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Interim Results

Wed, 18th Jun 2014 07:00

RNS Number : 8671J
LXB Retail Properties Plc
18 June 2014

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For immediate release 18 June 2014

LXB Retail Properties Plc

INTERIM RESULTS FOR THE PERIOD ENDED 31 MARCH 2014

LXB Retail Properties Plc, a Jersey resident closed-ended real estate investment company focused on edge of town and out of town retail assets, today announces interim results for the period ended 31 March 2014.

Highlights

31 March 30 September

2014 2013

· Cash deposits and liquid investments: £34.5m £20.0m

· NAV per share: 120.98p 115.93p

· EPRA* NAV per share: 121.35p 116.38p

· Earnings per share: 5.88p 4.64p

· October 2013: completed land assembly requirements relating to the Brocklebank site in Greenwich

· November 2013: commenced second phase of construction at Sheppey

· November 2013: completed sale of the foodstore in Gloucester

· December 2013: completed sale of Sainsbury's/M&S in Greenwich for an initial sum of £58m

· December 2013: completed sale of Wickes in Greenwich

· December 2013: undertook a share buyback programme returning £40m of surplus funds to shareholders

· December 2013: obtained resolution to grant planning for a mixed use development including a 123,000 sq ft foodstore in Sutton, Greater London

· December-February 2014: continued to make progress with land assembly at Sutton

· January 2014: commenced demolition of multi-storey car park in Stafford

· January 2014: obtained resolution to grant planning consent for an improved scheme at the Brocklebank site in Greenwich

· March 2014: unconditionally exchanged contracts to purchase Prodrive site in Banbury

· March 2014: judicial review process concluded and the decision to grant planning permission at Banbury was upheld

Post period end:

· June 2014: the Secretary of State granted permission for the £100m retail and leisure redevelopment at Rushden Lakes

* excluding fair values of financial instruments and deferred tax.

Commenting on the recent activity, Phil Wrigley, Chairman said:-

"This has been a period of some success on planning and lettings and, even with the Rushden Lakes delay, we have delivered EPRA NAV growth of 4.3% in the half year. There is still a lot to be done in a very challenging market but we are moving forward on each investment, very much with the shareholder continuation vote in mind."

For further information please contact:

LXB Adviser LLP Tel: 020 7432 7900

Tim Walton, CEO

Brendan O'Grady, FD

Buchanan Communications Tel: 020 7466 5000

Charles Ryland/Sophie McNulty

www.buchanan.uk.com

Forward looking statements

This document includes forward looking statements which are subject to risks and uncertainties. You are cautioned that forward looking statements are not guarantees of future performance and that if risks and uncertainties materialise, or if assumptions underlying any of these statements prove incorrect, the actual results of operations and financial condition of the Group may materially differ from those made in, or suggested by, forward looking statements. Other than in accordance with its legal or regulatory obligations, the Company undertakes no obligation to review, update or confirm expectations or estimates or to release publicly any revisions to any forward looking statements to reflect events that occur or circumstances that arise after the date of this document.

Chairman's statement

Dear Shareholder,

I am pleased to present the Group's results for the six months ended 31 March 2014.

In my last report I stated that our priorities for this period were to gain further planning permissions, sign more tenants, and move into the construction phase for our investment properties. We have had successes and made progress on all fronts but inevitably, given the current retail and planning environment, we have encountered some challenges too.

We delivered a profit of £11.6m in the half year, EPRA NAV per share growth of 4.3% and returned £40m to shareholders through share buybacks. We also see the potential for significant uplift in value as additional planning consents and lettings come through.

Planning

We now have the planning permissions we need for the Old Gasworks at Sutton and Brocklebank Retail Park at Greenwich. Additionally, we received positive news on Banbury Gateway and Rushden Lakes. In March 2014, the Court of Appeal dismissed the judicial review challenge to our Banbury scheme and the local authority resolved to give an enhanced consent for the Primark store. On 12 June 2014 we received confirmation that the Secretary of State had supported the Planning Inspector's recommendation that the planning permission for Rushden Lakes be granted and, assuming no subsequent judicial review, the planning permission will become unchallengeable after six weeks. Rushden Lakes has the potential to be one of the UK's foremost retail and leisure destinations and continues to generate significant interest from prospective tenants. Once the planning position is final it will be a major contributor to incremental NAV, but as the decision was outstanding at 31 March 2014, the interim balance sheet reflects a conservative valuation of this development.

In aggregate (and adjusting for assets sold), we have added over 409,000 sq ft of ground floor retail consent since my last report, an increase of 57% and we expect planning decisions this month for our foodstore-led investments at Truro and Ayr (which are 73% pre-let). These involve a further 179,000 sq ft of ground floor retail as well as nearly 1,200 homes. If those applications are successful and Rushden Lakes concludes as we hope, we will have the planning consents we need at all of our major retail destinations.

Lettings

The planning progress outlined above has encouraged more retailers to commit to leases. At the time of my last report the aggregate annual rent for pre-lets agreed or in solicitors' hands (excluding investments which have been sold in the intervening period) was £16.07m. The equivalent now is £19.02m, an increase of 18%, and the annual rent on units under offer amounts to a further £2.80m. If all of our outstanding planning applications and current lettings under offer conclude satisfactorily, we will have let 67% of our ground floor retail space and 70% of our estimated annual rent roll. That still leaves much to be done but it is particularly pleasing that we have been able to attract a number of popular high street fashion retailers including Primark, H&M, Arcadia and River Island to our out of town retail parks; securing high quality tenants such as these is a key element underpinning the institutional value of the portfolio.

Notwithstanding this strong lettings performance, we are inevitably having to meet the challenges arising from the structural changes taking place in retail today. Although the general economic backdrop is positive, the environment for retailers is not easy; in particular, views continue to evolve on the most appropriate format for a multi-channel world with store size, lease length and the significant cost of fitting out, all being key considerations for prospective tenants. Our lettings achievements show we have the right locations, although we do sometimes have to offer attractive incentive packages before retailers will commit to institutional grade leases. In some instances too, tenants who have signed pre-lets are revisiting their requirements and, whilst we always make sure that our contracts are robust, we engage constructively with these tenants, wherever possible, to accommodate their revised aspirations in a way which maintains shareholder value.

Construction

We are now moving into the construction phase for many of our investments. We are already building at Sheppey and Greenwich and by the third quarter of this year we also expect to be on site at Banbury, Biggleswade, Stafford and Sutton. Increased activity levels in the construction sector are driving cost inflation and we have had to revise upwards some of our original cost assumptions. We only sign fixed price building contracts therefore, once a contract is placed, the Group is protected from further cost increases.

Portfolio and divestments

The investment market for our assets has been strong despite the pressure on tenants' incentives and building costs. We continue to receive frequent approaches from institutions seeking to acquire properties, reinforcing our view that we have assembled a very attractive portfolio which is fit for today's needs and cost effective for tenants. One of the major factors underpinning the value of any investment is the covenant strength of the tenant line-up and that remains a major focus in all our pre-letting decisions.

My last report mentioned specific approaches to acquire three of the Group's investments and one of those resulted in the conditional disposal of Banbury Gateway to the Crown Estate in December 2013. Provided that the resolution to grant planning permission for the Primark unit is confirmed by signing a S.106 agreement, we expect to be unconditional by autumn 2014, triggering a cash receipt of approximately £43m.

We announced in April 2014 that the conditional disposal of the existing Sainsbury's foodstore at Greenwich Peninsular to IKEA was on hold following a request to English Heritage for the building to be listed and a decision on that is still awaited.

Although the Group's primary focus is on developing the retail portfolio, our mixed use schemes at Sutton, Truro and Ayr include substantial residential elements which have benefitted from the recent reported rises in average house prices. An offer received to acquire the residential element at Sutton is in solicitors' hands and we hope to conclude a transaction shortly. We are also in early stage discussions with housebuilders about the residential land at Truro and Ayr. We are exploring the potential for joint ventures at both locations to deliver further value for shareholders.

Living Villages

Our Living Villages concept took a major step forward during the period when we launched the public consultation for our first development at Higher Newham Farm in Cornwall. We attracted over 1,200 visitors and, of the 630 who completed questionnaires, over 86% were supportive. Higher Newham Farm is a powerful demonstration of how Living Villages can deliver new homes in a way that respects and enhances the local environment and I encourage you to visit the website (www.highernewham.com) to see the distinctive nature of our approach. We have worked closely with community partners including Duchy College and Cornwall Food Foundation to ensure our proposal respects the particular characteristics of Higher Newham Farm and its association with the nearby city of Truro. We are now finalising the planning application which we expect to submit in July 2014, and to have a decision by the end of 2014.

Corporate

At the Extraordinary General Meeting in October, shareholders granted the Board a further authority to buy back up to 14.99% of its issued share capital and this, together with the receipt of £58m proceeds from the sale of the new Sainsbury's foodstore and M&S investments at Greenwich, enabled the Group to return £40m to shareholders in December 2013. We have now returned £84.6m over the course of three share buyback programmes.

Conclusion

This has been a period of some success on planning and lettings and, even with the Rushden Lakes delay, we have delivered EPRA NAV growth of 4.3% in the half year. There is still a lot to be done in a very challenging market but we are moving forward on each investment, very much with the shareholder continuation vote in mind.

We committed to demonstrate the value in the portfolio prior to the vote and some very important planning matters which will have a major impact on NAV, namely Rushden Lakes, Truro and Ayr, are expected to be resolved before then. If those planning permissions are secured, we estimate the additional value in the portfolio at practical completion of all our investments to be c.£120m and expect that a substantial part of that will be capable of being recognised in NAV by the end of this calendar year. There are, of course, many risks to delivery of that outcome but this gives shareholders an insight into how we see the potential value of the portfolio. The Board will issue a further detailed update on each of the Group's investments in September 2014.

Looking beyond the retail portfolio, Higher Newham Farm is an excellent demonstration of Living Villages' potential to deliver desirable places for people to live in a way which both enhances local communities and creates shareholder value. Although this is a very exciting concept which we plan to continue to refine, our primary focus for the coming months is to maximise the potential of the retail investment portfolio.

Phil Wrigley

Chairman

18 June 2014

Report of the Investment Manager, LXB Adviser LLP

LXB Adviser LLP advises LXB Retail Properties Plc ("LXB" or "the Group") and is pleased to report on the operations of the Group during the six months ended 31 March 2014.

Investment portfolio

Planning consents

Since the last reporting date the Group has received planning permissions at Sutton and Banbury Gateway as well as additional consent at Greenwich Brocklebank. Furthermore, the judicial review at Banbury Gateway has been quashed and after the period end, on 12 June 2014, the Group was advised that the Secretary of State has granted permission for the retail and leisure redevelopment of Rushden Lakes. The planning application for Rushden Lakes, which was recommended for approval by the local planning authority, was called-in for review in December 2012 by the Secretary of State and the Inquiry was held in June and July 2013. The local planning authority supported the application at the Inquiry, but it was opposed by a consortium of other local authorities, including Northampton Borough Council, Kettering Borough Council and Corby Borough Council, as well as several institutional landowners. The permission is subject to a six week judicial review period, during which the decision can be challenged.

This progress on planning consents and resolutions to grant planning consents means that since the IPO in October 2009 the Group has secured approximately 2.5m sq ft of new permissions. That includes properties which had been sold prior to the balance sheet date. The position for the Group's retained investments is as follows:

Retail

Retail

Other

Other

Ground

Mezzanine

Ground

Mezzanine

Total

Site

Sq ft

Sq ft

Sq ft

Sq ft

Sq ft

Banbury Gateway

153,088

129,222

3,014

-

285,324

Biggleswade London Road

251,268

113,342

-

-

364,610

Gloucester Phase 2

-

-

183,525

-

183,525

Greenwich Brocklebank

76,526

83,830

-

-

160,356

Greenwich Hotel scheme

14,886

-

-

30,277

45,163

Rushden Lakes

268,131

145,097

51,768

29,333

494,329

Sheppey Phase 2

66,776

-

22,500

-

89,276

Stafford Kingsmead

77,702

7,641

-

-

85,343

Stafford Riverside

120,864

114,860

-

-

235,724

Sutton*

99,044

31,146

20,762

-

150,952

1,128,285

625,138

281,569

59,610

2,094,602

* Consent also includes 186 residential units.

In addition, the Group has submitted applications for planning consents on its remaining sites and to add to existing consented space due to tenant demand. The following table shows the additional applications that are pending:

Retail

Retail

Other

Other

Ground

Mezzanine

Ground

Mezzanine

Total

Site

Sq ft

Sq ft

Sq ft

Sq ft

Sq ft

Ayr foodstore*

101,221

-

-

-

101,221

Stafford

-

-

21,300

-

21,300

Truro Threemilestone**

78,000

-

8,000

-

86,000

179,221

-

29,300

-

208,521

* Application also includes a neighbourhood centre, 750 houses and offices.

** Application also includes a district centre and 435 houses.

Agreements for lease

In the following section the Group classes the space on its schemes as pre-let, in solicitors' hands, under offer or to let. The agreements for lease on pre-let space always contain conditions which can include (but are not limited to) delivering a completed unit to the correct specification, signing certain other occupiers or signing a certain amount of space. Where the Group has no reason to believe that it cannot meet those conditions the space is considered pre-let. Where the Group has a credible offer from a prospective tenant and are actively engaged in detailed discussions but have not yet appointed solicitors we regard that unit as "under offer". Of course, there is no certainty that all of those discussions will result in a pre-let.

The Group has made good progress on signing pre-lets to tenants, having added another £3.06m to the committed annual rent roll since the last annual report. Agreements for lease signed now correspond to total rental income of £16.32m per annum and the Group is in solicitors' hands to let a further 99,125 sq ft of ground floor space plus associated mezzanines which equates to further rental income of £2.70m per annum. The aggregate annual rents on units currently under offer is £2.80m.

Many of the Group's developments include mezzanine space and, although this space is included in the planning consent, it is (for retail property) generally not rentalised; consequently, references made to pre-let space in the table below are to ground floor rentalised space only. Agreements for lease signed (by sq ft) up to the date of this report (excluding properties unconditionally sold at the balance sheet date) are shown below:

Agreements for

lease signed

In solicitors'

hands

Under offer

Site

Sq ft

Sq ft

Sq ft

Ayr foodstore

98,596

-

-

Banbury Gateway

117,000

19,308

1,200

Biggleswade London Road

85,382

19,382

74,500

Gloucester Phase 2

1,851

-

-

Greenwich Brocklebank

16,000

40,000

-

Rushden Lakes

32,000

-

20,000

Sheppey Phase 2

36,784

10,000

-

Stafford Riverside

82,014

-

10,600

Stafford Kingsmead

86,193

-

-

Stafford Leisure

-

10,435

-

Sutton foodstore

123,269

-

-

Truro Threemilestone

78,100

-

-

757,189

99,125

106,300

Following practical completion of all of the Group's investment properties, based on current pre-lets and those agreements in solicitors' hands, the prospective Weighted Average Lease Term ("WALT") by investment is shown below:

WALT

Site

Years

Ayr foodstore

25.0

Banbury Gateway

15.3

Biggleswade London Road

12.5

Gloucester Phase 2

15.0

Greenwich Brocklebank

14.1

Rushden Lakes

19.4

Sheppey Phase 2

9.8

Stafford Riverside

12.9

Stafford Kingsmead

18.9

Stafford Leisure

15.0

Sutton foodstore

25.0

Truro Threemilestone

25.0

Property details

The Group's most significant investments are discussed in greater detail below.

Ayr foodstore

The outline application for planning permission for 750 homes and the foodstore pre-let to Sainsbury's is expected to go to a June 2014 committee of the local authority with a recommendation for approval. Assuming a favourable outcome, infrastructure work would commence in the second quarter of 2015 with nine months to completion of that phase. Construction of the foodstore would then commence in early 2016 with completion likely by the end of 2016.

We are also in early stage discussions with a housebuilder about a possible joint venture in relation to the residential land.

Banbury Gateway

There were two important developments in March 2014. The Court of Appeal rejected the attempt to overturn the planning permission granted in 2012. This concludes the judicial review process and the Group now has a fully implementable consent. In addition, Cherwell District Council passed a resolution to grant planning permission to accommodate the requirements of the pre-let to Primark for a 60,000 sq ft (30,000 sq ft on ground floor) unit on a 15 year lease. This consent is subject to a S.106 agreement which can only be completed once confirmation has been received that the Secretary of State does not intend to call-in the application for review. That confirmation was received on 16 June 2014 and the Group intends to sign the S.106 agreement before the end of June 2014, The Group has served notice to secure vacant possession and construction work is scheduled to start later this year.

There has been significant interest from retailers wanting space at Banbury Gateway. Pre-lets have already been agreed with M&S, Next, River Island, Outfit and Primark so 73% of the ground floor space is now pre-let. Further announcements on pre-lets are expected in the near future and if all the lettings which are currently in solicitors' hands result in binding contracts, Banbury Gateway will be 86% pre-let (by ground floor space).

In December 2013, the Group entered into a conditional agreement for the Crown Estate to acquire the Group's interests in Banbury Gateway and fund the development costs. The Group will oversee the development and be responsible for letting the remaining space. The agreement becomes binding when a variety of conditions are satisfied, the most important of which are securing planning permission, acquiring ownership of the entire development site and achieving a minimum pre-letting level. Provided the enhanced planning consent is confirmed by signing a S.106 agreement and assuming no further judicial review delays the Group expects the deal to become unconditional by the autumn and to receive approximately £43m of sale proceeds at that time.

Biggleswade

The A1 Shopping Park will be constructed in three phases and the demolition of redundant structures has been completed. Ground works are underway to enable construction of Phase 1 and negotiations are continuing with existing tenants around surrendering their current stores; already, Matalan and Pets at Home have agreed to relocate to the new development. Pre-lets to relocate two other existing tenants to the new development are in solicitors' hands. A Compulsory Purchase Order hearing is set for 8 July 2014 which we hope will facilitate vacant possession of the remaining three units if negotiations are not otherwise concluded satisfactorily.

An agreement for lease for a 10,000 sq ft unit was signed with TK Maxx in April 2014 and along with the existing pre-lets to M&S, Next, Matalan, Arcadia and Pets at Home 56% of the ground floor space at Phase 1 and 73% of Phase 2 is now pre-let. A further three pre-lets are in solicitors' hands.

Gloucester

Having sold the foodstore, as announced in January 2013, the Group is making progress on Phase 2. Contracts have been exchanged with Rygor Group Limited to acquire three acres of Phase 2 for use as a vehicle showroom for £1.25m. Detailed planning permission has now been granted and the sale is conditional on the discharge of the remaining planning conditions which are due to be approved shortly. The sale is expected to complete before the end of September 2014, upon expiry of the judicial review period.

The Group has applied for a variation of the planning permission on the remainder of Phase 2, to allow delivery of the A3 element of the project to be brought forward and a decision is expected imminently.

Greenwich

The conditions relating to the sale of the Sainsbury's/M&S development were satisfied in December 2013 and £58m of purchase proceeds were received. As part of the sale terms, the Group retained responsibility for overseeing the construction and for letting the remaining space. Construction is well underway with practical completion expected in early 2015. The accounting treatment for the construction arrangements is considered in more detail below. In terms of the remaining units, 1,650 sq ft of space has been pre-let to Costa which leaves 6,000 sq ft of space to let. Interest has been received from potential operators and discussions are ongoing.

The Group acquired two adjacent sites to facilitate highways and service road requirements for the Sainsbury's/M&S. These have now served their purposes and since 31 March 2014, the Group has sold one for £1.825m and exchanged contracts to sell the other for £2m on receipt of a change of use permission. That sale is expected to complete in July 2014.

As part of the agreement to provide Sainsbury's with the new store, the Group agreed to acquire their existing store on Greenwich Peninsula when the new one is open for trade. The Group announced in December 2013 that a conditional offer from IKEA to acquire its interest in the existing Sainsbury's had been accepted. IKEA achieved a resolution to grant the desired planning consent in February 2014, but the sale process has stalled pending the outcome of a third party application to English Heritage for the existing foodstore to be Grade II listed. A decision by the Minister for Culture is expected by the end of the summer.

In January 2014, the council's planning committee resolved to grant Open A1 retail planning consent at Brocklebank Retail Park for a four unit scheme comprising 160,356 sq ft (76,500 sq ft on ground floor) of retail space. The resolution is subject to a S.106 agreement which the Group expects to sign shortly.

The retail scheme will replace the recently vacated Matalan store at Bugsby's Way and the Brocklebank industrial estate. Negotiations are ongoing with a number of the remaining tenants on the industrial estate regarding relocation or surrender of leases. The Group concluded a pre-let to Next for a 38,500 sq ft unit on three floors (16,000 sq ft on ground floor) in April 2014. Pre-lets for a 20,000 sq ft (10,000 sq ft on ground floor) unit and a 60,000 sq ft (30,000 sq ft on ground floor) unit are in solicitors' hands. As announced in June 2013 the scheme is pre-sold, subject to contracted letting criteria and construction. Practical completion of the scheme is expected by the end of 2015.

Rushden Lakes

In June 2014, the Secretary of State granted permission for the £100m retail and leisure redevelopment which includes 268,131 sq ft of ground floor retail space and 81,101 sq ft of A3 and leisure space. The permission will be beyond challenge, provided no new proceedings are launched during the six week judicial review period which expires in August 2014.

Pre-lets have been signed with M&S for a unit of 60,000 sq ft (30,000 sq ft on ground floor) and with Costa for 2,000 sq ft and the Group is under offer for a further 36,000 sq ft (20,000 sq ft on ground floor) of space. Following the Secretary of State's positive decision the Group expects to make further progress on lettings in the near future.

Sheppey

Having sold the foodstore and KFC, the Group continues to make progress on Phase 2 of this investment. Construction of the north terrace which forms Phase 2a is well advanced. Pre-lets have been signed with B&M for a unit of 22,000 sq ft and with Iceland for 7,250 sq ft. 85% (by ground floor space) of space on the Phase 2a terrace has now been pre-let and practical completion of this phase is expected in August 2014.

The west terrace forms Phase 2b and a pre-let was signed in April 2014 with Poundland for 7,500 sq ft. A further pre-let for 10,000 sq ft is in solicitors' hands and is expected to exchange shortly. These agreements mean that 54% (by ground floor space) of this terrace will be pre-let in the near future. Practical completion is expected in October 2014.

A further planning application has been submitted to revise the planning permission on Phase 2c, on the eastern side of the site. The existing permission is mainly for employment use and the Group is seeking A3 use in response to operator demand. A decision is expected in August 2014 and, assuming it is favourable, construction work would follow on immediately after practical completion of Phase 2b with practical completion of the final phase expected by May 2015.

Stafford

At Kingsmead, agreements for lease with Just for Pets and B&M were finalised in the period so, alongside the agreement for lease to Morrisons, the scheme is now 100% pre-let. Negotiations are expected to conclude shortly to allow for the development of the Kingsmead foodstore in tandem with the multi-storey car park which will bring forward completion of this investment by 12 months.

The Group had previously announced the pre-letting of a 56,000 sq ft unit at Riverside Retail Park to Debenhams. This has recently been replaced by a pre-let of the same unit to Primark on terms which are in substance identical to the arrangements with Debenhams. This investment has an impressive tenant line up with pre-lets also agreed with M&S, H&M, Arcadia, River Island, Costa and Phones 4U and it is 80% pre-let (by ground floor space). The Group is under offer with several other major high street names and, if these result in agreed contracts, the scheme will be 90% pre-let. Terms for bank development finance have been agreed and construction work will commence shortly.

The leisure element of the Riverside scheme includes a multi-screen cinema and a planning application is scheduled to be determined in August 2014. Discussions continue with potential occupiers. Planning permission has already been secured for the retail/restaurant units at the ground floor level of the multi-storey car park and three of the five restaurant units are in solicitors' hands. Demolition of the redundant multi-storey car park is complete and work will start on the replacement 14 floor multi-storey car park in late June 2014.

The Old Gasworks, Sutton

Planning consent has been secured and the scheme includes a 123,000 sq ft foodstore (pre-let to Sainsbury's), 27,500 sq ft of further retail space and 186 residential units in two tower blocks.

The Group will not acquire the final part of the site until Southern Gas Networks (the owner and operator of the gas holder site) has decommissioned the existing gas holders. That work is under way and is expected to complete in October 2014. Several banks have expressed interest in providing development funding when the site assembly is completed.

Site remediation works are scheduled to commence in October 2014 and are expected to be complete in April 2015 at which point the foodstore construction will start. Practical completion of the foodstore is expected in March 2016.

The Group has received several approaches from housebuilders to acquire the residential element of the scheme. An offer, whereby the residential towers would be sold with the Group retaining ownership of the retail space underneath, has been accepted and is in in solicitors' hands.

Truro

At Willow Green, to the west of Truro, an outline planning application was submitted in November 2013 for a mixed-use development including 435 houses, a 78,000 sq ft foodstore pre-let to Asda, a pub, care home and primary school. A decision is expected in June 2014. The Group is in early stage discussions with a housebuilder about a possible joint venture in relation to the residential land and a major brewery company has agreed to acquire the pub.

In August 2012, the Group acquired approximately 92 acres of agricultural land (including three dwellings) at Higher Newham Farm to the south of Truro and a further 9 acres of adjacent agricultural land (including one dwelling) at Lamorran. The innovative proposals for Higher Newham Farm include 155 homes to be developed by Living Villages, a restaurant/cafe to be run by charity Cornwall Food Foundation and an educational community farm to be run by Duchy College. This will involve gifting 80% of the land at Higher Newham Farm to the local community via a new Charitable Company with the intention of preserving over 70 acres for farming and food education in perpetuity. The intention is for Higher Newham Farm to become an exemplar scheme which embodies the Living Villages ethos of high quality design and enhancement of the local community. A public consultation on the Group's proposals was held in May 2014 and the response from the public was overwhelmingly positive with 86% of respondents to a questionnaire supporting the proposals. It is anticipated that a planning application will be submitted in July 2014 with a decision expected in late 2014.

Revaluation surplus

As described in note 8 to the Interim Report the investment properties held by the Group at 31 March 2014 were valued by external property valuers, Jones Lang LaSalle Limited. In their opinion the fair value of these investment properties at that date was £199.76m, resulting in a revaluation surplus for the six months to 31 March 2014 of £12.83m.

Accounting treatment of Greenwich Maritime construction activities

Under the terms of the sale of the Sainsbury's/M&S development, the buyer funds the development with the Group overseeing the works. The Group recharges the costs associated with the Institutional Funding Agreement plus a 1% fee on the main contractor's costs. Following consultation with the Group's auditors, the appropriate accounting treatment for these arrangements has been determined as to include the amounts receivable from the buyer (in respect of each reporting period) in Gross revenue and to include the costs incurred by the Group (in respect of each reporting period) in Direct costs. The relevant amounts for the period are disclosed in note 4 to the Interim Report.

Cash position and future expenditure

During the six months to 31 March 2014, £19.43m of cash has been deployed in the purchase of, and capital expenditure on, investment properties.

At the balance sheet date the Group had £34.48m of cash and other liquid resources and this is substantially all allocated to existing projects or pipeline opportunities.

The Group has largely completed negotiations for development funding for the Stafford Riverside and Kingsmead developments. In addition the Group is in discussions with a number of banks in relation to a development facility for Sutton. The Group is confident that it will be able to secure the further development and investment financing required to supplement the cash on hand and facilitate delivery of the investment portfolio.

Tim Walton

On behalf of LXB Adviser LLP

18 June 2014

Group income statement

for the period ended 31 March 2014

Unaudited

six months to

31 March

2014

Unaudited

six months to

31 March

2013

Audited

year to

30 September

2013

Note

£

£

£

Gross revenue

4

5,748,039

2,533,691

4,421,702

Direct costs

4

(4,968,741)

(610,916)

(1,555,685)

Net revenue and gross profit

779,298

1,922,775

2,866,017

Administrative expenses:

Corporate administrative expenses

(2,698,514)

(3,263,115)

(6,254,970)

Cost of property activities

-

-

(107,995)

Total administrative expenses

(2,698,514)

(3,263,115)

(6,362,965)

Investment property revaluation surplus

12,831,192

10,330,475

16,843,204

Profit on sale of investment properties

742,498

4,951,053

839,886

Other income

146,487

154,142

327,949

Operating profit

11,800,961

14,095,330

14,514,091

Finance income

5

369,193

368,811

1,185,830

Finance costs

5

Reclassification of cumulative changes in fair value of derivative financial instruments on revocation of a hedge accounting relationship

Other finance costs

14

5

-

(384,203)

(2,649,103)

(750,212)

(2,649,103)

(1,794,585)

Total finance costs

(384,203)

(3,399,315)

(4,443,688)

Profit before tax

11,785,951

11,064,826

11,256,233

Taxation charge

6

(143,361)

(221,542)

(202,471)

Profit for the period

11,642,590

10,843,284

11,053,762

Earnings per share

Pence

per share

Pence

per share

Pence

per share

Basic and diluted

7

5.88

4.31

4.64

All amounts relate to continuing activities.

Group statement of comprehensive income

for the period ended 31 March 2014

Unaudited

six months to

31 March

2014

Unaudited

six months to

31 March

2013

Audited

year to

30 September

2013

£

£

£

Profit for the period

11,642,590

10,843,284

11,053,762

Cash flow hedges:

Market value adjustment of interest rate

derivatives, recognised directly in equity

29,216

105,332

210,770

Reclassification to profit and loss:

- on revocation of a hedge accounting

relationship

-

2,649,103

2,649,103

- on partial cancellation of an effective hedge

29,318

-

308,900

Hedging reserve recycling adjustment

(31,704)

(31,355)

(63,233)

Tax effect of interest rate derivative

valuation adjustment

5,366

(14,796)

(91,288)

Other items:

Gains and losses arising on current asset

investments that are measured at fair

value

-

46,521

46,521

Reclassification to profit and loss on

disposal of current asset investments

-

(181,306)

(181,306)

Total comprehensive income for the

period, net of tax

11,674,786

13,416,783

13,933,229

Group statement of changes in equity

for the period ended 31 March 2014

Period ended 31 March 2014 (unaudited)

Stated

capital

Hedging reserve

Retained earnings

Total

£

£

£

£

At 1 October 2013 (audited)

212,601,278

(10,244)

37,829,297

250,420,331

Profit for the period

-

-

11,642,590

11,642,590

Own shares purchased for

cancellation inclusive of costs

(39,946,819)

-

-

(39,946,819)

Reclassification to profit and loss on

partial cancellation of an effective

hedge

-

29,318

-

29,318

Market value adjustment of

interest rate derivatives

-

29,216

-

29,216

Hedging reserve recycling

adjustment

-

(31,704)

-

(31,704)

Tax effect of interest rate

derivative valuation adjustment

-

5,366

-

5,366

At 31 March 2014 (unaudited)

172,654,459

21,952

49,471,887

222,148,298

Period ended 31 March 2013 (unaudited)

Stated

capital

Hedging reserve

Other

reserve

Retained earnings

Total

£

£

£

£

£

At 1 October 2012 (audited)

257,501,358

(3,024,496)

134,785

26,775,535

281,387,182

Profit for the period

-

-

-

10,843,284

10,843,284

Own shares purchased for

cancellation inclusive of costs

(24,999,999)

-

-

-

(24,999,999)

Reclassification to profit and loss on

revocation of a hedge accounting

relationship

-

2,649,103

-

-

2,649,103

Gains and losses arising

on current asset investments

that are measured at fair value

-

-

46,521

-

46,521

Reclassification to profit and loss on

disposal of current asset

investments

-

-

(181,306)

-

(181,306)

Market value adjustment of

interest rate derivatives

-

105,332

-

-

105,332

Hedging reserve recycling

adjustment

-

(31,355)

-

-

(31,355)

Tax effect of interest rate

derivative valuation adjustment

-

(14,796)

-

-

(14,796)

At 31 March 2013 (unaudited)

232,501,359

(316,212)

-

37,618,819

269,803,966

Group balance sheet

at 31 March 2014

Unaudited

as at

31 March

2014

Unaudited

as at

31 March

2013

Audited

as at

30 September

2013

Note

£

£

£

Non-current assets

Investment properties

8

199,765,000

240,832,525

215,285,000

Deferred tax asset

6

23,536

114,627

44,511

199,788,536

240,947,152

215,329,511

Current assets

Business and other receivables

9

19,723,735

45,641,547

41,581,881

Cash and cash equivalents

10

34,482,488

38,705,451

20,046,784

54,206,223

84,346,998

61,628,665

Total assets

253,994,759

325,294,150

276,958,176

Current liabilities

Business and other payables

11

(26,657,872)

(10,088,971)

(5,111,332)

Income tax creditor

(5,842)

(286,375)

(187,667)

Borrowings

12

-

(16,099,080)

(12,700,002)

Derivative financial liabilities

14

(570,570)

(1,395,751)

(607,735)

(27,234,284)

(27,870,177)

(18,606,736)

Non-current liabilities

Borrowings

13

(4,468,328)

(25,650,516)

(7,510,753)

Derivative financial liabilities

14

(143,849)

(1,969,491)

(420,356)

(4,612,177)

(27,620,007)

(7,931,109)

Total liabilities

(31,846,461)

(55,490,184)

(26,537,845)

Net assets

222,148,298

269,803,966

250,420,331

Equity

Stated capital

15

172,654,459

232,501,359

212,601,278

Hedging reserve

21,952

(316,212)

(10,244)

Retained earnings

49,471,887

37,618,819

37,829,297

Total equity

222,148,298

269,803,966

250,420,331

Net asset value per share

Pence

per share

Pence

per share

Pence

per share

Basic and diluted

16

120.98

115.77

115.93

Adjusted (EPRA)

16

121.35

117.16

116.38

Group cash flow statement

for the period ended 31 March 2014

Unaudited

six months to

31 March

2014

Unaudited

six months to

31 March

2013

Audited

year to

30 September

2013

£

£

£

Cash flows from operating activities

Profit before tax

11,785,951

11,064,826

11,256,233

Adjustments for non-cash items:

Investment property revaluation surplus

(12,831,192)

(10,330,475)

(16,843,204)

Profit on sale of investment properties

(742,498)

(4,951,053)

(839,886)

Net finance costs

15,010

3,030,504

3,257,858

Cash flows from operating activities

before changes in working capital

(1,772,729)

(1,186,198)

(3,168,999)

Change in business and other receivables

(2,481,484)

50,690

776,802

Change in business and other payables

(174,929)

1,027,150

(543,124)

Taxation paid

(298,845)

(298,171)

(390,757)

Cash flows from operating activities

(4,727,987)

(406,529)

(3,326,078)

Investing activities:

Interest received

86,493

180,933

303,427

Purchase of and capital expenditure on

investment properties

(19,425,200)

(21,452,759)

(40,770,459)

Proceeds on sale of investment properties

94,531,149

-

45,402,029

Net movements on current

asset investments

-

34,981,310

34,981,310

Cash flows from investing activities

75,192,442

13,709,484

39,916,307

Financing activities:

Own shares purchased for cancellation,

inclusive of costs

(39,946,819)

(24,999,999)

(44,900,080)

Bank borrowings drawn

-

16,011,994

23,574,979

Bank borrowings repaid

(15,750,000)

-

(29,274,977)

Collateral advanced to hedging

counterparty

-

(365,000)

(365,000)

Collateral repaid from hedging

counterparty

283,894

-

1,792,671

Finance costs paid

(615,826)

(402,595)

(2,529,134)

Cash flows from financing activities

(56,028,751)

(9,755,600)

(51,701,541)

Net increase/(decrease) in cash and cash equivalents

14,435,704

3,547,355

(15,111,312)

Cash and cash equivalents at the

beginning of the period

20,046,784

35,158,096

35,158,096

Cash and cash equivalents at the end of

the period

34,482,488

38,705,451

20,046,784

Notes to the interim report

1. General information about the Group

LXB Retail Properties Plc was listed on the AIM and CISX markets on 23 October 2009. It is a closed-ended real estate investment company that was incorporated in Jersey on 27 August 2009.

This Interim Report includes the results and net assets of the Company and its subsidiaries, together referred to as the Group, on a consolidated basis.

Further general information about the Company and the Group can be found on its website:

www.lxbretailproperties.com.

2. Basis of preparation

The financial information contained in this report has been prepared in accordance with IAS 34, "Interim Financial Reporting", as adopted by the European Union and on a going concern basis.

The condensed set of financial statements for the half year are unaudited and do not constitute statutory accounts for the purposes of the Companies (Jersey) Law 1991. They should be read in conjunction with the Group's statutory financial statements for the year ended 30 September 2013, which were prepared under International Financial Reporting Standards adopted for use in the European Union and upon which an unqualified auditors' report was given.

Except as noted below, the accounting policies adopted in this report are consistent with those applied in the Group's Annual Report and financial statements for the year ended 30 September 2013 (the 2013 Annual Report) and are expected to be consistently applied in the year ending 30 September 2014.

In the six month period to 31 March 2014, the Group has adopted IFRS 13 "Fair Value Measurement". IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not affect when the Group is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. This has resulted in some minor changes to disclosure in notes 8 and 14 but has had no numerical impact.

The 2013 Annual Report is available from the "Investor relations" page of the Company's website, www.lxbretailproperties.com, or by writing to the Company Secretary at Ogier Fund Administration (Jersey) Limited, Ogier House, The Esplanade, St Helier, Jersey, JE4 9WG.

The Group's financial performance is not subject to material seasonal fluctuations.

3. Segmental information

During the current period and prior periods, the Group operated in and was managed as one business segment, being property investment, with all investment properties located in the United Kingdom.

4. Gross revenue and direct costs

Gross revenue:

Unaudited

six months to

31 March

2014

Unaudited

six months to

31 March

2013

Audited

year to

30 September

2013

£

£

£

Gross rental income

1,247,944

2,533,691

4,421,702

Revenue derived from Institutional Funding

Agreement

4,500,095

-

-

5,748,039

2,533,691

4,421,702

Direct costs:

Unaudited

six months to

31 March

2014

Unaudited

six months to

31 March

2013

Audited

year to

30 September

2013

£

£

£

Property outgoings

485,626

610,916

1,555,685

Costs associated with Institutional Funding

Agreement

4,483,115

-

-

4,968,741

610,916

1,555,685

Revenue and costs in connection with Institutional Funding Agreement relate solely to the Group's contractual obligations in respect of the construction of the Sainsbury's/M&S development in Greenwich which was disposed of during the period.

5. Finance income and costs

Recognised in the income statement:

Unaudited

six months to

31 March

2014

Unaudited

six months to

31 March

2013

Audited

year to

30 September

2013

£

£

£

Finance income:

Interest on cash deposits

114,054

170,341

297,263

Increase in fair value of the ineffective element of derivative financial instruments

255,139

-

690,097

Gains arising on the disposal of current

asset investments:

Amounts recognised in the current period

-

63,685

63,685

Reclassification of cumulative changes in

fair value, previously recognised in other

comprehensive income

-

134,785

134,785

Total finance income in the income statement

369,193

368,811

1,185,830

Other finance costs:

Bank interest

(379,148)

(470,083)

(1,182,912)

Amortisation of capitalised finance costs

(7,441)

(105,769)

(366,006)

Decrease in fair value of the ineffective

element of derivative financial instruments

-

(205,715)

-

Reclassification from equity on partial cancellation of an effective hedge

(29,318)

-

(308,900)

Hedging reserve recycling

31,704

31,355

63,233

(384,203)

(750,212)

(1,794,585)

Reclassification of cumulative changes in

fair value of derivative financial

instruments on revocation of a

hedge accounting relationship

-

(2,649,103)

(2,649,103)

Total finance costs in the income statement

(384,203)

(3,399,315)

(4,443,688)

Net finance costs recognised in the income

statement

(15,010)

(3,030,504)

(3,257,858)

Recognised in other comprehensive

income:

Unaudited

six months to

31 March

2014

Unaudited

six months to

31 March

2013

Audited

year to

30 September

2013

£

£

£

Movements in current asset investments:

Gains and losses arising on investments

that are measured at fair value

-

46,521

46,521

Reclassification to profit and loss on disposal of current asset investments

-

(181,306)

(181,306)

Changes in fair value of derivative

financial instruments:

Gains and losses recognised on the market

value adjustment of the effective

element of interest rate derivatives

29,216

105,332

210,770

Reclassification to profit and loss on partial cancellation of an effective hedge

29,318

-

308,900

Reclassification to profit and loss on

revocation of a hedge accounting

relationship

-

2,649,103

2,649,103

Hedging reserve recycling

(31,704)

(31,355)

(63,233)

Net finance costs recognised in other

comprehensive income

26,830

(2,588,295)

(2,970,755)

The average interest rate incurred by the Group on its bank borrowings for the period ended 31 March 2014, including the effects of hedging instruments and the lender's margin but excluding amortisation of capitalised finance costs was 3.4% (31 March 2013: 3.4%, 30 September 2013: 3.9%).

Further information about the derivative financial instruments, including details of their valuation at each balance sheet date is included in note 14.

6. Taxation

Unaudited

six months to

31 March

2014

Unaudited

six months to

31 March

2013

Audited

year to

30 September

2013

£

£

£

The tax charge for the period recognised

in the income statement comprises:

Current tax on results for the period

117,020

227,815

215,120

Change in deferred tax in the period

26,341

(6,273)

(12,649)

143,361

221,542

202,471

The tax assessed for the period varies from the standard rate of income tax in the UK of 20%. The differences are explained below:

Unaudited

six months to

31 March

2014

Unaudited

six months to

31 March

2013

Audited

year to

30 September

2013

£

£

£

Profit before tax

11,785,951

11,064,826

11,256,233

Profit before tax at the standard rate of

income tax in the UK of 20%

2,357,190

2,212,965

2,251,247

Items not subject to UK income tax:

Expenses

474,186

633,912

1,207,670

Changes in fair value of derivatives

51,509

529,821

428,286

Investment property revaluation surplus

(2,566,238)

(2,066,095)

(3,368,641)

Capital surplus on disposal of

investment properties

(148,500)

(990,210)

(167,977)

Accrued and other income

(29,863)

(92,887)

(107,879)

Deduction for allowable financing costs

(55,132)

(49,997)

(48,856)

Other amounts:

Capital allowances claimed

(1,845)

(14,672)

(102,244)

Losses carried forward

62,054

58,705

110,865

Tax charge for the period recognised in

the income statement

143,361

221,542

202,471

The Group has revenue related losses of £1,978,020 (31 March 2013: £1,406,952; 30 September 2013: £1,667,751) available to carry forward to utilise against applicable future revenue profits, for which no deferred tax asset is currently recognised.

Tax status of the Company and its subsidiaries

All group undertakings are either tax resident in Jersey or are tax transparent entities owned by Jersey resident entities. Jersey has a corporate tax rate of zero, so the Company and its subsidiaries have no liability to taxation on their income or gains in Jersey. The Company is not subject to UK Corporation tax on any dividend or interest income it receives.

The Group's investment properties are located in the United Kingdom and therefore the net rental income earned less deductible items is subject to UK income tax, currently at a rate applicable to the relevant group undertakings of 20%.

Deferred tax asset

Unaudited

six months to

31 March

2014

Unaudited

six months to

31 March

2013

Audited

year to

30 September

2013

£

£

£

At the start of the period

44,511

123,150

123,150

Tax on interest rate derivative market

value adjustment charged to other

comprehensive income

5,366

(14,796)

(91,288)

Tax on interest rate derivative market

value adjustment (charged)/credited to

the income statement

(26,341)

6,273

12,649

At the end of the period

23,536

114,627

44,511

7. Earnings per share

Earnings per share is calculated on a weighted average of 197,952,219 (31 March 2013: 251,461,951; 30 September 2013: 238,189,650) ordinary shares in issue for the period and is based on earnings attributable to shareholders for the period of £11,642,590 (31 March 2013: earnings of £10,843,284; 30 September 2012: earnings of £11,053,762).

There are no share options or other equity instruments in issue and therefore no adjustments need to be made for dilutive or potentially dilutive equity arrangements.

The European Public Real Estate Association ("EPRA") issues guidelines aimed at providing a measure of earnings per share designed to present underlying earnings from core operating activities only. The adjusted EPRA earnings per share figure is calculated as follows:

Unaudited

six months to

31 March 2014

Unaudited

six months to

31 March 2013

Audited

year to

30 September 2013

£

Pence per share

£

Pence per share

£

Pence per share

Basic earnings

11,642,590

5.88

10,843,284

4.31

11,053,762

4.64

Adjustments:

Investment property

revaluation movements

(12,831,192)

(6.48)

(10,330,475)

(4.10)

(16,843,204)

(7.07)

Profit on sale of

investment properties

(742,498)

(0.37)

(4,951,053)

(1.97)

(839,886)

(0.35)

Market value adjustments:

- of interest rate derivatives

in the period, net of tax

(260,502)

(0.13)

168,087

0.07

(765,978)

(0.32)

- of interest rate derivatives

reclassified to profit and

loss

29,318

0.01

2,649,103

1.05

2,958,003

1.24

EPRA loss

(2,162,284)

(1.09)

(1,621,054)

(0.64)

(4,437,303)

(1.86)

8. Investment properties

£

Carrying value as at 30 September 2013 (audited)

215,285,000

Additions

40,871,438

Disposals

(69,222,630)

Revaluation surplus

12,831,192

Carrying value as at 31 March 2014 (unaudited)

199,765,000

Movements in the prior year were as follows:

Carrying value at 30 September 2012 (audited)

244,893,352

Additions

31,795,283

Transfers from current assets

329,325

Disposals

(78,576,164)

Revaluation surplus

16,842,204

Carrying value as at 30 September 2013 (audited)

215,285,000

At 31 March 2014, all of the Group's investment properties were valued by Jones Lang LaSalle Limited, Chartered Surveyors, on a fixed fee basis, in their capacity as independent external valuers. The total external valuation of these properties at 31 March 2014 is £199,765,000 (31 March 2013: £242,540,000; 30 September 2013: £215,285,000).

The external valuers' valuation was undertaken in accordance with the Royal Institution of Chartered Surveyors' Valuation Professional Standards (2014) on the basis of fair value. Fair value represents the estimated amount that should be received for selling an investment property in an orderly transaction between market participants at the valuation date.

The historic cost of the Group's investment properties as at 31 March 2014 was £167,999,812 (31 March 2013: £209,930,084; 30 September 2013: £181,639,033).

9. Business and other receivables

Unaudited

as at

31 March

2014

Unaudited

as at

31 March

2013

Audited

as at

30 September

2013

£

£

£

Business receivables

317,359

141,068

713,480

Property sales receivables

9,448,000

35,560,062

34,014,021

Amounts receivable under Institutional

Funding Agreement

3,757,459

-

-

Prepayments and accrued income

3,083,017

2,240,123

2,336,839

Interest receivable

-

-

11,000

Rents recognised in advance

and lease incentives

-

1,707,475

-

Other receivables

3,117,900

5,992,819

4,506,541

19,723,735

45,641,547

41,581,881

Property sales receivables comprises amounts receivable in respect of investment property sales that have unconditionally exchanged prior to 31 March 2014.

Amounts receivable under Institutional Funding Agreement relate to the income described in note 4.

All of the amounts above are either receivable within one year or will be released to the income statement within one year except for £601,435 (31 March 2013: £2,678,000; 30 September 2013: £885,329) which has been advanced to the provider of the Group's £50m swap facility (see note 14) as collateral due to the current fair value deficit position of the swap at the balance sheet date.

No business receivables were overdue or impaired at the end of any of the above periods.

10. Cash and cash equivalents

Included within the Group's cash and cash equivalents balance as at 31 March 2014 is £571,161 (31 March 2013: £3,817,502; 30 September 2013: £990,865) in bank accounts held as security by the providers of the Group's secured bank debt and hedging facilities.

11. Business and other payables

Unaudited

as at

31 March

2014

Unaudited

as at

31 March

2013

Audited

as at

30 September

2013

£

£

£

Business payables

598,421

2,839,141

2,078,260

Rents received in advance

380,255

991,995

577,823

Other creditors

488,830

1,215,470

404,326

Accruals and other amounts payable

25,190,366

5,042,365

2,050,923

26,657,872

10,088,971

5,111,332

Accruals and other amounts payable includes £24,603,201 (31 March 2013: £4,323,170; 30 September 2013: £1,194,220) of committed costs included as additions to the Group's investment properties either in the current period or in a prior period.

All of the above amounts are due within one year and none incur interest.

12. Borrowings: amounts repayable within one year

Unaudited

as at

31 March

2014

Unaudited

as at

31 March

2013

Audited

as at

30 September

2013

£

£

£

Bank loans (secured)

-

16,099,080

12,700,002

On 15 January 2013 and 30 January 2013 two group entities entered into agreements with the Royal Bank of Scotland Plc for short term development finance facilities. The loans shown above (net of unamortised loan issue costs) were drawn during the year ended 30 September 2013 in several tranches. The amounts were secured against certain properties held within ring-fenced sub-groups beyond which the loans were non-recourse. Both secured properties have been sold and the loans (and accrued interest payable) were repaid at the time of completion of the transactions.

There were no defaults or other breaches of financial covenants under the terms of the loan agreements during the current period, or in any earlier periods.

13. Borrowings: amounts repayable in more than one year

Unaudited

as at

31 March

2014

Unaudited

as at

31 March

2013

Audited

as at

30 September

2013

£

£

£

Bank loans (secured)

4,468,328

25,650,516

7,510,753

In February 2011 a group entity entered into an agreement with Deutsche Hypothekenbank (Actien-Gesellschaft) for a five year debt facility. A loan amounting to £25,950,000 was drawn on 17 February 2011, secured against three investment properties held within a ring-fenced sub-group beyond which the loan is non-recourse.

On 28 June 2013, one of the secured properties was sold and £18.4m of the outstanding loan was repaid. On 11 December 2013, completion of another secured property sale occurred and a further £3.05m of the outstanding loan was repaid.

At 31 March 2014 the remaining secured property has been externally valued at £9,500,000 (31 March 2013: three secured properties were externally valued at £49,050,000; 30 September 2013 the property not subject to a sale was externally valued at £10,000,000). The balance of the loan is due for repayment on 30 April 2016 with only interest payable, subject to covenant compliance, until the repayment date.

The loan to value financial covenant at all times has been 70%.

There have been no defaults or other breaches of financial covenants under the terms of the loan agreement during the current or prior periods, or in the period since the balance sheet date.

The Group has no undrawn, committed borrowing facilities at 31 March 2014 (31 March 2013: £nil; 30 September 2013: £nil).

There was no difference between the book value and the fair value of the borrowings disclosed above.

14. Derivative financial instruments

The Group enters into hedging arrangements to provide protection against interest rate fluctuations in respect of its bank borrowings.

In October 2011, the Group entered into an interest rate swap facility with the Royal Bank of Scotland Plc which became effective on 25 March 2013 in anticipation of hedging needs for future investments. On 15 August 2013, due to a change in the projected future borrowings of the Group, £50m of the instrument was cancelled at a cost of £1.027m. The fair value of this instrument at each balance sheet date is set out below:

Fair value

Fair value

Fair value

Notional

Protected

31 March

31 March

30 September

amount

rate

Expiry

2014

2013

2013

£

%

£

£

£

Non-amortising swap

100m

1.6675

25 Sep 2015

-

(2,854,818)

-

Non-amortising swap

50m

1.6675

25 Sep 2015

(676,868)

-

(932,006)

(676,868)

(2,854,818)

(932,006)

The total increase in the valuation of the swap in the period of £255,138 (period to 31 March 2013: decrease of £205,715; period to 30 September 2013: increase of £690,097 after taking account of the partial cancellation noted above) has been recognised in the income statement. In October 2011, the Group, anticipating its debt profile to be substantially different, chose to adopt hedge accounting for this instrument, with the adverse movements in fair value to 30 September 2012 recognised in other comprehensive income. The decision of the Directors to revoke hedge accounting in the prior year, as referred to in the Company's Interim Report for the period to 31 March 2013, resulted in £2,649,103 being reclassified from other comprehensive income to the income statement in that period.

Also in 2011, the Group entered into a swap in respect of its borrowings from Deutsche Hypothekenbank (Actien-Gesellschaft). On 28 June 2013, following a part-repayment of the Group's bank borrowings £18.4m of this instrument was cancelled at a cost of £308,900. On 11 December 2013, following a further part-repayment, £3.05m of this instrument was cancelled at a cost of £29,318. The fair value of this instrument at each balance sheet date is set out below:

Fair value

Fair value

Fair value

Notional

Protected

31 March

31 March

30 September

amount

rate

Expiry

2014

2013

2013

£

%

£

£

£

Non-amortising swap

25.95m

1.565

31 Jan 2015

-

(510,424)

-

Non-amortising swap

7.55m

1.565

31 Jan 2015

-

-

(96,085)

Non-amortising swap

4.5m

1.565

31 Jan 2015

(37,551)

-

-

(37,551)

(510,424)

(96,085)

After taking account of the cost of the partial cancellations noted above, the total increase in the valuation of this instrument during the period of £29,216 (period to 31 March 2013: increase of £105,332; year to 30 September 2013: increase of £210,770) has been credited to the group statement of comprehensive income.

All interest rate derivative financial instruments have been valued in accordance with IFRS 13 by reference to interbank bid market rates as at the close of business on 31 March 2014 by J.C. Rathbone Associates Limited and include the relevant LIBOR basis spread.

All derivative financial instruments are classed as 'level 2' as defined in IFRS 13 as their fair value measurements derive from inputs that are observable either directly or indirectly, rather than from quoted prices in active markets for identical assets and liabilities.

Derivative financial instruments are analysed as follows:

Unaudited

Unaudited

Audited

as at

as at

as at

31 March

31 March

30 September

2014

2013

2013

Liabilities falling due:

£

£

£

In less than one year

(570,570)

(1,395,751)

(607,735)

In more than one year

(143,849)

(1,969,491)

(420,356)

(714,419)

(3,365,242)

(1,028,091)

The market values of hedging instruments change constantly with interest rate fluctuations, but the cash flow exposure of the Group to movements in interest rates is protected by way of the hedging products referred to above. These valuations do not necessarily reflect the cost or gain to the Group of cancelling its interest rate protection, which is generally a marginally higher cost or smaller gain than a market valuation.

15. Stated capital

Unaudited

as at

31 March

Unaudited

as at

31 March

Audited

as at

30 September

2014

2013

2013

Number

Number

Number

Authorised

Ordinary shares of no par value - number

Unlimited

Unlimited

Unlimited

Issued and fully paid

Ordinary shares of no par value - number

183,630,374

233,049,442

216,010,321

£

£

£

Ordinary shares of no par value - paid

- total paid on issues to date

266,359,124

266,359,124

266,359,124

- purchased for cancellation to date

(84,593,108)

(24,925,220)

(44,765,773)

Issue and purchase costs deducted to date

(9,111,557)

(8,932,545)

(8,992,073)

Stated capital per the balance sheet

172,654,459

232,501,359

212,601,278

Share buybacks

In December 2013, the Company purchased a total of 32,379,947 of its own shares for cancellation for cash at a price of 123p per share.

In March 2013, the Company purchased a total of 21,050,453 of its own shares for cancellation for cash at an average price of 118.76p per share. In June and July 2013, the Company purchased a further 17,039,121 of its own shares for cancellation for cash at an average price of 116.79p per share.

16. Net asset value per share

Net asset value per share is calculated as the net assets of the Group attributable to shareholders at each balance sheet date, divided by the number of shares in issue at that date (see note 15).

There are no share options or other equity instruments in issue and therefore no adjustments need to be made for dilutive or potentially dilutive equity arrangements.

The European Public Real Estate Association ("EPRA") has issued guidelines aimed at providing a measure of net asset value ("NAV") on the basis of long term fair values. The EPRA measure excludes items that are considered to have no impact in the long term, such as the fair value of derivative financial instruments and deferred tax balances.

The Group's EPRA NAV is calculated as follows:

Unaudited

as at

31 March

2014

Unaudited

as at

31 March

2013

Audited

as at

30 September

2013

£

Pence per share

£

Pence per share

£

Pence per share

Basic NAV

222,148,298

120.98

269,803,966

115.77

250,420,331

115.93

Adjustments:

Fair value of derivative

financial instruments

714,419

0.38

3,365,242

1.44

1,028,091

0.47

Deferred tax balances

(23,536)

(0.01)

(114,627)

(0.05)

(44,511)

(0.02)

EPRA NAV

222,839,181

121.35

273,054,581

117.16

251,403,911

116.38

17. Related party transactions and balances

Interests in shares

The interests of the Directors and their families in the share capital of the Company are as follows:

Ordinary shares

Unaudited

as at

31 March

2014

Unaudited

as at

31 March

2013

Audited

as at

30 September

2013

Number

Number

Number

Phil Wrigley

447,448

447,448

447,448

Steve Webb

243,385

111,938

243,385

Danny Kitchen

467,927

467,927

467,927

Alastair Irvine

2,500,000

2,968,750

2,500,000

The interests disclosed above include both direct and indirect interests in shares.

The group headed by LXB Partners LLP, which includes LXB Adviser LLP and its wholly owned subsidiaries, is a related party of the Company. LXB Adviser LLP is the Investment Manager to the Group. At 31 March 2014, the members of LXB Partners LLP (and their spouses) held an aggregate total of 12,245,348 (31 March 2013: 11,397,405; 30 September 2013: 11,855,890) shares in the Company.

There have been no changes to any of the above shareholdings between 31 March 2014 and the date of this report.

Fees

Directors' fees payable during the period to 31 March 2014 were £152,500 (period to 31 March 2013: £152,500; year ended 30 September 2013: £305,000). As at 31 March 2014, £76,250 (31 March 2013: £76,250; 30 September 2013: £82,750) of fees remained outstanding and are included within business and other payables (note 11).

Management fees during the period to 31 March 2014 of £2,008,756 (period to 31 March 2013: £2,452,571; year ended 30 September 2013: £4,793,208) were payable to the group headed by LXB Partners LLP. No amounts were outstanding at the respective balance sheet dates.

The Investment Manager, LXB Adviser LLP, is under the terms of the Investment Advisory Agreement, permitted to recharge certain costs and expenses incurred in the discharge of its duties. During the period it has recharged costs totalling £42,861 (31 March 2013: £42,144; 30 September 2013: £63,933).

Incentives - carried interest arrangements with LXB Partners LLP

At a future date, when a cumulative hurdle amount has been returned to shareholders the carried incentive arrangements with LXB Partners LLP are activated. This cumulative hurdle amount is calculated by reference to the net proceeds base amount (net funds raised from the issue of all shares as adjusted for the shares cancelled as a consequence of the share buyback programmes undertaken to date) and a 12% per annum preferred return thereon. Cash returns over and above the cumulative hurdle amount are then shared between shareholders (50%) and LXB Partners LLP (50%) until amounts returned to shareholders are 80% of the total amount. Returns above this level are shared between shareholders (80%) and LXB Partners LLP (20%).

As at 31 March 2014, the net proceeds base amount, to which the 12% per annum preferred return is applied, is £185,981,418 (31 March 2013: £236,033,205; 30 September 2013: £218,775,930).

As the net assets of the Group are less than the cumulative hurdle amount as at 31 March 2014, no provision for future incentive payments has been recognised in these financial statements.

18. Post balance sheet events

On 12 June 2014, the Secretary of State granted permission for the £100m Rushden Lakes retail and leisure redevelopment which includes 268,131 sq ft of ground floor retail space and 81,101 sq ft of A3 and leisure space.

Glossary

AIM

The Alternative Investment Market of the London Stock Exchange.

CISX

The Daily Official List of the Channel Islands Stock Exchange.

EPRA

European Public Real Estate Association.

EPRA EPS

An adjusted measure of earnings per share designed by EPRA to present underlying earnings from core operating activities only.

EPRA NAV

An adjusted measure of net asset value designed by EPRA to present net asset value excluding the effects of changes in value of financial instruments held for long term benefit and the deferred tax effects of those changes.

EPS

Earnings per share, calculated as earnings after tax divided by the weighted average number of shares in issue in the period or year.

Investment Manager

LXB Adviser LLP.

Investment Advisory Agreement

The agreement between LXBRP GP Limited, the General Partner of LXB Retail Properties Fund LP, and LXB Adviser LLP under which LXB Adviser LLP provides investment advice to the Group.

LIBOR

The London Interbank Offered Rate, being the interest rate charged by one bank to another for lending money.

NAV

Net asset value.

This information is provided by RNS
The company news service from the London Stock Exchange
END
IR DDLFFZQFXBBE

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