Final Results

Final Results

Gresham House plc

29 April 2013

GRESHAM HOUSE PLC

(the “Company” or the “Group”)

PRELIMINARY FINANCIAL STATEMENT

YEAR ENDED 31 DECEMBER 2013

Gresham House plc (GHE.L), the property and early-stage investment trust, is pleased to announce its preliminary results for the year ended 31 December 2013.

CHAIRMAN’S STATEMENT

Please find below my report on the results of the Gresham House group of companies for the year to 31 December 2013.

The Results

The revenue loss after taxation has increased from £810,000 for the year to 31 December 2012 to £1,503,000 for the year to 31 December 2013. As explained in the Strategic Report the principal reasons for this adverse movement is the reduction in dividend and interest income as a result of the realisations from the securities portfolio and the increase in property outgoings following a further write down in the value of the development site at Knowsley.

Net Asset Value per Share

The net asset value per share has decreased in the year to 31 December 2013 to 378.5p per share from 445.1p per share at 31 December 2012 (405.1p as at 30 June 2013).

The reduction in asset value is largely due to the revaluation deficits on investment properties of £1,439,000 and on the value of our shareholding in Memorial Holdings Ltd of £1,464,000 together with the revenue loss for the year of £1,503,000 offset by the increase in value of our holding in SpaceandPeople plc amounting to £1,299,000.

Property Portfolio

The principal assets of the Group remain the property investments which, following the sale of Vincent Lane, Dorking and Northern Gateway, Knowsley during the year ended 31 December 2013, now consists of two properties or sites valued by Jones Lang La Salle at a total of £16,700,000 as at 31 December 2013, down from a comparable £19,000,000 for the previous year.

The decrease in the total value of £2,300,000 is represented predominantly by Newton-le-Willows where we have had to adjust the valuation to take into account the adverse cost of ground works to make the proposed development viable. This has been marginally offset by an increase in the value of our investment in Southern Gateway at Speke where progressive improvement has led to an uplift of £100,000. During the year we have been able to sell our investment at Northern Gateway, Knowsley following the previously announced letting to an excellent tenant, on attractive commercial terms. The net sale value was £6,615,000 and the proceeds have been used to reduce the Groups borrowings down to the current level of £3,746,000.

Securities Portfolio

During the year we sold £1,480,000 of investments. We realised losses of £37,000 and our unrealised losses to 31 December 2013 were £467,000 resulting in a capital loss of £504,000. Our portfolio at the year-end was valued at £5,159,000, of which listed and AIM investments accounted for 56.2%. The principal investment in the portfolio is our holding in SpaceandPeople plc the value of which had increased by £1,299,000 over the year under review but which has been adversely affected by a recently announced profit warning. Consequently the value as at 25 April 2014 has been reduced by £1,320,000 when compared to the year end valuation. Our holding in Memorial Holdings Ltd, which has developed a new cemetery in Chislehurst, has had to be written down from £1,786,000 as at 30 June 2013 to £610,000 following the decision by Ulster Bank to withdraw from its funding arrangement as a part of its own reduction in commercial operations. As a result, given the current early stage of trading at the cemetery, it was only possible to replace the loan facility through a mezzanine level arrangement which had the effect of reducing the Company’s holding in Memorial from 11% to 4.4% and the values included in the financial statements reflect this.

Loans and Cash

Details of the borrowings are reviewed in the Strategy Report. Bank borrowings in the year have been reduced from £20,458,000 to £3,746,000. We remain confident that the current facility will be either renewed or replaced as and when it falls due.

Realisation of the Group’s Assets

Shareholders approved the orderly realisation of the Group’s assets at the 2011 annual general meeting. As announced your Board have been pursuing a strategy to achieve this and utilising the majority of the sales proceeds to reduce bank borrowings. A significant amount of the consideration to be paid following the sale of our property assets is likely to be made through staged payments of up to 3 years. This is due to the payment policy being adopted by residential developers and thus associated payments to shareholders could be similarly extended. As shareholders will know, notices have been served to terminate the service contracts and letters of appointment of each of the Company’s executive and non-executive directors on 31 July 2014.

The Board is, in parallel, reviewing alternative proposals for the future of the Company which may provide for a return of capital to shareholders sooner than the scenario above. However the process is far from simple given that one of the most active considerations is to ensure that proceeds are received by shareholders in the most tax efficient way. We expect to write to shareholders setting out details of the Board’s proposals in due course.

Director’s Resignation

We have to announce the resignation of our Chief Executive, Derek Lucie-Smith on 25 April 2014 due to ill health. We thank him for his services to the Group and wish him a speedy recovery.

28 April 2014

Tony Ebel
Chairman

STRATEGIC REPORT

This report has been prepared by the directors in accordance with the requirements of section 414 of the Companies Act 2006.

Investment objective and policy

Gresham House plc is an authorised investment trust listed on the London Stock Exchange. Following the passing of an ordinary resolution at the Company’s 2011 annual general meeting its investment objective and policy is the orderly realisation of the Group’s assets over a period of approximately two years with a view to returning capital to shareholders thereafter. Given, in particular, the fragile state of the commercial property market in 2011 and 2012, this period of time has been greater than originally anticipated.

To achieve this objective the Board has continued to realise assets during the year and has served notice on all directors to terminate their service contracts/letters of appointment on 31 July 2014. It is intended to send a circular to shareholders prior to that date setting out the Board’s proposals relating to returning capital to shareholders.

The Group continues to invest in both commercial properties and securities but only where this enhances or protects the value of existing investments whilst the realisation process is underway or where value can be achieved in new investments in the short term.

Investment in commercial properties must be undertaken through subsidiary undertakings, joint ventures or associates which are funded mainly through bank loans, both short term and long term. Certain of these property investments also provide a rental income flow which is intended to cover interest and any capital repayments of the related loans as well as contributing to the Group’s operating cash flow.

Investment in securities is primarily by way of supporting existing equity and loan stock positions in unquoted companies with a view to contributing to their development. By their very nature these investments are considered to be of very high risk.

The investment policy is designed to ensure that the Company continues to qualify as an authorised investment trust and is approved as such by H M Revenue & Customs which has accepted the Company’s application for approval as an investment trust for accounting periods commencing on or after 1 January 2013. Since that date the directors have sought to conduct its affairs so as to enable it to continue to maintain such approval.

Risk is spread by investing in commercial properties, corporate bonds and high risk securities. The executive directors have authority to make initial investments up to a value of £50,000. Once this exposure level is reached any additional investment requires final approval by the Board.

All property borrowing is made to specific subsidiary undertakings against specific assets held within that subsidiary undertaking or sub-group with cross guarantees from other group members where appropriate. Borrowings made for working capital purposes can be secured against any asset held within the Group. To minimise the exposure to interest rate movements, loans may have a mix of fixed and floating interest rates but with interest rate hedging where required. Gearing levels may be up to 100% of asset value at the time of obtaining the loan provided there was sufficient income, or potential income, to meet interest and any capital repayments.

Performance during the year

The Board continues to focus on maximising shareholder returns by an orderly realisation of the Group’s assets with a view of returning cash to shareholders as soon as practicable whilst exploring all opportunities to unlock shareholder value.

Operating profit

The Group operating result for the year ended 31 December 2013 was a loss of £746,000 against a break even position in 2012. The comparison between both years is as follows:

	Â	Â	2013	Â	Â	2012
			£’000			£’000
Dividend and investment income			268			690
Rental income			999			1,038
Other income			76			102
Property outgoings			(1,243)			(989)
Administration overheads			(846)			(841)
Operating loss			(746)			-
						Â

The significant variances between the two years are as follows:-

The decrease in dividend and interest income was mainly as a result of the sale of our remaining bond portfolio and the repayment of the loan note from SMU Investments Ltd. The total interest on these investments amounted to £304,000 in 2012 compared to £nil for this current year. In addition the interest accrued on the remainder of the loan portfolio decreased by £92,000 compared with 2012.

The increase in property outgoings was primarily as a result of a further write down of £435,000 (2012: £34,000) on the six acre site at Knowsley for which contracts were exchanged post year end in the sum of £415,000. This asset was valued at £775,000 as at 31 December 2012 and £550,000 as at 30 June 2013. In addition, the Company has incurred a further £75,000 in respect of planning costs.

Net asset value

The net asset value per share has decreased in the year to 31 December 2013 to 378.5p from 445.1p per share at 31 December 2012 (405.1p as at 30 June 2013).

The decrease in net asset value is due to the loss on the revenue account of £1,503,000 together with revaluation deficit on the investment properties amounting to £1,439,000 and the loss on investments held at fair value of £504,000.

Property portfolio

Two property assets were disposed of during the year which has contributed to a significant reduction in the Group’s borrowings which have decreased from £20,458,000 as at 31 December 2012 to £3,746,000 as at 31 December 2013.

The first sale at Vincent Lane, Dorking was in two parts where T E Beteiligungs GmbH completed the purchase of 1.2 acres on 17 January 2013 for a sum of £1.88m and Persimmon Homes Limited completed the purchase of the remaining 1.8 acres on 7 August 2013 for £2.95m. The second was the sale of the property at Knowsley, Liverpool known as Northern Gateway for £6.775m on 29 November 2013.

The property portfolio now consists of the property in Speke, Liverpool, known as Southern Gateway, and the land at Newton-Le-Willows where negotiations are well advanced with a house builder for the sale of the residential portion of the site on a deferred consideration basis. As mentioned above there is also a six acre development site at Knowsley which has been valued at £415,000 at year end (2012: £775,000) being the agreed exchange value post year end.

At Speke we continue with our strategy to maximise income over the short term with a view to selling thereafter. Heads of terms have recently been agreed with a prospective tenant for 68,430 sq.ft. which will not only have a positive impact on net rental income but also is expected to lead to a significant uplift in the value of this investment.

Year end valuations have resulted in a write down of £1,439,000 in the fair value of property investments primarily as a result of the value of the site at Newton-Le-Willows falling from £13.75m at 31 December 2012 to £11.35m at 31 December 2013 offset by an increase over book value of £1.125m in the gross sale proceeds of Northern Gateway.

Securities portfolio

At 31 December 2013 the value of the investment portfolio decreased by £1,895,000 as a result of disposals of £1,480,000 and acquisitions of £89,000 together with net realised and unrealised losses of £504,000.

Our investments at 31 December 2013 amounted to £5,159,000 of which listed and AIM investments represented £2,898,000. The principal quoted investment remaining is our holding in SpaceandPeople plc, which has risen in value in the year from £1,506,000 to £2,805,000 at 31 December 2013. However, since the year end, the value of this investment has reduced to £1,485,000 as of 25 April 2014 following a recently announced profits warning.

The unquoted investments of £2,185,000 include the investment in Memorial Holdings Limited which has been revalued downwards to £610,000 (2012: £2,074,000 and 30 June 2013: £1,786,000) as a result of greater than forecast trading losses and a refinancing of the business which has lead to a reduction in the amount of equity held by the Company from an effective 11.01% to 4.39%.

The other significant unquoted investment is the holding of 10% unsecured loan notes in Attila (BR) Limited which has a cost, and book value, of £935,000. This company owns a city centre development site in Edinburgh for which it is seeking residential planning permission and subsequent sale. Offers have been received from two developers and these are presently being evaluated. Any such sale however is likely to be on a deferred consideration basis.

At 31 December 2013 the securities portfolio was invested in the following sectors:	Â	%
Media & photography		54
Property investment		39
Financial		2
Engineering		5
		100
		Â

Borrowings and cash at bank

Loans and overdrafts at 31 December 2013 were £3,746,000 against £20,458,000 at 31 December 2012. The amount consists of a loan from the Co-operative Bank which is secured against the property portfolio. This represents a loan to value of 22% against the overall property investments. This loan is short term and confirmation has been received from the Co-operative Bank that it expects to extend its facility until 30 September 2014 with a further extension to 31 December 2014 subject to progress with disposals/repayments. The board is also seeking terms from other banks to refinance the position for a longer term.

Cash in hand at 31 December 2013 has decreased from £8.348m at 31 December 2012 to £1.625m at 31 December 2013 following the repayment of the overdraft facility of £7.376m during the year.

Key performance indicators

The Board considers the main key performance indicator applicable to the Group to be net asset value per share (“NAV”). As at 31 December 2013, the basic NAV was 378.5p (2012: 445.1p). The main non-financial KPI is considered to be the amount of vacant space within the property portfolio. As at 31 December 2013 this totalled 157,657 sq. ft. representing 34.9% of the total available (2012: 137,496 sq. ft. and 23%), the percentage increase being principally as a result of the disposal of the property known as Northern Gateway.

Employee, environmental, human rights, social and community issues

The average number of persons employed by the Group, including three executive directors, was six (2012: seven) of which five are male and one female. In addition there are three non-executive directors of which two are male and one female. Given the number of employees it is the Company’s objective to retain those that remain as long as necessary to achieve the Company’s objective.

Although the Group does not have a formal environmental policy it does recognise the importance of environmental responsibility. The Group encourages the active involvement of persons working for and on behalf of the Group to minimise so far as reasonably practicable any adverse effects on the environment of their activities.

Whilst the Group does have potential greenhouse gas emissions from its investment property known as Southern Gateway and its administrative centres, it is believed that this relates to heating and lighting only. The other property owned directly by the group relates to vacant land. Given the Company’s investment objective and policy to realise these investments in the short term the Board is of the opinion that it is not in shareholders’ best interests to commission the necessary reports due to the cost involved.

The Board is not aware of any social, community or human rights issues that have had an impact on the Group’s business. The Company does not support any social or community initiatives.

Principal risks, risk management and regulatory environment

The Board believes that, as per the previous year, the principal risks faced by the Group are:

Economic risk – events such as unfavourable economic conditions and/or movement in interest rates could affect trading conditions and consequently (i) the Company’s investment portfolio, particularly the value of smaller company investments, and (ii) the value of the property investments.

Strategic and investment – an inappropriate strategy, poor asset allocation or weak stock selection could lead to underperformance and poor returns. Investments in small unquoted companies involve a higher degree of risk than investments in companies traded on the main market of the London Stock Exchange. Investments in companies traded on AIM may be difficult to realise, particularly where the holding is large.

Regulatory – the Company is required to comply with the Companies Act 2006, the listing rules of the UK Listing Authority and International Financial Reporting Standards. A breach of any of these might lead to a suspension of the Company’s Stock Exchange listing, financial penalties or a qualified audit report. The Company must also comply with section 1158 of the Corporation Tax Act 2010 to ensure that all gains made in the Company remain tax free. Any breach in these rules may lead to the Company losing its authorised investment trust status.

Financial and operating risk – inadequate controls may lead to misappropriation of assets, inappropriate accounting policies could lead to misreporting or breaches of regulations.

Market price risk – there will always be uncertainty regarding future prices of investments held within the Company’s portfolio, particularly where the investment is unquoted.

Asset liquidity risk – the remaining investments held may be difficult to realise as (i) the majority of equity investments relate to holdings in AIM and ISDX traded companies and unquoted companies and (ii) the general secondary property market has suffered from both lack of tenant demand and little or no funding from banks.

Market liquidity risk – shareholders may find it difficult to sell their shares in the Company at a price which is near to the net asset value.

Interest rate risk – the Group’s investments and net revenue may be affected by interest rate movements.

Credit risk – a counterparty may fail to discharge an obligation or commitment that it has entered into with the Group.

Property risk – tenants may become of insufficient financial standing to meet their obligations to the Group.

The Company’s shares may qualify for inclusion in a stocks and shares ISA depending on the interpretation of H M Revenue & Customs’ rules. Any shareholder considering an investment in their ISA should take professional advice before so doing. The Company cannot take any responsibility for potential losses which may be incurred by shareholders.

The portfolio is not managed against a benchmark. The reference to the FTSE All Share Index in the Remuneration Report is provided only as a guide to shareholders. The portfolio is managed on a high risk strategy basis.

The Board seeks to mitigate these and other perceived risks by setting policies and by undertaking a risk assessment at least annually.

Tony Ebel

Chairman

28 April 2014

PRELIMINARY FINANCIAL STATEMENT

GROUP STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2013

Â		Â		Â	2013	Â		Â	Â			Â	2012	Â
			Revenue		Capital		Total		Revenue				Capital		Total
			£' 000		£' 000		£' 000		Â	£' 000			£' 000		£' 000
Income:
Dividend and interest income			268		-		268			690			-		690
Rental income			999		-		999			1,038			-		1,038
Other operating income			76	Â	-	Â	76			102		Â	-	Â	102
Total Income			1,343		-		1,343			1,830			-		1,830
Operating costs:
Property outgoings			(1,243)		-		(1,243)			(989)			-		(989)
Administrative overheads			(846)	Â	-	Â	(846)			(841)		Â	-	Â	(841)
Net trading loss			(746)		-		(746)			-			-		-
Gains & losses on investments:
Gains & losses on investments held at fair value			-		(504)		(504)			-			(280)		(280)
Movement in fair value of property investments			-	Â	(1,439)	Â	(1,439)			-		Â	2,086	Â	2,086
Group operating (loss)/profit			(746)		(1,943)		(2,689)			-			1,806		1,806
Finance costs			(757)		-		(757)			(810)			-		(810)
			Â	Â	Â	Â	Â			Â		Â	Â	Â	Â
Group operating (loss)/profit before taxation			(1,503)		(1,943)		(3,446)			(810)			1,806		996
Taxation			-	Â	-	Â	-			-		Â	-	Â	-
(Loss)/profit and total comprehensive income			(1,503)	Â	(1,943)	Â	(3,446)			(810)		Â	1,806	Â	996
															Â
Attributable to:
Equity holders of the parent			(1,281)		(2,216)		(3,497)			(428)			1,848		1,420
Non-controlling interest			(222)	Â	273	Â	51			(382)		Â	(42)	Â	(424)
			(1,503)	Â	(1,943)	Â	(3,446)			(810)		Â	1,806	Â	996
Basic and diluted (loss)/earnings per ordinary share			(23.8p)	Â	(41.3p)	Â	(65.1p)			(8.0p)		Â	34.4p	Â	26.4p
															Â

Notes

(i) The total column of this statement represents the Group’s Statement of Comprehensive Income, prepared in accordance with IFRSs.

(ii) The revenue and capital columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.

(iii) Dividends - Ordinary shares:

Proposed final dividend of nil p per share (2012: 2.5p) at a total cost of £nil (2012: £134,247).

(iv) The basic and diluted earnings / (loss) per share figure is based on the net loss for the year attributable to the equity shareholders of £3,497,000 (2012: profit £1,420,000) and on 5,369,880 (2012: 5,369,880) ordinary shares, being the weighted average number of ordinary shares in issue during the period.

There were no potentially dilutive ordinary shares as at 31 December 2013.

PRELIMINARY FINANCIAL STATEMENT

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

YEAR ENDED 31 DECEMBER 2013										Â		Â				Â				Â				Â				Â
						Â	Ordinary share capital	Â	Share premium					Â	Capital reserve			Â	Retained earnings			Â	Equity attributable to equity share-holders			Â	Non-controlling interest			Â	Total equity
				Â			£'000		£'000						£'000				£'000				£'000				£'000				£'000
Balance as at 31 December 2012							1,342		2,302						35,822				(15,562)				23,904				-				23,904
Loss for the period being total comprehensive income for the year							-		-						(2,216)				(1,281)				(3,497)				51				(3,446)
Transfer of non-controlling interest deficit							-		-						(222)				273				51				(51)				-
Ordinary dividends paid							-	Â	-					Â	-			Â	(134)			Â	(134)			Â	-			Â	(134)
Balance at 31 December 2013							1,342	Â	2,302					Â	33,384			Â	(16,704)			Â	20,324			Â	-			Â	20,324
		Â					Â
YEAR ENDED 31 DECEMBER 2012 (Restated)
			Ordinary share capital				Share premium				Share option reserve		Capital reserve				Retained earnings				Equity attributable to equity share-holders				Non-controlling interest				Total equity
			£'000				£'000				£'000		£'000				£'000				£'000				£'000				£'000
Balance as at 31 December 2011			1,342				2,302				14		34,356				(15,052)				22,962				-				22,962
Profit/(loss) for the period being total comprehensive income for the year			-				-				-		1,848				(428)				1,420				(424)				996
Transfer of non-controlling interest deficit			-				-				-		(382)				(42)				(424)				424				-
Ordinary dividends paid			-				-				-		-				(54)				(54)				-				(54)
Share options lapsed			-			Â	-			Â	(14)	Â	-			Â	14			Â	-			Â	-			Â	-
Balance at 31 December 2012			1,342			Â	2,302			Â	-	Â	35,822			Â	(15,562)			Â	23,904			Â	-			Â	23,904
																																Â

PRELIMINARY FINANCIAL STATEMENT

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2013

Â			Â	2013	Â	Â	2012
Assets				£'000			Restated £'000
Non current assets
	Investments – securities			5,159			5,905
	Property investments			9,270			21,516
				14,429			27,421
Current assets
	Trade and other receivables			358			187
	Accrued income and prepaid expenses			639			626
	Other current assets			415			775
	Cash and cash equivalents			1,625			8,348
Non current assets held for sale
	Investments – securities			-			1,149
	Property investments			7,430			7,380
Total current assets and non current assets held for sale				10,467			18,465
							Â
Total assets				24,896			45,886
							Â
Current liabilities
	Trade and other payables			826			1,524
	Short term borrowings			3,746			14,958
Liabilities of a disposal group classified as held for sale
Short term borrowings				-	Â		5,500
				4,572			21,982
				Â			Â
Total assets less current liabilities				20,324			23,904
							Â
Non-current liabilities
	Deferred taxation			-			-
				Â			Â
Net assets				20,324			23,904
							Â
Capital and reserves
	Ordinary share capital			1,342			1,342
	Share premium			2,302			2,302
	Capital reserve			33,384			35,822
	Retained earnings			(16,704)			(15,562)
Equity attributable to equity shareholders				20,324			23,904
Non-controlling interest				-			-
Total equity				20,324			23,904
							Â
Basic and diluted net asset value per ordinary share				378.5p			445.1p
							Â

Notes

Basic and diluted net asset value per ordinary share is based on Equity attributable to equity shareholders at the year end and on 5,369,880 (2012: 5,369,880) ordinary shares being the number of ordinary shares in issue at the year end. No shares were deemed to have been issued at nil consideration as a result of options granted and hence there were no potentially dilutive ordinary shares as at 31 December 2013.

PRELIMINARY FINANCIAL STATEMENT

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2013

	Â	Notes	Â	2013	Â	Â	2013	Â	Â	2012	Â	Â	2012
				£'000			£'000			£'000			£'000
Cash flow from operating activities
Investment income received				88						76
Interest received				108						453
Rental income received				1,037						1,093
Other cash payments				(2,118)						(1,686)
Net cash utilised in operations		19					(885)						(64)
													Â
Interest paid on property loans				(600)						(757)
							(600)						(757)
													Â
Net cash flow from operating activities							(1,485)						(821)
													Â
Cash flow from investing activities
Purchase of investments				(89)						(571)
Sale of investments				1,480						2,343
Sale of investment properties				11,466						1,500
Expenditure on investment properties				(1,227)						(563)
Purchase of developments in hand				(22)						(29)
							11,608						2,680
Cash flow from financing activities
Repayment of loans				(16,937)						(1,956)
Receipt of loans				225						2,306
Equity dividends paid				(134)						(54)
							(16,846)						296
													Â
(Decrease) / increase in cash and cash equivalents							(6,723)						2,155
													Â
Cash and cash equivalents at start of year							8,348						6,193
							Â						Â
Cash and cash equivalents at end of year							1,625						8,348
													Â

NOTES TO THE GROUP STATEMENT OF CASH FLOWS

	Â	2013	Â	Â	Â	2012
		£’000				£’000
Revenue return before taxation		(1,503)				(810)
Interest payable		504				679
		(999)				(131)
Decrease/(increase) in current assets		484				(30)
(Decrease)/increase in current liabilities		(370)				97
Net cash utilised in operations		(885)				(64)
							Â

PRELIMINARY FINANCIAL STATEMENT

SEGMENTAL REPORTING

	Â	Â	Investment					Â	Â	Â	Property Investment					Â	Â	Â	Elimination					Â	Â	Â	Consolidated
			2013	Â	Â	Â	2012				2013	Â	Â	Â	2012				2013	Â	Â	Â	2012				2013	Â	Â	Â	2012
Revenue			£’000				£’000				£’000				£’000				£’000				£’000				£’000				£’000
External income			310				727				987				1,033				-				-				1,297				1,760
Inter – segment income			637				1,369				-				-				(637)				(1,369)				-				-
Total revenue			947				2,096				987				1,033				(637)				(1,369)				1,297				1,760
																															Â
Gains and losses on investments at fair value			(504)				(280)				-				-				-				-				(504)				(280)
Movement on property investments at fair value			-				-				(1,439)				2,086				-				-				(1,439)				2,086
Total income and gains			443				1,816				(452)				3,119				(637)				(1,369)				(646)				3,566
																															Â
Segment expenses			-				-				(1,243)				(989)				-				-				(1,243)				(989)
Inter – segment expense			-				-				(637)				(1,369)				637				1,369				-				-
Finance costs			(106)				(203)				(651)				(607)				-				-				(757)				(810)
Segment (loss)/profit			337				1,613				(2,983)				154				-				-				(2,646)				1,767
Unallocated corporate expenses																											(846)				(841)
Operating (loss)/profit																											(3,492)				926
Interest income																											46				70
(Loss)/profit before taxation																											(3,446)				996
																															Â
The Group’s policy is to invest in both securities and commercial properties. Accordingly management reporting is split on this basis under the headings “Investment” and “Property Investment” respectively. Inter-segment income consists of management fees and interest on inter-company loans. Unallocated corporate expenses relate to those costs which cannot be readily identified to either segment.   All activity and revenue is derived from operations within the United Kingdom. Four customers accounted for £327,000, £222,000, £132,000 and £100,000 respectively of the external income for the Property Investment segment. Property operating expenses relating to property investments that did not generate any rental income were £18,000 (2012: £221,000).
Other Information			Investment								Property Investment								Unallocated								Consolidated
			2013				2012				2013				2012				2013				2012				2013				2012
			£’000				£’000				£’000				£’000				£’000				£’000				£’000				£’000
Segment assets			6,658				16,339				18,238				29,547				-				-				24,896				45,886
Segment liabilities			(194)				(7,571)				(4,378)				(14,411)				-				-				(4,572)				(21,982)
			6,464				8,768				13,860				15,136				-				-				20,324				23,904
Capital expenditure			89				571				942				867				-				-				1,031				1,438
Depreciation			-				-				-				-				-				-				-				-
Non-cash expenses other than depreciation			-				-				-				-				-				-				-				-
All non current assets are located within the United Kingdom.
Â

GRESHAM HOUSE PLC

PRELIMINARY FINANCIAL STATEMENT

The principal accounting policies adopted by the Group are fundamentally the same as the previous year other than the Basis of preparation note. Full disclosure of the principal accounting policies and related party transactions are included in the financial statements which will be available on the Company’s website www.greshamhouse.com shortly.

Basis of preparation

The financial statements of the Group and the Company have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union and those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

The financial information set out in the announcement does not constitute the Company's statutory accounts for the year ended 31 December 2013 or the year ended 31 December 2012. The financial information for the year ended 31 December 2013 and the year ended 31 December 2012 are extracted from the statutory accounts of Gresham House plc, with the balance sheet for 2012 having been restated for the reclassification within equity referred to below. The auditor, BDO LLP has reported on the accounts for both periods; their report was unqualified and did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006 for the periods ended 31 December 2013 or 2012. The auditor has raised an Emphasis of Matter in relation to going concern in 2013 only as follows:

‘Emphasis of matter – financial statements prepared other than on a going concern basis

In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosures made in the Basis of Preparation accounting policy concerning the basis on which the financial statements were prepared. As the objective of the directors is to achieve an orderly realisation of the Group’s assets over a relatively short period with a view to returning capital to shareholders thereafter, the financial statements have been prepared on a basis other than that of going concern.’

The full statutory accounts will be available on the Company’s website at www.greshamhouseplc.com and will be posted to shareholders shortly.

The following standards and interpretations have been adopted in 2013 as they are mandatory for the year ended 31 December 2013:

(i) Amendment to IAS 1 – Presentation of items of other comprehensive income

(ii) IFRS 13 – Fair value measurement

The principal accounting policies adopted are detailed in the full statutory accounts for the year ended 31 December 2013. Where presentational guidance set out in the Statement of Recommended Practice (“the SORP”) for investment trusts issued by the Association of Investment Companies (“the AIC”) is consistent with the requirements of IFRS and appropriate in the context of the Company’s activities, the directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP.

Other standards and interpretations have been issued which will be effective for future reporting periods but have not been adopted in these financial statements as set out in note (s) to the full statutory accounts.

As the Group’s investment objective is now the orderly realisation of the Group’s assets over a relatively short period with a view to returning capital to shareholders thereafter, the Group technically ceases to be a going concern as it is the intention to realise assets and return capital to shareholders in due course. During the realisation period the Group expects to trade in an orderly fashion and, in the directors’ opinion, the valuation bases applied to the assets and liabilities (as disclosed elsewhere within the accounting policies) are such that there would be no material adjustments to the financial statements if they had been prepared on a going concern basis.

The Group has short term bank borrowings of £3.7m due within one year from the Co-operative Bank repayable by 31 May 2014. Confirmation has been received from the Co-operative Bank plc that it expects to extend the facility until 30 September 2014 with a further extension to 31 December 2014 subject to progress with disposals/repayments. The Board is also seeking terms from other banks to refinance the position for a longer term.

On this basis the directors are of the opinion that the Group will have sufficient working capital to fund ongoing activities for at least the next 12 months.

Restatement of prior year reserves

Having reconsidered the relationship between the creditors of a non-wholly owned loss-making subsidiary and the wider group, the directors consider that arrangements are in place which enable losses previously attributable to the non-controlling interest to be absorbed by equity holders of the parent. Consequently, an adjustment has been made within equity to reflect these arrangements, with comparative numbers restated accordingly. The impact on the balance sheet as at 31/12/12 is to reduce the debit balance attributable to the non-controlling interest by £1,467,000, with a corresponding reduction to equity attributable to shareholders of the parent. The impact on the balance sheet as at 31/12/11 is not material and therefore a 3^rd balance sheet has not been presented. The only impact on the balance sheet as at 31/12/11 is a similar transfer within equity of £1,043,000. As there is no further adjustment it is not felt necessary to reproduce the balance sheet at this date in full. There is no impact on group profit or total equity for any prior period.

DIRECTORS’ RESPONSIBILITIES STATEMENT

This preliminary announcement complies with the Disclosure and Transparency Rules (DTR) of the United Kingdom’s Financial Conduct Authority. The preliminary announcement is the responsibility of, and has been approved by the directors of Gresham House plc.

The responsibility statement below has been prepared in connection with the Company’s full Annual Report for the year ended 31 December 2013. Certain parts thereof are not included in this announcement.

The directors confirm, to the best of their knowledge:

• that the Group financial statements, which have been prepared in accordance with IFRS as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group; and
• that the management report included within the report of the directors includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

Further information:

Brian Hallett	Â	Â	Â	(Finance Director, Gresham House plc)	Â	Â	Â	01489 570 861
Richard Johnson				(Westhouse Securities Limited)				020 7601 6100
								Â