2007 Unaudited Unaudited Unaudited 31 Dec 31 Dec 30 June 2007 2006 2007 Note £000 £000 £000 Non current assetsInvestment properties 24,075 24,057 24,075Property, plant and equipment 17 27 17Investments 22 43 41 ______ ______ ______Total non-current assets 24,114 24,127 24,133Current assetsTrading properties 11,205 8,965 10,767Trade and other receivables 423 756 539Cash and cash equivalents 274 1,316 824 ______ ______ ______Total current assets 11,902 11,037 12,130 ______ ______ ______Total assets 36,016 35,164 36,263 ______ ______ ______Current liabilitiesTrade and other payables (499) (409) (654)Interest bearing loans and borrowings (1,984) (1,710) (696)Income tax liabilities - - - ______ ______ ______ (2,483) (2,119) (1,350)Non current liabilitiesInterest bearing loans and borrowings (7,400) (7,000) (8,400)Deferred tax liabilities (641) (727) (717) ______ ______ ______ (8,041) (7,727) (9,117) ______ ______ ______Total liabilities (10,524) (9,846) (10,467) ______ ______ ______Net assets 6 25,492 25,318 25,796 ===== ===== =====EquityIssued share capital 7 2,377 2,377 2,377Other reserves 2,920 2,920 2,920Retained earnings 6 20,195 20,021 20,499 ______ ______ ______Total equity attributable to equity holdersof the parent 6 25,492 25,318 25,796 ===== ===== ===== Consolidated interim cash flow statement for the six months ended 31 December2007 Unaudited Unaudited Unaudited 6 months ended 6 months ended Year ended 31 Dec 31 Dec 30 June 2007 2006 2007 £000 £000 £000 (Loss)/profit for the period (361) (399) 398AdjustmentsProfit on sale of investment property - - (15)Investment property valuation movements - - (642)Loss on sale of plant and equipment - - 4Depreciation - - 6Net finance expense 327 229 310 ____ ____ ____Operating cash flows before movementsin working capital (34) (170) 61Increase in trading properties (439) (1,931) (3,732)Decrease in trade and other receivables 116 212 429(Decrease)/increase in trade and other payables (71) (20) 162 _____ _____ _____Cash generated from operating activities (428) (1,909) (3,080) Interest paid (424) (373) (557)Interest received 13 92 257 _____ _____ _____Cash flows from operating activities (839) (2,190) (3,380) _____ _____ _____Investing activitiesPurchases of investment property - (26) -Proceeds from sale of investment properties - - 613Purchases of plant and equipment - (6) (6) _____ _____ _____Cash flows from investing activities - (32) 607 _____ _____ _____Financing activitiesProceeds from new long term borrowings 289 1,334 1,720Repayment of borrowingsDividends paid - - (327) _____ _____ _____Cash flows from financing activities 289 1,334 1,393 _____ _____ _____Net decrease in cash andcash equivalents (550) (888) (1,380)Cash and cash equivalents at beginningof period 824 2,204 2,204 _____ _____ _____Cash and cash equivalents at end of period 274 1,316 824 ==== ==== ==== Notes to the accounts 1 This interim statement for the six month period to 31 December 2007 isunaudited and was approved by the directors on 26 March 2008. The informationset out does not constitute statutory accounts within the meaning of Section 240of the Companies Act 1985. 2 Report and financial statements The comparative figures for the financial year ended 30 June 2007 whichare now presented under International Financial reporting Standards as adoptedby the EU ("Adopted IFRSs") are not the statutory financial statements for thatfinancial year. Those financial statements were presented under UK GAAP,reported on by the Group's auditors and delivered to the Registrar of Companies.The report of the auditors was unqualified and did not contain a statementunder section 237 (2) or (3) of the Companies Act 1985. Copies of the AnnualReport for 2007 are available from the Company's head office by applying to theCompany Secretary. 3 Accounting policies Basis of preparation The AIM rules require that the next annual consolidated financial statements ofthe company for the year ending 30 June 2008, be prepared in accordance withAdopted IFRSs. This interim financial information has been prepared on the basis of therecognition and measurement requirements of IFRSs in issue that either areendorsed by the EU at 30 June 2008 or are expected to be endorsed and effectiveat 30 June 2008, the Group's first annual reporting date at which it is requiredto use adopted IFRSs. Based on these adopted and unadopted IFRSs, the directorshave made assumptions about the accounting policies expected to be applied,which are as set out below, when the first annual IFRS financial statements areprepared for the year ending 30 June 2008. In addition, the Adopted IFRSs that will be effective in the annual financialstatements for the year ending 30 June 2008 are still subject to change and toadditional interpretations and therefore cannot be determined with certainty.Accordingly, the accounting policies for that annual period will be determinedfinally only when the annual financial statements are prepared for the yearending 30 June 2008. As required by IFRS 1, the impact of the transition from UK GAAP to IFRSs isexplained in note 8. The accounting policies set out below have been applied consistently to allperiods presented in this interim financial information and in preparing anopening IFRS balance sheet at 1 July 2006 for the purposes of the transition toIFRS. The group has taken advantage of the exemption available under IFRS1 andhas not restated business combinations prior to the date of transition. The financial statements are prepared on the historical cost basis except forinvestment properties, and available for sale financial assets which are statedat their fair values. The preparation of financial statements in conformity with Adopted IFRSsrequires the directors to make judgements, estimates and assumptions that affectthe application of policies and reported amounts of assets and liabilities,income and expense. The estimates and judgements are based on historicalexperience and various other factors that are believed to be reasonable underthe circumstances, the results of which form the basis of making judgementsabout carrying amounts of assets and liabilities that are not readily apparentfrom other sources . Actual results may differ from these estimates. Notes to the accounts (continued) 3 Accounting policies (continued) Basis of preparation (continued) In particular the most significant area of estimation and judgement is inrelation to the valuation of investment property which is explained below. The significant accounting policies that have been used in the preparation ofthe financial statements are summarised below. Basis of consolidation The financial statements incorporate the financial statements of thecompany and all its subsidiaries. Subsidiaries are entities controlled by thegroup. Control exists when the group has the power to determine the financialand operating policies of an entity to obtain benefits from its activities. Thefinancial statements of subsidiaries are included in the consolidated financialstatements from the date that control commences until the date it ceases. Revenue Rental income from properties leased out under operating leases isrecognised in the income statement on a straight line basis over the term of thelease. Lease incentives granted are recognised as an integral part of totalrental income. Other income comprises income from former leisure operations and othermiscellaneous and is stated net of VAT. Revenue from the sale of trading properties is recognised in the incomestatement on the date at which the significant risks and rewards of ownershipare transferred to the buyer. Investment properties Investment properties are properties owned by the group which are heldeither for long term rental growth or for capital appreciation or both.Investment property is initially recognised at cost including relatedtransaction costs and is valued at each balance sheet date to reflect fair valueeither by the directors or by independent professional valuers. Independentprofessional valuations are prepared at least once every three years. The fairvalues are based on market values, being the estimated amount for which aproperty could be exchanged on the date of valuation between a willing buyer anda willing seller in an arms' length transaction after proper marketing whereinthe parties had each acted knowledgeably, prudently and without compulsion. Purchases and sales of investment properties Purchases and sales of investment properties are recognised in thefinancial statements on the date at which the significant risks and rewards ofownership are transferred to the buyer. Notes to the accounts (continued) 3 Accounting policies (continued) Property, plant and equipment Property, plant and equipment are stated at cost, net of depreciationand any provision for impairment. Depreciation is provided on all property,plant and equipment at varying rates calculated to write off cost to theexpected current residual value by equal annual instalments over their estimateduseful economic lives. The principal rates employed are: Office equipment - 11 - 33.3 per cent Fixtures and fittings - 10 per cent Motor vehicles - 33.3 per cent Investments The group's investments in equity securities are classified asavailable for sale financial assets. They are initially recognised at fairvalue plus any directly attributable transaction costs. Subsequent to initialrecognition they are measured at fair value and changes therein, other thanimpairment losses, are recognised directly in equity. The fair value ofavailable for sale investments is their quoted bid price at the balance sheetdate. When an investment is disposed of, the cumulative gain or loss in equityis recognised in profit or loss. Trading properties Trading properties (inventories) are stated at the lower of cost or netrealisable value. Net realisable value is based on estimated selling price lessestimated cost of disposal. Income tax Income tax on the profit or loss for the year comprises current anddeferred tax. Income tax is recognised in the income statement except to theextent that it relates to items recognised directly in equity, in which case itis recognised in equity. Current tax is the expected tax payable on taxableincome for the current year, using tax rates enacted or substantively enacted atthe reporting date, adjusted for prior years under and over provisions. Deferred tax is provided using the balance sheet liability method inrespect of all temporary differences between the values at which assets andliabilities are recorded in the financial statements and their cost base fortaxation purposes. Deferred tax includes current tax losses which can be offsetagainst future capital gains. A deferred tax asset is recognised only to the extent that it isprobable that future taxable profits will be available against which the assetcan be utilised. Notes to the accounts (continued) 4 Loss/(earnings) per share Basic (loss)/earnings per share is calculated by dividing the (loss)/earnings attributable to ordinary shareholders by the weighted average number ofordinary shares outstanding during the period as follows: 6 months ended 6 months ended Year ended 31 Dec 31 Dec 30 June 2007 2006 2007 £000 £000 £000(Loss)/profit for financial period (285) (284) 523 === === === No. No. No.Weighted average no of shares:For basic earnings per share and for dilutedearnings per share 11,882,923 11,882,923 11,882,923 ======== ======== ========Basic (loss)/earnings per share (2.40p) (2.39p) 4.40pDiluted (loss)/earnings per share (2.40p) (2.39p) 4.40p 5 Taxation Taxation for the 6 months ended 31 December 2007 is based on theeffective rate of taxation which is estimated to apply to the year ending 30June 2008. In the case of deferred tax in relation to investment propertyrevaluation surpluses, the base cost used is historical book cost and includesallowances or deductions which may be available to reduce the actual taxliability which would crystallise in the event of a disposal of the asset. 6 Capital and reserves Share Other Retained capital reserves earnings Total £000 £000 £000 £000 At 1 July 2007 2,377 2,920 20,499 25,796 Total recognised income and expense - - (304) (304) _____ _____ ______ ______ At 31 December 2007 2,377 2,920 20,195 25,492 ==== ==== ===== ===== At 1 July 2006 2,377 2,920 20,305 25,602 Total recognised income and expense - - (284) (284) _____ _____ ______ ______ At 31 December 2006 2,377 2,920 20,021 25,318 ==== ==== ===== ===== At 1 July 2006 2,377 2,920 20,305 25,602 Total recognised income and expense - - 521 521 Dividends - - (327) (327) _____ _____ ______ ______ At 30 June 2007 2,377 2,920 20,499 25,796 ==== ==== ===== ===== The other reserves consist of the share premium account and the capital redemption reserve. Notes to the accounts (continued) 7 Issued share capital 31 December 2007 31 December 2006 30 June 2007 No £000 No. £000 No. £000 000 000 000 Authorised Ordinary shares of 20p each 20,000 4,000 20,000 4,000 20,000 4,000 ===== ==== ===== ==== ===== ==== Issued and fully paid Ordinary shares of 20p each 11,883 2,377 11,883 2,377 11,883 2,377 ===== ==== ===== ==== ===== ==== 8 Transition to International Financial Reporting Standards The group will prepare its group accounts for the financial year ending30 June 2008 using adopted International Financial Reporting Standards (adoptedIFRSs). Previously the group has applied United Kingdom Generally AcceptedAccounting Principles (UK GAAP). These interim financial statements are thegroup's first published financial statements under adopted IFRSs. The areas of accounting that are most significantly impacted are: (1) The treatment of investment property revaluations - under UK GAAP gainsor losses on revaluation of investment properties were recorded in a revaluationreserve. Under IFRS revaluation gains and losses are recorded in the incomestatement (2) Accounting for investments - under UK GAAP investments were held at costless permanent impairments in value. Under IFRS investments are held asavailable for sale financial assets and are held at fair value with gains orlosses recorded directly in equity unless there is a permanent impairment whichis recorded in the income statement (3) Deferred taxation - under UK GAAP deferred taxation on investmentproperty revaluation gains was not provided for in the balance sheet unlessthere was a commitment to sell the property. Under IFRS deferred tax provisionsare made for the tax that would potentially be payable on the sale of investmentproperties where their carrying value is different from their cost for taxpurposes. Where current tax losses can be offset against future capital gains,the related deferred tax asset has been recognised and offset against thedeferred tax liability. The following table summarises the impact of the adoption on thegroup's profit for the six months ended 31 December 2006 and the year ended 30June 2007. Unaudited Unaudited 6 months ended Year ended 31 Dec 30 June 2006 2007 £000 £000Loss for the period as reported under UK GAAP (399) (244)IFRS adjustmentsRevaluation of investment properties (1) - 642Deferred taxation (3) 115 125 ____ ____(Loss)/profit before tax as reported under IFRS (284) 523 === === Notes to the accounts (continued) 8 Transition to International Financial Reporting Standards (continued) The impact on total equity (and net assets) at 30 June 2006, 31December 2006 and 30 June 2007 is shown in the table below: 30 June 31 December 30 June 2006 2006 2007 £000 £000 £000 Net assets as previously reported underUK GAAP 26,444 26,045 26,515IFRS adjustmentsFair value of financial assets (2) - - (2)Deferred taxation (3) (842) (727) (717) ______ ______ ______Net assets as reported under IFRS 25,602 25,318 25,796 ===== ===== ===== 9 Availability of Results Copies of the Interim Results for the six months to 31 December 2007 will beposted to shareholders shortly and will be available, free of charge, from theGroup's Nominated Adviser, Noble & Company Limited, 76 George Street, Edinburgh,EH2 3BU, for a period of one month from the date thereof. The Interim Resultsare also available on the Group's website www.caledoniantrust.com . This information is provided by RNS The company news service from the London Stock Exchange