London & Associated Properties Regulatory News (LAS)

31 Mar 2008 08:01

FOR IMMEDIATE RELEASE

31 March 2008 LONDON & ASSOCIATED PROPERTIES PLC: RESULTS FOR 12 MONTHS TO 31 DECEMBER 2007 HIGHLIGHTS

London & Associated Properties PLC is a highly focused retail property investor with a strong bias towards London and the South East

* Defensive nature of portfolio and well timed disposals reflected in diluted net asset value per share of 116.7p, a dip of just 12.5% * Disposals of ‚£44.6m of mature properties produced ‚£2.3m profit over 2006 book values * During past two years sales - completed or contracted - now total ‚£137.8m * Wholly owned property portfolio valued at ‚£248m, including full ownership of King Edward Court in Windsor, against ‚£192.8m last time * Rental income rose from ‚£7.9m to ‚£13.0m * IFRS pre-tax loss of ‚£23.9m, including ‚£25m fall in valuation reserve, against pre-tax profit of ‚£18.3m * Recommended final dividend of 1.3p a share making a total of 1.95p a share for the year - an increase of 5.4% * Well placed to take advantage of market opportunities - bank credit committee approval for new ‚£75m joint venture

"Our performance in 2007 was satisfying in the economic circumstances¢â‚¬¦.I look forward to building on our success to date during the coming year," Michael Heller, Chairman.

-more- Contact:

London & Associated Properties PLC Tel: 020 7415 5000

John Heller, Chief Executive or Robert Corry, Finance Director

Baron Phillips Associates Tel: 020 7920 3161

Baron Phillips

Chairman's Statement

2007 was a dramatic year for property investors. During the first half capital values rose to record highs but then receded quickly in the second half and into 2008. LAP's retail portfolio was not immune from this general market shift, but any reductions in our capital values have been considerably cushioned by well-timed disposals of some ‚£44.6m of mature property during 2007 at a profit of ‚£2.3m over 2006 book values. Indeed, we have continued to make selective disposals at attractive levels even in the current difficult market.

In March 2008, we contracted to sell Chenil House, Kings Road for ‚£15.0m, although this figure may be higher depending on the final planning consent secured by the purchaser. This sale compares well to the year end book value of ‚£13.5m. We also completed in March the sale of some shops and adjoining land in Bradford for ‚£1.5m compared to a book value of ‚£0.8m. This means that over the last two years, we have disposed, or contracted to dispose, of some ‚£137.8m of properties that no longer fit our investment criteria.

We have at the same time generated high cash balances and maintained significant bank facilities in anticipation of the current change to market sentiment. We have also benefited from increased exposure to property in Central London and in the prosperous parts of the South East. At the end of 2007, some 59% of our properties were in this geographical area of the UK. Since last Autumn, prices outside the South East have fallen to attractive levels once again and we are now carefully building up our portfolio there.

Over the last few months, we have acquired two prime blocks of retail property. These were secured at attractive prices from vendors wishing to raise cash quickly. In December we purchased 119/121 High Street and 2/8 Mill Lane, Solihull for ‚£13.7m, reflecting a net initial yield of 5.4%, and in January we bought a 53,000 sq. ft Primark store in Chesterfield for ‚£8.7m, a net initial yield of 5.7%. Both of these properties are reversionary, and are outlined in more detail in the Chief Executive's review. Both were acquired for cash, although they have subsequently been refinanced from our existing bank facilities. These purchases were achievable because our strategy of maintaining high cash balances enabled us to move quickly on both occasions.

Our property portfolio was valued at 31st December 2007 at ‚£248.0m against ‚£ 192.8m in 2006. This includes for the first time full ownership of King Edward Court, Windsor following our acquisition in September 2007 of the outstanding 50% owned by our joint venture partner, Bank of Scotland. On a like-for-like basis, the value of LAP's property portfolio was 8.6% lower than the previous year. As a result, our diluted net assets per share have decreased by 12.5% to 116.7p against 133.5p. Total assets under management, including those of Bisichi Mining PLC, our listed associate, and Dragon Retail Properties, a joint venture with Bisichi, now stand at ‚£341.6m. As stated, this is a satisfactory performance at a time when the property market is in a state of flux.

Under IFRS we made a loss before tax of ‚£23.9m in 2007. However, this figure reflects ‚£25.2m lower property valuation. Diluted loss per share under IFRS is 16.40p against diluted earnings of 19.97p in 2006.

Retailer demand for our units remains strong, and we have just 2.2% of our units vacant excluding those deliberately vacated for development. This also reflects the quality of our portfolio.

Our financing is strong and we have fully hedged our bank loans. This has enabled us to pursue further investment opportunities. We also have credit committee approval from a high street bank for a new ‚£74m joint venture which will increase our capacity to take advantage of these opportunities. Our agents, and direct vendors, are presenting us with numerous available properties and we expect to be able to make further announcements in due course.

We have made good progress in managing our existing portfolio. There is a significant development underway at Orchard Square, Sheffield. We are also finalising applications to commence developments at Antiquarius in the Kings Road, London and The Mall, Islington which we wish to convert to a single shop by carrying out some minor works to the building. All of these projects have pre-lets in place to recognised retailers, and again are more fully described in the Chief Executive's review. In total we will spend some ‚£7.5m on these projects while we anticipate receiving some ‚£700,000 in net incremental rent as well as improving the quality of the income and tenant mix.

In 2007, our rental income rose from ‚£7.9m to ‚£13.0m. This increase reflects a full year's contribution from the Atlantic Group of Companies, since renamed LAP Ocean Holdings, and a full contribution from King Edward Court, Windsor in the last quarter.

The Board is recommending a final dividend of 1.3p per share which, if approved by shareholders, will make a total of 1.95p for the year, an increase of 5.4%. This will be paid on 4 July 2008 to all those shareholders on the register at close of business on 30 May 2008.

In 2007, Barry O'Connell retired from the Board. Barry was an outstanding contributor to the success of LAP, and we wish him well in his retirement.

Our performance in 2007 was satisfying in the economic circumstances and I would like to thank my Board colleagues, staff and advisers for all their hard work. 2008 has started well including one particular highlight which was the official opening on 29th February of the extension of King Edward Court, Windsor, by Her Majesty The Queen and HRH The Duke of Edinburgh. I look forward to building on our success to date during the coming year.

Michael Heller, Chairman

31 March 2008

Chief Executive's Report

The year under review was a challenging one for the property investment world. Property values declined sharply in the second half of the year as a reaction to broader economic concerns.

LAP's property portfolio was valued at ‚£248.1m, a like-for-like decline of 8.6%. However, this could have been more severe were it not for the sale of properties in Dagenham, Christchurch, Wolverhampton and London for a total of ‚£ 44.6m. These sales produced a net profit of ‚£2.3m. So far in 2008, we have sold a property in Bradford for ‚£1.5m against a book value of ‚£0.8m and we have exchanged contracts to sell Chenil House, Kings Road, London for ‚£15.0m plus a share of any additional value created should the buyer obtain planning consent for a larger building than anticipated. This transaction is conditional on vacant possession only. We have already secured vacant possession of the retail unit, while the upper parts are let on short term agreements with no rights of renewal. Vacant possession will occur no later than July this year.

The difficult investment market has thrown up certain opportunities and we were able to secure in December 2007 and January 2008 two off-market acquisitions. The first of these was a block of shops in Solihull, West Midlands, which we acquired for ‚£13.7m to show a net initial yield of 5.4%. Solihull is arguably the most prosperous town in the West Midlands, and these shops are situated in a prime location between the entrance to the Touchwood Centre and the soon to be refurbished Mell Square. The list of high quality retailers who want to trade from these shops is extensive and we anticipate being able to drive forward the rents over the coming months and years. We have already negotiated a lease surrender from one of the existing tenants and the unit is under offer to a high quality national retailer at what will be a record rent.

The second acquisition was a 53,000 sq ft department store let until 2030 to Primark, plus an adjacent shop unit, in Market Square, Chesterfield. We paid ‚£ 8.7m for this property, a net initial yield of 5.7%. Primark are currently paying ‚£8.90 per sq ft which we feel should increase on review. There is a rent review in 2010.

The vendors of both of these properties required completion in a short period of time. We were able to achieve this because we had available strong cash balances. Both properties have been refinanced subsequently from existing facilities; therefore we still have some ‚£23m of unencumbered cash and committed facilities available for future acquisitions.

We continue to be presented with numerous interesting properties at attractive yields both on and off-market. We are looking seriously at a number of them. Our capacity to make acquisitions will be further enhanced by a joint venture with a high street bank for which we have full credit committee approval. This joint venture has already identified a potential acquisition and we hope to make a further announcement shortly.

Our remaining portfolio continues to perform well. We have few voids, accounting for just 2.2% of the total. In 2007 we achieved net incremental rental growth of some ‚£795,000 pa on an annualised basis. This does not take into account the further ‚£2.4m pa contracted at Windsor in 2006 on agreements for lease. These rents will all be receivable during this year.

Windsor

As reported in the interim statement, in September we acquired from Bank of Scotland the 50% of Analytical Properties' equity and loan stock that we did not already own for ‚£14.1m. Following this transaction, we have been able to refinance the property, again with Bank of Scotland but on much better terms. This has led to an interest saving of some ‚£800,000 pa.

The redevelopment of the property has been completed at a final cost of ‚£24.1m. The new units are all let, with Top Shop taking the one remaining large unit at Mall level at a rent of ‚£195,000 pa. This compares favourably with our estimated rental value of ‚£175,000 pa and completes the line-up of top fashion retailers in this new block.

The unit at the lower level has been let to European Bathrooms, a chain of bathroom showrooms, and the kiosk at Mall level is let to Zest juice bars, at a combined rent of some ‚£130,000 pa.

King Edward Court has a 900 space car park. We reviewed the price of parking there once the works were finished. The consequent price rises have added a net ‚£475,000 pa of income with no drop in the level of usage.

The rest of the centre is fully let with the exception of one double unit that was temporarily occupied by Waitrose while their new 45,000 sq ft unit was being built. This is now under offer at a higher rent than Waitrose were paying, and once completed will add a further recognised national fashion retailer to this successful Centre.

Sheffield

We are now well underway into the demolition and rebuild of the Stonehouse public house and adjacent shops to create a 45,000 sq ft flagship store for TK Maxx, the anchor tenant of Orchard Square. TK Maxx will take a new lease at ‚£ 625,000 pa, an increase of some ‚£383,000 pa over all previous income from this part of the property. The contract sum and tenant incentives have been negotiated at ‚£4.8m and works are due to complete in late August of this year.

Elsewhere in the Centre, we have reached agreement with Evans to take a surrender of their existing lease and grant them a new lease on an extended unit. This is one unit within a block of four extended units emanating from a planning consent that we were awarded in 2003. Two of the three remaining units have been let to Starbucks at ‚£62,500 pa and to fashion retailer Blue Banana at ‚£87,500 pa. These deals reflect Zone A rates of approximately ‚£90 per sq ft compared to ‚£71 per sq ft currently in the centre. This is useful evidence for the next round of rent reviews which get underway this year. The rest of the centre remains fully let.

We have also agreed the rent review of the large unit fronting Fargate which is let to Zavvi, formerly Virgin Retail, at ‚£460,000 pa, an increase of 15%.

The London Portfolio

At Antiquarius, on Kings Road London, we obtained consent from the freeholder, Cadogan Estates, to create a new unit of approx. 6,000 sq ft fronting onto the Kings Road. Preparation of the site commenced in late February this year including the removal of existing kiosks and certain walls. In March we were notified by English Heritage that the building had just been listed and all work was to cease immediately. Our advisers are now working to prepare a listed building application. We believe that our proposed works should be acceptable notwithstanding the listing. However, shareholders should be aware that there may be a delay while these matters are resolved. Net rental income in the Centre is largely unaffected as almost all of the displaced retailers have been relocated to previously empty units within Antiquarius.

The proposed unit has been pre-let to a major fashion retailer and will add significantly to the net rental income of this property. The projected costs including fees are estimated at ‚£1.7m.

To the rear of Antiquarius, we successfully carried out a refurbishment of the vacant flat that had been in a state of disrepair for many years prior to our acquisition. This cost ‚£488,000 including fees, but has been let at well over ‚£ 50,000 pa.

In January 2008, we submitted a listed building application at The Mall Islington to allow us to make some minor adjustments to the ground floor slab and widen two access staircases into the basement. These works were approved by English Heritage, although the Local Authority has informally advised us that they are unwilling to give consent at first instance. We therefore expect this application to go to appeal and are confident as to the outcome. The proposed shop has been pre-let to a national retailer at a significantly higher net rent. Total projected costs of the works will be approximately ‚£1.0m. We will keep shareholders updated on progress.

Phelps Cottage, a residential property adjacent to The Mall, is currently being refurbished at a cost of ‚£300,000, and we expect to let it during the second half. Our two indoor markets at Brixton continue to trade satisfactorily and we are working hard to grow net rents there.

The rest of our portfolio is performing well. We have no current plans to sell any further properties in the near future. However, we are always looking for ways to enhance shareholder returns. In 2007 this included the acquisition of 324,030 of our own shares at an average of 85.1p. These shares have been placed in Treasury.

I am satisfied with our performance in 2007 and so far in 2008. Our strategy of selling mature properties was well timed. Our relationships with banks, agents and vendors are strong and, as we have seen in Solihull and Chesterfield, this is paying rewards. We remain keen to expand in the current market, and I feel confident that further opportunities will present themselves during this year.

John Heller, Chief Executive31 March 2008Finance Director's Report

During 2007, we consolidated our financial position by continuing to sell mature properties where we believed that the offer was sufficiently attractive. This enabled us to build up our cash reserves, while maintaining our policy of prudently managing our loans. We entered into interest rate swaps on all outstanding floating rate debt at attractive rates of between 4.68% and 4.76% plus margin. We also refinanced and hedged a loan on King Edward Court, Windsor, following our acquisition of the 50% of the joint venture we previously did not own, which saved us some ‚£0.8m pa.

Cash Flow

The Group currently is in a strong position with some ‚£23.0m of unencumbered cash and facilities.

In 2007, we sold the Mall, Dagenham for ‚£18.7m, Saxon Square in Christchurch for ‚£20.5m, and three smaller properties for ‚£4.6m. As stated, we acquired the 50% of Windsor that we did not already own for ‚£14.1m from our joint venture partner, Bank of Scotland, as well as a block of shops in Solihull for ‚£13.7m.

Since the year end, we have sold a property in Bradford for ‚£1.5m and have exchanged contracts to sell Chenil House, Kings Road for ‚£15.0m. The final price may rise depending on planning consent obtained by the purchaser and completion is scheduled for July. In February this year, we also acquired the 53,000 sq ft Primark store in Chesterfield for ‚£8.7m.

The acquisitions in Solihull and Chesterfield have since been refinanced and the Group continues to be in a solid position with strong cash balances, and so able to take advantage of any opportunities as they arise.

We also acquired 324,030 of our own shares to be placed in Treasury for ‚£ 300,000.

Income Statement

The Group loss before tax was ‚£23.9m (2006: profit ‚£18.3m). This figure is adversely affected by the fall in value of the property portfolio which under IFRS is incorporated into the income statement. This diminution of value totals ‚£26.7m, including our share of the property write-downs in Bisichi Mining PLC, our listed associate, and Dragon Retail Properties, our joint venture with Bisichi.

The average cost of debt has fallen to 6.1% (2006: 6.9%) despite the rising interest rates in the general market where three month LIBOR has risen in the year from 5.3% at 31 December 2006 to 6.0% at 31 December 2007.

The current tax charge in the year is ‚£1.7m. However, the deferred tax recovery was ‚£13.1m after taking into account the reduction the property portfolio valuation, and this has resulted in a net tax recovery of ‚£11.4 m.

Balance Sheet

The overall property portfolio, including the properties owned by Bisichi and Dragon Retail Properties reduced in the year to ‚£266.2m. On a like for like basis the reduction was 9.0%.

The net assets of the Group, after taking into account the reduction in the property portfolio, were down by 12.6% to ‚£89.0m. Fully diluted net assets per share were 116.7p (2006: 133.5p).

As we now own 100% of Analytical Properties, the company that owns King Edward Court, Windsor we have consolidated all of this company's debt. Analytical Properties remains a separate subsidiary and the loan is therefore ring-fenced. This loan is also fully hedged.

As mentioned above, the Group's term debt is fully hedged at rates below the current three month level of LIBOR. We entered into three different interest rate swaps towards the end of the year, full details of which will be shown in the annual accounts. The previous interest rate collar and cap that we used to hedge these loans were sold back to the respective banks. These transactions resulted in a net saving for the group of ‚£2.6m pa against the prevailing interest rates at the time of entering into the hedges.

Under IFRS our long term debenture debt continues not to be shown at fair value. An adjustment to fair value would amount to 3.5p per share (2006: 4.0p). It remains our policy not to repay the debt early.

Dividends

The proposed final dividend of 1.3p, payable to shareholders on 4 July 2008, gives a total dividend for the year of 1.95p, an increase of 5.4%.

Our associated company Bisichi Mining PLC, in which we hold a 41.7% stake, produced an excellent result from its direct mining operation in South Africa but this was offset by the revaluation deficit on its property portfolio resulting in a pre-tax loss for the year of ‚£0.4m. With potential opencast mining expected to come on stream during 2008 the outlook for the company is positive.

London & Associated Properties is well placed to make further acquisitions as opportunities arise. Our prudent management of the company's finances has stood us in good stead in times of economic uncertainty and I look forward to reporting on further progress in 2008.

Robert Corry, Finance Director

31 March 2008