Final Results

RNS Number : 3649E

London & Stamford Property PLC

30 May 2012

 



30 May 2012

LONDON & STAMFORD PROPERTY PLC

("London & Stamford", "LSP" or the "Group")

RESULTS FOR THE YEAR ENDED 31 MARCH 2012

London & Stamford Property Plc (LSE: LSP.L) today announces full year results for the year ended 31 March 2012.

Financial highlights

	Year to 31 March 2012	Year to 31 March 2011
Underlying profit*	£25.4m	£15.9m
EPRA earnings for the year	£24.0m	£15.8m
Profit for the year	£5.3m	£43.3m
Investment properties*	£1,021.2m	£987.7m
Cash deposits	£136.9m	£156.8m
Bank debt	£319.8m	£383.0m
Net assets	£633.6m	£668.7m
EPRA NAV per share	119.1p	122.5p
EPRA earnings per share	4.4p	3.0p
Dividend per share	7.0p	6.3p

* Includes share of associates and Joint Ventures

·     60% increase in underlying profit in the year

·     47% increase in EPRA earnings in the year

·     Total dividend of 7p per share; an increase of 11% on 2011

·     Total firepower of almost £900 million

·     Finalising tripartite £200 million Central London Residential Joint Venture.  LSP committing £80 million

·     Currently c.£300 million of investment opportunities under offer

·     Total further Group investment of £161.4 million in the year and £24.1 million through Joint Ventures

·     Creation of new £205 million Distribution Joint Venture with Green Park Investments.  LSP committed £46 million

·     Disposal of Triangle Distribution Portfolio for £265 million in the year.  An equity return of 33%

·     Actively engaged in disposal of our interest in Meadowhall Shopping Centre

·     Increasing rental levels in Central London residential

·     Net gearing of 28% at year end

Raymond Mould, The Executive Chairman of London & Stamford Property Plc, said:

"The continued economic and financial uncertainty which surrounds us has supported our cautious and disciplined investment approach.

Our total firepower currently is c.£900 million and this puts London & Stamford in a very strong position in a market which we believe is offering increasingly exciting opportunities for investment in good quality assets with good covenants at reasonable prices.

Our strategy continues to be to identify opportunities in the UK market which will offer double digit cash equity yields and I am delighted to report that we currently have under offer four potential investments with a value around £300 million which we are hopeful can complete in the near future.

The Group generated a profit for the year of £5.3 million (2011: £43.3 million) with an underlying profit of £25.4 million (2011: £15.9 million). This is a 60% increase in the recurring profit of the Group, which provides supporting evidence to a progressive dividend policy as exceptional and non recurring costs work their way through the system.

The Board has proposed a final dividend of 3.5p per share to be paid on 13 July 2012, which, when taken with the interim dividend of 3.5p per share paid on 21 December 2011, produces a total dividend in respect of the year of 7.0p per share, an increase of 11.1% on the 2011 dividend.

We remain convinced that the strength of our balance sheet will enable us to find sufficient attractive investment opportunities in the market to continue with our progressive dividend policy going forward."

For further information contact:

London & Stamford Property Plc Raymond Mould Patrick Vaughan Martin McGann	Tel: [phone]
Kreab Gavin Anderson Richard Constant James Benjamin Anthony Hughes	Tel: [phone]

Notes to editors:

London & Stamford Property Plc was set up to exploit opportunities that it anticipated in the UK property cycle and is a group UK-REIT. The Company has a highly experienced management team and invests in and actively manages commercial property, including office, retail, residential and distribution real estate assets, principally in the UK.

The Company is traded on the London Stock Exchange's Main Market (LSP.L) and is authorised by the FSA to carry out certain regulated activities.

Further information on the Company is available from the Company's website: www.londonandstamford.com 

Chairman's statement

I am delighted to present our annual report for the year ended 31 March 2012.

At the year end our cash balance stood at £137 million and has been further increased since then by the proceeds from the sale of our Triangle Distribution Portfolio.  Our current cash, together with unspent commitments from Green Park, our Joint Venture Partner, and prudent gearing which we believe is attainable in the market, gives us total firepower of c. £900 million.

This puts London & Stamford in a very strong position in a market which we believe is offering increasingly exciting opportunities for investment in good quality assets with good covenants at reasonable prices. Our strategy continues to be to identify opportunities in the UK market which will offer double digit cash equity yields and I am delighted to report that we currently have under offer four potential investments with a value around £300 million which we are hopeful can complete in the near future. We consider the key driver here to be the addition of sustainable income.

Where appropriate, we will continue to realise value by making sales when investments have fulfilled our expectations.

I am disappointed by the current share price, although with all the problems that are being experienced in the economy and from Europe I think we all understand why the markets have been difficult.

Nevertheless, our total returns have outperformed our peer group and the two major indices (FTSE 100 and FTSE 250) since our IPO.

Results

The Group generated a profit for the year of £5.3 million (2011: £43.3 million) with an underlying profit of £25.4 million (2011: £15.9 million). This is a 60% increase in the recurring profit of the Group which reflects a full year's earnings on the majority of the portfolio (with the exception of One Carter Lane which was acquired in June 2011 and Clapham Road, Oval, which was acquired in August 2011).

Net assets at 31 March 2012 were £633.6 million (2011: £668.7 million), equivalent to 116.7p per share (2011: 122.5p per share).

This arises after mark to market adjustments we would not expect to recur of 1.6p, internalisation costs of 3.2p and the temporary write down of our Focus unit of 1.7p, a total of 6.5p and our dividend paid during the year of 6.8p. Offset against this reduction of 13.3p is a net trading surplus of 7.5p per share.

The lack of earnings on our cash position remains a concern, but we continue to regard the future investment potential that the cash provides as a far greater opportunity.

The Board has proposed a final dividend of 3.5p per share to be paid on 13 July 2012, which, when taken with the interim dividend of 3.5p per share paid on 21 December 2011, produces a total dividend in respect of the year of 7.0p per share, an increase of 11.1% on the 2011 dividend.

Investment

The continued wider economic and financial uncertainty which surrounds us has supported our cautious and disciplined investment approach and although we made investments of £161.4 million in the first six months of the year, we made no further investments in the second half of the year. The investments in the first six months of the year included One Carter Lane, an office building in the City of London for £78.7 million, 74 residential units at Clapham Road, Oval, for £24.4 million and we contracted to acquire 107 units at Seward Street, Islington, London, for £49.1 million which will be completed later this year. In August 2011 we acquired a distribution unit at Harlow, let to Tesco, for £24.1 million. This acquisition was made directly into our Distribution Joint Venture with Green Park.

We are also delighted to report that we have agreed a new tripartite £200 million Residential Joint Venture with Green Park and another partner. The Joint Venture will be owned 40% by London & Stamford and our partners will hold 30% each. The focus of the Joint Venture will be Central London residential opportunities and will be the vehicle for our future investment in London residential assets. To the extent that our existing residential assets have met our performance targets, their disposal may now be contemplated. Overall we consider a total equity commitment in residential, of not more than 20% of our asset base, to be the correct level.

It is in the Central London Residential and Distribution sectors where, with careful management of occupational risk, the potential for rental growth persists and we can best leverage our ability to swiftly utilise our cash resources and rapid decision making processes.

Goldman Sachs, the tenant at One Carter Lane, have exercised their break option on the lease and will depart in March 2013. We look forward to the opportunity to create a first class office refurbishment on a really outstanding site in the City of London the moment they depart, with a view to reletting it early in 2014.

Disposals

Whilst we have seen weakening yields in non-prime property over the last year, we have seen prime yields sustained by significant availability and low cost of capital for investment in prime property.

Consequently we have taken the opportunity to sell into the market certain assets where we have been able to achieve sales prices above book value.

On 18 April 2012 we completed the disposal of the Triangle portfolio of 17 distribution units for £265 million to an entity managed by a Blackstone real estate fund. The disposal generated a return on equity of c.33% and net cash after the repayment of debt of £94 million.

We continue to explore a disposal of our Joint Venture interest in the Meadowhall Shopping Centre.

Outlook

We are currently engaged in due diligence on a number of exciting opportunities, which, if successful, could involve around £300 million of new investment. We believe that our patience and discipline will be well rewarded as we are increasingly seeing better value opportunities coming to the market as property owners and lenders decide to deleverage their portfolios.

We are happy with our investment and development assets in the City of London. We retain our commitment in Joint Venture with Green Park to our excellent distribution portfolio and we remain active in Central London residential. There are other sectors where the availability of excellent income returns is increasingly clear and appealing and we hope to announce progress shortly.

Again, I would like to thank everyone at London & Stamford and those with whom we are engaged for all their hard work during the last year and look forward with anticipation to an exciting next 12 months of new investment and enhanced shareholder returns.

We remain convinced that we will find sufficient attractive investment opportunities to continue with our progressive dividend policy going forward.

Operating and Financial Review

Overview of the year

The Group generated a profit for the year of £5.3 million (2011: £43.3 million) with an underlying profit of £25.4 million (2011: £15.9 million).

This table provides an analysis of the underlying profit.

	Year ended 31 March 2012 £000	Year ended 31 March 2011 £000
Net rental income	35,544	36,056
Property advisory fee income	6,360	5,591
Corporate overheads	(9,515)	(10,699)
Share of trading profit of Joint Ventures and associates(1)	5,380	986
	37,769	31,934
Net finance costs	(13,429)	(18,795)
Profit on sale of investment and trading properties	1,035	2,790
Underlying profit	25,375	15,929
Change in fair value of derivatives(2)	(8,859)	6,975
Profit on revaluation of investment properties(2)	5,688	51,033
Profit before exceptional items and taxation	22,204	73,937
Accounting for internalisation	(17,415)	(5,605)
Goodwill and costs of other acquisitions(2)	2,876	(11,558)
Taxation	(1,131)	(12,307)
Minority interest	(1,195)	(1,155)
Profit for the year	5,339	43,312

(1)    Reflects profit after tax adjusted for movements in revaluation, derivatives and goodwill (See note 10 to the financial statements). 

(2)    Includes share of joint ventures and associates.

The portfolio

Our investment criteria remains opportunistic and not constrained within particular sectors. Consequently our portfolio is diversified across a number of property sectors.

At the year end, the portfolio comprised:

	Asset valuation (Group share) £'000	Assets under management £'000
Investment properties	662,672	662,672
Investments in associates and Joint Ventures	358,516	1,755,503
Trading assets	3,837	3,837
	1,025,025	2,422,012

Since the year end we have completed the disposal of the Triangle portfolio of distribution warehouses, which has reduced our asset valuation to £768.4 million.

City of London Offices

The portfolio comprises two buildings in prime locations in the City of London.

Goldman Sachs, the tenant of One Carter Lane, which we acquired during the year, has given formal notice of its intention to break the lease. We will achieve vacant possession on 18 March 2013. We intend to create a first class refurbishment of One Carter Lane to relet into the market early in 2014, when we believe demand for this outstanding location and building will be strong.

The other building, at One Fleet Place, was acquired in January 2009 and is let to Denton Wilde Sapte. The building generates a high quality rental stream and is subject to a rent review in September 2013. Current passing rent is £36 per square foot.

We will keep both buildings under review to ensure that their performance continues to meet our performance criteria.

The acquisition of One Carter Lane allowed us to put a new debt facility in place for £100 million secured against both One Carter Lane and One Fleet Place, the excellent cash flow on Fleet Place providing adequate interest cover through the development period at One Carter Lane.

Distribution

At the start of the year 36% of our portfolio was invested in prime distribution units/business parks. We had at that time already agreed to place a part of the portfolio previously acquired in November 2010 from Lojix and AEW into our new £205 million Distribution Joint Venture with Green Park, the transfer of which was completed in May 2011.

In April 2012 we completed the disposal of the Triangle portfolio (previously referred to as the Radial portfolio). As explained in the Chairman's Statement, consideration for the Triangle disposal was £265 million and comprised of 17 distribution units.

The disposal included the 212,000 sq ft unit at Magna Park which was acquired during the year for £9.5 million and refurbished as part of an asset management initiative within our Magna Park ownership at a cost of £0.9 million. The consideration on disposal was £12.4 million.

Consequently our distribution portfolio now represents 26% of the property portfolio and is held almost entirely in Joint Venture with Green Park.  The exceptions are our buildings at Tamworth, Wellingborough and Nottingham. The collapse of the Focus DIY chain during the year has caused our distribution unit at Tamworth to be vacant for much of the year. We have taken the opportunity presented during the vacancy to undertake refurbishment works on the asset and as a result discussions with prospective occupiers are making good progress and we are optimistic of securing a new letting in the near future. Our 341,000 sq ft building at Wellingborough occupied by Yusen Logistics produces a high quality rental stream, with an unexpired lease term of 16 years and our building at Nottingham is let for an unexpired term of c.10 years to Hillary's Blinds Limited.

We have been active in the year in progressing a number of rent reviews and lease regears.

The distribution portfolio has provided excellent cash flow this year, having been held in the portfolio (in earnings terms) for the entire year. With the exception of Tamworth, it was fully leased for the entire year with negligible non recoverable costs and we are optimistic that further opportunities exist to extend leases over the next year.  We are advised that there is less than three months' supply of modern distribution warehouses in the South East of England and we believe this shortage of supply will have a positive impact on rental growth.

Central London Residential

We have continued to focus on residential opportunities in Central London during the year, acquiring 74 residential units at Clapham Road, Oval, for £24.4 million in August 2011 and contracting to acquire a further 107 units currently under construction at Seward Street, Islington.

The portfolio now comprises 266 units at Highbury, Bridges Wharf, Battersea and Clapham Road, Oval, and 96% of these are let.

In rental terms the portfolio has performed well during the year where we have seen rental growth on new lettings of between 9% and 11%

Our confidence in the Central London residential market has led us to agree a new Joint Venture with Green Park and another partner. The Joint Venture will be owned 40% by London & Stamford, with the two partners owning 30% each.

The Joint Venture will be primed with £200 million of equity, funded by £80 million from London & Stamford and £120 million from the Joint Venture partners. We are working, through our solicitors, to acquire over £150 million of residential assets for the Joint Venture and we are in advanced discussions with a number of banks to provide gearing.

We continue to explore the possibility that ultimately our Central London Residential Joint Venture can become a residential REIT. Notwithstanding the changes in the draft Finance Bill 2012, which we consider to be helpful, discussions continue with HMRC on changes which we believe are still required to the legislation to allow us to invest efficiently, without adverse tax implications, as one REIT investing in another REIT.

We have undertaken a small number of sales of units in the year, selling 8 apartments in total, all at or ahead of book value.

Meadowhall

Our 15.7% investment in the Meadowhall Shopping Centre, alongside Green Park and British Land, remains our only retail asset.  During the year we completed the £2.2 million acquisition into our Joint Venture of the surrounding lands. Together with our partners we have submitted an initial planning application for the development of the first 11.6 acres of the 74 acre site.

We are delighted with progress at Meadowhall, where sales are marginally increasing and although footfall in the year was steady, there was a 10% increase in April 2012 compared with a 2% fall nationally.

During the year the refurbishment of the Oasis food court has completed and has been the catalyst for the introduction of a number of new brands to the Centre, including Giraffe, Harvester, Chao Baby and Rice.  Carluccio's is currently fitting out for opening later in the year.

Meadowhall has not been able to avoid entirely the impacts of the economic downturn and has suffered a number of administrations and liquidations, although, on a positive note, there have been a number of very notable relets and assignments of units falling into administration.

In total, during the year 33 new leases were completed for 71,000 sq ft.  Notable new store openings included Boux Avenue, Bose, Internationale, Vans and TK Maxx.  Urban Outfitters opens its new flagship store in June.  In addition, 14 existing tenants have signed lease renewals.

Income statement

Profit for the year ended 31 March 2012 was £5.3 million (2011: £43.3 million).

An important focus for management is the underlying profit which this year has increased to £25.4 million (2011: £15.9 million). Despite such a large part of our asset base being held in cash during the year, this represents an increase of 60% in the year, the detail of which is set out above. The underlying profit is identified as the sustainable net rent after net finance costs and overheads, inclusive of realised surpluses on sales. It excludes, in particular, the accounting impact of the internalisation of the management of London & Stamford in 2010 and property and derivative valuations which are not expected to recur, unless debt arrangements are repaid early.

The increase in the underlying profit is a result of the full year impact of investment undertaken during 2010 and 2011 and provides increasing evidence to support the dividend policy. The dividend policy continues to be progressive, nothwithstanding the Company's decision to hold significant cash balances in anticipation of improving investment opportunities. The increasing cover provided by the underlying profit is evidence of the sustainability of income from the current investments we do make. We consider the opportunity in the market of having significant cash fully compensates for the lack of short term returns.

The component parts of underlying profit have changed during the year. As a result of the transfer of our AEW and Lojix distribution assets into Joint Venture with Green Park early, our net rents suffered an annualised £9.2 million fall but with a corresponding annualised increase of £1.3 million in advisory fee income and £3.9 million in the share of profit of Joint Ventures. The transfer into the Joint Venture generated a £41.8 million increase in our cash resources.

Corporate overheads have fallen by £1.2 million (11%) in the year, due primarily to the advisory costs of REIT conversion, listing on the Main List of the London Stock Exchange and purchase of LSI Management LLP, the former Management Company having been incurred in the previous financial year. Like for like, overheads have remained broadly in line.

Capital growth in the portfolio has been weak this year, with net uplifts being only c. 1% of the portfolio. The impact of weak uplifts in the year alongside the adverse accounting adjustments for internalisation of £17.4 million and mark to market hedging derivatives have brought profit for the year down from £43.3 million in 2011 to £5.3 million this year.

The tax charge of £1.1 million comprises a deferred tax charge of £1.8 million offset by a corporation tax credit of £0.7 million. Last year the tax charge was significant (£12.3 million), representing, in large part, REIT entry charges.

Net finance costs and interest rate management

Careful consideration is given to the management of our interest exposure across the various debt arrangements we have.

Currently our hedging arrangements are a combination of interest rate swaps, caps, floating rate debt and fixed interest borrowings.

Our current cost of borrowing is 4.12%.

Although there has been an £8.9 million charge in respect of the change in the fair value of derivatives, all of the adverse movement was in respect of the first half of the year (£10.2 million), with an improvement of £1.3 million in the second half of the year.

In managing our interest rate risk, we take independent advice, details of which are regularly discussed at Board meetings.

Balance sheet

The NAV movement reflected in the balance sheet in the year can be summarised as follows:

	£ million
Net Asset Value as at 1 April 2011	668.7
Profit for the year	5.3
Purchase and cancellation of our shares	(3.2)
Purchase of shares held in trust	(0.5)
Dividends paid in the year	(37.1)
Other	0.4
Net Asset Value as at 31 March 2012	633.6

As discussed previously, whilst reported profit for the year has fallen considerably, the level of dividend cover provided by underlying profit has increased very significantly in the year, being 67% covered compared with 46% in 2011.

Cash balances remain an important component part of the balance sheet. The year end position is £136.9 million. Since the year end, the cash balance has been supplemented by the additional disposal proceeds from the sale of the Triangle distribution assets of £74 million (£20 million of sale proceeds were on deposit and included in the year end position).

Our financing structure may now be summarised as follows:

	London & Stamford Cash Balances £ million	Green Park Joint Venture Commitment £ million	Total £ million
As at 31 March 2012	136.9	141.5	278.4
Disposal proceeds from Triangle	74.0	-	74.0
			352.4
Potential debt funding at an assumed gearing level of 60%			528.6
Available firepower			881.0

No adjustment has been made to increase our available firepower in respect of our new residential Joint Venture partner.

Liquidity and cash management

We obtain third party advice on the management of our cash resources in terms of liquidity, returns and counterparty risk, which is taken into consideration at each meeting of the Board.

Deposits are placed with a diverse mix of institutions subject to credit rating, rates of return and overall exposure.

Bank debt

The banking industry continues to be under significant pressure to degear and to meet new and stringent regulatory requirements. The ability of the property sector to source new loans is therefore reduced. Senior debt, to the extent that it is available, will be directed towards the best product albeit at increasing prices. Nevertheless, we have been able to source significant new funding during the year.

In July we completed the £25 million financing of the residential portfolio at Highbury with the Metropolitan Life Insurance Company (MetLife) with whom we had successfully financed the acquisition of the Lojix and AEW distribution assets in February 2011 for £133 million and subsequently extended by £15 million, to finance our Harlow distribution acquisition in the year.

In August 2011, following the acquisition of One Carter Lane, we completed a £100 million refinancing with Santander and DekaBank of One Carter Lane, alongside One Fleet Place which had previously secured a £55 million senior debt facility with Santander.

In February 2012, we entered into a further facility with MetLife of £22 million secured against our residential assets at Bridges Wharf, Battersea and Clapham Road, Oval.

In total in the year we entered into £107 million of new senior debt (inclusive of £15 million Joint Venture debt on Harlow) and currently we are in discussions with various lending banks to obtain in excess of £120 million of senior debt in support of investment opportunities currently under offer.

Finally, we are very pleased to be in the legal stages of extending and amending our revolving credit facility with Bank of Scotland.

Financial Covenants

The net debt position at the year end was £185.8 million (2011: £229.9 million) which represents gearing of 28% (2011: 31%) calculated as a percentage of investment property assets.  The Group was compliant at all times during the year with its loan covenants.

Group Income Statement

For the year ended 31 March

	Note		2012 £000		2011 £000
Gross rental income	2		38,526		38,766
Property outgoings			(2,982)		(2,710)
Net rental income			35,544		36,056
Property advisory fee income			6,360		5,591
Net proceeds from sales of trading properties	2		333		181
Net income			42,237		41,828
General corporate costs			(9,515)		(10,699)
Share-based payments	3		(13,450)		(6,609)
Negative goodwill on acquisition of subsidiaries			-		42,917
Write down of positive goodwill on acquisition of subsidiaries			-		(7,544)
Write down and amortisation of intangible asset			(3,965)		(36,871)
Acquisition costs			-		(9,026)
Total administrative costs			(26,930)		(27,832)
Profit on revaluation of investment properties	9		5,910		30,080
Profit on sale of investment properties			56		2,609
Profit on sale of subsidiaries			646		-
Share of profits of associates and Joint Ventures	10		4,346		21,961
Operating profit	3		26,265		68,646
Finance income	5		684		1,165
Finance costs	5		(14,113)		(19,960)
Change in fair value of derivative financial instruments	5		(5,171)		6,923
Profit before tax			7,665		56,774
Taxation	6		(1,131)		(12,307)
Profit after tax			6,534		44,467
Profit for the year and total comprehensive income attributable to:
Equity shareholders			5,339		43,312
Non-controlling interest			1,195		1,155
			6,534		44,467
Earnings per share
Basic and diluted	8		1.0p		8.3p

All amounts relate to continuing activities.

Group Balance Sheet

As at 31 March

	Note		2012 £000		2011 £000
Non current assets
Investment properties	9		662,672		748,275
Investment in equity accounted associates and Joint Ventures	10		161,575		115,345
Intangible asset	11		12,424		16,389
Other tangible assets			383		348
Deferred tax assets	6		6,097		7,883
			843,151		888,240
Current assets
Trading properties			3,837		5,760
Trade and other receivables	12		22,739		45,291
Cash and cash equivalents	13		136,934		156,785
			163,510		207,836
Total assets			1,006,661		1,096,076
Current liabilities
Trade and other payables	14		35,217		18,574
Taxation payable			-		14,197
			35,217		32,771
Non current liabilities
Borrowings	15		319,833		382,956
Derivative financial instruments	15		12,274		6,642
			332,107		389,598
Total liabilities			367,324		422,369
Net assets			639,337		673,707
Equity
Called up share capital	16		54,280		54,580
Capital redemption reserve			300		-
Other reserve			47,069		47,551
Retained earnings			531,905		566,589
Equity shareholders' funds			633,554		668,720
Non-controlling interest			5,783		4,987
Total equity			639,337		673,707
Net asset value per share	8		116.7p		122.5p

The financial statements were approved and authorised for issue by the Board of Directors on 30 May 2012 and were signed on its behalf by:

M F McGann

Finance Director

Group Statement of Changes in Equity

For the year ended 31 March

	Note		Share capital £000		Capital redemption reserve £000		Other reserve £000		Retained earnings £000		Subtotal £000		Non-controlling interest £000		Total £000
At 1 April 2011			54,580		-		47,551		566,589		668,720		4,987		673,707
Profit for the year and total comprehensive income			-		-		-		5,339		5,339		1,195		6,534
Purchase and cancellation of own shares			(300)		300		-		(3,157)		(3,157)		-		(3,157)
Purchase of shares held in trust			-		-		(482)		-		(482)		-		(482)
Share-based payments			-		-		-		248		248		-		248
Distribution paid to non-controlling interest			-		-		-		-		-		(399)		(399)
Dividends paid	7		-		-		-		(37,114)		(37,114)		-		(37,114)
At 31 March 2012			54,280		300		47,069		531,905		633,554		5,783		639,337

	Note		Share capital £000		Special reserve £000		Other reserve £000		Retained earnings £000		Subtotal £000		Non-controlling interest £000		Total £000
At 1 April 2010			50,000		446,620		-		103,950		600,570		-		600,570
Profit for the year and total comprehensive income			-		-		-		43,312		43,312		1,155		44,467
Non-controlling interest on acquisition of subsidiary			-		-		-		-		-		4,169		4,169
Distribution paid to non-controlling interest			-		-		-		-		-		(337)		(337)
Reverse acquisition and share for share exchange			-		(446,620)		-		446,620		-		-		-
Share issue on acquisition of Property Advisor			4,580		-		48,084		-		52,664		-		52,664
Purchase of shares held in trust			-		-		(533)		-		(533)		-		(533)
Share-based payments			-		-		-		81		81		-		81
Dividends paid	7		-		-		-		(27,374)		(27,374)		-		(27,374)
At 31 March 2011			54,580		-		47,551		566,589		668,720		4,987		673,707

Group Cash Flow Statement

For the year ended 31 March

		2012 £000		2011 £000
Cash flows from operating activities
Profit before tax		7,665		56,774
Adjustments for non-cash items:
Profit on revaluation of investment properties		(5,910)		(30,080)
Profit on sale of investment properties		(56)		(2,609)
Profit on sale of subsidiaries		(646)		-
Share of post-tax profit of associates		(4,346)		(21,961)
Share-based payment		13,450		6,609
Negative goodwill on acquisition of subsidiaries		-		(35,373)
Write down of intangible asset		3,965		36,871
Net finance costs		18,600		11,872
Cash flows from operations before changes in working capital		32,722		22,103
Change in trade and other receivables		6,828		(1,984)
Movement in lease incentives		63		(2,862)
Change in trade and other payables		21,273		1,316
Acquisition of trading properties		-		(5,760)
Disposal of trading properties		1,923		-
Cash flows from operations		62,809		12,813
Interest received		680		1,160
Interest paid		(12,687)		(11,441)
Tax paid		(10,489)		(1,123)
Financial arrangement fees and break costs		(2,359)		(10,768)
Cash flows from operating activities		37,954		(9,359)
Investing activities
Purchase of subsidiary undertakings net of cash acquired		-		(77,844)
Purchase of investment properties		(115,732)		(59,656)
Purchase of other tangible assets		(136)		-
Capital expenditure on investment properties		(3,034)		(7,708)
Sale of investment property		2,254		103,168
Sale of subsidiary undertakings net of cash disposed		34,411		-
Cash flow to associates and Joint Ventures		(9,341)		(8,066)
Cash flow from associates and Joint Ventures		5,575		3,967
Cash flow from investing activities		(86,003)		(46,139)
Financing activities
Dividends paid		(37,513)		(27,711)
Purchase of shares held in trust		(482)		(533)
Purchase of own shares		(3,157)		-
New borrowings		142,980		151,565
Repayment of loan facilities		(73,630)		(187,631)
Cash flows from financing activities		28,198		(64,310)
Net decrease in cash and cash equivalents		(19,851)		(119,808)
Opening cash and cash equivalents		156,785		276,593
Closing cash and cash equivalents		136,934		156,785

Notes forming part of the Group financial statements

For the year ended 31 March

1 Accounting policies

The financial information set out herein does not constitute the Company's statutory accounts for the years ended 31 March 2012 or 2011, but is derived from those accounts. Statutory accounts for the years ended 31 March 2012 and 31 March 2011 have been reported on by the independent auditors. The independent auditors' reports on the annual reports and financial statements for 2012 and 2011 were unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

Statutory accounts for the year ended 31 March 2011 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 March 2012 will be delivered to the Registrar following the Company's Annual General Meeting.

The financial information set out in this preliminary results release has been prepared using the recognition and measurement principles of International Accounting Standards, International Financial Reporting Standards and Interpretations adopted for use in the European Union (collectively Adopted IFRSs). The accounting policies adopted in these preliminary results have been consistently applied to all the years presented and are consistent with the policies used in the preparation of the statutory accounts for the year ended 31 March 2011.

a) General information

London & Stamford Property Plc was incorporated on 13 January 2010 under the Companies Act 2006 as a public limited company domiciled in the United Kingdom. The address of its registered office is 21 St James's Square, London SW1Y 4JZ.

The Group is a UK-REIT and London & Stamford Property Plc is the principal Company of the UK-REIT Group. The Company's shares trade on the Main Market of the London Stock Exchange.

b) Statement of compliance

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union.

c) Basis of preparation

The functional and presentational currency of the Company and all subsidiaries ("the Group") is sterling. The financial statements are prepared on the historical cost basis except that investment and development properties and derivative financial instruments are stated at fair value.

The accounting policies have been applied consistently in all material respects.

i) Estimates and judgements

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Significant items subject to such assumptions and estimates include the fair value of investment properties, the recognition of deferred tax assets and liabilities for potential corporation tax, amortisation of intangible assets and the fair value of derivative financial instruments. The most critical accounting polices in determining the financial condition and results of the Group are those requiring the greatest degree of subjective or complex judgements. These relate to property valuation, business combinations and goodwill, intangible assets, investment in associates and Joint Ventures, derivative financial instruments and taxation and these are discussed in the policies below. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period. If the revision affects both current and future periods, the change is recognised over those periods.

1 Accounting policies (continued)

ii) Adoption of new and revised standards
Standards and interpretations effective in the current period

No new standards or interpretations issued by the International Accounting Standards Board ("IASB") or the International Financial Reporting Interpretations Committee ("IFRIC") have led to any material changes in the Group's accounting policies or disclosures during the year.

Standards and interpretations in issue not yet adopted

The IASB and the International Financial Reporting Interpretations Committee have issued the following standards and interpretations that are mandatory for later accounting periods and which have not been adopted early. These are:

Name	Description	Effective date
IFRS 7	Amendments to IFRS 7	01/07/2011
IAS 12	Amendments to IAS 12	01/01/2012
IAS 1	Amendments to IAS 1	01/07/2012
IFRS 10	Consolidated financial statements	01/01/2013
IFRS 11	Joint arrangements	01/01/2013
IFRS 12	Disclosure of interests in other entities	01/01/2013
IFRS 13	Fair value measurement	01/01/2013
IAS 27	Amendments to IAS 27	01/01/2013
IAS 28	Amendments to IAS 28	01/01/2013
IFRS 9	Financial instruments	01/01/2015

The Directors do not anticipate that the adoption of these standards and interpretations will have a material impact on the Group's financial statements in the period of initial application, other than on presentation and disclosure.

d) Basis of consolidation

i) Subsidiaries

The consolidated financial statements include the accounts of the Company and the Group using the purchase method. Subsidiaries are those entities controlled by the Group. Control is assumed when the Group has the power to govern the financial and operating policies of an entity to gain benefits from its activities. In the consolidated balance sheet, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair value at the acquisition date. The results of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Where properties are acquired through corporate acquisitions and there are no significant assets or liabilities other than property, the acquisition is treated as an asset acquisition, in other cases the purchase method is used.

ii) Joint Ventures and Associates

Joint Ventures are those entities over whose activities the Group has joint control. Associates are those entities over whose activities the Group is in a position to exercise significant influence but does not have the power to jointly control.

Joint Ventures and associates are accounted for under the equity method, whereby the consolidated balance sheet incorporates the Group's share of the net assets of its Joint Ventures and associates. The consolidated income statement incorporates the Group's share of Joint Venture and associate profits after tax.

The Group's Joint Ventures and associates adopt the accounting policies of the Group for inclusion in the Group financial statements.

iii) Intangible assets

Intangible assets, such as property advisory agreements acquired through business combinations, are measured initially at fair value and are amortised on a straight-line basis over their estimated useful lives. Intangible assets are subject to regular reviews for impairment.

1 Accounting policies (continued)

iv) Goodwill

Any excess of the purchase price of business combinations over the fair value of the assets, liabilities and contingent liabilities acquired and resulting deferred tax thereon is recognised as goodwill. This is recognised as an asset and is reviewed for impairment at least annually. Any impairment is recognised immediately in profit or loss within administration expenses and is not subsequently reversed.

Any excess of the fair value of the assets, liabilities and contingent liabilities acquired and resulting deferred tax thereon over the purchase price of business combinations is recognised immediately in profit or loss.

e) Property portfolio

i) Investment properties

Investment properties are properties owned or leased by the Group which are held for long-term rental income and for capital appreciation. Investment property includes property that is being constructed, developed or redeveloped for future use as an investment property. Investment property is initially recognised at cost, including related transaction costs. They are subsequently carried at each published balance sheet date at fair value on an open market basis as determined by professionally qualified independent external valuers.

The determination of the fair value of each property requires, to the extent applicable, the use of estimates and assumptions in relation to factors such as future rental income, current market rental yields, future development costs and the appropriate discount rate. In addition, to the extent possible, the valuers make reference to market evidence of transaction prices for similar properties. Gains or losses arising from changes in the fair value of investment properties are recognised in the income statement in the period in which they arise.

In accordance with IAS 40 "Investment Property", no depreciation is provided in respect of investment properties.

Investment property is recognised as an asset when:

·  it is probable that the future economic benefits that are associated with the investment property will flow to the Group;

·  there are no material conditions precedent which could prevent completion; and

·  the cost of the investment property can be measured reliably.

All costs directly associated with the purchase of an investment property are capitalised. Capital expenditure that is directly attributable to the redevelopment or refurbishment of investment property, up to the point of it being completed for its intended use, is capitalised in the carrying value of the property.

ii) Trading properties

Trading properties are initially recognised at cost and subsequently at the lower of cost and net realisable value.

iii) Tenant leases

Management has exercised judgement in considering the potential transfer of the risks and rewards of ownership in accordance with IAS 17 for all properties leased to tenants and has determined that such leases are operating leases.

iv) Net rental income

Revenue comprises rental income.

Rental income from investment property leased out under an operating lease is recognised in the profit or loss on a straight-line basis over the lease term.

Contingent rents, such as turnover rents, rent reviews and indexation, are recorded as income in the periods in which they are earned. Rent reviews are recognised when such reviews have been agreed with tenants.

Where a rent free period is included in a lease, the rental income foregone is allocated evenly over the period from the date of lease commencement to the lease termination date.

Lease incentives and costs associated with entering into tenant leases are amortised over the lease term.

Revenue from the sale of trading properties is recognised in the period within which there is an unconditional exchange of contracts.

1 Accounting policies (continued)

iv) Net rental income (continued)

Property operating expenses are expensed as incurred and any property operating expenditure not recovered from tenants through service charges is charged to profit or loss.

v) Surplus on sale of investment and development properties

Surpluses on sales of investment and development properties are calculated by reference to the carrying value at the previous valuation date, adjusted for subsequent capital expenditure.

f) Financial assets and financial liabilities

Financial assets and financial liabilities are recognised in the balance sheet when the Group becomes a party to the contractual terms of the instrument. Unless otherwise indicated, the carrying amounts of the financial assets and liabilities are a reasonable approximation of their fair values.

i) Loans and receivables

These are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables comprise trade and other receivables, intra-group loans and cash and cash equivalents. Loans and receivables are initially recognised at fair value, plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment. Cash and cash equivalents include cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less.

ii) Other financial assets

These comprise deposits held with banks where the original maturity was more than three months.

iii) Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

iv) Other financial liabilities

Other financial liabilities include interest bearing loans, trade payables (including rent deposits and retentions under construction contracts) and other short-term monetary liabilities. Trade payables and other short-term monetary liabilities are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method. Interest bearing loans are initially recorded at fair value net of direct issue costs, and subsequently carried at amortised cost using the effective interest method. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis to the profit and loss account using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

v) Derivative financial instruments

The Group uses derivative financial instruments to hedge its exposure to interest rate risks.

Derivative financial instruments are recognised initially at fair value, which equates to cost and subsequently remeasured at fair value, with changes in fair value being included in profit or loss.

g) Finance costs

Net finance costs include interest payable on borrowings, net of interest capitalised and finance costs amortised.

h) Finance income

Finance income includes interest receivable on funds invested, measured at the effective rate of interest on the underlying sum invested.

1 Accounting policies (continued)

i) Dividends

Dividends on equity shares are recognised when they become legally payable. In the case of interim dividends, this is when paid. In the case of final dividends, this is when approved by the shareholders at the Annual General Meeting.

j) Tax

Tax is included in profit or loss except to the extent that it relates to items recognised directly in equity, in which case the related tax is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, together with any adjustment in respect of previous years.

Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases.

The following differences are not provided for:

·  the initial recognition of goodwill;

·  goodwill for which amortisation is not tax deductible;

·  the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit; and

·  investments in subsidiaries, associates and jointly controlled entities where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.

The amount of deferred tax provided is based on the expected manner or realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.

k) Share-based payments

The fair value of equity-settled share-based payments to employees is determined at the date of grant and is expensed on a straight-line basis over the vesting period based on the Group's estimate of shares that will eventually vest.

The cost of the Company's shares held by the Employee Benefit Trust is deducted from equity in the Group balance sheet. Any shares held by the Trust are not included in the calculation of earnings per share.

l) Segmental reporting

An operating segment is a distinguishable component of the Group that engages in business activities, earns revenue and incurs expenses, whose operating results are regularly reviewed by the Group's chief operating decision-makers and for which discrete financial information is available.

The Group has one business activity, being property investment and development and operates in the United Kingdom. The Group's investment properties are managed as a single portfolio by an asset management team whose responsibilities are not segregated by asset type or location, but on an asset by asset basis. The Board receives financial information for the portfolio as a whole and not as separate businesses or divisions. The Directors have considered the nature of the business, how the business is managed and how they review performance and, in their judgement believe that the Group has only one reportable business segment.

m) Capital management policy

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance.

In managing its capital, the Group's primary objective is to ensure its continued ability to provide a consistent return for its equity shareholders through a combination of capital growth and distributions. In order to achieve this objective, the Group seeks to maintain a gearing ratio that balances risks and returns at an acceptable level and also maintain a sufficient funding base to enable the Group to meet its working capital and strategic investment needs. In making decisions to adjust its capital structure to achieve these aims, either through altering its dividend policy, new share issues, or the reduction of debt, the Group considers not only its short-term position but also its long-term operational and strategic objectives.

2 Net income

		2012 £000		2011 £000
Gross rental income		38,526		38,766
Property outgoings		(2,982)		(2,710)
		35,544		36,056
Proceeds from sales of trading properties		2,300		1,700
Cost of sales of trading properties		(1,967)		(1,519)
		333		181

For the year ended 31 March 2012 15% and 12% (2011: 15% and nil) of the Group's gross rental income was receivable from two tenants.

Property outgoings of £1.1 million (2011: £0.5 million) related to investment properties that did not generate rental income in the year.

3 Profit from operations

		2012 £000		2011 £000
This has been arrived at after charging:
Property advisor management fees		-		4,711
Share-based payments		13,450		6,609
Auditors' remuneration:
Audit of the Group and Company Financial Statements, pursuant to legislation		155		192
Fees payable to the Company's auditors for other services to the Group:
-    Statutory audit of subsidiary accounts, pursuant to legislation		32		22
-    Taxation compliance work		-		46
-    Corporate advisory services		-		441
-    Other advisory services		-		20

A share based payment prepayment was created for £39.5 million of the purchase consideration payable under the LSI Acquisition Agreement as reported in the 2011 financial statements. This element of the consideration is subject to bad leaver provisions and subject to future services being provided for three years post acquisition. The prepayment is being charged to the profit and loss evenly over the three years to 30 September 2013. In the year to 31 March 2012 £13.5 million (2011: £6.6 million) has been charged to the profit and loss, reducing the share based payment prepayment to £19.8 million (2011: £33.0 million).

4 Employee costs

		2012 £000		2011 £000
Employee costs, including those of Directors, comprise the following:
Wages and salaries		4,499		2,624
Social security costs		622		151
Other pension costs		333		137
Share-based payment		248		81
		5,702		2,993

Employee costs in the previous year were for the six months to 31 March 2011.

The share incentive scheme allows eligible employees to receive an award of shares, held in trust, dependent on performance conditions based on the net asset value of the Group over a three-year period. The Group expenses the estimated number of shares likely to vest over the three-year period based on the market price at the date of grant.

On 1 October 2010 and 1 October 2011, awards were granted over 417,791 and 451,639 shares respectively, with share prices at grant date of 115p and 117.1p and vesting dates three years from the date of grant. During the period an expense of £248,000 was recognised in profit or loss in respect of the scheme.

The average number of employees including Executive Directors during the year was:

		2012 Number		2011 Number
Head office and property management		22		20

5 Finance income and costs

		2012 £000		2011 £000
Finance income
Interest on short-term deposits		684		1,165
		684		1,165
Finance costs
Interest payable on bank loans		12,800		12,384
Loan break costs and amortisation of loan issue costs		1,313		7,576
Fair value (profit)/loss on derivative financial instruments		5,171		(6,923)
		19,284		13,037

6 Taxation

		2012 £000		2011 £000
The tax charge/(credit) comprises:
Current tax
UK tax (credit)/charge on profit		(655)		1,611
REIT charges		-		13,055
Deferred tax
Change in deferred tax		1,786		(2,359)
		1,131		12,307

The tax assessed for the year varies from the standard rate of corporation tax in the UK. The differences are explained below:

		2012 £000		2011 £000
Profit before tax		7,665		56,774
Profit at the standard rate of corporation tax in the UK of 26% (2011: 28%)		1,993		15,897
Effects of:
Expenses not deductible for tax purposes		4,842		16,686
Tax effect of income not subject to tax		(5,565)		(24,735)
REIT charges		-		13,055
Share of post tax profit of associate		(1,130)		(5,867)
Capital allowances		-		(147)
Temporary differences		1,786		(2,359)
Prior year tax adjustments		(795)		133
Difference in tax rates		-		(356)
UK tax charge on profit		1,131		12,307

Deferred tax asset

	Losses £000		Intangible assets £000		Total £000
At 31 March 2011	1,808		6,075		7,883
(Charged)/credited during the year	-		(1,786)		(1,786)
At 31 March 2012	1,808		4,289		6,097

As the Group is a UK-REIT there is no provision for deferred tax arising on the revaluation of properties or other temporary differences.

The Group does not have unprovided deferred tax assets (2011: nil).

7 Dividends

For the year to 31 March		2012 £000		2011 £000
Ordinary dividends paid
2010 Second interim dividend: 2.2p per share				11,000
2011 Interim dividend: 3.0p per share				16,374
2011 Final dividend: 3.3p per share		18,011
2012 Interim dividend: 3.5p per share		19,103
		37,114		27,374
Proposed for approval by shareholders at Annual General Meeting
2012 Final dividend: 3.5p per share		18,998		18,011

The proposed final dividend was approved by the Board on 29 May 2012 and is subject to approval at the Annual General Meeting on 11 July 2012. It has not been included as a liability or deducted from retained earnings as at 31 March 2012. The proposed final dividend of 3.5p per share, of which 1.5p per share is a Property Income Distribution, is payable on 13 July 2012 to ordinary shareholders on the register at the close of business on 15 June 2012 and will be recognised as an appropriation of retained earnings in 2013.

8 Earnings and net assets per share

Earnings per share of 1.0p (2011: 8.3p) is calculated on a weighted average of 544,775,895 (2011: 522,688,690) ordinary shares of 10p each and is based on profits attributable to ordinary shareholders of £5.3 million (2011: £43.3 million). There are no potentially dilutive or anti-dilutive share options in the year.

Net assets per share is based on equity shareholders' funds at 31 March 2012 of £633.6 million (2011: £668.7 million) and 542,795,171 ordinary shares in issue at that date (2011: 545,795,171).

Adjusted earnings and adjusted net assets per share are calculated in accordance with guidance issued by the European Public Real Estate Association (EPRA) as follows:

For the year to 31 March		2012 £000		2011 £000
Basic and adjusted earnings
Basic earnings attributable to ordinary shareholders		5,339		43,312
Revaluation of investment property (including share of associates and Joint Ventures)		(5,688)		(51,033)
Fair value of derivatives (including share of associates and Joint Ventures)		8,859		(6,975)
Goodwill on acquisitions (including share of associates and Joint Ventures)		(2,876)		(35,343)
Write down of intangible assets		3,965		36,871
Share-based payments		13,450		6,529
Acquisition costs		-		9,026
REIT charges		-		13,055
Deferred tax		1,786		(2,359)
Cost on closing out of derivatives		111		5,920
Profit on disposal of investment and trading property and subsidiaries		(1,035)		(2,790)
Minority interest in respect of the above		50		(435)
EPRA adjusted earnings		23,961		15,778

8 Earnings and net assets per share (continued)

As at 31 March		2012 Number of shares		2011 Number of shares
Number of shares
Opening ordinary share capital		545,795,171		500,000,000
Issue of 45,795,171 ordinary shares (1 October 2010)		-		22,897,586
Purchase and cancellation of own shares		(501,370)		-
Shares held in employee trust		(517,906)		(208,896)
Weighted average number of ordinary shares		544,775,895		522,688,690
Basic earnings per share		1.0p		8.3p
EPRA adjusted earnings per share		4.4p		3.0p

As at 31 March		2012 £000		2011 £000
Net assets per share
Equity shareholders' funds		633,554		668,720
Fair value of derivatives		12,274		6,642
Cost of cap and swaption		-		(1,902)
Revaluation of trading properties		408		405
Fair value of associate and Joint Ventures' derivatives		4,272		815
Deferred tax		(4,289)		(6,075)
EPRA adjusted net assets		646,219		668,605
Basic net assets per share		116.7p		122.5p
EPRA adjusted net assets per share		119.1p		122.5p

9 Investment properties

As at 31 March		2012										2011
		Freehold £000		Long leasehold £000		Total £000		Freehold £000		Long leasehold £000		Total £000
Opening balance		583,553		164,722		748,275		291,827		65,868		357,695
Reclassifications		67,225		(67,225)		-		-		-		-
Acquisitions		34,039		81,625		115,664		356,906		93,583		450,489
Other capital expenditure		1,932		1,102		3,034		7,704		4		7,708
Disposals		(207,896)		(2,252)		(210,148)		(97,708)		(2,851)		(100,559)
Revaluation movement		(4,393)		10,303		5,910		22,392		7,688		30,080
Movement in tenant incentives and rent free uplifts		(25)		(38)		(63)		2,432		430		2,862
At 31 March valuation		474,435		188,237		662,672		583,553		164,722		748,275

At 31 March 2012, the Group's investment properties were externally valued by CB Richard Ellis Limited and Savills plc, both Chartered Surveyors, at £652.9 million (£652.3 million net of income guarantees). Investment property in the course of construction has been valued by the Directors at £10.4 million.

The external valuations were undertaken in accordance with the Royal Institution of Chartered Surveyors' Appraisal and Valuation Standards 2012 on the basis of market value. Market value represents the estimated amount for which a property would be expected to exchange at the date of valuation between a willing buyer and willing seller in an arm's-length transaction. A deduction is made to reflect purchasers' acquisition costs.

Included within the investment property valuation is £9.6 million (2011: £9.7 million) in respect of lease incentives and rent free periods.

The historical cost of all of the Group's investment properties at 31 March 2012 was £599.5 million (2011: £686.4 million).

10 Investment in associate and Joint Venture

As at 31 March		2012 £000		2011 £000
Opening balance		115,345		89,285
Additions at cost		47,459		8,066
Share of profit in the year		4,346		21,961
Profit distributions received		(5,575)		(3,967)
At 31 March		161,575		115,345

In February 2009 the Group entered into an arrangement with Green Park Investments, a wholly-owned subsidiary of a major Gulf institution. The Group has a 31.4% interest in LSP Green Park Property Trust, a Guernsey registered trust, which is accounted for by the Group as an associate. LSP Green Park Property Trust acquired a 50% interest in the Meadowhall Shopping Centre from The British Land Company Plc on 11 February 2009.

In May 2011 the Group disposed of a 50% interest in its distribution portfolio of 10 prime assets acquired in November 2010 to Green Park Investments realising a profit on disposal of the related subsidiaries of £0.6 million. It retained a 50% interest in the Joint Venture company, LSP Green Park Distribution Holdings Limited.

Both Group interests are equity accounted for in these financial statements.

10 Investment in associate and Joint Venture (continued)

The Group's share of the profit after tax and net assets of its associates and Joint Ventures is as follows:

		LSP Green Park Property Trust (Meadowhall) £000		LSP Green Park Distribution Holdings £000		2012 £000		2011 £000
Summarised income statement
Net rental income		11,980		7,189		19,169		12,473
Administration expenses		(1,871)		(914)		(2,785)		(3,105)
Movement in fair value of net assets acquired over consideration paid		2,876		-		2,876		(30)
(Deficit)/surplus on revaluation of investment properties		(4,952)		4,730		(222)		20,953
Net interest payable		(8,330)		(2,723)		(11,053)		(8,223)
Movement in fair value of derivatives		(1,294)		(2,394)		(3,688)		52
Tax		49		-		49		(159)
Profit after tax		(1,542)		5,888		4,346		21,961
Summarised balance sheet
Investment properties		237,667		120,849		358,516		239,425
Current assets		4,607		4,728		9,335		4,763
Current liabilities		(10,971)		(3,800)		(14,771)		(6,245)
Bank debt		(102,243)		(73,192)		(175,435)		(104,269)
Derivative financial instruments		(2,109)		(2,163)		(4,272)		(815)
Other non current liabilities		(11,798)		-		(11,798)		(17,514)
Net assets		115,153		46,422		161,575		115,345

The investment properties were valued on an open market value basis by CB Richard Ellis Limited, Chartered Surveyors, as at 31 March 2012 in accordance with the Royal Institution of Chartered Surveyors Appraisal and Valuation Standards.

11 Intangible assets

As at 31 March		2012 £000		2011 £000
Cost
Opening balance		53,260		-
Additions		-		53,260
At 31 March		53,260		53,260
Amortisation
Opening balance		36,871		-
Amortisation during the year		3,965		36,871
At 31 March		40,836		36,871
Net carrying amount		12,424		16,389

The intangible asset was created on the acquisition by the Company of the LSP Green Park Property Trust Property Advisory Agreement. The asset is being amortised on a straight-line basis over the remaining period of the contract to May 2015.

12 Trade and other receivables

As at 31 March		2012 £000		2011 £000
Trade receivables		288		1,603
Amounts receivable from income guarantees		557		1,518
Share-based payment prepayment		19,767		32,969
Corporation tax debtor		752		-
Prepayments and accrued income		1,068		784
Performance fees receivable		-		5,244
Other receivables		307		3,173
		22,739		45,291

All amounts fall due for payment in less than one year.

Trade receivables comprise rental income which is due on contractual quarter days with no credit period. All trade receivables are considered recoverable at the balance sheet date and as such no allowance for doubtful debts has been made. Since the year end all trade receivables have been collected.

At 31 March 2012 there were no amounts which were overdue and no amounts which were impaired. There is no provision for impairment of trade receivables as at 31 March 2012 as the risk of impairment of the amounts outstanding is not considered to be significant.

The Group's minimum lease payments receivable under non-cancellable operating leases, excluding associates and Joint Ventures, are as follows:

		2012 £000		2011 £000
Less than one year		37,190		48,227
Between one and five years		98,579		173,759
Between six and ten years		81,679		162,957
Between eleven and fifteen years		41,273		106,588
Between sixteen and twenty years		2,094		17,844
		260,815		509,375

13 Cash and cash equivalents

Cash and cash equivalents include £29.1 million (2011: £11.1 million) retained in rent and restricted accounts which are not readily available to the Group for day to day commercial purposes.

14 Trade and other payables

As at 31 March		2012 £000		2011 £000
Trade payables		775		577
Amounts payable on property acquisitions and disposals		51		193
Rent received in advance		8,156		10,694
Accrued interest		2,239		2,220
Other payables		2,009		2,444
Other accruals		1,971		2,446
Deferred income		20,016		-
		35,217		18,574

The Group has financial risk management policies in place to ensure that all payables are paid within the credit time frame.

15 Borrowings and financial instruments

a) Non current financial liabilities

As at 31 March		2012 £000		2011 £000
Secured bank loans		322,769		386,669
Unamortised finance costs		(2,936)		(3,713)
		319,833		382,956

The bank loans are secured by fixed charges over certain of the Group's investment properties with a carrying value of £598 million and are repayable within two to five years of the balance sheet date.

b) Financial risk management

Financial risk factors

The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance. The Group's financial risk management objectives are to minimise the effect of risks it is exposed to through its operations and the use of debt financing.

The principal financial risks to the Group and the policies it has in place to manage these risks are summarised below:

i) Credit risk

Credit risk is the risk of financial loss to the Group if a client or counterparty to a financial instrument fails to meet its contractual obligations.

The Group's principal financial assets are cash balances and deposits and trade and other receivables. The Group's credit risk is primarily attributable to its cash deposits and trade receivables.

The Group mitigates financial loss from tenant defaults by dealing with only creditworthy tenants. The trade receivable amounts presented in the balance sheet are net of allowances for doubtful receivables. An allowance for impairment is made where there is objective evidence that the Group will not be able to collect amounts due according to the original terms of the receivables concerned. The balance is low relative to the scale of the balance sheet and therefore the credit risk of trade receivables is considered to be low.

Cash is placed on deposit with a diverse mix of institutions with suitable credit ratings and rates of return and for varying periods of time. At the year end deposits were spread across eight different banks. The credit ratings of the banks are monitored by J C Rathbone Associates Limited and reported to the Board at least quarterly in order to make necessary changes and manage risk.

The credit risk on liquid funds and derivative financial instruments is limited due to the Group's policy of monitoring counterparty exposures with a maximum exposure equal to the carrying amount of these instruments. The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties.

15 Borrowings and financial instruments (continued)

ii) Liquidity risk

Liquidity risk arises from the Group's management of working capital and the finance charges and principal repayments on its debt instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.

The Group actively maintains a mixture of long-term and short-term committed facilities that are designed to ensure that the Group has sufficient available funds for operations and committed investments. The Group's funding sources are diversified across a range of banks. Quarterly cash flow forecasts are prepared for the Board in order to ensure sufficient resources of cash and undrawn borrowing facilities are in place to meet liabilities as they fall due. The Group deposits surplus cash with a number of banks and for varying periods of time to ensure diversification, liquidity of resources and so as to deliver appropriate returns.

The Group had cash reserves of £136.9 million (2011: £156.8 million) and available and undrawn bank loan facilities at 31 March 2012 of £22.3 million (2011: £ nil). Following the disposal of the Triangle Distribution portfolio on 18 April 2012 a further £150 million of undrawn bank loan facilities became available to the Group.

The following table shows the contractual maturity profile of the Group's financial liabilities on an undiscounted cash flow basis and assuming settlement on the earliest repayment date.

		Less than one year £000		One to two years £000		Two to five years £000		Total £000
At 31 March 2012
Bank loans		8,553		8,553		335,134		352,240
Derivative financial instruments		5,272		5,346		4,493		15,111
		13,825		13,899		339,627		367,351

		Less than one year £000		One to two years £000		Two to five years £000		Total £000
At 31 March 2011
Bank loans		9,465		9,439		406,636		425,540
Derivative financial instruments		6,436		6,419		12,343		25,198
		15,901		15,858		418,979		450,738

iii) Market risk - Interest rate risk

The Group is exposed to interest rate risk from the use of debt financing at a variable rate. It is the risk that future cash flows of a financial instrument will fluctuate because of changes in interest rates. It is Group policy that a reasonable portion of external borrowings are at a fixed interest rate in order to manage this risk.

The Group uses interest rate swaps and caps to manage its interest rate exposure and hedge future interest rate risk for the term of the bank loan. Although the Board accepts that this policy neither protects the Group entirely from the risk of paying rates in excess of current market rates nor eliminates fully the cash flow risk associated with interest payments, it considers that it achieves an appropriate balance of exposure to these risks.

At 31 March 2012 the Group had £289 million of hedges in place, and its debt was 84% fixed. Consequently, based on year end debt levels, a 1% change in interest rates would increase or decrease the Group's annual profit before tax by £0.7 million.

The average interest rate payable by the Group on all bank borrowings at 31 March 2012 net of undrawn facility commitment fees was 4.12% (31 March 2011: 4.08%).

15 Borrowings and financial instruments (continued)

iv) Capital risk management

The Group's objectives when maintaining capital are to safeguard the entity's ability to continue as a going concern so that it can provide returns to shareholders and as such it seeks to maintain an appropriate mix of debt and equity. The capital structure of the Group consists of debt, which includes long-term borrowings and undrawn debt facilities, and equity comprising issued capital, reserves and retained earnings. The Group balances its overall capital structure through the payment of dividends, new share issues as well as the issue of new debt or the redemption of existing debt.

c) Financial instruments

i) Categories of financial instruments

As at 31 March		Loans and receivables
		2012 £000		2011 £000
Current assets
Cash and cash equivalents		136,934		156,785
Trade receivables (note 12)		288		1,603
Amounts receivable from income guarantees (note 12)		557		1,518
Performance fees receivable (note 12)		-		5,244
Corporation tax receivable		752		-
Other receivables (note 12)		307		3,173
		138,838		168,323

As at 31 March		Measured at amortised cost				Measured at fair value
		2012 £000		2011 £000		2012 £000		2011 £000
Non current liabilities
Borrowings (note 15a)		319,833		382,956		-		-
Current liabilities
Trade payables (note 14)		775		577		-		-
Accrued interest (note 14)		2,239		2,220		-		-
Other accruals (note 14)		1,971		2,446		-		-
Deferred income (note 14)		20,016		-		-		-
Other payables (note 14)		2,009		193		-		-
Corporation tax payable		-		14,197		-		-
Derivative financial instruments (see 15c(iii))		-		-		12,274		6,642
		346,843		402,589		12,274		6,642

ii) Fair values

To the extent financial assets and liabilities are not carried at fair value in the consolidated balance sheet, the Directors are of the opinion that book value approximates to fair value at 31 March 2012.

15 Borrowings and financial instruments (continued)

iii) Derivative financial instruments

All derivative financial instruments are carried at fair value following a valuation as at 31 March 2012 by JC Rathbone Associates Limited.

Details of the fair value of the Group's derivative financial instruments that were in place at 31 March 2012 are provided below:

		Protected rate %		Expiry		Market value 31 March 2011 £000		Disposed in the period £000		Movement recognised in income statement £000		Market value 31 March 2012 £000
£43 million swap*		3.77		October 2014		(1,920)		-		1,920		-
£12.3 million swap*		3.90		October 2014		(936)		-		936		-
£66.6 million fixed rate		2.98		February 2016		(749)		749		-		-
£40.0 million cap		3.00		February 2016		1,210		(1,210)		-		-
£17.5 million cap		4.00		October 2014		213		-		(193)		20
£85 million swap		3.68		October 2014		(3,958)		-		(1,731)		(5,689)
£38.5 million swaption*		3.75		January 2012		85		-		(85)		-
£48.1 million swap		2.69		January 2015		(587)		-		(1,209)		(1,796)
£55.3 million swap		3.77		October 2014		-		-		(3,840)		(3,840)
£40.7 million swaption		2.35		March 2016		-		-		25		25
£40.7 million swap		1.88		October 2012		-		-		(213)		(213)
£25.0 million fixed rate		2.03		July 2016		-		-		(767)		(767)
£17.6 million fixed rate		1.31		July 2016		-		-		(14)		(14)
						(6,642)		(461)		(5,171)		(12,274)

* Derivatives cancelled or lapsed in the year

All derivative financial instruments are non current and are interest rate derivatives.

The market values of hedging products change with interest rate fluctuations, but the exposure of the Group to movements in interest rates is protected by way of the hedging products listed above. In accordance with accounting standards, fair value is calculated on a replacement basis using mid-market rates. For all derivative financial instruments this equates to a Level 2 fair value measurement as defined by IFRS 7 Financial Instruments: Disclosures. The valuation therefore does not reflect the cost or gain to the Group of cancelling its interest rate protection at the balance sheet date, which is generally a marginally higher cost (or smaller gain) than a market valuation.

16 Share capital

As at 31 March		2012 Number		2012 £000		2011 Number		2011 £000
Authorised
Ordinary shares of 10p each		Unlimited		Unlimited		Unlimited		Unlimited

As at 31 March		2012 Number		2012 £000		2011 Number		2011 £000
Issued, called up and fully paid
Ordinary shares of 10p each		542,795,171		54,280		545,795,171		54,580

On 9 January 2012 the Company acquired three million ordinary shares as Treasury Stock. On 28 March 2012 these shares were cancelled.

17 Reserves

The following describes the nature and purpose of each reserve within equity:

Share capital	The nominal value of shares issued.
Capital redemption reserve	Amounts transferred from share capital on redemption of issued ordinary shares.
Other reserve	A reserve relating to the application of merger relief in the acquisition of LSI Management Limited by London & Stamford Property Plc, the cost of the Company's shares held in treasury and the cost of shares held in trust to provide for the Company's future obligations under share award schemes.
Retained earnings	The cumulative profits and losses after the payment of dividends.

18 Related party transactions and balances

During the year the Group received property advisory fees of £5.5 million (2011: £5.6 million) from LSP Green Park Property Trust, in which it has a 31.4% interest. It also received £1.1 million (2011: nil) from LSP Green Park Distribution Holdings Limited, in which it has a 50% interest. None of the fees were outstanding at 31 March 2012 (2011: £5.2 million outstanding).

Transactions between the Company and its subsidiaries which are related parties have been eliminated on consolidation.

19 Events after the balance sheet date

On 18 April 2012 the Group completed the sale of the Triangle Distribution portfolio of 17 assets for £265 million to BRE/Rhombus Bidco Sarl, an entity managed by a Blackstone real estate fund resulting in a profit on sale of £0.7 million. Of the total consideration received, £150 million was used to repay related bank debt.

 

END

 

 

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