NTA.L Regulatory News (NTA)

NORTHACRE PLC

(the ''Company'' or ''Group'')

Results for the period ended 31st December 2015

Northacre PLC is pleased to announce its financial results for the period ended 31st December 2015. The Annual Report and Accounts and Notice of the Company's Annual General Meeting, to be held at the Company's registered office at 10.00 am on 9 June 2016, will be available shortly on the Company's website www.northacre.com and are being posted to those shareholders who have elected to receive hard copies.

Extracts from the Company's Annual Report and Accounts are shown below.

Enquiries:

Northacre PLC

Niccolò Barattieri di San Pietro (Chief Executive Officer)

020 7349 8000

finnCap Ltd (Nominated Adviser and Broker)

Stuart Andrews

020 7220 0500

Chairman's Statement

There is a growing concern amongst developers and investors in the London prime residential sector over increasing costs and a reduction in the volume of transactions. There are a number of factors contributing to these issues, the prime factor being the chancellor's increase in the stamp duty tax which has had an adverse effect on luxury properties.

The uncertainty surrounding a possible Brexit has further undermined the market. The other main area of concern is the rise in construction costs where, in some instances, costs have doubled over a period of 12 months.

Despite an abundance of job opportunities, (in excess of 12,000 job vacancies currently available in the UK construction industry), there has been a failure to attract new recruits resulting in a shortage of skilled labourers.

Over the next decade an estimated 400,000 skilled workers will retire so the sector needs to recruit a further 200,000 workers over the next 5 years in order to deliver the pipeline of new projects.

Another area to consider is the potential effect a Brexit would have on the many skilled EU Nationals currently employed in the UK without whom the industry would suffer. As a consequence, several contractors have diverted away from the London Residential market to seek work in others sectors.

Northacre has been at the forefront of the Prime Residential Sector for over 25 years. Despite these challenges we will continue to take the lead in design, procurement and marketing which we are sure will enable us to continue to be the leading high-end residential developer in prime central London.

Klas Nilsson

Non-Executive Chairman

Date: 29th April 2016

Chief Executive's Statement

The last twelve months have seen Northacre PLC progressing on all fronts. Early in the year we were appointed as Development Managers for The Broadway (formally the New Scotland Yard site) in Westminster, one of the largest redevelopment sites in Prime Central London. In a twelve-month period we have been able to achieve full planning consent for a one million square foot, residentially-led, mixed use scheme. This is a testament to our current capabilities and thorough understanding of the planning process.

Current developments

The Broadway (Formally known as New Scotland Yard site)

As mentioned above, in the space of twelve months we have managed to achieve a very ambitious planning consent for a very contentious site. We are now swiftly moving forward, and in May 2016 will start tendering the demolition contract with a view to commencing onsite once we get vacant possession in November. In parallel we are currently working on the branding and sales collateral.

1 Palace Street

The Demolition phase has been completed as per our programme and we have now tendered the larger subcontractor packages. We are aiming to sign up the general contractor in late April having 80% cost certainty. It should be noted that we are finding the construction market very challenging as contractors are not willing to take risk which is reflected in their pricing. On the sales front we have exchanged on twenty-eight units (as of December 31st) out of the seventy-two. This is a very good result as we have only been marketing since April 22nd (less than eight months).

Vicarage Gate House

The development reached Practical Completion on April 20th 2016. The issues we encountered at the sub-contractor level significantly impacted on the programme causing a one-year delay. On the other hand, we are delivering a beautiful building coupled with finishes of outstanding quality. Sales will resume in early May.

13&14 Vicarage Gate

Progress on site has been slower than expected however, we reached Practical Completion in March 2016 for the lateral units and the rest are expected to follow in May. On the positive side, costs have been broadly in line with budget and the quality of the finishes is proving to be very good.

Chester Square

The basement works have been completed and the contractor for the second phase works, to the listed building, has been selected and began on site this April. The basement works came under budget and the second phase contract has come in broadly in line with our forecasts.

22 Prince Edward Mansions

In early December 2015 we achieved Practical Completion and we have recently put the property on the market. The development was completed slightly under budget and the finishes are of a very high quality. We have had a very positive response from the agents and the property will be featured in several publications.

Outlook

The high-end residential market in Prime Central London has shown signs of price consolidation which is natural after a twenty-year bull run. During this prolonged period the market had experienced only one negative quarter. Looking more closely at market dynamics, it is clear that there has been a flight to quality where only the best properties are selling. I will go a step further and say that we have entered a binary market where challenged properties are not on the radar screen of buyers.

On a separate note, it is worth noting that construction inflation has reached unsustainable levels and this will prevent many developments from being delivered on time. In turn, this will constrain supply which will benefit the pricing on the developments which are being delivered. We strongly believe that Northacre's superior product will benefit from these constraints and that the business is well placed to enjoy significant and healthy demand going forward.

Niccolò Barattieri di San Pietro

Chief Executive Officer

Date: 29th April 2016

Financial Review

The past year has seen the Group continue to strive in pursuit of key objectives. On the 19th June 2015, Northacre was delighted to be officially appointed as Development Managers at The Broadway, popularly known as the former home of the Metropolitan Police, New Scotland Yard. The landmark development, alongside our continued work at our other prominent site 1 Palace Street, highlights the Group's sustained ambition to identify and acquire key London sites and will provide the Group with long-term stability for future growth.

During the year the Group continued work on the Chester Square, Vicarage Gate House, 13 & 14 Vicarage Gate, and 22 Prince Edward Mansions developments; the latter of which completed in December 2015. However deferred completion dates due to various events have had a disappointing impact on the Group's financial results compared to forecasts.

Consolidated Income Statement

Group revenue for the year increased to £4.2m (2014: £3.9m), this is notwithstanding the recognition of the development management fee and performance fee in respect of the property at 33 Thurloe Square in the previous period. Development management fee income decreased to £3.4m (2014: £3.6m) while N Studio's revenue increased to £0.5m (2014: £0.2m), which highlights the contribution of the interior design business to Northacre's developments, following rebranding in February 2015. This year also saw fees receivable where the Group acted as sales agents on 1 Palace Street. Commission received of £0.25m (2014: £nil) represents 50% of the total fee with a further 50% due on completion.

Although administrative expenses increased to £4.7m (2014: £4.4m) this does indicate a 12% efficiency saving on the previous 10 month period.

The Group reported a loss before tax of £1.2m (2014: £1,858).

Consolidated Statement of Financial Position

As at 31st December 2015 the Group had cash and cash equivalents of £1.2m (2014: £2.5m). The cash balance fell due to the need to fund operating activities and the delayed receipt of the development management fee for The Broadway, which is to be released at Vacant Possession.

The Group anticipates that next year's operating activities will be funded from current reserves and the proceeds of the sale of 22 Prince Edward Mansions. No requirement for further financing is expected.

Financing

In the prior period, the Group secured a loan facility with Royal Bank of Scotland to finance 22 Prince Edward Mansions. As at 31st December 2015 £2.4m had been drawn (2014: £1.0m), with no further drawdowns to take place following the year end. The loan incurs interest at 3.25% above LIBOR and is expected to be repaid in full prior to the end of the next financial year, either on completion of sale or 18 months following the initial drawdown.

The outlook for the next financial year is positive, with the expected completion of several developments and sale of 22 Prince Edward Mansions. The expected returns and release of capital from these developments will be utilised by the Group to stimulate further growth and to take advantage of investment opportunities.

Matthew Mowlam

Group Financial Controller

Consolidated Income Statement

For the year ended 31st December 2015

Consolidated Statement of Comprehensive Income

For the year ended 31st December 2015

Consolidated Statement of Financial Position

As at 31st December 2015 

Director

Company registration no. 03442280

Company Statement of Financial Position

As at 31st December 2015

Director

Company registration no. 03442280

Consolidated and Company Statements of Cash Flows

For the year ended 31st December 2015

Consolidated and Company Statements of Changes in Equity

For the year ended 31st December 2015

Notes to the Consolidated Financial Statements

For the year ended 31st December 2015

1. Principal accounting policies

The principal accounting policies are as follows:

Accounting basis and standards

These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union.

The Company and its subsidiaries in the prior period shortened their reporting periods to 31st December 2014 to be co-terminous with the ultimate parent undertaking Abu Dhabi Financial Group LLC. The amounts presented in the financial statements for the 10 month period ended 31st December 2014 are thus not entirely comparable to the year ended 31st December 2015.

During the year ended 31st December 2015 the Group adopted a number of new IFRS standards, interpretations, amendments and improvements to existing standards, including IAS19. These new standards and changes did not have any material impact on the Company's financial statements.

The following new standards, amendments to standards or interpretations are mandatory for the Group for the first time for the financial year beginning 1st January 2016, but are not currently considered to be relevant to the Group (although they may affect the accounting for future transactions and events):

· IAS16 (Amended), 'Property, Plant and Equipment' and IAS 38 (Amended), 'Intangible Assets', issued in May 2014 and effective from 1st January 2016. These amendments clarify that a deprecation method that is based on revenue that is generated by an activity that includes the use of an asset is not appropriate for property, plant and equipment. There is also a rebuttable presumption that an amortisation method that is based on the revenue generated by an activity that includes the use of an intangible asset is inappropriate.

· IFRS11 (Amended), 'Joint Arrangements', effective for periods beginning on or after 1st January 2016 requires an acquirer of an interest in a joint operation in which the activity constitutes a business to apply all of the business combinations accounting principles in IFRS3 and all other IFRSs.

· IAS27 (Amended), 'Separate Financial Instruments', issued in August 2014 and effective 1st January 2016 permits investments in subsidiaries, joint ventures and associates to be optionally accounted using the equity method in separate financial statements.

The following new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year beginning 1st January 2016 and have not been early adopted:

· IFRS9, 'Financial Instruments', effective for periods commencing on or after 1st January 2018 but not yet adopted by the EU. This is final version of the project to replace IAS39 'Financial Instruments: Recognition and Measurement'.

· IFRS15, 'Revenue from Contracts with Customers', effective for periods commencing on or after 1st January 2018 but not yet adopted by the EU. This standard focuses on a principles based model which is to be applied to all contracts with customers.

· IAS12 (Amended), 'Income Taxes', effective for periods commencing on or after 1st January 2017 but not yet adopted by the EU. This amendment relates to the recognition of deferred tax assets for unrealised losses and clarifies that estimations for future taxable profits exclude tax deductions arising from the reversal of temporary differences

Business combinations and goodwill

Goodwill relating to acquisitions prior to 1st March 2006 is carried at the net book value on that date and is no longer amortised but is subject to annual impairment review. On acquisition, the assets, liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. Any deficiency of the cost of acquisition below the fair values of the identifiable net assets acquired (i.e. discount on acquisition) is credited to the income statement in the period of acquisition. Goodwill is tested annually for impairment.

Going Concern

The Company and Group currently meet their day-to-day working capital requirements through fees receivable from its projects: Vicarage Gate House, 13-14 Vicarage Gate, 1 Palace Street, 10 Broadway and Chester Square and also through the bank loan.

The Directors have prepared detailed cash flow projections for the period ending 31st December 2020 making reasonable assumptions about the levels and timings of income and expenditure, and in particular the timing of receipt of certain fees due from major developments. These projections show that the Group can meet its on-going working capital requirements. On this basis the Directors consider it appropriate to prepare the financial statements on a going concern basis.

Significant judgements and areas of estimation

In preparing these financial statements the Directors are required to make judgements and best estimates of the outcome of and in particular, the timing of revenues, expenses, assets and liabilities based on assumptions. These assumptions are based on historical experience and various other factors that are considered reasonable under the various circumstances. The estimates and assumptions are reviewed on a regular basis with any revisions being applied in the relevant period. The material areas where estimates and assumptions are made are:

- The valuation of goodwill

- The valuation of available for sale financial assets

- The status and progress of the developments and projects

Basis of consolidation

The Group financial statements include the financial statements of the Company and its subsidiary undertakings. Subsidiary undertakings are all entities over which the Group has the power to govern the financial and operating policies of the subsidiary and therefore exercises control. The existence and effect of both current voting rights and potential voting rights that are currently exercisable or convertible are considered when assessing whether control of an entity is exercised. Subsidiaries are consolidated from the date at which the Group obtains the relevant level of control and are de-consolidated from the date at which control ceases.

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Property, plant and equipment

Property, plant and equipment are stated at historical cost, net of any depreciation and any provision for impairment.

Depreciation has been calculated on a straight line basis and aims to write off the costs, less estimated residual value of each property, plant and equipment over their expected useful lives using the following periods:

Leasehold improvements over the period of the lease

Fittings and office equipment 25% straight line

Computer equipment 33 1/3% straight line

Impairment of assets

Assets that have an indefinite useful life are not subject to amortisation but are instead tested annually for impairment and are subject to additional impairment testing if events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Assets that are subject to depreciation and amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Indicators of impairment are reviewed annually.

An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. Any impairment charge is recognised in profit or loss in the year in which it occurs. When an impairment loss, other than an impairment loss on goodwill, subsequently reverses due to a change in the original estimate, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, up to the carrying amount that would have resulted, net of depreciation, had no impairment loss been recognised for the asset in prior years.

Inventories

Work in progress is valued at the lower of cost and net realisable value. Cost of work in progress includes overheads appropriate to the stage of development. Net realisable value is based upon estimated selling price less further costs expected to be incurred to completion and disposal.

Revenue

Revenue represents amounts earned by the Group in respect of services rendered during the period net of value added tax. Shares in development profits and performance fees are recognised when the amounts involved have been finally determined and agreed criteria for recognition have been fulfilled. Fees in respect of project management and interior and architectural design are recognised in accordance with the stage of completion of the contract.

Revenue also includes sales commission fees receivable where the Group acts as sales agent on developments. The sales commission is recognised 50% on exchange of contracts, which is non-refundable and 50% on completion.

Current taxation

The tax expense for the year represents the total of current taxation and deferred taxation. The charge in respect of current taxation is based on the estimated taxable profit for the year. Taxable profit for the year is based on the profits as shown in profit or loss, as adjusted for items or expenditure, which are not deductible for tax purposes.

The current tax liability for the year is calculated using tax rates, which have either been enacted or substantively enacted at the reporting date.

Deferred taxation

Deferred tax is provided in full on all temporary differences arising between the tax base of assets and liabilities and their carrying values in the financial statements. The deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of transaction affects neither accounting nor taxable profit or loss.

Deferred tax is determined using tax rates which have been enacted or substantively enacted at the reporting date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. Deferred tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

Leased assets

Assets held under finance leases and hire purchase contracts are capitalised in the statement of financial position and depreciated over their expected useful lives. The interest element of the rental obligations is charged to profit or loss over the period of the lease on a straight-line basis.

Rentals under operating leases are charged to profit or loss on a straight-line basis over the lease term.

Investments

Investments in subsidiaries, associates and joint ventures, and other investments are presented in the Parent financial statements at cost, less any necessary provision for impairment.

Associates

Associates are all entities over which the Group exercise significant influence but does not exercise control. Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost, which includes goodwill identified on acquisition, net of any accumulated impairment loss. The Group's share of its associate's profits or losses after acquisition of its interest is recognised in profit or loss and cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Where the Group's share of losses of an associate equals or exceeds the carrying amount of the investment, the Group only recognises further losses where it has incurred obligations or made payments on behalf of the associate.

Financial assets

Available for sale financial assets consist of equity investments in other companies or limited partnerships where the Group does not exercise either control or significant influence. The investments reflect loans and capital contributions made in respect of projects undertaken with other partners in which the Group will be entitled to an eventual profit share.

Available for sale financial assets are shown at fair value at each reporting date with changes in fair value being shown in Other Comprehensive Income, or at cost less any necessary provision for impairment where a reliable estimate of fair value is not able to be determined. In cases where the Group can reliably estimate fair value of the available for sale financial assets, fair value will be determined in reference to practical completion of each development project.

All assets for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

· Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities.

· Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.

· Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

The valuation technique applied to the available for sale financial assets in the current and preceding period is a Level 3 technique.

Pensions

The Group operates a defined contribution pension scheme under which fixed contributions are payable. Pension costs charged to the income statement represent amounts payable to the scheme during the year.

Foreign currency translation

Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of the transaction. Assets and liabilities are translated at the rate of exchange ruling at the reporting date. Exchange differences are taken into account in arriving at Group operating loss.

Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are charged to the share premium account.

Equity balances

· Called up share capital represents the aggregate nominal value of Ordinary shares in issue.

· The share premium account represents the incremental paid up capital above the nominal value of Ordinary shares issued.

· The merger reserve represents the excess over nominal value of the fair value of consideration received for equity shares issued directly to acquire another entity meeting the specific requirements of section 612 of the Companies Act 2006.

Financial assets - loans and receivables

Trade receivables, loans and other receivables are classified as 'trade and other receivables' and are measured at cost less any provisions. Interest income is recognised by applying the appropriate interest rate of the contractual arrangement.

Financial liabilities - loans and payables and borrowings

Trade payables, other payables and borrowings are classified as 'trade and other payables' and 'borrowings, including lease finance'. These are measured at amortised cost and the interest expense is recognised by applying the appropriate interest rate of the contractual arrangement.

Borrowings

Interest-bearing borrowings are recognised initially at fair value, net of any transaction costs incurred. Borrowings are subsequently stated at amortised cost using the effective interest method with any differences between the proceeds (net of transaction costs) and the redemption value being recognised over the period of borrowings.

All borrowings are classified as current unless the Group has an unconditional right to defer payment of the borrowings until at least twelve months from the reporting date.

Borrowing costs which relate directly to a development which is included within inventories are capitalised as part of the cost of the inventory.

2. Capital and financial risk management

The Group manages its capital to ensure that the Group will be able to continue as a going concern, while maximising the return to shareholders through the optimisation of its debt and equity balance.

The capital structure of the Group consists of cash and cash equivalents, debt and equity attributable to equity holders of the Parent Company, comprising issued capital, share premium account and retained earnings.

The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends payable to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt or increase capital.

The Board regularly reviews the capital structure, with an objective to minimise net debt whilst investing in the development opportunities.

The Group's activities expose it to a variety of financial risks and those activities involve the analysis, evaluation, acceptance and management of some degree of risk or combination of risks. Taking risk is core to the property business and the operational risks are an inevitable consequence of being in business. The Group's aim is to achieve an appropriate balance between risk and return and minimise potential adverse effects on the Group's performance.

The Group's risk management policies are designed to identify and analyse these risks, to set appropriate risk limits and controls, and to monitor the risks by means of a reliable up-to-date information system. The Group regularly reviews its risk management policies and systems to reflect changes in markets, products and emerging best practice.

Risk management is carried out by the Board of Directors. Directors are responsible for the identification of the major business risks faced by the Group and for determining the appropriate course of action to manage those risks. The most important types of risk are credit risk, liquidity and market risk. Market risk includes currency, interest rate and other price risks.