Correction - Final Results

RNS Number : 8592N
Terrace Hill Group PLC
25 February 2009
 



Within Terrace Hill Group PLC's final results announcement released today at 07:00 under RNS No 8345N, the date for payment of the final dividend should read 7 April 2009. 

The remainder of announcement text is unchanged and is reproduced in full below.


25 February 2009


Terrace Hill Group plc

('Terrace Hill', the 'Company' or the 'Group')


PRELIMINARY RESULTS FOR THE YEAR ENDING 31 OCTOBER 2008


Terrace Hill Group plc (AIM: THG), a leading UK property development and investment group, today announces its preliminary results for the year to 31 October 2008.


Financial highlights


  • Triple Net Asset Value per share of 53.4p (31 October 2007: 83.7p)

  • Adjusted Diluted Net Asset Value per share of 58.0p (31 October 2007: 96.3p)

  • £108.2 million of debt refinanced since October 2007

  • Adjusted pre-tax profit (before property provisions) £1.0 million (31 October 2007: £4.7 million)

  • Pre-tax loss of £31.6 million (31 October 2007: profit £18.1 million)  

  • Balance sheet loan to value gearing of 45.7%

  • Final dividend of 0.54 pence per share, bringing the total dividend for the year to 1.34 pence per share, demonstrating the Board's confidence in the Company's financial strength and long term prospects

  • Sale of Queens Wharf, Hammersmith completed for £30.75 million realising a profit of £11.1 million.


Operational highlights


  • Completed or contracted sales of £72.4 million

  • Contracted lettings with annual rent roll of £5.7 million

  • Gained detailed planning consent for 882,155 sq ft

  • Pre-let a 92,333 sq ft superstore in Bishop Auckland to Sainsbury's and contracted to sell a five-acre site to them in Helston

  • Planning applications submitted at four Scottish housebuilding sites for a total of 519 units.


Commenting, Robert Adair, Chairman of Terrace Hill, said:

'Despite the unprecedented economic difficulties and consequent rapid decline of property values, we have made good operational progress and been successful in managing and ameliorating the impact of these conditions. Our focus on risk management, tight control of capital and overhead expenditure, coupled with our drive towards long-term value creation, means that we are confident that we can weather the current turbulence and ultimately take advantage of the opportunities that will arise. In line with the rest of the sector, our financial results are, of course, greatly affected by the general economic situation. As a result, we have seen a fall in trading margins and volumes, increased funding costs and falls in triple net asset value as a result of asset value writedowns.


'Clearly the immediate future for our industry looks challenging and I anticipate further falls in asset values. Within our business, however, we have a range of abilities and expertise and, importantly, the experience of managing the business through previous downturns. Our goal has always been to produce superior relative returns for our shareholders through our undoubted skills and management of risk, and I am confident that we are well positioned to outperform our peers over the medium-term.'


For further information:


Terrace Hill Group plc                                                       Tel: +44 (0)20 7631 1666

Robert Adair, Chairman

Philip Leech, Chief Executive

Jon Austen, Group Finance Director




Oriel Securities (Nominated Adviser)                           Tel: +44 (0)20 7710 7600

Richard Crawley

Daniel Conti


Financial Dynamics                                                           Tel: +44 (0)20 7831 3113

Stephanie Highett/Richard Sunderland

Jamie Robertson/Rachel Drysdale

terracehill@fd.com

  CHAIRMAN'S STATEMENT


I am pleased to report our financial results for the year ended 31 October 2008. Despite the unprecedented economic difficulties and consequent rapid decline of property values, we have made good operational progress and been successful in managing and ameliorating the impact of these conditions. Our focus on risk management, tight control of capital and overhead expenditure, coupled with our drive towards long-term value creation, means that we can weather the current turbulence and ultimately take advantage of the opportunities that will arise. In line with the rest of the sector, our financial results are, of course, greatly affected by the general economic situation. As a result, we have seen a fall in trading margins and volumes, increased funding costs and falls in triple net asset value (TNAV) as a result of asset value writedowns.


During the year our adjusted diluted NAV (ADNAV, as defined by EPRA) has decreased by 39.8% to 58.0 pence per share (31 October 2007: 96.3 pence per share) and our TNAV has fallen by 36.2% to 53.4 pence per share (31 October 2007: 83.7 pence per share). Adding back the dividend payments made during the year the underlying TNAV has decreased by 35.1%. The TNAV takes account of any valuation uplifts above book costs of assets held as trading stock, as well as contingent tax on prospective gains and adjustments for financial instruments.


In line with our dividend policy, the board is recommending a final dividend of 0.54 pence per share to be paid on 7 April 2009. This proposed final dividend is lower than last year's final dividend of 1.3 pence per share. We have adjusted the dividend in line with the movement in TNAV. Taken with the interim dividend of 0.8 pence per share paid in August, the total dividend in respect of the year to 31 October 2008 will be 1.34 pence per share. Our commitment to pay a final dividend is a demonstration of the confidence the board has in our financial strength and the Group's future.


The Group's loss before tax for the year amounted to £31.6 million, which is stated after accounting for changes in the value of our investment properties and reductions in the value of our trading stock. Excluding these, our operating profit before tax for the year was £1.0 million, compared with £4.7 million for the year ended 31 October 2007. The financial review contains further analyses of our performance in the period and a reconciliation of these amounts.


We have successfully dealt with all re-financings that fell due during the period and since the year end, totalling £84.8 million in respect of on-balance sheet loans and £23.4 million in respect of off-balance sheet loans. Our strong bank relationships have been essential in achieving this outcome. Most of these re-financings have been characterised by somewhat harsher terms, reflecting the lack of competition in the banking market. In 2009, we will have more re-financings to complete and our initial discussions with our lenders give us confidence that these will be completed satisfactorily, a position borne out by our successes to date. None of our existing loans is in default. 


Our focus is on our cash flow and preserving our cash resources. We constantly review our cost base and believe we have a lean operation. We have reduced our headcount by 7.1% since the year end and continue to exercise tight control over our discretionary expenditure.


Commercial property

We have continued to make good operational progress with a number of lettings. These include Biogen at Quantum in Maidenhead, Eon at 129 Wilton Road in Victoria, Hertel at Hudson Quay in Middlehaven, further lettings at Kean House in Covent Garden and a substantial pre-letting to Sainsbury's in Bishop Auckland.


We have also sold and forward sold a number of assets, including Queens Wharf in Hammersmith, a site to Sainsbury's in Helston, Cornwall, an office building to the Open University in Gateshead and the sale of smaller units to occupiers in Bristol, Farnborough and Eastbourne.


Residential property

Our residential investment properties have fallen in value by 8.9% in the year, largely out-performing the wider residential market where the Halifax HPI fell by 14.6% over the same period. We are particularly pleased with occupancy levels, now at 91.8%, and with rental levels which have very little delinquency. Rents have grown by approximately 4.0% per annum over the two years to June 2008 and remained stable since then. 


Our strategy, however, remains to sell residential units profitably, although the dearth of mortgages has made this difficult recently. In the meantime, we are managing the portfolios efficiently and have effected a reduction in operating costs equivalent to £2.9 million per annum.


We remain confident that our residential investment portfolios will produce good returns over the medium-term driven by: the low relative value of each unit (£138,000); the geographic diversity avoiding cluster risk; and the pent up demand for homes.


Clansman Homes, our Scottish housebuilding business, is consolidating its position with the sites it owns. We now control a land-bank with capacity to develop in excess of 1,300 units and have very little unsold stock, with those units that are built seeing signs of renewed interest. We continue to pursue planning consents where needed and, as mortgage availability improves, we will continue to make sales. In the longer-term, Clansman Homes offers a real opportunity to add to shareholder value through an ultimate demerger or trade sale.


Board

I am very happy to welcome Jon Austen to the Group as our new Group Finance Director. Jon brings a wealth of experience to us and his knowledge of property fund management and structuring will be invaluable. I am also pleased to report that Tom Walsh, his predecessor, has agreed to stay on as Deputy Finance Director. I am grateful to all the directors and staff for their hard work and dedication over the last year.



Outlook

Clearly the immediate future for our industry looks challenging and I anticipate further falls in asset values. Within our business, however, we have a range of abilities and expertise and, importantly, the experience of managing the business through previous downturns. We continue to add value through active management of our assets. Our continued focus on risk management and banking relationships makes us confident that we can survive the current difficulties and, ultimately, build on the opportunities presented by this market. Our goal has always been to produce superior relative returns for our shareholders through our undoubted skills and management of risk, and I am confident that we are well positioned to outperform our peers over the medium-term.


Robert FM Adair

Chairman

24 February 2009


REVIEW OF OPERATIONS


Commercial property

The main focus during the course of the year has been intensively managing existing assets and sites to maximise revenue. This has been achieved by letting vacant space, exploiting pre-letting opportunities, releasing capital through sales and adding value through gaining planning consents.


The majority of our current developments have been carried out in financial joint ventures in which we hold minority equity stakes and all of which have been financed with limited recourse to the Group. Our financial exposure to these developments is, therefore, restricted to our original equity stake and to limited interest overrun guarantees. Where a development has been carried out in phases and part sold, the receipts have generally been used to reduce initial borrowings and project gearing. Properties that have been let or part-let, but not yet sold, provide an income which is used to help service the debt.


It is our usual practice with bare sites to own the whole of the equity until we have added value through planning and mitigated risk through pre-lets or fixed price building contracts, following which we sell down the majority of the equity to a joint venture partner. We recognise that in the current market we are unlikely to develop these sites without substantial pre-lets or forward sales. Further capital expenditure is therefore limited, however, we are still committed to adding additional value through the planning process.


Some of our operational highlights during the year and since the year end are set out below:


since 31 October 2007 we have completed or contracted sales of £72.4 million and have contracted lettings with an annual rent roll of £5.7 million;

letting of 53,584 sq ft of new offices at Quantum 2, Vanwall Business Park, Maidenhead to Biogen Idec on a 15 year lease at an initial rent of £1.6 million per annum;

pre-letting to Sainsbury's, conditional upon planning, of a 92,333 sq ft food superstore at the Group's retail park at Bishop Auckland, County Durham. Detailed planning has now been granted by the local authority pending a final decision by the Government Office;

Eon leased 19,857 sq ft at 129 Wilton RoadVictoria on an average rent of £70.85 per sft. In the same building, we let the ground floor retail unit to Prêt-a-Manger for £100,000 per annum. The sale of the private and affordable residential units was also completed for £14.5 million;

Hertel leased 15,000 sq ft in Hudson Quay at Middlehaven on Teesside making the building fully let. The remainder is let to the Crown Prosecution Service;

at Kean House in Covent Garden we have let all but one floor of the office accommodation, at rents up to £60.00 per sft;

within the Terrace Hill Development Partnership we sold three more units at Aeropark, Farnborough, let or sold three units at Brabazon Office Park, Bristol and sold seven units at Brampton Road, Eastbourne;

the completion of the sale of a 19,500 sq ft office building to the Open University at Baltic Business Quarter;

we completed the sale of Queens Wharf in Hammersmith for £30.75 million, realising a profit of £11.1 million; and

detailed planning consent has been granted for a 55,750 sq ft food store at Helston in Cornwall, which is contracted for sale to Sainsbury's.


We have also added significant value to a number of our sites by gaining new consents, or improving upon existing planning consents, at Southampton, Middlesbrough, Croydon, Bristol and, most recently, at Howick Place in Victoria, London for offices and residential.


In total, we have achieved detailed planning consent for 882,155 sq ft of new space since 31 October 2007.


Residential investment portfolios

At the year end, our residential investment portfolio under management totalled 1,957 units valued at £271 million. Out of this total, 1,714 units are within Terrace Hill Residential PLC in which we have a 49.0% stake.


The value of the portfolios has fallen by 8.9% since last year. Compared to the average fall in residential values across the UK, as measured by the Halifax HPI of 14.6%, our properties have performed well. 


Across the whole portfolio, occupancy levels have fallen slightly. At 31 October 2008 occupancy was 91.8% compared to 93.0% at the previous year end. This fall reflects our refurbishment programme where properties are vacant whilst building works are carried out. Demand for the units remains strong.


Rental growth is now largely static, as a consequence of an increased supply of properties to let. The rents from our properties remain very affordable and offer better value than much of the competition. As ever, we aim to maintain a careful balance between rental levels and occupancy rates.


As expected during the current economic climate, sales activity has been slow compared with previous years but we achieved the sale of some individual properties totalling £1.1 million in aggregate. 


During the year we also entered into a new management agreement with Allsop Residential Investment Management Limited, who are responsible for the letting and management of the Terrace Hill Residential PLC portfolio. This new agreement will significantly reduce our letting and management fees by £2.9 million per annum.


Clansman Homes

As a result of the weakness in the housing market, we have significantly scaled back plans for new builds and have concentrated on selling inventory stock. This has had some success and has been achieved without large discounts. We have, however, made limited use of part exchanges to facilitate some sales. Currently we have 24 completed and unsold units and have seen an encouraging growth in the number of visitors and enquiries since the beginning of 2009. We continue to pursue planning consents on our landbank and are confident of obtaining planning at our sites at Fenwick, Patna, Carluke and Kilmarnock during the course of the year. This will add 519 new units to the consented landbank. We have also submitted a planning application for the 65 acre site we own partially in joint venture, at Armadale, West Lothian which has capacity for 500 residential units, a food superstore and a neighbourhood centre. Our landbank has the capacity for in excess of 1,300 units and we will be able to accelerate turnover rapidly once market conditions improve.


Philip Leech

Chief Executive

24 February 2009


FINANCIAL REVIEW


Financial results and net asset value

The Group's NAV fell by 24.7% in the period to £103.0 million (48.6 pence per share) from £136.9 million (64.6 pence per share) at 31 October 2007 and our adjusted NAV (equivalent to that defined by EPRA) fell by 39.8% to £124.2 million (58.0 pence per share) from £210.9 million (96.3 pence per share) at 31 October 2007. 


The main reasons for the movement of 38.3 pence per share in the adjusted NAV are as follows:


a fall of 14.9 pence per share in the value of our properties as reflected on our balance sheet;

a fall of 22.0 pence per share in the value of our trading properties as included in our adjusted NAV;

earnings for the year (before property valuation adjustments) of 2.4 pence per share; and

dividends paid in the year of 2.1 pence per share.


Our triple net asset value (TNAV) is arrived at by including the effect of tax estimated to be payable on the profits arising if all the Group's properties were to be sold at the values used for adjusted NAV. We also write off all goodwill carried in the balance sheet and reverse any fair value adjustments of our financial instruments in arriving at our TNAV figures. The TNAV at 31 October 2008 fell by 36.2% to £114.3 million (53.4 pence per share) from the 2007 figure of £183.3 million (83.7 pence per share).


Calculation of ADNAV and TNAV (unaudited)



31 October 2008



31 October 2007




Number



Number




of shares 

Pence per 


of shares 

Pence per


£'000 

000s 

share 

£'000 

000s

 share

Audited net asset value 

103,047 

211,971 

48.6 

136,879 

211,971 

64.6

Revaluation of property held as current assets

 20,324 



68,560



Shares to be issued under the LTIP 

41

 2,038 


140

6,965


Deferred taxation in respect of investment properties 

781 



5,301



Adjusted diluted net asset value 

124,193 

214,009 

58.0 

210,880 

218,936 

96.3

Decrease %



 (39.8)%



 

Estimated taxation on revaluation of current assets, unrealized gains and availability of tax losses 

(6,472) 



(23,953)



Goodwill 

(3,456)



 (3,589)



Triple net asset value 

114,265 

214,009 

53.4

183,338 

218,936 

83.7

Decrease %



 (36.2)% 





Income statement

Our income statement for 2008 contains adjustments in respect of our development properties which were not a feature of our 2007 results. The table set out below derives a figure for adjusted profit which strips out these adjustments and other items.


Adjusted profit




October 2008 

October 2007


£m 

£m

Reported (loss)/profit before tax 

(31.6) 

18.1

Write downs in respect of development properties 

12.6

 -

Write downs in respect of loans to joint ventures and associated companies 

7.8 

-

Deficits/(gains) from investment properties 

3.8 

(7.1)

Deficits/(gains) from joint ventures and associated companies 

8.4

 (6.3)

Adjusted profit before tax

 1.0

 4.7


Revenue in the period was £63.4 million (2007: £69.9 million), a decrease of 9.6%. The single most significant transaction in the period was the sale of a site at Hammersmith for £30.8 million. Also included in revenue are sales of houses at three Clansman Homes sites totalling £3.0 million (2007: £1.6 million) and the balance of the proceeds from pre-sold developments at Wokingham, Gateshead and Newcastle. We also completed the sale of the residential parts of our mixed use development in VictoriaLondon


The Group generated £4.8 million in rental income (2007: £4.2 million), an increase of 14.3%, while development management fees and other income contributed £2.6 million (2007: £2.4 million) an increase of 8.3%.


The Group recorded a gross loss for the period of £4.1 million (2007: profit £20.7 million). The principal reason for the loss is the inclusion of £12.6 million of write downs in respect of our development properties and £7.8 million in respect of provisions against loans to joint ventures and associated companies. The major contributor to profit in the period, as reported in our interim results, was the sale of the property at Hammersmith which generated a profit of £11.1 million.


Administrative expenses, which largely reflect the operational overheads of the Group, were £6.2 million compared with £9.6 million in 2007, a decrease of 35.4%. The main reason for the decrease is due to a credit of £1.0 million in respect of the Group's share-based payment scheme in 2008 compared with a charge of £1.5 million in 2007. Ignoring this, underlying administrative expenses have reduced from £8.1 million in 2007 to £7.2 million in 2008.


Movements in the carrying value of our developments and investment properties are included in various lines in our income statement, depending on whether the properties are wholly or partly owned. Unrealised losses arising from the revaluation of wholly owned trading and investment properties amounted to £16.4 million. This comprises £12.6 million in respect of our development properties and is included in the direct costs line of our income statement (as noted above) and £3.8 million, in respect of our on-balance sheet investment properties included in the income statement, in the line of the same description. In addition, included in direct costs is a provision of £7.8 million against loans to joint ventures and associates as a consequence of falling values in the underlying developments. Finally, included in the share of joint ventures and associated undertakings post tax loss is £8.4 million relating to reductions in the carrying value of those off-balance sheet development and investment properties. 


The operating loss for the period after the recognition of the unrealised losses referred to above (excluding those relating to the Group's share of joint ventures and associated undertakings) was £14.1 million, a reduction on the previous year's operating profit of £18.6 million, although it should be noted that the 2007 figure included valuation uplifts of £7.1 million in respect of investment properties.


Finance costs of £5.5 million (2007: £2.4 million) represents the cost of our on-balance sheet debt. The figure for 2008 includes £2.1 million in respect of a development funding agreement which will reverse in 2009. Our weighted average interest rate during the year was 6.1%.


Our investment in joint ventures and associated undertakings generated a loss for the period of £12.4 million (2007: profit £0.5 million). This is primarily due to the results of Terrace Hill Residential PLC, of which our share is 49.0%. The figure of £12.4 million comprises our share of the pre-tax loss on property revaluations of £11.8 million (2007: £5.9 million), a related taxation credit of £3.4 million (2007: £2.5 million) and a trading loss in the period £3.9 million (2007: £5.3 million). Other contributors to the results from joint ventures and associates are the Castlegate House Partnership where our share is 30.0% and Achadonn Limited, our land holding joint venture in Scotland, where our interest is 50.0%.


Balance sheet

The Group's total assets at 31 October 2008 were £232.4 million, a decrease of 15.3% on the 2007 amount of £274.3 million. The net assets, after deducting minority interests, were £103.0 million (2007: £136.9 million), a reduction of 24.8%.


Financial resources and capital management

The Group's financial resources are principally its cash balances and bank loans and facilities. Typically, the Group finances its projects with dedicated debt facilities where an individual project provides the security to the lender, making the project and debt ring-fenced. This results in a relatively large number of discrete bank facilities, which are also relatively short-term, thus reducing risk and maintaining flexibility for the Group. At any one time, therefore, the Group has a relatively high proportion of its overall debt due for repayment within one year. The majority of our committed commercial developments are financed in off-balance sheet associated or joint venture companies with limited recourse to the Group.


At 31 October 2008 our debt position is summarised in the table below.


Summary of debt position




October 2008 

October 2007

Net debt 

£85.9m 

£65.5m

Net gearing 

69.1%

 47.8%

Net debt including share of off-balance sheet debt 

£231.1m 

£222.5m

Total net gearing 

186.1% 

105.5%

Loan to value %

 45.7% 

29.6%

Loan to value % including share of off-balance sheet debt

 63.3% 

52.0%


The net gearing and loan to value percentages shown above are in relation to our adjusted NAV. The majority of off-balance sheet debt is of limited recourse to the Group.


At 31 October 2008, 16.8% of our on-balance sheet debt was subject to hedging arrangements with an average rate of interest of 5.9%. The percentage of our on-balance sheet debt subject to hedging arrangements is low, as typically such debt has short maturities and is used to finance early stage developments where we have needed to retain flexibility for the repayment of debt. By contrast, the percentage of our off-balance sheet debt that was subject to hedging arrangements was 74.8% at 31 October 2008. Our typical strategy with our off-balance sheet projects is to reduce interest rate risk by a significant degree.


We continually monitor our bank facilities and constantly update a rolling cash forecast for 24 months ahead. It is worth noting that the Group has no unfunded capital commitments in respect of its on-balance sheet development projects and all commercial development expenditure in respect of off-balance sheet projects is funded by related bank facilities.


The Group regularly stress tests the portfolio for falls in value and builds into its cash forecasts varying assumptions concerning margin calls or increased funding costs as a consequence of loan to value covenants being breached. The Group believes that it has sufficient resources to continue trading for the foreseeable future.


Since October 2007, £108.2 million of debt (including £23.4 million of off-balance sheet debt) has been successfully re-financed. With regard to our re-financings, in all cases they have been characterised by higher margins, but loan to value covenants have largely remained constant. Due to the recent falls in interest rates, funding costs to the Group have remained broadly level, notwithstanding the increase in margins on our revised facilities. 


The Group has a further £47.2 million of on-balance sheet debt requiring re-financing during 2009 and £289.4 million that requires re-financing in relation to our off-balance sheet projects. Our experience to date and our discussions with lenders in 2009 indicate a willingness to renew our loans. We borrow from a wide range of banks with whom we have good and long-established relationships. 


None of our existing loans is in default and our covenants are generally limited to loan to value covenants.  With regards to our off-balance sheet projects, the Group monitors loan to value ratios and, depending on the recourse to the Group and the overall status of the project, makes appropriate provisions against its investments.



Dividends

Dividends paid in the year to 31 October 2008 amounted to 2.1 pence (2007: 1.9 pence) and comprised the final dividend in respect of the year to 31 October 2007 of 1.3 pence per share and an interim dividend of 0.8 pence per share in respect of the year to 31 October 2008. The board is recommending to shareholders at the Annual General Meeting on 2 April 2009 a final dividend for the year to 31 October 2008 of 0.54 pence per share. The final dividend will be paid on 7 April 2009 to all shareholders on the register at 20 March 2009. 



Debt expiry profile




On-balance

 Off-balance


sheet 

sheet*


£m 

£m

Bank loans and overdraft repayable in one year 

63.0 

119.4

Bank loans repayable after more than one year

 40.9 

25.9

Total 

103.9 

145.3

* group share



Summary of loan to value ratios of on-balance sheet property




Loan to value 

Range of


covenants

Commercial property 

53.6% 

50-60%

Residential property 

71.4% 

70-75%

Housebuilding property

 34.3% 

65-75%

All property

 45.7%





Jon Austen

Group Finance Director

24 February 2009


Consolidated income statement

for the year ended 31 October 2008




Year ended

Year ended



31 October

31 October



2008

2007


Notes

£'000

£'000

Revenue

2

63,366 

69,849 

Direct costs


(67,438)

(49,142)

Gross (loss)/profit


(4,072)

20,707 

Administrative expenses


(6,195)

(9,587)

(Loss)/profit on disposal of investment properties


(20)

404 

(Loss)/gain on revaluation of investment properties


(3,846)

7,062 

Operating (loss)/profit


(14,133)

18,586 

Finance income

467 

1,447 

Finance costs

(5,488)

(2,400)

Share of joint venture and associated undertakings post tax (loss)/profit


(12,448)

505 

(Loss)/profit before tax


(31,602)

18,138 

Tax

6 

4,327 

(3,577)

(Loss)/profit from continuing operations


(27,275)

14,561 

Attributable to




Equity holders of the parent


(27,253)

14,527 

Minority interest


(22)

34 



(27,275)

14,561 

Basic earnings per share

8

(12.90)p

7.33p

Diluted earnings per share

8

(12.90)p

7.09p

The notes below form part of this financial information

 

Consolidated statement of changes in equity

for the year ended 31 October 2008



 



Capital


Unrealised






Share

Share

Own 

redemption

Merger

gains and 

Retained


Minority



capital

premium

Shares

reserve

reserve

losses

earnings

Total

interest

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 31 October 2006

3,744

19,369

-

849

8,386

-

67,930 

100,278 

314 

100,592 

Profit for the year

-

-

-

-

-

-

14,527 

14,527 

34 

14,561 

Total recognised income and expense for the year

-

-

-

-

-

-

14,527 

14,527 

34 

14,561 

Acquisition of minority interest

-

-

-

-

-

-

- 

- 

(42)

(42)

Share-based payment

-

-

-

-

-

-

1,494 

1,494 

- 

1,494

Interim ordinary dividends

-

-

-

-

-

-

(1,696)

(1,696)

- 

(1,696)

Final ordinary dividends

-

-

-

-

-

-

(2,059)

(2,059)

- 

(2,059)

Issue of share capital

496

23,839

-

-

-

-

- 

24,335 

- 

24,335 

Balance at 31 October 2007

4,240 

43,208

-

849

8,386

-

80,196 

136,879 

306 

137,185 

Loss for the year

-

-

-

-

-

-

(27,253)

(27,253)

(22)

(27,275)

Unrealised losses on available-for-sale investments

-

-

-

-

-

(498)

-

(498)

- 

(498)

Total recognised income and expense for the year

-

-

-

-

-

(498)

(27,253)

(27,751)

(22)

(27,773)

Acquisition of minority interest

-

-

-

-

-

-

-

-

(26)

(26)

Own shares

-

-

(609)

-

-

-

-

(609)

- 

(609)

Share-based payment

-

-

-

-

-

-

(997)

(997)

- 

(997)

Merger reserve release

-

-

-

-

(1,298)

-

1,298 

-

- 

-

Interim ordinary dividends

-

-

-

-

-

-

(1,684)

(1,684)

- 

(1,684)

Final ordinary dividends

-

-

-

-

-

-

(2,791)

(2,791)

- 

(2,791)

Balance at 31 October 2008

4,240 

43,208

(609)

849

7,088

(498)

48,769 

103,047 

258 

103,305 


Consolidated balance sheet

at 31 October 2008




31 October

31 October



2008

2007


Notes

£'000

£'000

Non-current assets




Investment properties

10

49,160 

53,887 

Property, plant and equipment

9

590 

594 

Investments in equity accounted associates and joint ventures

11

7,145 

18,619 

Available-for-sale investments

11

442 

- 

Other investments

11

109 

147 

Intangible assets


3,456 

3,589 

Deferred tax assets

17

4,327 

661 



65,229 

77,497 

Current assets




Property inventories

12

120,488 

126,950 

Trade and other receivables

13

28,612 

42,888 

Cash and cash equivalents


18,022 

26,958 



167,122 

196,796 

Total assets


232,351 

274,293 

Non-current liabilities




Bank loans

16

(40,890)

(64,339)

Other payables

15

(3,370)

(7,480)

Deferred tax liabilities

17 

(782)

(1,863)



(45,042)

(73,682)

Current liabilities




Trade and other payables

14

(20,878)

(34,094)

Current tax liabilities


(153)

(1,190)

Bank overdrafts and loans

16

(62,973)

(28,142)



(84,004)

(63,426)

Total liabilities


(129,046)

(137,108)

Net assets


103,305 

137,185 

Equity




Called up share capital

19

4,240 

4,240 

Share premium account

20

43,208 

43,208 

Own shares

20

(609)

- 

Capital redemption reserve

20

849 

849 

Merger reserve

20

7,088 

8,386 

Unrealised losses

20

(498)

- 

Retained earnings

20

48,769 

80,196 

Equity attributable to equity holders of the parent


103,047 

136,879 

Minority interests


258 

306 

Total equity


103,305 

137,185 


The financial information was approved and authorised for issue by the board of directors on 24 February 2009 and was signed on its behalf by:


P A J Leech       J M Austen

Director               Director


Consolidated cash flow statement

for the year ended 31 October 2008



Year ended

Year ended


31 October

31 October


2008

2007


£'000

£'000

Cash flows from operating activities



(Loss)/profit before taxation

(31,602)

18,138 

Adjustments for:



Finance income

(467)

(1,447)

Finance costs

5,488 

2,400 

Share of joint venture and associated undertakings post tax loss/(profit)

12,448 

(505)

Depreciation and impairment charge

20,777 

598 

Loss/(gain) on revaluation of investment properties

3,846 

(7,062)

Loss/(profit) on disposal of investment properties

20 

(404)

Share-based payment (credit)/charge

(997)

1,494 

Cash flows from operating activities before change in working capital

9,513 

13,212 

Increase in property inventories

(3,634)

(34,026)

Decrease in trade and other receivables

6,419 

5,565 

Decrease in trade and other payables

(22,295)

(6,466)

Cash absorbed by operations

(9,997)

(21,715)

Income from investments

7 

41 

Finance costs

(4,087)

(2,745)

Finance income

1,615 

1,155 

Tax paid

(1,500)

(3,174)

Net cash flows from operating activities

(13,962)

(26,438)

Investing activities



Purchase of investment property

- 

(4,491)

Sale of investment property

1,137 

15,101 

Purchase of investments

(4,011)

(100)

Sale of investments

1,982 

1,207 

Purchase of property, plant and equipment

(236)

(678)

Net cash flows from investing activities

(1,128)

11,039 

Financing activities



Borrowings drawn down

39,813 

58,827 

Borrowings repaid

(34,516)

(46,022)

Purchase of own shares

(609)

- 

Issue of shares



- gross receipts

- 

25,001 

- issue costs

- 

(666)

Equity dividends paid

(4,475)

(3,755)

Net cash flows from financing activities

213 

33,385 

Net (decrease)/increase in cash and cash equivalents

(14,877)

17,986 

Cash and cash equivalents at 1 November 2007

26,371 

8,385 

Cash and cash equivalents at 31 October 2008

11,494 

26,371 


NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION

for the year ended 31 October 2008


1 Accounting policies 

Basis of preparation

This financial information has been prepared in accordance with International Financial Reporting Standards (IFRSs and IFRIC interpretation) published by the International Accounting Standards Board (IASB) as adopted by the European Union ('EU adopted IFRSs') and with those parts of the Companies Act 1985 applicable to companies preparing its financial statements in accordance with IFRSs. 


Changes in accounting policies

The accounting policies adopted are consistent with those of the previous financial year except as follows:


The Group has adopted the following new and amended IFRSs during the year. Adoption of these revised standards did not have any effect on the financial performance or position of the Group in the current or prior periods. In certain cases, they did however give rise to additional disclosures.


IFRS 7 Financial Instruments: Disclosures

IAS 1 Amendment - Presentation of Financial Statements


Going concern

The directors are required to make an assessment of the Group's ability to continue to trade as a going concern. Because of the difficult market conditions prevailing, this assessment has been subject to more uncertainties than are usual. The directors have given this matter due consideration and have concluded that it is appropriate to prepare the Group financial statements on a going concern basis. The two main considerations were as follows:


Cash flow - the Group maintains a rolling 24 month cash forecast that takes account of all known inflows and outflows. The cash flow includes estimates of a number of key variables including the assumed dates and amounts relating to property disposals and amounts that may be required to reduce indebtedness as a consequence of falling property values and re-financing. The cash flow is regularly stress tested to ensure that the Group can withstand reasonable changes in circumstances that could adversely affect its cash flow. The key potential changes that the Group has considered include: possible falls in value of the portfolio which could result in margin calls or increased funding costs if future loan to value covenants were breached; possible delays in the timing and reductions in proceeds from portfolio sales given the current lack of liquidity in the market; and, possible reductions in anticipated cash flows from re-financing properties after planning permission has been obtained. After considering the potential cash flow sensitivities the Group believes that it has sufficient resources to continue trading for the foreseeable future.


Support of the Group's banks - the Group maintains a regular dialogue with its lenders and keeps them informed of how the Group is trading. The Group has re-financed £84.8 million of debt since October 2007 (including £28.7m since 1 November 2008) and has a further £47.2 million of debt and overdraft facilities due to be re-financed in 2009. Whilst the due dates for renewal of these facilities have not yet occurred, the Group has opened discussions with each lender to gauge their appetite for their renewal. In all cases the lenders concerned have been supportive and have indicated their desire to renew the facilities subject to mutually acceptable terms being agreed. Further information is contained in the financial review.


Investment property and inventory

In relation to the investment and development properties, the directors have relied upon the external valuations and advice provided by professionally qualified valuers in accordance with the Appraisal and Valuation Standards of the Royal Institution of Chartered Surveyors. 


2 Revenue


Total

Total


2008

2007


£'000

£'000

Sales of development properties

55,982

63,246

Rents receivable

4,777

4,211

Fees and other income

2,607

2,392


63,366

69,849


  3 Segmental information 

The Group operates in three principal segments being commercial property development and investment, residential property investment and housebuilding. The Group does not operate outside the UK.




House

Unallocated




House

Unallocated



Residential

Commercial

building

items

Total

Residential

Commercial

building

items

Total


2008

2008

2008

2008

2008

2007

2007

2007

2007

2007

Income statement

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Revenue

2,722 

57,654 

2,990 

- 

63,366 

3,496 

64,719 

1,634 

- 

69,849 

Direct costs

(1,266)

(57,176)

(8,996)

- 

(67,438)

(2,009)

(45,726)

(1,407)

- 

(49,142)

Gross (loss)/profit

1,456 

478 

(6,006)

- 

(4,072)

1,487 

18,993 

227 

- 

20,707 

Administrative expenses

- 

- 

- 

(6,195)

(6,195)

- 

- 

- 

(9,587)

(9,587)

(Loss)/profit on disposal of investment properties

(20)

- 

- 

- 

(20)

244 

160 

- 

- 

404 

(Loss)/gain on revaluation of investment properties

(2,182)

(1,664)

- 

- 

(3,846)

1,221 

5,841 

- 

- 

7,062 

Operating (loss)/profit

(746)

(1,186)

(6,006)

(6,195)

(14,133)

2,952 

24,994 

227 

(9,587)

18,586 

Net finance costs

(1,580)

(3,576)

115 

20 

(5,021)

(1,379)

451 

(25)

- 

(953)

Share of results of joint venture before tax

-

- 

(138)

- 

(138)

- 

- 

(167)

- 

(167)

Share of results of associated undertakings before tax

(16,200)

451 

- 

- 

(15,749)

(1,954)

88 

- 

- 

(1,866)

Associated undertakings tax

3,439 

-

- 

- 

3,439 

2,538 

- 

- 

- 

2,538 

(Loss)/profit before tax

(15,087)

(4,311)

(6,029)

(6,175)

(31,602)

2,157 

25,533 

35 

(9,587)

18,138 






House

Unallocated




House

Unallocated



Residential

Commercial

building

items

Total

Residential

Commercial

building

items

Total


2008

2008

2008

2008

2008

2007

2007

2007

2007

2007

Balance sheet

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Investment properties

28,633 

20,262 

265 

- 

49,160 

31,962 

21,925 

- 

- 

53,887 

Property, plant and equipment

- 

34 

67 

489 

590 

23 

45 

22 

504 

594 

Investments - associates and joint ventures

3,938 

2,437 

770 

- 

7,145 

16,700 

2,066 

(147)

- 

18,619 

Other investments

3 

449 

- 

99 

551 


147 

- 

- 

147 

Goodwill

975 

2,481 

- 

- 

3,456 

992 

2,597 

- 

- 

3,589 

Deferred tax assets

- 

- 

- 

4,327 

4,327 

- 

- 

- 

661 

661 


33,549 

25,663 

1,102 

4,915 

65,229 

49,677 

26,780 

(125)

1,165 

77,497 

Property inventories

- 

92,372 

28,116 

- 

120,488 

- 

105,269 

21,681 

- 

126,950 

Trade and other receivables

14,554 

11,278 

1,903 

877 

28,612 

12,803 

30,085 

- 

- 

42,888 

Cash

102 

17,024 

896 

- 

18,022 

702 

26,256 

- 

- 

26,958 


48,205 

146,337 

32,017 

5,792 

232,351 

63,182 

188,390 

21,556 

1,165 

274,293 

Borrowings

(20,444)

(72,878)

(10,541)

- 

(103,863)

(29,545)

(59,199)

(3,737)

- 

(92,481)

Trade and other payables

(515)

(18,331)

(4,282)

(1,120)

(24,248)

(1,129)

(38,619)

(681)

(1,145)

(41,574)

Current tax

- 

- 

- 

(153)

(153)

- 

(1,190)

- 

- 

(1,190)

Deferred tax liabilities

- 

- 

- 

(782)

(782)

(464)

(1,399)

- 

- 

(1,863)


(20,959)

(91,209)

(14,823)

(2,055)

(129,046)

(31,138)

(100,407)

(4,418)

(1,145)

(137,108)

Net assets

27,246 

55,128 

17,194 

3,737 

103,305 

32,044 

87,983 

17,138 

20 

137,185 



Other segmental information


Investment

Developments

Total

Investment

Developments

Total

 

2008

2008

2008

2007

2007

2007


£'000

£'000

£'000

£'000

£'000

£'000

Depreciation

194

10

204

95

-

95

Goodwill impairment

133

-

133

438

14

452

Capital expenditure

235

-

235

653

25

678


4 Finance costs and finance income


2008

2007


£'000

£'000

Interest payable on borrowings

7,558 

5,025 

Interest payable under a development funding agreement

2,050 

-

Interest capitalised

(4,120)

(2,625)

Finance costs

5,488 

2,400 

Interest receivable from cash deposits and other financial assets

467 

1,447 

Finance income

467 

1,447 


Interest is capitalised at the same rate as the Group is charged on the respective borrowings. Fair value adjustments to financial liabilities totalled £nil (2007: £nil) and gains on interest rate swaps totalled £nil (2007: £nil).


5 Administrative expenses


2008

2007


£'000

£'000

Depreciation of property, plant and equipment

204 

95

Loss on disposal of property, plant and equipment

5 

6

Operating lease charges - rent of properties

1,311 

1,276

Impairment of goodwill 

133 

452

Share-based payment remuneration

(997)

1,494

Fees paid to BDO Stoy Hayward LLP in respect of:



- audit of the company's annual accounts

125 

117

- audit of the company's subsidiaries

50 

 75

- other services

29 

19


6 Tax on (loss)/profit on ordinary activities

(a) Analysis of charge in year


2008

2007


£'000

£'000

Current tax



UK corporation tax on (loss)/profit for the year

376 

3,943 

Adjustment in respect of prior periods

44 

(354)

Total current tax

420 

3,589 

Deferred tax



Origination and reversal of temporary differences

(4,747)

(12)

Total deferred tax credit

(4,747)

(12)

Total tax (credit)/expense

(4,327)

3,577 


b) Factors affecting the tax (credit)/expense for the year

The tax assessed for the year is lower than the standard rate of corporation tax in the UK of 28% (2007: 30%). The differences are explained below:


2008

2007


£'000

£'000

(Loss)/profit before tax

(31,602)

18,138 

Less joint ventures and associates

12,448 

(505)

(Loss)/profit attributable to the Group before tax

(19,154)

17,633 

(Loss)/profit multiplied by the average rate of UK corporation tax of 28.83% (2007: 30%)

(5,522)

5,290 

Disallowables

376 

253 

Other temporary differences

(397)

(394)

Consortium loss relief utilised

- 

(2,168)

Utilisation of losses

1,172 

950 


(4,371)

3,931 

Adjustments in respect of prior periods

44 

(354)

Total tax (credit)/expense

(4,327)

3,577 


(c) Associates and joint ventures

The Group's share of tax on the associates is £3,439,000 credit (2007: £2,538,000 credit). No tax charge arises on the results of the joint ventures.

  

7 Dividends


2008

2007


£'000

£'000

Ordinary shares



Final dividend of 1.3 pence (2007: final dividend for 2006 of 1.1 pence) per share for the year ended 31 October 2007

2,756

2,059

Interim dividend paid of 0.8 pence (2007: interim dividend for 2007 of 0.8 pence) per share for the year ended 31 October 2008

1,684

1,696


4,440

3,755

Final dividend after the year of 0.54 pence (2007: 1.3 pence) per share

1,139

2,756


The proposed final dividend has not been accrued at the balance sheet date.


8 Earnings per ordinary share

The calculation of basic earnings per ordinary share is based on a loss of £27,253,000 (2007 profit: £14,527,000) and on 211,187,902 (2007: 198,069,224) ordinary shares, being the weighted average number of shares in issue during the period.


The calculation of diluted earnings per ordinary share for 2008 is the same as the calculation of basic earnings per ordinary share. For 2007, the calculation of diluted earnings per ordinary share is based on a profit of £14,527,000 and on 204,787,224 ordinary shares, being the weighted average number of shares in issue during the period adjusted to allow for the issue of shares in relation to all performance related share awards.


9 Property, plant and equipment


Leasehold

Motor

Office

Furniture



improvements

vehicles

equipment

and fittings

Total


£'000

£'000

£'000

£'000

£'000

Cost






At 1 November 2006

-

6 

82 

55 

143 

Additions

151

315 

78 

134 

678 

Disposals

-

(25)

(74)

- 

(99)

At 1 November 2007

151

296 

86 

189 

722 

Additions

8

109 

32 

86 

235 

Disposals

-

(35)

(5)

(14)

(54)

At 31 October 2008

159

370 

113 

261 

903 

Depreciation






At 1 November 2006

-

4 

72 

31 

107 

Charge for period

9

39 

17 

30 

95 

Disposals

-

- 

(74)

- 

(74)

At 1 November 2007

9

43 

15 

61 

128 

Charge for period

14

84 

45 

61 

204 

Disposals

-

(7)

(5)

(7)

(19)

At 31 October 2008

23

120 

55 

115 

313 

Net book value:






At 31 October 2008

136

250 

58 

146 

590 

At 31 October 2007

142

253 

71 

128 

594 


At the year end there were no assets held under finance leases. At 31 October 2007, the net book value of assets under finance leases was £87,000.


Acquisitions in the year to 31 October 2007 comprised assets acquired by the Group from Terrace Hill Partnership on its cessation of activities on 31 March 2007.  


10 Investment properties


£'000

Valuation


At 1 November 2006

56,967 

Additions

4,491 

Disposals

(14,486)

Surplus on revaluation

6,915 

At 31 October 2007

53,887 

Transfer from inventory

220 

Disposals

(1,101)

Loss on revaluation

(3,846)

At 31 October 2008

49,160 


Included in additions for the year is capitalised interest of £nil (2007: £431,000).


The investment properties situated in Scotland owned by the Group have been valued as at 31 October 2008 by qualified valuers from Allied Surveyors, an independent firm of Chartered Surveyors, on the basis of open market value. The valuations were carried out in accordance with guidance issued by the Royal Institution of Chartered Surveyors.


The commercial investment properties situated in England owned by the Group have been valued as at 31 October 2008 by qualified valuers from CB Richard Ellis, and independent form of Chartered Surveyors, on the basis of open market value. The valuations were carried out and in accordance with guidance issued by the Royal Institution of Chartered Surveyors.


Residential investment properties situated in England owned by the Group have been valued at open market value by directors, who are suitably qualified or experienced, at 31 October 2008 having regard to professional advice and/or sales evidence during the period. The value of these properties was £5,387,000 (2007: £7,172,000)


11 Investments

Associates and joint venture



Joint



Associates

venture

Total


£'000

£'000

£'000

Cost or valuation




At 1 November 2006

18,068 

20 

18,088 

Additions

26 

- 

26 

Share of results

672 

(167)

505 

At 31 October 2007

18,766 

(147)

18,619 

Investment write off

(81)

- 

(81)

Share of results

(12,310)

(138)

(12,448)

Unrealised profit

- 

1,055 

1,055 

At 31 October 2008

6,375 

770 

7,145 


The Group's interest in its principal associates which have been equity accounted in the consolidated financial statements were as follows:

Terrace Hill Residential PLC

49%

Property investment

Castlegate House Partnership

30%

Property development

Devcap 2 Partnership 

26%

Property development

Terrace Hill Development Partnership

20%

Property development

Howick Place JV S.a.r.l.

20%

Investment holding company

Two Orchards Limited

20%

Property development

Terrace Hill Residential PLC was incorporated in Scotland and Howick Place JV S.a.r.l. is resident in Luxemburg.


Summarised information 2008


Terrace Hill 


Castlegate 

Terrace Hill






Development 

Devcap 2

House

Residential

Howick

Two




Partnership

Partnership

Partnership

PLC

Place

Orchards 

Other

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Revenue

7,012 

308 

610 

12,265 

1,502 

- 

-

21,697 

(Loss)/profit after taxation

(2,119)

(1,793)

92 

(26,043)

(1,708)

- 

-

(31,571)

Total assets

56,285 

46,367 

9,398 

247,724 

72,278 

59,805 

-

491,857 

Bank debt

(27,604)

(38,962)

(8,558)

(207,502)

(50,523)

(52,273)

-

(385,422)

Other liabilities

(16,602)

(9,190)

(2,355)

(32,184)

(25,530)

(7,531)

-

(93,392)

Total liabilities

(44,206)

(48,152)

(10,913)

(239,686)

(76,053)

(59,804)

-

(478,814)

Net assets/(liabilities)

12,079 

(1,785)

(1,515)

8,038 

(3,775)

1 

-

13,043 

Share of results for period

- 

- 

451 

(12,761)

- 

- 

-

(12,310)

Share of net assets

2,416 

- 

 - 

3,938 

20 

1 

-

6,375 

Capital commitments

2,424 

- 

- 

- 

- 

13,485 

-

15,909 


Summarised information 2007


Terrace Hill 


Castlegate 

Terrace Hill






Development 

Devcap 2

House

Residential

Howick

Two




Partnership

Partnership

Partnership

PLC

Place

Orchards 

Other

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Revenue

31,550 

-

702 

14,268 

1,922 

- 

-

48,442 

Profit/(loss) after taxation

2,765 

-

(1,550)

1,192 

(2,167)

- 

-

240 

Total assets

46,527 

37,255 

9,747 

276,947 

66,348 

28,391 

-

465,215 

Bank debt

(24,906)

(26,544)

(8,558)

(211,737)

(48,785)

(4,607)

-

(325,137)

Other liabilities

(9,542)

(10,703)

(2,642)

(31,128)

(19,630)

(23,783)

-

(97,478)

Total liabilities

(34,448)

(37,247)

(11,250)

(242,865)

(68,415)

(28,390)

-

(422,615)

Net assets/(liabilities)

12,079 

8 

(1,503)

34,082 

(2,067)

1 

-

42,600 

Share of results for period

553 

- 

(465)

584 

- 

- 

-

672 

Share of net assets/(liabilities)

2,416 

2 

(451)

16,700 

20 

1 

78

18,766 

Capital commitments

831 

4,836 

- 

- 

- 

- 

-

5,667 


  The Group's interest in its joint venture which has been equity accounted in the consolidated financial statements was as follows:


Achadonn Limited

50%

Property development


Summarised information


2008

2007


Achadonn

Achadonn


Limited

Limited


£'000

£'000

Revenue

2,803 

39 

Profit/(loss)

1,834 

(334)

Total assets

14,332 

11,420 

Bank debt

(9,436)

(9,536)

Other liabilities

(3,356)

(2,178)

Total liabilities

(12,792)

(11,714)

Net assets/(liabilities)

1,540 

(294)

Share of results for period

917 

(167)

Share of net assets/(liabilities)

770 

(147)


Available-for-sale investments and other investments


Available-for-sale

Other



investments

investments

Total


£'000

£'000

£'000

Valuation




At 1 November 2006

-

1,338 

1,338 

Additions

-

1 

1 

Disposals

-

(1,250)

(1,250)

Increase in fair value

-

58 

58 

At 31 October 2007

-

147 

147 

Additions

3,987

1 

3,988 

Disposals

(3,047)

(15)

(3,062)

Decrease in fair value

(498)

(24)

(522)

At 31 October 2008

442

109 

551 




2008

2007



£'000

£'000

UK unlisted investments at fair value


45 

1 

UK listed investments at fair value


506 

146 



551 

147 


12 Property inventories


2008

2007


£'000

£'000

At 1 November 2007

126,950 

75,693 

Additions

43,301 

100,399 

Disposals

(36,978)

(49,142)

Transfers to investment properties

(220)

- 

Amounts written off the value of inventories

(12,565)

- 

At 31 October 2008

120,488 

126,950 

Included in these figures is capitalised interest of

8,269 

4,162 


13 Trade and other receivables


2008

2007


£'000

£'000

Trade receivables

1,915 

2,299

Other receivables

2,553 

4,277

Trade and other receivables

4,468 

6,576

Prepayments and accrued income

2,247 

12,261

Amounts due from associates and joint ventures

29,673 

24,051

Provision for amounts due from associates and joint ventures

(7,776)

-


28,612 

42,888

Included in the amount due from associate and joint ventures is a balance due from Howick Place JV S.a.r.l. of £3.4 million that has a final maturity date of 31 December 2014.


  The ageing of trade and other receivables was as follows:


2008

2007


£'000

£'000

Up to 30 days

1,676 

2,397

31 to 60 days

1,504 

843

61 to 90 days

107 

22

Over 90 days

451 

1,251

Total

3,738 

4,513

Amounts not yet due 

730 

2,063

Closing balance

4,468 

6,576

No amounts were overdue at the year end.


The movement in the allowance for impairment in respect of amounts due from associates and joint ventures during the year was as follows:


2008

2007


£'000

£'000

At 1 November 2007

-

-

Amounts written off in year

-

-

Increase in allowance on amounts due from associates 

7,776

-

Closing balance

7,776

-

The allowance is based on falling asset values in the associates.


  14 Trade and other payables


2008

2007


£'000

£'000

Trade payables

2,452 

3,398 

Other taxation and social security costs

650 

1,499 

Accruals and deferred income

8,168 

27,384 

Other payables

9,608 

1,813 


20,878 

34,094 


15 Other payables (non-current)


2008

2007


£'000

£'000

Other payables

3,370 

7,480 


16 Bank overdrafts and loans


2008

2007


£'000

£'000

Bank loans

97,680 

92,410 

Bank overdrafts

6,528 

587 


104,208 

92,997 

Unamortised loan issue costs

(345)

(516)


103,863 

92,481 

Amounts due:



Within one year

62,973 

28,142 

After more than one year

40,890 

64,339 


103,863 

92,481 


An analysis of interest rates and information on fair value and security is given in note 18.


17 Deferred tax

Details of the deferred tax (credited)/charged to the Consolidated income statement are as follows:


2008

2007


£'000

£'000

Investment property revaluations

(1,515)

521 

Trade losses

(3,084)

- 

Share-based payments

279 

(413)

Short-term timing differences

(427)

(120)


(4,747)

(12)


The Consolidated balance sheet deferred tax assets and liabilities are as follows:


2008

2007


£'000

£'000

Deferred tax provision



Investment property revaluations

(782)

(1,863)


(782)

(1,863)

Deferred tax asset



Share option scheme

221 

501 

Investment property revaluations

434 

- 

Trade losses

3,084 

- 

Other timing differences

588 

160 


4,327 

661 


Under IAS 12, deferred tax is recognised for tax potentially payable on the realisation of investment properties at fair values at the balance sheet date. No deferred tax asset is recognised in respect of losses if there is uncertainty over future recoverability.


18 Financial instruments

The Group's principal financial instruments comprise loans, overdrafts, cash and short-term deposits. The main purpose of these financial instruments is to provide finance for the Group's operations.  Further information on the group's financial resources and capital management is given in the Financial review.


The Group has various other financial instruments such as trade receivables and trade payables that arise directly from its operations, listed and unlisted investments.


The main risks arising from the Group's financial instruments are interest rate risk, credit risk and liquidity risk. The board reviews and agrees policies for managing each of these risks and they are summarised below. The magnitude of the risk that has arisen over the period is detailed below.


Interest rate risk

The Group holds cash balances on short-term deposit. The Group's policy is to monitor the level of these balances to ensure that funds are available as required, recognising that interest earnings will be subject to interest rate fluctuations.

The Group borrows cash in the form of loans and overdrafts, which are subject to interest at floating rates, recognising that rates will fluctuate according to changes in the bank base rate. The Group is cognisant at all times of movements in interest rates and will, as appropriate, enter into interest rate swaps to maintain a balance between borrowings that are subject to floating and fixed rates.


Credit risk

The Group's principal financial assets are cash and trade receivables. Our cash deposits are placed with a range of banks to minimise the risk to the Group. The principal risk therefore arises from trade receivables. Trade receivables from the sale of properties are secured against those properties until the proceeds are received. Rental receivables are unsecured but the Group's exposure to tenant default is limited as no tenant accounts for more than 10% of total rent. Rental cash deposits and third party guarantees are obtained as a means of mitigating financial loss from defaults.


Liquidity risk

The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of bank balances and loans. Cash flow and funding needs are regularly monitored.  Further information is given in note 1.


Categories of financial assets and financial liabilities


2008

2007


£'000

£'000

Current financial assets



Available-for-sale investments

442

-

Other investments

109

147

Trade and other receivables

4,468

6,576

Amounts due from associates and joint ventures

21,879

24,051

Cash and cash equivalent

18,022

26,958


44,920

57,732


The maximum exposure to credit risk in financial assets is £44,920,000 (2007: £57,732,000). The maximum amount due from any single party is £14,403,000 (2007: £10,196,000) included in amounts due from associates and joint ventures.  


Financial liabilities measured at amortised cost


2008

2007


£'000

£'000

Current financial liabilities



Trade and other payables

20,228

32,595

Loans and borrowings

63,099

28,258

Total current financial liabilities

83,327

60,853

Non-current financial liabilities



Other payables

3,370

7,480

Loans and borrowings

41,109

64,739

Total non-current financial liabilities

44,479

72,219

Total financial liabilities

127,806

133,072


Interest rate risk profile of financial assets and liabilities

The interest rate profile of financial assets and liabilities of the Group at 31 October 2008 was as follows:





Financial



Floating


assets on



rate

Fixed rate

which no



financial

financial

interest


Total

assets

assets

is earned


£'000

£'000

£'000

£'000

Sterling

44,920

18,022

3,480

23,418










Financial



Floating


liabilities on



rate

Fixed rate

which no



financial

Financial

interest


Total

liabilities

Liabilities

is charged


£'000

£'000

£'000

£'000

Sterling

127,806

104,208

-

23,598


Floating rate financial liabilities bear interest at LIBOR or base rate plus margins of between 1% and 2.5%.

Included in floating rate financial liabilities is £17,517,000 (2007: £nil) subject to interest rate swaps entered into on 28 October 2008.

  

The interest rate profile of financial assets and liabilities of the Group at 31 October 2007 was as follows:





Financial



Floating


assets on



rate

Fixed rate

which no



financial

financial

interest


Total

assets

assets

is earned


£'000

£'000

£'000

£'000

Sterling

57,732

26,958

3,480

27,294





Financial



Floating


liabilities on



rate

Fixed rate

which no



financial

financial

interest


Total

liabilities

liabilities

is charged


£'000

£'000

£'000

£'000

Sterling

133,072

92,997

-

40,075


The floating rate financial assets comprise:

  • cash on deposit.

The floating rate financial liabilities comprise:

  • sterling denominated bank loans that bear interest based on LIBOR and bank base rates; and

  • sterling denominated bank overdrafts that bear interest based on bank base rates.


The fair value of the financial assets and liabilities is equal to the book value.


Borrowings

The Group's bank borrowings and overdrafts are repayable as follows:


2008

2007


£'000

£'000

On demand or within one year

63,099

28,258

In more than one year but less than two

8,924

51,361

In more than two years but less than five

32,185

13,378


104,208

92,997

The bank overdraft is secured by way of debenture and cross guarantee from certain subsidiaries. 


The bank loans are secured by legal charges over the Group's investment and development properties together with guarantees from certain subsidiary undertakings with a limited guarantee from the parent company and in one case a floating charge from the parent company.


Borrowing facilities

The Group has the following undrawn committed bank borrowing facilities available to it at the year end:


2008

2007


£'000

£'000

Expiring in one year or less:

5,375

8,782

Expiring in more than one year but not more than two:

12,756

24,877

Expiring in more than two years but not more than five:

8,187

4,000


26,318

37,659


Guarantees

The Group has given a guarantee of £15.0 million as part of the security arrangements for the bank facilities of Terrace Hill Residential PLC, one of its associated undertakings.


Market rate sensitivity analysis

Financial instruments affected by market risk include borrowings, deposits and derivative financial instruments. The analysis below shows the sensitivity of the income statement and net assets to a 0.5% change in interest rates on the Group's financial instruments.


The sensitivity analysis is based on the sensitivity of interest to movements in interest rates and is calculated on net floating rate exposure on debt and deposits.



0.5% decrease 

0.5% increase


in interest rates

in interest rates


£'000

£'000

Impact on interest payable - gain/(loss)

266 

(266)

Impact on interest receivable - (loss)/gain

(144)

152 

Total impact on pre tax (loss)/profit and equity

122 

(114)


  

19 Called up share capital


2008

2007


£'000

£'000

Authorised:



500,000,000 (2007: 500,000,000) ordinary shares of 2 pence each

10,000

10,000

200,000 cumulative 8% redeemable preference shares of £1 each

200

200

44,859 convertible shares of 20 pence each

9

9

32,551,410 deferred shares of 2 pence each

651

651


10,860

10,860





£'000

£'000

Allotted, called up, and fully paid:



211,971,299 (2007: 211,971,299) ordinary shares of 2 pence each

4,240

4,240


  20 Reserves




Capital


Unrealised



Share

Own

 redemption

Merger

gains and

Retained


premium

shares

reserve

reserve

losses

earnings


£'000

£'000

£'000

£'000

£'000

£'000

At 1 November 2006

19,369 

-

849

8,386 

-

67,930 

Profit for the year

- 

-

-

- 

-

14,527 

Share-based payment

- 

-

-

- 

-

1,494 

Interim ordinary dividends

- 

-

-

- 

-

(1,696)

Final ordinary dividends

- 

-

-

- 

-

(2,059)

Issue of ordinary share capital







- gross proceeds

24,505 

-

-

- 

-

- 

- issue costs

(666)

-

-

- 

-

- 

At 31 October 2007

43,208 

-

849

8,386 

-

80,196 

Loss for the year

- 

-

-

- 

-

(27,253)

Unrealised losses on available-for-sale investments

- 

-

-

- 

(498)

- 

Own shares

- 

(609)

-

- 

-

- 

Share-based payment

- 

-

-

- 

-

(997)

Merger reserve release

- 

-

-

(1,298)

-

1,298 

Interim ordinary dividends

- 

-

-

- 

-

(1,684)

Final ordinary dividends

- 

-

-

- 

-

(2,791)

At 31 October 2008

43,208 

(609)

849

7,088 

(498)

48,769 


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


Share premium - represents the excess of value of shares issued over their nominal amount

Own shares - represents amount paid to purchase issued shares for the employee share-based payment plan

Capital redemption reserve - represents amount paid to purchase issued shares for cancellation at their nominal value

Merger reserve - the Merger reserve has arisen following acquisitions where the Group's equity has formed all or part of the consideration and represents the premium on the issued shares less costs

Unrealised gains and losses - represents unrealised loss on available-for-sale investments.


Retained earnings - represents cumulative net gains and losses recognised in the consolidated income statement


21 Contingent liabilities and capital commitments

On the acquisition by Terrace Hill Group PLC of a subsidiary company, amounts were repayable in the event of:

(a)

disposal of the property/ies prior to an agreed cut-off point; or

(b)

the discontinuation of rental income from the property/ies.

The directors are of the opinion that neither of these contingencies will crystallise, since the principal activity of the subsidiary concerned is the letting of the properties for rental income and it is not anticipated that the properties will be disposed of within the timeframe of (a) above. In the event of crystallisation of (a) and/or (b), the subsidiary concerned will be obligated to pay an amount calculated with reference to the properties disposed of/not let out. The maximum sum repayable is £381,000 (2007: £442,000).

Capital commitments relating to development sites are as follows:



2008

2007


£'000

£'000

Contracted but not provided for

-

13,772



22 Leases

Operating lease commitments where the Group is the lessee

The future aggregate minimum lease rentals payable under non-cancellable operating leases are as follows:


Land and

Land and


buildings

buildings


2008

2007


£'000

£'000

In one year or less

1,373

1,373

Between two and five years

5,490

5,492

In five years or more

6,982

8,358


13,845

15,223


Operating lease commitments where the Group is the lessor

The future aggregate minimum rentals receivable under non-cancellable operating leases are as follows:


Land and

Land and


buildings

buildings


2008

2007


£'000

£'000

In one year or less

1,997

1,463

Between two and five years

7,746

5,565

In five years or more

8,346

1,584


18,089

8,612




Statutory information

The financial information set out in this announcement does not constitute the Group's statutory financial statements for the year ended 31 October 2008 but is derived from those financial statements.


The financial information is extracted from the audited financial statements of the Group for the year ended 
31 October 2008 which were approved by the board of directors on 24 February 2009 The Company's auditors, BDO Stoy Hayward LLP, have reported on the accounts for the period ended 31 October 2008 under section 235(1) of the Companies Act 1985 ('Act').  Their report was not qualified within the meaning of section 235(2) of the Act and did not contain statements made under section 237(2) and section 237(3) of the Act.

Copies of the full financial statements will be posted to shareholders 
as soon as possible and will also be available on the company's website, www.terracehill.co.uk The financial statements for the year ended 31 October 2008 will be delivered to the Registrar of Companies following the Annual General Meeting.




TERRACE HILL'S PORTFOLIO


Office development portfolio

Current schemes

Developments completed or under construction 

Development

Region

Size (sq ft)

Description

Timing

Terrace Hill share

Victoria, SW1

129 Wilton Road

London

60,407

Substantial mixed-use development comprising 60,407 sq ft of grade A office accommodation part let to Eon and Prêt à Manger. The residential elements of the scheme have all been sold.

Completed

50%

Bracknell

Maxis I & II, Western Road

South East

194,210

Prominent 7.9 acre site with planning for three buildings. 

Phase 1 comprises two buildings, totalling 194,210 sq ft.

On site Completes May 2009

20%

Farnborough

Phrase 1

Aeropark Cirrus

South East

36,300

Development of 15 small office units ranging in size from 1,793 - 2,975 sq ft. Located adjacent to Farnborough Airfield and Aerospace Business Park. Five units sold.

Completed

20%

Maidenhead 

Quantum 1 & 2 Vanwall Business Park

South East

120,000

Prime office park development of two buildings.

Quantum 2 let to Biogen Idec.

Completed

26%

Teesside

Phase 1, 3 Acre SiteTeesdale 

Business Park

North East

32,955

Office scheme of five buildings. Phase 1, Buildings 1, 2 and 4, completed. Building 1 part-let to HBoS.

Completed

20%

Gateshead

Baltimore House

Baltic Business Quarter 

North East

24,500

The second of three Phase 1 office buildings, Baltimore House, is adjacent to the pre-sold Open University HQ building, Chalk Hill, and is being marketed to let or for sale.

Completed

100%

Filton, Bristol

Phase 1 & 2

Brabazon Office Park

South West

44,600

Small unit office scheme for owner occupation or to let. 

Phase 1 completed. Phase 2 on site, with one building pre-sold.

Phase 2

Completes June 2009

20%


Consented schemes

Sites with detailed planning permission

Development

Region

Size (sq ft)

Description

Terrace Hill share

Bracknell 

Maxis III, Western Road

South East

78,895

Prominent 7.9 acre site with planning for three buildings. Phase 1, Maxis I & II, on site. Phase 2, Maxis III, pending.

20%

Teesside

Resolution, Teesdale Business Park

North East

60,000

Prime development site on Teesdale Business Park.

100%

Teesside

Phase 2, 3 Acre Site,

Teesdale Business Park

North East

22,828

Office scheme of five buildings. Phase 1 completed. Phase 2,

Buildings 3 & 5 fully serviced plots.

100%

Gateshead

Admiral House

Baltic Business Quarter  

North East

31,545

The third and final Phase 1 office building, Admiral House is adjacent to the new Open University building, Chalk Hill, and the Baltic Business Quarter completed Baltimore House.

100%

Victoria, SW1

Howick Place

London

135,368

Substantial mixed use development, with resolution to grant detailed planning consent.

20%

Welwyn Garden City

Broadwater Road

South East

15,810

Site with detailed planning for small unit office scheme of seven units. Located close to railway station.

100%

Croydon

Chroma, George Street

South East

260,133

Office development site in prime location opposite East Croydon railway station. Consent for HQ office increased to 258,056 sq ft, plus 2,077 sq ft of retail on ground floor.

100%

Bristol

Bristol Bridge House

138/143 Redcliff Street

South West

53,143

Existing city centre office building, with detailed planning consent secured to provide 53,141 sq ft.

100%

Southampton

Mayflower Plaza

South East

116,000

Mixed-use scheme, including offices, hotel and a forward sold residential site.

100%


Pending schemes

Medium-term developments held prior to detailed planning

Development

Region

Size (sq ft)

Description

Terrace Hill share

Teesside

Phase 2-5, Hudson Quay

Middlehaven

North East

99,500

Office park with option to drawdown sites under preferred developer agreement with English Partnership.

50% 

Gateshead

Balance of site at

Baltic Business Quarter

North East

34 acres

Unserviced land with benefit of OPP. Whole 50 acre site has planning consent for 1.5 million sq ft of business use.

100% 

Stevenage

Knebworth Innovation Park

South East

40 acres

Ten year option from March 2002 for employment use

(such as business or science park). Currently negotiating planning consents.

100%

Farnborough

Aerospace Park

South East

273,000

Site comprising 11.5 acres with OPP for mixed use.

100%

Middlesbrough

Central Gardens

North East

130,000

Preferred developer for town centre urban regeneration scheme to include offices and hotel.

100%


Retail development portfolio

Consented schemes

Sites with detailed planning permission

Development

Region

Size (sq ft)

Description

Terrace Hill share

Bishop Auckland

Phase 1, Food Store

North East

93,000

Site with detailed planning consent for a foodstore, pre-let to Sainsbury's supermarket.

100%

Bishop Auckland

Phase 2

North East

65,000

Leisure complex with multiplex cinema, ten-pin bowling and bingo, together with two drive-through restaurant facilities.

100%

Middlesbrough

Gateway, Middlehaven

North East

128,000

16.8 acre cleared site with existing consent for a mixed-use scheme; non-food retail warehouse and leisure uses.

100% 

Blyth, Northumberland

Phase 2, Blyth Retail Park

North East

15,000

Adjacent to Phase 1. Detailed bulky goods planning consent for further 15,000 sq ft in three units.

100%

Helston 

Retail Warehouse Site

South West

55,750

Site with detailed planning consent. Contracted for sale to Sainsbury's.

100%


Pending schemes

Medium-term developments held prior to detailed planning

Development

Region

Size (sq ft)

Description

Terrace Hill share

Galashiels 

Phase 2, Gala Retail Park

Scotland

15,000

Small parcel of land held for strategic ownership, forming access to Phase 2 land. Site assembly and planning consent required.

100%

Ashington Town Centre

Retail warehouse site

North East

30,000

Conditional contract to acquire town centre retail warehouse site.

100%


Industrial development portfolio

Current schemes

Developments completed or under construction

Development

Region

Size (sq ft)

Description

Timing

Terrace Hill share

Eastbourne

Brampton Business Park

South East

103,000

Industrial and trade counter scheme. Industrial now fully sold or let. Trade park unit marketing ongoing

Completed

20%


Consented schemes

Sites with detailed planning permission

Development

Region

Size (sq ft)

Description

Terrace Hill share

Welwyn Garden City

Broadwater Road

South East

42,151

Site with detailed planning for small unit industrial scheme of 13 units.

100%




  



Pending schemes

Medium-term developments held prior to detailed planning

Development

Region

Size

Description


Terrace Hill share

Christchurch

Site at Grange Road

South West

9.1 acres

Proposed mixed-use scheme, to include industrial, care home and residential uses. 


100%








Commercial investment portfolio

Development

Sector

Region

Size (sq ft)

Description

Terrace Hill share

Platts Eyot, TW12

Mixed use

London

12 acres

Listed island on the Thames, at Hampton, with residential potential.

100%

Sheffield

Castle Gate House and 
22-22 Haymarket

Mixed use

North

110,000

Vacant department store, let on long lease to BHS, together with adjacent, occupied corner retail unit. Redevelopment potential for mixed-use scheme.

30%

Bristol

Canningford House 38 Victoria Street

Offices

South West

20,500

Multi-let office building with future redevelopment potential.

100%

Teesside

Phase 1, 

Hudson Quay

Middlehaven

Offices

North East

30,700

First office building on a planned 160,000 sq ft office park. 

Fully let to the Crown Prosecution Service and Hertel Limited.

50%

Kean House

11 Kingsway, WC1

Offices

London

25,200

Substantial refurbishment of an existing office building arranged over nine floors.

100%

Redditch

REDD 42,

Ravensbank Business Park

Industrial

Midlands

232,680

High bay distribution warehouse. Let to iForce Limited, the e-fulfilment provider for John Lewis PLC.

20%



Residential investment portfolio

Property Portfolio

No. of units

Description

Terrace Hill share

TH 'Portfolio One'

243

Mixed portfolio of residential units, principally in Scotland, with small representation in England.

100%

TH Residential plc

1,714

Portfolio of residential properties located across the UK.

49%


Scottish housebuilding sites

Sites completed, under construction or with detailed planning permission

Development

Size (acres)

Description

Timing

Carnshalloch AvenuePatna 

2

Development of 16 units. 

Completed

Wellington SquareAyr 

0.5

Refurbishment of a former hotel into 16 flats and three storey office building.

Completed

Cairn Road, Cumnock 

1.6

Development of 18 units.

Completed

Bertram House, Carnwath 

11.5

Former country house and grounds. Development comprises 

Phase 1 conversion of country house into 11 flats and

Phase 2 construction of 20 detached houses in the grounds.

Phase 1 completed

Torbothie Road, Shotts

22

Former brickwork site. Development of 173 units. Phase 1 comprises 20 units.

Phase 1 completes 2009


Sites held prior to pending detailed planning

Development

Size (acres)

Description

Timing

Kersewell Avenue, Carnwarth

3

Site with planning consent for nine units. Revised application being submitted to increase density.

Anticipated planning consent 2009.

Irvine RoadKilmarnock

18

Former brickwork site. Planning application submitted for 182 units.

Anticipated planning consent 2009

Patna Caravan ParkPatna 

30

Former caravan park. Potential for 250 units. 

Anticipated planning consent 2009

Boghall Road, Carluke

12

Industrial brownfield land with potential for 67 units.

Anticipated planning consent 2009

'Dunselma', Fenwick

3

Former Church of Scotland home. Planning application submitted for 20 detached houses.

Anticipated planning consent 2009.

Lower Bathville, Armadale 

65

Industrial brownfield land. Partly owned in JV. Potential for 500 units and a neighbourhood shopping centre.

Anticipated planning consent 2010. 

Mayfield Brickworks, Carluke 

10.9

Industrial brownfield land. Currently owned in JV. Potential for 90 units.

Anticipated planning consent 2010

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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