London & Associated Properties Regulatory News (LAS)

London & Associated Properties Plc - Half-year Report

PR Newswire

London, August 27

FOR IMMEDIATE RELEASE

31 August 2021

LONDON & ASSOCIATED PROPERTIES PLC

HALF YEAR RESULTS TO 30 JUNE 2021

London & Associated Properties PLC (“LAP” or “the Group”) is a main market listed property investment group that specialises in industrial and community retail.

It also holds a substantial stake in the main market listed Bisichi PLC which operates coal mines in South Africa and owns UK property investments.

HIGHLIGHTS

“While this has been a difficult period, we are beginning to see the light at the end of the tunnel. As we have stated rent collection is improving strongly and we are making real progress in diversifying our portfolio into non-retail areas. At the same time great strides have been made, and are continuing to be made, in reducing our cost base and returning to profitability. We believe the actions we have taken place LAP in the right position to take full advantage of improved market conditions as the economy strengthens. Therefore, we view the future with increasing confidence.”

-more-

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 2021

Half year review

Our report for the six months to 30 June 2021 covers a period of significant disruption for many of our tenants’ businesses with a gradual return to more normal activity. Despite the extension of Government’s moratorium on enforcing commercial rent payments, we are pleased to report rent collections from our more community-orientated tenants reached 83% for the March quarter and for the June quarter, to date, we have collected 70% even though a number of tenants continue to pay monthly by agreement.

Revenue from property activities showed a modest increase in the period (£0.3m), although the increase in Bisichi mining revenue (£9.3m) accounted for most of the growth in Group revenue for this period. The Bisichi position is discussed separately below, after a review of the core property business.

Group losses before tax at £0.9 million are an improvement on 2020 (Losses of £2.9 million) and we continue with our efforts to improve performance.

Since reopening after lockdown all tenants apart from one are paying rent and making progress on any arrears that have accumulated. We are in the process of taking legal action against the non-paying tenant.

Of the current 4.6% of vacancies by rental income, one unit in Runcorn has now been refurbished and is currently being marketed while another unit in Sheffield is planned to be part of future development activities. These two units comprise 2.9% of the total vacancies.

At Orchard Square, Sheffield our development activities are progressing well. Construction of the food court, Sheffield Plate, is complete. Demand for units from street food operators has been strong, with the opening scheduled for September. This development will be managed by Market Asset Management, one of the UK’s foremost operators of food halls and will further position the property as a mixed-use asset.

We have seen a small number of tenants go through administration or insolvency during the period, but in all cases we have relet the units at similar rents to the same brands, as they have come out of administration or restructuring.

We continue to progress our overhead cutting initiatives which commenced two years ago. These are now providing positive cashflow and profitability outcomes. As our central London office lease nears its end, we are looking to reduce our cost base even further by operating from offices more suitable to our restructured core activities.

During the period, we sold our retail property in Radcliffe for £1.8 million to the council, against a December 2020 book value of £1.65 million. We are continuing to manage the property, for a fixed fee over the next two years, as we support the council with its regeneration of the town centre. £1.0 million of the proceeds remain charged against a property loan facility.

In August, contracts were exchanged for the unconditional £2.35 million sale of a large industrial unit in Runcorn against a December 2020 valuation of £2.5 million. This uncharged property was purchased for £1.6 million in 2018, with £0.1 million net being spent on refurbishment.

The proceeds from these sales will be reinvested into the business to continue our portfolio diversification strategy and we are examining suitable investment opportunities.

As opportunities arise, we will dispose of other properties that do not meet our core investment criteria. We are in discussions with interested parties on a number of retail properties which will allow us to further move our portfolio away from this sector.

At West Ealing, we are finalising the planning approval documents following planning consent obtained in November 2020 for the development of 56 flats and ground floor retail.

Within the next 12 months the 25-year £10 million, 8.109% Aviva debenture will be refinanced. We are making preparations for this event which will provide us with an opportunity to reduce our interest costs and further improve profitability and cashflow.

During the period an extension of the Dragon Retail Properties loan with Santander to October 2021 was secured. Santander offered terms for a further loan and we are exploring available options for the refinancing.

Bisichi PLC, which is 42% owned, has seen an improvement in global economic activity in the first half of 2021. During the period, this improvement had a significant impact on demand for coal in the international market. In the first six months of 2021, the average weekly price of Free on Board (FOB) coal from Richard Bay Coal Terminal (API4 price) averaged US$97, compared to $67 in the first six months of 2020, when demand for coal was particularly impacted by the outbreak of Covid-19. This has had a positive impact on the Bisichi operations, particularly the South African coal mining and processing operations. As a result, in the six months ended 30 June 2021, Bisichi made a loss before tax of £0.5 million (2020: loss of £1.9 million) from revenue of £23.6 million (2020: £14.3 million).

Bisichi’s results would have been even better if they had not encountered difficult mining conditions at Black Wattle, the South African mining operation, which impacted adversely coal production during the period. Nonetheless, the mine achieved production of 553,000 metric tonnes compared to 580,000 metric tonnes in the first half of 2020. Black Wattle’s operating costs during the period were also impacted by the difficult mining conditions, as well as the higher overall cost of mining of the remaining reserves at Black Wattle’s current mining area. This mainly accounts for the increase in Bisichi’s operating costs during the reported period.

Despite lower output from Black Wattle, at Sisonke Coal Processing, the South African coal processing operation, Bisichi was able to take advantage of the improved coal price by reducing stockpiles of coal that had built up during the economic downturn of 2020. The overall increase in revenue and earnings during the first half of the year is attributable mainly to the coal processing operations.

Looking forward, Bisichi’s overall mining production in the second half of 2021 is expected to remain at similar levels to the first half of the year. However, plans are in place to move into a new mining area at Black Wattle by the end of 2021, where mining conditions and production are expected to improve. In the interim, Bisichi will look to keep costs as low as possible while developing new opportunities for Sisonke Coal Processing, to take advantage of the improved coal market conditions seen in 2021 to date. In addition, Bisichi continues to work closely with their BEE partner in South Africa, to seek further opportunities to extend the life of the existing mining operations or to develop new independent mining operations in South Africa.

We are not paying a dividend for the half year. Our strategy is to maximise income over the medium term by moving the emphasis away from retail, replacing high cost finance and judicious cost cutting. This is beginning to show results and our dividend policy will reflect this, once our cash has been reinvested and our income has returned to previous levels.

While this has been a difficult period, we are beginning to see the light at the end of the tunnel. As we have stated, rent collection is improving strongly and we are making real progress in diversifying our portfolio into non-retail areas. At the same time great strides have been made, and are continuing to be made, in reducing our cost base and returning to profitability. We believe the actions we have taken place LAP in the right position to take full advantage of improved market conditions as the economy strengthens. Therefore, we view the future with increasing confidence.

Sir Michael Heller John Heller

Chairman Chief Executive

31 August 2021

Consolidated income statement

for the six months ended 30 June 2021

Consolidated statement of comprehensive income

for the six months ended 30 June 2021

Consolidated balance sheet

at 30 June 2021

Consolidated statement of changes in shareholders’ equity

for the six months ended 30 June 2021

Consolidated statement of changes in shareholders’ equity - continued

for the six months ended 30 June 2021

Consolidated cash flow statement

for the six months ended 30 June 2021

Consolidated cash flow statement - continued

for the six months ended 30 June 2021

The cash flows above relate to continuing and discontinued operations.

Cash and cash equivalents

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

Notes to the half year reportfor the six months ended 30 June 2021

Notes to the half year report – continued

5. Properties 

Investment properties are held a fair value at each reporting period.

During the period one property was sold for a gross sales value of £1.8 million. This property was valued at £1.65 million at 31 December 2020 and after costs there was a profit on sale of £0.1 million.

Management evaluate on an ongoing basis the impact of Covid-19 and the current economic performance of the UK property market on the future performance of the group’s existing UK property portfolio. The Board considers the final impact of Covid-19 on the investment properties to remain uncertain. However, the Directors have placed a valuation on the properties which is not materially different to the value as at 31 December 2020. Therefore, no change in fair value of investment properties has been made during the period. Investment properties are therefore included at a Director’s valuation which is considered to be the fair value as at 30 June 2021. Please refer to page 43 of the 2020 Annual report and Accounts for details on the valuation of investment and inventory properties as at 31 December 2020.

Notes to the half year report - continued

7. 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 2020.

8. Dividends

There is no interim dividend payable for the period (30 June 2020: Nil).

There is no final dividend payable in respect of 2020.

9. Risks and uncertainties

The group’s principal risks and uncertainties are reported on pages 10 and 11 in the 2020 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)..

For Bisichi PLC, the largest area of estimation 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).

Property, plant and equipment representing Bisichi’s mining assets in South Africa are reviewed for impairment where there is evidence of a material impairment. The impairment test indicated significant headroom as at 31 December 2020 and no impairment was considered appropriate. Although the final impact of Covid-19 remains uncertain, the directors of Bisichi have assessed the expected range of impact of the Covid-19 pandemic on its impairment model using similar key assumptions and estimates as outlined on page 60 of the 2020 Annual report and Accounts, and no impairment was considered appropriate as at 30 June 2021.

Other areas of estimation and uncertainly are referred to in the Group's annual financial statements. There have been no significant changes to the basis of accounting of key estimates and judgements as disclosed in the annual report as at 31 December 2020.

10. 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 2020 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' and in conformity with the requirements of the Companies Act 2006 applicable to companies reporting under IFRS 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 and in conformity with the requirements of the Companies Act 2006 applicable to companies reporting under IFRS. the company has applied UK-adopted IAS and at the date of application, both UK-adopted IAS and EU-adopted IFRS are the same. The same accounting policies are used for the six months ended 30 June 2021 as were used for the year ended 31 December 2020.

As stated in the 2020 Annual Report in the group accounting policies, Bisichi 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.

The interim financial statements have been prepared on the going concern basis. Although the final impact of Covid-19 on both our UK and South African operations remains uncertain and an estimate of the overall financial effect cannot be made, the Directors have assessed the range of expected impact of the pandemic on its cashflow forecasts. The forecasts demonstrate that the group has adequate resources to continue in operational existence for the foreseeable future and is well placed to manage its business risks.

11. Board approval

The half year results were approved by the Board of London & Associated Properties PLC on 31 August 2021.

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 7 and 8 of the 2020 Annual Report & Accounts. We do not assume any obligation to update the forward-looking statements contained in this report.

Signed on behalf of the Board on 31 August 2021

Sir Michael Heller Jonathan Mintz

Director Director