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

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June 20, 2019 02:00 ET (06:00 GMT)

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