Final Results

Final Results

Gresham House plc

GRESHAM HOUSE PLC
(the “Company” or the “Group”)
PRELIMINARY FINANCIAL STATEMENT
YEAR ENDED 31 DECEMBER 2012

Gresham House plc (GHE.L), the property and early-stage investment trust, is pleased to announce its preliminary results for the year ended 31 December 2012.

CHAIRMAN’S STATEMENT

I am pleased to report on the results of the Gresham House group of companies for the year to 31 December 2012.

The Results

The revenue loss after taxation has increased from £361,000 for the year to 31 December 2011 to £810,000 for the year to 31 December 2012. The principal reason for this adverse movement is that in 2011 there was a £795,000 share of joint venture operating profit following the sale of an office development in Aberdeen which significantly reduced the running losses of £1,156,000.

Net Asset Value per Share

The net asset value per share has increased in the year to 31 December 2012 to 472.5p per share from 447.0p per share at 31 December 2011. As I reported last year it is the Board’s opinion that the net asset value attributable to shareholders is overstated because of the requirements of IAS27 to show minority stakes in subsidiaries with a negative net worth as a debit to equity. This requirement results in an overstated net asset value of £1,467,000 at 31 December 2012 (£1,043,000 at 31 December 2011). The adjustment of this treatment would reduce the net asset value per share to 445.1p per share at 31 December 2012 against 427.6p per share at 31 December 2011.

The increase in asset value is largely due to the revaluation surplus on investment properties of £2,086,000 offset by the revenue loss for the year of £810,000.

Property Portfolio

The principal assets of the Group remain the property investments which, following the sale of the unit at Knowsley during the year ended 31 December 2012, now consists of four properties or sites valued by Jones Lang Lasalle at a total of £28,896,000 as at 31 December 2012, up from a comparable £25,943,000 for the previous year.

The increase in the total value of £2,953,000 is represented predominantly by Newton-le-Willows where we secured a valuable food retail consent on 10 acres in September 2012 and, to a lesser extent, by Vincent Lane, Dorking where Persimmon Homes Ltd successfully won its planning appeal in January 2013 for residential development. They are expected to complete the purchase of the site by the end of June 2013 for £2,950,000. There is also a small uplift in value at Northern Gateway, Knowsley where a letting has been agreed since the year end to an excellent tenant, on attractive commercial terms. Terms have also been agreed on the sale of this investment once the letting has been finalised.

Securities Portfolio

During the year we sold £2,315,000 of investments and made acquisitions with an aggregate value of £571,000. We realised losses of £753,000 and our unrealised gains to 31 December 2012 were £473,000 resulting in a capital loss of £280,000. Since the year end we have sold a further £1,136,000 of investments at a small increase over year end values. Our portfolio at the year-end was valued at £7,054,000, of which listed and AIM investments accounted for 41.6%. We anticipate making further sales during the current year to reduce our investment portfolio as we unlock potential value in most of these investments.

Loans and Cash

Details of the borrowings are reviewed in the Chief Executive’s Report. We remain confident that all facilities will be renewed as and when they fall due as a result of the pending sales of property assets against which the loans are secured.

Realisation of the Group’s Assets

Shareholders approved the orderly realisation of the Group’s assets at the 2011 annual general meeting. This continues to be a slower process than originally anticipated as we are seeking to realise value on both the property and investment portfolio under difficult market conditions. We continue to seek to maximise value of the Group’s assets and sell these at the appropriate time whilst exploring all opportunities to unlock shareholder value.

17 April 2012

Tony Ebel
Chairman

CHIEF EXECUTIVE’S REPORT

Dear Shareholder,

Despite the fact that the general secondary property market is suffering from both lack of tenant demand and little or no funding from banks, the Group has delivered an increased net asset value as a result of successful planning gains and strategic asset management of the property portfolio. We continue to focus on maximising shareholder returns by an orderly realisation of the Group’s assets with a view of returning cash to shareholders as soon as practicable whilst exploring all opportunities to unlock shareholder value.

Results for the Year to 31 December 2012

The Group and share of joint venture operating profit for the year ended 31 December 2012 was break even against a profit of £334,000 in 2011. The comparison between both years is as follows:

  2012   2011
£’000 £’000
Dividend and investment income 690 386
Rental income 1,038 1,036
Other income 102 81
Property outgoings (989) (1,051)
Administration overheads (841) (913)
Joint venture profit - 795
Operating profit - 334

The significant variances between the two years are as follows:-

The increase in dividend and interest income was mainly as a result of an increase in bank interest receivable of £65,000 and an increase in interest from two loan notes, one issued by SMU Investments Ltd, which was repaid in full during the year, and the other by Attila (BR) Ltd, a property investment company whose sole asset is a site in Edinburgh which is expected to obtain residential planning consent in the near future. The total interest on these loan notes amounted to £446,000 against which must be offset the decrease of £257,000 from the interest receivable from the quoted bond portfolio, the majority of which had been sold by the year end.

The results for the year ended 31 December 2011 included a sum of £795,000 in respect of the trading profit made from the sale of the joint venture office development in Aberdeen.

Property Portfolio

In recent months we have seen an improvement in market conditions for our commercial properties and we continue to seek to maximise the value of these assets.

I am pleased to report that we received a valuable planning consent at Newton-le-Willows in September 2012 for a 70,000sq ft (6,500sq m) foodstore, a petrol filling station and associated car parking and we are now in discussions with retail operators for the potential letting or sale of this part of the site. On the residential portion of the site, we have received offers from housebuilders and negotiations are ongoing.

At Vincent Lane, Dorking, T E Beteiligungs GmbH completed the purchase of 1.2 acres in January 2013 and has commenced development of a Lidl store. On the remaining 1.8 acres, Persimmon Homes Ltd successfully won its planning appeal also in January 2013 and is expected to complete its purchase in the summer of 2013.

The sale to the tenant of our 40,000sq ft industrial unit at Deacon Park, Knowsley was completed in November 2012.

At Northern Gateway, Knowsley, terms have been agreed since the year end with an excellent tenant for the letting of the entire 143,000sq ft (13,200sq m) warehouse on attractive terms. Solicitors have been instructed and the lease is expected to be signed by the end of June 2013 after which we hope to be able to sell this investment for a sum in excess of the year end valuation.

Securities Portfolio

At 31 December 2012 the value of the investment portfolio decreased by £2,024,000 as a result of disposals of £2,315,000 and acquisitions of £571,000 together with net realised and unrealised losses of £280,000.

Our investments at 31 December 2012 amounted to £7,054,000 of which listed and AIM investments represented £2,931,000. Since the year end we have disposed of £1,136,000 of these investments at slightly above year end values. The principal quoted investment remaining is our holding in SpaceandPeople plc, which has risen in value since the year end from £1,506,000 to £2,124,000 as of 15 April 2013.

The unquoted investments of £4,059,000 include the investment in Memorial Holdings Limited which has opened Kemnal Park Cemetery in the London Borough of Bromley. Despite a small write down by the independent valuer, value is likely to increase once the business plan has been proven. The cemetery opened for burials last October and services have been held in the new chapel since early March this year with a facility for off site cremations. Phase 1 of the memorial gardens has been developed resulting in Kemnal Park being one of the finest cemeteries in the United Kingdom. The book value of our 10.1% investment in Memorial Holdings Ltd is £2,074,000.

Our investment in Attila (BR) Limited is in respect of a site in Edinburgh which was a former post office sorting facility. Contracts have been exchanged for the sale of the whole site to Barratt Homes Limited who anticipate receiving residential planning consent shortly.

Borrowings and Cash at Bank

Loans and overdrafts at 31 December 2012 were £20.5m against £20.1m at 31 December 2011. These consisted of an overdraft facility, which is cash backed, of £7.4m and two loans from the Royal Bank of Scotland (£3.5m) and one from the Co-operative Bank (£9.6m) all of which are secured against the property portfolio. This represents a loan to value of 45% against the overall property investments. These loans are short term due to the proposed repayment of these as a result of the property sales referred to above. Confirmation has been received from the Co-operative Bank that it expects to extend its facility for a further 12 months subject to meeting an additional condition which is in the process of being finalised.

Cash in hand at 31 December 2012 has increased from £6.193m at 31 December 2011 to £8.348m at 31 December 2012.

Disposal Strategy

We continue to work to our business plan of disposing of the Group’s assets as soon as reasonably practicable although completion of this programme will almost certainly extend well into next year. We are however always looking for opportunities to realise disposals at an earlier time.

Finally, I would like to thank my two executive directors and the staff for the commitment under difficult times in making progress with an enhanced asset value over the past twelve months.

17 April 2012

Derek Lucie-Smith
Chief Executive

PRELIMINARY FINANCIAL STATEMENT

GROUP STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2012

    2012           2011  
Revenue Capital Total     Revenue Capital Total
£' 000 £' 000 £' 000 £' 000 £' 000 £' 000
Income:
Dividend and interest income 690 - 690 386 - 386
Rental income 1,038 - 1,038 1,036 - 1,036
Other operating income 102 - 102 81 - 81
Total Income 1,830 - 1,830 1,503 - 1,503
Operating costs:
Property outgoings (989) - (989) (1,051) - (1,051)
Administrative overheads (841) - (841) (913) - (913)
Net trading result / (loss) - - - (461) - (461)
Gains & losses on investments:
Gains & losses on investments held at fair value - (280) (280) - (203) (203)
Movement in fair value of property investments - 2,086 2,086 - (1,804) (1,804)
Group operating profit/(loss) - 1,806 1,806 (461) (2,007) (2,468)
Finance costs (810) - (810) (695) - (695)
Share of joint venture operating profit - - - 795 - 795
Group and share of joint venture operating profit/(loss) before taxation (810) 1,806 996 (361) (2,007) (2,368)
Taxation - - - - - -
Profit/(loss) and total comprehensive income (810) 1,806 996 (361) (2,007) (2,368)
 
Attributable to:
Equity holders of the parent (428) 1,848 1,420 264 (1,816) (1,552)
Non-controlling interest (382) (42) (424) (625) (191) (816)
(810) 1,806 996 (361) (2,007) (2,368)
Basic and diluted earnings/(loss) per ordinary share (8.0p) 34.4p 26.4p 4.9p (33.8p) (28.9p)

Notes

(i) The total column of this statement represents the Group’s Statement of Comprehensive Income, prepared in accordance with IFRSs.

(ii) The revenue and capital columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.

(iii) Dividends - Ordinary shares:

Proposed final dividend of 2.5p per share (2011: 1p) payable on 7 June 2013 to shareholders on the register at 17 May 2013 at a total cost of £134,247 (2011: £53,699).

(iv) The summary of results for the year ended 31 December 2012 does not constitute statutory accounts within the meaning of s435(1) of the Companies Act 2006. The financial information has been extracted from the Group’s full statutory accounts for the year ended 31 December 2012 in which the auditors’ report was neither qualified, nor contained any reference to emphasis of matter, nor any statement under section 498(2) or section 498(3) of the Companies Act 2006. The full statutory accounts will be available on the Company’s website www.greshamhouse.com and will be posted to shareholders shortly.

(v) The basic and diluted earnings / (loss) per share figure is based on the net profit for the year attributable to the equity shareholders of £1,420,000 (2011: loss £1,552,000) and on 5,369,880 (2011: 5,369,880) ordinary shares, being the weighted average number of ordinary shares in issue during the period.

There were no potentially dilutive ordinary shares as at 31 December 2012.

PRELIMINARY FINANCIAL STATEMENT

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

YEAR ENDED 31 DECEMBER 2012
  Ordinary share capital   Share premium   Share option reserve   Capital reserve   Retained earnings   Equity attributable to equity share-holders   Non-controlling interest   Total equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance as at 31 December 2011 1,342 2,302 14 34,086 (13,739) 24,005 (1,043) 22,962
Profit/(loss) for the period being total comprehensive income for the year - - - 1,848 (428) 1,420 (424) 996
Ordinary dividends paid - - - - (54) (54) - (54)
Share options lapsed - - (14) - 14 - - -
Balance at 31 December 2012 1,342 2,302 - 35,934 (14,207) 25,371 (1,467) 23,904

 

YEAR ENDED 31 DECEMBER 2011
Ordinary share capital Share premium Share option reserve Capital reserve Retained earnings Equity attributable to equity share-holders Non-controlling interest Total equity
  £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance as at 31 December 2010 1,342 2,302 14 35,902 (13,949) 25,611 (227) 25,384
(Loss)/profit for the year being total comprehensive income for the period - - - (1,816) 264 (1,552) (816) (2,368)
Ordinary dividends paid - - - - (54) (54) - (54)
Balance at 31 December 2011 1,342 2,302 14 34,086 (13,739) 24,005 (1,043) 22,962

PRELIMINARY FINANCIAL STATEMENT

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2012

  2011   2011
Assets £'000 £'000
Non current assets
Investments – securities 5,905 6,808
Property investments 21,516 22,193
Other investments - -
27,421 29,001
Current assets
Trade and other receivables 187 243
Accrued income and prepaid expenses 626 512
Other current assets 775 802
Cash and cash equivalents 8,348 6,193
Non current assets held for sale
Investments – securities 1,149 2,270
Property investments 7,380 5,250
Total current assets and non current assets held for sale 18,465 15,270
 
Total assets 45,886 44,271
 
Current liabilities
Trade and other payables 1,524 1,122
Short term borrowings 14,958 14,858
Other financial liabilities - 79
Liabilities of a disposal group classified as held for sale
Short term borrowings 5,500   5,250
21,982 21,309
   
Total assets less current liabilities 23,904 22,962
 
Non-current liabilities
Deferred taxation - -
- -
   
Net assets 23,904 22,962
 
Capital and reserves
Ordinary share capital 1,342 1,342
Share premium 2,302 2,302
Share option reserve - 14
Capital reserve 35,934 34,086
Retained earnings (14,207) (13,739)
Equity attributable to equity shareholders 25,371 24,005
Non-controlling interest (1,467) (1,043)
Total equity 23,904 22,962
 
Basic and diluted net asset value per ordinary share 472.5p 447.0p

Notes

Basic and diluted net asset value per ordinary share is based on Equity attributable to equity shareholders at the year end and on 5,369,880 (2011: 5,369,880) ordinary shares being the number of ordinary shares in issue at the year end. No shares were deemed to have been issued at nil consideration as a result of options granted and hence there were no potentially dilutive ordinary shares as at 31 December 2012.

PRELIMINARY FINANCIAL STATEMENT

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2012

  2012   2012   2011   2011
£'000 £'000 £'000 £'000
Cash flow from operating activities
Investment income received 76 65
Interest received 453 508
Rental income received 1,093 989
Other cash payments (1,686) (1,795)
Net cash utilised in operations (64) (233)
 
Interest paid on property loans (757) (848)
(757) (848)
 
Net cash flow from operating activities (821) (1,081)
 
Cash flow from investing activities
Purchase of investments (571) (843)
Receipt from joint venture - 1,703
Sale of investments 2,343 3,955
Sale of investment properties 1,500 -
Repayment of loans - 167
Expenditure on investment properties (563) (2,832)
Purchase of developments in hand (29) (17)
2,680 2,133
Cash flow from financing activities
Repayment of loans (1,956) (484)
Receipt of loans 2,306 2,848
Equity dividends paid (54) (54)
296 2,310
 
Increase in cash and cash equivalents 2,155 3,362
 
Cash and cash equivalents at start of year 6,193 2,831
   
Cash and cash equivalents at end of year 8,348 6,193

NOTES TO THE GROUP STATEMENT OF CASH FLOWS

  2012   2011
£’000 £’000
Revenue return before taxation (810) (361)
Interest payable 679 598
Share of joint venture profits - (795)
(131) (558)
(Increase)/decrease in current assets (30) 169
Increase/(decrease) in current liabilities 97 156
Net cash utilised in operations (64) (233)

PRELIMINARY FINANCIAL STATEMENT

SEGMENTAL REPORTING

  Investment   Property Investment   Elimination   Consolidated
2012   2011 2012   2011 2012   2011 2012   2011
Revenue £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
External income 727 466 1,033 1,032 - - 1,760 1,498
Inter – segment income 1,369 1,133 - - (1,369) (1,133) - -
Total revenue 2,096 1,599 1,033 1,032 (1,369) (1,133) 1,760 1,498
 
Gain/(loss) on investments at fair value (280) (203) - - - - (280) (203)
Movement on property investments at fair value - - 2,086 (1,804) - - 2,086 (1,804)
Total income and gains 1,816 1,396 3,119 (772) (1,369) (1,133) 3,566 (509)
 
Segment expenses - - (989) (1,051) - - (989) (1,051)
Inter – segment expense - - (1,369) (1,133) 1,369 1,133 - -
Interest expense (203) (134) (607) (561) - - (810) (695)
Segment profit/(loss) 1,613 1,262 154 (3,517) - - 1,767 (2,255)
Unallocated corporate expenses (841) (913)
Operating profit/(loss) 926 (3,168)
Share of joint venture profit - 795
Interest income 70 5
Profit/(loss) before taxation 996 (2,368)
 
The Group’s policy is to invest in both securities and commercial properties. Accordingly management reporting is split on this basis under the headings “Investment” and “Property Investment” respectively. Inter-segment income consists of management fees and interest on inter-company loans. Unallocated corporate expenses relate to those costs which cannot be readily identified to either segment.

 

All activity and revenue is derived from operations within the United Kingdom. Three customers accounted for £301,000, £222,000 and £172,000 respectively of the external income for the Property Investment segment. Property operating expenses relating to property investments that did not generate any rental income were £221,000 (2011: £105,000).

Other Information Investment Property Investment Unallocated Consolidated
2012 2011 2012 2011 2012 2011 2012 2011
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
Segment assets 16,339 16,147 29,547 28,124 - - 45,886 44,271
Segment liabilities (7,571) (5,415) (14,411) (15,894) - - (21,982) (21,309)
8,768 10,732 15,136 12,230 - - 23,904 22,962
Capital expenditure 571 843 867 627 - - 1,438 1,470
Depreciation - - - - - - - -
Non-cash expenses other than depreciation - - - - - - - -

All non current assets are located within the United Kingdom.

GRESHAM HOUSE PLC

PRELIMINARY FINANCIAL STATEMENT

The principal accounting policies adopted by the Group are fundamentally the same as the previous year other than the Basis of preparation note. Full disclosure of the principal accounting policies and related party transactions are included in the financial statements which will be available on the Company’s website www.greshamhouse.com shortly.

Basis of preparation

The financial statements of the Group and the Company have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union and those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

There have been no new standards, amendments and interpretations issued and made effective for the accounting period commencing 1 January 2012 that have a material impact on the financial statements of the Group.

The principal accounting policies adopted are set out below. Where presentational guidance set out in the Statement of Recommended Practice (“the SORP”) for investment trusts issued by the Association of Investment Companies (“the AIC”) is consistent with the requirements of IFRS and appropriate in the context of the Company’s activities, the directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP.

Other standards and interpretations have been issued which will be effective for future reporting periods but have not been adopted in these financial statements as set out in note (u).

As the Group’s investment objective is now the orderly realisation of the Group’s assets over a period of approximately two years with a view to returning capital to shareholders thereafter, the Group technically ceases to be a going concern as it is the intention to realise assets and return capital to shareholders in due course. During the realisation period the Group expects to trade in an orderly fashion and, in the directors’ opinion, the valuation bases applied to the assets and liabilities (as disclosed elsewhere within the accounting policies) are such that there would be no material adjustments to the financial statements if they had been prepared on a going concern basis.

The Group has short term bank borrowings of £20.5m due within one year including an overdraft facility of £7.4m which is secured on a similar amount of cash deposits, a loan of £9.6m from the Co-operative Bank repayable by 31 May 2013 and a further loan of £3.5m from Royal Bank of Scotland repayable by 30 September 2013. Confirmation has been received from the Co-operative Bank plc that it expects to extend the facility for a further 12 month period on similar terms but subject to a condition that needs to be met. The directors fully expect to be able to meet this additional requirement and are therefore confident that the loan will be renewed. The Royal Bank of Scotland loan is expected to be repaid out of the proceeds of asset sales prior to it falling due.

On this basis the directors are of the opinion that the Group will have sufficient working capital to fund ongoing activities for at least the next 12 months.

DIRECTORS’ RESPONSIBILITIES STATEMENT

This preliminary announcement complies with the Disclosure and Transparency Rules (DTR) of the United Kingdom’s Financial Conduct Authority. The preliminary announcement is the responsibility of, and has been approved by the directors of Gresham House plc.

The responsibility statement below has been prepared in connection with the Company’s full Annual Report for the year ended 31 December 2012. Certain parts thereof are not included in this announcement.

The directors confirm, to the best of their knowledge:

  • that the Group financial statements, which have been prepared in accordance with IFRS as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group; and
  • that the management report included within the report of the directors includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

Further information:

Derek Lucie-Smith (Chief Executive, Gresham House plc) 020 7592 7020
Brian Hallett (Finance Director, Gresham House plc) 01489 570 861
Richard Johnson (Westhouse Securities Limited) 020 7601 6100

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