REG - Caledonian Trust PLC - Final Results <Origin Href="QuoteRef">CNN.L</Origin> - Part 3
23/12/2016 10:45
- Part 3: For the preceding part double click ID:nRSW7351Sb
accordance with International Financial Reporting Standards and
its interpretation as adopted by the EU ("Adopted IFRSs"). The Company has
elected to prepare its parent Company financial statements in accordance with
IFRS; these are presented on pages 50 to 69.
3 Basis of preparation
The financial statements are prepared on the historical cost basis except for
available for sale financial assets and investment properties which are
measured at their fair value.
The preparation of the financial statements in conformity with Adopted IFRSs
requires the directors to make judgements, estimates and assumptions that
affect the application of policies and reported amounts of assets and
liabilities, income and expenses. The estimates and associated assumptions
are based on historical experience and various other factors that are believed
to be reasonable under the circumstances, the results of which form the basis
of making the judgements about carrying values of assets and liabilities that
are not readily apparent from other sources. Actual results may differ from
these estimates.
These financial statements have been presented in pounds sterling which is the
functional currency of all companies within the Group. All financial
information has been rounded to the nearest thousand pounds.
Going concern
The Group's business activities, together with the factors likely to affect
its future development, performance and position are set out in the Chairman's
Statement on pages 2 to 19. The financial position of the Group, its cash
flows, liquidity position and borrowing facilities are described in Note 18.
In addition, note 18 to the financial statements includes the Group's
objectives, policies and processes for managing its capital; its financial
risk management objectives; details of its financial instruments and hedging
activities; and its exposures to credit risk and liquidity risk.
The Group and Company finance their day to day working capital requirements
through related party loans (see note 23). The related party lender has
indicated its willingness to provide further funds to facilitate the continued
construction of certain properties during 2017.
The Directors have prepared projected cash flow information for the period
ending twelve months from the date of their approval of these financial
statements. These forecasts assume the Group will make property sales in the
normal course of business to provide sufficient cash inflows to allow the
Group to continue to trade.
Should these sales not complete as planned, the directors are confident that
they would be able to sell sufficient other properties within a short
timescale to generate the income necessary to meet the Group's liabilities as
they fall due.
For these reasons they continue to adopt the going concern basis in preparing
the financial statements.
Areas of estimation uncertainty and critical judgements
Information about significant areas of estimation uncertainty and critical
judgements in applying accounting policies that have the most significant
effect on the amount recognised in the financial statements is contained in
the following notes:
· Valuation of investment properties (note 10)
The fair value has been calculated using third party valuations provided by
external independent valuers. The valuations are based upon assumptions
including future rental income, anticipated void cost, the appropriate
discount rate or yield. The independent valuers also take into consideration
market evidence for comparable properties in respect of both transaction
prices and rental agreements.
· Valuation of trading properties (note 13)
Trading properties are carried at the lower of cost and net realisable value.
The net realisable value of such properties is based on the amount the Company
is likely to achieve in a sale to a third party. This is then dependent on
availability of planning consent and demand for sites which is influenced by
the housing and property markets.
· Deferred Tax (note 20)
A significant proportion of the Group's deferred tax asset relates to
differences between the carrying value of investment properties and their
original tax base. A decision has been taken not to recognise the asset on
the basis of the uncertainty that surrounds the availability of future taxable
profits.
4 Accounting policies
The accounting policies below have been applied consistently to all periods
presented in these consolidated financial statements.
Basis of consolidation
The financial statements incorporate the financial statements of the Company
and all its subsidiaries. Subsidiaries are entities controlled by the Group.
Control exists when the Group has the power to determine the financial and
operating policies of an entity so as to obtain benefits from its activities.
The financial statements of subsidiaries are included in the consolidated
financial statements from the date that control commences until the date it
ceases.
Revenue
Rental income from properties leased out under operating leases is recognised
in the income statement on a straight line basis over the term of the lease.
Costs of obtaining a lease and lease incentives granted are recognised as an
integral part of total rental income and spread over the period from
commencement of the lease to the earliest termination date on a straight line
basis.
Revenue from the sale of trading properties is recognised in the income
statement on the date at which the significant risks and rewards of ownership
are transferred to the buyer with proceeds and costs shown on a gross basis.
Other income
Other income comprises income from agricultural land and other miscellaneous
income.
Finance income and expenses
Finance income and expenses comprise interest payable on bank loans and other
borrowings. All borrowing costs are recognised in the income statement using
the effective interest rate method. Interest income represents income on bank
deposits using the effective interest rate method.
Taxation
Income tax on the profit or loss for the year comprises current and deferred
tax. Income tax is recognised in the income statement except to the extent
that it relates to items recognised directly in equity, in which case the
charge / credit is recognised in equity. Current tax is the expected tax
payable on taxable income for the current year, using tax rates enacted or
substantively enacted at the reporting date, adjusted for prior years under
and over provisions.
Deferred tax is provided using the balance sheet liability method in respect
of all temporary differences between the values at which assets and
liabilities are recorded in the financial statements and their cost base for
taxation purposes. Deferred tax includes current tax losses which can be
offset against future capital gains. As the carrying value of the Group's
investment properties is expected to be recovered through eventual sale rather
than rentals, the tax base is calculated as the cost of the asset plus
indexation. Indexation is taken into account to reduce any liability but does
not create a deferred tax asset. A deferred tax asset is recognised only to
the extent that it is probable that future taxable profits will be available
against which the asset can be utilised.
Investment properties
Investment properties are properties owned by the Group which are held either
for long term rental growth or for capital appreciation or both. Properties
transferred from trading properties to investment properties are revalued to
fair value at the date on which the properties are transferred. When the Group
begins to redevelop an existing investment property for continued future use
as investment property, the property remains an investment property, which is
measured based on the fair value model, and is not reclassified as property,
plant and equipment during the redevelopment.
The cost of investment property includes the initial purchase price plus
associated professional fees. Borrowing costs directly attributable to the
acquisition or construction of qualifying assets are capitalised during the
period of construction. Subsequent expenditure on investment properties is
only capitalised to the extent that future economic benefits will be
realised.
Investment property is measured at fair value at each balance sheet date.
External independent professional valuations are prepared at least once every
three years. The fair values are based on market values, being the estimated
amount for which a property could be exchanged on the date of valuation
between a willing buyer and a willing seller in an arms-length transaction
after proper marketing wherein the parties had each acted knowledgeably,
prudently and without compulsion.
Any gain or loss arising from a change in fair value is recognised in the
income statement.
Purchases and sales of investment properties
Purchases and sales of investment properties are recognised in the financial
statements at completion which is the date at which the significant risks and
rewards of ownership are transferred to the buyer.
Property, plant and equipment
Property, plant and equipment are stated at cost, less accumulated
depreciation and any provision for impairment. Depreciation is provided on
all property, plant and equipment at varying rates calculated to write off
cost to the expected current residual value by equal annual instalments over
their estimated useful economic lives. The principal rates employed are:
Plant and equipment - 20.0 per cent
Fixtures and fittings - 33.3 per cent
Motor vehicles - 33.3 per cent
Trading properties
Trading properties held for short term sale or with a view to subsequent
disposal in the near future are stated at the lower of cost or net realisable
value. Cost is calculated by reference to invoice price plus directly
attributable professional fees. Net realisable value is based on estimated
selling price less estimated cost of disposal.
Financial assets
Trade and other receivables
Trade and other receivables are initially recognised at fair value and then
stated at amortised cost.
Financial instruments
Available for sale financial assets
The Group's investments in equity securities are classified as available for
sale financial assets. They are initially recognised at fair value plus any
directly attributable transaction costs. Subsequent to initial recognition
they are measured at fair value and changes therein, other than Impairment
losses, are recognised directly in equity. The fair value of available for
sale investments is their quoted bid price at the balance sheet date. When an
investment is disposed of, the cumulative gain or loss in equity is recognised
in profit or loss. Dividend income is recognised when the company has the
right to receive dividends either when the share becomes ex dividend or the
dividend has received shareholder approval.
Cash and cash equivalents
Cash includes cash in hand, deposits held at call (or with a maturity of less
than 3 months) with banks, and bank overdrafts. Bank overdrafts that are
repayable on demand and which form an integral part of the Group's cash
management are shown within current liabilities on the balance sheet and
included with cash and cash equivalents for the purpose of the statement of
cash flows.
Financial liabilities
Trade payables
Trade payables are non-interest-bearing and are initially measured at fair
value and thereafter at amortised cost.
Interest bearing loans and borrowings
Interest-bearing loans and bank overdrafts are initially carried at fair value
less allowable transactions costs and then at amortised cost.
New Standards and interpretations not yet adopted
The International Accounting Standards Board (IASB) and International
Financial Reporting Interpretations Committee has recently issued the
following new standards and amendments which are effective for annual periods
beginning on or after 1 January 2016, unless stated otherwise, and have not
been applied in preparing these consolidated financial statements.
- IFRS 9 Financial Instruments: Classification and Measurement which is
the first phase of a wider project to replace IAS 39.
Financial Instruments: Recognition and Measurement, replaces the current
models for classification measurement of financial instruments. Financial
assets are to be classified into two measurement categories: fair value and
amortised cost. Classification will depend on an entity's business model and
the characteristics of contractual cash flow of the financial instrument. The
standard is effective for annual periods beginning on or after 1 January
2018.
As at the time of publication of these financial statements, the IASB is
re-deliberating the requirements for classification and measurement in IFRS 9
while the requirements of latter phases of IFRS 9 are in development and
therefore remain uncertain.
- IFRS 15 Revenue fom contracts with customers
The standard specifies how and when revenue is recognised, using a principles
based five-step model. The standard is effective for accounting periods
beginning on or after 1 January 2018 but has not yet been endorsed.
- IFRS 16 Leases
This standard will eliminate the current IAS 17 dual accounting model, which
distinguishes between on-balance sheet finance leases and off-balance sheet
operating leases and, instead, introduces a single, on-balance sheet
accounting model that is similar to current finance lease accounting. The
standard is effective for accounting periods beginning on or after 1 January
2-19 but has not yet been endorsed.
Operating segments
The Group determines and presents operating segments based on the information
that is internally provided to the Board of Directors ("The Board"), which is
the Group's chief operating decision maker. The directors review information
in relation to the Group's entire property portfolio, regardless of its type
or location, and as such are of the opinion that there is only one reportable
segment which is represented by the consolidated position presented in the
primary statements.
5 Operating profit 2016 2015
£000 £000
The operating profit is stated after charging :
Depreciation 11 14
Amounts received by auditors and their associates in respect of:
- Audit of these financial statements (Group and Company) 12 7
- Audit of financial statements of subsidiaries pursuant to 6 6
legislation
====== ======
6 Employees and employee benefits 2016 2015
£000 £000
Employee remuneration
Wages and salaries 373 412
Social security costs 39 43
Other pension costs 30 31
_______ _______
442 486
====== =======
Other pension costs represent contributions to defined contribution plans.
The average number of employees during the year was as follows:
No. No.
Management 2 2
Administration 3 3
Other 3 4
_______ _______
8 9
====== =======
2016 2015
Remuneration of directors £000 £000
Directors' emoluments 228 251
Company contributions to money purchase pension schemes 25 26
====== ======
Director Salary andFees Benefits PensionContributions 2016Total 2015Total
£000 £000 £000 £000 £000
ID Lowe 87 5 - 92 115
MJ Baynham 125 3 25 153 153
RJ Pearson 8 - - 8 9
______ ______ ______ ______ ______
220 8 25 253 277
7 Finance income and finance expenses
2016 2015
£000 £000
Finance income
Interest receivable:
- on bank balances 1 1
=== ===
Finance expenses
Interest payable:
- Other loan interest 22 21
- Loan stock repayable within five years - 95
____ ____
22 116
==== ====
8 Income tax
There was no tax charge/(credit) in the current or preceding year.
2016 2015
£000 £000
Profit before tax 105 565
===== =====
Current tax at 20% (2015 : 20.75%) 21 117
Effects of:
Expenses not deductible for tax purposes 9 20
Indexation on chargeable gains (20) -
Losses carried forward 88 91
Revaluation of property not taxable (98) (228)
______ ______
Total tax charge - -
===== =====
Reductions in the UK corporation tax rate from 23% to 21% (effective from 1
April 2014) and 20% (effective from 1 April 2015) were substantively enacted
on 2 July 2013. Further reductions to 19% (effective from 1 April 2017) and
to 18% (effective from 1 April 2020) were substantively enacted on 26 October
2015. This will reduce the Company's future current tax charge accordingly.
An additional reduction to 17% (effective 1 April 2020) was substantively
enacted on 6 September 2016. This will reduce the company's future current
tax charge accordingly.
In the case of deferred tax in relation to investment property revaluation
surpluses, the base cost used is historical book cost and includes allowances
or deductions which may be available to reduce the actual tax liability which
would crystallise in the event of a disposal of the asset (see note 20).
9 Profit per share
Basic profit per share is calculated by dividing the profit attributable to
ordinary shareholders by the weighted average number of ordinary shares
outstanding during the period as follows:
2016 2015
£000 £000
Profit for financial period 105 565
====== ======
No. No.
Weighted average no. of shares:
for basic earnings per share and for diluted
earnings per share 11,783,577 11,783,577
======== ========
Basic profit per share 0.89p 4.79 p
Diluted profit per share 0.89p 4.79 p
The diluted figure per share is the same as the basic figure per share as there are no dilutive shares.
10 Investment properties
2016 2015
£000 £000
Valuation
At 30 June 2015Sold in year 10,515(100) 9,415-
Revaluation in year 490 1,100
________ ________
Valuation at 30 June 2016 10,905 10,515
======== ========
Investment properties were valued at £9,505,000 as at 30 June 2016 by Montagu Evans, Chartered Surveyors, external valuers not
connected with the Group. They were valued at fair value in accordance with the RICS Valuation - Professional Standards
(January 2014, revised April 2015) published by the Royal Institution of Chartered Surveyors (RICS). The valuations are arrived
at by reference to market evidence of transaction prices and completed lettings for similar properties. The properties have
been valued individually and not as part of a portfolio and no allowance has been made for expenses of realisation or for any
tax which might arise. They assume a willing buyer and a willing seller in an arm's length transaction, after proper marketing
and where the parties had each acted knowledgeably, prudently and without compulsion. The valuations reflect usual deductions
in respect of purchaser's costs, SDLT and LBTT as applicable at the valuation date. The valuer makes various assumptions
including future rental income, anticipated void cost, the appropriate discount rate or yield.One investment property was valued
at £1,400,000 as at 30 June 2016 by Rettie & Co, an independent firm of property specialists not connected with the Group. The
valuation was undertaken by a Chartered Surveyor in accordance with the RICS Standards and willing buyer and seller referred to
above. The market value was arrived at having regard to local comparable data, adjusted to reflect the individual circumstances
and unique characteristics of the valuation subjects. The 'review of activities' within the Chairman's statement provides the
current status of the Group's property together with an analysis of the 'property prospects' for 2017 and beyond. The historical
cost of investment properties held at 30 June 2016 is £9,521,406 (2015: £9,620,837). The cumulative amount of interest
capitalised and included within historical cost in respect of the Group's investment properties is £451,000 (2015: £476,000).
11 Property, plant and equipment
MotorVehicles Fixtures and fittings Otherequipment Total
£000 £000 £000 £000
Cost
At 30 June 2014 18 14 62 94
Additions in year - - 3 3
At 30 June 2015 18 14 65 97
Depreciation
At 30 June 2014 11 9 39 59
Charge for year 2 4 8 14
At 30 June 2015 13 13 47 73
Net book value
At 30 June 2015 5 1 18 24
24
MotorVehicles Fixtures and fittings Otherequipment Total
£000 £000 £000 £000
Cost
At 30 June 2015 18 14 65 97
Additions in year - - 2 2
At 30 June 2016 18 14 67 99
Depreciation
At 30 June 2015 13 13 47 73
Charge for year 3 1 7 11
At 30 June 2016 16 14 54 84
Net book value
At 30 June 2016 2 - 13 15
15
12 Investments
2016 2015
£000 £000
Available for sale investments
At the start of the yearPurchased in year 1- -1
_______ _______
Available for sale financial assets 1 1
====== ======
13 Trading properties
2016 2015
£000 £000
At start of year 11,418 11,498
AdditionsSold in year 139(391) 190(270)
_________ _________
At end of year 11,166 11,418
======== ========
14 Trade and other receivables 2016 2015
£000 £000
Amounts falling due within one year
Other debtors 67 68
Prepayments and accrued income 86 28
_______ _______
153 96
====== ======
The Group's exposure to credit risks and impairment losses relating to trade receivables is given in note 18.
15 Cash and cash equivalents 2016 2015
£000 £000
Cash 103 131
====== ======
Cash and cash equivalents comprise cash at bank and in hand. Cash deposits are held with UK banks. The carrying amount of cash equivalents approximates to their fair values. The company's exposure to credit risk on cash and cash equivalents is regularly monitored (note 18).
16 Trade and other payables
2016 2015
£000 £000
Accruals and other creditors 698 645
====== ======
The Group's exposure to currency and liquidity risk relating to trade payables is disclosed in note 18.
17 Other interest bearing loans and borrowings
The Group's interest bearing loans and borrowings are measured at amortised cost. More information about the Group's exposure to interest rate risk and liquidity risk is given in note 18.
Current liabilities
2016 2015
£000 £000
Floating rate unsecured Loan Notes 2016 - 2,725
Unsecured loan - 805
________ _________
- 3,530
======= ========
Non current liabilitiesUnsecured loans 3,630 100
======= =======
Terms and debt repayment schedule
Terms and conditions of outstanding loans and loan stock were as follows:
2016 2015
Currency Nominal interest rate Fair value Carrying amount Fair value Carrying amount
£000 £000 £000 £000
Unsecured loan GBP Base +3% 3,530 3,530 805 805
Floating rate unsecured loan stock Unsecured loan GBP GBP Base + 3% Base + 3% - 100 - 100 2,725 100 2,725 100
3,630 3,630 3,630 3,630
The unsecured loan of £3,530,000 is repayable in 12 months and one day after
the giving of notice by the lender. Interest is charged at 3% over Bank of
Scotland base rate but the lender varied its right to the margin over base
rate until further notice.
An unsecured loan of £100,000 is repayable in July 2017. Interest is charged
at a margin of 3% over Bank of Scotland base rate.
18 Financial instruments
Fair valuesFair values versus carrying amountsThe fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet, are as follows:
2016 2015
Fair value Carrying Fair value Carrying
amount amount
£000 £000 £000 £000
Trade and other receivables 153 153 96 96
Cash and cash equivalents 103 103 131 131
256 256 227 227
Loans from related parties 3,630 3,630 3,630 3,630
Trade and other payables 698 698 645 645
4,328 4,328 4,275 4,275
Estimation of fair valuesThe following methods and assumptions were used to estimate the fair values shown above:Available for sale financial assets - as such assets are listed, the fair value is determined at the market price.Trade and other
receivables/payables - the fair value of receivables and payables with a remaining life of less than one year is deemed to be the same as the book value.Cash and cash equivalents - the fair value is deemed to be the same as the carrying amount due to the
short maturity of these instruments.Other loans - the fair value is calculated by discounting the expected future cashflows at prevailing interest rates.
Overview of risks from its use of financial instrumentsThe Group has exposure to the following risks from its use of financial instruments:· credit risk· liquidity risk· market riskThe Board of Directors has overall responsibility for the
establishment and oversight of the Company's risk management framework and oversees compliance with the Group's risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group.
The Board's policy is to maintain a strong capital base so as to cover all liabilities and to maintain the business and to sustain its development.The Board of Directors also monitors the level of dividends to ordinary shareholders.There were no changes in
the Group's approach to capital management during the year. Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.The Group's principal financial instruments comprise cash and short term deposits. The main
purpose of these financial instruments is to finance the Group's operations. As the Group operates wholly within the United Kingdom, there is currently no exposure to currency risk.The main risks arising from the Group's financial instruments are interest
rate risks and liquidity risks. The board reviews and agrees policies for managing each of these risks, which are summarised below:
Credit riskCredit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Group's receivables from customers, cash held at banks and
its available for sale financial assets.Trade receivablesThe Group's exposure to credit risk is influenced mainly by the individual characteristics of each tenant. The majority of rental payments are received in advance which reduces the Group's exposure
to credit risk on trade receivables.Other receivablesOther receivables consist of amounts due from a company in which the Group holds a minority investment.
Available for sale financial assetsThe Group does not actively trade in available for sale financial assets. Bank facilitiesAt the year end the Company had no bank loan facilities available (2015: Nil).Exposure to credit riskThe carrying amount of
financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:
Carrying value 2016 2015 £000 £000 Available for sale investments 1 1 Other receivables 67 68 Cash and cash equivalents 103 131 ________ ________ 171 200 ======= =======
The Group does not have an allowance for impairment on trade receivables as, based on historical experience, management does not consider that such an impairment is required.Credit risk for trade receivables at the reporting date was all in relation to property tenants in United Kingdom.The Group's exposure is spread across a number of customers.
£000
£000
Available for sale investments
1
1
Other receivables
67
68
Cash and cash equivalents
103
131
________
________
171
200
=======
=======
The Group does not have an allowance for impairment on trade receivables as,
based on historical experience, management does not consider that such an
impairment is required.Credit risk for trade receivables at the reporting date
was all in relation to property tenants in United Kingdom.The Group's exposure
is spread across a number of customers.
Liquidity riskLiquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group's approach to managing liquidity
is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due without incurring unacceptable losses or risking damage
to the Group's reputation. Whilst the directors cannot envisage all possible circumstances, the directors believe that, taking account of reasonably foreseeable adverse
movements in rental income, interest or property values, the Group has sufficient resources available to enable it to do so.
The Group's exposure to liquidity risk is given below
30 June 2016 £'000 Carrying amount Contractual cash flows 6 months or less 6-12 months 2-5 years
Unsecured loan Unsecured loan 3,530 100 3,548 107 9 2 9 2 3,530 103
Trade and other payables 698 698 698 - -
30 June 2015 £'000 Carrying amount Contractual cash flows 6 months or less 6-12 months 2-5 years
Floating rate unsecured loan stock 2,725 2,774 48 2,726 -
Unsecured loan Unsecured loan 805 100 817 107 12 2 805 2 - 103
Trade and other payables 645 645 645 - -
Market riskMarket risk is the risk that changes in market prices, such as interest rates, will affect the company's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.Interest rate riskThe Group borrowings are at floating rates of interest based on LIBOR or Base Rate.The interest rate profile of the Group's borrowings as at the year end
was as follows:
2016 2015
£000 £000
Unsecured loanUnsecured loan 3,530100 805100
Floating rate instruments - financial liabilities - 2,725
======= =======
The weighted average interest rate of the floating rate borrowings was 3.5% (2015: 3.5%). As set out in Note 17, the lender varied its right to the margin of interest above base rate until further notice and so the rate of interest charged in the year is 0.5%.A 1% movement in interest rates would be expected to change the Group's annual net interest charge by £36,300 (2015: £36,300).
19 Operating leases
Leases as lessorsThe Group leases out its investment properties under operating leases. The future minimum receipts under non-cancellable operating leases are as follows:
2016 2015
£000 £000
Less than one year 221 146
Between one and five years
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