PRELIMINARY RESULTS FOR THE P

RNS Number : 5550X

Terrace Hill Group PLC

08 December 2010

 



8 December 2010

Terrace Hill Group PLC

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

PRELIMINARY RESULTS FOR THE PERIOD ENDED 30 SEPTEMBER 2010

Terrace Hill Group PLC (AIM: THG), a leading UK property development and investment group, today announces its preliminary results for the period ended 30 September 2010.

Financial highlights

•	EPRA Net Asset Value per share rose 7.2% to 48.3 pence per share
	(31 October 2009: 45.1 pence per share)
•	EPRA Triple Net Asset Value per share rose 9.5% to 44.7 pence per share
	(31 October 2009: 40.8 pence per share)
•	Profit before tax for eleven month period of £8.4 million compared to a loss of £26.7 million
	for the year ended 31 October 2009
•	Balance sheet gearing has reduced to 88.4% as at 30 September 2010
	(31 October 2009: 102.4%, and 30 April 2010: 91.0%)

Operational highlights

•	Excellent momentum in foodstore development programme continues
•	Completion and sale of Sainsbury's supermarket at Bishop Auckland
•	Development agreement signed with Kondor for £5.0 million warehouse at Christchurch
	Business Park
•	Additional strong progress since period end:
•	Development agreements signed with Sainsbury's for new stores at
•	Wessington Way, Sunderland and Whitchurch, Shropshire
•	Imminent sale of Sainsbury's site at Heaton Park, Manchester
•	Letting of 8,400 sq ft secured at Teesside Business Park development
•	Construction started at Northern Design Centre in Gateshead
•	Exchanged contracts for the sale of mixed use development at 129
	Wilton Road, Victoria, for £53.5 million

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

"Although economic uncertainty continues to affect our markets we have shown our ability to generate strong, low risk returns by concentrating on our core expertise of pre-let development, particularly foodstores and central London offices, and residential asset management.  In the coming year I am therefore confident that we will be able to continue to perform well and add value to the business."

For further information:

Terrace Hill Group plc	Tel: [phone]
Robert Adair, Chairman
Philip Leech, Chief Executive
Jon Austen, Group Finance Director
Oriel Securities (Nominated Adviser)	Tel: [phone]
Tom Durie/Mark Young/Gareth Price
Financial Dynamics	Tel: [phone]
Stephanie Highett/Richard Sunderland/Will Henderson/Olivia Goodall

CHAIRMAN'S REPORT

I have pleasure in reporting our financial results for the 11 months ended 30 September 2010, during which time we have seen further growth in our EPRA Net Asset Value and some significant advances in our operations.

Our EPRA Net Asset Value has increased by 7.2% to 48.3 pence per share (31 October 2009: 45.1 pence per share) and our EPRA Triple Net Asset Value (NAV) has increased by 9.5% to 44.7 pence per share (31 October 2009: 40.8 pence per share).  The EPRA Triple NAV takes account of contingent tax on prospective gains and other fair value adjustments.

The Group's profit before tax for the eleven months ended 30 September 2010 was £8.4 million (year to 31 October 2009: loss £26.7 million).  The pleasing result reflects a number of trading successes and continued recovery in the value of our assets, following the improvement we saw in the first half of the year.  We have decided to maintain the suspension of the payment of dividends but would hope to resume a progressive dividend policy when market conditions improve further.

We continue to manage our borrowings and banking relationships well.  Our net gearing has fallen from 102.4% at 31 October 2009 to 88.4% at 30 September 2010 as a result of reduced debt through asset sales and recovering asset values.  The banking climate is still challenging with lenders with legacy issues notably less willing to write new business.  We have been pleased, however, to see a number of new prospective lenders starting to offer competitive terms on developments.  The business review contains further details of our results and financial position.

In the commercial development division our focus on pre-let or pre-sold developments is beginning to show positive returns.  We have achieved a number of successes in the foodstore sector where we have seen the completion and sale of the Sainsbury's supermarket at Bishop Auckland, the imminent sale of the Sainsbury's site at Heaton Park in Manchester and the securing of forward commitments with operators at Sunderland and Whitchurch.  We have real and growing expertise in this sector and benefit from the market knowledge provided by our regional office network and, as a result, are progressing a lengthy pipeline of similar deals.  These, together with the pre-sold office and industrial developments in Gateshead and Christchurch, demonstrate how we are able to develop new properties profitably at low risk.

In central London the office occupational market has continued to strengthen allowing us to fully let and exchange contracts to sell our Wilton Road joint venture development in Victoria.  This has given us and our joint venture partners the confidence to start work on Howick Place in Victoria which will provide a mixture of office and residential space totalling 160,300 sq ft on completion in late 2012.

Our residential investment portfolios have risen in value by 5.1% over the period thanks largely to the heavy weighting to properties in London and the South East.  It is also pleasing to see record levels of occupancy and rising rents on the back of limited competing supply and strong demand.  Values are, however, now coming under more pressure outside London and the South East.

Our proposed residential investment fund with AEGON Asset Management has experienced a slow fundraising campaign against an uncertain economic backdrop, but we hope that we will achieve a successful first closing during the next 12 months.

I am pleased to announce that we have strengthened our board with the appointment of a further independent non-executive director.  Julie Green, Managing Director of Lowndes Partners LLP, has many years of corporate finance and property experience having previously worked at Lazard and Jones Lang LaSalle and I look forward to her contribution to our business.  I would like to thank my fellow directors, management and staff for their hard work during the last year.

Outlook

Although economic uncertainty continues to affect our markets we have shown our ability to generate strong, low risk returns by concentrating on our core expertise of pre-let development, particularly foodstores and central London offices, and residential asset management.  In the coming year I am therefore confident that we will be able to continue to perform well and add value to the business.

Robert FM Adair

Chairman

8 December 2010

OPERATIONAL REVIEW

Commercial property

We have continued to focus on our core areas of expertise in commercial property development: edge of town retail and offices with a small amount of industrial development in areas of particularly strong demand.

In the edge of town retail, market demand from foodstore occupiers remains strong and our pipeline of supermarket development opportunities continues to grow with five sites in various stages of assembly or development.  This form of development is both relatively low risk and profitable as the properties are always pre-let or pre-sold to occupiers with very strong covenants.  We also have particular operational strengths in this market with development site finding abilities through our network of regional offices and strong relationships with the supermarket retailers.

The occupational side of the office market is, in contrast, much weaker with the exception of central London where take‑up of available space has been strong leading to the prospect of lack of supply and rising rents.  With the exception, therefore, of our speculative JV office and residential development at Howick Place in Victoria, all our office development plans are centred around pre-lets and we have a number of active discussions with prospective tenants about pre-let office developments in the regions.

The operational highlights since the half year ended 30 April 2010 are as follows:

Foodstores

•	Bishop Auckland - the 97,000 sq ft pre-let supermarket development was
	completed and opened for trading in October 2010.  Some additional floor area
	and a petrol filling station were added to the development during construction and
	the whole investment was funded and pre-sold to Aviva Investors Pensions
	Limited.  Two adjacent sites have been pre-sold, subject to planning, to KFC and
	Marston's.
•	Heaton Park, Manchester - following the grant of detailed planning consent for
	a new 135,000 sq ft Sainsbury's store in March 2010, timing for vacant
	possession of the site by the existing tenants is agreed and completion of the
	sale to Sainsbury's is due this month.
•	Wessington Way, Sunderland - we completed a conditional contract to acquire
	a 6 acre site for a foodstore development earlier this year and have now entered into a pre-letting
	agreement with Sainsbury's, conditional on planning, to develop a 98,000sq ft supermarket and
	petrol filling station.  A planning application was submitted in late November 2010.
•	London Road, Whitchurch, Shropshire - following the completion of a conditional contract to acquire
	this site earlier this year we have secured a forward commitment with Sainsbury's for a foodstore.
	A detailed planning application will be made later this month.
•	We have a number of other foodstore development opportunities across the
	country at various stages of progression including a large site at Teesside where
	terms have been agreed with an operator to pre-let a 125,000 sq ft foodstore

Offices and industrial

•	Wilton Road, Victoria - since the half year results, the remaining office space in this joint venture development has been let and contracts have been exchanged to sell the investment to Cordea Savills
	European Commercial Fund for £53.5 million.  Completion of the sale will take place before the end of this month.
•	Howick Place, Victoria - the construction has commenced of our joint venture mixed use office and
	residential scheme in the heart of Victoria.  The development will comprise 135,000 sq ft
	of offices and 25,300 sq ft of residential when it completes in late 2012.  Office rents are predicted to rise
	by 22% by the time of completion of the scheme.  The joint venture is with Doughty Hanson and
	has the benefit of development finance with no recourse to the Group.
•	Baltic Business Quarter, Gateshead - construction of the 60,000 sq ft Northern Design Centre has
	commenced on our 50 acre business park on the south bank of the Tyne.  The building is being funded
	and will be owned and operated by Gateshead Council and One North East.  In addition,
	we have let the top floor of Baltimore House, our office development situated between our earlier
	developments for the Open University and Gateshead College.
•	Teesside Business Park - Steria Limited, an outsourcing IT company, has leased 8,400 sq ft of offices
	in part of the campus owned by the Terrace Hill Development Partnership, bringing the
	amount let to 38.5% in this three unit scheme.  This complements our earlier lettings
	on Teesside to Middlesbrough Primary Care Trust and the Crown Prosecution Service.
•	Christchurch Business Park - a 59,740 sq ft warehouse building has been pre-sold for £5.0 million to
	Kondor Limited, a leading mobile phone accessory distributor.  Construction is underway
	with completion expected in March 2011 and detailed negotiations are underway with other
	occupiers about taking industrial space at the Park.
•	Site sales - during this period we profitably disposed of our 4.4 acre site at Welwyn Garden City and
	the majority of our site at Farnborough.

Residential investment

The heavy 49.4% weighting of our residential investment portfolio to London and the South East has boosted performance with an overall rise in values since 31 October 2009 of 5.1%.  Furthermore, there is increasingly strong demand in the letting market and we have seen occupancy rates across our portfolio rise by 3% to 94% in the same period and we are now experiencing rapid rental growth in London where shortages of suitable rental accommodation is most acute.

Our proposed residential investment fund with AEGON Asset Management, reflecting trends across the sector, has experienced a slow fundraising campaign against an uncertain economic backdrop, but we hope that we will achieve a successful first closing during the next 12 months.

BUSINESS REVIEW - FINANCE

Financial results and net asset value

The Group's NAV increased by 7.6% in the 11 month period ended 30 September 2010 to £84.1 million (39.7 pence per share) from £78.2 million (36.9 pence per share) at 31 October 2009 and our EPRA NAV increased by 7.2% to £102.6 million (48.3 pence per share) from £95.8 million (45.1 pence per share) at 31 October 2009.

The increase in our EPRA NAV before deduction of administrative expenses and interest was caused principally by the following:

•	2.6 pence per share arising from recognised profit at our Bishop Auckland development
•	2.2 pence per share as a consequence of increases in the value of assets held on the balance sheet
•	3.5 pence per share arising from positive contributions from our joint ventures and associates

The Group's EPRA Triple NAV, which takes into account any tax payable on profits arising if all the Group's properties were sold at the values used for the EPRA NAV, the write off of goodwill and any other fair value adjustments, increased by 9.5% to £95.1 million (44.7 pence per share) from £86.8 million (40.8 pence per share) at 31 October 2009.

	Calculation of EPRA NAV and EPRA Triple NAV (unaudited)
	30 September 2010			31 October 2009
Number of shares			Pence per		Number of shares	Pence per
£'000		000s	share	£'000	000s	share
Audited net asset value	84,104	211,971	39.7	78,156	211,971	36.9
Increase/(Decrease)%			7.6%	(24.2%)
Revaluation of property held as current assets	18,313			16,633
Fair value of financial instruments	177			962
Shares to be issued under the LTIP	12	595		12	595
EPRA NAV	102,606	212,566	48.3	95,763	212,566	44.6
Increase/(Decrease)%			7.2%			(22.4%)
Fair value of financial instruments	(177)			(962)
Estimated taxation on revaluation of current assets	(4,005)			(4,657)
Goodwill	(3,336)			(3,336)
EPRA Triple NAV	95,088	212,566	44.7	86,808	212,566	40.8
Increase/(Decrease)%	9.5%					(23.5%)

Statement of comprehensive income

Revenue for the 11 month period ended 30 September 2010 includes rental income of £4.3 million (2009: £6.6 million), recognition of revenue under the construction contract at Bishop Auckland of £17.7 million (2009: £7.1 million), site sales at Welwyn Garden City and Farnborough totalling £4.2 million, project management fees of £0.6 million (2009: £1.3 million) and the sale of eight completed residential units.

The statement of comprehensive income also includes movements in the valuation of our properties.  Included in cost of sales is the reversal of £3.7 million of write-downs to the carrying value of our development properties (2009: write-down £22.0 million).  Further positive valuation movements of £1.0 million relating to our investment properties (2009: write-down £2.1 million) and positive movements of £6.6 million reflecting our share of the valuation uplifts in our joint ventures and associated undertakings (2009: write-down £5.2 million) are included in the statement of comprehensive income.

Administrative expenses for the period ended 30 September 2010 amounted to £4.7 million (2009: £5.2 million).  We continue to exercise tight control over our overheads and look at ways of operating our business at maximum efficiency. 

Net finance costs for the period ended 30 September 2010 were £1.8 million (2009: £1.2 million).  Included in the 2010 figure is £0.6 million of swap break costs relating to the loan on Kean House which was repaid on its disposal and a credit of £0.8 million of fair value adjustments on our financial instruments.  After accounting for these, our normalised net interest charge for the period was £2.0 million compared with a similar normalised figure for 2009 of £2.9 million.  The reduction of £0.9 million is largely explained by the reduction in our net debt following the repayment of our loan on Kean House in November 2009.

Our investment in joint ventures and associated undertakings generated a contribution in the period ended 30 September 2010 of £7.6 million (2009: loss £5.6 million) of which £6.6 million related to positive movements in the value of the underlying properties (2009: £5.2 million write down).  This result is substantially attributed to our investment in Terrace Hill Residential PLC of which our share is 49% and which has benefited from lower borrowing costs during the period and growth in rental income.

Balance Sheet

The Group's net assets at 30 September 2010 were £84.1 million, an increase of 7.6% on the amount reported at 31 October 2009 of £78.4 million.  The Group's gearing has improved and net debt as a percentage of adjusted net assets was 88.4% as at 30 September 2010 compared to 102.4% at 31 October 2009.  The amount of net debt has also reduced to £90.7 million at 30 September 2010 from £98.1 million at 31 October 2009. 

Financial resources and capital management

As mentioned above, our net debt at 30 September 2010 was £90.7 million.  The main reasons for the changes since 31 October 2009 are as follows:

•	Property sales (£15.8 million reduction)
•	Expenditure at our Hudson Quay development (£5.9 million increase)
•	Expenditure at our development sites (£0.3 million increase)
•	Rental income less administrative expenses and net finance costs (£3.7 million increase)

The Group continues to use bank debt secured on individual projects, together with its own resources, to finance its projects.  This ensures to the maximum degree possible that each project is ring-fenced.  A consequence of this is that the Group has a relatively large number of discrete bank facilities outstanding at any moment in time, some of which are relatively short-term.  The Group prefers this, as it gives it flexibility, but it can mean that we are exposed to changing banking markets and sentiment.  In the period since 31 October 2009, and including amounts reported as re-financed in March and June this year, the Group has re-financed £27.3 million of Group debt and £268.0 million of joint venture and associated undertaking debt.  Given the backdrop of banks with stressed balance sheets and security having fallen in value, negotiations on re-financings have been robust.  The Group currently has £56.1 million of short-term debt, mostly in two loans, of which £11.8 million relates to our property at Wilton Road and which will be repaid on the sale of the property in December 2010, and £33.7 million which matures in September 2011.  We expect that this loan will be partially repaid through sales with the balance being re-financed.

The average maturity of Group debt is now 14 months with a weighted average margin of 2.8%.  The average maturity of joint ventures and associated undertaking debt is now 21 months with a weighted average margin of 2.6%.

Summary of debt position	30 September 2010	31 October 2009
Net debt	£90.7m	£98.1m
Net gearing	88.4%	102.4%
Net debt including share of joint venture and associated	£228.2m	£235.3m
undertaking debt
Total net gearing	220.7%	245.7%
Loan to value	58.6%	59.4%
Loan to value including share of joint venture and
associated undertaking debt	70.9%	73.1%

The net gearing and loan to value percentages shown above are in relation to our adjusted NAV.  The majority of joint venture and associated undertaking debt is of limited recourse to the Group.

On balance sheet		Off balance sheet*
Debt expiry profile	£m	£m
Bank loans and overdraft repayable in one year	56.1	19.5
Bank loans repayable in more than one year	36.3	116.3
Total	92.4	135.8

*Group share

The Group actively monitors its interest rate exposure.  At 30 September 2010, 23.5% of Group debt was subject to hedging arrangements with an average interest rate of 3.3%.  The hedging arrangements are fixed rate swaps, which expired in October 2010.  Given the short maturity profile of the Group's debt and the current benign interest rate environment, the Group has decided to take advantage of the low current interest rates.  37.6% of joint ventures and associated undertaking debt is hedged with an average interest rate of 3.0%.

The Group has no loans in place which measure loan to value ratios on an aggregated basis.  A number of loans have loan to value covenants based on the value of the assets secured against them and in certain instances those covenants have been modified or the loans have been partially repaid to ensure they remain within the covenanted levels.  The amounts involved have not been material.

Summary of loan to	30 September	31 October
value ratios of Group	2010	2009
property
Commercial property	55.6%	56.7%
Residential property	72.5%	72.4%
Total	58.6%	59.4%

The Group monitors its cash resources and future cash flows closely through its comprehensive rolling 24 months cash forecasts.  The Group regularly reviews the underlying assumptions supporting the cash forecast and believes it has sufficient resources to execute its strategy for the foreseeable future.

Philip Leech	Jon Austen
Chief Executive	Group Finance Director
8 December 2010

Consolidated statement of comprehensive income

for the period ended 30 September 2010

Period ended			Year ended
30 September			31 October
2010			2009
Notes		£'000	£'000
Revenue	2	30,747	29,065
Direct costs		(24,437)	(41,584)
Gross profit / (loss)		6,310	(12,519)
Administrative expenses		(4,745)	(5,174)
Profit on disposal of investment properties		47	-
Profit / (loss) on revaluation of investment properties		1,008	(2,141)
Operating profit / (loss)		2,620	(19,834)
Finance income	4	1,281	1,202
Finance costs	4	(3,105)	(2,423)
Share of joint venture and associated undertakings post tax profit/(loss)		7,581	(5,625)
Profit / (loss) before tax		8,377	(26,680)
Tax	6	(2,818)	3,135
Profit / (loss) from continuing operations		5,559	(23,545)
Other comprehensive income
Available for sale losses transferred to profit or loss		-	498
Total comprehensive income		5,559	(23,047)
Profit / (loss) attributable to:
Equity holders of the parent		5,563	(23,517)
Non controlling interest		(4)	(28)
5,559			(23,545)
Total comprehensive income attributable to:
Equity holders of the parent		5,563	(23,019)
Non controlling interest		(4)	(28)
5,559			(23,047)
Basic earnings per share	8	2.64p	(11.15)p
Diluted earnings per share	8	2.64p	(11.15)p

The notes below form part of this financial information.

Consolidated statement of changes in equity

for the period ended 30 September 2010

Capital					Unrealised		Non
Share		Share	Own	redemption	Merger	gains	Retained		controlling
capital		premium	shares	reserve	reserve	and losses	earnings	Total	interest	Total
£'000		£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31
October 2008	4,240	43,208	(609)	849	7,088	(498)	48,769	103,047	258	103,305
Total
comprehensive
income and
expense for the
year	-	-	-	-	-	498	(23,517)	(23,019)	(28)	(23,047)
Share-based
payment	-	-	-	-	-	-	(718)	(718)	-	(718)
Final ordinary
dividends	-	-	-	-	-	-	(1,154)	(1,154)	-	(1,154)
Balance at 31
October 2009	4,240	43,208	(609)	849	7,088	-	23,380	78,156	230	78,386
Total
comprehensive
income and
expense for the
period	-	-	-	-	-	-	5,563	5,563	(4)	5,559
Share-based
payment	-	-	-	-	-	-	384	384	-	384
Distribution to non
controlling interest	-	-	-	-	-	-	-	-	(226)	(226)
Balance at 30
September 2010	4,240	43,208	(609)	849	7,088	-	29,327	84,103	-	84,103

Consolidated balance sheet

at 30 September 2010

30 September			31 October
2010			2009
Notes		£'000	£'000
Non-current assets
Investment properties	10	31,373	46,758
Property, plant and equipment	9	235	350
Investments in equity accounted associates and joint ventures	11	9,081	2,846
Other investments	11	182	147
Intangible assets		3,336	3,336
Deferred tax assets	17	5,789	7,439
49,996			60,876
Current assets
Development properties	12	104,902	101,719
Trade and other receivables	13	40,521	36,331
Cash and cash equivalents		1,759	5,290
147,182			143,340
Total assets		197,178	204,216
Non-current liabilities
Bank loans	16	(36,286)	(91,678)
Other payables	15	(3,000)	(3,370)
Deferred tax liabilities	17	-	(73)
(39,286)			(95,121)
Current liabilities
Trade and other payables	14	(14,640)	(17,862)
Current tax liabilities		(3,012)	(1,176)
Bank overdrafts and loans	16	(56,137)	(11,671)
(73,789)			(30,709)
Total liabilities		(113,075)	(125,830)
Net assets		84,103	78,386
Equity
Called up share capital	19	4,240	4,240
Share premium account	20	43,208	43,208
Own shares	20	(609)	(609)
Capital redemption reserve	20	849	849
Merger reserve	20	7,088	7,088
Retained earnings	20	29,327	23,380
Equity attributable to equity holders of the parent		84,103	78,156
Non controlling interests		-	230
Total equity		84,103	78,386

The financial information was approved and authorised for issue by the board of directors on 8 December 2010 and was signed on its behalf by:

P A J Leech	J M Austen
Director	Director

Consolidated cash flow statement

For the period ended 30 September 2010

Period ended		Year ended
30 September		31 October
2010		2009
£'000		£'000
Cash flows from operating activities
Profit / (loss) before taxation	8,377	(26,680)
Adjustments for:
Finance income	(1,281)	(1,202)
Finance costs	3,105	2,423
Share of joint venture and associated undertakings post tax (profit)/loss	(7,581)	5,625
Depreciation and impairment charge	3,844	22,813
(Profit) / loss on revaluation of investment properties	(1,008)	2,141
Profit on disposal of investment properties	(47)	-
Loss on sale of tangible financial assets	12	26
Share-based payment / (credit)	384	(718)
Cash flows from operating activities before change in working capital	5,805	4,428
Increase in property inventories	(6,635)	(2,054)
Increase in trade and other receivables	(2,330)	(11,101)
Decrease in trade and other payables	(3,491)	(2,389)
Cash absorbed by operations	(6,651)	(11,116)
Income from investments	-	1
Finance costs	(3,222)	(1,669)
Finance income	465	577
Tax received	594	338
Net cash flows from operating activities	(8,814)	(11,869)
Investing activities
Purchase of investment property	(50)	(4)
Sale of investment property and tangible fixed assets	16,459	289
Sale of investments	28	448
Purchase of property, plant and equipment	(35)	(16)
Net cash flows from investing activities	16,402	717
Financing activities
Borrowings drawn down	6,342	35,084
Borrowings repaid	(17,581)	(28,982)
Equity dividends paid	-	(1,154)
Net cash flows from financing activities	(11,239)	4,948
Net decrease in cash and cash equivalents	(3,651)	(6,204)
Cash and cash equivalents at 1 November 2009	5,290	11,494
Cash and cash equivalents at 30 September 2010	1,639	5,290

1 Accounting policies

Basis of preparation

While the financial information included in the preliminary announcement has been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards as endorsed for use in the European Union (IFRSs), this announcement does not contain sufficient information to comply with IFRSs.  The company expects to publish full financial statements that comply with IFRSs in January 2011.

Changes in accounting policies

The Group adopted the following new and amended IFRS and IFRIC interpretations in the period.

IAS 1	Presentation of Financial Statements: A Revised Approach	1 January 2009
IAS 23	Borrowing Costs (revised March 2007)	1 January 2009
IAS 27	Consolidated and Separate Financial Statements (revised January 2008)	1 July 2009
IFRS 2	Amendment to IFRS 2 - Vesting Conditions and Cancellations	1 January 2009
IFRS 7	Amendment to IFRS 7 Financial Instruments: Disclosures - Improving	1 January 2009
	disclosures about financial instruments
IFRS 8	Operating Segments	1 January 2009
IFRIC 15	Agreements for the Construction of Real Estate	1 January 2009
IFRIC 17	Distributions of Non-cash Assets to Owners	1 November 2009

IAS 1 (revised 2007) - Presentation of Financial Statements: The revised standard has proposed a number of terminology changes (including revised titles for the primary statements and minority interest) and has resulted in the following change in  presentation and disclosure: other recognised gains and losses previously recognised in the statement of changes in equity are now included in the consolidated statement of comprehensive income as part of the total comprehensive income for the period.  The effect on the reported results of the previous period is to decrease the loss by £0.5 million.  It has no effect on reported net asset values. 

New standards and interpretations not applied

IASB and IFRIC have issued the following standards and interpretations relevant to the Group. These standards and interpretations are mandatory for accounting periods beginning on or after the date of these financial statements and will become effective for future reporting periods:

IAS 28	Investments in Associates
IAS 32	Financial Instruments - Presentation - Classification of Rights Issues
IFRIC 19	Extinguishing financial liabilities with equity instruments
	Improvements to IFRSs (2009) (2010)

The impact of the other standards and interpretations are not considered to be significant either because their impact is not likely to be material or that the Group already adopts the accounting policy proposed in the new or revised standard or interpretation.

Going concern

The directors are required to make an assessment of the Group's ability to continue to trade as a going concern.  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 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: the timing of planned property sales and possible reductions in anticipated cash flows from re-financing properties after planning permission has been obtained.  

Bank facilities - the Group maintains a regular dialogue with its lenders and keeps them informed of how the Group is trading.  Since 31 October 2009, £27.3 million of Group debt and £268.0 million of joint venture and associated undertaking debt has been re-financed.  The Group has a further £56.1 million of debt and overdraft facilities to be re-financed by 30 September 2011.  In the normal course of business, developments will be completed and disposed of and so the actual requirement to renew financing is expected to be at a lower level than this.  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.

Having considered the headroom in the Group's forecasts and its previous success in extending finance terms when required, the Group believes that it has sufficient resources to continue trading for the foreseeable future.

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.

The group uses the valuation performed by its independent valuers as the fair value of its investment properties and in assessing the net realisable values of its development properties.  The valuation is based upon assumptions including future rental income, anticipated maintenance costs, future development costs and the appropriate discount rate.  The valuers also make reference to market evidence of transaction prices for similar properties.

2 Revenue

Total		Total
2010		2009
£'000		£'000
Sales of development properties	25,595	21,195
Rents receivable	4,392	6,612
Project management fees and other income	760	1,258
30,747		29,065

Sales of development properties includes £17,777,000 (2009: £7,088,000) of revenue recognised on a construction contract for one investor.

3 Segmental information

The Group has adopted IFRS 8, Operating Segments with effect from 1st November 2009.  IFRS 8 requires operating segments to be identified on the basis of internal financial reports about components of the Group that are regularly reviewed by the chief operating decision maker (which in the Group's case is its executive board comprising the three executive directors) in order to allocate resources to the segments and to assess their performance.  The internal financial reports received by the Group's executive board contain financial information at a Group level as a whole and there are no reconciling items between the results contained in these reports and the amounts reported in the financial statements.

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

Unallocated				Unallocated				Total
Residential		Commercial	items	Total	Residential	Commercial	items
2010		2010	2010	2010	2009	2009	2009	2009
£'000		£'000	£'000	£'000	£'000	£'000	£'000	£'000
Statement of comprehensive income
Revenue	1,261	29,486	-	30,747	1,663	27,402	-	29,065
Direct costs	(405)	(24,032)	-	(24,437)	(615)	(40,969)	-	(41,584)
Gross profit/(loss)	856	5,454	-	6,310	1,048	(13,567)	-	(12,519)
Administrative expenses	-	-	(4,745)	(4,745)	-	-	(5,174)	(5,174)
Profit on disposal of investment properties	-	47	-	47	-	-	-	-
(Loss) / profit on revaluation of investment properties	(19)	1,027	-	1,008	(446)	(1,695)	-	(2,141)
Operating profit / (loss)	837	6,528	(4,745)	2,620	602	(15,262)	(5,174)	(19,834)
Net finance costs	(533)	(1,218)	(73)	(1,824)	(1,180)	(70)	29	(1,221)
Share of results of joint venture before tax	-	(43)	-	(43)	-	(72)	-	(72)
Share of results of associated undertakings before tax	7,624	-	-	7,624	(5,137)	(416)	-	(5,553)
Profit / (loss) before tax	7,928	5,267	(4,818)	8,377	(5,715)	(15,820)	(5,145)	(26,680)

The segmental results that are monitored by the Board include all the separate lines making up the segmental IFRS operating profit.  This excludes central overheads and taxation which are not allocated to operating segments.

Balance sheet
Investment properties	28,103	3,270	-	31,373	28,187	18,571	-	46,758
Property, plant and equipment	-	25	210	235	-	29	321	350
Investments - associates and joint ventures	6,425	2,656	-	9,081	147	2,699	-	2,846
Other investments	3	49	130	182	3	45	99	147
Intangible assets	2,476	860	-	3,336	860	2,476	-	3,336
Deferred tax assets	-	-	5,789	5,789	-	-	7,439	7,439
37,007		6,860	6,129	49,996	29,197	23,820	7,859	60,876
Development properties	-	104,902	-	104,902	-	101,719	-	101,719
Trade and other receivables	15,356	25,165	-	40,521	13,833	21,877	621	36,331
Cash	41	1,718	-	1,759	49	5,241	-	5,290
15,397		131,785	-	147,182	13,882	128,837	621	143,340
Borrowings	(20,375)	(72,048)	-	(92,423)	(20,401)	(82,948)	-	(103,349)
Trade and other payables	(514)	(17,126)	-	(17,640)	(575)	(20,175)	(482)	(21,232)
Current tax	-	-	(3,012)	(3,012)	-	-	(1,176)	(1,176)
Deferred tax liabilities	-	-	-	-	-	-	(73)	(73)
(20,889)		(89,174)	(3,012)	(113,075)	(20,976)	(103,123)	(1,731)	(125,830)
Net assets	31,515	49,471	3,117	84,103	22,103	49,534	6,749	78,386

4 Finance costs and finance income

2010		2009
£'000		£'000
Interest payable on borrowings	4,793	6,233
Interest credited under a development funding agreement	-	(2,050)
Interest capitalised	(1,688)	(1,760)
Finance costs	3,105	2,423
Interest receivable from cash deposits and other financial assets	1,281	1,202
Finance income	1,281	1,202

Interest is capitalised at the same rate as the Group is charged on the respective borrowings.  Fair value adjustments to financial liabilities totalled £785,000 gains (2009: £962,000 losses) on interest rate swaps.

5 Administrative expenses

2010		2009
£'000		£'000
Depreciation of property, plant and equipment	143	206
Loss on disposal of property, plant and equipment	12	26
Operating lease charges - rent of properties	1,228	1,332
Impairment of goodwill	-	120
Share-based payment remuneration	384	(718)
Fees paid to BDO LLP in respect of:
- audit of the Group's annual accounts	180	175
- audit of the Group's associates	19	16
- other services	30	30

6 Tax on profit/(loss) on ordinary activities

(a) Analysis of charge/(credit) in the period

2010		2009
£'000		£'000
Current tax
UK corporation tax on profit / (loss) for the period	63	53
Adjustment in respect of prior periods	1,177	633
Total current tax	1,240	686
Deferred tax
Origination and reversal of temporary differences	1,578	(3,821)
Total deferred tax charge/(credit)	1,578	(3,821)
Total tax charge / (credit)	2,818	(3,135)

(b) Factors affecting the tax credit for the period

The tax assessed for the period is higher than the standard rate of corporation tax in the UK of 28% (2009: 28%). The differences are explained below:

2010		2009
£'000		£'000
Profit / (loss) before tax	8,377	(26,680)
Less joint ventures and associates	(7,581)	5,625
Profit / (loss) attributable to the Group before tax	796	(21,055)
Profit/(loss) multiplied by the average rate of UK corporation tax of 28% (2009: 28%)	223	(5,895)
Disallowables	1,252	2,049
Other temporary differences	166	78
1,641		(3,768)
Adjustments in respect of prior periods	1,177	633
Total tax charge/(credit)	2,818	(3,135)

(c) Associates and joint ventures

The Group's share of tax on the associates and joint ventures is £Nil (2009: £Nil).

7 Dividends

2010		2009
£'000		£'000
Ordinary shares
Final dividend of 0.0 pence (2009: final dividend for 2008 of 0.54 pence) per share for the year
ended 31 October 2009	-	1,139
-		1,139

8 Earnings per ordinary share

The calculation of basic earnings per ordinary share is based on a profit of £5,563,000 (2009 loss: £23,517,000) and on 210,951,299 (2009: 210,951,299) ordinary shares, being the weighted average number of shares in issue during the period.

The calculation of diluted earnings per ordinary share for 2010 is based on earnings of £5,563,000 and on 210,952,880 ordinary shares being the weighted average number of shares in issue during the period adjusted to allow for the issue of ordinary shares in connection with a share award.

The calculation of diluted earnings per ordinary share for 2009 is the same as the basic earnings per share.

Share awards to employees are only included in the calculation of the diluted earnings per share where these awards are not subject to vesting conditions.

The number of awards in issue is disclosed in note 24.

9 Property, plant and equipment

Leasehold		Motor	Office	Furniture	Total
improvements		vehicles	equipment	and fittings
£'000		£'000	£'000	£'000	£'000
Cost
At 1 November 2008	159	370	113	261	903
Additions	-	-	4	32	36
Disposals	-	(78)	(5)	(64)	(147)
At 1 November 2009	159	292	112	229	792
Additions	-		12	23	35
Disposals	-	(19)	(4)	(36)	(59)
At 30 September 2010	159	273	120	216	768
Depreciation
At 1 November 2008	23	120	55	115	313
Charge for period	16	89	24	77	206
Disposals	-	(47)	(5)	(25)	(77)
At 1 November 2009	39	162	74	167	442
Charge for period	15	60	23	45	143
Disposals	-	(12)	(4)	(36)	(52)
At 30 September 2010	54	210	93	176	533
Net book value
At 30 September 2010	105	63	27	40	235
At 31 October 2009	120	130	38	62	350

At the year end there were no assets held under finance leases.

10 Investment properties

£'000
Valuation
At 1 November 2008	49,160
Additions	4
Disposals	(265)
Loss on revaluation	(2,141)
At 1 November 2009	46,758
Additions	443
Disposals	(16,810)
Gain on revaluation	982
At 30 September 2010	31,373

The investment properties situated in Scotland owned by the Group have been valued as at 30 September 2010 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 30 September 2010 by qualified valuers from CB Richard Ellis, 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.

Residential investment properties situated in England owned by the Group have been valued as at 30 September 2010 by suitably qualified valuers from Allsop LLP, 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.

11 Investments

Associates and joint ventures

Joint			Total
Associates		venture
£'000		£'000	£'000
Cost or valuation
At 1 November 2008	6,375	770	7,145
Disposals	(6)	-	(6)
Transfer to other investments	(14)	-	(14)
Share of results	(5,553)	(72)	(5,625)
Share of results for period applied against long-term receivables forming part
of net investment	1,346	-	1,346
At 1 November 2009	2,148	698	2,846
Share of results	7,624	(43)	7,581
Share of results for period applied against long-term receivables forming part
of net investment	(1,346)	-	(1,346)
At 30 September 2010	8,426	655	9,081

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
Two Orchards Limited	20%	Property development

Terrace Hill Residential PLC is incorporated in Scotland.

Summarised information 2010

Terrace Hill			Castlegate	Terrace Hill	Two	Total
Development		Devcap 2	House	Residential	Orchards
Partnership		Partnership	Partnership	PLC	Limited
£'000		£'000	£'000	£'000	£'000	£'000
Revenue	3,702	2,101	557	11,819	-	18,179
(Loss)/profit after taxation	(496)	1,114	(2,782)	15,561	(5,089)	8,308
Total assets	38,073	43,713	6,811	254,825	60,853	404,275
Bank debt	(21,409)	(40,553)	(8,302)	(206,741)	(78,884)	(355,889)
Other liabilities	(8,222)	(4,554)	(2,723)	(34,970)	(5,888)	(56,357)
Total liabilities	(29,631)	(45,107)	(11,025)	(241,711)	(84,772)	(412,246)
Net assets/(liabilities)	8,442	(1,394)	(4,214)	13,114	(23,919)	(7,971)
Opening carrying amount of interest
under equity method	2,000	-	-	147	1	2,148
Share of results for period	-	-	-	7,624	-	7,624
Share of results for period applied
against long-term receivables forming
part of net investment	-	-	-	(1,346)	-	(1,346)
Closing carrying amount of interest
under equity method	2,000	-	-	6,425	1	8,426
Capital commitments	-	-	-	-	-	-

Summarised information 2009

Terrace Hill			Castlegate	Terrace Hill		Two	Total
Development		Devcap 2	House	Residential	Howick	Orchards
Partnership		Partnership	Partnership	PLC	Place	Limited
£'000		£'000	£'000	£'000	£'000	£'000	£'000
Revenue	5,304	1,824	605	12,515	-	-	20,248
(Loss)/profit after taxation	(1,023)	(8,765)	83	(10,484)	-	(18,840)	(39,029)
Total assets	39,981	40,127	9,480	236,888	-	59,982	386,458
Bank debt	(25,009)	(40,291)	(8,568)	(206,363)	-	(73,652)	(353,883)
Other liabilities	(6,034)	(2,344)	(2,344)	(32,972)	-	(5,160)	(48,854)
Total liabilities	(31,043)	(42,635)	(10,912)	(239,335)	-	(78,812)	(402,737)
Net assets/(liabilities)	8,938	(2,508)	(1,432)	(2,447)	-	(18,830)	(16,279)
Opening carrying amount of interest
under equity method	2,416	-	-	3,938	20	1	6,375
Disposals	-	-	-	-	(6)	-	(6)
Transfer to other investments	-	-	-	-	(14)	-	(14)
Share of results for period	(416)	-	-	(5,137)	-	-	(5,553)
Share of results for period applied
against long-term receivables forming
part of net investment	-	-	-	1,346	-	-	1,346
Closing carrying amount of interest
under equity method	2,000	-	-	147	-	1	2,148
Capital commitments	-	-	-	-	-	630	630

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

2010		2009
Achadonn		Achadonn
Limited		Limited
£'000		£'000
Revenue	81	157
Loss	(87)	(143)
Total assets	14,591	14,337
Bank debt	(8,110)	(8,110)
Other liabilities	(5,171)	(4,831)
Total liabilities	(13,281)	(12,941)
Net assets	1,310	1,396
Share of results for the period	43	(72)
Share of net assets	655	698

Available-for-sale investments and other investments

Available-for-sale		Other	Total
investments		investments
£'000		£'000	£'000
Valuation
At 1 November 2008	442	109	551
Transfer from associates	-	14	14
Disposals	(442)	-	(442)
Change in fair value	-	24	24
At 1 November 2009	-	147	147
Disposals	-	(24)	(24)
Change in fair value	-	59	59
At 30 September 2010	-	182	182

2010		2009
£'000		£'000
UK unlisted investments at fair value	30	59
UK listed investments at fair value	152	88
182		147

12 Development properties

2010		2009
£'000		£'000
At 1 November 2009	101,719	120,488
Additions	6,170	17,116
Disposals	(6,742)	(13,852)
Amounts written back /(off) the value of development properties	3,755	(22,033)
At 30 September 2010	104,902	101,719
Included in these figures is capitalised interest of	10,450	9,536

The reversal in the write down of development properties arises from assessments of the net realisable value of the development properties.  No amounts are held in development properties in respect of construction contracts and retentions on such contracts is £Nil.

13 Trade and other receivables

2010		2009
£'000		£'000
Trade receivables	5,229	801
Other receivables	8,984	9,608
Trade and other receivables	14,213	10,409
Amounts recoverable under construction contracts	4,872	8,000
Prepayments and accrued income	4,235	2,289
Share of associates loss (see note 13)	-	(1,346)
Amounts due from associates and joint ventures	27,896	25,867
Provision for amounts due from associates and joint ventures	(10,695)	(8,888)
40,521		36,331

Included in other receivables and prepayments and accrued income is a balance due from Howick Place JV S.a.r.l. of £4.5 million (2009: £4.3 million) that has a final maturity date of 31 December 2014.

The ageing of trade and other receivables was as follows:

2010		2009
£'000		£'000
Up to 30 days	4,169	305
31 to 60 days	67	175
61 to 90 days	4	6
Over 90 days	155	231
Total	4,395	717
Amounts not yet due	9,818	9,692
Closing balance	14,213	10,409

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 period was as follows:

2010		2009
£'000		£'000
At 1 November 2009	10,234	7,776
Amounts written (back)/off in period	(1,346)	-
Increase in allowance on amounts due from associates	1,807	2,458
Closing balance	10,695	10,234

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

14 Trade and other payables

2010		2009
£'000		£'000
Trade payables	1,189	1,958
Other taxation and social security costs	427	702
Accruals and deferred income	11,609	10,088
Derivative liabilities	177	962
Other payables	1,238	4,152
14,640		17,862

15 Other payables (non-current)

2010		2009
£'000		£'000
Other payables	3,000	3,370

16 Bank overdrafts and loans

2010		2009
£'000		£'000
Bank loans	92,504	103,744
Bank overdrafts	120	-
92,624		103,744
Unamortised loan issue costs	(201)	(395)
92,423		103,349
Amounts due:
Within one year	56,137	11,671
After more than one year	36,286	91,678
92,423		103,349

An analysis of interest rates and information on fair value and security is given in note 20.

17 Deferred tax

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

2010		2009
£'000		£'000
Investment property revaluations	-	(275)
Trade losses	1,588	(4,335)
Share-based payments	(83)	201
Short-term timing differences	73	588
1,578		(3,821)

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

2010		2009
£'000		£'000
Deferred tax provision
Other timing differences	-	(73)
	-	(73)
Deferred tax asset
Share option scheme	104	20
Trade losses	5,685	7,419
5,789		7,439

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 Business review - finance.

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 libor and 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

2010		2009
£'000		£'000
Current financial assets
Other investments	182	147
Trade and other receivables	14,213	10,409
Amounts due from associates and joint ventures	17,201	15,633
Cash and cash equivalents	1,639	5,290
33,235		31,479

Financial assets measured at fair value amount to £182,000 (2009: £147,000)

Financial liabilities measured at amortised cost

2010		2009
£'000		£'000
Current financial liabilities
Trade and other payables	14,036	14,889
Loans and borrowings	56,145	11,673
Total current financial liabilities	70,181	26,562
Non-current financial liabilities
Other payables	3,000	3,370
Loans and borrowings	36,359	92,071
Total non-current financial liabilities	39,359	95,441
Total financial liabilities	109,540	122,003

The maximum exposure to credit risk in financial assets is £33,053,000 (2009: £31,332,000).  The maximum amount due from any single party is £14,948,000 (2009: £14,948,000) included in amounts due from associates and joint ventures.  Financial liabilities measured at fair value amount to £177,000 (2009: £962,000) in respect of financial derivatives.

All the Group's financial liabilities designated at fair value through the statement of comprehensive income are defined as level 2, in accordance with IFRS 7, as they are derived from inputs other than quoted prices.

Interest rate risk profile of financial assets and liabilities

The interest rate profile of financial assets and liabilities of the Group at 30 September 2010 was as follows:

Floating rate			Fixed rate	Financial assets on which
Total		financial assets	financial assets	no interest is earned
£'000		£'000	£'000	£'000
Sterling	33,235	1,639	3,480	28,116
Financial liabilities on
Floating rate			Fixed rate	which no interest is
Total		financial liabilities	financial liabilities	charged
£'000		£'000	£'000	£'000
Sterling	109,540	92,504	-	17,036

Floating rate financial liabilities bear interest at LIBOR or base rate plus margins of between 1% and 4%.

Included in floating rate financial liabilities is £20,795,000 (2009: £40,660,000) subject to interest rate swaps.

The interest rate profile of financial assets and liabilities of the Group at 31 October 2009 was as follows:

Floating rate			Fixed rate	Financial assets on which
Total		financial assets	financial assets	no interest is earned
£'000		£'000	£'000	£'000
Sterling	31,479	5,290	3,480	22,709
Financial liabilities on
Floating rate			Fixed rate	which no interest is
Total		financial liabilities	financial liabilities	charged
£'000		£'000	£'000	£'000
Sterling	122,003	103,744	-	18,259

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:

2010		2009
£'000		£'000
On demand or within one year	56,265	11,673
In more than one year but less than two	26,256	75,546
In more than two years but less than five	10,103	16,525
92,624		103,744

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

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:

2010		2009
£'000		£'000
Expiring in one year or less	3,176	2,514
Expiring in more than one year but not more than two	1,102	8,825
Expiring in more than two years but not more than five	-	977
4,278		12,316

Guarantees

Refer to note 21 for details.

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 statement of comprehensive income 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 exposures on debt and deposits.

0.5% decrease		0.5% increase
in interest rates		in interest rates
£'000		£'000
Impact on interest payable - gain/(loss)	259	(259)
Impact on interest receivable - (loss)/gain	(20)	20
Total impact on pre-tax loss and equity	239	239

19 Called up share capital

2010		2009
£'000		£'000
Authorised:
500,000,000 (2009: 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
Allotted, called up, and fully paid:
211,971,299 (2009: 211,971,299) ordinary shares of 2 pence each	4,240	4,240

20 Reserves

	Capital
Share			Own	redemption	Merger	Unrealised gains	Retained
premium			shares	reserve	reserve	and losses	earnings
£'000			£'000	£'000	£'000	£'000	£'000
At 1 November 2008	43,208		(609)	849	7,088	(498)	48,769
Total comprehensive income and expense for the year	-		-	-	-	498	(23,517)
Share-based payment	-		-	-	-	-	(718)
Final ordinary dividends	-		-	-	-	-	(1,154)
At 1 November 2009	43,208		(609)	849	7,088	-	23,380
Total comprehensive income and expense for the period		-	-	-	-	-	5,563
Share-based payment	-		-	-	-	-	384
Balance at 30 September 2010	43,208		(609)	849	7,088	-	29,327

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 statement of comprehensive income.

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 £301,000 (2009: £337,000).

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.

The Group has provided an interest shortfall guarantee of £3.0 million to a bank as part of its investment in Two Orchards Limited, an associated company.  The bank loan to this company has expired and the borrowers are negotiating with the lender the terms of a revised loan.  The directors believe that the interest shortfall guarantee will not be called in full and a provision of £1.0 million has been included in accruals and deferred income.

Capital commitments relating to development sites are as follows:

2010		2009
£'000		£'000
Contracted but not provided for	2,135	3,349

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
2010		2009
£'000		£'000
In one year or less	1,338	1,374
Between two and five years	5,341	5,351
In five years or more	6,736	7,951
	13,415	14,676

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
2010		2009
£'000		£'000
In one year or less	3,927	3,784
Between two and five years	11,358	14,589
In five years or more	13,418	11,964
	28,703	30,337

Statutory information

The financial information set out in this announcement does not constitute the company's statutory accounts for 2010 or 2009.  Statutory accounts for the period ended 30 September 2010 and the year ended 31 October 2009 have been reported on by the Independent Auditors.  The Independent Auditors' Reports on the Annual Reports and Financial Statements for 2010 and 2009 were unqualified, did not draw attention to any matters by way of emphasis, and did not contain statements under 498(2) or 498(3) of the Companies Act 2006.  Statutory accounts for the year ended 31 October 2009 have been filed with the Registrar of Companies.  The statutory accounts for the period ended 30 September 2010 will be delivered to the Registrar in due course.

Copies of the full financial statements will be posted to those shareholders who requested them as soon as possible and will also be available on the company's website, www.terracehill.co.uk.  The financial statements for the period ended 30 September 2010 will be delivered to the Registrar of Companies following the Annual General Meeting.

 

END

 

 

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