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RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2014

Thu, 18th Dec 2014 07:00

RNS Number : 1039A
LXB Retail Properties Plc
18 December 2014

For immediate release 18 December 2014

LXB Retail Properties Plc

RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 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 results for the year ended 30 September 2014.

Highlights

30 September 30 September

2014 2013

· Cash deposits and liquid investments: £7.7m £20.0m

· NAV per share: 134.30p 115.93p

· EPRA* NAV per share: 134.54p 116.38p

· Earnings per share: 18.94p 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 2013 - 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

· April 2014: demolition works commenced at Crown Road, Sutton and Brocklebank Road, Greenwich

· June 2014: resolution to grant planning permission in principle granted for the Group's scheme in Ayr

· June 2014: construction of Stafford multi-storey car park underway

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

· July 2014: land assembly at Stafford completed and enabling works commence at Stafford Riverside

· September 2014: enabling works commenced at Stafford Kingsmead

Post year end:

· October 2014: completed forward funded sale of Banbury Gateway scheme

· November 2014: entered into a £23.35m development facility with Royal Bank of Scotland Plc for the Stafford Kingsmead site

· December 2014: entered into a £28.5m development facility with Royal Bank of Scotland Plc for the Stafford Riverside site

· December 2014: acquired a parcel of land for £10m at Sutton, completing the Group's land assembly requirements at that site

* excluding fair values of financial instruments and deferred tax.

Commenting on the recent activity, Phil Wrigley, Chairman of LXB Retail Properties Plc said:-

"The Group made very good progress during the last financial year.

We achieved notable planning success at a number of our developments, securing over 1.2m sq ft of new planning permissions bringing the total achieved since IPO in late 2009 to 2.64m sq ft. In addition, we hope to have a planning decision for our first Living Villages project before the end of 2014.

On the lettings side we also performed well, signing 26 new pre-let agreements and now, without including those in solicitors' hands or under offer, our rent roll has increased to £18.35m.

All this success has resulted in a very strong financial performance for LXB which bodes well for 2015, as we reach our important Continuation Vote, five years after our IPO as planned.

We look forward to 2015 with confidence and look forward to updating Shareholders further on our progress."

For further information please contact:

LXB Adviser LLP Tel: 020 7432 7900

Tim Walton, CEO

Brendan O'Grady, FD

J.P. Morgan Cazenove (NOMAD) Tel: 020 7742 4000

Bronson Albery/Kristof Vashegyi

Buchanan Tel: 020 7466 5000

Charles Ryland/Sophie McNulty

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 Annual Report and Financial Statements for the year to 30 September 2014.

These results are announced at a particularly significant point in the Company's development as the Board undertook to offer Shareholders a Continuation Vote at the next Annual General Meeting ('AGM') (the first AGM following the fifth anniversary of the October 2009 Initial Public Offering ('IPO')). In my statement this year, I will review progress with the Group's investments since we reported the results for the year to 30 September 2013 (on 4 December 2013). I will also brief Shareholders on the proposals which the Board is currently reviewing and which will be presented at the time of the AGM.

There has been very significant progress across the portfolio. We had a number of successes on the planning front, the most notable of which were at Banbury Gateway and Rushden Lakes, both following significant challenges. In total, we secured 1.2m sq ft (0.79m sq ft on ground floor) of new planning permissions during the period.

Indeed since the IPO we have secured more than 2.64m sq ft of new planning permissions and now have the planning consent needed for all bar one of our retail projects. Of course, when developing large and complex investments initial designs are routinely amended as store layouts are tailored to the needs of particular tenants. This frequently requires an amended planning consent, but these applications tend to be relatively uncontroversial once the original consent has been awarded. Our sole outstanding retail consent is the foodstore led scheme at Truro (where the Group's interest is limited to an option to acquire the site if planning is achieved). To complete the picture on planning, we are hoping to have a planning decision for our first Living Villages project before the end of 2014. I say more about Living Villages below.

We have performed well on lettings too and, in terms of the pre-construction obligations, the pre-lets entered into at all our major schemes are now unconditional with the retailers. We have signed 26 new pre-let agreements adding £5.17m to the rent roll in the period and our annual contracted future rent roll (excluding investments sold at the balance sheet date) currently stands at £18.35m with pre-lets for in excess of £3.78m of annual rent either in solicitors' hands or under offer. If we exclude Rushden Lakes, 72% of the Group's space is now let/pre-let, in solicitors' hands or under offer. We are very pleased with that lettings success although the market for letting new space remains challenging with retailers taking great care before committing and seeking expensive incentive packages to do so.

We deliberately chose to delay the start of the Rushden Lakes lettings campaign whilst we refined our thoughts on how to maximise the potential of the lakes and woodlands to enable us to create an all-day destination. We are currently reconfiguring the layout to increase the restaurant offer and are working with a number of leisure operators to make this a reality. At the present time, we have signed just two pre-lets with occupiers but full lettings discussions are now in progress and we are seeing considerable interest from retailers including many who would not normally trade in retail parks. Rushden Lakes is showing that there is still strong demand for high quality, well configured and located stores and we expect to announce several significant pre-lettings in the next few months.

The Investment Manager's report provides more detail on each of our key locations and notes that work has started on site at all of our investments except Truro and Ayr.

All of this activity is reflected in strong financial performance with the Group's profit up significantly by more than £25m to £36.1m and EPRA NAV up 15.6% to 134.54p per share. This is primarily due to the revaluation of our investment portfolio by Jones Lang LaSalle Limited, the Group's independent valuers.

As we approach the Continuation Vote, it is essential that Shareholders have the best possible understanding of the worth of our portfolio so I would like to focus here on the valuation process because, for assets which have not yet reached the stage of practical completion, it is not straightforward. The independent valuer is obliged by IFRS to report fair value in line with the RICS' 'Red Book' guidance and the standard approach is to apply the Residual Method of Valuation. Under this approach, total costs including construction costs, professional fees, contingency and finance costs together with an allowance for developer's profit are deducted from the valuer's estimate of the investment's value at completion to arrive at a surplus which is called the Residual Land Value, i.e. the amount that a purchaser would be willing to pay for the development in that state and at that time. This approach works well in the early stages of a development however matters can become more complicated as the development progresses towards the date when rents start to accrue. It is important that Shareholders understand that these valuations which are properly recognised for accounting purposes are different to (and in general lower than) the values which the Board would place on those assets when considering offers for investments. In some cases, there is a significant difference between the carrying value and the price we would be prepared to accept. This is most notable in the case of Rushden Lakes because, when calculating the Residual Land Value, notwithstanding the planning success and the investment's very significant long term potential, the independent valuer is required to reflect, amongst other things, that only 9% of the space is pre-let.

The investment market for retail property has been very active in the last 12 months although valuations for foodstores have come under recent pressure as a reflection of tenants' operational issues. Unsurprisingly, given the Group's portfolio of high quality retail investments, we frequently receive approaches from institutional investors. Even when a potentially attractive offer is proposed, it typically requires many months of detailed negotiations before a contract which is acceptable to the Board is concluded. It is also the case that detailed discussions often fail to result in an agreed transaction but, with that note of caution, I can advise Shareholders that the Group is currently engaged in discussions which may result in contracts to sell three of our investments and generate significant cash receipts. In some cases, these discussions are at a very advanced stage and, if they all proceed satisfactorily to completion, we expect to be able to announce within the next three months that we have exchanged contracts which will generate cash of at least £140m either on signing or when all post contractual conditions are satisfied. We will, of course, make further announcements when it is appropriate to do so.

The Board's policy is to return surplus cash to Shareholders and in the past the most cost-effective means of doing so has been to use the authority given by Shareholders to purchase the Company's shares in the market. We returned £39.8m through buybacks in the year to 30 September 2014 bringing the total returned by this means since the IPO to almost £85m. The Company has an existing authority to purchase up to 14.99% of its shares and the Board considers this an appropriate way to return relatively small amounts of capital to Shareholders. Given the substantial quantum of the proceeds which we hope to receive if all the current negotiations referred to above conclude satisfactorily, the Board considers that a more structured process to return that cash will be appropriate and we are currently formulating proposals with our advisers on that. Clearly there can be no commitment to that until all of the legal processes surrounding asset disposals are complete, but it is our intention to communicate proposals around the time of the forthcoming AGM.

I have signalled previously that the Group sees real value in progressing the Living Villages opportunity in the coming years as our current investment portfolio reaches maturity. The Group's first Living Villages project involves the construction of 155 new homes and creation of a new village centred around a community farm in Truro. We believe Living Villages has the potential to bring a completely fresh approach to the way that new homes are provided in the UK and I would urge Shareholders to look at the website www.highernewham.com to see how that thinking is being brought to life in Cornwall. The planning application which has received overwhelming local support will be considered in December 2014.

We will provide an update on the Board's thoughts around the Group's future investment strategy, including Living Villages, as part of the pre AGM briefing for Shareholders. Our intention is to provide the Board's views on current values (as opposed to accounting values) and any associated risks as part of that so that Shareholders are able to make their investment decisions in the light of the best possible information at that time. With the potential asset divestments and returns of capital as well as guidance on the future direction of the Group's business reflecting the Living Villages opportunity, there is a lot of activity at Board level to ensure Shareholders are briefed comprehensively ahead of the AGM and Continuation Vote. Consequently, we anticipate a longer than usual interval between the announcement of this year's results and the AGM which we currently expect to convene in March 2015.

In summary, this period has seen the hard work of the last five years translated into significant further Shareholder value. Given the challenging markets we have faced since late 2009 we are very pleased to have secured over 2.64m sq ft of new planning permissions and signed pre-lets providing £24.8m of annual rent since the IPO. These achievements (which include investments which were sold before the balance sheet date) have enabled us to deliver NAV at 30 September 2014 of £246.6m. This may be compared to the net £172.9m raised from share issues (after adjustment for capital returned by way of share buybacks) so these results demonstrate that we had already generated significant value for Shareholders by the end of the last financial year. We are confident there is more NAV growth to be realised from our investment portfolio in the current year.

The Board has a very full agenda for the immediate future and I look forward to briefing Shareholders on further positive developments in the portfolio and on our proposals for capital returns and the next phase of the Group's business in the near future.

Phil Wrigley

Chairman

18 December 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 Group's financial statements for the year ended 30 September 2014.

Investment portfolio

Planning consents

In the period since announcement of the results for the year to 30 September 2013 (on 4 December 2013) the Group has received planning permissions at Ayr, Sutton, Stafford Leisure and Banbury Gateway as well as additional consent at Greenwich Brocklebank and additional mezzanine consent at Stafford Kingsmead. Furthermore, the judicial review at Banbury Gateway was quashed and in June 2014, the Secretary of State granted permission for the retail and leisure investment at Rushden Lakes. The Group has now achieved the planning consent it sought at each of its key locations other than Truro which is discussed further below.

This progress on planning consents and resolutions to grant planning consents means that since the IPO in October 2009 the Group has secured approximately 2.64m sq ft of new permissions, including consents for properties which had been sold prior to the balance sheet date. The planning consents position for the Group's assets still owned at the balance sheet date is as follows:

Retail

Retail

Other

Other

Ground

Mezzanine

Ground

Mezzanine

Total

Site

Sq ft

Sq ft

Sq ft

Sq ft

Sq ft

Ayr foodstore*

111,989

-

31,757

-

143,746

Banbury Gateway**

147,627

124,762

11,482

1,453

285,324

Biggleswade London Road

249,632

114,978

-

-

364,610

Gloucester Phase 2

-

-

158,742

-

158,742

Greenwich Brocklebank

76,564

83,792

-

-

160,356

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

10,641

-

-

88,343

Stafford Riverside & Leisure

122,669

128,860

18,000

-

269,529

Sutton***

99,044

31,146

20,762

-

150,952

1,220,134

639,276

315,011

30,786

2,205,207

* Consent also includes a neighbourhood centre, 750 houses and a 60 bed hotel

** Sold since the balance sheet date

*** Consent also includes 186 residential units

In addition, the Group has one application pending as follows:

Retail

Retail

Other

Other

Ground

Mezzanine

Ground

Mezzanine

Total

Site

Sq ft

Sq ft

Sq ft

Sq ft

Sq ft

Truro Threemilestone*

111,985

-

31,757

-

143,742

* Application includes 435 houses

Agreements for lease

In the following section the Group classes the space on its schemes as let or 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 pre-lets to certain other occupiers or pre-letting 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 is actively engaged in detailed discussions but has not yet appointed solicitors that unit is regarded as "under offer". Of course, there is no certainty that all of those discussions will result in a pre-let.

The agreements for lease signed and the leases completed correspond to total rental income of £18.35m per annum. The Group anticipates further lettings in the near future and is currently in solicitors' hands to let a further 119,985 sq ft of ground floor space plus associated mezzanines which equates to further rental income of £3.26m per annum. Aggregate annual rent on units currently under offer is in excess of £0.52m.

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

Agreement for

lease signed or

In solicitors'

Under

lease completed

hands

offer

Site

Sq ft

Sq ft

Sq ft

Ayr foodstore

98,596

-

-

Banbury Gateway

137,458

1,200

1,708

Biggleswade London Road

153,124

31,500

22,000

Gloucester Phase 2

1,851

-

-

Greenwich Brocklebank

16,000

47,150

-

Rushden Lakes

32,000

10,000

-

Sheppey Phase 2

46,784

15,000

-

Stafford Riverside

86,004

4,600

-

Stafford Kingsmead

86,193

-

-

Stafford Leisure

-

10,535

-

Sutton

93,055

-

-

Truro Threemilestone

78,100

-

-

829,165

119,985

23,708

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

WALT

Ayr foodstore

25.00

Banbury Gateway

14.92

Biggleswade London Road

11.88

Gloucester Phase 2

15.00

Greenwich Brocklebank

15.00

Rushden Lakes

15.74

Sheppey Phase 2

11.09

Stafford Riverside

12.61

Stafford Kingsmead

18.89

Stafford Leisure

15.00

Sutton

25.00

Truro Threemilestone

25.00

Property details

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

Ayr

Having secured approval "in principle" for a 101,000 sq ft foodstore, 750 houses, a primary school and a neighbourhood centre, the two major areas of activity in recent months have been on agreeing the detailed terms of the Section 75 planning agreement and submitting the Section 42 planning application to revise the Sainsbury's floor space condition. The Group hopes to submit detailed plans early in 2015 for the first infrastructure works and expects to be in a position to start work on site in June 2015.

Banbury Gateway

The Crown Estate contracted to acquire this investment and fund the construction programme once a number of planning and letting related conditions were satisfied. These conditions were satisfied during October 2014 and initial cash proceeds of £42m were received. Under the terms of the agreement with The Crown Estate, the Group is responsible for overseeing the development and for letting the remaining space. Construction works have started and practical completion is expected in the third quarter of 2015.

Biggleswade

On 13 September 2014, the Secretary of State for Communities and Local Government upheld the finding of the July 2014 public inquiry that the Compulsory Purchase Orders for any of the existing tenants should proceed. This decision removed a major uncertainty regarding delivery of the whole scheme.

Construction of Phase 1 of this three phase project is now well advanced with Practical Completion of Phase 1 anticipated in March 2015. This involves constructing seven units in the main retail park and the three unit terrace (Plot S) which stands opposite the main retail park. Agreements for lease for 70,264 sq ft of ground floor retail space have been signed and potential lettings of 16,500 sq ft of ground floor retail space are in solicitors' hands. If the potential lettings in solicitors' hands result in signed pre-let agreements then 100% of Phase 1 will be pre-let.

Phase 2 will commence once the existing tenants who have agreed to take units on Phase 1 have relocated into their new stores. Phase 2 comprises 55,000 sq ft of ground floor retail space of which 40,000 sq ft is pre-let and 15,000 sq ft is in solicitors' hands. There is good interest in the remaining 35,500 sq ft of ground floor space which is available to let on Phase 3. The current intention is to build Phase 2 and Phase 3 at the same time and thus, final completion of the entire scheme has been brought forward to March 2016.

Gloucester

The sale of part of the site to Rygor Mercedes Commercial Vehicles for £1.25m completed on 20 November 2014.

Tenders have been received for the construction of the Costa drive thru and the two adjacent fast food units. The development of this phase of the investment requires a variation to the planning permission, a decision on which is expected in January 2015. Assuming the planning variation is forthcoming, site works are expected to commence shortly thereafter.

The Group has received a couple of conditional offers for the majority of the remaining land, both of which require a variation to the existing planning consent. If these offers progress, the Group will update Shareholders in due course.

Greenwich Brocklebank

The 160,000 sq ft (76,000 sq ft on ground floor) retail development at Greenwich Brocklebank continues to make progress. The Section 106 agreement was concluded in September 2014 and terms have now been agreed with all the existing tenants of Brocklebank Industrial Estate to ensure that vacant possession will be available by the end of 2014. Work on site is expected to start in March 2015 with practical completion expected to occur by January 2016.

Two pre-lets are in solicitors' hands, for a total of 47,150 sq ft of ground floor space and it is hoped these will be signed shortly. Once these pre-lets are concluded, alongside Next's 38,500 sq ft three storey unit (16,000 sq ft on ground floor), 83% of the ground floor space will be pre-let at this location.

Rushden

As explained in the Chairman's Statement, the Group has been refining its thoughts on how to maximise this investment's significant potential over recent months.

On 4 August 2014, after a lengthy and thorough review process, the planning permission for this 494,329 sq ft investment was confirmed and is beyond challenge. This has stimulated significant interest from potential occupiers seeking a presence at Rushden Lakes and the Group is now in discussion with a substantial number of retailers to take space alongside M&S's 60,000 sq ft (30,000 sq ft on ground floor) unit. Rushden Lakes has the potential to be one of the UK's foremost retail and leisure destinations.

Preparatory site clearance work started in September 2014.

Sheppey

The building works on the north terrace of Phase 2 completed in August 2014. B&M have signed their 15 year lease on a unit of 22,000 sq ft and Iceland have also signed their lease for 7,500 sq ft. These lettings mean 29,500 sq ft of the 34,500 sq ft of retail warehousing on the Phase 2a terrace is occupied.

The building works on the west terrace of Phase 2 completed in October 2014. Poundland have signed their 10 year lease on a unit of 7,500 sq ft. A further 10,000 sq ft is pre-let to Sports Direct and this lease is anticipated to complete shortly. Heads of terms have been agreed with a supermarket operator to take a 25 year lease on a unit of 15,000 sq ft. This would be conditional on a variation to the planning permission which is expected shortly.

A further planning application has been submitted to replace the planning permission on Phase 3, which is the east side of the site, and a decision is expected in the next few months. It currently has permission for mainly employment use and consent is being sought for a combination of A1 and A3 use and a pub/restaurant.

Stafford

At Riverside, enabling works have started and the scheme is 83% pre-let by ground floor sq ft with a further two units in solicitors' hands and discussions continuing with a number of other retailers to take the remaining space. The bank facility supporting the development was signed in December 2014.

At Bridge Street, construction of the new multi-storey car park adjacent to Riverside has commenced and pre-letting negotiations are advanced in respect of several potential restaurants. Planning permission was granted in October 2014 for the cinema adjoining the multi-storey car park and discussions with potential operators continue.

At Kingsmead, initial demolition and enabling works have been undertaken and construction of the foodstore which is pre-let to Morrisons is due to start early in 2015. The two adjacent retail units were pre-let to B&M and Just For Pets in spring and summer 2014. This investment is now fully pre-let. The bank facility supporting the development was signed in November 2014.

Sutton

In December 2014, the Group acquired the SGN land, the final major parcel of land required to deliver this investment which will include a Sainsbury's foodstore, 27,500 sq ft of other retail and 186 apartments. Also in December, the five month programme of ground works and remediation commenced on site. The construction of the foodstore will commence on completion of these works with practical completion expected in spring 2016.

The Group announced on 25 September 2014 that an offer from a housebuilder to acquire the residential element of this investment had been accepted. The contract discussions are at an advanced stage.

Truro Threemilestone

Planning permission for the development on the western side of Truro, which includes a 78,000 sq ft ASDA foodstore and 435 houses was recommended for approval by planning officers, but planning committee members deferred making a decision on 26 September 2014 to enable a competing scheme to be considered at the same time. Due to the uncertainty as to when this would be, the Group lodged an appeal against the non-determination of its application. A planning inquiry is expected to be held in the summer of 2015, however the Group has also submitted a duplicate planning application to enable a local decision to be made, should this be possible, prior to the appeal being determined. It is currently due to be determined in March 2015. ASDA has exchanged a long term contract to occupy the foodstore and has confirmed that they would not consider the alternative sites being promoted.

Truro Higher Newham

The Group's Living Villages project at Higher Newham Farm has seen significant progress over the summer. A public consultation event was held, receiving an overwhelmingly positive response, and dialogue has continued with the local authority, Truro City Council and community interest groups. The feedback from the consultation process was reflected in the outline planning application which was submitted to Cornwall County Council in August 2014. The application includes the provision of 155 new homes; a community hub; a restaurant and cookery school to be operated by Cornwall Food Foundation; and a community farm and educational facility which will be run by Duchy College. The application will go before the Strategic Planning Committee of Cornwall Council in December 2014 with an officers' recommendation for approval.

Revaluation surplus

As described in note 10 to the Group Financial Statements the investment properties held by the Group at 30 September 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 £245.5m resulting in a revaluation surplus for the year of £38.45m.

Accounting treatment of forward funded construction activities

Under the terms of the sale of the Sainsbury's/M&S investment at Greenwich, 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. As explained in the Group's Interim Report, 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 Annual Report.

Cash position and future expenditure

During the year to 30 September 2014, £59.1m of cash has been deployed in the purchase of and capital expenditure on investment properties.

At the balance sheet date the Group had £7.7m of cash and other liquid resources and this is all allocated to existing projects or pipeline opportunities.

The Group signed development facilities totalling £51.85m with RBS in respect of the Stafford Kingsmead and Stafford Riverside projects in November and December respectively. The Group continues to maintain regular dialogue with a range of banks and 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 portfolio.

Tim Walton

On behalf of LXB Adviser LLP

18 December 2014

Group Income Statement

for the year ended 30 September 2014

Year ended

30 September

2014

Year ended

30 September

2013

Note

£

£

Gross revenue

4

15,805,259

4,421,702

Direct costs

4

(14,124,567)

(1,555,685)

Net revenue and gross profit

1,680,692

2,866,017

Administrative expenses:

Corporate administrative expenses

(5,253,075)

(6,254,970)

Cost of property activities

(41,708)

(107,995)

Total administrative expenses

(5,294,783)

(6,362,965)

Investment property revaluation surplus

10

38,449,077

16,843,204

Profit on sale of investment properties

1,217,241

839,886

Other income

240,181

327,949

Operating profit

5

36,292,408

14,514,091

Finance income

7

767,229

1,185,830

Finance costs:

Reclassification of cumulative changes in fair

value of derivative financial instruments on

revocation of a hedge accounting relationship

16a

-

(2,649,103)

Other finance costs

7

(834,010)

(1,794,585)

Total finance costs

7

(834,010)

(4,443,688)

Profit before tax

36,225,627

11,256,233

Taxation charge

8

(98,209)

(202,471)

Profit for the year

36,127,418

11,053,762

Earnings per share

Pence

per share

Pence

per share

Basic and diluted

9

18.94

4.64

All amounts relate to continuing activities.

Group Statement of Comprehensive Income

for the year ended 30 September 2014

Year ended

30 September

2014

Year ended

30 September

2013

Note

£

£

Profit for the year

36,127,418

11,053,762

Cash flow hedges:

Market value adjustment of interest rate derivatives,

recognised directly in equity

7

52,152

210,770

Reclassification to profit and loss:

- on revocation of a hedge accounting relationship

7

-

2,649,103

- on partial cancellation of an effective hedge

7

29,318

308,900

Hedging reserve recycling adjustment

7

(63,582)

(63,233)

Tax effect of interest rate derivative valuation adjustment

8

(7,644)

(91,288)

Other items:

Gains and losses arising on current asset

investments that are measured at fair value

7

-

46,521

Reclassification to profit and loss on

disposal of current asset investments

7

-

(181,306)

Total comprehensive income for the year, net of tax

36,137,662

13,933,229

There are no items in the current or prior year that will never be reclassified to profit or loss.

Group Statement of Changes in Equity

for the year ended 30 September 2014

Year ended 30 September 2014

Stated

capital

Hedging

reserve

Retained earnings

Total

£

£

£

£

At 1 October 2013

212,601,278

(10,244)

37,829,297

250,420,331

Profit for the year

-

-

36,127,418

36,127,418

Own shares purchased for cancellation inclusive of costs

(39,946,819)

-

-

(39,946,819)

Reclassification of the attributed retained earnings

element of share buybacks undertaken

to date (see note 17)

10,951,754

-

(10,951,754)

-

Reclassification to profit and loss on partial cancellation

of an effective hedge

-

29,318

-

29,318

Market value adjustment of interest rate derivatives

-

52,152

-

52,152

Hedging reserve recycling adjustment

-

(63,582)

-

(63,582)

Tax effect of interest rate derivative valuation

adjustment

-

(7,644)

-

(7,644)

At 30 September 2014

183,606,213

-

63,004,961

246,611,174

Year ended 30 September 2013

Stated

capital

Hedging

reserve

Other

reserve

Retained earnings

Total

£

£

£

£

£

At 1 October 2012

257,501,358

(3,024,496)

134,785

26,775,535

281,387,182

Profit for the year

-

-

-

11,053,762

11,053,762

Own shares purchased for

cancellation inclusive of costs

(44,900,080)

-

-

-

(44,900,080)

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)

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

-

308,900

-

-

308,900

Market value adjustment of

interest rate derivatives

-

210,770

-

-

210,770

Hedging reserve recycling

adjustment

-

(63,233)

-

-

(63,233)

Tax effect of interest rate

derivative valuation adjustment

-

(91,288)

-

-

(91,288)

At 30 September 2013

212,601,278

(10,244)

-

37,829,297

250,420,331

Group Balance Sheet

at 30 September 2014

As at

30 September

2014

As at

30 September

2013

Note

£

£

Non-current assets

Investment properties

10

245,515,000

215,285,000

Deferred tax asset

8

-

44,511

245,515,000

215,329,511

Current assets

Business and other receivables

11

12,976,701

41,581,881

Cash and cash equivalents

12

7,702,578

20,046,784

20,679,279

61,628,665

Total assets

266,194,279

276,958,176

Current liabilities

Business and other payables

13

(14,632,950)

(5,111,332)

Income tax creditor

-

(187,667)

Borrowings

14

-

(12,700,002)

Derivative financial liabilities

16

(450,155)

(607,735)

(15,083,105)

(18,606,736)

Non-current liabilities

Borrowings

15

(4,500,000)

(7,510,753)

Derivative financial liabilities

16

-

(420,356)

(4,500,000)

(7,931,109)

Total liabilities

(19,583,105)

(26,537,845)

Net assets

246,611,174

250,420,331

Equity

Stated capital

17

183,606,213

212,601,278

Hedging reserve

-

(10,244)

Retained earnings

63,004,961

37,829,297

Total equity

246,611,174

250,420,331

Net asset value per share

Pence

per share

Pence

per share

Basic and diluted

19

134.30

115.93

Adjusted (EPRA)

19

134.54

116.38

Group Cash Flow Statement

for the year ended 30 September 2014

Year ended

30 September

2014

Year ended

30 September

2013

Note

£

£

Cash flows from operating activities

Profit before tax

36,225,627

11,256,233

Adjustments for non-cash items:

Investment property revaluation surplus

10

(38,449,077)

(16,843,204)

Profit on sale of investment properties

(1,217,241)

(839,886)

Net finance costs

7

66,781

3,257,858

Cash flows from operating activities before

changes in working capital

(3,373,910)

(3,168,999)

Change in business and other receivables

(2,204,269)

776,802

Change in business and other payables

1,020,617

(543,124)

Taxation paid

(301,012)

(390,757)

Cash flows from operating activities

(4,858,574)

(3,326,078)

Investing activities:

Interest received

281,763

303,427

Purchase of and capital expenditure on investment properties

(59,093,561)

(40,770,459)

Proceeds on disposal of investment properties

107,653,382

45,402,029

Proceeds received on disposal of current asset investments

-

34,981,310

Cash flows from investing activities

48,841,584

39,916,307

Financing activities:

Own shares purchased for cancellation

(39,797,835)

(44,765,773)

Costs associated with own shares purchased

(148,984)

(134,307)

Bank borrowings drawn

-

23,574,979

Bank borrowings repaid

(15,750,000)

(29,274,977)

Collateral advanced to hedging counterparty

-

(365,000)

Collateral repaid from hedging counterparty

428,044

1,792,671

Finance costs paid

(1,058,441)

(2,529,134)

Cash flows from financing activities

(56,327,216)

(51,701,541)

Net decrease in cash and cash equivalents

(12,344,206)

(15,111,312)

Cash and cash equivalents at the beginning of the year

20,046,784

35,158,096

Cash and cash equivalents at the end of the year

7,702,578

20,046,784

Notes to the Preliminary Announcement

The financial information set out in this preliminary announcement, which has been approved by the Board, does not constitute the Group's statutory financial statements for the year ended 30 September 2014 ("the 2014 accounts") or for the year ended 30 September 2013 ("the 2013 accounts"), but is derived from those audited statutory financial statements.

The 2014 accounts, included within the Company's Annual Report for the year ended 30 September 2014, have been prepared in accordance with International Financial Reporting Standards adopted for use in the European Union. The auditors have reported on the 2014 accounts and their report was unqualified and did not draw attention to any matters by way of emphasis. The 2014 accounts will be available from the Company's website today.

The 2013 accounts, which also included an unqualified audit report, have been filed with the Registrar of Companies in Jersey.

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.

The financial information set out in this report covers the year to 30 September 2014 with comparative amounts relating to the year to 30 September 2013.

The Group Financial Statements include 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 Group can be found on its website: www.lxbretailproperties.com.

2. Accounting policies

Statement of compliance

The Group Financial Statements have been prepared in accordance with the International Financial Reporting Standards ('IFRS') adopted for use in the European Union.

Basis of preparation

The financial statements have been prepared on a going concern basis and are presented in pounds sterling.

The financial statements have been prepared on the historical cost basis except that investment properties (defined below), investments and derivative financial instruments are stated at fair value.

The accounting policies have been applied consistently to the results, other gains and losses, assets, liabilities and cash flows of entities included in the consolidated financial statements.

Any revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period. If the revision affects both current and future periods, the change is recognised over these periods.

The preparation of financial statements often requires the Directors to make judgements, estimates and assumptions that may affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. However, the nature and scale of the Group's business in the period since listing has meant that there has been a limited requirement for the Directors to make such judgements or estimates to date. For example, the single most significant line item in the financial statements, "Investment Properties" (comprising completed investment properties and development properties held for investment) have been supported by external valuations. Details of the overall approach to the valuation of these assets are set out in note 10. Similarly, the values of derivative financial instruments have been independently assessed on the basis of market rates as at the balance sheet date. Details of the current status of the Group's carried interest arrangements are set out in note 20 and show that no judgements or estimates have been required to be made in this area to date.

The Group's accounting policies for these matters together with other policies material to the Group, are set out below.

Adoption of new and revised standards

During the year the Group has adopted the amendments to IAS 1 "Presentation of Items of Other Comprehensive Income" and IFRS 13 "Fair Value Measurement". The amendments to IAS 1 require items of comprehensive income to be grouped by those items that will be reclassified subsequently to profit and loss and those that will never be reclassified, as well as their associated income tax. IFRS 13 impacts the disclosure and measurement of certain balances held at fair value, as set out in relation to investment properties in note 10 and financial instruments in note 16, but its adoption has not had any material impact on the carrying value of balances contained within these financial statements.

No other new standards or interpretations issued by the International Accounting Standards Board (IASB) or the IFRS Interpretations Committee (IFRIC) have led to any material changes in the Group's accounting policies or disclosures during the year.

Standards and interpretations in issue not yet adopted

The IASB have issued or amended the following standards and interpretations that are mandatory for later accounting periods and which are or may be relevant to the Group and have not been adopted early. These are:

Effective under IFRS (EU)

Standard

Subject matter

for periods commencing

IFRS 10/IAS 27

Consolidated and separate financial statements

1 January 2014

IFRS 12

Disclosures of interests in other entities

1 January 2014

IFRS 11/IAS 28

Joint arrangements

1 January 2014

IFRS 15*

Revenue from contracts with customers

1 January 2017

IFRS 9*

Financial instruments

1 January 2018

*subject to EU endorsement

The Directors do not anticipate that the adoption of these standards and interpretations will have a material impact on the Group's financial statements in the period of initial application, other than on presentation and disclosure.

Basis of consolidation

Subsidiaries

Subsidiaries are those entities controlled by the Group. Control is assumed when the Group has the power (directly or indirectly) to govern the financial and operating policies of an entity, or business, to benefit from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Property portfolio

Investment properties

Investment properties are properties owned or held leasehold by the Group which are held for capital appreciation, rental income or both. Investment properties include property that is being constructed, developed or redeveloped for future use as an investment property. Investment properties are initially recorded at cost, including related transaction costs. They are subsequently carried at each published balance sheet date at fair value as determined by professionally qualified independent external valuers.

The determination of the fair value of each property requires, to the extent applicable, the use of estimates and assumptions in relation to factors such as future rental income, current market rental yields, future development costs and the appropriate discount rate. In addition, to the extent possible, the valuers make reference to market evidence of transaction prices for similar properties.

Gains or losses arising from changes in the fair value of investment properties are recognised in the income statement in the period in which they arise.

In accordance with IAS 40 "Investment Property", no depreciation is provided in respect of investment properties.

Investment property is recognised as an asset when:

• it is probable that the future economic benefits that are associated with the investment property will flow to the Group;

• there are no material conditions precedent which could prevent completion; and

• the cost of the investment property can be measured reliably.

All costs directly associated with the purchase of an investment property are capitalised. Capital expenditure that is directly attributable to the redevelopment or refurbishment of investment property, up to the point of it being completed for its intended use, is capitalised in the carrying value of the property.

Acquisitions and disposals of investment properties are usually recognised when unconditional exchange of legally binding and irrevocable contracts occurs and where it is reasonable to assume at the balance sheet date that completion of the acquisition or disposal will occur.

Occupational leases

The Board considers the potential transfer of the risks and rewards of ownership in accordance with IAS 17 "Leases", for all investment properties that are leased to tenants by the Group and determines whether such leases are operating leases or finance leases. Where the Group substantially retains all the risks and rewards of ownership the lease is classified as an operating lease. In the event that substantially all of the risks and rewards of ownership are transferred to the lessee under the terms of a lease then such a lease would be classified as a finance lease. All tenant leases that have been entered into by the Group to date have met the criteria for classification as operating leases.

Net rental income

Rental income from investment properties leased out under operating leases is recognised in the income statement on a straight-line basis over the lease term.

Contingent rents, such as turnover rents, rent reviews, and indexation, are recorded as income in the periods in which they are earned. Rent reviews are recognised when such reviews have been agreed with tenants.

Rent free periods, other lease incentives and any costs associated with entering into tenant leases are amortised evenly over the period from lease commencement to the first break option or, if the probability that the break option will be exercised is considered sufficiently low, over the full lease term.

Rental income from fixed and minimum guaranteed rent reviews is recognised on a straight-line basis over the shorter of the entire lease term or the period to the first tenant break option.

Where such income or costs are recognised ahead of the related cash flow, an adjustment is made to ensure the carrying value of the related investment property including the accrued rent does not exceed the external valuation.

Property operating expenses are expensed as incurred and any property operating expenditure not recovered from tenants through service charges is charged to the income statement.

Revenue derived from an Institutional Funding Agreement

Where the Group remains responsible for overseeing the development of incomplete investment properties that have been sold to third parties who have contracted to fund the construction works, the revenue which arises from such arrangements is recognised in the income statement over the course of the development work through to the time of practical completion.

Profits on sale of investment properties

Profits on the sale of investment properties are calculated by reference to the fair value at the time that ownership of the properties has passed to the buyer, usually being when legally binding contracts that are irrevocable and effectively unconditional are exchanged.

Financial instruments

Financial assets and liabilities are recognised in the balance sheet when a member of the Group becomes a party to the contractual terms of the relevant instrument. Unless otherwise indicated, the carrying values of the Group's financial assets and liabilities are a reasonable estimate of their fair values.

Business receivables and payables

Business receivables and payables are initially measured at fair value, subsequently measured at amortised cost and, where material, discounted to reflect the time value of money. If there is objective evidence that the recoverability of an asset is at risk, appropriate allowances for any estimated irrecoverable amounts are recognised in the income statement.

Financial instruments

Cash and cash equivalents

Cash and cash equivalents comprise cash in hand, deposits held at call with banks and financial institutions and other highly liquid investments with original maturities of three months or less.

Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Finance income

Finance income includes interest receivable on funds invested.

Borrowings and finance charges

Borrowings are initially recognised at their fair value, net of any transaction costs directly attributable to their issue. Subsequently, loans are carried at their amortised value using the 'effective interest method', which spreads the interest expense over the period to maturity at a constant rate on the balance of the liability carried in the balance sheet for the relevant period.

Finance charges are accounted for on an accruals basis using the effective interest method and are added to or offset against the carrying amount of the loan instrument to the extent that they are not settled in the period in which they arise.

Derivative financial instruments

Derivative financial instruments are used to minimise the exposure of the Group to cash flow risks arising from interest rate fluctuations. Derivatives are initially recognised at fair value on the date on which the derivative contract is entered into. Derivatives are re-measured to fair value at each published balance sheet date.

Derivatives are classified either as derivatives in effective hedges or held for trading. When hedges are 'highly effective' within the meaning of IAS 39 and the other criteria necessary for applying hedge accounting are met, the Group may elect to apply hedge accounting. Such hedges are assessed on an ongoing basis to ensure they remain effective.

The gains or losses arising on the re-measurement to fair value of the portion of derivative financial instruments that qualify as effective hedges of cash flow interest rate risk are recognised directly in other comprehensive income and accumulated in the hedging reserve. If hedges are no longer expected to remain effective as a result of forecast transactions no longer being expected to occur, then hedge accounting in respect of the relevant designated hedging relationship is revoked. Any amounts previously accumulated in the hedging reserve in respect of the relevant financial instrument are reclassified immediately from other comprehensive income to the income statement.

The gains or losses on the re-measurement to fair value of the portion of derivative financial instruments deemed as ineffective are recognised in the income statement.

Provisions

A provision is recognised when a legal or constructive obligation exists as a result of an event that has occurred prior to the balance sheet date and where it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions will be measured at the Board's best estimate of the expenditure required to settle that obligation as at the balance sheet date, and will be discounted to present value if the effect is material.

Distributions

Distributions on equity shares are recognised when they become legally payable.

Management fees and incentive arrangement payments

Management fees and incentive arrangement payments are recognised in the income statement in the period to which they relate. Any amounts relating to incentive arrangements that have been earned and are reasonably likely to become payable in the future will be provided for in the financial statements and balances will be discounted to reflect the deferred nature of the payment.

Tax

Tax is included in the income statement except to the extent that it relates to items recognised directly in equity, in which case the related tax is recognised in other comprehensive income.

Current tax is the expected tax payable on taxable income for the reporting period, using tax rates enacted or substantively enacted at the balance sheet date, together with any adjustment in respect of previous periods.

Deferred tax is provided for using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. If applicable to any financial period, the tax effect of the following differences will not be provided for:

• the initial recognition of goodwill;

• the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit; and

• investments in subsidiaries, associates and jointly controlled entities where the Group is expected to be able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.

3. Segmental information

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

The Board, which is considered to be the chief operating decision maker of the Group for IFRS 8 purposes, receives quarterly management accounts that are prepared on an IFRS (EU) basis and which aggregate the performance of all the Group's investment properties and focus on total returns on Shareholders' equity.

For the year ended 30 September 2014, 23% of the Group's gross rental income was receivable from one tenant (year ended 30 September 2013: 24%).

4. Gross revenue and direct costs

Gross revenue:

Year ended

30 September

2014

Year ended

30 September

2013

£

£

Gross rental income

2,182,909

4,421,702

Revenue derived from Institutional Funding Agreement

13,622,350

-

15,805,259

4,421,702

Direct costs:

Year ended

30 September

2014

Year ended

30 September

2013

£

£

Property outgoings

588,661

1,555,685

Costs associated with Institutional Funding Agreement

13,535,906

-

14,124,567

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 year.

5. Operating profit

Year ended

Year ended

30 September

30 September

2014

2013

£

£

Operating profit is stated after charging:

Investment Manager's fees

3,952,858

4,793,208

Directors' fees

305,000

305,000

Auditors' remuneration:

Audit services:

-audit of the Group and Company Financial Statements

82,000

78,250

-audit of a subsidiary undertaking

10,000

9,750

Audit related assurance services:

-review of the Group's Interim Report

22,500

26,000

Other non-audit services:

-total fees for other non-audit services

1,500

27,800

Included in the auditors' remuneration expensed in the income statement for other non-audit services was £1,500 (30 September 2013: £nil) for reviews of certain internal controls and processes.

The Group has no employees.

Fees payable to the Directors in the year were as follows:

Year ended

Year ended

30 September

30 September

2014

2013

£

£

Phil Wrigley

85,000

85,000

Steve Webb

50,000

50,000

Danny Kitchen

60,000

60,000

Alastair Irvine

50,000

50,000

George Baird

60,000

60,000

Total charged to the income statement

305,000

305,000

6. Operating leases

The Group enters into operating leases with tenants on its investment properties.

Future minimum rents receivable under non-cancellable operating leases as at 30 September 2014 are set out in the table below. The rents receivable shown in the table are calculated on the assumption that any tenant with a break option chooses to exercise that option.

Leases are generally for fixed terms of between 5 and 15 years and include periodic rent reviews and may include tenant and/or landlord break options.

There was no contingent rental income in the year (2013: £nil).

As at

As at

30 September

30 September

2014

2013

£

£

Minimum rents receivable:

- within one year

2,043,928

2,298,014

- in two to five years

6,131,786

8,335,714

- in more than five years

10,945,659

12,491,706

19,121,373

23,125,434

7. Finance income and costs

Year ended

Year ended

30 September

30 September

Recognised in the income statement:

2014

2013

£

£

Finance income:

Interest on cash deposits

270,763

297,263

Increase in fair value of the ineffective element of

derivative financial instruments

496,466

690,097

Gains arising on the disposal of current asset investments:

- amounts recognised in the current year

-

63,685

- reclassification of cumulative changes in fair value,

previously recognised in other comprehensive income

-

134,785

Total finance income in the income statement

767,229

1,185,830

Other finance costs:

Bank interest

(829,162)

(1,182,912)

Amortisation of capitalised finance costs

(39,112)

(366,006)

Reclassification from equity on partial cancellation of

an effective hedge

(29,318)

(308,900)

Hedging reserve recycling

63,582

63,233

(834,010)

(1,794,585)

Reclassification of cumulative changes in fair value of

derivative financial instruments on revocation of a

hedge accounting relationship

-

(2,649,103)

Total finance costs recognised in the income statement

(834,010)

(4,443,688)

Net finance costs recognised in the income statement

(66,781)

(3,257,858)

Year ended

Year ended

Recognised in other comprehensive income:

30 September

30 September

2014

2013

£

£

Movements in current asset investments:

Gains and losses arising on current asset investments that

are measured at fair value

-

46,521

Reclassification to profit and loss on disposal of current

asset investments

-

(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

52,152

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

Hedging reserve recycling

(63,582)

(63,233)

Net finance income/(costs) recognised in other

comprehensive income

17,888

(2,970,755)

Net finance costs recognised in the income statement analysed by the categories of financial assets and liabilities shown in note 16b are as follows:

Year ended

Year ended

30 September

30 September

2014

2013

£

£

Cash and cash equivalents and current

asset investments

270,763

495,733

Bank loans (secured)

(868,274)

(1,548,918)

Derivative financial instruments

530,730

(2,204,673)

(66,781)

(3,257,858)

Sensitivity to changes in interest rates:

Movements in LIBOR impact the valuation of the Group's hedging instruments and the returns on its cash deposits and current asset investments. Increases in LIBOR impact positively on the valuation of effective hedging instruments and returns on current asset investments in the statement of comprehensive income, and on the interest receivable and valuation of ineffective hedging instruments in the income statement. A 1% increase or decrease in LIBOR would have the following maximum effects on the Group's results:

Year ended

Year ended

30 September

30 September

2014

2013

£

£

Effect on profit before tax

491,393

1,420,821

Effect on other comprehensive income

15,022

100,383

Effect on equity

506,415

1,521,204

The average interest rate incurred by the Group on its bank borrowings for the year ended 30 September 2014, including the effects of hedging instruments and the lender's margin but excluding amortisation of capitalised finance costs was 3.5% (30 September 2013: 3.9%).

Further information about the derivative financial instruments, including details of their valuations at each balance sheet date is included in note 16.

8. Taxation

Year ended

Year ended

30 September

30 September

2014

2013

£

£

The tax charge for the year recognised

in the income statement comprises:

Current tax on results for the year

61,342

215,120

Change in deferred tax in the year

36,867

(12,649)

98,209

202,471

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

Year ended

30 September

2014

Year ended

30 September

2013

£

£

Profit before tax

36,225,627

11,256,233

Profit before tax at the standard rate of income tax in the UK of 20%

7,245,125

2,251,247

Items not subject to UK income tax:

Expenses

1,075,648

1,207,670

Reclassified and other changes in fair value of derivatives

(123,445)

428,286

Investment property revaluation surplus

(7,689,815)

(3,368,641)

Capital surplus on disposal of investment properties

(243,488)

(167,977)

Accrued and other income

(76,544)

(107,879)

Deduction for allowable financing costs

(156,858)

(48,856)

Other amounts:

Capital allowances claimed

(235,000)

(102,244)

Losses carried forward

302,586

110,865

Tax charge for the period recognised in

the income statement

98,209

202,471

The Group has revenue related losses of £3,180,681 (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%.

Year ended

Year ended

30 September

30 September

Deferred tax asset

2014

2013

£

£

At the start of the year

44,511

123,150

Tax on interest rate derivative market value adjustment charged to

other comprehensive income

(7,644)

(91,288)

Tax on interest rate derivative market value adjustment

(charged)/credited to the income statement

(36,867)

12,649

At the end of the year

-

44,511

9. Earnings per share

Earnings per share is calculated on a weighted average of 190,771,677 (30 September 2013: 238,189,650) ordinary shares in issue for the year and is based on earnings attributable to Shareholders for the year of £36,127,418 (30 September 2013: 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:

Year ended

30 September 2014

Year ended

30 September 2013

£

Pence per share

£

Pence per share

Basic earnings

36,127,418

18.94

11,053,762

4.64

Adjustments:

Investment property revaluation movements

(38,449,077)

(20.15)

(16,843,204)

(7.07)

Profit on sale of investment

properties

(1,217,241)

(0.64)

(839,886)

(0.35)

Market value adjustments:

- of interest rate derivatives, net of tax

(523,181)

(0.27)

(765,979)

(0.32)

- of interest rate derivatives reclassified to

profit and loss

29,318

0.02

2,958,003

1.24

EPRA loss

(4,032,763)

(2.10)

(4,437,304)

(1.86)

10. Investment properties

£

Carrying value as at 30 September 2013

215,285,000

Additions

65,147,023

Transfers from current assets

306,020

Disposals

(73,672,120)

Revaluation surplus

38,449,077

Carrying value as at 30 September 2014

245,515,000

Movements in the prior year were as follows:

£

Carrying value as at 30 September 2012

244,893,352

Additions

31,795,283

Transfers from current assets

329,325

Disposals

(78,576,164)

Revaluation surplus

16,843,204

Carrying value as at 30 September 2013

215,285,000

At 30 September 2014, 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 30 September 2014 is £245,515,000 (30 September 2013: £215,285,000).

The external valuers' valuation was undertaken in accordance with the Royal Institution of Chartered Surveyors' Valuation Standards Professional Standards (January 2014) on the basis of fair value. Fair value is defined in IFRS 13 as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date.

The Board determines the Group's valuation policies and procedures and is responsible for appointing the Group's independent external valuer. The Audit Committee considers the valuation process as part of its overall responsibilities.

The fair value of completed investment properties is determined using the 'investment method' whereby capitalisation yields derived from market transactions involving comparable investment properties are applied to the estimated net current and future cash flows expected to be generated by the investment property, which the valuer calculates using comparable market information, to obtain a market rent. The fair value of an investment property undergoing development is derived using the 'residual method' whereby the costs required to complete the development, including a notional cost of finance and an estimated risk factor or "profit on cost", are deducted from the net development value arrived at under the 'investment method'.

As part of each half-yearly valuation exercise, the valuations performed by the external valuers are reviewed by appropriately qualified members of the Investment Manager's team. This includes discussion of the assumptions used and judgements made by the external valuers as well as detailed consideration of the resulting valuations. Discussion of the valuation process and results then takes place at a meeting between the external valuers and the auditors at which the key assumptions and estimates are reviewed together with consideration of the valuers' reasons for significant valuation movements on individual properties. The reasons for significant revaluation movements attributable to individual properties are explained in the auditor's report to the Audit Committee.

The key unobservable inputs used in the valuation of the Group's investment properties at 30 September 2014 are as follows:

ERV per square foot (£)

Equivalent yield (%)

Investment property type

Fair

value

Valuation method

Min

Max

Weighted average

Min

Max

Weighted average

Completed

19,850,000

Investment

10.0

15.5

11.7

5.2

6.3

6.1

Development

216,290,000

Residual

10.0

50.0

23.9

4.4

10.0

5.1

Other*

9,375,000

n/a

n/a

n/a

n/a

n/a

n/a

n/a

Total

245,515,000

*Comprises £6,900,000 of completed investment properties that were disposed of since the balance sheet date and where the carrying value reflects the sales proceeds received by the Group, and £2,475,000 of land assets that are held at their estimated open market value.

All other factors remaining constant, an increase in rental income would increase a valuation whilst increases in nominal equivalent yield and discount rate would result in a fall in value and vice versa. However, there are interrelationships between unobservable inputs as they are determined by market conditions. Corresponding movements in more than one unobservable input may have a complementary effect on a valuation whereas unobservable inputs moving in opposite directions may compensate each other. For example, where market rents and nominal equivalent yields increase simultaneously, the overall impact on a valuation may be minimal.

For investment properties undergoing development, a reduction in the cost and time to complete a scheme will have a positive impact on value, assuming all other factors remain constant. Conversley, if the anticipated cost or time to complete a scheme increased then this would negatively impact value, assuming all other factors remain constant

All of the Group's investment properties are considered to be 'Level 3' in the fair value hierarchy described by IFRS 13. There have been no transfers of property between hierarchical levels in the year.

The historic cost of the Group's investment properties as at 30 September 2014 was £186,496,469 (30 September 2013: £181,639,033).

Property outgoings (note 4) were split as follows:

Year ended

Year ended

30 September

30 September

2014

2013

£

£

Property outgoings that arose from investment properties that generated rental income in the year

322,054

575,674

Property outgoings that arose from investment properties that did not generate rental income in the year

266,607

980,011

588,661

1,555,685

11. Business and other receivables

As at

As at

30 September

30 September

2014

2013

£

£

Business receivables

467,339

713,480

Property sales receivables

1,250,000

34,014,021

Amounts receivable under Institutional

Funding Agreement

2,378,514

-

Prepayments and accrued income

3,289,555

2,336,839

Interest receivable

-

11,000

Other receivables

5,591,293

4,506,541

12,976,701

41,581,881

Property sales receivables comprise amounts receivable in respect of investment property sales that were either unconditionally exchanged prior to the balance sheet date or for which there were no material conditions precedent which could prevent completion after the balance sheet date.

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

All of the above amounts are either receivable within one year or will be released to the income statement within one year except for £885,329 included in other receivables at 30 September 2013 which comprised amounts advanced to the provider of the Group's £50m swap facility (see note 16) as collateral, due to the fair value deficit position of the swap at the previous balance sheet date.

No business receivables were overdue or impaired at the end of either of the above years.

12. Cash and cash equivalents

Included within the Group's cash and cash equivalents balance as at 30 September 2014 is £218,398 (30 September 2013: £1,746,751) in bank accounts held as security by the providers of the Group's secured bank debt and hedging facilities.

13. Business and other payables

As at

As at

30 September

30 September

2014

2013

£

£

Business payables

5,950,680

2,078,260

Rents received in advance

377,987

577,823

Other creditors

1,770,010

404,326

Accruals and other amounts payable

6,534,273

2,050,923

14,632,950

5,111,332

Accruals and other amounts payable includes £3,928,131 (30 September 2013: £1,194,220) of committed costs included as additions to the Group's investment properties either in the current year or in a prior year.

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

14. Borrowings: amounts repayable within one year

As at

As at

30 September

30 September

2014

2013

£

£

Bank loans (secured):

Short term development facilities

-

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 amounts drawn down under the agreement entered into on 15 January 2013 were fully repaid in the prior year. The amounts drawn down under the agreement entered into on 30 January 2013, which were outstanding at 30 September 2013 as shown above, were fully repaid on 4 November 2013. Both loans were secured against investment properties held within ring-fenced sub-groups beyond which the loans were non-recourse.

There were no defaults or other breaches of financial covenants under the terms of either of the above loan agreements during the current year or prior year.

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

15. Borrowings: amounts repayable after more than one year

As at

As at

30 September

30 September

2014

2013

£

£

Bank loans (secured):

Investment facility

4,500,000

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 and was secured against three investment properties held within a ring-fenced sub-group beyond which the loan was non-recourse.

On 28 June 2013, one of the secured investment 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 30 September 2014, the remaining secured property has been externally valued at £8,500,000 (30 September 2013: £10,000,000). The loan was due to mature in April 2016 but has been fully repaid since the balance sheet date (see note 21). The loan to value financial covenant at all times was 70%.

There were no defaults or other breaches of financial covenants under the terms of the loan agreement during the current year or in prior years, or in the period since the balance sheet date until the date of repayment.

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

16. Financial instruments and risk management

a) 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 a £100m 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. In the prior year, due to a change in the projected future borrowings of the Group, £50m of this instrument was cancelled, at a cost of £1.027m. The fair value of this instrument at the balance sheet date is set out below:

Fair value

Fair value

Notional

Protected

30 September

30 September

amount

rate

Expiry

2014

2013

£

%

£

£

Non-amortising swap

£50m

1.6675

25 Sep 2015

(435,540)

(932,006)

The total increase in the valuation of this swap in the year of £496,466 (2013: £690,097, after taking into account the partial cancellation referred to above) has been credited to the income statement. Initially, the Group chose to adopt hedge accounting for this instrument with movements in fair value recognised in other comprehensive income. In the year to 30 September 2013, the application of hedge accounting was revoked resulting in £2,649,103 of adverse fair value movements being reclassified to the income statement in that year.

Also in 2011, the Group entered into a swap in respect of its borrowings from Deutsche Hypothekenbank (Actien-Gesellschaft), as set out in note 15. In the prior year, following a part-repayment of the Group's bank borrowings, £18.4m of this instrument was cancelled, at a cost of £308,900. On 6 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 the balance sheet date is set out below:

Notional

amount

Protected rate

Expiry

Fair value

30 September 2014

Fair value

30 September 2013

£

%

£

£

Non-amortising swap

£4.5m (2013: £7.55m)

1.565

31 Jan 2015

(14,615)

(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 year of £52,152 (30 September 2013: £210,770) has been credited to the statement of other comprehensive income.

As described in note 21, on 6 November 2014 the borrowings from Deutsche Hypothekenbank (Actien-Gesellschaft) were repaid and the remainder of this swap instrument was cancelled at a cost of £11,500, including accrued interest to that date.

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 30 September 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:

As at

As at

30 September

30 September

2014

2013

Liabilities falling due:

£

£

In less than one year

450,155

607,735

In more than one year

-

420,356

450,155

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 its effective hedges. 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.

b) Categories of financial instruments

As at

As at

30 September

30 September

2014

2013

£

£

Financial assets - current assets

Loans and receivables:

Cash and cash equivalents

7,702,578

20,046,784

Business receivables

467,339

713,480

Property sales receivables

1,250,000

34,014,021

Amounts receivable under Institutional

Funding Agreement

2,378,514

-

Interest receivable

-

11,000

Other receivables

5,591,293

4,506,541

17,389,724

59,291,826

As at

As at

30 September

30 September

2014

2013

£

£

Financial liabilities

Current liabilities:

Business payables

5,950,680

2,078,260

Other creditors

1,770,010

404,326

Bank loans (secured)

-

12,700,002

Derivative financial instruments

450,155

607,735

Accruals and other amounts payable

6,534,273

2,050,923

14,705,118

17,841,246

Non-current liabilities:

Bank loans (secured)

4,500,000

7,510,753

Derivative financial instruments

-

420,356

19,205,118

25,772,355

All financial assets and liabilities are measured at amortised cost, except for derivative financial instruments, which are measured at fair value.

c) Financial risk management

Through the Group's operations and use of debt financing it is exposed to a variety of risks. The Group's financial risk management objectives are to minimise the effect of these risks by, for example, using derivative financial instruments to mitigate interest rate risk. Such instruments are not utilised for speculative purposes. The Board provides guidelines on the acceptable levels of interest rate risk, credit risk and liquidity risk and the use of any derivatives is pre-approved by the Board.

The principal financial risks that are considered to be potentially material to the Group and the policies that it has in place to manage these risks are summarised below:

i) Liquidity risk

Liquidity risk arises from the Group's management of working capital and the finance charges and principal repayments on its debt instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.

The Board utilises quarterly budgets and forecasts to make an assessment of the resources that are expected to be available to the Group to meet its liabilities when they fall due.

The Group ensures that surplus cash is managed with the following objectives: (i) to ensure efficient cash and liquidity management; (ii) to deliver appropriate returns on all surplus funds having regard to the Group's policy not to expose cash to significant risk; and (iii) to limit exposures through counterparty diversification.

Generally returns on cash deposits reflect the notice period required to release the deposit back to the Group.

The following table shows the maturity analysis for financial liabilities and their effective interest rates, where applicable. The table has been drawn up based on undiscounted cash flows, including future interest payments, based on the earliest repayment date.

As at 30 September 2014

Effective

interest

Less than one

Between 1 and

Financial liabilities

rate

year

5 years

Total

%

£

£

£

Business payables

5,950,680

-

5,950,680

Other creditors

1,770,010

-

1,770,010

Borrowings

3.4

153,000

4,589,250

4,742,250

Derivative financial instruments

450,155

-

450,155

Accruals and other amounts payable

6,534,273

-

6,534,273

14,858,118

4,589,250

19,447,368

As at 30 September 2013

Effective

interest

Less than one

Between 1 and

Financial liabilities

rate

year

5 years

Total

%

£

£

£

Business payables

2,078,260

-

2,078,260

Other creditors

404,326

-

404,326

Borrowings

3.37

13,175,728

7,952,316

21,128,044

Derivative financial instruments

607,735

420,356

1,028,091

Accruals and other amounts payable

2,050,923

-

2,050,923

18,316,972

8,372,672

26,689,644

ii) Credit risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its investment property letting activities and from its financing activities, including deposits with banks and other financial institutions and derivatives.

The credit risk on cash balances and short-term deposits is limited because the counterparties are typically banks with credit ratings of AA- or higher or that have substantial UK government backing. As at the year end, deposits were spread across 4 (30 September 2013: 5) different banks. The credit ratings of the banks are monitored and changes made as necessary to manage risk. The Board does not consider that there is a significant concentration of counterparty risk.

Rigorous credit control procedures are applied to facilitate recovery of business receivables. The majority of tenant leases are long-term contracts with rents payable quarterly in advance. Prospective tenants are assessed according to the Group's credit criteria prior to entering into lease agreements. Penal interest is charged on outstanding rents in accordance with the applicable lease terms and legal action would be taken to recover any substantial arrears.

The credit risk relating to counterparties transacting with the Group in relation to property acquisitions, disposals and Institutional Funding Agreements is managed through appropriate due diligence and contractual protection in the relevant agreements.

iii) Market risk - interest rate risk

Market risk arises from the Group's use of debt financing. It is the risk that the future cash flows of a financial instrument will fluctuate because of changes in interest rates.

The Group is exposed to cash flow interest rate risk from its variable rate borrowings. As described above, the Group uses interest rate hedging products in order to mitigate this risk.

The Group's derivative financial instruments in use at the balance sheet date are described in section a) of this note and the Group's sensitivity to changes in interest rates is considered in note 7.

iv) Capital risk management

The Group's total capital at each balance sheet date comprises net debt (which principally consists of the borrowings disclosed in notes 14 and 15 less the cash and cash equivalents disclosed in note 12) and equity attributable to Shareholders of the Company (stated capital and retained earnings). The Group monitors its capital with reference to committed expenditure with the primary objective of safeguarding its ability to continue to operate as a going concern whilst complying with its banking covenants. Borrowings are secured on specific properties and, as referred to in notes 14 and 15, are non-recourse to the Group as a whole.

The Group's ongoing monitoring of its capital structure and in particular the specific financing required for each of its individual capital projects allows it to quickly identify funding needs and thereby facilitates in the securing of any necessary further debt finance.

The Group is not subject to any external capital requirements.

17. Stated capital

Analysis of share capital:

As at

30 September

2014

As at

30 September

2013

Number

Number

Authorised

Ordinary shares of no par value - number

Unlimited

Unlimited

Issued and fully paid

Ordinary shares of no par value - number

183,630,374

216,010,321

£

£

Ordinary shares of no par value - paid

- total paid on issues to date

266,359,124

266,359,124

- purchased for cancellation in prior years

(44,765,773)

-

- purchased for cancellation in the year

(39,827,335)

(44,765,773)

- reclassification of the attributed retained earnings

element of share buybacks undertaken to date (see below)

10,951,754

-

Issue and purchase costs deducted to date

(9,111,557)

(8,992,073)

Stated capital per the balance sheet

183,606,213

212,601,278

In the current year the Group has decided to transfer to retained earnings £10,951,754 (2013: £nil) in respect of the amounts that it considers attributable to that reserve in relation to share buybacks undertaken to date.

Share buybacks in the current year:

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.

Share buybacks in the prior year:

In March 2013, the Company purchased a total of 21,050,043 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 116.79 per share.

18. Reserves

The Group statement of changes in equity is shown as a primary financial statement.

The nature and purpose of each reserve within equity is as follows:

Stated capital: This represents the proceeds on the issue of shares, net of issue costs, less the amounts considered attributable to this reserve in relation to purchasing shares for cancellation, inclusive of associated costs.

Hedging reserve: This represents the cumulative gains and losses arising on the effective portion of hedging instruments carried at fair value, net of any deferred tax, less amounts reclassified to profit and loss, such as at the time of revocation of a hedge accounting relationship.

Retained earnings: This represents the cumulative profits and losses recognised in the income statement, less the amounts considered attributable to this reserve in relation to purchasing shares for cancellation, inclusive of associated costs.

19. 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 17).

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 it considers 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:

As at

30 September 2014

As at

30 September 2013

£

Pence per share

£

Pence per share

Basic NAV

246,611,174

134.30

250,420,331

115.93

Adjustments:

Fair value of derivative financial instruments

450,155

0.24

1,028,091

0.47

Deferred tax balances

-

-

(44,511)

(0.02)

EPRA NAV

247,061,329

134.54

251,403,911

116.38

20. Related party transactions and balances

Interests in shares

The interests of the Directors and their families in the share capital of the Company are set out below:

Ordinary shares

As at

30 September

2014

As at

30 September

2013

Number

Number

Phil Wrigley

447,748

447,748

Steve Webb

243,385

243,385

Danny Kitchen

467,927

467,927

Alastair Irvine

2,500,000

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, LXBRP GP Limited, LXB DH Limited, LXB Gloucester GP Limited, LXB Sheppey GP Limited, LXB Kingsmead GP Limited and LXB Riverside GP Limited, is a related party of the Company. LXB Adviser LLP is the Investment Manager to the Group. LXBRP GP Limited, LXB DH Limited, LXB Gloucester GP Limited, LXB Sheppey GP Limited, LXB Kingsmead GP Limited and LXB Riverside GP Limited act as the sole corporate general partners of LXB Retail Properties Fund LP, LXB DH LP, LXB Gloucester LP, LXB Sheppey LP, LXB Kingsmead LP and LXB Riverside LP respectively, which are significant, indirectly controlled subsidiaries of the Company. At 30 September 2014, the members of LXB Partners LLP and their spouses held an aggregate total of 12,495,348 (30 September 2013: 11,855,890) shares in the Company.

There have been no changes to any of the above shareholdings between 30 September 2014 and the date of this report.

Fees

Directors' fees of £305,000 (30 September 2013: £305,000) were payable for the year ended 30 September 2014. As at 30 September 2014, £76,250 (30 September 2013: £82,750) of fees remained outstanding and are included within business and other payables (note 13).

Management fees of £3,952,858 (30 September 2013: £4,793,208) were payable to the group headed by LXB Partners LLP by the Group in respect of the year ended 30 September 2014, of which £nil was outstanding at the year end (30 September 2013: £nil).

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 year it has recharged costs totalling £82,849 (30 September 2013: £63,933) to the Group.

Subsidiary entities

LXB Retail Properties Plc is the ultimate controlling party of its subsidiary entities.

All of the Group's investment properties are held by entities that are either direct or indirect subsidiary undertakings of LXB Retail Properties Fund LP ("the Fund").

The consolidated financial statements include the financial statements of the Company and the following principal subsidiary entities, all of which are wholly-owned unless otherwise stated:

Entity

Country of incorporation

Nature of business

Appointment and removal of members

LXBRP CommCo Limited*

Jersey

of the investment committee

LXBRP LP Limited*

Jersey

Limited partner

LXB Retail Properties Fund LP**

Scotland

Intermediate holding entity

LXBRP TreasuryCo Limited

Jersey

Treasury operations

LXB DH Borrower Limited

Jersey

Treasury operations and group finance

LXB DH LP***

Scotland

Intermediate holding entity

LXBRP (Acquisitions) Limited

Jersey

Property investment

LXB RP (Ayr 1) Limited

Jersey

Property investment

LXB RP (Ayr 2) Limited

Jersey

Property investment

LXB RP (Ayr BP) Limited

Jersey

Property investment

LXB RP (Ayr Holdings) Limited

Jersey

Intermediate holding entity

LXB RP (Ayr Retail) Limited

Jersey

Property investment

LXB RP (Banbury) Limited

Jersey

Property investment

LXB RP (Banbury 2) Limited

Jersey

Property investment

LXB RP (Biggleswade) Limited

Jersey

Property investment

LXB RP (Biggleswade 2) Limited

Jersey

Property investment

LXB RP (Biggleswade 3) Limited

Jersey

Property investment

LXB RP (Biggleswade 4) Limited

Jersey

Property investment

LXB RP (Brocklebank Road) Limited

Jersey

Property development

LXB RP (Crown Road) Limited

Jersey

Property development

LXB RP (Gallions Road) Limited

Jersey

Property development

LXB Gloucester LP***

Scotland

Intermediate holding entity

LXB RP (Gloucester 2) Limited

Jersey

Property investment

LXB RP (Gloucester 3) Limited

Jersey

Property investment

LXB RP (Gloucester 4) Limited

Jersey

Property investment

LXB RP (Greenwich) Limited

Jersey

Property investment

LXB RP (Greenwich 3) Limited

Jersey

Property investment

LXB RP (Greenwich 6) Limited

Jersey

Property investment

LXB RP (Greenwich 7) Limited

Jersey

Property investment

LXB RP (Greenwich 8) Limited

Jersey

Property investment

LXB RP (Greenwich 9) Limited

Jersey

Property investment

LXB RP (Kingsmead) Limited

Jersey

Property development

LXB Kingsmead LP***

Scotland

Intermediate holding entity

Living Villages (Jersey) Limited

Jersey

Property investment

LXB RP (London Road) Limited

Jersey

Property development

LXB (Newham Farm) Limited

Jersey

Property investment

LXB RP (Queenborough) Limited

Jersey

Property development

LXB RP (Riverside) Limited

Jersey

Property development

LXB Riverside LP***

Scotland

Intermediate holding entity

LXB RP (Rushden) Limited

Jersey

Property investment

LXB RP (Rushden 2) Limited

Jersey

Property investment

LXB RP (Sheppey) Limited

Jersey

Property investment

LXB Sheppey LP***

Scotland

Intermediate holding entity

LXB RP (Skew Bridge) Limited

Jersey

Property development

LXB RP (Stafford) Limited

Jersey

Property investment

LXB RP (Stafford 2) Limited

Jersey

Property investment

LXB RP (Stafford 3) Limited

Jersey

Property investment

LXB RP (Sutton) Limited

Jersey

Property investment

LXB (Willow Green) Ltd

Jersey

Property investment

Threejack Properties Limited

Jersey

Property investment

* LXBRP CommCo Limited and LXBRP LP Limited are directly owned by the Company. All other entities are indirectly owned by the Company.

** LXB Partners LLP and LXBRP GP Limited (see the paragraph headed "Interests in shares" above) have partnership interests in LXB Retail Properties Fund LP ("the Fund") with LXB Partners LLP being entitled to certain incentives that may become payable, as described below. The Group has the power, indirectly, to govern the financial and operating policies of the Fund so as to benefit from its activities as a result of having the authority to appoint and remove members of the Investment Committee. The Investment Committee, which has approval rights over all significant matters pertaining to the business of the Fund, was originally constituted as a committee of LXBRP GP Limited and later reconstituted as a committee of the Fund. The registered office of the Fund is 15 Atholl Crescent, Edinburgh, EH3 8HA.

*** LXB DH Limited, LXB Gloucester GP Limited, LXB Sheppey GP Limited, LXB Kingsmead GP Limited and LXB Riverside GP Limited (see the paragraph headed "Interests in shares" above) have partnership interests in LXB DH LP, LXB Gloucester LP, LXB Sheppey LP, LXB Kingsmead LP and LXB Riverside LP respectively, but are not entitled to any profit shares.

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 30 September 2014, the net proceeds amount to which the 12% per annum preferred return is applied, is £185,981,418 (30 September 2013: £218,775,930).

The cumulative hurdle amount as at 30 September 2014 is £297.8m (30 September 2013: £265.9m).

As the net assets of the Group are less than the cumulative hurdle amount as at 30 September 2014, no provision for future incentive payments has been recognised in these financial statements.

Other transactions

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation.

21. Post balance sheet events

On 17 October 2014 the Group completed the sale of its investment property at Banbury Gateway. The sale generated initial cash proceeds of £42m.

On 6 November 2014, the Group repaid in full the borrowings from Deutsche Hypothekenbank (Actien-Gesellschaft) referred to in note 15 and cancelled the associated interest rate swap instrument referred to in note 16.

On 6 November 2014 the Group entered into a £23.35m development facility with Royal Bank of Scotland Plc for its Stafford Kingsmead site.

On 5 December 2014 the Group entered into a £28.5m development facility with Royal Bank of Scotland Plc for its Stafford Riverside site.

On 16 December 2014 the Group acquired a parcel of land for £10m at Sutton, completing its land assembly requirements at that site.

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 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
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