TIDMLSR
RNS Number : 8134C
Local Shopping REIT (The) PLC
20 June 2019
FOR IMMEDIATE RELEASE
20 June 2019
The Local Shopping REIT plc ("the Company")
Results for the six months ended 31 March 2019
The directors of The Local Shopping REIT plc are pleased to
announce the Company's unaudited consolidated interim results for
the six months ended 31 March 2019.
Enquiries:
Bill Heaney, Company Secretary +44 20 7355 8800
Rupert Wallman, Fund Manager +44 20 7355 8800
Chairman's Statement
During the period under review the asset management team
continued to progress the Company's property disposal programme,
comprising both the sale of investment properties and the
preparation of properties for marketing, as noted in the report
below. At a corporate level, the Company's activity during the
period focussed on, in the first instance, the Board's initiation
of plans to fulfil the Company's investment policy by returning
capital to shareholders via a members' voluntary liquidation and,
thereafter, the takeover bid by the Company's largest shareholder,
Thalassa Holdings Ltd ("Thalassa"), which had opposed the Board's
proposals.
The Board considered that the takeover proposal was not in the
best interests of shareholders as a whole, and the bid received
insufficient support from the Company's members to take effect.
However, dealing with the bid was an expensive exercise, the cost
of which is reflected in the interim financial statements.
As was announced by the Board following the lapse of Thalassa's
offer, the directors opened a dialogue with Thalassa to explore
whether a capital return to shareholders could be achieved on terms
acceptable to shareholders without resorting to an application to
the Court for a winding-up on Just and Equitable grounds (which
shareholders had approved at the general meeting held on 5 April
2019).
The outcome of these discussions, involving proposals to return
capital to shareholders by way of a capital reduction and share
buy-back tender offer, was set out in the announcement issued by
the Board on 18 June 2019. As indicated in that announcement, the
strike price per share for the share buy-back tender offer will be
equal to the net asset value per share set out in the Company's
interim accounts for 31 March 2019 contained in this report, which
is 31.33 pence per share.
The directors will shortly send a circular to shareholders
containing full details of the buy-back tender offer together with
a notice of general meeting to approve the necessary
resolutions.
Directors' Review
Basis of Preparation
The 30 September 2018 financial statements were prepared on a
break up basis, the directors having noted the likelihood that the
property sales programme would be completed during the coming
financial year, the Company's investment policy of returning cash
to shareholders and the advice of the Company's auditors.
Accordingly, the directors concluded that the financial statements
for 30 September 2018 should not be prepared on the Going Concern
basis. In view of the continuing progress with the property sales
programme and the continued prosecution of the Company's investment
policy of returning cash to shareholders, the directors consider it
appropriate to prepare these financial statements on a break-up
basis.
Financial Results and Portfolio Performance
The Company made a loss before tax on an IFRS basis for the
period of GBP1.90 million (or 2.30 pps). This compares with an IFRS
loss of GBP2.87 million (or 3.48 pps) for the equivalent period of
2017-18 and a loss of GBP7.15 million (or 8.7 pps) for the full
year to 30 September 2018.
Portfolio Revaluation
As the Company's accounts are prepared on a break-up basis, the
individual properties are held on the balance sheet at their net
realisable value, being their valuation (or contracted sales price
where applicable), less estimated sales costs. At 31 March 2019,
the Company held 10 properties. Of these, 9 investment properties
were revalued by Allsop LLP, a firm of independent chartered
surveyors, at GBP3.625 million, reflecting an equivalent yield
(excluding the residential element) of 13.98% before estimated
transaction costs. The remaining property not valued by Allsop LLP
became subject to a sale contract shortly after the period end, so
its carrying value equates to its contracted sale price less
estimated sale costs. The resultant carrying value of the 10
properties held at 31 March 2019 was GBP3.656 million (September
2018: GBP22.317 million).
Cash and Net Asset Value
At 31 March 2019 the Company held GBP22.76 million in cash.
The Net Asset Value was GBP25.85 million or 31.33 pps (September
2018: GBP27.73 million or 33.6 pps).
Property Disposals
During the period we continued to focus on property disposals,
contracting to sell or completing sales on a further 65 properties
at an aggregate price of GBP18.7 million, 1.77% above carrying
value at the time of sale.
Of the 10 properties remaining in the portfolio at 31 March
2019, one is under contract for sale, completion on which is
expected shortly, and terms have been agreed for the sale of three
other properties. The remaining six properties are either being
actively marketed or prepared for marketing.
Asset Management
Asset management activities during the period focussed on
preparing properties for sale, primarily by maximising occupancy
and opportunities for rental growth, as well as a small number of
repair and maintenance projects.
Financing
The Company did not utilise any external funding facilities
during the period.
Taxation
The Group continued to operate as a UK REIT during the period,
under which any profits and gains from the property investment
business are exempt from Corporation Tax provided certain
conditions continue to be met. The Group fulfilled the UK REIT
conditions during the period. The investment objective of the
Company remains for its remaining property assets to be sold and
the Company's cash reserves to be distributed to its members. On
the disposal of the property assets, the Company will exit the UK
REIT regime. Discussions have taken place with HMRC to ensure that
this will take place in an orderly manner. Should the Group depart
the UK REIT regime, it would at that point become liable to
Corporation Tax. However, the Board believes that the Group's
activities would be unlikely to generate any material Corporation
Tax liability.
Dividend
In line with the Group's current dividend distribution policy no
interim dividend will be paid. The Board will continue to review
the dividend policy in line with progress with the investment
strategy.
Principal Risks and Uncertainties for the Remaining Six Months
of the Financial Year
The risks facing the Group for the remaining six months of the
financial year remain consistent with those described in detail in
the Annual Report for the year ended 30 September 2018 (available
on the Group's website: www.localshoppingreit.co.uk).
These centre on:
-- Changes in the macroeconomic environment
-- Higher than anticipated property maintenance costs
-- Changes to legal environment, planning law or local planning policy
-- Regulatory requirements in connection with the property portfolio
-- Information technology systems and data security
-- Financial and property market conditions
However, the potential impact of these risk areas on the Company
has been mitigated by the considerable reduction in the size of the
Company's property portfolio, meaning that the dominant portion of
the Company's assets is now held as cash.
The Group does not speculate in derivative financial
instruments. Whilst the Group is exposed to the risk of non-payment
of trade receivables by its tenants, the Directors consider that
this does not comprise an undue concentration of credit risk, given
the reduced amounts involved. The level of arrears is monitored
continually by the Group's asset managers and are subject to
monthly review at executive level.
Responsibility Statement
We confirm that to the best of our knowledge:
(a) the condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted by
the EU: and (b) the Interim Management Report includes a fair
review of the information required by:
DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first
six months of the financial year and their impact on the condensed
set of financial statements; and a description of the principal
risks and uncertainties for the remaining six months of the year;
and
DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
Signed on behalf of the Board who approved the interim
management report on 20 June 2019.
S J East
Director
Independent Review Report to The Local Shopping REIT plc
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 31 March 2019 which comprises the Condensed
Consolidated Income Statement, Condensed Consolidated Statement of
Comprehensive Income, Condensed Consolidated Balance Sheet,
Condensed Consolidated Statement of Cash Flows, Condensed
Consolidated Statement of Changes in Equity and the related
explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 31
March 2019 is not prepared, in all material respects, in accordance
with IAS 34 Interim Financial Reporting as adopted by the EU and
the Disclosure Guidance and Transparency Rules ("the DTR") of the
UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
The impact of uncertainties due to the UK exiting the European
Union on our audit
Uncertainties related to the effects of Brexit are relevant to
understanding our audit of the financial statements. All audits
assess and challenge the reasonableness of estimates made by the
directors, such as the value of investment properties held for sale
and related disclosures. All of these depend on assessments of the
future economic environment and the company's future prospects and
performance.
Brexit is one of the most significant economic events for the
UK, and at the date of this report its effects are subject to
unprecedented levels of uncertainty of outcomes, with the full
range of possible effects unknown. We applied a standardised
firm-wide approach in response to that uncertainty when assessing
the Company's future prospects and performance. However, no audit
should be expected to predict the unknowable factors or all
possible future implications for a company and this is particularly
the case in relation to Brexit.
Emphasis of matter - non-going concern basis of preparation
We draw attention to the disclosure made in note 1 to the
financial statements which explains that the financial statements
are now not prepared on the going concern basis for reasons set out
in that note.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with International Financial
Reporting Standards as adopted by the EU. The directors are
responsible for preparing the condensed set of financial statements
included in the half-yearly financial report in accordance with IAS
34 as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities.
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have
reached.
Mark Flanagan
for and on behalf of KPMG LLP
Chartered Accountants
31 Park Row
Nottingham
NG1 6FQ
20 June 2019
Condensed Consolidated Income Statement for the six months ended
31 March 2019
Note
Unaudited Unaudited Audited
Six months Six months Year ended
ended ended
31 March 31 March 30 September
2019 2018 2018
GBP000 GBP000 GBP000
----- ----------- ----------- -------------
Gross rental income 459 2,250 3,381
----- ----------- ----------- -------------
Property operating expenses 3 (672) (1,200) (2,451)
----- ----------- ----------- -------------
Net rental income (213) 1,050 930
----- ----------- ----------- -------------
Loss on disposal of investment
properties held for sale 4 (147) (902) (1,417)
----- ----------- ----------- -------------
Change in fair value of
investment properties held
for sale 9 (295) (2,103) (4,536)
----- ----------- ----------- -------------
Administrative expenses 5 (1,261) (552) (1,522)
----- ----------- ----------- -------------
Operating loss before net
financing costs (1,916) (2,507) (6,545)
----- ----------- ----------- -------------
Financing income 6 20 1 2
----- ----------- ----------- -------------
Financing expenses 6 (4) (364) (611)
----- ----------- ----------- -------------
Loss before taxation (1,900) (2,870) (7,154)
----- ----------- ----------- -------------
Tax 7 - - -
----- ----------- ----------- -------------
Loss for the financial period
from discontinued operations (1,900) (2,870) (7,154)
----- ----------- ----------- -------------
Loss for the financial period
attributable to equity holders
of the parent Company (1,900) (2,870) (7,154)
----- ----------- ----------- -------------
Basic and diluted loss per
share on loss for the financial
period (2.30)p (3.48)p (8.67)p
----- ----------- ----------- -------------
Basic and diluted loss per
share on discontinued operations
for the period 11 (2.30)p (3.48)p (8.67)p
----- ----------- ----------- -------------
Condensed Consolidated Statement of Comprehensive Income for the
six months ended 31 March 2019
Unaudited Unaudited Audited
---------------------------------------------
Six months Six months Year ended
ended ended
---------------------------------------------
31 March 31 March 30 September
2019 2018 2018
GBP000 GBP000 GBP000
--------------------------------------------- ----------- ----------- -------------
Loss for the period (2,870) -
--------------------------------------------- ----------- ----------- -------------
Loss for the financial year on discontinued
operations (below) (1,900) - (7,154)
---------------------------------------------- ----------- ----------- -------------
Total comprehensive loss for
the period (1,900) (2,870) (7,154)
---------------------------------------------- ----------- ----------- -------------
Attributable to:
--------------------------------------------- ----------- ----------- -------------
Equity holders of the parent
Company (1,900) (2,870) (7,154)
---------------------------------------------- ----------- ----------- -------------
Unaudited Unaudited Audited
---------------------------------------------
Six months Six months Year ended
ended ended
---------------------------------------------
31 March 31 March 30 September
2019 2018 2018
GBP000 GBP000 GBP000
--------------------------------------------- ----------- ----------- -------------
Revenue less expenses for the period
on discontinued operations (1,605) (2,618)
---------------------------------------------- ----------- ----------- -------------
Fair value adjustment of assets
held for sale from discontinued
operations (295) - (4,536)
---------------------------------------------- ----------- ----------- -------------
Total comprehensive loss for
the period (1,900) - (7,154)
---------------------------------------------- ----------- ----------- -------------
Taxation on discontinued operations - -
--------------------------------------------- ----------- ----------- -------------
Total loss for the financial
year on discontinued operations
(above) (1,900) (7,154)
---------------------------------------------- ----------- ----------- -------------
Condensed Consolidated Balance Sheet as at 31 March 2019
Note Unaudited Unaudited Audited
------------------------------- -----
31 March 31 March 30 September
2019 2018 2018
------------------------------- -----
GBP000 GBP000 GBP000
------------------------------- ----- ---------- ---------- -------------
Non-current assets
----- ---------- ---------- -------------
Investment properties 9 - 25,236 -
----- ---------- ---------- -------------
Total non-current assets - 25,236 -
----- ---------- ---------- -------------
Current assets
----- ---------- ---------- -------------
Trade and other receivables 844 6,099 4,341
----- ---------- ---------- -------------
Investment properties held
for sale 9 3,656 10,825 22,317
----- ---------- ---------- -------------
Cash 22,755 1,968 3,292
----- ---------- ---------- -------------
Total current assets 27,255 18,892 29,950
----- ---------- ---------- -------------
Total assets 27,255 44,128 29,950
----- ---------- ---------- -------------
Non current liabilities
----- ---------- ---------- -------------
Interest bearing loans and
borrowings 10 - (9,353) -
----- ---------- ---------- -------------
Finance lease liabilities - (429) -
----- ---------- ---------- -------------
Total non-current liabilities - (9,782) -
----- ---------- ---------- -------------
Current liabilities
----- ---------- ---------- -------------
Interest bearing loans and
borrowings 10 - (392) -
----- ---------- ---------- -------------
Trade and other payables (1,402) (1,986) (2,217)
----- ---------- ---------- -------------
Total current liabilities (1,402) (2,378) (2,217)
----- ---------- ---------- -------------
Total liabilities (1,402) (12,160) (2,217)
----- ---------- ---------- -------------
Net assets 25,853 31,968 27,733
----- ---------- ---------- -------------
Equity
----- ---------- ---------- -------------
Issued capital 18,334 18,334 18,334
----- ---------- ---------- -------------
Reserves - 3,773 3,773
----- ---------- ---------- -------------
Capital redemption reserve 1,764 1,764 1,764
----- ---------- ---------- -------------
Retained earnings 5,755 8,097 3,862
----- ---------- ---------- -------------
Total attributable to equity
holders of the Company 25,853 31,968 27,733
Condensed Consolidated Statement of Cash Flows for the six
months ended 31 March 2019
Note Unaudited Unaudited Audited
---------------------------------- -----
Six months Six months Year ended
ended ended
---------------------------------- -----
31 March 31 March 30 September
2019 2018 2018
GBP000 GBP000 GBP000
---------------------------------- ----- ----------- ----------- -------------
Operating activities
----- ----------- ----------- -------------
Loss for the financial period (1,900) (2,870) (7,154)
----- ----------- ----------- -------------
Adjustments for:
----- ----------- ----------- -------------
Loss on change in fair value
of investment properties
held for sale 9 295 2,103 4,536
----- ----------- ----------- -------------
Net financing (income)/costs 6 (16) 363 609
----- ----------- ----------- -------------
Loss on disposal of investment
properties held for sale 147 902 1,417
----- ----------- ----------- -------------
Employee benefit trust shares
vesting 20 49 98
----- ----------- ----------- -------------
(1,454) 547 (494)
----- ----------- ----------- -------------
Decrease /(Increase) in trade
and other receivables 3,497 (3,965) (2,198)
----- ----------- ----------- -------------
Decrease in trade and other
payables (815) (689) (265)
----- ----------- ----------- -------------
1,228 (4,107) (2,957)
----- ----------- ----------- -------------
Interest paid - (278) (445)
----- ----------- ----------- -------------
Bank facility fees paid (4) -
----- ----------- ----------- -------------
Loan arrangement fees paid - - (23)
----- ----------- ----------- -------------
Interest received 20 1 2
----- ----------- ----------- -------------
Net cash flows from operating
activities 1,244 (4,384) (3,423)
----- ----------- ----------- -------------
Investing activities
----- ----------- ----------- -------------
Proceeds from sale of investment
properties held for sale 18,222 16,903 27,380
----- ----------- ----------- -------------
Acquisition of and improvements
to (3) (78) (188)
----- ----------- ----------- -------------
investment properties held
for sale
----- ----------- ----------- -------------
Cash flows from investing
activities 18,219 16,825 27,192
----- ----------- ----------- -------------
Net cash flows from operating
activities and investing
activities 19,463 12,441 23,769
----- ----------- ----------- -------------
Financing activities
----- ----------- ----------- -------------
Repayment of borrowings - (20,928) (30,932)
----- ----------- ----------- -------------
Cash flows from financing
activities - (20,928) (30,932)
----- ----------- ----------- -------------
Net increase (decrease)
in cash 19,463 (8,487) (7,163)
----- ----------- ----------- -------------
Cash at beginning of period 3,292 4,159 10,455
----- ----------- ----------- -------------
Cash at end of period 22,755 (4,328) 3,292
----- ----------- ----------- -------------
An acquisition reserve arose when the Company acquired Gilfin
Property Holdings Limited ("Gilfin") in 2007, and the acquisition
consideration was part cash and part shares in The Local Shopping
REIT plc.
During the current period all the remaining Gilfin properties
were disposed of, and Gilfin entered into a members' voluntary
liquidation. A distribution has been received from the liquidator
for an amount in excess of the carrying value of Gilfin.
Accordingly, the gain on acquisition has now been realised, and the
reserve has been transferred to distributable profits.
Condensed Consolidated Statement of Changes in Equity for the
six months ended 31 March 2019
Capital
-------------------------------
Share redemption Retained
-------------------------------
capital Reserves reserve earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------- -------- --------- ----------- --------- --------
At 30 September 2017 18,334 3,773 1,764 10,918 34,789
-------- --------- ----------- --------- --------
Total comprehensive loss
-------- --------- ----------- --------- --------
for the period
-------- --------- ----------- --------- --------
Loss for the period - - - (2,870) (2,870)
-------- --------- ----------- --------- --------
Transactions with owners,
-------- --------- ----------- --------- --------
recorded directly in
equity
-------- --------- ----------- --------- --------
Dividends - - - - -
-------- --------- ----------- --------- --------
Share based payments - - - 49 49
-------- --------- ----------- --------- --------
Total contributions by - - - - -
and
-------- --------- ----------- --------- --------
distributions to owners
-------- --------- ----------- --------- --------
At 31 March 2018 18,334 3,773 1,764 8,097 31,968
-------- --------- ----------- --------- --------
Total comprehensive loss
-------- --------- ----------- --------- --------
for the period
-------- --------- ----------- --------- --------
Loss for the period - - - (4,284) (4,284)
-------- --------- ----------- --------- --------
Transactions with owners,
-------- --------- ----------- --------- --------
recorded directly in
equity
-------- --------- ----------- --------- --------
Dividends - - - - -
-------- --------- ----------- --------- --------
Share based payments - - - 49 49
-------- --------- ----------- --------- --------
Total contributions by - - - - -
and
-------- --------- ----------- --------- --------
distributions to owners
-------- --------- ----------- --------- --------
At 30 September 2018 18,334 3,773 1,764 3,862 27,733
-------- --------- ----------- --------- --------
Total comprehensive loss
-------- --------- ----------- --------- --------
for the period
-------- --------- ----------- --------- --------
Loss for the period - - - (1,900) (1,900)
-------- --------- ----------- --------- --------
Transactions with owners,
-------- --------- ----------- --------- --------
recorded directly in
equity
-------- --------- ----------- --------- --------
Dividends - - - - -
-------- --------- ----------- --------- --------
Share based payments - - - 20 20
-------- --------- ----------- --------- --------
Release of Gilfin acquisition - - -
reserve to
-------- ----------- --------
distributable reserve (3,773) 3,773
-------- --------- ----------- --------- --------
Total contributions by - - - - -
and
-------- --------- ----------- --------- --------
distributions to owners
-------- --------- ----------- --------- --------
At 31 March 2019 18,334 - 1,764 5,755 25,853
-------- --------- ----------- --------- --------
Following the liquidation of Gilfin Property Holdings Limited
during the period, the acquisition reserve which arose when Gilfin
Property Holdings Limited was acquired in 2007 has become available
for distribution.
Notes to the Half Year Report for the six months ended 31 March
2019
1 Accounting policies
Basis of preparation
The condensed set of financial statements has been prepared
in accordance with IAS 34 "Interim Financial Reporting" as
adopted by the EU.
The annual financial statements of the Group are prepared in
accordance with International Financial Reporting Standards
(IFRSs) as adopted by the EU. As required by the Disclosure
and Transparency Rules of the Financial Services Authority,
the condensed set of financial statements has been prepared
applying the accounting policies and presentation that were
applied in the preparation of the Company's published consolidated
financial statements for the year ended 30 September 2018 (with
which they should be read in conjunction).
The Group has adopted IFRS 15 Revenue from Contracts with Customers
and IFRS 9 Financial Instruments from 1 January 2018. Neither
of these standards has a material effect on the Group's financial
statements.
IFRS 16 replaces existing leases guidance, including IAS 17
Leases, IFRIC(R) 4 Determining whether an Arrangement contains
a Lease, SIC-15(R) Operating Leases - Incentives and SIC-27
Evaluating the Substance of Transactions Involving the Legal
Form of a Lease. The standard is effective for annual periods
beginning on or after 1 January 2019. Early adoption is permitted.
IFRS 16 introduces a single, on-balance sheet lease accounting
model for lessees. A lessee recognises a right-of-use asset
representing its right to use the underlying asset and a lease
liability representing its obligation to make lease payments.
There are recognition exemptions for short-term leases and
leases of low-value items. Lessor accounting remains similar
to the current standard - i.e. lessors continue to classify
leases as finance or operating leases.
The adoption of IFRS 16 is not expected have a material effect
on the Group's financial statements.
As explained in the 30 September 2018 financial statements,
the financial statements are not prepared on a going concern
basis.
The comparative figures for the financial year ended 30 September
2018 are not the Company's statutory accounts for that financial
year. Those accounts have been reported on by the Company's
Auditors and delivered to the Registrar of Companies. The report
of the Auditors was (i) unqualified, (ii) did include a reference
to the financial statements not being prepared on a going concern
basis to which the Auditors drew attention by way of emphasis
without qualifying their report, and (iii) did not contain
a statement under section 498 (2) or (3) of the Companies Act
2006.
2 Segmental reporting
IFRS 8 requires operating segments to be identified on the
basis of internal reports that are regularly reported to the
chief operating decision maker to allocate resources to the
segments and to assess their performance.
Since the strategy review in July 2013 the Group has identified
one operation and one reporting segment which is reported to
the Board on a quarterly basis. The Board of directors is considered
to be the chief operating decision maker.
3 Property Operating Expenses
Six months Six months Year ended
ended ended
------------------------------
31 March 31 March 30 September
2019 2018 2018
------------------------------
GBP000 GBP000 GBP000
------------------------------ ----------- ----------- -------------
Bad debt charge (26) (106) (221)
------------------------------- ----------- ----------- -------------
Head rent payments (3) (12) (37)
------------------------------- ----------- ----------- -------------
Repairs (209) (437) (993)
------------------------------- ----------- ----------- -------------
Business rates and council
tax (2) (130) (185)
------------------------------- ----------- ----------- -------------
Irrecoverable service
charge (41) (23) (122)
------------------------------- ----------- ----------- -------------
Utilities (94) (60) (108)
------------------------------- ----------- ----------- -------------
Insurance (11) (21) (53)
------------------------------- ----------- ----------- -------------
Managing agent fees (99) (113) (158)
------------------------------- ----------- ----------- -------------
Leasing costs (32) (159) (266)
------------------------------- ----------- ----------- -------------
Legal & professional (74) (72) (173)
------------------------------- ----------- ----------- -------------
EPC amortisation, abortives,
and miscellaneous (81) (67) (135)
------------------------------- ----------- ----------- -------------
Total property operating
expenses (672) (1,200) (2,451)
------------------------------- ----------- ----------- -------------
In common with many property organisations, the company's
portfolio is a mix of residential, opted and non-opted properties
for VAT. In the above table the applicable VAT which is not
recovered has been included directly in the cost.
4. Property disposals
Six months Six months Year ended
ended ended
31 March 31 March 30 September
2019 2018 2018
------------- ------------- -----------------
Number Number Number
Number of sales 65 46 107
--------------------------- ------------- ------------- ------------- -----------------
GBP000 GBP000 GBP000
--------------------------- ------------- ------------- ------------- -----------------
Average value 288 376 264
--------------------------- ------------- ============= ============= =================
Sales
--------------------------- ------------- ------------- ------------- -----------------
Total sales 18,695 17,277 28,198
--------------------------- ------------- ------------- ------------- -----------------
Carrying value (18,369) (17,805) (28,797)
--------------------------- ------------- ------------- ------------- -----------------
Profit/(Loss) on disposals
before transaction costs 326 (528) (599)
--------------------------- ------------- ============= ============= =================
Transaction costs
--------------------------- ------------- ------------- ------------- -----------------
Legal fees (201) (114) (339)
--------------------------- ------------- ------------- ------------- -----------------
Agent fees, marketing and
brochure costs (238) (236) (426)
--------------------------- ------------- ------------- ------------- -----------------
Disbursements (6) (2) (2)
--------------------------- ------------- ------------- ------------- -----------------
Non recoverable VAT (on
non-opted
and residential elements) (28) (22) (51)
--------------------------- ------------- ------------- ------------- -----------------
Total transaction costs (473) (374) (818)
--------------------------- ------------- ============= ============= =================
Loss on disposals after
transaction
costs (147) (902) (1,417)
--------------------------- ------------- ------------- ------------- -----------------
Transaction costs as
percentage
of sales value 2.5% 2.2% -2.9%
--------------------------- ------------- ------------- ------------- -----------------
5. Administrative expenses
Six months Six months Year ended
ended ended
-------------------------------------
31 March 31 March 30 September
2019 2018 2018
-------------------------------------
GBP000 GBP000 GBP000
------------------------------------- ----------- ----------- -------------
Investment manager fees (232) (304) (496)
-------------------------------------- ----------- ----------- -------------
Legal and professional (885) (51) (186)
-------------------------------------- ----------- ----------- -------------
Tax and audit (49) (57) (113)
-------------------------------------- ----------- ----------- -------------
Remuneration costs* (69) (99) (194)
-------------------------------------- ----------- ----------- -------------
Other 29 (19) (41)
-------------------------------------- ----------- ----------- -------------
Irrecoverable VAT on administration
expenses** (55) (22) (92)
-------------------------------------- ----------- ----------- -------------
Provision for liquidators'
fees - - (250)
-------------------------------------- ----------- ----------- -------------
Provision for legal costs
of winding up (150)
-------------------------------------- ----------- ----------- -------------
Total administrative expenses (1,261) (552) (1,522)
-------------------------------------- ----------- ----------- -------------
* Remuneration costs include GBP20,000 (30 September 2018: GBP 98,000,
31 March 2018; GBP49,000) in respect of the expensing of employee
share options which vest in 2019 onwards or if liquidation targets
are met. This amount has a corresponding entry in equity and has
no impact on the Company's net assets now or in the future.
** The company's portfolio contains residential elements and commercial
properties not opted for VAT. Accordingly, VAT on overheads is not
fully recoverable.
6. Net financing income
Six months Six months Year ended
ended ended
----------------------------------
31 March 31 March 30 September
2019 2018 2018
----------------------------------
GBP000 GBP000 GBP000
---------------------------------- ----------- ----------- -------------
Interest receivable 20 1 2
----------------------------------- ----------- ----------- -------------
Financing income 20 1 2
----------------------------------- ----------- ----------- -------------
Bank loan interest - (278) (327)
----------------------------------- ----------- ----------- -------------
Amortisation of loan arrangement
fees - (58) (261)
----------------------------------- ----------- ----------- -------------
Head rents treated as finance - (14) -
leases
---------------------------------- ----------- ----------- -------------
Bank facility fees (4) (14) (23)
----------------------------------- ----------- ----------- -------------
Financing expenses (4) (364) (611)
----------------------------------- ----------- ----------- -------------
Net financing income/(costs) 16 (363) (609)
----------------------------------- ----------- ----------- -------------
7. Taxation
From 11 May 2007, the Group elected to join the UK REIT regime.
As a result, the Group is exempt from corporation tax on the profits
and gains from its 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.
On entering the UK REIT regime, a conversion charge equal to 2%
of the gross market value of properties involved in the property
rental business, at that date, became due which was paid in full.
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 these losses will be utilised in the foreseeable
future.
8. Dividends
No dividends have been paid since December 2012.
9. Investment properties
Total
--------------------------
GBP000
-------------------------- ---------
At 1 October 2018 22,317
---------
Additions 3
---------
Disposals (18,369)
---------
Fair value adjustments (295)
---------
At 31 March 2019 3,656
---------
The investment properties have all been revalued to their fair
value at 31 March 2019.
For the Group as a whole Allsop LLP, a firm of independent
chartered surveyors valued the Group's property portfolio at 31
March 2019, 30 September 2018, 31 March 2018 and 30 September 2017.
On 30 September 2017, 31 March 2018 and 30 September 2018 Allsop
LLP performed a full valuation of approximately 25% of the Group's
properties (including site inspections) and a desktop valuation of
the remainder of the portfolio. On 31 March 2019 Allsop LLP
performed a desktop valuation of all the Group's remaining
properties, other than one property for which a sale contract was
entered into shortly after the period end, the carrying value of
which equates to its contracted sale price less estimated sale
costs.
All properties owned by the Group at 31 March 2019 have been
subject to a full valuation, including inspection over the two-year
period. These valuations were undertaken in accordance with the
Royal Institute 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.
A reconciliation of the portfolio valuation at 31 March 2019 to
the total value for investment properties given in the Consolidated
Balance Sheet is as follows:
31 March 31 March 30 September
2019 2018 2018
-----------------------------------
GBP000 GBP000 GBP000
----------------------------------- --------- --------- -------------
Portfolio valuation * 3,656 35,632 22,317
------------------------------------ --------- --------- -------------
Investment properties held
for sale (3,656) (10,825) (22,317)
Head leases treated as investment 429 -
properties held under
--------- --------- -------------
finance leases in accordance
with IAS 17
------------------------------------ --------- --------- -------------
Total per Consolidated Balance - 25,236 -
Sheet
------------------------------------ --------- --------- -------------
* Revalued assets and held for sale at net realisable value
10. Interest-bearing loans and borrowings
31 March 31 March 30 September
2019 2018 2018
---------------------------
GBP000 GBP000 GBP000
--------------------------- --------- --------- -------------
Non-current liabilities
--------------------------- --------- --------- -------------
Secured bank loans - 9,556 -
--------------------------- --------- --------- -------------
Loan arrangement fees - (203) -
--------------------------- --------- --------- -------------
- 9,353 -
--------------------------- --------- --------- -------------
Current liabilities
--------------------------- --------- --------- -------------
Current portion of secured - 392 -
bank loans
--------------------------- --------- --------- -------------
All bank borrowings were secured by fixed charges over certain
of the Group's property assets and floating charges over the
companies which own the assets charged.
The Group's loans were fully repaid in July 2018.
11. Earnings per share and Basic earnings per share
The calculation of basic earnings per share was based on the
profit attributable to ordinary shareholders and a weighted
average number of ordinary shares outstanding, calculated as
follows:
Loss attributable to ordinary
shares
Six months Six months Year ended
ended ended
31 March 31 March 30 September
2019 2018 2018
GBP000 GBP000 GBP000
----------- ----------- -------------
Loss for the financial period (1,900) (2,870) (7,154)
---------------------------------- ----------- ----------- -------------
Loss per share (2.30)p (3.48)p (8.67)p
---------------------------------- ----------- ----------- -------------
Weighted average number of
shares
31 March 31 March 30 September
2019 2018 2018
---------------------------------
Number Number Number
000 000 000
--------------------------------- ----------- ----------- -------------
Issued ordinary shares 91,670 91,670 91,670
---------------------------------- ----------- ----------- -------------
Treasury shares (9,164) (9,164) (9,164)
---------------------------------- ----------- ----------- -------------
Weighted average number of
ordinary shares 82,506 82,506 82,506
---------------------------------- ----------- ----------- -------------
Diluted earnings per share
There is no difference between the basic and diluted earnings
per share.
12. Net asset value (NAV)
The number of shares used to calculate net asset value per
share is as follows:
31 March 31 March 30 September
2019 2018 2018
------------------------------------
Number Number Number
000 000 000
------- --------- --------- --------------
Number of shares in issue 91,670 91,670 91,670
--------------------------------------------- --------- --------- --------------
Less: shares held in Treasury (9,164) (9,164) (9,164)
--------------------------------------------- --------- --------- --------------
82,506 82,506 82,506
------- --------- --------- --------------
31 March 31 March 30 September
2019 2018 2018
------------------------------------
GBP000 GBP000 GBP000
------------------------------------ ------- --------- --------- --------------
Net assets per Consolidated
Balance Sheet 25,853 31,968 27,733
--------------------------------------------- --------- --------- --------------
Net asset value per share GBP0.31 GBP0.39 GBP0.34
--------------------------------------------- --------- --------- --------------
13. Derivative financial
instruments
Derivative financial instruments were in the past held by the
Group in the form of interest rate swaps used to manage the
Group's interest rate exposure. These were fully paid down in
the year to 30 September 2016. The Company continues to monitor
the interest rate environment and may enter into some hedging
arrangements in the future. However, given the currently low
and stable rates and the Company's sales programme, this would
not be advantageous at present.
14. Related parties
There have been no transactions with related parties which have
materially affected the financial position or performance of
the Group during the current or previous period nor have there
been any changes in related party transactions which could have
a material effect on the financial position or performance of
the Company during the first six months of the current financial
year.
15. Significant contracts
With effect from 22 July 2013 the Company entered into a management
agreement with Internos Global Investors Limited ("Internos").
In April 2019 Internos changed its name to Principal Real Estate
Europe Limited ("Principal"). Under this agreement the Company
pays to Principal:
1. an annual management fee of 0.70% of the gross asset value
of the Company, subject to a minimum fee of GBP1m in each of
the first two years, GBP0.95m for the third year and GBP0.9m
for the fourth year. This minimum fell away in July 2018;
2. an annual performance fee of 20% of the recurring operating
profits above a pre-agreed target recurring profit;
3. fees for property sales, as follows:
up to GBP50m: nil
GBP50m - GBP150m: 0.5% of sales
over GBP150m: 1% of sales;
4. a terminal fee of 5.7% of cash returned to the Company's
shareholders in excess of 36.1 pence per share per annum from
the Effective Date outside of dividend payments (the "Terminal
Fee Hurdle"). The Terminal Fee Hurdle rises by 8% per annum
after the first year but reduces on a pro-rata daily basis each
time equity is returned to shareholders outside of dividend
payments from recurring operating profits.
Under the terms of the agreement, Principal received a fee of
GBP232,000 (September 2018: GBP416,000; March 2018: GBP304,000).)
ENDS
Important Notices
BDO LLP ("BDO"), which is authorised and regulated by the
Financial Conduct Authority in the United Kingdom, is acting
exclusively as financial adviser to the Company and no one else in
connection with the prospective capital reduction and share
buy-back tender offer announced by the Company on 18 June 2019 (the
"Offer") and will not be responsible to anyone other than the
Company for providing the protections afforded to clients of BDO or
for providing advice in connection with the Offer or any other
matter referred to in this announcement.
This announcement is not intended to, and does not, constitute
or form part of any offer, invitation or solicitation of any offer
to purchase, otherwise acquire, subscribe for, sell or otherwise
dispose of any securities or the solicitation of any vote or
approval in any jurisdiction. The Offer (if made) will be made
solely by certain documentation which will contain the full terms
and conditions of any offer (if made), including details of how
such offer may be accepted. This announcement has been prepared in
accordance with English law and the Code and information disclosed
may not be the same as that which would have been prepared in
accordance with laws outside the United Kingdom. The release,
distribution or publication of this announcement in jurisdictions
outside the United Kingdom may be restricted by the laws of the
relevant jurisdictions and therefore persons into whose possession
this announcement comes should inform themselves about, and
observe, any such restrictions. Any failure to comply with the
restrictions may constitute a violation of the securities laws of
any such jurisdiction.
Disclosure requirements of the Takeover Code (the "Code")
Under Rule 8.3(a) of the Code, any person who is interested in
1% or more of any class of relevant securities of an offeree
company or of any securities exchange offeror (being any offeror
other than an offeror in respect of which it has been announced
that its offer is, or is likely to be, solely in cash) must make an
Opening Position Disclosure following the commencement of the offer
period and, if later, following the announcement in which any
securities exchange offeror is first identified. An Opening
Position Disclosure must contain details of the person's interests
and short positions in, and rights to subscribe for, any relevant
securities of each of (i) the offeree company and (ii) any
securities exchange offeror(s). An Opening Position Disclosure by a
person to whom Rule 8.3(a) applies must be made by no later than
3.30 pm (London time) on the 10th business day following the
commencement of the offer period and, if appropriate, by no later
than 3.30 pm (London time) on the 10th business day following the
announcement in which any securities exchange offeror is first
identified. Relevant persons who deal in the relevant securities of
the offeree company or of a securities exchange offeror prior to
the deadline for making an Opening Position Disclosure must instead
make a Dealing Disclosure.
Under Rule 8.3(b) of the Code, any person who is, or becomes,
interested in 1% or more of any class of relevant securities of the
offeree company or of any securities exchange offeror must make a
Dealing Disclosure if the person deals in any relevant securities
of the offeree company or of any securities exchange offeror. A
Dealing Disclosure must contain details of the dealing concerned
and of the person's interests and short positions in, and rights to
subscribe for, any relevant securities of each of (i) the offeree
company and (ii) any securities exchange offeror(s), save to the
extent that these details have previously been disclosed under Rule
8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies
must be made by no later than 3.30 pm (London time) on the business
day following the date of the relevant dealing.
If two or more persons act together pursuant to an agreement or
understanding, whether formal or informal, to acquire or control an
interest in relevant securities of an offeree company or a
securities exchange offeror, they will be deemed to be a single
person for the purpose of Rule 8.3.
Opening Position Disclosures must also be made by the offeree
company and by any offeror and Dealing Disclosures must also be
made by the offeree company, by any offeror and by any persons
acting in concert with any of them (see Rules 8.1, 8.2 and
8.4).
Details of the offeree and offeror companies in respect of whose
relevant securities Opening Position Disclosures and Dealing
Disclosures must be made can be found in the Disclosure Table on
the Takeover Panel's website at www.thetakeoverpanel.org.uk,
including details of the number of relevant securities in issue,
when the offer period commenced and when any offeror was first
identified. You should contact the Panel's Market Surveillance Unit
on +44 (0)20 7638 0129 if you are in any doubt as to whether you
are required to make an Opening Position Disclosure or a Dealing
Disclosure.
Publication on website
A copy of this announcement will, subject to certain
restrictions relating to persons resident in restricted
jurisdictions, be available on the Company's website at
www.localshoppingreit.co.uk by no later than 12 noon on the
Business Day following the date of this announcement. For the
avoidance of doubt, the content of the website referred to above is
not incorporated into and does not form part of this
announcement.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR QKLFFKQFBBBF
(END) Dow Jones Newswires
June 20, 2019 02:00 ET (06:00 GMT)
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