Half-yearly Report
FOR IMMEDIATE RELEASE 28 August 2009
LONDON & ASSOCIATED PROPERTIES PLC:
HALF YEARLY RESULTS TO 30 JUNE 2009
London & Associated Properties is a fully listed UK shopping centre and Central
London retail property specialist. The company owns and manages £245m of retail
investments
HIGHLIGHTS
* Rental income grew by £0.3m (4%) over period to £8.3m
* Net Asset Value per share rose 25% to 66.13p compared to December 2008 year
end
* Group gross assets total £310m, including £245m of property
* Low tenant failure - insolvency accounted for only £0.1m out of £16.9m of
annualised rental income
* Current pre-let developments in London - Kings Road, Chelsea and Upper
Street, Islington - to complete in October 2009 and will produce additional
£1.5m of annual rent against aggregate costs of £2m
* All debt is long term - no loans expire before September 2011
* Company continues to be covenant compliant
* £5.5m current cash at bank
* Cash dividend of 0.75p per share to be paid
"Our portfolio has to date withstood the worst of the tenant defaults and
rental declines witnessed elsewhere, and we have no reason to believe that it
will not continue to do so. I therefore feel that LAP can face the future with
cautious optimism." Michael Heller, Chairman
-more-
Contact:
London & Associated Properties PLC Tel: 020 7415 5000
John Heller, Chief Executive or Robert Corry, Finance Director
Baron Phillips Associates Tel: 020 7920 3161
Baron Phillips
HALF YEAR REVIEW
We are pleased to report on a positive performance by LAP during the first half
of 2009. Against a backdrop of considerable economic uncertainty we have grown
rental income by some £0.3m pa, or 4%, to £8.3m compared to the first half of
2008. This is in spite of two of our properties in London being vacated to
enable redevelopment.
Of equal importance, we have experienced very few tenant failures during the
six months to 30 June 2009 which reflects the underlying strength of our
portfolio and the quality of tenant it attracts. Since the start of the year we
have lost through insolvency only £0.1m of rental income out of an annualised
rental income of £16.9m. These insolvencies have been from within the smaller
tenant end of our portfolio. There is a regular turnover of tenants here and
historically such voids have tended to be filled quickly.
During the first half of the year we have let space at a rent of £0.5m in
aggregate. All these lettings have been at, or above, the original estimated
rental value (ERV) of the unit in question, and higher than the previous
passing rent. We have in total empty units with a combined ERV of just £0.3m
pa, and only two tenants trading while in any form of administration; indeed,
one tenant is on the verge of assigning its lease to a new, solvent company. In
June this year, we collected some 95% of all sums due within two weeks of the
quarter day. This is comparable to any of the June rent collections of the last
few years.
We benefit from a profile of relatively long lease terms with a strong and
diversified tenant base. By value, 80% of our leases have more than five years
to run and some 77% are let to major national multiples. This figure is skewed
by our two markets in Brixton where there are shorter leases. However we
experience consistent income in these markets as any tenant voids tend to be
replaced within a few weeks. If the two markets are excluded, the percentage of
our leases with more than five years to run rises to 84% while major national
multiples account for 84% of our rent roll. Finally our largest single tenant
accounts for only 4.5% of our total rental income.
The resilience of our rental income is also in part a result of our successful
development programme. In particular, we pre-let new units at Orchard Square,
Sheffield to TK Maxx, Evans, Starbucks and others during 2008. These units were
completed in August of that year and are now making a full contribution to our
income. They generate a total rent of £1.0m per annum, an incremental rent of £
0.5m.
Our two current developments, at Kings Road, Chelsea, and Upper Street,
Islington, in London, are progressing well. They have been pre-let to fashion
retailers Anthropologie and Jack Wills respectively, with handover of both
anticipated in October 2009. The two units, amounting to 28,000 sq ft, will
produce further rental income of £1.5m per annum. The costs for both projects,
including all fees, are anticipated to be less than £2m in total.
We do not value our property portfolio at the interim stage. However, the book
value of our properties has increased from £218.5m at December 2008 to £219.7m
in June 2009. This increase reflects capital expenditure on our portfolio in
the last six months, particularly on the two London developments. Our net
assets have nevertheless risen from £40.3m at the year end to £51.5m at June
30, resulting in a net asset value per share of 66.13p. This is due principally
to a swing of £10.3m net of tax in the mark-to-market value of our interest
rate derivatives. This movement in our interest rate derivatives also means we
are reporting a pre-tax profit of £14.7m. This figure contrasts to a loss of £
0.9m for the interim period a year ago and a loss of £57.2m at the 2008 year
end (when we were obliged to provide £21.1m in relation to these derivatives).
Under EPRA, as at 30 June 2009 our net asset value was £62.9m, equivalent to
81p per share, compared to £62.7m (82p per share) at 31 December 2008. Gross
assets of the group, including those of Bisichi Mining, Dragon Retail
Properties and Analytical Ventures were £310m, including property assets of £
245m.
All our term loans are hedged at rates between 4.69% and 4.76% plus margin. We
use interest rate derivatives as management tools to regulate our cash flow and
do not trade in them. However, under IFRS we are required to revalue them on a
half-yearly basis as though they were investments. As can be seen this
treatment creates significant movements in the "market value" of our
derivatives which in turn causes significant swings in our consolidated income
statement.
We are covenant compliant; all our debt, apart from overdrafts, is long term
with none of our loans expiring before September 2011. We also currently have £
5.5m cash in the bank, even after expenditure on our two London developments.
Throughout our portfolio our properties continue to perform satisfactorily.
Some 55% of our centres by value are in prime locations in London and the South
East where the retail recession has, to date, been less severe than elsewhere
in the country. We monitor footfall at all our main centres and we have seen no
decline in the number of weekly shoppers. We can also report that car park usage
at King Edward Court, Windsor is showing an increase in the number of visitors
over last year.
We are proposing to pay a cash dividend at the half-year stage of 0.75p per
share. This is the same level as at the half year in 2008 and reflects our
confidence in the group's financial position which is supported by our strong
cash collections and the quality of ours tenants. The dividend will be payable
on 22 January 2010 to shareholders on the register at 18 December 2009.
Although it is too early to say that this current property downturn is easing,
we do feel that the dramatic fall in confidence seen around the end of 2008 and
into the early months of this year has abated. Our portfolio has to date
withstood the worst of the tenant defaults and rental declines witnessed
elsewhere, and we have no reason to believe that it will not continue to do so.
We therefore feel that LAP can face the future with cautious optimism.
Michael Heller John Heller
Chairman Chief Executive
28 August 2009
Consolidated income statement
for the six months ended 30 June 2009
6 months 6 months Year
ended ended ended
30 June 30 June 31
2009 2008 December
(unaudited) (unaudited) 2008
(audited)
Notes £'000 £'000 £'000
Gross rental income
Group and share of joint ventures 8,523 8,024 16,775
Less: joint ventures - share of rental (255) (47) (272)
income
Revenue 8,268 7,977 16,503
Direct property expenses (1,237) (1,324) (3,137)
Overheads (1,826) (1,829) (4,408)
Property overheads (3,063) (3,153) (7,545)
Net rental income 1 5,205 4,824 8,958
Listed investments held for trading 1 26 216 298
Profit on sale of investment properties - 685 897
Net decrease on revaluation of investment - - (33,125)
properties
Net increase/(decrease) in value of 59 (905) (1,530)
investments held for trading
Operating profit/(loss) 1 5,290 4,820 (24,502)
Share of loss of joint ventures after tax (40) (108) (588)
Share of profit of associate after tax 1,330 250 172
Profit/(loss) before interest and taxation 6,580 4,962 (24,918)
Interest rate derivatives 14,362 - (21,063)
Finance income 2 56 415 681
Finance expenses 2 (6,287) (6,233) (11,966)
Profit /(loss) before taxation 14,711 (856) (57,266)
Income tax 3 (3,569) 984 9,812
Profit/(loss) for the period attributable 11,142 128 (47,454)
to the equity shareholders of the company
Basic earnings/(loss) per share 4 14.40p 0.17p (62.30)p
Diluted earnings/(loss) per share 4 14.40p 0.17p (62.30)p
The above revenue and operating result relate to continuing operations in the
United Kingdom.
Consolidated statement of comprehensive income
for the six months ended 30 June 2009
30 June 30 June 31
2009 2008 December
(unaudited) (unaudited) 2008
(audited)
£'000 £'000 £'000
Profit/(loss) for the period 11,142 128 (47,454)
Currency translation in associate 109 (212) 26
Fair value of interest derivatives - 1,034 -
Net gain recognised in equity 109 822 26
Total comprehensive income for the period 11,251 950 (47,428)
attributable to equity shareholders of the
company
Consolidated balance sheet
at 30 June 2009
30 June 30 June 31
2009 2008 December
(unaudited) (unaudited) 2008
(audited)
Notes £'000 £'000 £'000
Non-current assets
Market value of properties attributable 219,676 260,869 218,532
to group
Present value of head leases 28,550 32,137 27,238
Property 5 248,226 293,006 245,770
Plant and equipment 825 894 917
Investments in joint ventures 1,753 2,123 1,793
Investments in associated company 8,055 6,488 6,567
Held to maturity investments 1,805 5 1,805
260,664 302,516 256,852
Current assets
Trade and other receivables 4,330 9,756 3,974
Financial assets-investments held for 1,025 3,002 2,330
trading
Cash and cash equivalents 6,457 14,828 8,191
11,812 27,586 14,495
Total assets 272,476 330,102 271,347
Current liabilities
Trade and other payables (10,444) (12,317) (11,268)
Financial liabilities -borrowings (7,521) (7,221) (7,277)
Current tax liabilities (2,538) (2,082) (2,417)
(20,503) (21,620) (20,962)
Non-current liabilities
Financial liabilities -borrowings (160,482) (174,477) (160,417)
Interest rate derivatives 6 (5,254) - (19,616)
Present value of head leases on (28,550) (32,137) (27,238)
properties
Deferred tax (6,218) (12,373) (2,808)
(200,504) (218,987) (210,079)
Total liabilities (221,007) (240,607) (231,041)
Net assets 51,469 89,495 40,306
Equity attributable to equity
shareholders of the company
Share capital 8,232 8,232 8,232
Share premium account 5,236 5,236 5,236
Translation reserve in associate (395) (742) (504)
Fair value reserve - interest rate - 2,035 -
derivatives
Capital redemption reserve 47 47 47
Retained earnings (excluding treasury 43,118 81,236 33,532
shares)
Treasury shares (4,769) (6,549) (6,237)
Retained earnings 38,349 74,687 27,295
Total shareholders' equity 51,469 89,495 40,306
Net assets per share 7 66.13p 117.53p 52.73p
Diluted net assets per share 7 66.11p 117.39p 52.70p
Consolidated statement of changes in shareholders' equity
for the six months ended 30 June 2009
Retained Earnings
Share Share Translation Capital Fair Treasury Earnings Total
capital premium reserve redemption value Shares ex: equity
reserve reserve treasury
shares
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 8,232 5,236 (530) 47 1,001 (6,549) 81,554 88,991
2008
Fair value of interest - - - - 1,034 - - 1,034
derivatives
Currency translation - - (212) - - - - (212)
in associate
Net (losses)/gains - - (212) - 1,034 - - 822
recognised in equity
Profit for the period - - - - - - 128 128
Total comprehensive - - (212) - 1,034 - 128 950
income
Equity share options - - - - - - 49 49
in associate
Dividend - - - - - - (495) (495)
Balance at 30 June 8,232 5,236 (742) 47 2,035 (6,549) 81,236 89,495
2008 (unaudited)
Balance at 1 January 8,232 5,236 (530) 47 1,001 (6,549) 81,554 88,991
2008
Reclassification of
fair value of interest
- - - - (1,001) - 1,001 -
Derivatives
Currency translation - - 26 - - - - 26
in associate
Net (losses)/gains - - 26 - (1,001) - 1,001 26
recognised in equity
Loss for the year - - - - - - (47,454) (47,454)
Total comprehensive - - 26 - (1,001) - (46,453) (47,428)
income
Equity share options - - - - - - 99 99
in associate
Disposal of own shares - - - - - 312 - 312
Loss on disposal of - - - - - - (183) (183)
own shares
Dividend - - - - - - (1,485) (1,485)
Balance at 31 December 8,232 5,236 (504) 47 - (6,237) 33,532 40,306
2008 (audited)
As at 1 January 2009 8,232 5,236 (504) 47 - (6,237) 33,532 40,306
Currency translation - - 109 - - - - 109
in associate
Net (losses)/gains - - 109 - - - - 109
recognised in equity
Profit for the period - - - - - - 11,142 11,142
Total comprehensive - - 109 - - - 11,142 11,251
income
Equity share options - - - - - - 49 49
in associate
Disposal of own shares - - - - - 1,468 - 1,468
Loss on disposal of - - - - - - (1,032) (1,032)
own shares
Dividend - - - - - - (573) (573)
Balance at 30 June 8,232 5,236 (395) 47 - (4,769) 43,118 51,469
2009 (unaudited)
All of the above are attributable to the equity shareholders of the company.
Consolidated cash flow statement
for the six months ended 30 June 2009
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2009 2008 2008
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Operating activities
Profit/(loss) before interest and taxation 6,580 4,962 (24,918)
Depreciation 103 106 200
(Profit)/loss on disposal of non-current (2) 4 (2)
assets
Profit on sale of investment properties - (685) (897)
Net decrease on revaluation of investment - - 33,125
properties
Share of (profit)/loss of joint ventures (1,290) (142) 416
and associate after tax
Net (increase)/decrease in value of (59) 905 1,530
investments held for trading
Decrease in net current assets 747 117 2,566
Cash generated from operations 6,079 5,267 12,020
Income tax (paid)/repaid (36) 104 104
Cash inflows from operating activities 6,043 5,371 12,124
Cash outflows from investing activities (1,358) (12,806) (5,280)
Cash (outflows)/inflows from financing (6,663) 4,828 (16,144)
activities
Net decrease in cash and (1,978) (2,607) (9,300)
cash equivalents
Cash and cash equivalents at 914 10,214 10,214
beginning of period
Cash and cash equivalents at (1,064) 7,607 914
end of period
Cash and cash equivalents
For the purpose of the cash flow statement, cash and cash equivalents comprise
the following balance sheet amounts:
30 June 30 June 31 December
2009 2008 2008
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Cash and cash equivalents 6,457 14,828 8,191
Bank overdraft (7,521) (7,221) (7,277)
Cash and cash equivalents at end of period (1,064) 7,607 914
Notes to the half year report
for the six months ended 30 June 2009
1. Segmental analysis 6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2009 2008 2008
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Net rental income (property) 5,205 4,824 8,958
Other income (listed investments) 26 216 298
Segment result
Property 5,205 5,509 (23,270)
Listed investments 85 (689) (1,232)
5,290 4,820 (24,502)
Operating profit/(loss) 5,205 5,509 (23,270)
Property
Listed investments 85 (689) (1,232)
5,290 4,820 (24,502)
2. Finance costs 6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2009 2008 2008
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Finance income 56 415 681
Finance expenses
Interest on bank loans and overdrafts (1,865) (5,107) (9,575)
Other loans (1,052) (1,052) (2,178)
Hedging (2,373) 841 1,614
Interest on obligations under finance (997) (1,028) (1,989)
leases
Total borrowing costs (6,287) (6,346) (12,128)
Less : amounts included in the cost of - 113 162
qualifying assets
(6,287) (6,233) (11,966)
(6,231) (5,818) (11,285)
3. Income tax 6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2009 2008 2008
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Current tax 160 116 451
Deferred tax 3,409 (1,100) (10,263)
3,569 (984) (9.812)
Notes to the half year report continued
4. Earnings/(loss) per share 6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2009 2008 2008
(unaudited) (unaudited) (audited)
Group profit/loss after tax (£'000) 11,142 128 (47,454)
Weighted average number of shares in
issue
for the period ('000) 77,386 76,149 76,172
Basic earnings/(loss) per share 14.40p 0.17p (62.30)p
Diluted number of shares in issue 77,386 76,215 76,172
('000)
Fully diluted earnings/(loss) per 14.40p 0.17p (62.30)p
share
5. Property
Properties at 30 June 2009 are included at valuation as at 31 December 2008,
plus additions, less disposals in the period.
During the six months ended 30 June 2009 the group had property additions of
£1.1 million (30 June 2008: £13.6 million, 31 December 2008: £18.9 million).
Properties with a carrying value of £Nil were disposed of during the six months
ended 30 June 2009 (30 June 2008: £0.8 million, 31 December 2008: £15.3
million).
6. Interest rate derivatives
The directors have estimated the financial effect of the fair value to the
business of the hedging instruments. This has been calculated as the Net
Present Value of the difference between the 19 year interest rate, which was
4.45 per cent at 30 June 2009 against the rate payable under the specific
hedge. This has given a liability at 30 June 2009 of £5,254,000 as shown in the
balance sheet. The banks own initial quotations at 30 June 2009 to close each
of the hedges were £14,044,000.
7. Net assets per share 30 June 30 June 31 December
2009 2008 2008
(unaudited) (unaudited) (audited)
Shares in issue ('000) 77,825 76,149 76,443
Net assets per balance sheet (£'000) 51,469 89,495 40,306
Basic net assets per share 66.13p 117.53p 52.73p
Shares in issue diluted by 77,895 76,269 76,563
outstanding share options ('000)
Net assets after issue of share 51,497 89,535 40,346
options (£'000)
Fully diluted net assets per share 66.11p 117.39p 52.70p
8. Related party transactions
The related parties and the nature of costs recharged are as disclosed in the
group's annual financial statements for the year ended 31 December 2008. The
group received management fees of £148,000 (30 June 2008: £148,000, 31 December
2008: £355,000) from Bisichi Mining PLC, an associated company.
During the period the group repaid £225,000 of Dragon Retail Properties
Limited's (a joint venture) loan, leaving a balance of £1,205,000 at 30 June
2009.
9. Capital commitments
The group had contractual capital commitments of £1.3 million as at 30 June
2009 (30 June 2008: £6.4 million, 31 December 2008: £Nil).
Notes to the half year report continued
10. Dividends and capitalisation issue
The interim dividend payable on 22 January 2010 of 0.75p (30 June 2008: 0.75p)
will amount to £596k (30 June 2008: £573k). The final dividend in respect of
2008, amounting to £311k, was paid on 3 July 2009. In addition, 1,605,057 new
ordinary shares (capitalisation issue in lieu of additional 2008 dividend) with
an aggregate value equal to 0.80p for each ordinary share, was issued to
shareholders on 3 July 2009 and are admitted to the Official List and trading
on the London Stock Exchange. The new ordinary shares rank pari passu with the
existing ordinary shares.
11. Risks and Uncertainties
The group's principal risks and uncertainties are reported on page 22 in the
2008 Annual Report. They have been reviewed by the Directors and remain
unchanged for the current period.
The largest area of estimation and uncertainty in the interim financial
statements is in respect of the valuation of investment properties (which are
not revalued at the half year end) and the valuation of interest rate
derivatives.
12. Financial information
The above financial information does not constitute statutory accounts within
the meaning of section 434 of the Companies Act 2006. The figures for the year
ended 31 December 2008 are based upon the latest statutory accounts, which have
been delivered to the Registrar of Companies; the report of the auditor's on
those accounts was unqualified, but included an emphasis of matter concerning
the fair values of the hedging arrangements entered into by the group and the
company and did not contain a statement under section 237(2) or (3) of the
Companies Act 1985.
As required by the Disclosure and Transparency Rules of the UK's Financial
Services Authority, the interim financial statements have been prepared in
accordance with the International Financial Reporting Standards (IFRS) and in
accordance with both IAS 34 'Interim Financial Reporting' as adopted by the
European Union and the disclosure requirements of the Listing Rules.
The half year results have not been audited or subject to review by the
company's auditor.
The annual financial statements of London & Associated Properties PLC are
prepared in accordance with IFRS as adopted by the European Union. The same
accounting policies are used for the six months ended 30 June 2009 as were used
for the year ended 31 December 2008, except as stated below.
During 2009 the following accounting standards and guidance were adopted by the
group:
IAS 1 (revised) `Presentation of Financial Statements;
IAS 7 (amendment) `Statement of Cash Flows';
IAS 16 (amendment) `Property, Plant and Equipment';
IAS 23 (amendment) `Borrowing Costs';
IAS 27 (amendment) `Consolidated and Separate Financial Statements';
IAS 32 (amendment) `Financial Instruments Presentation';
IAS 39 (amendment) `Financial Instruments Recognition and Measurement';
IAS 40 (amendment) `Investment Property';
IFRS 2 (amendment) `Share-based payment'; and
IFRS 8 `Operating Segments'
All of the above were effective for accounting periods beginning on or after 1
January 2009.
The new adopted standards either have no impact on the interim financial
statements or resulted in changes to presentation and disclosure only.
The assessment of new standards, amendments and interpretations issued but not
effective, not included above, is that these are not anticipated to have a
material impact on the financial statements.
There is no material seasonal impact on the group's financial performance.
Taxes on income in the interim periods are accrued using tax rates expected to
be applicable to total annual earnings.
The interim financial statements have been prepared on the going concern basis
as the Directors are satisfied the group has adequate resources to continue in
operational existence for the foreseeable future.
13. Board approval
The half year results were approved by the Board of London & Associated
Properties PLC on 28 August 2009.
Directors' responsibility statement
The Directors confirm that to the best of their knowledge:
(a) the condensed set of financial statements have been prepared in accordance
with applicable accounting standards and IAS 34 Interim Financial Reporting as
adopted by the EU;
(b) the interim management report includes a fair review of the information
required by:
(1) 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:
(2) 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.
Michael Heller Robert Corry
Chairman Finance Director
28 August 2009
Directors and advisors
Directors
Executive directors
* Michael A Heller MA FCA (Chairman)
John A Heller LLB MBA (Chief Executive)
Robert J Corry BA FCA (Finance Director)
Michael C Stevens FCA
Non-executive directors
†Howard D Goldring BSC (ECON) ACA
#†Clive A Parritt FCA CF FIIA
* Member of the nomination committee
# Senior independent director
†Member of the audit, remuneration and
nomination
committees.
Secretary & registered office
Michael C Stevens FCA
Carlton House, 22a St James's Square,
London SW1Y 4JH
Director of property
Mike J Dignan FRICS
Registrars & transfer office
Capita Registrars
Northern House, Woodsome Park
Fenay Bridge, Huddersfield, W. Yorkshire HD8 OLA
Telephone 0871 664 0300
(Calls cost 10p per minute + network extras) or
+44 208 639 3399
for overseas callers
Website: www.capitaregistrars.com
E-mail: ssd@capitaregistrars.com
Company registration number
341829 (England and Wales)
Website
www.lap.co.uk
E-mail
CompanySecretary@lap.co.uk
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