8th Feb 2010 07:00
St. Modwen Properties PLC
Results for the year ended 30th November 2009
St. Modwen Properties PLC, the UK's leading regeneration specialist, announces annual results for the year ended 30th November 2009.
HIGHLIGHTS
·; Business refinanced with issue of £101.6m of new equity
·; Renegotiated and improved banking covenants
·; Positive operational cashflow, including £101m from property disposals
·; Trading profit of £8.4m* (2008: £19.5m)
·; Net assets of 200p per share (2008: 251p**), a decline of 20%** in the year (4% in the second half).
·; Hopper increased by 12% to 5,600 developable acres with strong flow of new planning consents
*Trading profit - excludes non-cash items such as revaluations and mark-to-market adjustments. The statutory loss for the year was £101.7m (2008: £50.7m).
**(adjusted for equity issue in the year)
Anthony Glossop, Chairman, comments:
"Property market prospects still remain uncertain. The economy may be slowly emerging from recession, but business confidence remains fragile, with continued pressure on rents and occupancy levels.
"However, St Modwen is well prepared for such conditions: our financial position is sound; our business model will increasingly create value; and we are in a good position to seize attractive opportunities to add further to the Hopper.
"As yet our portfolio has not seen the resurgence in values experienced in other parts of the property market. But nevertheless I believe that we are now beginning to see important signs of improvement.
"I am confident that 2010 will see the company returning to growth in profits and NAV."
8 February 2010
ENQUIRIES:
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St. Modwen Properties PLC |
Tel: 0121 222 9400 |
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Bill Oliver, Chief Executive |
www.stmodwen.co.uk |
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Tim Haywood, Finance Director |
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Menna Rees-Steer (Regional media enquiries) |
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College Hill |
Tel: 020 7457 2020 |
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Gareth David |
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A presentation for analysts and investors will be held at 9.30am today at the offices of JP Morgan Cazenove, 20 Moorgate, London EC2R 6DA
Chairman's Statement
I am pleased to report that the property market is showing some signs of recovery, and that your company is in good condition to benefit from this. Our finances are in good shape, our Hopper is full of opportunities, and we are beginning to find attractively- priced acquisitions.
Over the past twelve months, we have worked extremely hard to strengthen the company's position.
·; We have refinanced the business with an issue of new equity.
·; We have renegotiated and improved the covenants on our banking facilities.
·; We have generated positive operational cash flow through a judicious programme of asset sales and a careful control of development expenditure.
·; We have succeeded in delivering a trading profit* and have made real progress in our asset management activities.
·; We have continued to marshal our schemes successfully through the planning process to ensure a pipeline of future activity and added value.
·; We have preserved our core team throughout the downturn, and have consequently retained all of our key capabilities, undiminished.
St Modwen's reputation as the UK's leading regeneration specialist has, if anything, been enhanced by our ability to continue to deliver schemes throughout this downturn. We are now looking forward to a gradual return to a more normal level of activity in our major markets.
Results
Despite another extremely difficult year, we made a trading profit* of £8.4m (2008: £19.5m). We also generated a positive operational cashflow, and reduced gearing from 105% to 80%.
However, including revaluations and other non-cash items, we incurred a loss after tax for the year of £101.7m (2008: £50.7m). This loss was principally (£80.6m) incurred in the first half of the year, since when market conditions and the company's performance have significantly improved.
After adjusting for the effect of the equity issue, our net asset value declined by 20% to 200p per share (2008: 251p**).
Trading and valuations
The broad range and regional spread of our activities has enabled us to continue to find business even in difficult market conditions. We achieved property sales of £101m, and have steadily reduced our stock of unoccupied completed buildings.
However, compared with recent years, we have had a very low level of development activity. This, together with the absence of any meaningful cashflow from our residential land disposal programme, has placed more emphasis on the asset management aspect of our business. One long-term strategic objective has always been for our recurring income to be sufficient to cover the running and financing costs of the business. This year that has proved particularly valuable. Our team improved the rental income from our portfolio, in very challenging conditions.
Our valuations at 30th November 2009 represent what I hope is the end of a long period of adverse sentiment in the real estate investment market. The results for the year include a negative yield shift on average of 1.4%. The value of our commercial land has been reduced to reflect the lower values of the developments that will be undertaken on the land. The valuation of our residential land was also reduced significantly in the first half of the year, to reflect the depressed housing market. It is encouraging to note, however, that in this area at least, values had stabilized by the year end and no further write-down was required on our residential land in November. This is evidenced by four residential land sale transactions that we currently have in solicitors' hands, all for prices at or above November carrying values.
Throughout the period of market price deterioration, our strategy of constantly seeking to add value has helped to mitigate the unavoidable market value write-downs. During the year we achieved a number of important planning consents and advanced the status of several of our key schemes.Market related adjustments of £134m this year (2008: £129m) were offset by added value gains arising from our marshalling and asset management activities of £27m (2008: £65m). Following these additional consents, we now have more than 20,000 residential plots with planning recognition in our Hopper, and the recovery of the residential market will make an important contribution to the company's future returns.
Financing
In May we announced a refinancing of the business, comprising new banking covenants and a Firm Placing and Placing and Open Offer of new shares. I was very pleased with the positive reaction to the equity issue, which attracted a number of significant new investors and which raised £101.6m net of costs. This new equity finance, together with the relaxation of our banking covenants, enabled us both to reduce our gearing levels and to continue to operate well within our banking covenants despite the prolonged and significant fall in property values.
Dividend
Your board is not recommending a final dividend for the year, as we believe that the funds are currently better used in the operations of the business. We anticipate resuming the payment of dividends when we are once again generating net asset value increases.
Strategy
The economic downturn caused us to examine closely our business model and strategy; and I am pleased to say that they have not been found wanting.
We have therefore been able to adapt our activities to suit the changing conditions, scaling-back speculative schemes, but continuing to marshal sites for development on the back of pre-let or pre-sold opportunities. We have also continued to dispose of those mature assets to which we can add no further significant value. We have been able to nurture our recurring income (which now amounts to £43m per annum), by letting voids, by offering flexibility and value for money to tenants, and by retaining those income-producing assets where we felt that investment prices achievable could be improved. The broad range and regional spread of our business ensured that, whatever activity there was in the market, we have been able to respond to it.
All of this is a strong reaffirmation of our hopper strategy, which now embraces more than 5,600 acres: regionally structured, prudently financed, with the emphasis on value creation and diversification.
Therefore, despite our focus on cash generation, we have continued to seek, and to find, long-term opportunities for the Hopper. Our acquisition of an extensive portfolio from BP, following on from last year's acquisition of their Llandarcy oil refinery, is a good example of the excellent opportunities we are finding. The acquisition, which was undertaken after considerable due diligence, includes 566 acres of developable land. It will be self-financing and will have a 20-year development horizon that will enable the company to utilise fully its brownfield land remediation expertise. We also made other significant acquisitions at Exeter, Taunton and Doncaster, adding a total of 139 acres of developable land, at a total cost of £13m.
Looking ahead, I remain confident that St Modwen's strategy is valid in the long-term, and will give us the opportunity to provide sector-leading returns to shareholders once again.
Directors and Employees
Achieving the results for the year in the current climate is a tribute to the quality and strength of the team at all levels in the organisation. My thanks go to everyone for the efforts they have made.
We are currently in the process of making a number of changes to the composition of the board, as we continue to implement our long-term board succession strategy.
During the year Christopher Roshier and Mary Francis both stepped down as non-executive directors: Christopher, having completed 22 years' service, including a long spell as chairman of the audit committee and senior independent director; and Mary, having completed 4 years' service, for most of which she was chairman of the remuneration committee.
At the forthcoming Annual General Meeting, Paul Rigg will also step down as non-executive director, having completed 6 years' service.
I would like to thank them all for the valued contribution that they have made to the guidance of the company during their time with us.
We have been fortunate to find excellent replacements in Katherine Innes Ker and Lesley James, the latter of whom has taken the chair of the Remuneration Committee. We have also recruited Reeta Stokes as Company Secretary, assuming the role previously covered on a temporary basis by Tim Haywood, our Finance Director.
With these changes successfully implemented, and the board duly strengthened, the next steps in our non-executive succession strategy are to seek appropriate candidates for the roles of Chairman and Senior Independent Director, in time for my retirement and that of Ian Menzies-Gow in 2011. Ian and I will work to ensure that the process is seamless and that the board will continue to function as robustly and effectively as ever during this period of transition.
Prospects
Property market prospects still remain uncertain. The economy may be slowly emerging from recession, but business confidence remains fragile, with continued pressure on rents and occupancy levels.
However, St Modwen is well prepared for such conditions: our financial position is sound; our business model will increasingly create value; and we are in a good position to seize attractive opportunities to add further to the Hopper.
As yet our portfolio has not seen the resurgence in values experienced in other parts of the property market. But nevertheless I believe that we are now beginning to see important signs of improvement.
I am confident that 2010 will see the company returning to growth in profits and NAV.
Anthony Glossop
Chairman
5 February 2010
* trading profit - excludes non-cash items such as revaluations and mark-to-market adjustments
** net asset value per share - adjusted as if the equity issue had taken place on 1 December 2007
BUSINESS REVIEW
Our Market
St Modwen is proud to be recognised as the UK's leading regeneration specialist, delivering complex schemes throughout the country and within all sectors of the property market.
Over the past two years we have experienced some of the worst property market conditions for decades. There has been a widespread lack of confidence and activity amongst housebuilders and commercial property occupiers, who are key to the profitability and growth of our business. There has also been a well-documented valuation crisis, which together with a shortage of bank finance has restricted investor appetite and triggered a rapid and significant reduction in property values.
It is with some relief that we are able to say that we believe that the worst of these conditions are now behind us. Although we have not seen evidence within our portfolio of the strong recovery of values recently reported for some prime assets, we are achieving transactions that underpin our current valuations. This leads us to believe that future valuation movements are more likely to be positive than negative
In particular, we are pleased to have agreed four disposals of residential land at sites throughout the country, to a range of housebuilders, at prices at or ahead of our previous carrying values. Before the credit crunch, our residential land disposal programme was a major part of our development activities. With the gradual re-opening of residential markets, we expect to resume that activity and start to re-capture some of the value that has been written off our residential land holdings.
Notwithstanding the depressed state of the economy, we have found a few bright spots within our various markets. In particular, we are currently on site with two sizeable colleges of further education (at Rugby and Longbridge), with two foodstores (at Farnborough, Hampshire and Connah's Quay, Flintshire) and with several significant employment buildings (at Taunton and Stoke on Trent). These pre-sold transactions have enabled us to continue to be relatively active and to maintain a degree of momentum with our key strategic projects.
Although we believe that we have now reached the bottom of the cycle, the pace and extent of recovery from this point will be determined mainly by macro-economic factors outside of our control:
·; Increasing unemployment and interest rate levels would represent significant threats to occupier and investor confidence.
·; Future cuts in public spending may have a negative impact on local government's ability or willingness to support large-scale infrastructure or regeneration projects.
We have experienced extremely challenging markets in the past year, but are pleased that our business model has proved sufficiently robust for us to emerge relatively unscathed and in a strong position to take advantage of improving conditions.
Competitive and Regulatory Environment
In the recessionary post credit crunch market, the lack of readily-available finance has restricted the appetite and ability to compete of many developers. The dislocation of the residential market, combined with falling investment returns, and increasing levels of caution amongst occupiers has undermined the viability of a number of proposed schemes. As a result, development and acquisition activity has fallen to low levels.
Following our refinancing in the summer, we are now able to operate from a position of strength. This new competitive landscape is already beginning to provide us with opportunities, for acquisitions and for renegotiating schemes that have become unviable in present market conditions. We do not see this environment changing markedly in the short- to medium-term. Consequently we have been in no rush to use our available funds on any but the most compelling transactions.
Despite this backdrop, the regulatory environment remains restrictive, wasteful and expensive. Planning process reforms have not worked, and the cost and timescale involved in obtaining planning permission continue to escalate with every new initiative, guidance and regulation. However, as one of our key skills is being able to work our schemes through the planning system, the more restrictive the system becomes, the more our skills are needed, and the greater the value that is created by our marshalling activities.
Business Model and Strategy
St Modwen's underlying purpose is to add value to the properties we control. We do not acquire or retain property unless we believe that we can add significant value to it by asset management, refurbishment or redevelopment.
In a declining market, such as the one we have recently been facing, new and different challenges have arisen, and our business model has been stress-tested to previously unthought-of levels. It is with some satisfaction therefore that we are able to reflect on the past two years, and on the reaffirmation of many long-standing elements of our business model:
·; First and foremost our recurring income, generated from an extensive and diversified rent roll, enabled us to continue to operate profitably despite at times the almost total absence of any investment market for our new developments.
·; Our long-standing emphasis on value creation enabled us to mitigate the worst effects of the deteriorating property investment market on our portfolio valuations, as we continued to marshal our Hopper through the planning process to extract maximum value
·; Our prudent approach to financing and excellent relationships with our key banks enabled us to address covenant issues proactively and at a realistic cost
·; Our network of regional offices, supported by a strong central management team, ensured that we had a broadly-based programme of activity and that, even in very difficult market conditions, we were able to pull out of the hopper projects for which there was a current market opportunity.
·; Our skills in brownfield land remediation and other aspects of regeneration make us an attractive partner to landowners, local authorities and central government agencies.
Nevertheless the past two years have provided us with some useful lessons for the future evolution of the company. We will set more demanding hurdles before initiating speculative development schemes; and we will be more rigorous in exiting mature schemes to which no further value can be added, other than by market yield movements.
Employees
St Modwen's business model is based on a hands-on approach in all areas: asset management; marshalling; construction and development. As a result, the skill of our people is fundamental to our success. Therefore, particularly in these difficult times, we have sought to retain and incentivise them, and to continue to grow the abilities of the talented people who will be the drivers of the company's future expansion. With the current short-term financial constraints, this has been achieved by putting in place share options and deferred bonuses which seek to reward and lock-in key employees. We have also maintained our programme of internal promotion, with a number of staff taking on significant additional responsibilities during the year.
To avoid implementing any further enforced headcount reductions since the 20% in October 2008, we consulted widely with staff during the year and agreed a cost-reduction package that would enable us to keep our core team together. With effect from September therefore, we put in place a company-wide salary freeze, closed the company's final salary pension scheme to future accrual and also reduced employer contributions into the money purchase scheme until we are once again growing our net asset value and paying dividends.
Financial Objectives and Key Performance Indicators
St Modwen's financial objectives over the past year have been simple and obvious, namely: to manage through the downturn by running the business for cashflow; and to be in the best possible shape to profit from the opportunities that will undoubtedly arise.
Both of these objectives required us to adapt our activities to the deteriorating market conditions. We did this by:
·; reducing our expenditure;
·; seeking to drive down debt and gearing levels;
·; selling assets to which we could no longer add value;
·; eliminating speculative development activity; and
·; minimising any other non-funded commitments.
The success of these activities enabled us to be cash-generative during the year, notwithstanding the absence of cash inflow from residential land sales.
But despite all of these actions, market conditions were so adverse, and property values were falling to such an extent, that we were ultimately left with little alternative but to seek to refinance the business in May, in order to address bank covenant limits. The subsequent renegotiation of our banking covenants and the issuing of new equity (reported on in more detail below), addressed the risk of a future covenant breach. It also took away the need to sell further assets into a declining market, and put the company into a position of financial strength from which we could benefit from future opportunities.
The company is trading within all its banking covenants and its realistic forward projections show a continuation of that position.
Our key performance indicators are:-
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Target |
Actual 2009 |
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Gearing1 |
75-100% |
80% |
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Rental cover2 |
>100% |
97% |
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Hopper replenishment3 |
>120% |
569% |
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NAV growth4 |
upper quartile |
upper quartile |
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Dividend growth5 |
in line with NAV growth |
n/a |
1 Gearing = net debt as a percentage of shareholders' funds
2 Rental cover = net rental income as a percentage of overheads and net interest (excluding non-cash items such as mark-to-market of swaps)
3 Hopper replenishment = land acquired for the hopper as a percentage of land used in the year
4 NAV growth = balance sheet total as percentage of previous year. Target = upper quartile performance compared with FTSE350 real estate index over five years...
5 Dividend growth = dividend per share as percentage of previous year.
Development and Performance of the Business
The Hopper - assembly and acquisition
Despite the financial constraints on the business, 2009 was another excellent year for acquisitions, and we were able to achieve this without significant cash outlay. Obtaining control of opportunities through self-financing transactions has always been part of our hopper strategy, and this year our skills in deal structuring have enabled us to continue to build for the future without compromising the short-term requirements of the business.
Our total expenditure on new acquisitions during the year was only £13m. However, we were able to add 705 acres of developable land to the hopper. As a result, our hopper now stands at 5,604 developable acres. The hopper is very broadly based, comprising some 174 separate schemes, across all sectors of the property market.
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Hopper Analysis |
2009 |
2008 |
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(acres) |
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Developable |
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Retail and leisure |
433 |
314 |
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Employment |
2,735 |
2,324 |
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Residential |
1,564 |
1,462 |
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Unspecified |
872 |
920 |
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|
|
|
|
|
5,604 |
5,020 |
The most significant acquisitions that we made during the period were:
·; BP Portfolio - we acquired a portfolio of former BP sites with 566 developable acres, situated primarily in South Wales. Together with our existing Coed Darcy site, this acquisition provides us with an exciting and significant development programme for the long-term regeneration of an area extending from Neath Port Talbot to Swansea.
·; Skypark, Exeter - we entered into a partnership agreement with Devon County Council to develop the 107 acre Skypark scheme in Exeter, which will include 1.4 million sq ft of office and industrial/manufacturing space. We are currently working up the masterplan and the Section 106 agreement, with a view to starting construction in 2011.
·; Firepool, Taunton - we completed a development agreement with Taunton Deane Borough Council for the £270 million regeneration of this important town centre opportunity.
·; Weston Super Mare - we also completed a development agreement with South West Regional Development Agency and the Homes and Communities Agency for a new 200 acre mixed use community at the former RAF Locking site, and expect to start work on site this spring.
·; Sunderland- we acquired a seven acre parcel of land, formerly owned by glass manufacturer, Corning, adjacent to the 10-acre former Pyrex factory site that we purchased in 2008. The combined 17 acre site is now one of Sunderland's major strategic development zones, earmarked for a £10 million mixed-use development which will provide 65,000 sq ft of office accommodation and 285, two-, three- and four-bedroom homes
·; Doncaster - we acquired a 27 acre site for £3 million. To be known as 'Parklands Industrial Estate' it comprises 600,000 sq ft of existing buildings including a 250,000 sq ft warehouse and a 350,000 sq ft production building.
·; Weston Super Mare - we acquired the 26 acre Westland Distribution Park site for £3.4 million, reflecting a net initial yield of 13%. It currently comprises eight acres of open storage land and 335,000 sq ft of distribution and production facilities.
Marshalling
Our teams have continued to make very good progress in marshalling the schemes in our hopper for future delivery, which is shown by the quantity and quality of planning permissions that we have obtained in the year:
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PLANNING PERMISSIONS OBTAINED IN THE YEAR |
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No. |
Sq Ft |
Units |
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Residential |
9 |
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932 |
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Retail |
4 |
332,000 |
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Commercial |
13 |
2,011,000 |
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Office |
2 |
183,000 |
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The planning position on our residential land bank is now:-
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Planning status |
Acres |
Units |
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Allocated in local plan or similar |
242 |
6,134 |
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Resolution to grant permission |
323 |
5,230 |
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Outline permission granted |
519 |
7,887 |
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Detailed permission granted |
32 |
833 |
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Sub-total - with planning recognition |
1,116 |
20,084 |
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|
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No planning recognition |
448 |
4,956 |
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|
|
|
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TOTAL |
1,564 |
25,040 |
Although we have scaled back our construction programme in response to market conditions, and in particular have avoided starting any new speculative schemes, we have nevertheless remained active and have made significant progress on a number of important schemes:
·; We are making excellent progress with our mixed use town centre schemes at Farnborough (with the completion of the 62,000 sq ft Sainsbury's foodstore and the 77-bed Travelodge Hotel) and at Wembley Central (with the completion of the first retail phase, anchored by TK Maxx, Peacocks and Bon Marche and the fit-out of the first phase of 32 apartments).
·; We have recently begun building a pre-sold 52,000 sq ft foodstore for Morrison and 20,000 sq ft of additional retail space at Connah's Quay, Flintshire, following demolition of a 1970's shopping centre.
·; We have also continued to make excellent progress with the construction of the 150,000 sq ft Warwickshire College at our Rugby site, despite the insolvency of the main contractor. Using the skill and knowledge of our in-house construction team, we assumed direct responsibility for this construction programme thereby not only safeguarding numerous subcontractor jobs but also keeping the project on programme and within the original budget.
·; We received planning consent and confirmation of funding for the flagship 250,000 sq ft Bournville College at Longbridge, and began work on site in October on this two-year project which is of great strategic importance to the area. The building of this six storey development will create hundreds of construction and associated jobs locally. The College will create a dynamic new learning environment for over 10,000 students in both further and higher education, and will provide a significant impetus for the regeneration of the former MG Rover facility.
Delivery
During the year, a number of our usual markets were highly illiquid or, in the case of residential land disposals, closed altogether. Investor confidence was low, as was the availability of finance, and realistic prices were difficult to obtain. Nevertheless, we adhered to our long-standing philosophy of disposing of those assets to which we could add no further value, and undertook a number of sales of mature properties or newly-completed developments in order to recycle cash for our other schemes.
We therefore realised disposal proceeds of £101m, benefitting from the wide range, varied lot sizes, and realistic pricing of our products. Some of the principal disposals in the period were:
·; The Vodafone call centre, sold to a private investor for £10.7 million, reflecting a net initial yield of 8.0%.
·; Part of the site at Thurleigh Business Park in Bedfordshire, to MSV Group Ltd for £5.3 million, reflecting a net initial yield of 8.5%.
·; A foodstore, let to Tesco for a further 62 years, at our Catford Shopping Centre in Lewisham, sold to a private investor for £9.1 million, a net initial yield of 6.9%.
·; A 39,000 sq ft cash and carry store let to Booker at Langford Mead Business Park in Taunton, Somerset for £2.9 million, reflecting a net initial yield of 7.25%.
In the industrial/distribution sector we completed over 750,000 sq ft of new buildings, including:-
·; A 26,150 sq ft supply and distribution centre for East Riding of Yorkshire Council at Melton Business Park, Hull. The building was pre-sold to the Council for £2.25m.
·; At the 200,000 sq ft Langford Mead Business Park in Taunton, part of our £100 million redevelopment of a 65-acre former industrial estate and MoD site, we have built:
- Two new bespoke buildings totalling 76,000 sq ft to form a new Heritage Centre for Somerset County Council's Historical Artefacts with a specifically designed and controlled environment which also allows wider public access, and
- An 11,000 sq ft unit for West Country Feeds, the supplier of animal feeds and accessories
·; A 22,400 sq ft facility for Staffordshire Fire and Rescue Service and a 36,000 sq ft factory and head office building for Wade Ceramics at our 400 acre Trentham Lakes Business Park development.
·; Substantial progress has been made during the year at RAF Northolt, where, as part of Project MoDEL, over £150 million is being invested to provide service personnel with brand new living, working and dining accommodation. This part of the project is due to complete in the summer of 2010, and remains on plan and on budget, with more than 95% of the 600,000 sq ft of buildings completed.
We also successfully completed a number of developments in the office and leisure parts of our business, including:
·; The construction and fit-out of a pre-let call centre for Vodafone, an innovatively-designed 80,000 sq ft building which secured jobs for about 1,100 people in Stoke on Trent. This spacious and modern building achieved BREEAM "Very Good" rating, and is the largest commercial office building we have ever built in this region.
Encouragingly, we are now beginning to see signs of recovery in the residential land market, with bids received, or contracts exchanged at or above current book values, on four disposals totalling 34 acres.
Hands-on asset management remains a significant part of our business model, and our regional teams have been very active during the period, as we seek to mitigate the impact on our rent roll of the current difficult market conditions. We are, of course, mindful of the effect of rent reviews and lease renewals on asset valuations, but also very aware of the impact of void costs and loss of rent on our trading profit. We have therefore sought to minimise voids wherever possible, taking a pragmatic view of passing rents and seeking to work with those of our tenants who are experiencing difficulties.
The benefit of our overall approach to asset management is shown by the fact that our like-for-like gross rent roll has increased by £2.0m to £43.0m since 30 November 2008. This reflects our success in achieving £7.7 m of new lettings to offset rent lost of £5.1m due to vacations and £0.6m due to tenant failures in the period.
Experiences, however, vary across our portfolio. For example, a number of our secondary shopping centres (including Edmonton Green, Elephant & Castle, and Catford) have strongly underpinned ERVs due to the competitive pressures brought about by near 100% occupancy levels. On the other hand, certain centres (including Basingstoke) are troubled by significant voids to which a highly competitive rent reduction is our principal response. These factors are reflected in the yields and ERVs used in our year end valuations.
We anticipate that 2010 will continue to see pressure on our net rents, as the macro-economic conditions continue to give rise to increased unemployment and a reduction in consumer spending. However, our rents are at the affordable end of the scale, which we believe will provide some insulation from the effect of further tenant failures.
Supplementing our traditional rent roll, our leisure activities at Trentham Gardens and Solihull Ice Rink, continue to perform strongly. The gardens, in particular had a very successful year, attracting 216,000 visitors (2008: 108,000) and recording a trading profit before interest of £1.7m (2008: £0.8m).
[For further details of projects referred to in this business review, and other projects, see our website www.stmodwen.co.uk]
FINANCIAL REVIEW
In the trading profits table and throughout the financial review, certain numbers are quoted which include the group's share of joint ventures and associates as detailed in note 9
Equity Issue and Refinancing
In May 2009 we announced a refinancing of the business, comprising new banking covenants and a Firm Placing and Placing and Open Offer of new shares. Together these enabled us to reduce our gearing levels and to meet our banking covenants in the wake of a prolonged and significant fall in property values.
We were very heartened by the level of interest shown by both existing shareholders and new institutional investors, which enabled the issue to be undertaken without significant dilution of existing shareholders' interests. This was the first time that we had raised new equity for over 20 years, and the opportunity to participate was taken by a number of high quality new institutional investors, whose participation strengthens and diversifies our share register.
We continue to benefit from excellent and longstanding relationships with our principal banks (Lloyds Banking Group, RBS, HSBC, Barclays and Bank of Ireland), whose support was reflected in the terms and conditions that we obtained for our new banking arrangements, which stand favourable comparison with similar refinancing exercises undertaken by our peers.
The subsequent refinancing of our Sowcrest joint venture was also concluded satisfactorily, with the existing £38m Fortis bank facility for our Wembley scheme extended until June 2012.
Trading profit
In very difficult conditions, we are pleased to have delivered a trading profit of £8.4m for the year. Our business model is based on core rental and other income covering the running costs of the company (property outgoings, overheads and interest), so that even when development profits are reduced, the company is still able to meet its commitments.
|
(£m)* |
2009 |
2008 |
|
Net rental income |
33.5 |
33.2 |
|
Property profits1 |
7.6 |
20.9 |
|
Other income |
1.8 |
7.3 |
|
Administrative expenses |
(14.1) |
(14.1) |
|
Bank interest2 |
(20.4) |
(27.8) |
|
|
|
|
|
Trading Profit |
8.4 |
19.5 |
|
|
|
|
|
* including the group's share of joint ventures and associates |
|
|
|
|
|
|
|
1 comprises results from development and disposal of investment properties before the deduction of net realisable value provisions of £15.8m (2008: £11.3m). |
|
|
|
2 excluding mark to market adjustments and other non-cash items of £5.1m (2008: £20.8m) in the group and £1.2m (2008: £2.9m) in joint ventures. |
|
|
After the inclusion of revaluations and other non-cash items, we incurred a loss after tax for the year of £101.7m (2008: £50.7m).
Net rental income
The overall increase in net rental income was the result of a year of significant asset management activity in which the effect of asset disposals, tenant failures and vacations was more than offset by our successes in letting void space and newly-completed developments.
At 30th November 2009 the like-for-like gross rent roll, including our share of rent from joint ventures had increased from £41.0m to £43.0m. At the year end our overall voids had been held steady at 16.8% (2008:16.8%).
Property profits
Property profits, including our share of joint ventures, were £7.6m (2008: £20.9m), with significant contributions from a number of pre-let and pre-sold developments (including for Vodafone, Wades, Morrisons and Somerset and East Riding councils), as well as property profits at Thurleigh, Catford and Bournville and Rugby Colleges.
Property Valuations
All of our investment properties (including land) are valued every six months by King Sturge and Co. at market value, and our work in progress is also independently assessed for any impairment issues.
INVESTMENT PROPERTY PORTFOLIO (£m)*
|
|
2009 |
2008 |
|
Residential land |
329 |
324 |
|
Commercial land |
132 |
150 |
|
Income producing: |
|
|
|
Retail |
192 |
233 |
|
Offices |
44 |
38 |
|
Industrial |
194 |
204 |
|
|
|
|
|
|
|
|
|
Total |
891 |
949 |
|
|
|
|
|
* including the group's share of joint ventures and associates (excluding minimum lease payments) |
|
|
The valuation of our investment properties reflects both market movements and the value added by our own activities, including the achievement of marshalling milestones in the planning process. The calculation of this added value reflects the present value of future cash flows, based on existing land prices and the current best estimate of costs to be incurred.
2009 was a year of considerable uncertainty in the real estate investment market, and our valuations at 30th November continue to reflect a weak secondary property market, and as a result, our investment property valuations have fallen by £107m (11%) during the year, and our assets for resale and work in progress carrying values by £16m (6%).
In the first half of the year, all elements of our portfolio were adversely affected, with significant market value movements in every sector. In the second half, the principal areas of down-valuation were our retail and commercial land holdings. We produced sizeable added value uplifts which helped to mitigate the worst effects of the adverse market movements.
Despite reports of positive valuation movements for prime assets in the latter part of 2009, we have not yet seen any material improvement in market conditions or values in our secondary property portfolio. However, it is encouraging to note that the rate of decline in our valuations has slowed considerably, with a net down-valuation of £87m for the first half being followed by a further down-valuation of £20m for the second half. For most of our portfolio, we now believe that we have reached the bottom of the cycle.
PROPERTY VALUATION MOVEMENTS (£m)*
|
|
2009 |
|
2008 |
|
|
|
H1 |
H2 |
Total |
|
|
Market value movement |
(112) |
(22) |
(134) |
(129) |
|
Marshalling and asset management |
25 |
2 |
27 |
65 |
|
|
|
|
|
|
|
Total |
(87) |
(20) |
(107) |
(64) |
|
|
|
|
|
|
|
* including the group's share of joint ventures and associates |
|
|
|
|
In particular, after suffering significant reductions over an 18 month period, we are pleased to report that the value of our residential land appears to have found a stable level, and we have in place a number of transactions that support the current values. We believe that this does not reflect the long-term value of residential land which we consider will return to more realistic levels once a functioning housing market is re-established. We therefore look forward to some positive valuation results on this part of the portfolio in the near future.
2009 PROPERTY VALUATIONS - market value movements (£m)*
|
|
H1 |
|
H2 |
|
Total |
|
|
|
|
|
|
|
|
|
|
Residential land |
(16) |
(6%) |
(1) |
0% |
(17) |
(6%) |
|
Commercial land |
(22) |
(14%) |
(10) |
(7%) |
(32) |
(20%) |
|
Income producing |
|
|
|
|
|
|
|
Retail |
(52) |
(22%) |
(5) |
(4%) |
(57) |
(25%) |
|
Offices |
(4) |
(10%) |
- |
0% |
(4) |
(10%) |
|
Industrial |
(18) |
(9%) |
(6) |
(3%) |
(24) |
(12%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
(112) |
(12%) |
(22) |
(2%) |
(134) |
(14%) |
|
|
|
|
|
|
|
|
|
* including the group's share of joint ventures and associates |
|
|
|
|
|
|
Administrative expenses
Towards the end of 2008, we took action to reduce our cost base to reflect the lower activity levels in the business. The impact of the resulting redundancy programme was a reduction in annualised costs of £3m. We continued to maintain a close control over costs in 2009, with a number of initiatives being implemented including:
·; the permanent closure of our final salary pension scheme,
·; the temporary suspension of company contributions to the remaining (money purchase) pension scheme, and
·; a further headcount reduction of 12 due to natural wastage,
The closure of the defined benefit pension scheme resulted in a one-off curtailment gain of £0.7m.
Also included within administrative expenses is the cost of employee share options. The charge for the year increased to £0.6m (2008: £3.3m credit), as a result of the recovery of the share price following the equity issue and refinancing.
As a result of the above factors, administrative expenses (including our share of joint ventures) have remained flat during the year at £14.1m (2008: £14.1m).
Joint ventures and associates
Our share of the post tax results of joint ventures and associates is shown on the income statement as one net figure. A full analysis of the underlying details is disclosed in note 9. The principal joint venture in which the group is involved is Key Property Investments Limited, which recorded a post-tax loss, of which our share was £22.1m (2008: £7.2m).
Finance costs and income
Net finance charges (including our share of joint ventures) have reduced to £26.7m (2008: £51.5m). This was due to three principal factors: lower borrowing levels; reduced mark-to-market costs; partly offset by increased borrowing costs.
·; The proceeds of the equity issue, and a positive net operational cashflow for the year, enabled us to drive average group borrowings down by £45m to £385m (2008: £430m).
·; As a result of more stable interest rates than in 2008, the revaluation of our interest rate swap contracts (which have a weighted average cost before margin of 4.99%) to market value at year end resulted in a much lower charge to the Income Statement of £5.9m (2008: £18.3m). This charge recognises the negative market value of such contracts in the prevailing climate of very low interest rates.
·; The impact of the renegotiation of our banking covenants was to increase the weighted average margin on our facilities by 113 basis points to 199 basis points. With the interest cost of 99% of our borrowings fixed, our total borrowing cost is currently 6.98%.
Net finance charges also include a charge of £0.2m (2008: £5.6m) for the amortisation of the discounted deferred consideration payable to the MoD in respect of Project MoDEL.
During 2009 the group has continued to expense all interest as it has arisen, and has not capitalised any interest on its developments or its investments.
Taxation
The effective rate of tax credit for the year, including our share of joint ventures is 15% (2008: 37%).
This rate is substantially lower than the standard rate of UK Corporation Tax due primarily to restrictions under IAS on our ability to reflect the utilisation of the current year's tax losses against future taxable profits. As a result of this, we have an unrecognised deferred tax asset of £8m which we envisage will be crystallised in future years when the company resumes profitable trading.
It is anticipated that, with the continued utilisation of these losses and of other tax allowances, and the benefit in future years of approved tax planning activities, the effective rate of tax on future profits will be lower than the standard rate of UK Corporation Tax.
Benefit from tax planning activities is only recognised when the outcome is reasonably certain.
FINANCING, COVENANTS AND GOING CONCERN
Financing
The company entered the downturn with adequate secured facilities and excellent banking relationships. During the year we focussed the business on cash generation, and worked closely with our banks to ensure that appropriate covenants are in place.
The company's cash flow was adversely affected by the illiquidity of a number of our markets, but we were nevertheless able to realise £101m from our ongoing programme of asset disposals. This, together with our recurring net rental income, and close management of our working capital, enabled us to meet our administrative expenses, interest, and an £80m development and capital expenditure programme, whilst delivering a net reduction in borrowings from operational cash flows.
The table below shows an additional non-statutory analysis of the operational cash flow of the business:
|
Operational cash flow |
2009 |
2008 |
|
(£m) |
|
|
|
Net Rent |
26.1 |
25.7 |
|
Property disposals |
100.9 |
127.1 |
|
Property acquisitions |
(12.9) |
(12.2) |
|
Capital expenditure |
(79.7) |
(190.3) |
|
Working capital and other movements |
(6.3) |
64.1 |
|
Overheads, interest and tax |
(27.0) |
(34.0) |
|
|
|
|
|
|
|
|
|
Net cash inflow (outflow) |
1.1 |
(19.6) |
The total reduction in group borrowings amounted to £102.7m, resulting from the operational cash flow above of £1.1m and the net receipts of £101.6m from the equity issue, all of which was initially used to reduce our debt levels. Towards the end of the year, with opportunities in the market conditions becoming more favourable, we began selectively to make property acquisitions.
With the receipt of the proceeds from the equity issue, and the significant level of undrawn capacity within our existing arrangements, we took the opportunity to cancel £100m of our previous facilities. Consequently we now have total group facilities of £519m (2008: £619m).
Current net debt is £319m (2008: £422m), giving us a gearing of 80% (2008: 105%) and a headroom to meet future commitments of £200m. Including joint ventures, total banking facilities are £764m (2008: £872m), net debt is £527m (2008: £625m) and gearing 106% (2008: 130%).
Our group facilities have a weighted average maturity of 3 years (2008: 4 years), with no maturities before November 2011.
The weighted average margin of our facilities has risen as a result of the new amendment agreements to 199 basis points (2008: 86 b.p.) over LIBOR. Our strategy had previously been to hedge two thirds of all borrowings, with the maturity of both hedges and facilities being aligned with individual schemes where applicable. Following the repayment of £101.6m of borrowings after the equity issue during the year, the amount of our debt at fixed rates rose to 99% (2008: 57%), and is unlikely to change materially from that level until 2011 when the first of the hedging contracts matures. The weighted average fixed interest payable under these hedges is 4.99 %.
Covenants
As part of the refinancing during the year, amendment agreements were put in place which substantially relaxed the covenants which apply to our banking facilities. The revised covenants are:-
·; net assets must be greater than £250 million (actual £401m);
·; gearing must not exceed 175 % (actual 80%); and
·; interest cover ratio (which excludes non-cash items, such as revaluation movements) must be greater than 1.25x (actual 1.7x)
The arrangement fees payable to the lenders and related advisory fees for these amendments amounted to approximately £2 million.
Although current economic conditions still have an element of uncertainty, we have considered available market information, consulted with our advisers and applied our own knowledge and experience to the group's property portfolio. As a result of this, we believe the revised covenant levels are more than adequate for our worst-case scenarios, and that we will once again be able to manage our business for property, rather than bank covenant, reasons.
Going Concern
In our consideration of going concern, we have considered the factors described above, reviewed the group's future cash forecasts and valuation projections, which we believe are based on realistic assumptions, and believe, based on those forecasts and assumptions, that it is appropriate to prepare the financial statements of the group on the going concern basis.
|
Financial Statistics |
2009 |
2008 |
|
|
|
|
|
Net Borrowings |
£319m |
£422m |
|
Gearing |
80% |
105% |
|
Gearing, incl share of JV debt |
106% |
130% |
|
Average debt maturity |
3 years |
4 years |
|
Interest cover |
1.7x |
1.62x |
|
Undrawn committed facilities |
£196m |
£185m |
Balance Sheet
Net assets
At the year end, net asset value per share was 200p, a reduction of 51p (20%), after restating 2008 comparatives for the effect of the equity issued in 2009. In common with other property companies, we also use the diluted EPRA NAV measure of net assets which analysts also use in comparing the relative performance of such companies. The adjustments required to arrive at our adjusted net assets measure are shown in the table below.
Adjusted net assets per share were 219p at 30th November 2009, a reduction of 57p (21%) in the year.
|
NET ASSETS |
|
|
|
|
|
|
|
2009 |
|
2008 |
|
|
|
£m |
|
£m |
|
|
|
|
|
|
|
Net Assets, beginning of year |
|
402.2 |
|
467.7 |
|
Issue of new shares |
|
101.6 |
|
- |
|
Loss after tax |
|
(101.7) |
|
(50.7) |
|
Dividends paid |
|
- |
|
(15.1) |
|
Other |
|
(1.1) |
|
0.3 |
|
Net assets, end of year |
|
401.0 |
|
402.2 |
|
|
|
|
|
|
|
Adjust for issue of new shares |
|
- |
|
101.6 |
|
Restated net assets |
|
401.0 |
|
503.8 |
|
|
|
|
|
|
|
Deferred tax on capital allowances |
|
4.7 |
|
4.3 |
|
Deferred tax on revaluations |
|
13.3 |
|
31.2 |
|
Mark to market of interest rate swaps |
|
19.3 |
|
14.6 |
|
|
|
|
|
|
|
Diluted EPRA NAV |
- total |
438.3 |
|
553.9 |
|
|
- per share |
219p |
|
276p |
In calculating the EPRA net asset value, we consider the fair value of inventories to be their book value
Investment properties
The total value of investment properties under our control, including 100% of joint ventures, reduced by £67m during the year to £1,035m (2008: £1,102m)
The independent valuations during the year ended 30th November 2009 resulted in net revaluation losses, including our share of joint ventures, of 11% (£107m), compared with the previous year end. Our properties are currently valued at the following weighted average equivalent yields:-
|
|
2009 |
2008 |
|
|
|
|
|
Retail |
9.9% |
7.8% |
|
Industrial |
9.4% |
8.8% |
|
Office |
8.7% |
7.9% |
|
|
|
|
|
Total |
9.5% |
8.1% |
Inventories
Inventories have reduced in the year from £228m to £193m reflecting the completion of the development programme started in previous years (including £86m relating to Project MoDEL) and the effect of disposals or transfers into investment properties of completed schemes. Assets held in inventories principally comprise development projects that are on site and under construction and have not been pre-sold, and other assets that are held for resale at the period end.
Assets held in inventories are not included in the annual valuation, but are assessed for impairment and net realisable value issues using independent external advice where appropriate. As a result, we have written down certain of our assets for resale and work in progress balances to reflect their net realisable value in current market conditions. The total provided amounted to £14.2m in the group and £1.6m in joint ventures.
OUTLOOK
Despite a difficult climate for occupiers, giving rise to low levels of demand for space, and continuing pressures on rents, we believe that our portfolio of flexible and affordable space is resilient.
Encouragingly, the residential market is showing signs of improvement. The sales of residential land we are currently progressing mark the restoration of some meaningful housebuilding activity, albeit from an extremely low base.
With our Hopper at record levels, and our finances sound, our marshalling and development skills will increasingly be applied, and as normal market conditions return, we will once again return to net asset value growth.
Bill Oliver, Chief Executive
Tim Haywood, Finance Director
5 February 2010
Directors' Responsibility Statement
We confirm to the best of our knowledge:
- The financial information contained within this announcement has been prepared on the basis of the accounting policies applied in the year ended 30th November 2009 which are set out below. Whilst the information included in this announcement has been computed in accordance with International Financial Reporting Standards ("IFRS"), this announcement does not itself contain sufficient information to comply with IFRS as adopted by the European Union. The financial information contained in this announcement does not constitute the company's statutory accounts for the years ended 30th November 2009 or 2008, but is derived from those accounts. Those accounts give a true and fair view of the assets, liabilities, financial position and profit and loss of the company and the undertakings in the consolidation taken as a whole.
- Statutory accounts for 2008 have been delivered to the Registrar of Companies and those for 2009 will be delivered following the company's annual general meeting. The auditors have reported on these accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report, and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
- The Chairman's Statement, Business Review, Financial Review and the principal risks and uncertainties faced by the company within this announcement are extracted from the company's annual report which gives a fair review of the business and the position of the company and the undertakings included in the consolidation taken as a whole.
- The company expects to post full financial statements that comply with IFRS to shareholders, and on its website at www.stmodwen.co.uk, on or before 2nd March 2010. The full financial statements will be sent to the Document Viewing Facility on the same date.
Signed on behalf of the Board on 5 February 2010
|
BILL OLIVER |
TIM HAYWOOD |
|
Chief Executive |
Finance Director |
Group income statement
For the year ended 30th November
|
|
|
2009 |
2008 |
|
|
Notes |
£m |
£m |
|
Revenue |
1 |
113.7 |
146.5 |
|
|
|
|
|
|
Net rental income |
1 |
26.1 |
25.7 |
|
|
|
|
|
|
Development (loss)/profit |
1 |
(9.3) |
9.0 |
|
|
|
|
|
|
Gains on disposal of investments/ investment properties |
|
2.2 |
0.1 |
|
|
|
|
|
|
Investment property revaluation losses |
5 |
(81.7) |
(49.7) |
|
|
|
|
|
|
Other net income |
1 |
1.8 |
7.3 |
|
|
|
|
|
|
Losses of joint ventures and associates (post tax) |
7 |
(22.9) |
(8.9) |
|
|
|
|
|
|
Administrative expenses |
|
(13.9) |
(14.0) |
|
|
|
|
|
|
Loss before interest and tax |
|
(97.7) |
(30.5) |
|
|
|
|
|
|
Finance cost |
2 |
(26.0) |
(49.3) |
|
|
|
|
|
|
Finance income |
2 |
4.3 |
6.7 |
|
|
|
|
|
|
Loss before tax |
|
(119.4) |
(73.1) |
|
|
|
|
|
|
Tax credit |
3 |
17.7 |
22.4 |
|
|
|
|
|
|
Loss for the year |
|
(101.7) |
(50.7) |
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
|
|
|
|
Equity shareholders of the company |
12 |
(101.1) |
(51.7) |
|
|
|
|
|
|
Minority interests |
13 |
(0.6) |
1.0 |
|
|
|
|
|
|
|
|
(101.7) |
(50.7) |
|
|
|
|
|
|
|
Notes |
2009 |
2008 |
|
|
|
Pence |
Pence |
|
|
|
|
|
|
Basic and diluted loss per share (as restated) |
4 |
(59.7) |
(37.3) |
|
|
|
|
|
Group statement of recognised income and expense
For the year ended 30th November
|
|
|
2009 |
2008 |
|
|
Notes |
£m |
£m |
|
|
|
|
|
|
Loss for the year |
|
(101.7) |
(50.7) |
|
|
|
|
|
|
Pension fund: |
|
|
|
|
- actuarial losses |
|
(0.8) |
(0.4) |
|
- deferred tax thereon |
|
0.2 |
0.1 |
|
|
|
|
|
|
Total recognised income and expense |
|
(102.3) |
(51.0) |
|
|
|
|
|
|
Attributable to: |
|
|
|
|
- Equity shareholders of the company |
13 |
(101.7) |
(52.0) |
|
- Minority interests |
13 |
(0.6) |
1.0 |
|
|
|
|
|
|
Total recognised income and expense |
|
(102.3) |
(51.0) |
|
|
|
|
|
|
|
|
|
|
Group balance sheet as at 30th November
|
|
|
2009 |
2008 |
|
|
Notes |
£m |
£m |
|
Non-current assets |
|
|
|
|
Investment property |
5 |
762.9 |
814.3 |
|
Operating property, plant and equipment |
6 |
7.9 |
4.3 |
|
Investments in joint ventures, associates |
7 |
41.3 |
64.2 |
|
Trade and other receivables |
8 |
5.2 |
20.6 |
|
|
|
|
|
|
|
|
817.3 |
903.4 |
|
|
|
|
|
|
Current assets |
|
|
|
|
Inventories |
9 |
192.7 |
228.1 |
|
Trade and other receivables |
8 |
47.0 |
48.5 |
|
Cash and cash equivalents |
|
4.8 |
12.7 |
|
|
|
|
|
|
|
|
244.5 |
289.3 |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
Trade and other payables |
10 |
(139.2) |
(131.1) |
|
Borrowings |
11 |
(0.4) |
(0.4) |
|
Tax payables |
3 |
(7.7) |
(5.7) |
|
|
|
|
|
|
|
|
(147.3) |
(137.2) |
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
Trade and other payables |
10 |
(188.9) |
(201.4) |
|
Borrowings |
11 |
(323.2) |
(433.8) |
|
Deferred tax |
3 |
(1.4) |
(18.1) |
|
|
|
|
|
|
|
|
(513.5) |
(653.3) |
|
|
|
|
|
|
Net assets |
|
401.0 |
402.2 |
|
|
|
|
|
|
Capital and reserves |
|
|
|
|
|
|
|
|
|
Share capital |
|
20.0 |
12.1 |
|
Share premium account |
12 |
102.8 |
9.1 |
|
Capital redemption reserve |
12 |
0.3 |
0.3 |
|
Retained earnings |
12 |
269.6 |
371.3 |
|
Own shares |
12 |
(0.4) |
(0.1) |
|
|
|
|
|
|
Shareholders' equity |
|
392.3 |
392.7 |
|
|
|
|
|
|
Minority interests |
13 |
8.7 |
9.5 |
|
|
|
|
|
|
Total equity |
|
401.0 |
402.2 |
Group cash flow statement for the year ended 30th November
|
|
|
2009 |
2008 |
|
|
Notes |
£m |
£m |
|
|
|
|
|
|
Operating activities |
|
|
|
|
|
|
|
|
|
Loss before interest and tax |
|
(97.7) |
(30.5) |
|
Gains on the disposal of investments |
|
- |
(0.3) |
|
(Gains)/losses on investment property disposals |
|
(2.2) |
0.2 |
|
Share of loss of joint ventures and associates (post-tax) |
7 |
22.9 |
8.9 |
|
Investment property revaluation losses |
5 |
81.7 |
49.7 |
|
Depreciation |
6 |
1.0 |
0.5 |
|
Impairment losses on inventories |
|
14.2 |
10.1 |
|
Decrease/(increase) in inventories |
|
6.5 |
(29.8) |
|
Decrease/(increase) in trade and other receivables |
|
0.6 |
(3.1) |
|
(Decrease)/increase in trade and other payables |
|
(13.5) |
53.3 |
|
Share options and share awards |
|
(0.3) |
3.9 |
|
Pension |
|
(0.8) |
(0.1) |
|
Tax refund/(payment) |
3 (c) |
3.2 |
(4.8) |
|
|
|
|
|
|
Net cash inflow from operating activities |
|
15.6 |
58.0 |
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
|
|
Investment property disposals |
|
31.3 |
44.4 |
|
Investment property additions |
|
(28.0) |
(89.1) |
|
Disposal of investments |
|
- |
0.9 |
|
Property, plant and equipment additions |
|
(1.5) |
(0.9) |
|
Cash and cash equivalents acquired with subsidiary |
|
0.4 |
- |
|
Investment in associate |
|
- |
(2.3) |
|
Interest received |
|
1.4 |
2.5 |
|
Dividends received |
|
- |
4.0 |
|
|
|
|
|
|
Net cash inflow/(outflow) from investing activities |
|
3.6 |
(40.5) |
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
|
|
|
Dividends paid |
|
- |
(14.1) |
|
Dividends paid to minorities |
13 |
(0.2) |
(1.0) |
|
Interest paid |
|
(17.9) |
(22.0) |
|
Net proceeds on issue of share capital |
|
101.6 |
- |
|
New borrowings drawn |
|
44.2 |
23.5 |
|
Repayment of borrowings |
|
(154.8) |
(9.1) |
|
|
|
|
|
|
Net cash outflow from financing activities |
|
(27.1) |
(22.7) |
|
|
|
|
|
|
Decrease in cash and cash equivalents |
|
(7.9) |
(5.2) |
|
Cash and cash equivalents at start of year |
|
12.7 |
17.9 |
|
|
|
|
|
|
Cash and cash equivalents at end of year |
|
4.8 |
12.7 |
|
|
|
|
|
ACCOUNTING POLICIES
Basis of consolidation
The group financial statements consolidate the financial statements of St. Modwen Properties PLC and the entities it controls. Control comprises the power to govern the financial and operating policies of the investee and is achieved through direct or indirect ownership of voting rights or by contractual agreement.
VSM Estates (Holdings) Limited is 50% owned by St Modwen Properties PLC; however, under the funding agreement the group obtains the majority of the benefits of the entity and also retains the majority of the residual risks. This entity is therefore consolidated in accordance with SIC 12 "Consolidation - Special Purpose Entities".
All entities are consolidated from the date on which the group obtains control, and continue to be consolidated until the date that such control ceases. All intra-group transactions, balances, income and expense are eliminated on consolidation.
Minority interests represent the portion of profit or loss and net assets that are not held by the group and are presented separately within equity in the group balance sheet.
Interests in joint ventures
The group recognises its interest in joint ventures using the equity method of accounting. Under the equity method, the interest in the joint venture is carried in the balance sheet at cost plus post-acquisition changes in the group's share of its net assets, less distributions received and less any impairment in value of individual investments. The income statement reflects the group's share of the jointly controlled entities' results after interest and tax.
Financial statements of jointly controlled entities are prepared for the same reporting period as the group. Where necessary, adjustments are made to bring the accounting policies used into line with those of the group.
The group statement of recognised income and expense reflects the group's share of any income and expense recognised by the jointly controlled entities outside the income statement.
Interests in associates
The group's interests in its associates, being those entities over which it has significant influence and which are neither subsidiaries nor joint ventures, are accounted for using the equity method of accounting, as described above.
Properties
Investment properties
Investment properties, being freehold and leasehold properties held to earn rental income, for capital appreciation and/or for undetermined future use, are carried at fair value following initial recognition at the present value of the consideration payable. To establish fair value, investment properties are independently valued on the basis of market value. Any surplus or deficit arising is recognised in the income statement for the period.
Once classified as an investment property, a property remains in this category until development with a view to sale commences, at which point the asset is transferred to inventories at current valuation.
Where an investment property is being redeveloped for continued use as an investment property, the property remains within investment property and any movement in valuation is recognised in the income statement.
Investment property disposals are recognised on completion. Profits and losses arising are recognised through the income statement and the profit on disposal is determined as the difference between the sales proceeds and the carrying amount of the asset.
Investment properties are not depreciated.
Inventories
Inventories principally comprise properties held for sale, properties under construction and land under option.
Cost comprises land, direct materials and, where applicable, direct labour costs that have been incurred in bringing the inventories to their present location and condition. When inventory includes a transfer from investment properties, cost is recorded as the book value at the date of transfer. Net realisable value represents the estimated selling price less any further costs expected to be incurred to completion and
disposal.
Finance costs
Interest incurred is not capitalised, but charged to the income statement on an accruals basis.
Operating property, plant and equipment
Operating property, plant and equipment is stated at cost less accumulated depreciation and accumulated impairment losses. Such cost includes costs directly attributable to making the asset capable of operating as intended.
Depreciation is provided on all operating property, plant and equipment at rates calculated to write off the cost less estimated residual value of each asset evenly over its expected useful life as follows:
Leasehold operating properties - over the shorter of the lease term and 25 years
Plant, machinery and equipment - over 2 to 5 years
Leases
The group as lessee
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Non-property assets held under finance leases are capitalised at the inception of the lease with a corresponding liability being recognised for the fair value of the leased asset or, if lower, the present value of the minimum lease payments. Lease payments are apportioned between the reduction of the lease liability and finance charges in the income statement so as to achieve a constant rate of interest on the remaining balance of the liability. Non-property assets held under finance leases are depreciated over the shorter of the estimated useful life of the asset and the lease term.
Freehold interests in leasehold investment properties are accounted for as finance leases with the present value of guaranteed minimum ground rents included within the carrying value of the property and within long-term liabilities. On payment of a guaranteed ground rent, virtually all of the cost is charged to the income statement, as interest payable, and the balance reduces the liability.
Rentals payable under operating leases are charged in the income statement on a straight-line basis over the lease term.
The group as lessor
Rental income from operating leases is recognised in the income statement on a straight-line basis over the lease term.
Income taxes
Current tax assets and liabilities are measured at the amount expected to be recovered from, or paid to, the taxation authorities, based on tax rates and laws that are enacted or substantively enacted by the balance sheet date.
The tax currently payable is based on the taxable result for the year. The taxable result differs from the result as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.
Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements, using the rates of tax expected to apply based on legislation enacted or substantively enacted at the balance sheet date, with the following exceptions:
- in respect of taxable temporary differences associated with investments in subsidiaries, joint ventures and associates, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and
- deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carried forward tax credits or tax losses can be utilised.
Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the related asset is realised or liability is settled, based on tax rates and laws substantively enacted at the balance sheet date. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same authority and the group intends to settle its current tax assets and liabilities on a net basis.
Income tax is charged or credited directly to equity if it relates to items that are credited or charged to equity. Otherwise, income tax is recognised in the income statement.
Pensions
The group operates a pension scheme with both defined benefit and defined contribution sections. The defined benefit section is closed to new members and from 1st September 2009, to future accrual.
The cost of providing benefits under the defined benefit section is determined using the projected unit credit method, which attributes entitlement to benefits to the current period (to determine current service cost) and to the current and prior periods (to determine the present value of defined benefit obligation) and is based on actuarial advice. Past service costs are recognised in the income statement immediately if the benefits have vested.
The interest element of the defined benefit cost represents the change in present value of scheme obligations resulting from the passage of time and is determined by applying the discount rate to the opening present value of the benefit obligation, taking into account material changes in the obligation during the year. The expected return on plan assets is based on an assessment made at the beginning of the year of long-term market returns on scheme assets, adjusted for the effect on the fair value of plan assets of contributions received and benefits paid during the year. The difference between the expected return on plan assets and the interest cost is recognised in the income statement as other finance income or expense.
Actuarial gains and losses are recognised in full in the statement of recognised income and expense in the year in which they occur. The defined benefit pension asset or liability in the balance sheet comprises the present value of the defined benefit obligation, less any past service cost not yet recognised and less the fair value of plan assets out of which the obligations are to be settled directly.
When a pension asset (net surplus) arises and the directors consider it is controlled by the company such that future economic benefits will be available to the company, it is carried forward in accordance with the requirements of IFRIC 14.
Contributions to defined contribution schemes are recognised in the income statement in the year in which they become payable.
Own shares
St. Modwen Properties PLC shares held by the group are classified in shareholders' equity and are recognised at cost.
Dividends
Dividends declared after the balance sheet date are not recognised as liabilities at the balance sheet date.
Revenue recognition
Revenue is recognised to the extent that it is probable that economic benefits will flow to the group and the revenue can be reliably measured.
Revenue is measured at the fair value of the consideration received, excluding discounts, rebates, VAT and other sales taxes or duty. The following criteria must also be met before revenue is recognised:
Sale of property
Revenue arising from the sale of property is recognised on legal completion of the sale. Where revenue is earned for development of property assets not owned, this is recognised when the group has substantially fulfilled its obligations in respect of the transaction.
Construction contracts
Revenue arising from construction contracts is recognised in accordance with the group's accounting policy on construction contracts (see below).
Rental income
Rental income arising from investment properties is accounted for on a straight-line basis over the lease term.
Interest income
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts over the expected life of the financial asset to that asset's net carrying amount.
Dividend income
Dividend income from joint ventures is recognised when the shareholders' rights to receive payment have been established.
Construction contracts
Where the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the balance sheet date. The extent to which the contract is complete is determined by the total costs incurred to date as a percentage of the total anticipated costs for the entire contract. Variations in contract work, claims and incentive payments are included only to the extent they have been agreed with the purchaser.
Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred where it is probable they will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred.
When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.
Government grants
Government grants relating to property are treated as deferred income and released to profit or loss over the expected useful life of the assets concerned.
Share-based payments
When employee share options are exercised the employee has the choice of whether to have their liability settled by way of cash or the retention of shares. As it has been the company's practice to satisfy the majority of share options in cash, and new shares are not issued to satisfy employee share option plans, the group accounts for its share option schemes as cash-settled. The cost of cash-settled transactions is measured at fair value using an appropriate option pricing model and amortised through the income statement over the vesting period. The liability is re-measured at each balance sheet date. Revisions to the fair value of the accrued liability after the end of the vesting period are recorded in the income statement of the year in which they occur.
Financial instruments
Financial assets and financial liabilities are recognised on the group's balance sheet when the group becomes a party to the contractual provisions of the instrument. The group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.
If the group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the group recognises its retained interest in the asset and an associated liability for any amounts it may have to pay. If the group retains substantially all the risks and rewards of ownership of a transferred financial asset, the group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received. The group derecognises financial liabilities when, and only when, the group's obligations are discharged, cancelled, or they expire.
Trade and other receivables
Trade receivables are recognised and carried at the lower of their original invoiced value and recoverable amount. Provision is made when there is evidence that the group will not be able to recover balances in full. Balances are written off when the probability of recovery is assessed as being remote.
Cash and cash equivalents
Cash and cash equivalents comprises cash balances and short-term deposits with banks.
Trade and other payables
Trade and other payables on deferred payment terms are initially recorded by discounting the nominal amount payable to net present value.
The discount to nominal value is amortised over the period of the deferred arrangement and charged to finance costs.
Interest bearing loans and borrowings
All loans and borrowings are initially recognised at fair value less directly attributable transaction costs. After initial recognition, loans and borrowings are measured at amortised cost.
Gains and losses arising on the repurchase, settlement or otherwise cancellation of liabilities are recognised in finance income or finance expense as appropriate.
Interest incurred is not capitalised, but charged to the income statement using the effective interest rate method.
Derivative financial instruments and hedging
The group uses derivative financial instruments such as interest rate swaps to hedge its risks associated with interest rate fluctuations. Such instruments are initially recognised at fair value on the date on which a contract is entered into and are subsequently re-measured at fair value. The group has determined that the derivative financial instruments in use do not qualify for hedge accounting and, consequently, any gains or losses arising from changes in the fair value of derivatives are taken to the income statement.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all its liabilities. Equity instruments issued by the group are recorded at the proceeds received less direct issue costs.
Use of estimates and judgements
To be able to prepare accounts according to generally accepted accounting principles, management must make estimates and assumptions that affect the asset and liability items and revenue and expense amounts recorded in the financial accounts. These estimates are based on the group's systems of internal control, historical experience and the advice of external experts (including qualified professional valuers and actuaries) together with various other assumptions that management and the board of directors believe are reasonable under the circumstances. The results of these considerations form the basis for making judgements about the carrying value of assets and liabilities that are not readily available from other sources.
The areas requiring the use of estimates and critical judgements that may significantly impact the group's earnings and financial position are:
Going concern The financial statements have been prepared on a going concern basis. This is discussed in the Business Review, under the heading 'Financing, covenants and going concern'.
Valuation of investment properties Management has used the valuation performed by its independent valuers as the fair value of its investment properties. The valuation is performed according to RICS rules, using appropriate levels of professional judgement for the prevailing market conditions.
Net realisable value of inventories The group has ongoing procedures for assessing the carrying value of inventories and identifying where this is in excess of net realisable value. Management's assessment of any resulting provision requirement, is where applicable, supported by independent information supplied by the external valuers. The estimates and judgements used were based on information available at, and pertaining to, 30th November 2009. Any subsequent adverse changes in market conditions may result in additional provisions being required.
Estimation of remediation and other costs to completefor both development and investment properties. In making an assessment of these costs there is inherent uncertainty and the group has developed systems of internal control to assess and review carrying values and the appropriateness of estimates made. Any changes to these estimates may impact the carrying values of investment properties and/or inventories.
The calculation of deferred tax assets and liabilitiestogether with assessment of the recoverability of future tax losses. The recoverability of tax losses has been assessed and the accounts reflect the extent to which management believe recovery is likely against latent gains and future profits anticipated to be realised on the group's property portfolio.
Calculation of the net present value of pension scheme liabilities In calculating this liability it is necessary for actuarial assumptions to be made, including discount and mortality rates and the long-term rate of return upon scheme assets. The group engages a qualified actuary to assist with determining the assumptions to be made and evaluating these liabilities.
KEY RISKS AND UNCERTAINTIES
The key risks that have been identified, the management approach to each, and the assessment of the residual risk, are set out below:
1. Economic / Property Risks
The risks identified included:
Availability of liquidity for potential property investors
Demand for land from housebuilders
Demand for space from occupiers
Investment yield movements
Overexposure to single tenant / scheme / sector
Changing public sector requirements
The principal mitigating actions are:
Use of realistic, but conservative, property valuations
The hopper and geographical spread gives flexibility and facilitates diversification
Emphasis on value creation through active property management and development
Assessment We have chosen to operate only in the UK, which is normally subject to relatively low-risk, low-returns from a stable and mature, albeit cyclical economy and property market. By involvement with many sectors of that economy and that property market, we are well diversified, without venturing overseas.
The current economic climate, and the resultant illiquidity of UK financial and property markets, has increased risk levels in this area significantly. Property valuations have consequently been subject to higher degrees of volatility and uncertainty than in previous years. Increasing pressures on occupiers (and therefore on rental levels) are likely to continue to restrain any recovery of values in the short-term. However, strong, well-run companies will survive this downturn, and will benefit from enhanced opportunities and reduced competition when conditions improve. In the meantime, we will address this higher risk profile by maintaining our conservative stance to funding, development and acquisitions.
2. Financial Risks
The risks identified included:
Lack of available funds
Ability to balance cash flows to meet changing market conditions
Interest rates
Ability to manage business within existing banking covenants
The principal mitigating actions are:
Detailed cash flow forecasting
Recurring rent roll enabling interest costs to be met when development activity declines
Acquisition transactions structured in self-financing manner
Small number of high-quality banking relationships
Hedging policy to contain interest rate risk
Assessment The equity issue and the renegotiation of banking covenants during the year have significantly reduced the risk of the company not being able to manage within those covenants. In addition, the focus on reducing forward commitments and speculative development and progressing selective asset disposals has enabled us to optimize operational cash flows, and to offset the impact of very difficult market conditions. All of our banking facilities are now secured until at least November 2011, and we have £196m of available but undrawn facilities to finance future developments or acquisitions. Furthermore, we have once again recorded a trading profit in the year, with recurring income exceeding the overhead and interest costs of the business, which demonstrates our ability to succeed despite the lack of any material development activity.
3. Organisational / People factors
The risks identified included:
Failure to retain or train skilled personnel
Succession planning and talent management
IT
Disaster planning
Need to manage cost base to meet lower activity levels.
The principal mitigating actions are:
Competitive remuneration packages
Regular assessment of performance and identification of training needs
Headcount reduction undertaken in period
Regular communication of strategic and tactical objectives
Properly resourced and structured IT solutions
Appropriate disaster recovery procedures
Assessment Employee turnover has historically been low, indicating good retention levels. Vacancies have been few and are generally filled promptly, indicating the attractiveness of the company and remuneration packages. To support the long-term financial objectives, we will need to continue to improve the skills of our employees. In the short-term, we have continued to control our cost levels by closing the defined benefit pension scheme and by introducing a temporary suspension of pension contributions: these measures enabled us to maintain intact our core team, and the changes were met with equanimity by staff who recognised the steps taken by the company to protect their continuing employment.
4. Regulatory factors
The risks identified included:
Planning
Tax
Lease structures
The principal mitigating actions are:
Being alert to policies being promoted
Use of high quality professional advisers
In-house expert resources in planning / residential / construction / tax / IT
Assessment Our daily exposure to all aspects of the planning process, and internal procedures for spreading best practice ensure we remain abreast of most developments. We have become more active in attempting to influence public policy debate, although meaningful and beneficial changes are very difficult to bring about, notwithstanding the formalities of extensive public consultation.
5. Failure to secure schemes
The risks identified included:
Availability of finance
Competition
Reputation
The principal mitigating actions are:
Regional offices in touch with their local market
Dedicated central resource to support regional teams
Flexible and innovative approach to acquisitions in response to changing market conditions
Raising the profile of the company as the country's leading regeneration specialist
Assessment The excellent reputation and restored financial capacity of the company have enabled us to win a number of schemes and to grow the hopper to record levels, even in the current financially-constrained climate. We anticipate that the number of opportunities will increase as vendor expectations become more realistic and lenders begin to address the issues in their loan books. In this environment, with a reduced number of active competitors, we expect to be able to continue to source attractive acquisitions.
6. Social, ethical and environmental risks
The risks identified included:
Health, safety & environment risk
Business ethics / internal controls
Customer satisfaction
The principal mitigating actions are:
Systems of control procedures and delegated authorities
Regular and detailed operational and financial reporting
Regular dialogue with industry investors and commentators
Close supervision of transactions and key relationships
Proactive press / media contacts
Assessment The initial assessment of environmental costs (and the subsequent optimising of remediation solutions) is an integral part of our acquisition and post-acquisition procedures. We seek to minimise or pass on any such environmental risks, and believe that the residual risk in this respect is acceptably low. In other social and ethical areas, the company has benefited from an excellent reputation, which is underpinned by a simple set of operating commitments.
Reputational Risks
The risks identified included:
Failure to deliver on promises
Involvement with controversial schemes / partners
Failure to live up to expectations
The principal mitigating actions are:
Adherence to a system of principles and ethics
Thorough and proactive PR to get messages across clearly
Inclusion of reputational issues as an item in scheme selection process
A strong culture of propriety led from the Board
Regular top-level meetings with local authorities, RDAs, and other government or quasi governmental bodies
Assessment The company enjoys an excellent reputation with its stakeholders (including investors, business partners and employees). This is based on, and reinforced by, a strong set of principles and consistent delivery of promises.
8. Construction risk
The risks identified included:
Build quality
Remediation / contamination
Liability issues
Contractor failure
The principal mitigating actions are:
A strong internal construction management team
Projects, acquisitions and disposals are reviewed (and financially appraised) in detail within clearly defined authorisation limits
Regular management reviews
Use and close supervision of high-quality trusted contractors and professionals
Contractual liability clearly defined
Close monitoring of contractors' performance and financial viability
Assessment The company is willing to accept a degree of environmental / contamination risk, enabling higher returns to be made for the perceived higher risks undertaken. These risks are passed on or minimised where possible, but cannot be eliminated. In our recent experience, the residual risks have been acceptably low.
1. Revenue and gross profit
|
|
2009 |
|||
|
|
Rental |
Development |
Other |
Total |
|
|
£m |
£m |
£m |
£m |
|
|
|
|
|
|
|
Revenue |
34.3 |
74.5 |
4.9 |
113.7 |
|
|
|
|
|
|
|
Cost of sales |
(8.2) |
(83.8) |
(3.1) |
(95.1) |
|
|
|
|
|
|
|
Gross profit |
26.1 |
(9.3) |
1.8 |
18.6 |
|
|
|
|
|
|
|
|
2008 |
|||
|
|
Rental |
Development |
Other |
Total |
|
|
£m |
£m |
£m |
£m |
|
|
|
|
|
|
|
Revenue |
33.7 |
101.8 |
11.0 |
146.5 |
|
|
|
|
|
|
|
Cost of sales |
(8.0) |
(92.8) |
(3.7) |
(104.5) |
|
|
|
|
|
|
|
Gross profit |
25.7 |
9.0 |
7.3 |
42.0 |
The group operates exclusively in the UK and all of its revenues derive from its portfolio of properties which the group manages as one business. Therefore, the financial statements and related notes represent the results and financial position of the group's sole business segment.
The group's total revenue for 2009 was £122.7 (2008: £160.5m) and in addition to the amounts above included service charge income of £6.1m (2008: £5.3m), for which there was an equivalent expense, interest income of £2.9m (2008: £4.7m) and dividends received from joint ventures of £nil (2008: £4.0m).
Cost of sales in respect of rental income as disclosed above comprise direct operating expenses (including repairs and maintenance) related to the investment property portfolio and include £0.2m (2008: £0.3m) in respect of properties that did not generate any rental income.
During the year the following amounts were recognised (as part of development revenue and cost of sales) in respect of activity accounted for as construction contracts:
|
|
2009 |
2008 |
|
|
£m |
£m |
|
|
|
|
|
Revenue |
27.7 |
38.9 |
|
|
|
|
|
Cost of sales |
(25.3) |
(33.4) |
|
|
|
|
|
Gross profit |
2.4 |
5.5 |
Amounts due from customers of £0.9m (2008: £nil) were included in trade and other receivables in respect of contracts in progress at the balance sheet date.
Retentions due from customers in respect of construction contracts of £1.4m (2008: £0.5m) were included in trade and other receivables at the balance sheet date.
|
2. Finance cost and finance income |
|
|
|
|
|
2009 |
|
2008 |
|
|
£m |
|
£m |
|
|
|
|
|
|
Interest payable on borrowings |
17.3 |
|
23.7 |
|
|
|
|
|
|
Amortisation of loan arrangement fees |
0.7 |
|
0.6 |
|
|
|
|
|
|
Amortisation of discount on deferred payment arrangements |
1.7 |
|
7.8 |
|
|
|
|
|
|
Head rents treated as finance leases |
0.2 |
|
0.2 |
|
|
|
|
|
|
Movement in market value of interest rate derivatives |
4.7 |
|
15.4 |
|
|
|
|
|
|
Interest on pension scheme liabilities |
1.4 |
|
1.6 |
|
|
|
|
|
|
Total finance cost |
26.0 |
|
49.3 |
The finance cost on interest rate derivatives derives from financial liabilities held at fair value through profit or loss. All other finance costs derive from financial liabilities measured at amortised cost.
|
|
2009 |
|
2008 |
|
|
£m |
|
£m |
|
|
|
|
|
|
Interest receivable on cash deposits |
1.4 |
|
2.5 |
|
|
|
|
|
|
Credit in respect of discount on deferred receivables |
1.5 |
|
2.2 |
|
|
|
|
|
|
Expected return on pension scheme assets |
1.4 |
|
2.0 |
|
|
|
|
|
|
Total finance income |
4.3 |
|
6.7 |
3. Taxation
|
a. Tax on profit on ordinary activities |
|
|
|
|
|
|
|
|
2009 |
2008 |
|
|
£m |
£m |
|
Tax (credit)/charge in the income statement |
|
|
|
|
|
|
|
Corporation tax |
|
|
|
|
|
|
|
Current year tax |
- |
0.2 |
|
|
|
|
|
Adjustments in respect of previous years |
(1.2) |
(2.0) |
|
|
|
|
|
|
(1.2) |
(1.8) |
|
|
|
|
|
Deferred tax |
|
|
|
|
|
|
|
Reversal of temporary differences |
4.1 |
(2.9) |
|
|
|
|
|
Impact of current year revaluations and indexation |
(17.9) |
(13.1) |
|
|
|
|
|
Carry forward of tax losses |
(2.1) |
(3.2) |
|
|
|
|
|
Adjustments in respect of previous years |
(0.6) |
(1.4) |
|
|
|
|
|
|
(16.5) |
(20.6) |
|
|
|
|
|
Total tax credit in the income statement |
(17.7) |
(22.4) |
|
|
|
|
|
|
|
|
|
Tax relating to items credited to equity |
|
|
|
|
|
|
|
Deferred tax |
|
|
|
|
|
|
|
Actuarial losses on pension schemes |
(0.2) |
(0.1) |
|
Tax credit in the statement of total recognised income and expense |
(0.2) |
(0.1) |
b. Reconciliation of effective tax rate
|
|
2009 |
|
2008 |
|
|
£m |
|
£m |
|
|
|
|
|
|
Loss before tax |
(119.4) |
|
(73.1) |
|
|
|
|
|
|
Less: Joint ventures and associates |
22.9 |
|
8.9 |
|
|
|
|
|
|
Pre-tax loss attributable to the group |
(96.5) |
|
(64.2) |
|
|
|
|
|
|
Corporation tax at 28.00% (2008: 28.67%) |
(27.0) |
|
(18.4) |
|
|
|
|
|
|
Permanent differences |
(0.3) |
|
1.6 |
|
|
|
|
|
|
Impact of current year revaluations and indexation |
5.0 |
|
(3.2) |
|
|
|
|
|
|
Difference between chargeable gains and accounting profit |
(1.2) |
|
1.0 |
|
|
|
|
|
|
Deferred tax asset not recognised |
7.6 |
|
- |
|
|
|
|
|
|
Current year credit |
(15.9) |
|
(19.0) |
|
|
|
|
|
|
Adjustments in respect of previous years |
(1.8) |
|
(3.4) |
|
|
|
|
|
|
|
(17.7) |
|
(22.4) |
|
|
|
|
|
|
Effective rate of tax |
18% |
|
35% |
The post tax results of joint ventures and associates are stated after a tax credit of £0.8m (2008: £7.0m). The effective tax rate for the group including joint ventures and associates is 15.4% (2008: 36.7%).
c. Balance sheet
|
|
2009 |
2008 |
||
|
|
Corporation |
Deferred |
Corporation |
Deferred |
|
|
Tax |
tax |
tax |
tax |
|
|
£m |
£m |
£m |
£m |
|
|
|
|
|
|
|
Balance at start of the year |
5.7 |
18.1 |
12.3 |
38.8 |
|
|
|
|
|
|
|
Credit to the income statement |
(1.2) |
(16.5) |
(1.8) |
(20.6) |
|
|
|
|
|
|
|
Credit directly to equity |
- |
(0.2) |
- |
(0.1) |
|
|
|
|
|
|
|
Net refund/(payment) |
3.2 |
- |
(4.8) |
- |
|
|
|
|
|
|
|
Balance at end of the year |
7.7 |
1.4 |
5.7 |
18.1 |
An analysis of the deferred tax provided by the group is given below:
|
|
2009 |
2008 |
||||
|
|
Asset |
Liability |
Net |
Asset |
Liability |
Net |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
|
|
|
|
|
|
|
|
|
Property revaluations |
- |
13.3 |
13.3 |
- |
31.2 |
31.2 |
|
|
|
|
|
|
|
|
|
Capital allowances |
- |
4.7 |
4.7 |
- |
4.3 |
4.3 |
|
|
|
|
|
|
|
|
|
Appropriations to trading stock |
- |
0.8 |
0.8 |
- |
1.0 |
1.0 |
|
|
|
|
|
|
|
|
|
Unutilised tax losses |
(13.2) |
- |
(13.2) |
(15.2) |
- |
(15.2) |
|
|
|
|
|
|
|
|
|
Other temporary differences |
(4.2) |
- |
(4.2) |
(3.2) |
- |
(3.2) |
|
|
|
|
|
|
|
|
|
|
(17.4) |
18.8 |
1.4 |
(18.4) |
36.5 |
18.1 |
At the balance sheet date, the group has:
- unused tax losses in relation to 2009 and prior years of £17.5m (2008: £7.4m), of which £9.9m (2008: £7.4m) has been recognised as a deferred tax asset; and
- deductions of £3.3m (2008: £7.8m) that will be available in subsidiary companies in future periods and have been recognised in full as a deferred tax asset.
In both cases a deferred tax asset has been recognised on the basis that the losses or deductions will shelter the latent gains anticipated to be realised on the group's property portfolio including those reflected in the deferred tax liability for property revaluations.
No deferred tax asset has been recognised in respect of the remaining £7.6m (2008: £nil) of current and prior year tax losses as it is not considered certain that there will be sufficient taxable profits available in the short term against which these can be offset.
d. Factors that may affect future tax charges
Based on current capital investment plans, the group expects to continue to be able to claim capital allowances in excess of depreciation in future years.
The benefits of any tax planning are not recognised by the group until the outcome is reasonably certain.
4. Earnings per share
The calculation of basic and diluted earnings per share is set out below:
|
|
2009 |
|
2008 |
|
|
Number of |
|
Number of |
|
|
Shares |
|
Shares* |
|
Weighted number of shares in issue |
169,276,058 |
|
138,429,402 |
|
|
|
|
|
|
Weighted number of dilutive shares |
- |
|
- |
|
|
169,276,058 |
|
138,429,402 |
|
|
|
|
|
|
|
2009 |
|
2008 |
|
|
£m |
|
£m |
|
|
|
|
|
|
Loss attributable to equity shareholders (basic and diluted) |
(101.1) |
|
(51.7) |
|
|
|
|
|
|
|
2009 |
|
2008 |
|
|
Pence |
|
pence |
|
Basic and diluted loss per share |
(59.7) |
|
(37.3) |
\* To reflect the Firm Placing and Placing and Open Offer, the number of shares previously used to calculate the basic and diluted per share data have been amended. An adjustment factor of 1.15 has been applied based on the ratio of the company's share price of 219.3p on 13th May 2009, the day before the Ex-entitlement Date for the Firm Placing and Placing and Open Offer, and the theoretical ex-rights price of 191.2p per share. Shares held by the Employee Benefit Trust are excluded from the above calculations.
The group's share options are accounted for as cash-settled share-based payments. In calculating diluted earnings per share, earnings have been adjusted for changes which would have resulted from the option being classified as equity settled. The number of shares included in the calculation has also been adjusted accordingly.
5. Investment property
|
|
Freehold |
|
Leasehold |
|
|
|
|
investment |
|
investment |
|
|
|
|
properties |
|
properties |
|
Total |
|
|
£m |
|
£m |
|
£m |
|
Fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
At 30th November 2007 |
473.4 |
|
373.5 |
|
846.9 |
|
|
|
|
|
|
|
|
Additions - new properties |
8.4 |
|
0.4 |
|
8.8 |
|
|
|
|
|
|
|
|
Other additions |
46.2 |
|
31.7 |
|
77.9 |
|
|
|
|
|
|
|
|
Net transfers (to)/from inventories |
(14.0) |
|
14.9 |
|
0.9 |
|
|
|
|
|
|
|
|
Disposals |
(9.7) |
|
(60.8) |
|
(70.5) |
|
|
|
|
|
|
|
|
Deficit on revaluation |
(37.2) |
|
(12.5) |
|
(49.7) |
|
|
|
|
|
|
|
|
At 30th November 2008 |
467.1 |
|
347.2 |
|
814.3 |
|
|
|
|
|
|
|
|
Additions - new properties |
15.2 |
|
- |
|
15.2 |
|
|
|
|
|
|
|
|
Other additions |
13.8 |
|
6.0 |
|
19.8 |
|
|
|
|
|
|
|
|
Net transfers from/(to) inventories |
15.4 |
|
(0.7) |
|
14.7 |
|
|
|
|
|
|
|
|
Disposals |
(10.0) |
|
(9.4) |
|
(19.4) |
|
|
|
|
|
|
|
|
Deficit on revaluation |
(45.6) |
|
(36.1) |
|
(81.7) |
|
|
|
|
|
|
|
|
At 30th November 2009 |
455.9 |
|
307.0 |
|
762.9 |
Investment properties were valued at 30th November 2009 and 2008 by King Sturge & Co, Chartered Surveyors, in accordance with the Appraisal and Valuation Manual of the Royal Institution of Chartered Surveyors, on the basis of market value. King Sturge and Co are independent professionally qualified external valuers and have recent experience in the relevant location and category of the properties being valued.
The historical cost of investment properties at 30th November 2009 was £717.7m (2008: £680.5m).
As at 30th November 2009 £669.2m (2008: £776.8m) of investment property was pledged as security for the group's loan facilities.
Included within leasehold investment properties are £3.9m (2008: £3.9m) of assets held under finance leases.
6. Operating property, plant and equipment
|
|
|
Operating |
|
Plant machinery and |
|
|
|
|
|
Properties |
|
equipment |
|
Total |
|
|
|
£m |
|
£m |
|
£m |
|
Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 30th November 2007 |
|
2.6 |
|
4.3 |
|
6.9 |
|
|
|
|
|
|
|
|
|
Additions |
|
- |
|
0.9 |
|
0.9 |
|
|
|
|
|
|
|
|
|
Disposals |
|
- |
|
(0.2) |
|
(0.2) |
|
|
|
|
|
|
|
|
|
At 30th November 2008 |
|
2.6 |
|
5.0 |
|
7.6 |
|
|
|
|
|
|
|
|
|
Additions |
|
4.4 |
|
0.4 |
|
4.8 |
|
|
|
|
|
|
|
|
|
Disposals |
|
(0.1) |
|
(0.6) |
|
(0.7) |
|
|
|
|
|
|
|
|
|
At 30th November 2009 |
|
6.9 |
|
4.8 |
|
11.7 |
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 30th November 2007 |
|
0.4 |
|
2.6 |
|
3.0 |
|
|
|
|
|
|
|
|
|
Charge for the year |
|
- |
|
0.5 |
|
0.5 |
|
|
|
|
|
|
|
|
|
Disposals |
|
- |
|
(0.2) |
|
(0.2) |
|
|
|
|
|
|
|
|
|
At 30th November 2008 |
|
0.4 |
|
2.9 |
|
3.3 |
|
|
|
|
|
|
|
|
|
Charge for the year |
|
0.1 |
|
0.9 |
|
1.0 |
|
|
|
|
|
|
|
|
|
Disposals |
|
- |
|
(0.5) |
|
(0.5) |
|
|
|
|
|
|
|
|
|
At 30th November 2009 |
|
0.5 |
|
3.3 |
|
3.8 |
|
|
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 30th November 2007 |
|
2.2 |
|
1.7 |
|
3.9 |
|
|
|
|
|
|
|
|
|
At 30th November 2008 |
|
2.2 |
|
2.1 |
|
4.3 |
|
|
|
|
|
|
|
|
|
At 30th November 2009 |
|
6.4 |
|
1.5 |
|
7.9 |
|
Tenure of operating properties: |
|
|
|
|
|
|
|
2009 |
|
2008 |
|
|
|
£m |
|
£m |
|
Freehold |
|
3.6 |
|
0.3 |
|
|
|
|
|
|
|
Leasehold |
|
2.8 |
|
1.9 |
|
|
|
|
|
|
|
|
|
6.4 |
|
2.2 |
7. Joint ventures, associates and other investments
The group's share of the trading results for the year of its joint ventures and associates is:
|
|
2009 |
2008 |
||||
|
|
Key Property Investments Limited |
Other joint ventures and associates |
Total |
Key Property Investments Limited |
Other joint ventures and associates |
Total |
|
|
|
|
|
|
|
|
|
|
£m |
£m |
£m |
£m |
£m |
£m |
|
Income statements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
25.9 |
1.2 |
27.1 |
10.6 |
5.3 |
15.9 |
|
|
|
|
|
|
|
|
|
Net rental income |
7.2 |
0.2 |
7.4 |
7.6 |
(0.1) |
7.5 |
|
|
|
|
|
|
|
|
|
Development (loss)/profit |
(1.0) |
- |
(1.0) |
0.4 |
0.3 |
0.7 |
|
|
|
|
|
|
|
|
|
Loss on disposals of investment properties |
(0.1) |
- |
(0.1) |
(0.2) |
- |
(0.2) |
|
|
|
|
|
|
|
|
|
Investment property revaluation losses |
(24.4) |
(0.4) |
(24.8) |
(13.5) |
(1.4) |
(14.9) |
|
|
|
|
|
|
|
|
|
Administrative expenses |
(0.1) |
(0.1) |
(0.2) |
(0.1) |
- |
(0.1) |
|
|
|
|
|
|
|
|
|
Loss before interest and tax |
(18.4) |
(0.3) |
(18.7) |
(5.8) |
(1.2) |
(7.0) |
|
|
|
|
|
|
|
|
|
Finance cost |
(4.5) |
(0.7) |
(5.2) |
(7.9) |
(1.1) |
(9.0) |
|
|
|
|
|
|
|
|
|
Finance income |
0.2 |
- |
0.2 |
0.1 |
- |
0.1 |
|
|
|
|
|
|
|
|
|
Loss before tax |
(22.7) |
(1.0) |
(23.7) |
(13.6) |
(2.3) |
(15.9) |
|
|
|
|
|
|
|
|
|
Taxation |
0.6 |
0.2 |
0.8 |
6.4 |
0.6 |
7.0 |
|
|
|
|
|
|
|
|
|
Loss for the year |
(22.1) |
(0.8) |
(22.9) |
(7.2) |
(1.7) |
(8.9) |
Included in other joint ventures and associates above are losses from associated companies of £0.2m (2008: £0.1m profits).
The group's share of the balance sheet of its joint ventures and associates is:
|
|
2009 |
2009 |
||||
|
|
Key Property Investments Limited |
Other joint ventures and associates |
Total |
Key Property Investments Limited |
Other joint ventures and associates |
Total |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
|
Balance Sheets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets |
116.7 |
15.9 |
132.6 |
131.6 |
12.4 |
144.0 |
|
|
|
|
|
|
|
|
|
Current assets |
13.6 |
18.9 |
32.5 |
24.1 |
23.9 |
48.0 |
|
|
|
|
|
|
|
|
|
Current liabilities |
(12.0) |
(6.4) |
(18.4) |
(12.5) |
(25.3) |
(37.8) |
|
|
|
|
|
|
|
|
|
Non-current liabilities |
(82.2) |
(23.2) |
(105.4) |
(85.0) |
(5.0) |
(90.0) |
|
|
|
|
|
|
|
|
|
Net assets |
36.1 |
5.2 |
41.3 |
58.2 |
6.0 |
64.2 |
|
|
|
|
|
|
|
|
|
Equity at start of year |
58.2 |
6.0 |
64.2 |
69.4 |
5.4 |
74.8 |
|
|
|
|
|
|
|
|
|
Investment in associate |
- |
- |
- |
- |
2.3 |
2.3 |
|
|
|
|
|
|
|
|
|
Loss for the year |
(22.1) |
(0.8) |
(22.9) |
(7.2) |
(1.7) |
(8.9) |
|
|
|
|
|
|
|
|
|
Dividends paid |
- |
- |
- |
(4.0) |
- |
(4.0) |
|
|
|
|
|
|
|
|
|
Equity at end of year |
36.1 |
5.2 |
41.3 |
58.2 |
6.0 |
64.2 |
|
|
|
|
|
|
|
|
Included in other joint ventures and associates above are net assets of £2.4m (2008: £2.6m) in relation to associated companies. These net assets comprise total assets of £3.6m (2008: £3.9m) and total liabilities of £1.2m (2008: £1.3m).
Joint venture companies and associates comprise:
|
Name |
Status |
Interest |
Activity |
|
|
|
|
|
|
Key Property Investments Limited |
Joint venture |
50% |
Property investment and development |
|
|
|
|
|
|
Barton Business Park Limited |
Joint venture |
50% |
Property development |
|
|
|
|
|
|
Sowcrest Limited |
Joint venture |
50% |
Property development |
|
|
|
|
|
|
Holaw (462) Limited |
Joint venture |
50% |
Property investment |
|
|
|
|
|
|
Shaw Park Developments Limited |
Joint venture |
50% |
Property development |
|
|
|
|
|
|
Sky Park Developments LLP |
Joint venture |
50% |
Property development |
|
|
|
|
|
|
Chertsey Road Properties Limited |
Joint venture |
50% |
Property investment |
|
|
|
|
|
|
Coed Darcy Limited |
Associate |
49% |
Property investment and development |
Many of the joint ventures contain change of control provisions, as is common for such arrangements.
During the year the group entered into joint venture arrangements for Sky Park Developments LLP and Chertsey Road Properties Limited, both of which were both newly incorporated entities. No goodwill arose on the recognition of the group's initial interest in these joint ventures.
On 23 May 2008 the group acquired a 49% holding in Coed Darcy Limited for £2.3m. No goodwill arose on the acquisition of the group's interest in this associate and there has been no adjustment to the provisional fair values recorded.
8. Trade and other receivables
|
|
2009 |
2008 |
|
|
£m |
£m |
|
Non-current |
|
|
|
|
|
|
|
Other Debtors |
5.2 |
20.6 |
|
|
|
|
|
Current |
|
|
|
|
|
|
|
Trade receivables |
6.7 |
3.0 |
|
|
|
|
|
Prepayments and accrued income |
7.9 |
6.2 |
|
|
|
|
|
Other debtors |
26.7 |
35.9 |
|
|
|
|
|
Amounts due from joint ventures |
5.7 |
3.4 |
|
|
|
|
|
|
47.0 |
48.5 |
9. Inventories
|
|
2009 |
2008 |
|
|
£m |
£m |
|
|
|
|
|
Properties held for sale |
55.2 |
89.0 |
|
|
|
|
|
Properties under construction |
115.3 |
113.6 |
|
|
|
|
|
Land under option |
22.2 |
25.5 |
|
|
|
|
|
|
192.7 |
228.1 |
The movement in inventories during the two years ended 30th November 2009 is as follows:
|
|
£m |
|
At 30th November 2007 |
209.3 |
|
|
|
|
Additions |
112.5 |
|
|
|
|
Net transfers from investment property |
(0.9) |
|
|
|
|
Disposals (transferred to development cost of sales) |
(92.8) |
|
|
|
|
At 30th November 2008 |
228.1 |
|
|
|
|
Additions |
63.1 |
|
|
|
|
Net transfers to investment property |
(14.7) |
|
|
|
|
Disposals (transferred to development cost of sales) |
(83.8) |
|
|
|
|
At 30th November 2009 |
192.7 |
The directors consider all inventories to be current in nature. The operational cycle is such that a proportion of inventories will not be realised within 12 months. It is not possible to determine with accuracy when specific inventory will be realised as this will be subject to a number of issues including the strength of the property market.
Included within disposals of inventories are net realisable value provisions of £14.2m (2008: £10.1m).
As at 30th November 2009 £67.8m (2008: £112.3m) of inventory was pledged as security for the group's loan facilities.
10. Trade and other payables
|
|
2009 |
|
2008 |
|
|
£m |
|
£m |
|
Current |
|
|
|
|
|
|
|
|
|
Trade payables |
15.0 |
|
20.2 |
|
|
|
|
|
|
Amounts due to joint ventures |
3.5 |
|
3.5 |
|
|
|
|
|
|
Other payables and accrued expenses |
70.1 |
|
68.2 |
|
|
|
|
|
|
Provision for share options |
0.9 |
|
0.9 |
|
|
|
|
|
|
Other payables on deferred terms |
30.4 |
|
23.7 |
|
|
|
|
|
|
Derivative financial instruments |
19.3 |
|
14.6 |
|
|
|
|
|
|
|
139.2 |
|
131.1 |
|
|
|
|
|
|
|
|
|
|
|
Non-current |
|
|
|
|
|
|
|
|
|
Other payables and accrued expenses |
21.5 |
|
21.3 |
|
|
|
|
|
|
Provision for share options |
0.9 |
|
1.4 |
|
|
|
|
|
|
Other payables on deferred terms |
162.6 |
|
174.8 |
|
|
|
|
|
|
Finance lease liabilities (head rents) |
3.9 |
|
3.9 |
|
|
|
|
|
|
|
188.9 |
|
201.4 |
|
|
|
|
|
The payment terms of the other payables on deferred terms are subject to contractual commitments. In the normal course of events the payments will be made in line with either the disposal of investment properties held on the balance sheet or the commencement of development. net cash outflows on the settlement of the deferred consideration will therefore be limited.
11. Borrowings
|
|
2009 |
2008 |
|
|
£m |
£m |
|
Current |
|
|
|
|
|
|
|
Floating rate unsecured loan notes |
0.4 |
0.4 |
|
|
|
|
|
|
0.4 |
0.4 |
|
|
|
|
|
Non-current |
|
|
|
|
|
|
|
Bank loans repayable between one and two years |
55.9 |
- |
|
|
|
|
|
Bank loans repayable between two and five years |
267.3 |
376.1 |
|
|
|
|
|
Bank loans repayable after more than five years |
- |
57.7 |
|
|
|
|
|
|
323.2 |
433.8 |
All bank borrowings are secured by a fixed charge over the group's property assets.
Maturity profile of committed bank facilities
|
|
2009 |
||||||
|
|
Floating rate borrowings |
Interest rate swaps |
|||||
|
|
Drawn |
Undrawn |
Total |
Earliest termination |
Latest termination |
||
|
|
£m |
£m |
£m |
£m |
% |
£m |
% |
|
|
|
|
|
|
|
|
|
|
Less than one year |
0.4 |
5.0 |
5.4 |
110.0 |
5.36 |
- |
- |
|
|
|
|
|
|
|
|
|
|
One to two years |
55.9 |
34.1 |
90.0 |
130.0 |
4.67 |
80.0 |
4.70 |
|
|
|
|
|
|
|
|
|
|
Two to three years |
162.4 |
91.6 |
254.0 |
- |
- |
80.0 |
5.54 |
|
|
|
|
|
|
|
|
|
|
Three to four years |
28.0 |
42.0 |
70.0 |
- |
- |
40.0 |
4.56 |
|
|
|
|
|
|
|
|
|
|
Four to five years |
76.9 |
23.1 |
100.0 |
- |
- |
- |
- |
|
|
|
|
|
|
|
|
|
|
More than five years |
- |
- |
- |
- |
- |
40.0 |
4.87 |
|
|
|
|
|
|
|
|
|
|
Total |
323.6 |
195.8 |
519.4 |
240.0 |
4.99 |
240.0 |
4.99 |
|
|
2008 |
||||||
|
|
Floating rate borrowings |
Interest rate swaps |
|||||
|
|
Drawn |
Undrawn |
Total |
Earliest termination |
Latest termination |
||
|
|
£m |
£m |
£m |
£m |
% |
£m |
% |
|
|
|
|
|
|
|
|
|
|
Less than one year |
0.4 |
5.0 |
5.4 |
80.0 |
4.70 |
- |
- |
|
|
|
|
|
|
|
|
|
|
One to two years |
- |
- |
- |
110.0 |
5.36 |
- |
- |
|
|
|
|
|
|
|
|
|
|
Two to three years |
121.5 |
28.5 |
150.0 |
50.0 |
4.63 |
80.0 |
4.70 |
|
|
|
|
|
|
|
|
|
|
Three to four years |
197.2 |
46.8 |
244.0 |
- |
- |
80.0 |
5.54 |
|
|
|
|
|
|
|
|
|
|
Four to five years |
57.4 |
62.6 |
120.0 |
- |
- |
40.0 |
4.56 |
|
|
|
|
|
|
|
|
|
|
More than five years |
57.7 |
42.3 |
100.0 |
- |
- |
40.0 |
4.87 |
|
|
|
|
|
|
|
|
|
|
Total |
434.2 |
185.2 |
619.4 |
240.0 |
4.99 |
240.0 |
4.99 |
12. Reserves
|
|
Share |
Capital |
|
|
|
|
premium |
redemption |
Retained |
Own |
|
|
account |
reserve |
earnings |
shares |
|
|
£m |
£m |
£m |
£m |
|
At 30th November 2007 |
9.1 |
0.3 |
437.4 |
(0.7) |
|
|
|
|
|
|
|
Loss for the year attributable to shareholders |
- |
- |
(51.7) |
- |
|
|
|
|
|
|
|
Pension fund actuarial losses |
- |
- |
(0.3) |
- |
|
|
|
|
|
|
|
Net share disposals |
- |
- |
- |
0.6 |
|
|
|
|
|
|
|
Dividends paid |
- |
- |
(14.1) |
- |
|
|
|
|
|
|
|
At 30th November 2008 |
9.1 |
0.3 |
371.3 |
(0.1) |
|
|
|
|
|
|
|
Loss for the year attributable to shareholders |
- |
- |
(101.1) |
- |
|
|
|
|
|
|
|
Pension fund actuarial losses |
- |
- |
(0.6) |
- |
|
|
|
|
|
|
|
Net shares acquired |
- |
- |
- |
(0.3) |
|
|
|
|
|
|
|
Issue of share capital |
93.7 |
- |
- |
- |
|
|
|
|
|
|
|
At 30th November 2009 |
102.8 |
0.3 |
269.6 |
(0.4) |
|
|
|
|
|
|
'Own shares' represents the cost of 273,330 (2008: 33,590) shares held by the Employee Benefit Trust. The market value of the shares held at 30th November 2009 was £580,280 (2008: £38,292).
13. Reconciliation of movement in equity
|
|
|
|||||
|
|
2009 |
2008 |
||||
|
|
Equity shareholders |
Minority interests |
Total |
Equity shareholders |
Minority interests |
Total |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
|
Total recognised income and expense |
(101.7) |
(0.6) |
(102.3) |
(52.0) |
1.0 |
(51.0) |
|
Dividends paid |
- |
(0.2) |
(0.2) |
(14.1) |
(1.0) |
(15.1) |
|
Net (purchase)/ disposal of own shares |
(0.3) |
- |
(0.3) |
0.6 |
- |
0.6 |
|
Issue of share capital |
101.6 |
- |
101.6 |
- |
- |
- |
|
Equity at start of year |
392.7 |
9.5 |
402.2 |
458.2 |
9.5 |
467.7 |
|
|
|
|
|
|
|
|
|
Equity at end of year |
392.3 |
8.7 |
401.0 |
392.7 |
9.5 |
402.2 |
14. Related Party Transactions
Transactions between the group and its non-wholly owned subsidiaries, joint ventures and associates are as follows:
KEY PROPERTY INVESTMENTS LIMITED (KPI)
During the year the group provided management and construction services to KPI for which it received fees totalling £6.5m (2008: £1.3m). The balance due to the group and the year end was £0.3m (2008: nil). No interest is charged on this balance.
HOLAW (462) LIMITED (HOLAW)
During the year Holaw repaid £0.2m of its loan (2008: £0.1m). The balance due to the group at the year end was £0.3m (2008: £0.5m). No interest is charged on the balance.
BARTON BUSINESS PARK LIMITED (BARTON)
The balance due to Barton at the year end was £3.4m (2008: £3.4m). No interest is charged on this balance.
SOWCREST LIMITED (SOWCREST)
During the year the group provided management services to Sowcrest for which it received fees totalling £0.2m (2008: £0.6m).
In addition, during the year £3.6m (2008: £1.2m) was paid to Sowcrest leaving an amount due from Sowcrest at the year end of £4.0m (2008: £0.4m). Interest is chargeable on £1.4m (2008: £nil) of the amount outstanding at a fixed rate of 10% (2008: nil)
SHAW PARK DEVELOPMENTS LIMITED (SPD)
The balance due to the group from SPD at the year end was £1.3m (2008: £2.2m). Interest is chargeable at 1.5% (2008: 1.5%) above base rate.
SKYPARK DEVELOPMENTS LLP (SKYPARK)
The balance due to the group from Skypark at the year end was £0.3m, of which £0.2m relates to loan notes issued to the group in the year. The remaining £0.1m relates to purchase ledger funding provided by the group. No interest is charged on these balances.
CHERTSEY ROAD PROPERTIES LIMITED (CRP)
During the year, the group provided CRP with a loan of £0.3m and this balance was outstanding at the year end. No interest is charged on this balance.
ST. MODWEN PENSION SCHEME
The group occupies offices owned by the pension scheme with a value of £0.5m (2008: £0.5m). The balance due to the group at the year end was £0.5m (2008: £0.1m).
NON-WHOLLY OWNED SUBSIDIARIES
The company provides administrative, treasury and management services to subsidiary companies. Management fees and interest charged/(credited) during the year and net balances due (to)/from subsidiaries in which the company has a less than 90% interest were as follows:
|
|
Management fees |
Interest |
Balance |
|||
|
|
2009 |
2008 |
2009 |
2008 |
2009 |
2008 |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
|
Stoke-on-Trent Regeneration Limited |
- |
- |
(0.1) |
(0.2) |
(7.4) |
(4.2) |
|
|
|
|
|
|
|
|
|
Stoke-on-Trent Regeneration (Investments) Limited |
- |
- |
- |
- |
(0.3) |
(0.2) |
|
|
|
|
|
|
|
|
|
Uttoxeter Estates Limited |
- |
- |
- |
- |
(0.2) |
0.1 |
|
|
|
|
|
|
|
|
|
Widnes Regeneration Limited |
- |
- |
0.1 |
0.1 |
3.0 |
2.2 |
|
|
|
|
|
|
|
|
|
Trentham Leisure Limited |
0.2 |
0.8 |
1.2 |
1.6 |
22.4 |
21.4 |
|
|
|
|
|
|
|
|
|
Norton & Profitt Developments Limited |
- |
- |
- |
- |
(0.3) |
(0.9) |
|
|
|
|
|
|
|
|
|
VSM Estates (Holdings) Limited |
0.2 |
0.2 |
- |
- |
(8.5) |
(6.5) |
|
|
|
|
|
|
|
|
|
|
0.4 |
1.0 |
1.2 |
1.5 |
8.7 |
11.9 |
All amounts due to the group are unsecured and will be settled in cash. All amounts above are stated before provisions for doubtful debts of £0.7m (2008: £0.4m). No guarantees have been given or received from related parties.
KEY MANAGEMENT PERSONNEL
The directors are considered to be the group's key management personnel and their remuneration is disclosed in the directors' remuneration report contained within the full Annual Report.
Related Shares:
SMP.L