Last checked at 28 Aug 2008 07:02
FOR IMMEDIATE RELEASE
28 August 2008 LONDON & ASSOCIATED PROPERTIES PLC: HALF YEARLY RESULTS TO 30 JUNE 2008 HIGHLIGHTS * Net assets up to ‚£89.5 million - equivalent to 117.39p a share fully diluted against 116.73p at the year end * Rental income risen by 29% to ‚£8 million against ‚£6.2 million in the 2007 comparative period * Total assets under management - including ‚£261 million of wholly owned properties - has risen to ‚£364 million from ‚£341.6 million * Interim dividend increased 15% to 0.75p compared to 0.65p for the 2007 half year * New ‚£74 million joint venture formed with Bank of Scotland * Cash and uncommitted facilities total ‚£34.1 million
"We face a period which may offer significant opportunities to grow LAP. There may, of course, be further decreases in commercial property values in the short term, as well as tenant defaults. However, we believe LAP is as well placed as possible to weather such eventualities and we therefore look forward to the next six months with confidence," Michael Heller, Chairman.
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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
HALF YEAR REVIEW
I am pleased to report that LAP finds itself in a strong position during one of the most difficult periods for commercial property in recent times. Since we last reported, the investment market has seen further restrictions in capital available to fund acquisitions. This has led to downward pressure on values. Whilst it is not possible for any property owner to totally escape the effects of this market shift, we did predict the market had reached unsustainable levels in 2007 and took decisive action to minimise the effect of any market correction by disposing of those assets we felt to be mature or where we received offers in excess of values we felt we could comfortably attain through our management initiatives.
During the last two years or so, we have sold some ‚£138 million of property including, since the end of the half year period, Chenil House, Kings Road for which we received ‚£14.9 million. Although this figure is ‚£0.1 million less than originally reported at the time of exchange of contracts, the difference reflects an earlier completion than that contracted. The resultant saving in empty rates and other costs, as well as interest payments on the revolving credit facility which was secured in part on this property, equates broadly to the reduction in price. The sale of this property alone will lead to annual savings of ‚£0.8 million in interest payments, and the final consideration may rise depending on the amount of space the buyer achieves in its planning consent. Profits on all disposals this year to June amounted to ‚£0.7 million.
We now have ‚£34.1 million in cash and committed facilities. This is important for two reasons: firstly, we are in a strong position to take advantage of any sales by forced sellers. We anticipate that a number of property investors, particularly property funds, may be under further pressure to realise cash towards the end of this year. This should provide a number of opportunities, and we will be able to move quickly to make acquisitions. As we saw at the beginning of 2008 with our purchases at Solihull and Chesterfield, this ability gives us a significant advantage. We will also be able to make opportunistic purchases through a new ‚£74 million joint venture with Bank of Scotland, Analytical Ventures Ltd. I will report on this more fully later in this statement.
Secondly, we are able to pay down loans if required to ensure that we do not breach any loan-to-value covenants. Avoiding such a breach can also be achieved by increasing the value of the portfolio against which a loan is charged, and to this end we have uncharged properties with a value as at year end 2007 of ‚£ 11.4 million, and liquid assets in addition to our cash of some ‚£16.6 million.
We do not externally value our properties at the half-year stage. However, the book value of our properties has risen from ‚£248.1 million at December 2007 to ‚£260.9 million at the end of June. The difference includes the acquisition, for ‚£9.2 million including costs, of our Chesterfield property, as well as investment of some ‚£4.4 million in our existing centres.
Total assets under management, including those of LAP, our associated company Bisichi Mining Plc, Dragon Retail Properties and Analytical Ventures, now have an aggregate book value of ‚£364.0 million compared to ‚£341.6 million at the year end.
Net assets have risen from ‚£89.0 million to ‚£89.5 million. This difference includes adjustments which go directly to reserves of ‚£0.5 million for the fair value gain of our interest rate swaps, as well as currency translations and share options in Bisichi Mining.
Over the six months to 30 June 2008, our rental income grew to ‚£8.0 million per annum compared to ‚£6.2 million for the same period in 2007. This growth comes primarily from the inclusion of the full rent from King Edward Court, Windsor following the acquisition in September last year of the 50% of Analytical Properties that we did not own. We have recorded a loss before tax of ‚£0.9 million mainly reflecting a revaluation of our equity portfolio. Under IFRS accounting standards, the decrease in value is put through the income statement although this is a non-cash item. We were, however, able to write back a tax provision following the disposal of some investment properties and utilise certain tax losses which collectively created a tax credit of ‚£1.0 million. This has led to fully diluted earnings per share of 0.1p. An interim dividend of 0.75p will be paid on 23rd January 2009 to those shareholders on the share register on 19th December 2008.
In these uncertain economic times, we are reaping the benefits of our longstanding policy of collecting our own rents and paying great attention to cash collection. I can report that some 99% of rent for the June Quarter Day was collected within two weeks of becoming due. Our 50 largest tenants by rent and the car park at King Edward Court in Windsor together account for over 75% of our total rental income. Two of these tenants are regional multiples, while the remainder are national or international household names. Although this does not guarantee that we will avoid further tenant failures, we believe that it places us in a relatively strong position. In the last six months only five tenants, accounting for just 1% of our rent roll, were placed into administration. All of these units continue to trade and pay rent with the exception of a restaurant in Upper Street, Islington which was paying ‚£55,000 per annum. This tenancy did, however, have a personal guarantor and we are confident that we will not suffer any loss of income on this unit.
In addition, none of our term debt is due to expire in the near future, and all of the company's loans are hedged at rates of between 4.69% and 4.76% plus margin.
I am also pleased to report that tenant demand for our properties continues to be high. We are achieving record rents at all our major centres and tenant demand for those properties we are considering for redevelopment remains strong.
I will now provide an update on progress at our major centres.
At King Edward Court, we remain effectively fully let. The former temporary unit that Waitrose occupied while their main new store was constructed has been let to Dorothy Perkins at ‚£195,000 per annum, a record rent for this part of the centre and some way ahead of the ‚£150,000 per annum that Waitrose was paying.
We have also established a record rent for one of the small units opposite our main redevelopment, where Benefit, the international cosmetics retailer, has taken a unit at a rent equating to ‚£115 per sq ft compared to ‚£105 for unit shops in this part of the scheme previously.
At Orchard Square, Sheffield, we are close to practical completion of the new 45,000 sq ft unit pre-let to TK Maxx at ‚£625,000 per annum, an incremental ‚£ 383,000 over previous rents passing. I am confident that the final costs of development will not differ significantly from the ‚£4.8 million including all fees and incentives that we reported at the last year end. TK Maxx has commenced its fitting out, and expects to open for trading in early October.
Elsewhere in this shopping centre, we are making good progress with the extension of four units to the rear of the River Island unit we completed in 2007. Three have been let, while the fourth is at an advanced stage of legal documentation. The final unit will show a rent of ‚£91 per sq ft which is a record for the units within the centre. Prior to the pre-letting of these units, rents within the centre were no higher than ‚£71 per sq ft.
Finally, we have achieved a planning consent to amalgamate five small units into one larger unit within the centre. We carried out a similar project some years ago on an adjacent unit when we were able to almost double the rent passing, and we expect to be able to achieve a similar result here. As always, we will agree a pre-letting before commencing any works.
At Solihull, our new block is already starting to realise the potential we saw when we acquired it at the beginning of the year. We orchestrated surrenders with two of the tenants in place at the time of acquisition, and simultaneously relet their units to TM Lewin and The White Company. These lettings are at ‚£ 112,000 and ‚£147,500 and have moved rents per sq ft to over ‚£165 from ‚£150-‚£160 previously.
At The Mall, Islington, our listed building application to remove the kiosks from within our building to create open retail space was refused by Islington Council. We immediately decided to appeal, and a hearing is provisionally set for November. Our advisers believe that we have a strong chance of success, and we will update shareholders as soon as possible.
In July, we completed the acquisition of Westgate House, Halifax for ‚£10.5 million in our new joint venture with Bank of Scotland. Analytical Ventures has pre-committed funds, including debt and equity, of ‚£74 million. Equity will comprise 30% of any acquisition and will be split equally between the two shareholders. The debt will be provided by Bank of Scotland and LAP will manage the properties. The joint venture follows our highly successful Analytical Properties joint venture that commenced in 2002 and ran until 2007. Analytical Ventures has an initial life of five years.
Westgate House is a well let block of shops with offices above in a busy part of the town centre. Retail tenants include Tesco, Dorothy Perkins, Savers and 99p Stores, while the Council and one of Halifax's longest established solicitors, occupy the offices. The price paid will reflect a net initial yield of 7.8% upon completion of the letting of the one vacant unit, currently under offer. We believe there are opportunities to grow the rents at this property and we will report on progress as appropriate.
We face a period which may offer significant opportunities to grow LAP. There may of course be further decreases in commercial property values in the short term, as well as tenant defaults. However, we believe LAP is as well placed as possible to weather such eventualities and we therefore look forward to the next six months with confidence.
Michael Heller John HellerChairman Chief Executive28 August 2008Consolidated income statementfor the six months ended 30 June 2008 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2008 2007 2007 (unaudited) (unaudited) (audited) Notes ‚£'000 ‚£'000 ‚£'000 Gross rental income Group and share of joint ventures 8,024 6,230 14,260 Less: joint ventures - share of rental (47) (1,026) (1,228)income Revenue 7,977 5,204 13,032 Direct property expenses (1,324) (846) (2,481) Overheads (1,829) (1,624) (4,974) Property overheads (3,153) (2,470) (7,455) Net rental income 1 4,824 2,734 5,577 Listed investments held for trading 1 216 79 144 Costs of evaluation - - (339) Goodwill impairment - - (173) Analytical Group 4 - - (512) Profit on sale of investment properties 685 375 2,295 Net decrease on revaluation of investment - - (25,208)properties Net (decrease)/increase in value of (905) 158 (16)investments held for trading Operating profit/(loss) 1 4,820 3,346 (17,720) Share of (loss)/profit of joint ventures (108) 369 1,572after tax Share of profit/(loss) of associate after 250 454 (448)tax 4,962 4,169 (16,596) Interest receivable 2 415 586 1,583 Interest payable 2 (6,233) (3,752) (8,874) (Loss)/profit before taxation (856) 1,003 (23,887) Income tax 3 984 1,254 11,384 Profit/(loss) for the period 128 2,257 (12,503) Basic earnings/(loss) per share 5 0.17p 2.96p (16.40)p Diluted earnings/(loss) per share 5 0.17p 2.96p (16.40)pThe above revenue and operating result relate to continuing operations in theUnited Kingdom.Consolidated balance sheetat 30 June 2008 30 June 30 June 31 December 2008 2007 2007 (unaudited) (unaudited) (audited) Notes ‚£'000 ‚£'000 ‚£'000 Non-current assets Market value of properties 260,869 170,729 248,076attributable to group Present value of head leases 32,137 7,758 31,671 Property 6 293,006 178,487 279,747 Plant and equipment 894 947 881 Investments in joint ventures 2,123 15,632 1,881 Investments in associated 6,488 7,283 6,401company Held to maturity investments 5 1,834 5 302,516 204,183 288,915 Current assets Trade and other receivables 9,756 4,173 7,214 Financial assets-investments 3,002 5,071 5,113held for trading Cash and cash equivalents 14,828 26,464 16,464 27,586 35,708 28,791 Total assets 330,102 239,891 317,706 Current liabilities Financial liabilities-borrowings (7,221) (3,356) (6,250) Trade and other payables (12,317) (10,590) (12,988) Current tax liabilities (2,082) - (1,869) (21,620) (13,946) (21,107) Non-current liabilities
Financial liabilities-borrowings 7 (174,477) (93,600) (162,866)
Present value of head leases on (32,137) (7,758) (31,671)properties Deferred tax (12,373) (20,970) (13,071) (218,987) (122,328) (207,608) Total liabilities (240,607) (136,274) (228,715) Net assets 89,495 103,617 88,991 Equity Share capital 8,232 8,232 8,232 Share premium account 5,236 5,236 5,236 Translation reserve in associate (742) (560) (530) Capital redemption reserve 47 47 47 Other reserves 429 429 429 Fair value reserve 2,035 - 1,001 Retained earnings (excluding 80,807 96,766 81,125treasury shares) Treasury shares (6,549) (6,533) (6,549) Retained earnings 74,258 90,233 74,576 Total shareholders' equity 89,495 103,617 88,991 Net assets per share 8 117.53p 135.93p 116.86p Diluted net assets per share 8 117.39p 135.77p 116.73p
Consolidated statement of changes in shareholders' equity for the six months ended 30 June 2008
Retained Earnings Earnings Share Share Translation Other Fair Treasury ex: Total value treasury capital premium reserve reserves reserve shares shares equity ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Balance at 8,232 5,236 (517) 476 - (6,533) 94,966 101,8601 January 2007 Currency - - (43) - - - - (43)translation in associate Dividend - - - - - - (457) (457) Profit for - - - - - - 2,257 2,257the period Balance at 8,232 5,236 (560) 476 - (6,533) 96,766 103,61730 June 2007 (unaudited) Balance at 8,232 5,236 (517) 476 - (6,533) 94,966 101,8601 January 2007 Fair value gain of interest rate derivatives (net of - - - - 1,001 - - 1,001deferred tax) Equity - - - - - - 99 99share options in associate Acquisition - - - - - (278) - (278)of own shares Disposal of - - - - - 262 - 262own shares Loss on - - - - - - (27) (27)disposal of own shares Currency - - (13) - - - - (13)translation in associate Dividend - - - - - - (1,410) (1,410) Loss for - - - - - - (12,503) (12,503)the year Balance at 8,232 5,236 (530) 476 1,001 (6,549) 81,125 88,99131 December 2007 (audited) Fair value gain of interest rate derivatives (net of - - - - 1,034 - - 1,034deferred tax) Currency - - (212) - - - - (212)translation in associate Equity - - - - - - 49 49share options in associate Dividend - - - - - - (495) (495) Profit for - - - - - - 128 128the period Balance at 8,232 5,236 (742) 476 2,035 (6,549) 80,807 89,49530 June 2008 (unaudited) Other reserves include Capital redemption reserve of ‚£47,000. Consolidated cash flow statement for the six months ended 30 June 2008 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2008 2007 2007 (unaudited) (unaudited) (audited) ‚£'000 ‚£'000 ‚£'000 Operating activities Operating profit/(loss) 4,820 3,346 (17,720) Depreciation 106 100 201 Goodwill impairment - - 173 Costs of evaluation - - 339 Analytical Group - - 512 Loss on disposal of non-current assets 4 13 9
Profit on sale of investment properties (685) (375) (2,295)
Net decrease on revaluation of investment - - 25,208properties Net decrease/(increase) in value of 905 (158) 16investments held for trading
Decrease/(increase) in net current assets 117 693 (1,966)
Cash generated from operations 5,267 3,619 3,965 Interest paid (6,220) (3,663) (9,303) Interest received 422 505 1,916 Income tax repaid/(paid) 104 - (3,420) Cash flows from operating activities (427) 461 (6,842)
Cash flows from investing activities (13,228) 20,792 13,181
Cash flows from financing activities 11,048 (7,007) (4,987) Net (decrease)/increase in cash and (2,607) 14,246 1,352cash equivalents Cash and cash equivalents at 10,214 8,862 8,862beginning of period Cash and cash equivalents at 7,607 23,108 10,214end of period Cash and cash equivalents For the purpose of the cash flow statement, cash and cash equivalents comprise the following balance sheet amounts: 30 June 30 June 31 December 2008 2007 2007 (unaudited) (unaudited) (audited) ‚£'000 ‚£'000 ‚£'000 Cash and cash equivalents 14,828 26,464 16,464 Bank overdraft (7,221) (3,356) (6,250) Cash and cash equivalents at end of 7,607 23,108 10,214period Notes to the half year reportfor the six months ended 30 June 20081. Segmental analysis 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2008 2007 2007 (unaudited) (unaudited) (audited) ‚£'000 ‚£'000 ‚£'000 Net rental income (property) 4,824 2,734 5,577 Other income (listed investments) 216 79 144 Segment result Property 5,509 3,109 (17,336) Listed investments (689) 237 128 4,820 3,346 (17,208) Operating profit/(loss) Property 5,509 3,109 (17,848) Listed investments (689) 237 128 4,820 3,346 (17,720) 2. Finance costs 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2008 2007 2007 (unaudited) (unaudited) (audited) ‚£'000 ‚£'000 ‚£'000 Interest receivable 415 586 1,583 Interest payable :- Interest on bank loans and overdrafts (5,107) (2,563) (6,592) Other loans (1,052) (1,052) (3,138) Hedging 841 - 509 Interest on obligations under finance (1,028) (222) (798)leases Total borrowing costs (6,346) (3,837) (10,019) Less : amounts included in the cost of 113 85 1,145qualifying assets (6,233) (3,752) (8,874) (5,818) (3,166) (7,291) 3. Income tax 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2008 2007 2007 (unaudited) (unaudited) (audited) ‚£'000 ‚£'000 ‚£'000 Current tax 116 - 1,721 Deferred tax (1,100) (1,254) (13,105) (984) (1,254) (11,384)The deferred tax release at 30 June 2008 is due to the write back of part of a tax provision following the disposal of properties and the utilisation of tax losses. 4. Exceptional items 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2008 2007 2007 (unaudited) (unaudited) (audited) ‚£'000 ‚£'000 ‚£'000 Costs of evaluation - - 339 Goodwill impairment - - 173 Analytical Group - - 512
The costs of evaluation represents fees incurred by the Company, prior to the decision being taken that the company should acquire the 50% interest in the issued share capital of Analytical Properties Holdings Limited (Analytical Group) not already owned by the Company. Goodwill impairment arose on the acquisition of Analytical Group on 25 September 2007. This goodwill arose primarily as a result of recognising the deferred tax which would arise if the properties within Analytical Group were realised at the fair valuation applied on acquisition. This goodwill is immediately written off to the income statement.
The company also acquired ‚£1,829,000 of B loan stock of Analytical Group at par value.
5. Earnings/(loss) per share 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2008 2007 2007 (unaudited) (unaudited) (audited) Group profit/(loss) after tax (‚£'000) 128 2,257 (12,503) Weighted average number of shares in issue for the period ('000) 76,149 76,229 76,230 Basic earnings/(loss) per share 0.17p 2.96p (16.40)p
Diluted number of shares in issue ('000) 76,215 76,317 76,230
Fully diluted earnings/(loss) per share 0.17p 2.96p (16.40)p
6. Property
Properties at 30 June 2008 are included at valuation as at 31 December 2007, plus additions, less disposals in the period.
During the six months ended 30 June 2008 the group had property additions of ‚£ 13.6 million (30 June 2007: ‚£0.6 million, 31 December 2007: ‚£121.9 million)
Properties with a carrying amount of ‚£0.8 million were disposed of during the six months ended 30 June 2008 (30 June 2007: ‚£22.6 million, 31 December 2007: ‚£ 41.4 million).
7. Borrowings During the period the group made a further draw down under the Revolving CreditFacility of ‚£11.55 million to refinance the purchase of Solihull made in December 2007. 8. Net assets per share 30 June 30 June 31 December 2008 2007 2007 (unaudited) (unaudited) (audited) Shares in issue ('000) 76,149 76,229 76,149 Net assets per balance sheet (‚£'000) 89,495 103,617 88,991 Basic net assets per share 117.53p 135.93p 116.86p
Shares in issue diluted by outstanding share 76,269 76,349 76,269 options ('000)
Net assets after issue of share options (‚£ 89,535 103,657 89,031 '000)
Fully diluted net assets per share 117.39p 135.77p 116.73p
9. Capital commitments
The group had contractual capital commitments of ‚£6.4 million as at 30 June 2008 (30 June 2007: ‚£Nil, 31 December 2007: ‚£6.7 million).
10. Post balance sheet events
On 16 July 2008 the group completed the sale of Chenil House, Kings Road for ‚£ 14.9 million cash.
Of the sale proceeds, ‚£10.1million has been used to reduce bank borrowings and the balance added to existing cash resources.
Analytical Ventures Limited (the new 50-50 joint venture with Bank of Scotland) acquired a property in Halifax for ‚£10.5 million on
31 July 2008, funded by zero coupon loan notes of ‚£1.3 million each from the Company and Bank of Scotland and the balance
from a Bank of Scotland loan.
In July 2008 Analytical Ventures Limited issued new loan stocks of ‚£450k to each joint venture shareholder. Additionally
the issued and paid share capital was increased from ‚£350k to ‚£500k for each joint venture shareholder. .
11. Dividends
The interim dividend payable on 23 January 2009 of 0.75p (30 June 2007: 0.65p) will amount to ‚£571k (30 June 2007: ‚£495k).
The final dividend in respect of 2007, amounting to ‚£990k, was paid on 4 July 2008.
12. Financial information
The above financial information does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985.
The figures for the year ended 31st December 2007 are based upon the latest statutory accounts, which have been delivered to the Registrar of Companies; the report of the auditors on those accounts was unqualified and did not contain a statement under Section 498(2) and (3) of the Companies Act 2006.
As required by the Disclosure and Transparency Rules of the UK's Financial Services 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 EU and the disclosure requirements of the Listing Rules. The same accounting policies are used for the six months ended 30 June 2008 as were used for the year ended 31 December 2007.
The half year results have not been audited or subject to review by the company's auditors.
13. Board approval
These half year results were approved by the Board of London & Associated Properties PLC on 28 August 2008.
Directors' responsibility statement
We confirm that to the best of our knowledge:
(a) the condensed set of financial statements have been prepared in accordance with 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.
Michael Heller Robert CorryChairman Finance Director28 August 2008Directors and advisers Directors Executive directors * Michael A Heller MA FCA (Chairman)
John A Heller LLB MBA (Chief Executive)
Robert J Corry BA FCA (Finance Director)
Michael C Stevens FCA Non-executive directors ¢â‚¬ Howard D Goldring BSC (ECON) ACA #¢â‚¬ Clive A Parritt FCA CF FIIA * Member of the nomination committee # Senior independent director
¢â‚¬ Member of the audit, remuneration and nomination
committees. Secretary & registered office Michael C Stevens FCA Carlton House, 22a St James's Square, London SW1Y 4JH Director of property Michael J Dignan FRICS Registrars & transfer office Capita Registrars Northern House, Woodsome Park Fenay Bridge, Huddersfield HD8 OGA Telephone 0871 664 0300 (Calls cost 10p per minute + network extras) or +44 208 639 3399 for overseas callers Website: www.capitaregistrars.com E-mail: ssd@capitaregistrars.com Company registration number 341829 (England and Wales) Website www.lap.co.uk E-mail admin@lap.co.uk
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