TIDMLSR

RNS Number : 8536Q

Local Shopping REIT (The) PLC

24 June 2020

FOR IMMEDIATE RELEASE

24 June 2020

The Local Shopping REIT plc ("the Company")

Results for the six months ended 31 March 2020

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 2020.

Enquiries:

Bill Heaney, Company Secretary +44 7712 868315

Management Report

Corporate Activity

The beginning of the period saw the finalisation of the share buy-back programme that commenced during the Company's 2018-19 financial year, with 631,058 ordinary shares being purchased by the Company and then cancelled on 1 October 2019. As a result of the buy-back programme overall, 59,808,456 ordinary shares were purchased by the Company at a price of 31.33 pence per share and then cancelled, leaving the Company with 22,697,397 ordinary shares in issue (excluding 9,164,017 ordinary shares held in treasury).

Following these changes the Company's previous board of directors, comprising Stephen East, Nicholas Vetch and Brett Miller, resigned and were replaced by Duncan Soukup (as non-executive Chairman) and Gareth Edwards (as senior independent non-executive director).

Following the buy-back, trading in the Company's shares on the London Stock Exchange was suspended, as the Company did not meet the minimum free-float requirement. The directors are actively working on plans for remedying this situation and restoring trading in the Company's shares.

The board are currently working on a plan to transfer the Company to the Standard List and change the Company's investment objectives from a Real Estate Investment Trust to an operating company focused on Travel and Leisure, subject to necessary approvals. Further details will be announced in due course.

Economic Background & Market Conditions

The uncertainty regarding the terms of the UK's exit from the European Union and its future relationship with its largest trading partner continued to affect the property market throughout the period. Towards the end of the period, many of our tenants were profoundly affected by the COVID-19 virus and the Government's consequent imposition of a lockdown. We were immediately in contact with our tenants, both directly and through our property managers, with a view to assisting them to apply for the grants and business rates exemptions made available to retailers. At the time of writing many of our tenants have been able to maintain rent payments and we look forward to a normalisation of trading as lockdown restrictions are lifted. However, the effects on trading of the outbreak are likely to last for a number of months to come and our aim will continue to be to support our tenants as far as reasonably possible during this difficult period.

Financial Results and Portfolio Performance

The Company made a loss before tax for the period of GBP0.06 million or 0.26p per share. This compares with a loss of GBP1.90 million or 2.30p per share for the equivalent period of 2018-19 and a loss of GBP1.874 million or 2.34p per share for the full year to 30 September 2019.

Asset Management

The programme of asset sales was suspended in order to maintain the Company's income stream. Accordingly, only two asset sales, which had been contracted during the previous financial year, were completed during the period, at an aggregate gross sale price of GBP0.355 million. The holding value of those properties in the Company's accounts at 30 September 2019 took account of agreed pricing and sales costs. The Company currently holds six property assets (of which one asset is considered to be held for sale, at a gross sale price of GBP0.350 million).

Besides completing the two asset sales contracted for during the previous financial year, asset management activities during the period focussed on maximising property occupancy and opportunities for rental growth, as well as a number of repair and maintenance projects. Marketing and letting activities are continuing, albeit with appropriate precautions to meet lockdown requirements.

Portfolio Valuation

In view of the market uncertainty and the operational restrictions arising from the COVID-19 outbreak, the directors have not considered it appropriate to carry out a fresh valuation of the property portfolio at the half-year (although inevitably the epidemic will have had a negative effect on the value of our properties at 31 March 2020). The six properties contained in the portfolio therefore continue to be recognised in the financial statements at their holding value in the Company's accounts at 30 September 2019. One property is considered to be held for sale and its holding value in the Company's accounts therefore takes account of agreed pricing and sales costs.

The fair value of the property portfolio of the six assets held at 31 March 2020 was GBP3.120 million (30 September 2019: 8 assets, GBP3.465m).

The 30 September 2019 valuations were provided by Allsop LLP, a firm of independent chartered surveyors, as a desktop update of the full RICS valuation that they supplied on 25 July 2019.

Cash and Net Asset Value

At 31 March 2020 the Company held GBP4.023 million in cash (30 September 2019: GBP3.566 million).

The Net Asset Value at 31 March 2020 was GBP6.933 million or 30.55p per share (September 2019: GBP6.992 million or 30.81p per share).

Basis of Preparation of Financial Statements

The Company's financial statements at 31 March 2019 were prepared on a break-up basis in view of the progress with the property sales programme then in place. Having suspended the property disposal programme, the new directors decided that it was appropriate for the financial statements for 30 September 2019 (published on 29 January 2020) should return to being prepared on the going concern basis. The financial statements contained in this report are also prepared on the going concern basis.

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. From the first closing date of the share buy-back offer on 16 September 2019, the Group no longer fulfilled the REIT conditions, principally owing to the proportion of the Company's issued share capital that had come to be held by Thalassa Holdings Ltd. The Company therefore entered discussions with HM Revenue & Customs who confirmed that the Company may maintain its REIT status until 30 September 2020 provided that the relevant conditions are met before that date.

In the event that the Company departs from the UK REIT regime at that date, HM Revenue & Customs may assess the Company for Corporation Tax from the beginning of the accounting period during which the REIT conditions were not fulfilled, i.e. 1 October 2018. However, the Board believes that the Group's activities since then are unlikely to have generated any material Corporation Tax liability.

Dividend

In line with the Group's current dividend distribution policy no interim dividend will be paid. The directors will continue to review the dividend policy in line with progress with the investment strategy.

Related Party

The investment advisory agreement between the Company its fund manager, Principal Real Estate Limited, which was considered to be a related party of the Company for the purposes of the rules of the UK Listing Authority of the Financial Conduct Authority, terminated on 24 November 2019. The Company has, therefore, been considered to be internally managed since that date.

Registered Office

During the period, the Company moved its registered office to Eastleigh Court, Bishopstrow, Warminster BA12 9HW.

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 2019 (available on the Group's website: www.localshoppingreit.co.uk).

These centre on:

-- Changes in the macroeconomic environment, particularly those arising from the COVID-19 epidemic

   --    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 
   --    Non-payment of trade receivables by tenants, potentially exacerbated by the COVID-19 epidemic 
   --    Financial and property market conditions 
   --    Uncontrolled exit from the UK REIT regime 

However, the potential impact of a number 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 a significant portion of the Company's assets is now held as cash.

The Group does not speculate in derivative financial instruments.

The Group's exposure to the risk of non-payment of trade receivables by its tenants is considered to have been heightened in recent months as a direct result of the COVID-19 virus and the consequent lockdown imposed by the UK Government. The lockdown has also impacted on the ability of the Company to refurbish, market and let vacant properties. The directors monitor the level of rent and service charge arrears, as well as progress with letting void properties, on a continual basis.

Auditors' Review

This half-yearly financial report has been reviewed but not audited by auditors pursuant to the Financial Reporting Council guidance on Review of Interim Financial Information.

Responsibility Statement

We confirm that to the best of our knowledge that:

(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 23 June 2020.

Duncan Soukup

Chairman

Condensed Consolidated Income Statement for the six months ended 31 March 2020

 
                                     Note 
                                             Unaudited    Unaudited        Audited 
                                            Six months   Six months     Year ended 
                                                 ended        ended 
                                              31 March     31 March   30 September 
                                                  2020         2019           2019 
                                                GBP000       GBP000         GBP000 
                                    -----  -----------  -----------  ------------- 
 Gross rental income                               229          459            764 
                                    -----  -----------  -----------  ------------- 
 Property operating expenses            3         (45)        (672)          (695) 
                                    -----  -----------  -----------  ------------- 
 Net rental income                                 184        (213)             69 
                                    -----  -----------  -----------  ------------- 
 Profit/(Loss) on disposal 
  of investment properties 
  held for sale                         4            1        (147)          (148) 
                                    -----  -----------  -----------  ------------- 
 Change in fair value of 
  investment properties held 
  for sale                              9            -        (295)          (258) 
                                    -----  -----------  -----------  ------------- 
 Administrative expenses                5        (155)      (1,261)        (1,580) 
                                    -----  -----------  -----------  ------------- 
 Operating Profit/(Loss) 
  before net financing costs                        30      (1,916)        (1,917) 
                                    -----  -----------  -----------  ------------- 
 Financing income                       6            3           20             49 
                                    -----  -----------  -----------  ------------- 
 Financing expenses                     6         (92)          (4)            (6) 
                                    -----  -----------  -----------  ------------- 
 Loss before taxation                             (59)      (1,900)        (1,874) 
                                    -----  -----------  -----------  ------------- 
 Tax                                    7            -            -              - 
                                    -----  -----------  -----------  ------------- 
 Loss for the financial period 
  attributable to equity holders 
  of the parent Company                           (59)      (1,900)        (1,874) 
                                    -----  -----------  -----------  ------------- 
 Basic and diluted loss per 
  share on loss for the financial 
  period                                       (0.26)p      (2.30)p        (2.34)p 
                                    -----  -----------  -----------  ------------- 
 

Condensed Consolidated Statement of Comprehensive Income for the six months ended 31 March 2020

 
                                   Unaudited    Unaudited        Audited 
------------------------------ 
                                  Six months   Six months     Year ended 
                                       ended        ended 
------------------------------ 
                                    31 March     31 March   30 September 
                                        2020         2019           2019 
                                      GBP000       GBP000         GBP000 
------------------------------   -----------  -----------  ------------- 
 Loss for the period & Total 
  Comprehensive Loss for the 
  Period                                (59)      (1,900)        (1,874) 
-------------------------------  -----------  -----------  ------------- 
 Attributable to: 
------------------------------   -----------  -----------  ------------- 
 Equity holders of the parent 
  Company                               (59)      (1,900)        (1,874) 
-------------------------------  -----------  -----------  ------------- 
 
 
 
 

Condensed Consolidated Balance Sheet as at 31 March 2020

 
                                  Note   Unaudited   Unaudited        Audited 
-------------------------------  ----- 
                                          31 March    31 March   30 September 
                                              2020        2019           2019 
-------------------------------  ----- 
 
                                            GBP000      GBP000         GBP000 
-------------------------------  -----  ----------  ----------  ------------- 
 Non-current assets 
                                 -----  ----------  ----------  ------------- 
 Investment properties               9       3,139           -          3,139 
                                 -----  ----------  ----------  ------------- 
 Total non-current assets                    3,139           -          3,139 
                                 -----  ----------  ----------  ------------- 
 Current assets 
                                 -----  ----------  ----------  ------------- 
 Trade and other receivables                   192         844            378 
                                 -----  ----------  ----------  ------------- 
 Investment properties held 
  for sale                           9         330       3,656            677 
                                 -----  ----------  ----------  ------------- 
 Cash                                        4,023      22,755          3,566 
                                 -----  ----------  ----------  ------------- 
 Total current assets                        4,545      27,255          4,621 
                                 -----  ----------  ----------  ------------- 
 Total assets                                7,684      27,255          7,760 
                                 -----  ----------  ----------  ------------- 
 Non-current liabilities 
                                 -----  ----------  ----------  ------------- 
 Finance lease liabilities                   (350)           -          (350) 
                                 -----  ----------  ----------  ------------- 
 Total non-current liabilities               (350)           -          (350) 
                                 -----  ----------  ----------  ------------- 
 Current liabilities 
                                 -----  ----------  ----------  ------------- 
 Trade and other payables                    (401)     (1,402)          (418) 
                                 -----  ----------  ----------  ------------- 
 Total current liabilities                   (401)     (1,402)          (418) 
                                 -----  ----------  ----------  ------------- 
 Total liabilities                           (751)     (1,402)          (768) 
                                 -----  ----------  ----------  ------------- 
 Net assets                                  6,933      25,853          6,992 
                                 -----  ----------  ----------  ------------- 
 
 Equity 
                                 -----  ----------  ----------  ------------- 
 Issued capital                                319      18,334            319 
                                 -----  ----------  ----------  ------------- 
 Capital redemption reserve                    598       1,764            598 
                                 -----  ----------  ----------  ------------- 
 Retained earnings                           6,016       5,755          6,075 
                                 -----  ----------  ----------  ------------- 
 Total attributable to equity 
  holders of the Company                     6,933      25,853          6,992 
 
 

Condensed Consolidated Statement of Cash Flows for the six months ended 31 March 2020

 
                                     Note    Unaudited    Unaudited        Audited 
----------------------------------  ----- 
                                            Six months   Six months     Year ended 
                                                 ended        ended 
----------------------------------  ----- 
                                              31 March     31 March   30 September 
                                                  2020         2019           2019 
                                                GBP000       GBP000         GBP000 
----------------------------------  -----  -----------  -----------  ------------- 
 Operating activities 
                                    -----  -----------  -----------  ------------- 
 Loss for the financial period                    (59)      (1,900)        (1,874) 
                                    -----  -----------  -----------  ------------- 
 Adjustments for: 
                                    -----  -----------  -----------  ------------- 
 Loss on change in fair value 
  of investment properties 
  held for sale                         9            -          295            258 
                                    -----  -----------  -----------  ------------- 
 Net financing (income)/costs           6           89         (16)           (43) 
                                    -----  -----------  -----------  ------------- 
 Profit/(Loss) on disposal 
  of investment properties                         (1)          147            148 
                                    -----  -----------  -----------  ------------- 
 Equity secured share-based 
  payment expenses                                   -           20             40 
                                    -----  -----------  -----------  ------------- 
                                                    29      (1,454)        (1,471) 
                                    -----  -----------  -----------  ------------- 
 Increase in trade and other 
  receivables                                      186        3,497          3,963 
                                    -----  -----------  -----------  ------------- 
 Decrease in trade and other 
  payables                                        (17)        (815)        (1,818) 
                                    -----  -----------  -----------  ------------- 
                                                   198        1,228            674 
                                    -----  -----------  -----------  ------------- 
 Bank facility fees paid                             -          (4)            (6) 
                                    -----  -----------  -----------  ------------- 
 Loss on foreign exchange                         (92)            -              - 
                                    -----  -----------  -----------  ------------- 
 Interest received                                   3           20             49 
                                    -----  -----------  -----------  ------------- 
 Net cash flows from operating 
  activities                                       109        1,244            717 
                                    -----  -----------  -----------  ------------- 
 
 Investing activities 
                                    -----  -----------  -----------  ------------- 
 Proceeds from sale of investment 
  properties                                       348       18,222         18,468 
                                    -----  -----------  -----------  ------------- 
 Acquisition of and improvements 
  to                                                 -          (3)            (4) 
                                    -----  -----------  -----------  ------------- 
 investment properties held 
  for sale 
                                    -----  -----------  -----------  ------------- 
 Cash flows from investing 
  activities                                       348       18,219         18,464 
                                    -----  -----------  -----------  ------------- 
 
 Net cash flows from operating 
  activities and investing 
  activities                                       457       19,463         19,181 
                                    -----  -----------  -----------  ------------- 
 
 Financing activities 
                                    -----  -----------  -----------  ------------- 
 Reduction in share capital                          -            -       (18,907) 
                                    -----  -----------  -----------  ------------- 
 Cash flows from financing 
  activities                                         -            -       (18,907) 
                                    -----  -----------  -----------  ------------- 
 
 Net increase in cash                              457       19,463            274 
                                    -----  -----------  -----------  ------------- 
 Cash at beginning of period                     3,566        3,292          3,292 
                                    -----  -----------  -----------  ------------- 
 Cash at end of period                           4,023       22,755          3,566 
                                    -----  -----------  -----------  ------------- 
 

Condensed Consolidated Statement of Changes in Equity for the six months ended 31 March 2020

 
 
                                                            Capital 
-------------------------------- 
                                      Share              redemption   Retained 
-------------------------------- 
                                    capital   Reserves      reserve   earnings      Total 
                                     GBP000     GBP000       GBP000     GBP000     GBP000 
--------------------------------  ---------  ---------  -----------  ---------  --------- 
 At 30 September 2018                18,334      3,773        1,764      3,862     27,733 
                                  ---------  ---------  -----------  ---------  --------- 
 Total comprehensive expense 
                                  ---------  ---------  -----------  ---------  --------- 
 for the period 
                                  ---------  ---------  -----------  ---------  --------- 
 Loss for the period                      -          -            -    (1,900)    (1,900) 
                                  ---------  ---------  -----------  ---------  --------- 
 Transactions with owners, 
                                  ---------  ---------  -----------  ---------  --------- 
 recorded directly in 
  equity 
                                  ---------  ---------  -----------  ---------  --------- 
 Dividends                                -          -            -          -          - 
                                  ---------  ---------  -----------  ---------  --------- 
 Share based payments                     -          -            -         20         20 
                                  ---------  ---------  -----------  ---------  --------- 
 Total contributions by                   -          -            -          -          - 
  and 
                                  ---------  ---------  -----------  ---------  --------- 
 distributions to owners 
                                  ---------  ---------  -----------  ---------  --------- 
 Release of Gilfin acquisition 
  reserve to distributable 
  reserve                                 -    (3,773)            -      3,773          - 
                                  ---------  ---------  -----------  ---------  --------- 
 
 At 31 March 2019                    18,334          -        1,764      5,755     25,853 
                                  ---------  ---------  -----------  ---------  --------- 
 Total comprehensive loss 
  for the period 
                                  ---------  ---------  -----------  ---------  --------- 
 Profit for the period                    -          -            -         26         26 
                                  ---------  ---------  -----------  ---------  --------- 
 Transactions with owners 
  recorded directly in 
  equity 
                                  ---------  ---------  -----------  ---------  --------- 
 Dividends                                -          -            -          -          - 
                                  ---------  ---------  -----------  ---------  --------- 
 Share based payments                     -          -            -         20         20 
                                  ---------  ---------  -----------  ---------  --------- 
 Total contributions by                   -          -            -          -          - 
  and distributions to 
  owners 
                                  ---------  ---------  -----------  ---------  --------- 
 Capital reduction (Note 
  a) 
                                  ---------  ---------  -----------  ---------  --------- 
                                   (17,417)          -            -     17,417          - 
                                  ---------  ---------  -----------  ---------  --------- 
 Transfer capital reserves 
  to revenue (Note b)                     -          -      (1,764)      1,764          - 
                                  ---------  ---------  -----------  ---------  --------- 
 Cost of own shares acquired 
  (note c)                            (598)          -            -   (18,309)   (18,907) 
                                  ---------  ---------  -----------  ---------  --------- 
 Creation of Capital Redemption 
  Reserve (note d)                        -          -          598      (598)          - 
                                  ---------  ---------  -----------  ---------  --------- 
 At 30 September 2019                   319          -          598      6,075      6,992 
                                  ---------  ---------  -----------  ---------  --------- 
 Total comprehensive profit 
                                  ---------  ---------  -----------  ---------  --------- 
 for the period 
                                  ---------  ---------  -----------  ---------  --------- 
 Loss for the period                      -          -            -       (59)       (59) 
                                  ---------  ---------  -----------  ---------  --------- 
 Transactions with owners, 
                                  ---------  ---------  -----------  ---------  --------- 
 recorded directly in 
  equity 
                                  ---------  ---------  -----------  ---------  --------- 
 Dividends                                -          -            -          -          - 
                                  ---------  ---------  -----------  ---------  --------- 
 Share based payments                     -          -            -          -          - 
                                  ---------  ---------  -----------  ---------  --------- 
 Total contributions by                   -          -            -          -          - 
  and 
                                  ---------  ---------  -----------  ---------  --------- 
 distributions to owners 
                                  ---------  ---------  -----------  ---------  --------- 
 At 31 March 2020                       319          -          598      6,016      6,933 
                                  ---------  ---------  -----------  ---------  --------- 
 

During the six months period to 30 September 2019 the Company successfully applied to the High Court to undertake a capital restructuring in order to enable a share buy-back. Under this restructuring and buy back:

(a) The nominal value of ordinary shares was reduced from 20p to 1p, resulting in GBP17.417m being released to retained earnings.

(b) The capital redemption reserves and other reserves were transferred to retained earnings as part of the Court approved capital restructuring.

(c) 59,808,456 ordinary 1p shares were purchased, representing 72.5% of total share capital at the time, at a price of 31.33p each and then cancelled, the total cost comprising:

 
                                                                                                GBP000s 
            59,808,456 shares               1p nominal value 
             purchased at                    of each share                                          598 
                                ------------------------------  ------------------  ------------------- 
             plus premium 
              30.33p on each 
              share                                                         18,140 
 -------------------------------------------------------------  ------------------  ------------------- 
             legal costs 
              of restructuring 
              and buy back                                                     169               18,309 
 -------------------------------------------------------------  ------------------  ------------------- 
                                                                                                 18,907 
 -------------------------------------------------------------  ------------------  ------------------- 
 

(d) A new capital redemption reserve of GBP0.598m was created to replace the nominal value of shares bought.

Notes to the Half Year Report for the six months ended 31 March 2020

 
 
   1 Accounting policies 
 
   Basis of preparation 
 
 The condensed unaudited 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 2019 (with 
  which they should be read in conjunction). The independent 
  auditor's report on the 2019 financial statements was not qualified. 
 
  The Group adopted IFRS 15 Revenue from Contracts with Customers 
  and IFRS 9 Financial Instruments from 1 January 2019. 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. 
 
  The financial statements are prepared on a going concern basis, 
  as were the financial statements for the year ended 30 September 
  2019. The financial statements for the six months ended 31 
  March 2019 were prepared on a break-up basis. 
 
   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. 
 
  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 
                                        2020         2019           2019 
  ---------------------------- 
                                      GBP000       GBP000         GBP000 
  ----------------------------   -----------  -----------  ------------- 
   Bad debt charge                         9         (26)            108 
  -----------------------------  -----------  -----------  ------------- 
   Head rent payments                    (8)          (3)           (11) 
  -----------------------------  -----------  -----------  ------------- 
   Repairs                              (12)        (209)          (211) 
  -----------------------------  -----------  -----------  ------------- 
   Business rates and council 
    tax                                 (14)          (2)           (25) 
  -----------------------------  -----------  -----------  ------------- 
   Irrecoverable service 
    charge                                 8         (41)           (39) 
  -----------------------------  -----------  -----------  ------------- 
   Utilities                               6         (94)          (109) 
  -----------------------------  -----------  -----------  ------------- 
   Insurance                             (7)         (11)           (36) 
  -----------------------------  -----------  -----------  ------------- 
   Managing agent fees                  (18)         (99)          (123) 
  -----------------------------  -----------  -----------  ------------- 
   Leasing costs                           -         (32)           (36) 
  -----------------------------  -----------  -----------  ------------- 
   Legal & professional                  (6)         (74)          (113) 
  -----------------------------  -----------  -----------  ------------- 
   EPC amortisation, abortive 
    costs, and miscellaneous             (3)         (81)          (100) 
  -----------------------------  -----------  -----------  ------------- 
   Total property operating 
    expenses                            (45)        (672)          (695) 
  -----------------------------  -----------  -----------  ------------- 
 

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.

During the period the rate of rent collection improved, enabling a reduction in the bad debt provision.

 
      4. Property disposals 
 
                                                  Six months     Six months         Year ended 
                                                       ended          ended 
                                                    31 March       31 March       30 September 
                                                        2020           2019               2019 
                                                 -----------  -------------  ----------------- 
                                                      Number         Number             Number 
 
  Number of sales                                          2             65                 66 
 ---------------------------  -------------      -----------  -------------  ----------------- 
                                                      GBP000         GBP000             GBP000 
     ---------------------------  -------------  -----------  -------------  ----------------- 
  Average value                                          175            288                287 
 ---------------------------  -------------      ===========  =============  ================= 
      Sales 
     ---------------------------  -------------  -----------  -------------  ----------------- 
  Total sales                                            355         18,410             18,955 
 ---------------------------  -------------      -----------  -------------  ----------------- 
  Carrying value                                       (347)       (18,369)           (18,616) 
 ---------------------------  -------------      -----------  -------------  ----------------- 
  Profit on disposals before 
   transaction costs                                       8            326                339 
 ---------------------------  -------------      ===========  =============  ================= 
      Transaction costs 
     ---------------------------  -------------  -----------  -------------  ----------------- 
  Legal fees                                             (4)          (201)              (210) 
 ---------------------------  -------------      -----------  -------------  ----------------- 
  Agent fees, marketing and 
   brochure costs                                        (3)          (238)              (240) 
 ---------------------------  -------------      -----------  -------------  ----------------- 
  Disbursements                                            -            (6)                (8) 
 ---------------------------  -------------      -----------  -------------  ----------------- 
  Non recoverable VAT (on 
   non-opted 
   and residential elements)                               -           (28)               (29) 
 ---------------------------  -------------      -----------  -------------  ----------------- 
  Total transaction costs                                (7)          (473)              (487) 
 ---------------------------  -------------      ===========  =============  ================= 
  Profit/(Loss) on disposals 
   after transaction costs                                 1          (147)              (148) 
 ---------------------------  -------------      -----------  -------------  ----------------- 
  Transaction costs as 
   percentage 
   of sales value                                       2.0%           2.5%               2.6% 
 ---------------------------  -------------      -----------  -------------  ----------------- 
 
 5. Administrative expenses 
                                           Six months   Six months     Year ended 
                                                ended        ended 
  ------------------------------------- 
                                             31 March     31 March   30 September 
                                                 2020         2019           2019 
  ------------------------------------- 
                                               GBP000       GBP000         GBP000 
  -------------------------------------   -----------  -----------  ------------- 
   Investment manager fees                        (8)        (232)          (320) 
  --------------------------------------  -----------  -----------  ------------- 
   Legal and professional                        (20)        (885)        (1,177) 
  --------------------------------------  -----------  -----------  ------------- 
   Tax and audit                                 (37)         (49)           (96) 
  --------------------------------------  -----------  -----------  ------------- 
   Remuneration costs*                           (61)         (69)          (134) 
  --------------------------------------  -----------  -----------  ------------- 
   Other                                          (7)           29             14 
  --------------------------------------  -----------  -----------  ------------- 
   Irrecoverable VAT on administration 
    expenses**                                   (22)         (55)           (92) 
  --------------------------------------  -----------  -----------  ------------- 
   Provision for liquidators' 
    fees                                            -            -            225 
  --------------------------------------  -----------  -----------  ------------- 
 
   Total administrative expenses                (155)      (1,261)        (1,580) 
  --------------------------------------  -----------  -----------  ------------- 
 
 
  *The Company had no employees at the beginning of the period and 
  one employee at the end of the period. The Company had three directors 
  at the beginning of the period and two directors at the end of the 
  period (2019: three). Remuneration costs include GBPnil in respect 
  of the expensing of employee share options which were to vest in 
  2019 onwards or if liquidation targets are met (30 September 2019: 
  GBP 40,000; 31 March 2019: GBP20,000). 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 
                                              2020         2019           2019 
  ---------------------------------- 
                                            GBP000       GBP000         GBP000 
  ----------------------------------   -----------  -----------  ------------- 
   Interest receivable                           3           20             49 
  -----------------------------------  -----------  -----------  ------------- 
   Financing income                              3           20             49 
  -----------------------------------  -----------  -----------  ------------- 
   Bank loan interest                            -            -              - 
  ----------------------------------   -----------  -----------  ------------- 
   Amortisation of loan arrangement              -            -              - 
    fees 
  ----------------------------------   -----------  -----------  ------------- 
   Loss on foreign exchange                   (92)            -              - 
  ----------------------------------   -----------  -----------  ------------- 
 
   Bank facility fees                            -          (4)            (6) 
  -----------------------------------  -----------  -----------  ------------- 
   Financing expenses                         (92)          (4)            (6) 
  -----------------------------------  -----------  -----------  ------------- 
   Net financing (Costs)/Income               (89)           16             43 
  -----------------------------------  -----------  -----------  ------------- 
 
 
  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. 
 
 
   From the first closing date of the Company's share buy-back offer 
   on 16 September 2019, the Group no longer fulfilled certain of the 
   REIT conditions, principally owing to the proportion of the Company's 
   issued share capital that had thereby come to be held by Thalassa 
   Holdings Ltd. The Company therefore entered discussions with HM 
   Revenue & Customs who confirmed that the Company may maintain its 
   REIT status until 30 September 2020 provided that the relevant conditions 
   are met on that date. In the event that the Company is confirmed 
   to have departed from the UK REIT regime at that date, HM Revenue 
   & Customs may assess the Company for corporation tax from the beginning 
   of the accounting period during which the REIT conditions were not 
   fulfilled, i.e. 1 October 2018. However, the Board believes that 
   the Group's activities since then and the availability of tax losses 
   means that the Company's activities are unlikely to have generated 
   any material corporation tax liability and no provision for corporation 
   tax has been made in these accounts. 
 
   8. Dividends 
 
   No dividends have been paid since December 2012. 
 
 
 
 9. Investment properties 
 
                              Total 
-------------------------- 
                             GBP000 
--------------------------  ------- 
 At 1 October 2019            3,816 
                            ------- 
 Additions                        - 
                            ------- 
 Disposals                    (347) 
                            ------- 
 Fair value adjustments           - 
                            ------- 
 At 31 March 2020             3,469 
                            ------- 
 

Allsop LLP, a firm of independent chartered surveyors valued the Group's property portfolio at 30 September 2017, 31 March 2018, 30 September 2018 and 31 March 2019. On each of these dates Allsop LLP performed a full valuation of 25% of the Group's properties (including site inspections) and a desktop valuation of the remainder, such that all properties owned by the Group were been inspected and valued over the two-year period. The valuations, using assumptions regarding yield rates, void levels and comparable market transactions, 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.

In July 2019 Allsop LLP carried out a full valuation (including site visits) on all the properties held at that date. In the light of that recent full valuation, for the 30 September 2019 financial statements the Company had desktop valuations prepared by Allsops for all the properties in the portfolio at that date, except for three properties which were considered to be held for sale and were therefore valued at their expected sale price less sales costs.

In view of the market uncertainty and the operational restrictions arising from the COVID-19 outbreak, the directors did not consider it appropriate to carry out a fresh valuation of the property portfolio at the half-year. The six properties contained in the portfolio therefore continue to be recognised in the financial statements at their holding value in the Company's accounts at 30 September 2019. One property is considered to be held for sale and its holding value in the Company's accounts therefore takes account of agreed pricing and sales costs. During the period sales were completed on two properties considered at 30 September 2019 to be held for sale.

Material valuation uncertainty

The outbreak of the Coronavirus (COVID-19), declared by the World Health Organization as a "Global Pandemic" on 11 March 2020, has impacted global financial markets and global economy. Given the unknown future impact that COVID-19 might have on the real estate market less certainty should be attached to the valuation than would normally be the case.

A reconciliation of the portfolio valuation at 31 March 2020 to the total value for investment properties given in the Consolidated Balance Sheet is as follows:

 
 
                                       31 March   31 March   30 September 
                                           2020       2019           2019 
----------------------------------- 
                                         GBP000     GBP000         GBP000 
-----------------------------------   ---------  ---------  ------------- 
 Portfolio valuation*                     3,100      3,656          3,447 
------------------------------------  ---------  ---------  ------------- 
 Investment properties held 
  for sale                                (330)    (3,656)          (677) 
 Head leases treated as investment 
  properties held under                     369 
                                      ---------  ---------  ------------- 
 finance leases in accordance 
  with IAS 17                                            -            369 
------------------------------------  ---------  ---------  ------------- 
 Total per Consolidated Balance 
  Sheet                                   3,139          -          3,139 
------------------------------------  ---------  ---------  ------------- 
 

* Revalued assets and held for sale at net realisable value

10. 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 
                                           2020         2019           2019 
                                         GBP000       GBP000         GBP000 
                                    -----------  -----------  ------------- 
 Loss for the financial period             (59)      (1,900)        (7,154) 
----------------------------------  -----------  -----------  ------------- 
 
 
 
   Weighted average number of 
   shares 
 
 
                                  31 March   31 March   30 September 
                                      2020       2019           2019 
------------------------------ 
 
                                    Number     Number         Number 
                                       000        000            000 
 ------------------------------  ---------  ---------  ------------- 
 Weighted average number of 
  ordinary shares                   31,861     91,670         31,861 
-------------------------------  ---------  ---------  ------------- 
 Treasury shares                   (9,164)    (9,164)        (9,164) 
-------------------------------  ---------  ---------  ------------- 
 Weighted average number of 
  ordinary shares                   22,697     82,506         22,697 
-------------------------------  ---------  ---------  ------------- 
 
 
 Diluted earnings per share 
 
   There is no difference between the basic and diluted earnings 
   per share. 
 
   11. 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 
                                                     2020       2019           2019 
---------------------------------- 
 
                                                   Number     Number         Number 
                                                      000        000            000 
 ----------                                     ---------  ---------  ------------- 
 Number of shares in issue                         31,861     91,670         31,861 
----------------------------------------------  ---------  ---------  ------------- 
 Less: shares held in Treasury                    (9,164)    (9,164)        (9,164) 
----------------------------------------------  ---------  ---------  ------------- 
                                                   22,697     82,506         22,697 
 ----------                                     ---------  ---------  ------------- 
 
 
 
                                                 31 March   31 March   30 September 
                                                     2020       2019           2019 
---------------------------------- 
                                                   GBP000     GBP000         GBP000 
----------------------------------  ----------  ---------  ---------  ------------- 
 Net assets per Consolidated 
  Balance Sheet                                     6,933     25,853          6,992 
----------------------------------------------  ---------  ---------  ------------- 
 Net asset value per share                        GBP0.31    GBP0.31        GBP0.31 
----------------------------------------------  ---------  ---------  ------------- 
 
 12. 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. 
 
   Since the termination of the investment advisory agreement between 
   the Company and Principal Real Estate Europe Limited on 24 November 
   2019, the Company's controlling shareholder, Thalassa Holdings 
   Ltd, has provided management accounting and registered office facilities 
   to the Company. Those services are supplied at cost and it is not 
   considered that they comprise a related party transaction. 
 
 
 
 
   13. Significant contracts 
 
         The management agreement between the Company and Principal Real 
         Estate Europe Limited ("Principal") was terminated on 24 November 
         2019. Under this agreement the Company had paid 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. 
 
         The fees paid by the Company to Principal in respect of the period 
         totalled GBP8,000 (6 months to 31 March 2019: GBP232,000; 12 months 
         to 30 September 2020: GBP320,000). 
 

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

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