London & Associated Properties Regulatory News (LAS)

LONDON AND ASSOCIATED PROPERTIES PLC - Half-year Report

PR Newswire

London, August 31

FOR IMMEDIATE RELEASE

31 August 2017

LONDON & ASSOCIATED PROPERTIES PLC

HALF YEAR RESULTS TO 30 JUNE 2017

London & Associated Properties PLC is a main market listed group which invests in UK shopping centres and retail property whilst also managing property assets for institutional clients.

It holds a substantial investment in Bisichi Mining PLC (main market listed) which operates coal mines in South Africa and owns UK property investments.

HIGHLIGHTS 

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Contact:

London & Associated Properties PLC Tel: 020 7415 5000 John Heller, Chief Executive 

Baron Phillips Associates Tel: 07767 444193 Baron Phillips

Half year results for the period ended

30 June 2017

Half year review

We are pleased to report on a half-year of progress for London & Associated Properties PLC group (“Group”). The results of Bisichi Mining PLC (“Bisichi”), of which we own 41.5%, are included as though it was a subsidiary, in accordance with IFRS 10.

The United Kingdom trading environment continues to be difficult. The combined uncertainties caused by Brexit followed by the General Election and the resultant minority Conservative government have led to retailers and other participants in the commercial property world adopting a very cautious approach.

Operating profit before tax increased by £0.346 million (to £1.961 million from £1.615 million). This improvement is attributable to increased property income (£0.117 million) supported by cost reductions and better mining profits. A favourable movement in the valuation of interest rate derivatives (£0.656 million), although having no impact on cash flow, was a significant contributor to the overall increase of £0.906 million in profit before tax.

Group net assets attributable to equity shareholders are lower at £38.01 million at 30 June 2017 compared to £38.89 million a year previously and £38.24 million at 31 December 2016. This variation from group net assets arises because the profits attributable to minority interests are excluded when calculating net assets attributable to equity shareholders in London & Associated Properties PLC (“LAP”).

LAP activities

We are pleased to report that property income in LAP increased to £3.136 million for the six months to June 2017 compared to £3.040 million in the same period in 2016. This increase is the result of a number of lettings across our portfolio, particularly at Kings Square in West Bromwich. This performance reflects our long-held view that our portfolio of retail properties continues to be relevant in the digital shopping age. Our strategy has been to retain only those properties that are either: part of a large shopping environment, such as a city centre; or that offer a more exciting and social experience, such as our markets in Brixton; or are convenience shops in accessible High Streets where shoppers can easily make frequent trips for “top-up” items.

We have made savings of £0.095 million in direct property expenses, although these were offset by increases in some exceptional overhead costs, including an interim property revaluation for one of our lenders, legal fees relating to charging a property to a different lender and litigation expenses in relation to ongoing cases against two of our tenants. 

We are endeavouring to reduce interest costs and on 2nd June we repaid £750,000 of debenture stock carrying a legacy coupon of 11.6%. The final £3 million of this debenture stock matures in August 2018. We are in the process of refinancing this debt and expect to make significant savings compared to the 11.6% that we are currently paying.

Performance of LAP properties 

At Orchard Square, Sheffield, we have completed several lettings and the Centre remains almost fully let. Furthermore, we continue to renew leases to existing tenants at estimated rental value. For example, the Perfume Shop will continue to occupy a prime unit on Fargate, Sheffield that we built for it in 2008. Currently, we have one retail unit and one office suite that are available and have held talks with potential tenants on both of these spaces. 

Our two markets in Brixton continue to trade well and grow. We have a disagreement with our tenant, Market Village, over whether two heads of expenditure are deductible under the terms of the leases that we have with it. This is due to be decided at Court later this year. However, the performance of this asset continues to be strong and is unaffected by this dispute.

Our smaller asset in Brixton remains an exciting opportunity. Shareholders will recall that we obtained planning consent to convert the upper floors to residential units in 2015, although this consent was subsequently questioned at judicial review and quashed as Lambeth Council chose not to defend itself. We have now agreed a 20 year lease with a major cocktail bar chain at over double the rent paid by the existing occupier. We remain in the process of obtaining vacant possession and are confident of success in due course.

All the malls at Kings Square, our shopping centre in West Bromwich, have now been fully let for the first time in many years. There remains a single unit outside the main building on which the tenant has exercised its break clause. This unit previously operated as a bookmaker and is adjacent to West Bromwich’s large and busy bus terminus so we do not expect re-letting to be difficult.

West Bromwich has also benefited from a significant drop in rateable values following the government revaluation in April 2017. We expect these savings to accrue to the tenants over the short to medium term, but we should then benefit from higher rents as the overall cost of occupation reduces.

Our joint venture with Oaktree Capital Management has had a successful first half of 2017. The three shopping centres it owns have performed well, particularly at the Vancouver Centre in King’s Lynn, where we obtained planning consent for a 32,790 square feet building on the site of a former Beales department store and we are about to commence construction. 

The largest unit within this building has been pre-let to H&M. The project should take 12 months to complete.

Bisichi

For the half year to 30 June 2017, Bisichi Mining PLC, of which LAP owns 41.5%, achieved earnings before interest, tax, depreciation and amortisation of £1.4 million (2016: £1.0 million).

Production at Black Wattle, Bisichi’s directly owned coal mining asset in South Africa, was impacted by higher than expected seasonal rains, as well as ongoing stone contamination issues at the opencast areas. Overall, the mine achieved total production of 582,000 metric tonnes (2016: 795,000 metric tonnes) in the six months. Although this was an improvement on the 466,000 metric tonnes achieved in the second half of last year, management has planned for further progress to be made in developing the opencast areas and increasing production in the second half of this year.

The majority of new infrastructure improvements to the coal washing plant are completed.

In terms of markets, the demand for Bisichi’s coal remained strong and international and domestic coal prices have continued to remain stable for most of the first half of 2017. The increase in Bisichi revenue compared to the same period in 2016 is attributable mainly to the appreciation of the Rand against UK sterling, as well as improved coal prices. In turn, the increase in Bisichi operating costs compared to the same period in 2016 is mainly attributable to the appreciation of the Rand against UK sterling, as well as increased mining costs at new opencast mining areas.

Bisichi’s UK retail property portfolio, which is managed by LAP, also continues to perform well.

Outlook

These results reflect the hard work of all the LAP directors, employees and advisors in challenging times. The Brexit referendum and General Election have made a difficult environment even more uncertain. However, we have positioned our property portfolio to meet the market challenges, and remain confident about the future.

The Board is not proposing a half year dividend (2016: nil).

Sir Michael Heller John HellerChairman Chief Executive30 August 2017

Consolidated income statement

for the six months ended 30 June 2017

Consolidated statement of comprehensive income

for the six months ended 30 June 2017

Consolidated balance sheet

at 30 June 2017

Consolidated statement of changes in shareholders’ equity

for the six months ended 30 June 2017

Consolidated statement of changes in shareholders’ equity - continued

for the six months ended 30 June 2017

Consolidated cash flow statement

for the six months ended 30 June 2017

Consolidated cash flow statement - continued

for the six months ended 30 June 2017

The cash flows above relate to continuing and discontinued operations.

Cash and cash equivalentsFor the purpose of the cash flow statement, cash and cash equivalents comprise the following balance sheet amounts:

£30,000 cash deposits at 30 June 2017 were charged as security to debenture stocks.

Notes to the half year report

for the six months ended 30 June 2017

5. Property 

Properties at 30 June 2017 are included at valuation as at 31 December 2016, plus additions in the period at cost.

During the six months ended 30 June 2017 the group had £0.02 million property additions (30 June 2016: £0.1 million, 31 December 2016: £0.16 million).

No properties were sold during the six months ended 30 June 2017 (carrying value of properties sold at 30 June 2016: £Nil, 31 December 2016: £Nil). 

6. Interest rate derivatives

At 30 June 2017 the fair value liability was £612,000 as valued by the hedge provider (30 June 2016: £1,053,000, 31 December 2016: £793,000).

At 30 June 2017 the fair value asset was £2,000 as valued by the hedge provider (30 June 2016: £4,000, 31 December 2016: £4,000).

Under IFRS 13 the hedges are not deemed to be eligible for hedge accounting and any movement in the value of the hedge is charged directly to the consolidated income statement.

Notes to the half year report - continued

8. Related party transactions

The related parties and the nature of costs recharged are as disclosed in the group’s annual financial statements for the year ended 31 December 2016.

9. Dividends

There is no interim dividend payable for the period (30 June 2016: Nil).

The final dividend in respect of 2016 of 0.165p per share, amounting to £141,000, is payable on 15 September 2017. As the 2016 final dividend was approved by the shareholders at the Annual General Meeting held on 6 June 2017, it is included as a liability in these interim financial statements. 

10. Risks and uncertainties

The group’s principal risks and uncertainties are reported on pages 22 and 24 in the 2016 Annual Report. They have been reviewed by the Directors and remain unchanged for the current period.

The largest area of estimation and uncertainty in the interim financial statements is in respect of the valuation of investment properties (which are not revalued at the half year) and the valuation of interest rate derivatives.

For our subsidiary, Bisichi Mining PLC, it also relates to currency movements and coal mining activities in South Africa, including depreciation, impairment and the provision for rehabilitation (relating to environmental rehabilitation of mining areas).

Notes to the half year report - continued

11. Financial information

The above financial information does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. The figures for the year ended 31 December 2016 are based upon the latest statutory accounts, which have been delivered to the Registrar of Companies; the report of the auditor on those accounts was unqualified and did not contain a statement under Section 498(2) or (3) of the Companies Act 2006.

As required by the Disclosure and Transparency Rules of the UK's Financial Conduct Authority, the interim financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) and in accordance with both IAS 34 'Interim Financial Reporting' as adopted by the European Union and the disclosure requirements of the Listing Rules.

The half year results have not been audited or subject to review by the company's auditor.

The annual financial statements of London & Associated Properties PLC are prepared in accordance with IFRS as adopted by the European Union. The same accounting policies are used for the six months ended 30 June 2017 as were used for the year ended 31 December 2016.

As stated in the 2016 Annual Report in the group accounting policies, Bisichi Mining PLC and Dragon Retail Properties Limited are consolidated with LAP, as required by IFRS 10. 

The assessment of new standards, amendments and interpretations issued but not effective, is that these are not anticipated to have a material impact on the financial statements.

There is no material seasonal impact on the group’s financial performance.

Taxes on income in the interim periods are accrued using tax rates expected to be applicable to total annual earnings.

The interim financial statements have been prepared on the going concern basis as the Directors are satisfied the group has adequate resources to continue in operational existence for the foreseeable future. 

12. Board approval

The half year results were approved by the Board of London & Associated Properties PLC on 30 August 2017.

Directors' responsibility statement

The Directors confirm that to the best of their knowledge:

(a) the condensed set of financial statements have been prepared in accordance with applicable accounting standards and IAS 34 Interim Financial Reporting as adopted by the EU;

(b) the interim management report includes a fair review of the information required by:

 (1) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements ; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(2) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

This report contains forward-looking statements. These statements are based on current estimates and projections of management and currently available information. Future statements are not guarantees of the future developments and results outlined therein. Rather, future developments and results are dependent on a number of factors; they involve various risks and uncertainties and are based upon assumptions that may not prove to be accurate. Risks and uncertainties identified by the Group are set out on pages 22 and 24 of the 2016 Annual Report. We do not assume any obligation to update the forward-looking statements contained in this report. 

Signed on behalf of the Board on 30 August 2017 

Sir Michael Heller Anil ThaparDirector Director