REG - Local Shopping REIT - Final Results <Origin Href="QuoteRef">LSR.L</Origin> - Part 2
18/12/2014 07:21
- Part 2: For the preceding part double click ID:nRSR1156Aa
commencing on or after:
IFRS 9 (Financial Instruments (revised)) - not yet endorsed 1 January 2014
Amendment to IAS 32 (Financial Instruments: Presentation) - endorsed 1 January 2014
Amendment to IAS 39 (Financial instruments:
Recognition and Measurement) - not yet endorsed 1 January 2014
IFRS 10 Consolidated Financial Statements and IAS 27 (2011) Separate Financial Statements
1 January 2014
IFRS 11 Joint Arrangements and Amendments
to IAS 28 (2008) Investments in Associates and Joint Ventures 1 January 2014
IFRS 12 Disclosure of Interest in Other Entities 1 January 2014
IFRS 15 Revenue from Customers' Contracts 1 January 2017
Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27) 1 January 2014
IFRIC Interpretation 21 Levies 1
January 2014
2. Disposal of subsidiary companies
During the year the company disposed of two subsidiaries, NOS 2 Limited and NOS 3 Limited by the sale of their entire share
capital.
The loss on sale was calculated as follows:
Sale proceeds 11,100
Deduct:
Assets of the subsidiaries
Properties 78,199
Debtors and prepayments 104
Cash 1,350
79,653
Liabilities of the subsidiaries
Creditors and accruals (1,319)
Bank loans (66,739)
(68,058)
Net assets of subsidiaries 11,595
Fees and other costs 817
Net loss (1,312)
3. Administrative Expenses
a) The following fees have been paid to the Group's Auditors:
2014 2013
£000 £000
Auditors' remuneration for audit services:
Audit of parent Company 37 34
Audit related assurance services 19 16
Statutory audit of subsidiaries 43 52
Auditors' remuneration for non-audit services:
Tax services 27 37
Other services supplied 15 10
The other services supplied related to the disposal under project Minard of NOS 2 Limited and NOS 3 Limited and in 2013
relate to professional advice received in connection with the strategic review and restructure.
b) Included in administrative expenses are staff costs and directors' remuneration.
The average number of persons employed by the Group was as follows:
2014 2013
Number of Number of
Employees Employees
Administration - 11
The average shown above for 2013 is for the full year. For the period from October 2012 to June 2013, when all the existing
employees either left or were transferred to Internos Global Investors Limited, the average was 15. From July 2013 onwards
the average has been nil.
The aggregate payroll costs of these people were as follows:
2014 2013
£000 £000
Wages and salaries - 1,024
Payments under compromise agreements - 965
Social security costs - 157
Other pension costs - 79
Equity settled share-based payments - -
- 2,225
Directors' emoluments are disclosed separately in the Remuneration Report.
c) Share Awards
There were no material share-based payment arrangements during the period.
d) Non-recurring items
IAS 1 (Revised) - "Presentation of financial statements" requires material items of income and expenditure to be disclosed
separately. The amounts are items which, in management's opinion, need to be disclosed by virtue of their size or incidence
in order for the user to obtain a proper understanding of the financial information.
Included in the administration costs are charges arising from the reconstruction following the strategic review, and are
non-recurring:
In administration costs:
2014 2013
£000 £000
Paid to directors under compromise agreements - 772
Employer's NI on the above payments - 15
Paid to employees under compromise agreements - 193
Employer's NI on the above payments - 6
Legal, professional and advisory fees - 912
Dilapidations provision on termination of Company's office lease - 39
- 1,937
Included within financial costs:
Accelerated amortisation of loan fees - 312
- 2,249
4. Net Other Income
2014 2013
£000 £000
Other income 5 22
Other expenses - -
5 22
5. Net Financing Costs
2014 2013
£000 £000
Interest receivable 3 4
Interest receivable excluding fair value movements 3 4
Fair value gains on derivative financial instruments (note 19) 2,267 2,753
Financing income 2,270 2,757
Bank loan interest (7,366) (7,436)
Amortisation of loan arrangement fees (146) (143)
Write off of loan arrangement fees - (313)
Head rents treated as finance leases (54) (55)
Financing expenses excluding fair value movements (7,566) (7,947)
Fair value losses on derivative financial instruments (note 19) - -
Financing expenses (7,566) (7,947)
Net financing costs (5,296) (5,190)
6. Taxation
2014 2013
£000 £000
Profit\(loss) before tax 1,206 (6,071)
Corporation tax in the UK of 22% (2013: 23.5%) 265 (1,427)
Tax relief available from REIT status (1,387) (1,199)
Effects of:
Revaluation deficit and other non-deductible items 391 2,004
Deferred tax asset not recognised 731 622
- -
Factors that may affect future current and total tax charges
The March 2013 UK Budget announced that the UK corporation tax rate will reduce to 20% by 2015. Reductions in the rate from
23% to 21% (effective from 1 April 2014) and 20% (effective from 1 April 2015) were substantively enacted on 2 July 2013.
This would reduce the Company's future tax charge accordingly.
From 11 May 2007, the Group elected to join the UK REIT regime. As a result, the Group will be exempt from corporation tax
on the profits and gains from its property investment business from this date, provided it continues to meet certain
conditions. Non-qualifying profits and gains of the Group (the residual business) continue to be subject to corporation
tax. The directors consider that all the rental income post-11 May 2007 originates from the Group's tax exempt business.
Due to the availability of losses no provision for corporation tax has been made in these accounts. The deferred tax asset
not recognised relating to these losses can be carried forward indefinitely. It is not anticipated that sufficient profits
from the residual business will be generated in the foreseeable future to utilise the losses carried forward as the current
year losses will be adequate to cover foreseeable profits. The unprovided deferred tax asset at 30 September 2014 was
£3,224,000 (2013: £2,648,000).
7. Property, Plant and Equipment
Leasehold Fixtures Computer
Improvements and Fittings Equipment Total
£000 £000 £000 £000
Cost
At 1 October 2012 167 41 72 280
Additions
Disposals (7) (7)
At 30 September 2013 167 41 65 273
Additions - - - -
Dsposals (167) (41) (65) (273)
At 30 September 2014 - - - -
Depreciation
At 1 October 2012 76 22 56 154
Charge for year 91 19 13 123
Dsposals (4) (4)
At 30 September 2013 167 41 65 273
Charge for year
Written back on disposals (167) (41) (65) (273)
At 30 September 2014 - - - -
Net book value
At 30 September 2014 - - - -
At 30 September 2013 - - - -
At 30 September 2012 91 19 16 126
8. Investment Properties
Freehold Leasehold
Investment Investment
Properties Properties Total
£000 £000 £000
At 30 September 2012 144,844 33,265 178,109
Additions 1,434 259 1,693
Disposals (1,159) (83) (1,242)
Fair value adjustments (7,473) (1,305) (8,778)
(2,857) (818) (3,675)
At 30 September 2013 134,789 31,318 166,107
Additions 51 994 1,045
Disposals (68,217) (13,878) (82,095)
Fair value adjustments 653 (1,149) (496)
Investment properties held for sale 1,487 153 1,640
At 30 September 2014 68,763 17,438 86,201
The investment properties have all been revalued to their fair value at 30 September 2014.
At the half year and year end, all properties acquired in those six months, together with a sample selected by the valuers
of 25% of the portfolio, at the half year and at the year end have been valued by Allsop LLP, a firm of independent
Chartered Surveyors. The valuations were undertaken in accordance with the Royal Institution of Chartered Surveyors
Appraisal and Valuation Standards on the basis of market value. Market value is defined as the estimated amount for which a
property should exchange on the date of valuation between a willing buyer and a willing seller in an arm's length
transaction, after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.
The disposals balance includes properties at carrying value of £78.2m that were disposed of as part of the NOS 2 and NOS 3
transaction.
The remainder of the portfolio has been valued on the basis of market value by the directors who have an appropriate
recognised professional qualification and recent experience in the location and category of the property being valued.
All rental income recognised in the Income Statement is generated by the investment properties held and all direct
operating expenses incurred resulted from investment properties that generated rental income.
A reconciliation of the portfolio valuation to the total value given in the Balance Sheet for investment properties is as
follows:
2014 2013
£000 £000
Portfolio valuation 87,564 168,860
Investment properties held for sale (2,035) (3,675)
Head leases treated as investment properties held under finance leases per IAS 17 672 922
Total per Balance Sheet 86,201 166,107
9. Investments in Jointly Controlled Entities
The Group has the following investments in jointly controlled entities:
2014 2013
Country Ownership Country Ownership
Local Parade Investments LLP United Kingdom nil United Kingdom nil
Gracechurch Commercial Investments Limited United Kingdom 50% United Kingdom 50%
On 26 November 2010 an agreement was entered into with Local Parade Investments LLP ("LPI"), a newly incorporated entity.
The initial investment made was £20. The principal activity of the entity is the acquisition and management of retail
parades. This investment was disposed of as part of the reconstruction following the strategic review, in July 2013. This
is now reflected in discontinued operations (note 25).
On 28 September 2011 an agreement was entered into with Gracechurch Commercial Investments Limited ("Gracechurch"), a newly
incorporated entity. The initial investment made was £500,000. The principal activity of the entity is to manage properties
for investment purposes. During the year the entire portfolio of Gracechurch was disposed of, and since the year end the
company has commenced the process of a members' voluntary liquidation.
Gracechurch LPI Total
£000 £000 £000
Cost
At 30 September 2012 641 3,429 4,070
Equity investments - - -
Loan advances - 317 317
Share of results, net of tax (134) 187 53
Distributions received - (681) (681)
Disposal (3,252) (3,252)
At 30 September 2013 507 - 507
Equity investments - - -
Loan advances - -
Share of results, net of tax (4) (4)
Distributions received (210) (210)
Investment disposed of -
At 30 September 2013 293 - 293
The summarised financial information in respect of the Group's share of the jointly controlled entities is shown below.
Year ended 30 September 2013:
Gracechurch LPI Total
£000 £000 £000
Non-current assets 1,019 - 1,019
Current assets 44 - 44
Non-current liabilities (491) - (491)
Current liabilities (65) - (65)
507 - 507
Represented by:
Capital 500 - 500
Loans 210 - 210
Brought forward share of results (68) - (68)
Share of results, net of tax (135) - (135)
Group's share of net assets 507 - 507
Gracechurch LPI Total
£000 £000 £000
Net rental income 91 544 635
Property expenses (26) (101) (127)
Administrative expenses (14) (24) (38)
Change in fair value of investment properties (139) 22 (117)
Net interest payable (54) (252) (306)
Movement in fair value of financial derivatives 8 (7) 1
Profit\(Loss) on disposal of investment properties - 5 5
Tax - -
(134) 187 53
Year ended 30 September 2014
Gracechurch LPI Total
£000 £000 £000
Current assets 317 - 317
Current liabilities (24) - (24)
293 - 293
Represented by:
Capital 500 - 500
Brought forward share of results (203) - (203)
Share of results, net of tax (4) - (4)
Group's share of net assets 293 - 293
Gracechurch LPI Total
£000 £000 £000
Net rental income 84 84
Property expenses (11) (11)
Administrative expenses (13) (13)
Change in fair value of investment properties -
Net interest payable (26) (26)
Movement in fair value of financial derivatives 9 9
Profit on disposal of investment properties (49) (49)
Tax 2 - 2
(4) - (4)
10. Other investments
On 8 March 2012, the Group entered into a partnership and property advisory agreement with Local Retail Fund GP Limited, a
newly incorporated entity. The initial investment made was £45. The principal activity of the entity is the acquisition and
management of a diversified portfolio of local retail property in the UK. As part of the restructuring following strategic
review, this investment was disposed of in July 2013.
Total
£000
Fair value
At 30 September 2012 909
Disposals (909)
At 30 September 2013 -
At 30 September 2014 -
Impairment losses
At 30 September 2012 -
Charge for the year (184)
Disposals 184
At 30 September 2013 -
At 30 September 2014 -
Net book value
At 30 September 2014 -
At 30 September 2013 -
At 30 September 2012 909
11 Trade and Other Receivables
2014 2013
£000 £000
Trade receivables 1,100 2,822
Other receivables 1,640 711
Prepayments 721 1,251
3,461 4,784
12. Cash
2014 2013
£000 £000
Cash in the Statement of Cash Flows 15,662 6,626
Included in bank balances are amounts held pending the next interest payment due in October 2014. Until the interest
payment has been deducted from these balances the cash is not available for use by the Group. At the year end the amount
held on such account was £1,240,306 (2013: £1,905,672) with accruals for interest due of £676,647 (2013: £1,493,409)
13. Interest Bearing Loans and Borrowings
2014 2013
£000 £000
Non-current liabilities
Secured bank loans 63,961 134,939
Loan arrangement fees (319) (576)
63,642 134,363
Current liabilities
Current portion of secured bank loans 1,164 -
All bank borrowings are secured by fixed charges over certain of the Group's property assetsand floating charges over the
companies which own the assets charged.
As part of the NOS 2 and NOS 3 transaction, loan balances of £66.7m were disposed of as part of the net assets of those
companies.
For more information about the Group's exposure to interest rate risk, see note 20.
14. Trade and Other Payables
2014 2013
£000 £000
Trade payables 399 929
Other taxation and social security 5 444
Other payables 967 1,005
Accruals and deferred income 1,948 4,121
3,319 6,499
Other payables include rent deposits held in respect of commercial tenants of £469,000 (2013: £862,000).
15. Leasing
Obligations Under Finance leases
Finance lease liabilities on head rents are payable as follows:
Minimum Lease Payment Interest Principal
£000 £000 £000
At 30 September 2012 6,864 (5,942) 922
(Payments)/charge (55) 55 -
At 30 September 2013 6,809 (5,887) 922
Disposals (2,028) 1,778 (250)
(Payments)/charge (54) 54 -
At 30 September 2014 4,727 (4,055) 672
In the above table, interest represents the difference between the carrying amount and the contractual liability/cash
flow.
All leases expire in more than five years.
16. Capital and Reserves
Share Capital
2014 2013
Ordinary 20p Shares Ordinary 20p Shares
Number Amount Number Amount
000 £000 000 £000
Allotted, called up and fully paid 91,670 18,334 91,670 18,334
Investment in Own Shares
At the year end, 9,164,017 shares were held in treasury (2013: 9,164,017).
The number of shares held by the Company's Employee Benefit Trust, LSR Trustee Limited at the year end was 1,096,545 (2013:
1,096,545). During the year the EBT transferred no shares (2013: Nil) to employees on the vesting of awards under the Long
Term Incentive Plan. During the year the EBT transferred no shares to employees on the exercise of awards under the
Company's Share Option Scheme.
Reserves
The value of shares issued to purchase Gilfin Property Holdings Limited in excess of their nominal value has been shown as
a separate reserve in accordance with the Companies Act 2006.
Capital Redemption Reserve
The capital redemption reserve arose in prior years on the cancellation of 8,822,920 Ordinary 20p Shares.
Calculation of Net Asset Value Per Share (NAV)
2014 2013
£000 £000
Net assets 34,832 33,626
Fair value of derivative financial instruments (see note 19) 4,022 6,289
Adjusted net assets 38,854 39,915
2014 2013
Number Number
Allotted, called up and fully paid shares 91,670 91,670
Treasury shares (9,164) (9,164)
Number of shares 82,506 82,506
NAV per share 42p 41p
Adjusted NAV per share 47p 48p
17. Dividends
The following dividends were paid during the current and previous year.
Dividend Total payment Classification
Date paid per share £000 of dividend
31-Dec-12 2.0 pence 1,628 PID
Under the REIT legislation, the Company's dividends are divided into two components, known as Property Income Distributions
("PID") and non-Property Income Distributions ("non-PID")
18. Earnings Per Share
Basic Earnings Per Share
The calculation of basic earnings per share was based on the loss attributable to Ordinary Shareholders and a weighted
average number of Ordinary Shares outstanding, calculated as follows:
Profit/(Loss) Attributable to Ordinary Shares
2014 2013
£000 £000
Profit\(Loss) for the year 1,206 (6,071)
Profit for the year from discontinued operations - (345)
Profit\(Loss) on continuing operations for the year 1,206 (6,416)
Weighted Average Number of Ordinary Shares
2014 2013
Number Number
Issued Ordinary Shares at 1 October 2013 91,670 91,670
Shares held by EBT (1,096) (1,096)
Treasury shares (9,164) (9,164)
Weighted average number of Ordinary Shares at 30 September 2014 81,410 81,410
Diluted Earnings Per Share
There is no difference between basic and diluted earnings per share in the prior year and no difference in the current
year.
Movements Movements
Fair Value in Income Fair Value in Income Fair Value
2012 Statement 2013 Statement 2014
£000 £000 £000 £000 £000
Non-current liabilities (6,595) 2,723 (3,872) 2,238 (1,634)
Current liabilities (2,447) 30 (2,417) 29 (2,388)
Fair value (9,042) 2,753 (6,289) 2,267 (4,022)
19. Derivative Financial Instruments
Derivative financial instruments held by the Group are interest rate swaps used to manage the Group's interest rate
exposure. These are shown in the Balance Sheet as follows:
At 30 September 2014 and 30 September 2013 these derivative financial instruments did not qualify as effective swaps for
hedge accounting under the criteria set out in IAS 39.
A summary of the swaps and their maturity dates are as follows:
Notional value of swap Effective date Maturity date Rate payable Movements
on fixed leg Fair Value in Income Fair Value
£000 % 2013 Statement 2014
20,979 16/07/2007 31/01/2017 4.85 (2,518) 860 (1,658)
22,500 30/04/2013 20/07/2016 5.05 (2,571) 959 (1,612)
10,500 30/04/2013 29/07/2016 5.05 (1,200) 448 (752)
(6,289) 2,267 (4,022)
The interest rate receivable on each swap is LIBOR. The notional value of the £20,979,000 swap amortises at a rate of
£200,000 per quarter.
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