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
IR BRGDLBBDDGGX
(END) Dow Jones Newswires
June 24, 2020 02:00 ET (06:00 GMT)
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