30 Apr 2015 14:00
NORTHACRE PLC
(the ''Company'' or ''Group'')
Results for the period ended 31st December 2014
Northacre PLC is pleased to announce its financial results for the period ended 31st December 2014. The Annual Report and Accounts for the period then ended and Notice of the Company's Annual General Meeting, to be held at the Company's registered office at 10am on 2nd June 2015, 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 Limited (Nominated Adviser and Broker)
Stuart Andrews
Henrik Persson
020 7220 0500
Chairman's Statement
There is a marked slowdown of activities in the London housing market with many potential purchasers waiting for the outcome of the May 2015 elections. Despite of the results, we don't believe that there will be any radical changes to the market's perception of London as the number one city in the world as a destination for ultra-high net worth individuals.
The London property market has a tendency to adjust itself and absorb whatever changes there may be, if any.
There is the inevitable pause in the London housing market as many potential purchasers await the outcome of the 2015 election. Irrespective of the results of the election, we do not believe that there will be a radical change in the market perception of London as the number one city in the world, a destination for ultra-high net worth individuals. The London residential market has historically adjusted itself and absorbed the various changes brought about by different governments.
The housing debate is steadily rising up the UK political agenda, and will continue to be a key issue. The construction of new homes at an affordable level will be at the forefront of future government programmes, and is likely to affect the attitude of the planning authorities towards the development of private housing for sale at the upper end of the market. The current re-focusing of the market towards the private rented sector could, however, open up further opportunities for companies prepared to invest in well-conceived and properly governed models for rental housing at both ends of the scale.
Klas Nilsson
Non-Executive Chairman
Date: 30th April 2015
Chief Executive's Statement
The last ten months have seen Northacre PLC make good progress across all of our developments. We have also strategically rebranded our interior design business which is now called "N Studio", which signifies a more sophisticated approach intended to reflect and capture the increasingly discerning taste of high net worth individuals and our target market.
Current developments
1 Palace Street
We have been making steady progress throughout the period and every milestone has been achieved in accordance with our programme. On 11th November 2014 we received planning consent for our revised scheme and by 30th November 2014 we were already onsite starting the strip-out and demolition phase.
Vicarage Gate House
The complications we have encountered with the windows have escalated and this has caused delay to our practical completion date which has now been moved to mid-October 2015. The vast majority of the windows have now been installed hence the rest of the fit-out can move forward at a much faster pace.
In respect of sales throughout the period, we have exchanged on five units. We are seeing more appetite from buyers as they can now get a much better feel for the development and the overall quality we are producing.
33 Thurloe Square
As highlighted in my statement last year, prior to starting the redevelopment of this site we received an unsolicited bid of £12.75m representing a significant premium to the market value of similar properties in similar condition. The transaction was completed on 25th June 2014 and resulted in a net IRR of over 30% to our investors and a substantial return for Northacre PLC in terms of development management fees, performance fee and return on our invested equity.
13&14 Vicarage Gate
The last few months have seen significant progress on-site. All the structural alterations have been completed and the partition walls are mostly in place. We are expecting to have practical completion by January 2016.
On the sales front we will do a soft launch in June 2015 which will then become more proactive once the show apartment is ready at the end of August 2015.
Chester Square (with mews at the rear)
We have received planning approval for the creation of a basement and also to interconnect the two properties. The basement contractor has been selected and will be onsite as soon as all the preconditions have been discharged. The project is progressing well towards implementing our plans.
22 Prince Edward Mansions
On 1st August 2014 we announced the completion of the acquisition of 22 Prince Edward Mansions by Northacre Capital (7) Limited, a wholly owned subsidiary of Northacre PLC. The unit was purchased in keeping with our new strategy for N Studio, and for the purpose of refurbishment and resale.
We are currently onsite and expect to reach practical completion by the end of 2015.
The Lancasters
The freehold interest in the property has now been transferred to the residents. We are in the process of finalising the last outstanding item which we hope to complete by the end of summer 2015.
Outlook
As a result of the upcoming general election in May 2015 the market in general has been quiet as expected. Nevertheless, it has been interesting to see that the market has become more selective and has been rewarding premium properties which satisfy all the requirements of buyers. On the other hand less impressive properties have struggled to sell. We believe that this trend will continue as buyers become more selective.
At Northacre, our differentiating value-add is the quality of our work and attention to detail which places our final product ahead of the crowd. We hope to continue to see ourselves as market leaders in the coming years.
Niccolò Barattieri di San Pietro
Chief Executive Officer
Date: 30th April 2015
Financial Review
In the period under review our development management team was engaged on various projects including Vicarage Gate House, 1 Palace Street, 33 Thurloe Square, 13 & 14 Vicarage Gate and Chester Square. Increased activity on all of these projects was reflected in the results for the period to 31st December 2014.
Consolidated Income Statement
Group revenue for the period increased to £3.9m (28th February 2014: £3.0m), which reflected increased activity on the project development side of the business and a lower level of activity in N Studio, the Group's interior design business. Development management fee income increased to £3.6m (28th February 2014: £1.0m) while N Studio's revenue fell by 89% to £0.2m (28th February 2014: £2.0m). Between October 2014 and February 2015 N Studio rebranded and we expect increased activity in the coming years.
Administrative expenses decreased to £4.4m (28th February 2014: £4.9m) reflecting the shorter 10 months financial period.
On 25th June 2014 the Group announced the sale of the 33 Thurloe Square project. Under the terms of the Development Management Agreement Northacre PLC was entitled to development management and performance fees which are included in the revenue above. The Group was also entitled to a return on the invested equity of £1.5m and dividends received of £0.4m (28th February 2014: The Lancasters dividends £15.0m) are recognised as investment revenue in the Consolidated Income Statement.
The Group reported a loss before tax of £1,858 (28th February 2014: profit before tax £12.3m).
Consolidated Statement of Financial Position
As at 31st December 2014 the Group had cash and cash equivalents of £2.5m (28th February 2014: £21.2m). The decrease in cash held was primarily due to dividends paid of £15.0m, the additional investment of £1.2m in available for sale financial assets being the 1 Palace Street Development and the £4.2m purchase and associated development costs of 22 Prince Edward Mansions.
Financing
On 19th September 2014 a loan facility of £3.2m was made available by the Royal Bank of Scotland in respect of the property at 22 Prince Edward Mansions. The loan is available on a drawdown basis and incurs interest at 3.25% above the LIBOR rate. The loan is due to be repaid the earlier of the latest expiry date of the current interest period outstanding as at the date of completion of sale of the property or the date which falls 18 months after the date on which the loan is drawn. As at 31st December 2014 £1.0m was drawn. The loan is expected to be repaid in full prior to the end of the next financial year.
In the next financial year, the Group will focus on progressing and completing current projects while looking for new exciting opportunities.
Kasia Maciborska-Singh
Group Financial Controller
Consolidated Income Statement
For the 10 months ended 31st December 2014
Note | 10 months ended 31st Dec 2014 | 12 months ended 28th Feb 2014 | ||||
£ | £ | |||||
Group | ||||||
Group revenue | 3 | 3,856,841 | 2,955,797 | |||
Cost of sales | 25,092 | (1,294,225) | ||||
Gross profit | 3,881,933 | 1,661,572 | ||||
Administrative expenses | (4,377,515) | (4,868,726) | ||||
Group loss from operations | (495,582) | (3,207,154) | ||||
Investment revenue | 4 | 493,727 | 15,063,052 | |||
Profit on disposal of available for sale financial assets | 5 | - | 111,213 | |||
Other gains | 6 | - | 336,264 | |||
Finance costs | 7 | (3) | (100) | |||
(Loss)/Profit for the year before taxation | 8 | (1,858) | 12,303,275 | |||
Taxation | 10 | 266,095 | (102,993) | |||
Profit for the year attributable to equity holders of the Company | 264,237 | 12,200,282 | ||||
Profit per Ordinary share | ||||||
Basic - Continuing and total operations | 22 | 0.62p | 39.51p | |||
Diluted - Continuing and total operations | 22 | 0.62p | 39.51p | |||
Company | |||||
Profit for the year attributable to equity holders of the Company | 5,402,344 | 44,703,358 | |||
Consolidated Statement of Comprehensive Income
For the 10 months ended 31st December 2014
Note | 10 months ended 31st Dec 2014 | 12 months ended 28th Feb 2014 | ||||
£ | £ |
| ||||
Group |
| |||||
| ||||||
Profit for the period attributable to equity holders of the Company | 264,237 | 12,200,282 |
| |||
| ||||||
Other comprehensive loss: |
| |||||
Changes in fair value of available for sale financial assets | 14(a) | - | (15,000,000) |
| ||
| ||||||
Total comprehensive income/(loss) for the period | 264,237 | (2,799,718) |
| |||
| ||||||
Company | |||||
Profit for the period attributable to equity holders of the Company | 5,402,344 | 44,703,358 | |||
Other comprehensive income | - | - | |||
Total comprehensive profit for the period | 11 | 5,402,344 | 44,703,358 | ||
Consolidated Statement of Financial Position
As at 31st December 2014
Note | 31st Dec 2014 | 28th Feb 2014 | |||||||
£ | £ | ||||||||
Non-current assets | |||||||||
Goodwill | 12 | 8,007,417 | 8,007,417 | ||||||
Property, plant and equipment | 13 | 721,525 | 822,739 | ||||||
Available for sale financial assets | 14(a) | 10,000,019 | 8,824,659 | ||||||
18,728,961 | 17,654,815 | ||||||||
Current assets | |||||||||
Inventories | 15 | 4,192,123 | 168,559 | ||||||
Trade and other receivables | 16 | 787,210 | 6,667,711 | ||||||
Cash and cash equivalents | 2,510,305 | 21,239,909 | |||||||
7,489,638 | 28,076,179 | ||||||||
Total assets | 26,218,599 | 45,730,994 | |||||||
Current liabilities | |||||||||
Trade and other payables | 17 | 838,384 | 6,615,535 | ||||||
Borrowings, including lease finance | 18 | 1,000,000 | - | ||||||
1,838,384 | 6,615,535 | ||||||||
Non-current liabilities | |||||||||
Borrowings, including lease finance | - | - | |||||||
- | - | ||||||||
Total liabilities | 1,838,384 | 6,615,535 | |||||||
Equity | |||||||||
Share capital | 23 | 1,058,388 | 1,058,388 | ||||||
Share premium account | 23 | 22,565,286 | 22,565,286 | ||||||
Merger reserve | 23 | - | 8,086,293 | ||||||
Retained earnings | 756,541 | 7,405,492 | |||||||
Total equity | 24,380,215 | 39,115,459 | |||||||
| Total equity and liabilities | 26,218,599 | 45,730,994 | |||||||
Approved by the Board on 30th April 2015 | |||||||||
N. Barattieri di San Pietro................................................. | |||||||||
Director
Company registration no. 03442280
Company Statement of Financial Position
As at 31st December 2014
Note | 31st Dec 2014 | 28th Feb 2014 | |||||||
£ | £ | ||||||||
Non-current assets | |||||||||
Property, plant and equipment | 13 | 728,963 | 823,633 | ||||||
Investments | 14(b) | 18,006,328 | 16,830,968 | ||||||
18,735,291 | 17,654,601 | ||||||||
Current assets | |||||||||
Trade and other receivables | 16 | 8,999,218 | 10,110,093 | ||||||
Cash and cash equivalents | 1,036,842 | 18,808,382 | |||||||
10,036,060 | 28,918,475 | ||||||||
Total assets | 28,771,351 | 46,573,076 | |||||||
Current liabilities | |||||||||
Trade and other payables | 17 | 1,576,073 | 9,780,661 | ||||||
Borrowings, including lease finance | 18 | - | - | ||||||
1,576,073 | 9,780,661 | ||||||||
Non-current liabilities | |||||||||
Borrowings, including lease finance | - | - | |||||||
- | - | ||||||||
Total liabilities | 1,576,073 | 9,780,661 | |||||||
Equity | |||||||||
Share capital | 23 | 1,058,388 | 1,058,388 | ||||||
Share premium account | 23 | 22,565,286 | 22,565,286 | ||||||
Merger reserve | 23 | - | 8,086,293 | ||||||
Retained earnings | 3,571,604 | 5,082,448 | |||||||
Total equity | 27,195,278 | 36,792,415 | |||||||
Total equity and liabilities | 28,771,351 | 46,573,076 | |||||||
Approved by the Board on 30th April 2015 | |||||||||
N. Barattieri di San Pietro................................................. | |||||||||
Director
Company registration no. 03442280
Consolidated and Company Statements of Cash Flows
For the 10 months ended 31st December 2014
Group | Company | |||||||
10 months ended 31st Dec 2014 | 12 months ended 28th Feb 2014 | 10 months ended 31st Dec 2014 | 12 months ended 28th Feb 2014 | |||||
£ | £ | £ | £ | |||||
Cash flows from operating activities | ||||||||
(Loss)/profit for the period before tax | (1,858) | 12,303,275 | 5,350,239 | 44,227,761 | ||||
Adjustments for: | ||||||||
Investment revenue | (493,727) | (15,063,052) | (7,763,727) | (42,756,665) | ||||
Finance costs | 3 | 100 | - | - | ||||
Loss on disposal of investments | - | 1,108 | - | 1,108 | ||||
Goodwill on acquisition less stamp duty paid | - | (368,287) | - | - | ||||
Profit on sale of available for sale financial assets | - | (111,213) | - | - | ||||
Fair value adjustment | - | (7,148,575) | - | - | ||||
Depreciation and amortisation | 125,037 | 148,181 | 94,670 | 113,604 | ||||
Increase in inventories | (4,023,564) | (13,748) | - | - | ||||
Decrease/(increase) in trade and other receivables | 5,893,986 | (4,834,599) | 326,464 | (8,849,164) | ||||
(Decrease)/increase in trade and other payables | (5,790,636) | 5,350,579 | (8,166,245) | (21,055,109) | ||||
| Cash used in operations | (4,290,759) | (9,736,231) | (10,158,599) | (28,318,465) | ||||
Interest paid | (3) | (100) | - | - | ||||
Corporation tax - consortium relief refunded | 266,095 | 3,292,776 | 798,173 | 2,375,362 | ||||
Net cash used in operating activities | (4,024,667) | (6,443,555) | (9,360,426) | (25,943,103) | ||||
Cash flows from investing activities | ||||||||
Purchase of property, plant & equipment | (23,823) | (51,691) | - | - | ||||
Increase in available for sale financial assets/investments | (1,175,360) | (8,824,655) | (1,175,360) | (8,824,655) | ||||
Acquisition of subsidiary, net of cash acquired | - | 10,502,191 | - | - | ||||
Interest received | 64,854 | 63,052 | 64,854 | 49,606 | ||||
Dividends received | 428,873 | 15,000,000 | 7,698,873 | 42,707,059 | ||||
Net cash (used in)/generated from investing activities | (705,456) | 16,688,897 | 6,588,367 | 33,932,010 | ||||
Cash flows from financing activities | ||||||||
Proceeds from issue of shares | - | 12,489,516 | - | 12,489,516 | ||||
Proceeds from borrowings | 1,000,000 | - | - | - | ||||
Repayment of borrowings | - | - | - | - | ||||
Repayment of finance leases | - | - | - | - | ||||
Dividends paid | (14,999,481) | (10,689,457) | (14,999,481) | (10,689,457) | ||||
Net cash (used in)/generated from financing activities | (13,999,481) | 1,800,059 | (14,999,481) | 1,800,059 | ||||
(Decrease)/increase in cash and cash equivalents | (18,729,604) | 12,045,401 | (17,771,540) | 9,788,966 | ||||
Cash and cash equivalents at the beginning of the period | 21,239,909 | 9,194,508 | 18,808,382 | 9,019,416 | ||||
Cash and cash equivalents at the end of the period | 2,510,305 | 21,239,909 | 1,036,842 | 18,808,382 | ||||
Consolidated and Company Statements of Changes in Equity
For the 10 months ended 31st December 2014
Called Up | Share | |||||||||||
Share | Premium | Merger | Retained | |||||||||
Group | Capital | Account | Reserve | Earnings | Total | |||||||
£ | £ | £ | £ | £ | ||||||||
As at 1st March 2013 | 668,091 | 18,552,361 | - | 20,894,667 | 40,115,119 | |||||||
Profit for the period | - | - | - | 12,200,282 | 12,200,282 | |||||||
Other comprehensive loss for the period: | ||||||||||||
Changes in fair value of available for sale financial assets | - | - | - | (15,000,000) | (15,000,000) | |||||||
Transactions with owners of the Company: | ||||||||||||
Issue of Ordinary shares | 390,297 | 4,012,925 | 8,086,293 | - | 12,489,515 | |||||||
Dividends | - | - | - | (10,689,457) | (10,689,457) | |||||||
As at 28th February 2014 | 1,058,388 | 22,565,286 | 8,086,293 | 7,405,492 | 39,115,459 | |||||||
As at 1st March 2014 | 1,058,388 | 22,565,286 | 8,086,293 | 7,405,492 | 39,115,459 | |||||||
Profit for the period | - | - | - | 264,237 | 264,237 | |||||||
Transactions with owners of the Company: | ||||||||||||
Dividends | - | - | (8,086,293) | (6,913,188) | (14,999,481) | |||||||
As at 31st December 2014 | 1,058,388 | 22,565,286 | - | 756,541 | 24,380,215 | |||||||
Called Up | Share | |||||||||||
Share | Premium | Merger | Retained | |||||||||
Company | Capital | Account | Reserve | Earnings | Total | |||||||
£ | £ | £ | £ | £ | ||||||||
As at 1st March 2013 | 668,091 | 18,552,361 | - | (28,931,453) | (9,711,001) | |||||||
Total comprehensive profit for the period | - | - | - | 44,703,358 | 44,703,358 | |||||||
Transactions with owners of the Company: | ||||||||||||
Issue of Ordinary shares | 390,297 | 4,012,925 | 8,086,293 | - | 12,489,515 | |||||||
Dividends | - | - | - | (10,689,457) | (10,689,457) | |||||||
As at 28th February 2014 | 1,058,388 | 22,565,286 | 8,086,293 | 5,082,448 | 36,792,415 | |||||||
As at 1st March 2014 | 1,058,388 | 22,565,286 | 8,086,293 | 5,082,448 | 36,792,415 | |||||||
Total comprehensive profit for the period | - | - | - | 5,402,344 | 5,402,344 | |||||||
Transactions with owners of the Company: | ||||||||||||
Dividends | - | - | (8,086,293) | (6,913,188) | (14,999,481) | |||||||
As at 31st December 2014 | 1,058,388 | 22,565,286 | - | 3,571,604 | 27,195,278 | |||||||
Notes to the Consolidated Financial Statements
For the 10 months ended 31st December 2014
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 have shortened their reporting periods to 31st December 2014 to be co-terminous with the ultimate parent undertaking Abu Dhabi Financial Group Limited. The amounts presented in the financial statements for the period ended 31st December 2014 are thus not entirely comparable to the comparative amounts.
During the period ended 31st December 2014 the Group adopted a number of new IFRS standards, interpretations, amendments and improvements to existing standards. These included IFRS10, IFRS11, IFRS12, IFRS13 and IAS1. 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 2015, but are not currently considered to be relevant to the Group (although they may affect the accounting for future transactions and events):
· IFRS 9, 'Financial Instruments', issued in November 2009 and effective from 1st January 2015. IFRS 9 represents the first phase of the IASB's project to replace IAS 39 'Financial Instruments: Recognition and Measurement'. It sets out the classification and measurement criteria for financial assets and liabilities and requires all financial assets, including assets currently classified under IAS 39 as available for sale, to be measured at fair value through profit and loss unless the assets can be classified as held at amortised cost. Qualifying equity investments held at fair value may have their fair value changes taken through other comprehensive income by election.
· IAS 19 (Revised), 'Employee Benefits' effective for periods beginning on or after 1st July 2014. These amendments are intended to provide a clearer indication of an entity's obligations resulting from the provision of defined benefit pension plan and how those obligations will affect its financial position, financial performance and cash flow.
The following new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year beginning 1st January 2015 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 the second and third phases 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 2017 but not yet adopted by the EU. This standard replaces IAS18, 'Revenue Recognition' and revenue recognition standards under US GAAP and aims to unify revenue recognition under IFRS and US GAAP. The standard focuses on entitlement to consideration as opposed to percentage completion under existing IFRS and introduces a five step approach to recognising income.
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 and Chester Square and also through the bank loan.
The Directors have prepared detailed cash flow projections for the period ending 31st December 2019 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 estimates of areas of uncertainty
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
Notes to the Consolidated Financial Statements
For the 10 months ended 31st December 2014 (Continued)
1. Principal accounting policies (continued)
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.
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.
Notes to the Consolidated Financial Statements
For the 10 months ended 31st December 2014 (Continued)
1. Principal accounting policies (continued)
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 profit.
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.
Notes to the Consolidated Financial Statements
For the 10 months ended 31st December 2014 (Continued)
1. Principal accounting policies (continued)
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.
Notes to the Consolidated Financial Statements
For the 10 months ended 31st December 2014 (Continued)
3. | Segmental information | ||||||||||
Segmental information is presented in respect of the Group's business segments. The business segments are based on the Group's corporate and internal reporting structure. Segment results and assets include items directly attributable to a segment as well as those that can be allocated to a segment on a reasonable basis. The segmental analysis of the Group's business as reported internally to management is as follows: | |||||||||||
Revenue | |||||||||||
10 months ended 31st Dec 2014 | 12 months ended 28th Feb 2014 | ||||||||||
Principal activities: | £ | £ | |||||||||
Development management | 3,554,800 | 900,705 | |||||||||
Interior design | 214,541 | 1,991,837 | |||||||||
Architectural design | 87,500 | 63,255 | |||||||||
3,856,841 | 2,955,797 | ||||||||||
(Loss)/profit before taxation | 10 months ended 31st Dec 2014 | 12 months ended 28th Feb 2014 | |||||||||
£ | £ | ||||||||||
Development management | 505,910 | 12,364,592 | |||||||||
Interior design | (585,943) | (105,086) | |||||||||
Architectural design | 78,175 | 43,769 | |||||||||
(1,858) | 12,303,275 | ||||||||||
Assets | 31st Dec 2014 | 28th Feb 2014 | |||||||||
£ | £ | ||||||||||
Development management | 26,017,628 | 45,138,754 | |||||||||
Interior design | 86,839 | 454,183 | |||||||||
Architectural design | 114,132 | 138,057 | |||||||||
26,218,599 | 45,730,994 | ||||||||||
Liabilities | 31st Dec 2014 | 28th Feb 2014 | |||||||||
£ | £ | ||||||||||
Development management | 365,962 | 5,259,612 | |||||||||
Interior design | 769,522 | 550,923 | |||||||||
Architectural design | 702,900 | 805,000 | |||||||||
| 1,838,384 | 6,615,535 | |||||||||
A geographical analysis of the Group's revenue, assets and liabilities is given below: | |||||||||||
Revenue | 10 months ended 31st Dec 2014 | 12 months ended 28th Feb 2014 | |||||||||
£ | £ | ||||||||||
United Kingdom | 3,880,379 | 2,536,571 | |||||||||
Saudi Arabia | (23,538) | 396,162 | |||||||||
USA | - | 23,064 | |||||||||
3,856,841 | 2,955,797 | ||||||||||
Included in the revenue above are revenues in respect of customers who account for over 10% of the Group's total revenue. | |||||||||||
10 months ended 31st Dec 2014 | 12 months ended 28th Feb 2014 | ||||||||||
£ | £ | ||||||||||
Customer A (Interior design) | (23,538) | 396,162 | |||||||||
Customer B (Development management) | 642,486 | - | |||||||||
Customer C (Interior design) | - | 707,113 | |||||||||
Customer D (Development management & interior design) | 438,462 | 326,669 | |||||||||
Customer E (Interior design) | - | 422,206 | |||||||||
Customer F (Development management) | 2,420,487 | 509,783 | |||||||||
Notes to the Consolidated Financial Statements
For the 10 months ended 31st December 2014 (Continued)
3. | Segmental information (continued) | |||||||||
Assets | 31st Dec 2014 | 28th Feb 2014 | ||||||||
£ | £ | |||||||||
United Kingdom | 26,218,599 | 45,618,042 | ||||||||
Saudi Arabia | - | 112,952 | ||||||||
26,218,599 | 45,730,994 | |||||||||
| ||||||||||
| ||||||||||
Liabilities | 31st Dec 2014 | 28th Feb 2014 | ||||||||
£ | £ | |||||||||
United Kingdom | 1,838,384 | 6,544,924 | ||||||||
Saudi Arabia | - | 70,611 | ||||||||
1,838,384 | 6,615,535 | |||||||||
4. | Investment revenue | 10 months | 12 months | |||||||
ended | ended | |||||||||
31st Dec 2014 | 28th Feb 2014 | |||||||||
£ | £ | |||||||||
Interest received | 64,854 | 63,052 | ||||||||
Dividends received | 428,873 | 15,000,000 | ||||||||
493,727 | 15,063,052 | |||||||||
5. | Profit on disposal of available for sale financial assets | 10 months | 12 months | |||||||
ended | ended | |||||||||
31st Dec 2014 | 28th Feb 2014 | |||||||||
£ | £ | |||||||||
Derecognition of available for sale financial assets | - | (7,148,575) | ||||||||
Change in fair value of available for sale financial assets previously recognised in Other Comprehensive Income | - | 7,259,788 | ||||||||
- | 111,213 | |||||||||
The profit on disposal of available for sale financial assets arose following the acquisition of Lancaster Gate (Hyde Park) Limited on 16th December 2013. The loss of £7.1m represented all gains recognised and booked to Other Comprehensive Income up to the time of derecognition of available for sale financial assets, as these gains are required to be transferred to the Consolidated Income Statement after the available for sale financial assets have been sold.
6. | Other gains | 10 months | 12 months | |||||||
ended | ended | |||||||||
31st Dec 2014 | 28th Feb 2014 | |||||||||
£ | £ | |||||||||
Written off share capital of dissolved dormant Group's subsidiaries | - | (1,108) | ||||||||
Negative goodwill arising on acquisition of Lancaster Gate (Hyde Park) Limited | - | 337,372 | ||||||||
- | 336,264 | |||||||||
7. | Finance costs | 10 months | 12 months | |||||||||||
ended | ended | |||||||||||||
31st Dec 2014 | 28th Feb 2014 | |||||||||||||
£ | £ | |||||||||||||
Interest on: | ||||||||||||||
Other interest | 3 | - | ||||||||||||
Tax penalties | - | 100 | ||||||||||||
3 | 100 | |||||||||||||
Notes to the Consolidated Financial Statements
For the 10 months ended 31st December 2014 (Continued)
8. | (Loss)/Profit before taxation | 10 months | 12 months | |||||||
ended 31st Dec 2014 | ended 28th Feb 2014 | |||||||||
£ | £ | |||||||||
(Loss)/Profit before taxation is stated after charging: | ||||||||||
Depreciation and amounts written off property, plant and equipment: | ||||||||||
Owned assets | 125,037 | 148,181 | ||||||||
Operating lease rentals: | ||||||||||
Land and buildings | 104,969 | 125,062 | ||||||||
Foreign exchange loss | - | 41 | ||||||||
Fees payable to the Company's auditors for: | ||||||||||
- the audit of the Company's annual accounts | 55,857 | 44,446 | ||||||||
Fees payable to the Company's auditors for other services to the Group: | ||||||||||
- the audit of the Company's subsidiaries | 33,600 | 42,828 | ||||||||
Total audit fees | 89,457 | 87,274 | ||||||||
Fees payable to the Company's auditors for: | ||||||||||
- taxation compliance services | - | 10,537 | ||||||||
- other taxation advisory services | 5,000 | 4,000 | ||||||||
- other services | 16,762 | 31,158 | ||||||||
Total other fees | 21,762 | 45,695 | ||||||||
9. | Employees | 10 months | 12 months | ||||||
ended | ended | ||||||||
31st Dec 2014 | 28th Feb 2014 | ||||||||
Number | Number | ||||||||
The average weekly number of employees (including Directors) during the year was: | |||||||||
Office and management | 12 | 12 | |||||||
Design and management | 12 | 11 | |||||||
24 | 23 | ||||||||
10 months ended 31st Dec 2014 | 12 months ended 28th Feb 2014 | ||||||||
Staff costs for the above employees: | £ | £ | |||||||
Wages and salaries | 1,691,496 | 1,821,228 | |||||||
Social security costs | 184,657 | 62,702 | |||||||
Other pension costs - money purchase schemes | 65,344 | 74,068 | |||||||
1,941,497 | 1,957,998 | ||||||||
Remuneration in respect of Directors was as follows: | 10 months ended 31st Dec 2014 | 12 months ended 28th Feb 2014 | |||||||
£ | £ | ||||||||
Aggregate emoluments (including benefits in kind) | 475,000 | 655,264 | |||||||
Consultancy fees | 100,050 | 57,150 | |||||||
Other fees | 25,000 | 40,000 | |||||||
600,050 | 752,414 | ||||||||
Company contribution to money purchase pension schemes | 27,500 | 23,354 | |||||||
Notes to the Consolidated Financial Statements
For the 10 months ended 31st December 2014 (Continued)
9. | Employees (Continued) | ||||||||
Remuneration for each Director (including benefits in kind) | 10 months ended 31st Dec 2014 | 12 months ended 28th Feb 2014 | |||||||
£ | £ | ||||||||
M. Kheriba | - | - | |||||||
J. Alseddiqi | - | - | |||||||
N. Barattieri di San Pietro | 416,667 | 213,000 | |||||||
K.B. Nilsson | 158,383 | 127,150 | |||||||
E.B. Harris | 25,000 | 30,000 | |||||||
M.F. Williams (resigned 27th March 2013) | - | 10,000 | |||||||
K. MacRae (resigned 19th June 2013) | - | 344,764 | |||||||
M.A. AlRafi (resigned 25th June 2013) | - | 10,000 | |||||||
A. de Rothschild (resigned 11th February 2014) | - | 17,500 | |||||||
600,050 | 752,414 | ||||||||
Remuneration of £25,000 (28th February 2014: £30,000) for Director E.B. Harris is payable to EC Harris LLP. | |||||||||
Remuneration in respect of the highest paid Director was as follows: | 10 months ended 31st Dec 2014 | 12 months ended 28th Feb 2014 | |||||||
£ | £ | ||||||||
Aggregate emoluments (including benefits in kind) | 416,667 | 344,764 | |||||||
Company contribution to money purchase pension scheme | 27,500 | 6,854 | |||||||
444,167 | 351,618 | ||||||||
The total emoluments of £416,667 (28th February 2014: £344,764) above includes compensation for loss of office of £nil (28th February 2014: £251,500) and bonus of £187,500 (28th February 2014: £nil).
The Directors consider that the key management personnel for reporting purposes as defined by IAS24 'Related Party Disclosures' are the Directors themselves only. | |||||||||
10. | Taxation | 10 months | 12 months | |||||||
ended | ended | |||||||||
31st Dec 2014 | 28th Feb 2014 | |||||||||
£ | £ | |||||||||
(a) Analysis of charge in year | ||||||||||
Current tax: | ||||||||||
Corporation tax credit | - | - | ||||||||
Adjustment in respect of prior periods | (347,727) | 311,298 | ||||||||
Total current tax | (347,727) | 311,298 | ||||||||
Deferred tax: | ||||||||||
Deferred tax charge/(credit) | 81,632 | (208,305) | ||||||||
Total deferred tax charge/(credit) | 81,632 | (208,305) | ||||||||
Total tax (credit)/charge | (266,095) | 102,993 | ||||||||
(b) Factors affecting the tax charge for the year | ||||||||||
The tax assessed for the year is lower than the standard rate of corporation tax in the UK of 21% (2014: 23%). | ||||||||||
The differences are explained below: | ||||||||||
10 months ended 31st Dec 2014 | 12 months ended 28th Feb 2014 | |||||||||
£ | £ | |||||||||
(Loss)/Profit on ordinary activities before tax | (1,858) | 12,303,275 | ||||||||
(Loss)/Profit on ordinary activities multiplied by the standard rate of corporation tax of 21% (2014: 23%) | (390) | 2,829,753 | ||||||||
Effects of: | ||||||||||
Expenses not deductible for tax purposes | 2,339 | 19,851 | ||||||||
Depreciation for the period in excess of capital allowances | 26,258 | 18,919 | ||||||||
Dividends and distributions received | (90,063) | (3,450,000) | ||||||||
Utilisation of tax losses | (314,450) | 666,704 | ||||||||
Other timing differences | (103,709) | (328,727) | ||||||||
Loss carried forward | 480,015 | 243,500 | ||||||||
Consortium relief in respect of prior periods | (347,727) | 311,298 | ||||||||
Current tax (credit)/charge for the period | (347,727) | 311,298 | ||||||||
Notes to the Consolidated Financial Statements
For the 10 months ended 31st December 2014 (Continued)
10. Taxation (continued)
(c) Factors that may affect future tax charges
The standard rate of corporation tax was reduced to 21% from 1st April 2014.
11. Profit of the parent company
As permitted by section 408 of the Companies Act 2006, the profit or loss element of the Parent Company Income Statement is not presented as part of these financial statements. The Group profit for the period ended 31st December 2014 of £264,237 (28th February 2014: £12,200,282) includes a profit of £5,402,344 (28th February 2014: £44,703,358), which was dealt with in the financial statements of the Company. | |
12. | Goodwill | ||||||||||
Group | 31st Dec 2014 | 28th Feb 2014 | |||||||||
£ | £ | ||||||||||
Cost | 14,940,474 | 14,940,474 | |||||||||
Amortisation and impairment | |||||||||||
At the beginning of the year | 6,933,057 | 6,933,057 | |||||||||
Impairment charge for the year | - | - | |||||||||
At the end of the year | 6,933,057 | 6,933,057 | |||||||||
Net book value | 8,007,417 | 8,007,417 | |||||||||
The Group performs an annual goodwill impairment review in accordance with IAS 36 'Impairment of Assets' based on its cash generating units (CGUs). The CGU that has associated goodwill allocated to it is the Group as a whole. This is the smallest identifiable group of assets that generate cash inflows to which goodwill is allocated. Although the interior design business is a separate CGU goodwill was not specifically allocated to it when the goodwill arose because it was treated as an integrated business when the Group was originally restructured. The Directors consider that it is now not appropriate to allocate goodwill to this CGU.
Recoverable amount
In accordance with IAS 36 the recoverable amount of the CGU is calculated, being the higher of value in use and fair value less costs to sell.
The fair value less costs to sell of the CGU is determined using cash flow projections derived from the business plan covering a five year period which has been approved by the Board. They reflect the Directors' expectations of the level and timing of revenue, expenses, working capital and operating cash flows, based on past experience and future expectations of business performance particularly future development projects.
Discount rates
The pre-tax discount rate applied to the cash flow projections are derived from the Group's weighted average cost of capital. The discount rate applied is 6% (28th February 2014: 6%) reflecting the future expected cost of capital for the Group.
Growth rates
Due to the nature of the Group's development business growth rates are not relevant. The cash flow projections assume a 100% probability of receiving a level of development fees over the five years and make assumptions on the probability of achieving certain development performance fee criteria.
The business growth rates have been assumed to be 5% (28th February 2014: nil) for the N Studio Limited interior design business.
Sensitivity analysis
The following percentage changes in assumptions would cause the recoverable amount to fall below the current carrying value:
• A 91.5% increase in the discount rate to 97.5% for the latter five year period • A 28% decrease in the development revenue cash flows over the five year period • A decrease to nil in the other interior design revenue cash flows over the five year period would not cause the recoverable amount to fall below the current carrying value. | |
Notes to the Consolidated Financial Statements
For the 10 months ended 31st December 2014 (Continued)
13. | Property, plant and equipment | ||||||||||
Fittings | |||||||||||
Group | Leasehold | and Office | Computer | ||||||||
Improvements | Equipment | Equipment | Total | ||||||||
Cost | £ | £ | £ | £ | |||||||
At 1st March 2013 | 1,115,434 | 70,672 | 208,469 | 1,394,575 | |||||||
Additions | - | 2,754 | 48,937 | 51,691 | |||||||
At 28th February 2014 | 1,115,434 | 73,426 | 257,406 | 1,446,266 | |||||||
Additions | - | 594 | 23,229 | 23,823 | |||||||
At 31st December 2014 | 1,115,434 | 74,020 | 280,635 | 1,470,089 | |||||||
Depreciation | |||||||||||
At 1st March 2013 | 236,677 | 45,643 | 193,026 | 475,346 | |||||||
Charge for the year | 113,604 | 10,544 | 24,033 | 148,181 | |||||||
At 28th February 2014 | 350,281 | 56,187 | 217,059 | 623,527 | |||||||
Charge for the year | 94,670 | 8,922 | 21,445 | 125,037 | |||||||
At 31st December 2014 | 444,951 | 65,109 | 238,504 | 748,564 | |||||||
| Net book value | |||||||||||
At 31st December 2014 | 670,483 | 8,911 | 42,131 | 721,525 | |||||||
At 28th February 2014 | 765,153 | 17,239 | 40,347 | 822,739 | |||||||
At 28th February 2013 | 878,757 | 25,029 | 15,443 | 919,229 | |||||||
Fittings | |||||||||||
Company | Leasehold | and Office | Computer | ||||||||
Improvements | Equipment | Equipment | Total | ||||||||
Cost | £ | £ | £ | £ | |||||||
At 1st March 2013 | 1,173,914 | - | - | 1,173,914 | |||||||
Disposals | - | - | - | - | |||||||
At 28th February 2014 | 1,173,914 | - | - | 1,173,914 | |||||||
Additions | - | - | - | - | |||||||
At 31st December 2014 | 1,173,914 | - | - | 1,173,914 | |||||||
Depreciation | |||||||||||
At 1st March 2013 | 236,677 | - | - | 236,677 | |||||||
Charge for the year | 113,604 | - | - | 113,604 | |||||||
At 28th February 2014 | 350,281 | - | - | 350,281 | |||||||
Charge for the year | 94,670 | - | - | 94,670 | |||||||
At 31st December 2014 | 444,951 | - | - | 444,951 | |||||||
| Net book value | |||||||||||
At 31st December 2014 | 728,963 | - | - | 728,963 | |||||||
At 28th February 2014 | 823,633 | - | - | 823,633 | |||||||
At 28th February 2013 | 937,237 | - | - | 937,237 |
There were no assets held under finance lease or hire purchase contracts.
Notes to the Consolidated Financial Statements
For the 10 months ended 31st December 2014 (Continued)
(a) | Available for sale financial assets | |||||||||||||
| ||||||||||||||
14. | Investments |
| ||||||||||||
Group | 31st Dec 2014 | 31st Dec 2014 | 28th Feb 2014 | 28th Feb 2014 |
| |||||||||
£ | £ | £ | £ |
| ||||||||||
| ||||||||||||||
At 1st March | 8,824,659 | 22,148,579 |
| |||||||||||
Dividend received | - | (15,000,000) |
| |||||||||||
Derecognition | - | (7,148,575) |
| |||||||||||
Increase in 1 Palace Street fair value | 1,175,360 | 8,824,655 |
| |||||||||||
Net movement transferred to/(from) comprehensive income | 1,175,360 | (13,323,920) |
| |||||||||||
| ||||||||||||||
At 31st December 2014 | 10,000,019 | 8,824,659 |
| |||||||||||
| ||||||||||||||
Net book value |
| |||||||||||||
At 31st December 2014 | 10,000,019 | 8,824,659 |
| |||||||||||
| ||||||||||||||
The increase in available for sale financial assets represents the additional investment in the 1 Palace Street Development.
The Company was committed to invest £10.0m into the 1 Palace Street Development. At 31st December 2014 the Company had paid the commitment.
The £15 investment in 33 Thurloe Square represents a 15% equity stake. The 33 Thurloe Square Development was sold during the period and the £15 investment will be refunded in the next financial year. |
| |||||||||||||
(b) | Other investments | ||||||||||||||||||||||
| Company |
| |||||||||||||||||||||
| Subsidiary | Other | Total |
| |||||||||||||||||||
| Undertakings | Investments |
| ||||||||||||||||||||
| £ | £ | £ |
| |||||||||||||||||||
| Cost |
| |||||||||||||||||||||
| At 1st March 2014 | 14,492,681 | 8,824,655 | 23,317,336 |
| ||||||||||||||||||
| Additions | - | 1,175,360 | 1,175,360 |
| ||||||||||||||||||
|
| ||||||||||||||||||||||
|
| ||||||||||||||||||||||
| As at 31st December 2014 | 14,492,681 | 10,000,015 | 24,492,696 |
| ||||||||||||||||||
|
| ||||||||||||||||||||||
| Impairment |
| |||||||||||||||||||||
| At 1st March 2014 | 6,486,368 | - | 6,486,368 |
| ||||||||||||||||||
| Impairment in the year | - | - | - |
| ||||||||||||||||||
|
| ||||||||||||||||||||||
|
| ||||||||||||||||||||||
| As at 31st December 2014 | 6,486,368 | - | 6,486,368 |
| ||||||||||||||||||
|
| ||||||||||||||||||||||
|
| ||||||||||||||||||||||
| Net book value as at 31st December 2014 | 8,006,313 | 10,000,015 | 18,006,328 |
| ||||||||||||||||||
|
| ||||||||||||||||||||||
|
| ||||||||||||||||||||||
| Net book value as at 28th February 2014 | 8,006,313 | 8,824,655 | 16,830,968 |
| ||||||||||||||||||
Notes to the Consolidated Financial Statements
For the 10 months ended 31st December 2014 (Continued)
(b) | Other investments (continued) | ||||||||||||||||||||||
| Company |
| |||||||||||||||||||||
| Subsidiary | Other | Total |
| |||||||||||||||||||
| Undertakings | Investments |
| ||||||||||||||||||||
| £ | £ | £ |
| |||||||||||||||||||
| Cost |
| |||||||||||||||||||||
| At 1st March 2013 | 14,492,681 | - | 14,492,681 |
| ||||||||||||||||||
| Additions | - | 8,824,655 | 8,824,655 |
| ||||||||||||||||||
|
| ||||||||||||||||||||||
|
| ||||||||||||||||||||||
| As at 28th February 2014 | 14,492,681 | 8,824,655 | 23,317,336 |
| ||||||||||||||||||
|
| ||||||||||||||||||||||
| Impairment |
| |||||||||||||||||||||
| At 1st March 2013 | 6,485,260 | - | 6,485,260 |
| ||||||||||||||||||
| Impairment in the year | 1,108 | - | 1,108 |
| ||||||||||||||||||
|
| ||||||||||||||||||||||
|
| ||||||||||||||||||||||
| As at 28th February 2014 | 6,486,368 | - | 6,486,368 |
| ||||||||||||||||||
|
| ||||||||||||||||||||||
|
| ||||||||||||||||||||||
| Net book value as at 28th February 2014 | 8,006,313 | 8,824,655 | 16,830,968 |
| ||||||||||||||||||
|
| ||||||||||||||||||||||
|
| ||||||||||||||||||||||
| Net book value as at 28th February 2013 | 8,007,421 | - | 8,007,421 |
| ||||||||||||||||||
(c) | Group shareholdings | ||||||||||||
The Group has shareholdings in the following companies, all incorporated in England and Wales: | |||||||||||||
Subsidiary undertakings | Holding | Proportion held | Nature of Business | ||||||||||
Waterloo Investments Limited | Ordinary shares | 100% | Development management services | ||||||||||
N Studio Limited | Ordinary shares | 100% | Interior design | ||||||||||
Northacre Development Management | Ordinary shares | 100% | Development management services | ||||||||||
Services Limited | |||||||||||||
Nilsson Architects Limited | Ordinary shares | 100% | Design architects | ||||||||||
Northacre Capital (1) Limited | Ordinary shares | 100% | Dormant | ||||||||||
Northacre Capital (3) Limited | Ordinary shares | 100% | Dormant | ||||||||||
Northacre Capital (5) Limited | Ordinary shares | 100% | Property development | ||||||||||
Northacre Capital (7) Limited | Ordinary shares | 100% | Property development | ||||||||||
Northacre International Limited | Ordinary shares | 100% | Dormant | ||||||||||
Lancaster Gate (Hyde Park) Limited | Ordinary shares | 100% | Property development | ||||||||||
Intarya Limited changed its name to N Studio Limited on 9th October 2014. | |||||||||||||
The holding in Lancaster Gate (Hyde Park) Limited is held by Northacre Capital (5) Limited. | |||||||||||||
Notes to the Consolidated Financial Statements
For the 10 months ended 31st December 2014 (Continued)
15. | Inventories | Group | ||||||||||
31st Dec 2014 | 28th Feb 2014 | |||||||||||
£ | £ | |||||||||||
Stock | 2,928 | 9,099 | ||||||||||
Work in progress | 4,189,195 | 159,460 | ||||||||||
4,192,123 | 168,559 | |||||||||||
The Company had no stock or work in progress in either the prior or current reporting period.
| ||||||||||||
16. | Trade and other receivables | Group | Company | |||||||||
31st Dec 2014 | 28th Feb 2014 | 31st Dec 2014 | 28th Feb 2014 | |||||||||
£ | £ | £ | £ | |||||||||
Trade receivables | 31,568 | 3,763,209 | - | - | ||||||||
Amounts owed by group undertakings | - | - | 8,567,254 | 7,096,422 | ||||||||
Other receivables | 220,038 | 2,734,177 | 110,908 | 2,891,453 | ||||||||
Prepayments and accrued income | 535,604 | 170,325 | 321,056 | 122,218 | ||||||||
787,210 | 6,667,711 | 8,999,218 | 10,110,093 | |||||||||
At the period end there was no provision for doubtful debts (28th February 2014: £nil). Included within other receivables is a total of £nil (28th February 2014: £1,459,774) which represented amounts paid on behalf of Bassamey Property Holdings Limited, a vehicle which acquired the 33 Thurloe Square project. The shareholder loan was repaid following the sale of the project in June 2014.
| ||||||||||||
A deferred tax asset of £nil (28th February 2014: £208,305) has been recognised on losses carried forward and is included in other receivables. | ||||||||||||
17. | Trade and other payables | Group | Company | |||||||||
31st Dec 2014 | 28th Feb 2014 | 31st Dec 2014 | 28th Feb 2014 | |||||||||
£ | £ | £ | £ | |||||||||
Trade payables | 67,555 | 297,211 | 34,720 | 54,223 | ||||||||
Amounts owed to group undertakings | - | - | 1,141,065 | 8,411,065 | ||||||||
Social security and other taxes | 199,440 | 534,829 | 130,186 | 16,092 | ||||||||
Other payables | 2,064 | 5,055 | 1,589 | 2,270 | ||||||||
Accruals and deferred income | 569,325 | 5,778,440 | 268,513 | 1,297,011 | ||||||||
838,384 | 6,615,535 | 1,576,073 | 9,780,661 | |||||||||
18. | Borrowings, including lease finance | Group | Company | |||||||||
Current Liabilities | 31st Dec 2014 | 28th Feb 2014 | 31st Dec 2014 | 28th Feb 2014 | ||||||||
£ | £ | £ | £ | |||||||||
Bank loan | 1,000,000 | - | - | - | ||||||||
1,000,000 | - | - | - | |||||||||
A loan facility of £3,150,000 was made available by the Royal Bank of Scotland from the 19th September 2014 to Northacre Capital (7) Limited in respect of the property at 22 Prince Edward Mansions. The loan is available on a drawdown basis and as at 31st December 2014 £1,000,000 was drawn. The loan incurs interest at 3.25% above the LIBOR rate and is charged quarterly. The loan is due to be repaid the earlier of the latest expiry date of the current interest period outstanding as at the date of completion of sale of the property or the date which falls 18 months after the date on which the loan is drawn. The loan is expected to be repaid in full prior to the end of the next financial year. The loan is secured via a first legal charge over the property included within inventories under the heading of work in progress, a guarantee for £120,000 given by Northacre PLC and a charge over certain cash balances. | ||||||||||||
19. | Corporation tax | Group | Company | |||||||||
31st Dec 2014 | 28th Feb 2014 | 31st Dec 2014 | 28th Feb 2014 | |||||||||
£ | £ | £ | £ | |||||||||
Corporation Tax | - | - | - | - | ||||||||
- | - | - | - | |||||||||
Notes to the Consolidated Financial Statements
For the 10 months ended 31st December 2014 (Continued)
20. | Future financial commitments | |||||||||||
Operating leases | Group | Company | ||||||||||
31st Dec 2014 | 28th Feb 2014 | 31st Dec 2014 | 28th Feb 2014 | |||||||||
£ | £ | £ | £ | |||||||||
Land & Buildings | Land & Buildings | Land & Buildings | Land & Buildings | |||||||||
Net amount payable on operating leases which expire: | ||||||||||||
Within one year | 147,975 | 147,975 | 147,975 | 147,975 | ||||||||
In two to five years | 591,900 | 591,900 | 591,900 | 591,900 | ||||||||
In over five years | 206,760 | 330,815 | 206,760 | 330,815 | ||||||||
946,635 | 1,070,690 | 946,635 | 1,070,690 | |||||||||
Group | Company | |||||||||||
Operating leases | 31st Dec 2014 | 28th Feb 2014 | 31st Dec 2014 | 28th Feb 2014 | ||||||||
£ | £ | £ | £ | |||||||||
Other | Other | Other | Other | |||||||||
Net amount payable on operating leases which expire: | ||||||||||||
Within one year | 29,148 | 31,804 | 12,920 | 12,920 | ||||||||
In two to five years | 7,042 | 33,465 | 6,460 | 19,380 | ||||||||
In over five years | - | - | - | - | ||||||||
36,190 | 65,269 | 19,380 | 32,300 | |||||||||
21. | Capital commitments | ||||||||||||
At the reporting date there were no outstanding commitments for capital expenditure. | |||||||||||||
22. | Earnings per share | ||||||||||||
Profit per share of 0.62p (28th February 2014: 39.51p) is calculated on the profit attributable to Ordinary shares of £264,237 (28th February 2014: £12,200,282) divided by the weighted number of Ordinary shares in issue during the period. | |||||||||||||
Computation of basic earnings per share: | 31st Dec 2014 | 28th Feb 2014 | |||||||||||
Net profit | £264,237 | £12,200,282 | |||||||||||
Weighted average number of shares outstanding | 42,335,538 | 30,879,049 | |||||||||||
Basic profit per share | 0.62p | 39.51p | |||||||||||
Diluted profit per share | 0.62p | 39.51p | |||||||||||
There were no potentially dilutive instruments in issue during the current or preceding period. All amounts shown relate to continuing operations. | |||||||||||||
23. | Equity |
| ||||||||||||
| ||||||||||||||
Share capital | 31st Dec 2014 | 28th Feb 2014 | ||||||||||||
£ | £ |
| ||||||||||||
| ||||||||||||||
Called up, allotted and fully paid: |
| |||||||||||||
42,335,538 (28th February 2014: 42,335,538) Ordinary shares of 2.5p each | 1,058,388 | 1,058,388 |
| |||||||||||
| ||||||||||||||
1,058,388 | 1,058,388 |
| ||||||||||||
| ||||||||||||||
Share premium account and reserves | Share premium | Merger reserve |
| |||||||||||
£ | £ |
| ||||||||||||
| ||||||||||||||
At 1st March 2014 | 22,565,287 | 8,086,293 |
| |||||||||||
Dividends paid | - | (8,086,293) |
| |||||||||||
| ||||||||||||||
At 31st December 2014 | 22,565,287 | - |
| |||||||||||
| ||||||||||||||
The share premium account represents the incremental paid up capital above the nominal value of the Ordinary shares of 2.5p issued.
|
| |||||||||||||
The merger reserve was created in December 2013 on the issue of 10,433,927 shares to Spadille Limited in consideration for the acquisition of NTA CB |
| |||||||||||||
Notes to the Consolidated Financial Statements
For the 10 months ended 31st December 2014 (Continued)
23. Equity (continued)
Limited (Cash Box Acquisition) with sole assets of £8,347,142. NTA CB Limited has been dissolved following the completion of the transaction. The merger reserve was cancelled on declaration of dividends in August 2014.
24. Dividends
31st Dec 2014 | 28th Feb 2014 | |||||||||||||
£ | £ |
| ||||||||||||
| ||||||||||||||
A special dividend paid during the period of 35.43p (28th February 2014: 40p) | 14,999,481 | 10,689,457 |
| |||||||||||
| ||||||||||||||
14,999,481 | 10,689,457 |
| ||||||||||||
| ||||||||||||||
No further dividends have been declared prior to the approval of these financial statements and the Board will continue to actively consider the payment of dividends.
|
| |||||||||||||
25. Contingent liabilities
The Company is included in a group registration for VAT purposes and is therefore jointly and severally liable for all other group companies' VAT liabilities amounting to £nil (28th February 2014: £477,048).
26. | Related party transactions | |||||||||||
Group | ||||||||||||
The Group's related parties as defined by International Accounting Standard 24 (revised), the nature of the relationship and the amount of transactions | ||||||||||||
with them during the period were as follows: | ||||||||||||
Nature of | 10 months ended 31st Dec 2014 | 12 months ended 28th February 2014 | ||||||||||
Related Party | Relationship | £ | £ | £ | £ | Nature of Transactions | ||||||
Total transactions in the period | Balance at the period end | Total transactions in the year | Balance at the year end | |||||||||
K. Nilsson | 1 | 100,050 | - | 57,150 | (57,150) | Consultancy fees for services | ||||||
provided for the 1 Palace Street project for the period March 2014 to December 2014. The consultancy fees were invoiced to Palace Revive Development Limited and paid by that company post year end | ||||||||||||
E.B. Harris | 2 | 25,000 | (25,000) | 30,000 | (30,000) | Non-executive Directors' fees for | ||||||
the March 2014 to December 2014 invoiced from E.C. Harris LLP | ||||||||||||
M. Williams | 3 | - | - | 10,000 | - | Non-executive Directors' fees for | ||||||
March 2013 | ||||||||||||
M.A. AlRafi | 4 | - | - | 10,000 | - | Executive Directors' fees for the | ||||||
period March 2013 to June 2013 | ||||||||||||
M.A. AlRafi | 4 | - | - | - | (975,000) | Bonus of £1,000,000 was payable | ||||||
from The Lancasters Development dividends. £25,000 was paid on 28th November 2012 and the balance of £975,000 was paid on 28th March 2014 | ||||||||||||
A. de Rothschild | 5 | - | (17,500) | 17,500 | (17,500) | Non-executive Directors' fees for | ||||||
the period July 2013 to February 2014 | ||||||||||||
ADCM Limited | 6 | 1,042,466 | - | 1,100,000 | - | Consultancy fees charged for the | ||||||
period March 2014 to December 2014 with £1,200,000 being paid in the period | ||||||||||||
ADCM Limited | 6 | 63,310 | 1,882 | 116,544 | 27,596 | Expenses charged by ADCM | ||||||
Limited as per the consultancy agreement. £1,882 represents a credit from ADCM Limited outstanding at the period end | ||||||||||||
Notes to the Consolidated Financial Statements
For the 10 months ended 31st December 2014 (Continued)
26. | Related party transactions (continued) | ||||||||||||||||||||
Nature of | 10 months ended 31st Dec 2014 | 12 months ended 28th February 2014 | |||||||||||||||||||
Related Party | Relationship | £ | £ | £ | £ | Nature of Transactions | |||||||||||||||
Total transactions in the period | Balance at the period end | Total transactions in the year | Balance at the year end | ||||||||||||||||||
Palace Revive | 7 | - | - | 2,705,004 | - | Development management fees | |||||||||||||||
Development Limited | invoiced for the period January 2014 to December 2014 as per the development management agreement. £2,705,004 was received in advance in the prior year for the period January 2014 to December 2014 | ||||||||||||||||||||
Palace Revive | 7 | 166,317 | - | 58,949 | 10,770 | Expenses paid on behalf of Palace | |||||||||||||||
Development Limited | Revive Development Limited. The £10,770 at the prior year end represented expenses paid but not reclaimed | ||||||||||||||||||||
Palace Real Estate | 8 | 1,175,360 | 10,000,000 | 8,824,640 | 8,824,640 | Amount invested by Northacre PLC | |||||||||||||||
Partners LP | into Palace Real Estate Partners LP to develop the 1 Palace Street project | ||||||||||||||||||||
Nature of Relationships |
| ||||||||||||||||||||
1 | K.B. Nilsson is a Director of the Company. |
| |||||||||||||||||||
2 | E.B. Harris is a Director of the Company, and a member of E.C. Harris LLP. |
| |||||||||||||||||||
3 | M. Williams was a Director of the Company (resigned on 27th March 2013). |
| |||||||||||||||||||
4 | M.A. AlRafi was a Director of the Company (resigned on 25th June 2013). |
| |||||||||||||||||||
5 | A. de Rothschild was a Director of the Company (resigned on 11th February 2014) |
| |||||||||||||||||||
6 | ADCM Limited is a fully owned subsidiary of ADFG, the Group's ultimate parent company. |
| |||||||||||||||||||
7 | Palace Revive Development Limited is a company set up to develop the 1 Palace Street Development and is controlled by ADCM Limited. |
| |||||||||||||||||||
8 | Palace Real Estate Partners LP is a partnership that controls Palace Revive Development Limited. Northacre PLC is a limited member of Palace Real Estate |
| |||||||||||||||||||
Partners LP. |
| ||||||||||||||||||||
Company | ||||||||||||
The Directors' and pension fund transactions in the Company are included in the Group disclosure above. In addition to these, the Company has the following related party transactions as defined by International Accounting Standard 24 (revised). | ||||||||||||
Nature of | 10 months ended 31st Dec 2014 | 12 months ended 28th February 2014 | ||||||||||
Related Party | Relationship | £ | £ | £ | £ | Nature of Transactions | ||||||
Total transactions in the period | Balance at the year period | Total transactions in the year | Balance at the year end | |||||||||
Group entities | 1 | 216,712 | - | 231,000 | - | Management fees receivable | ||||||
in the period from Group | ||||||||||||
subsidiaries provided at arm's length | ||||||||||||
Group entities | 1 | (42,655) | - | (60,000) | - | Management fees payable in | ||||||
the period to Group subsidiaries provided at arm's | ||||||||||||
length | ||||||||||||
Nature of Relationships | ||||||||||||
1 | The Group entities are wholly owned subsidiaries of the Company. | |||||||||||
The balances at the reporting date are shown under notes 16 and 17 of the Consolidated Financial Statements. | ||||||||||||
27. Immediate and ultimate parent undertakings
The immediate and ultimate parent undertakings are Spadille Limited, a company incorporated in England and Wales, and Abu Dhabi Financial Group LLC, a company incorporated in United Arab Emirates, respectively.