Final Results

GRESHAM HOUSE PLC PRELIMINARY FINANCIAL STATEMENT YEAR ENDED 31 DECEMBER 2008 Gresham House plc (GHE.L), the property and early-stage investment trust, today announces its preliminary results for the year ended 31 December 2008. CHAIRMAN'S STATEMENT The year ending 31st December, 2008 has been an exceptionally difficult one for your Company. During that period commercial property values in the UK have declined by 26.3%, exceeding the largest annual Investment Property Databank ("IPD") fall since records commenced in 1971; during the same period the FSTE All Share Index also fell by 32.8%. As a consequence the results for the year show a revenue loss of £3,140,000 (2007: £1,009,000) and a capital loss of £18,487,000 (2007: £2,430,000). The revenue loss was principally caused by net provisions made against two development sites of £2,220,000 as a result of the deteriorating property market; a provision of £306,000 in respect of compensation for loss of office as a result of the board reorganisation that took place in October 2008 and the redundancy costs associated with the sale of the head office and costs of £128,000 in connection with the Parkwood Property Investment LLP approach. If the above non-recurring costs were excluded, the loss would be reduced to £486,000 compared to £619,000 in 2007 on a like for like basis. The capital loss of £18,487,000 was a result of a fall in the investment property values of £13,512,000 together with a reduction in the value of the securities portfolio of £6,330,000. These losses were partly offset by the gain of £507,000 on the sale of the Company's head office at Elder Street and a taxation credit of £848,000. As a result of the above the diluted net asset value per share fell from 834.8p as at 31st December, 2007 to 405.3p as at 31st December, 2008 reflecting the widespread deterioration in the market. Property Portfolio The overall valuation of investment and development properties of £28,756,000 showed a decline of 34.3% compared to the 2007 year end valuation. This decline was greater than the IPD fall of 26.3%, as secondary and tertiary industrial estates have been the worst performing sector in the property market, particularly where short term occupational leases exist. Looking forward however, your Board has reasons for optimism. We have a number of potential planning gains that the management team are exploiting, in particular the change of use at Vincent Lane, Dorking and at Newton-le-Willows as well as a master plan for our site at Southern Gateway, Speke. Efforts are being concentrated on increasing rental income, which should subsequently have a favourable effect on capital values. With this in mind we have commenced a refurbishment programme at Southern Gateway which will enable a number of units to become available for letting. At Newton-le-Willows several empty units are being refurbished to attract potential tenants and three dilapidated units have been demolished thus saving on unrecoverable property outgoings. The Investment Portfolio The value of the investment portfolio has decreased 48.6% over the year compared with a fall in the FTSE All Share Index of 32.8% Following the AGM held in June 2008 and the appointment of two new executive directors in October 2008 the Board has been following a policy of progressive realisation of the investment portfolio. Between 9th October, 2008 and 31st March, 2009 a total of £1 million of investments have been realised. As at 31st December, 2008 the largest investment in the portfolio, the 8.96% holding in Hallin Marine, was valued at £3.1 million. The market value has since increased to £4.4 million, as at 31st March, 2009, following excellent results which showed an increase of pre tax profits of 216% to US$35.4 million. Your Board considers that this current valuation does not reflect the underlying potential of the business and therefore intends to hold this investment for the immediate future. The other two major investments as at 31st December, 2008 are Welsh Industrial Investment Trust valued at £455,000 and SpaceandPeople valued at £714,000. It remains your Board's policy to monitor all investments with a view of realising full value over the medium term. Debt Refinance and Cash I am pleased to report that we are optimistic that the current debt of £17.9 million will be refinanced for a period of between 2 and 3 years despite the prevailing difficult market conditions. We anticipate that these new facilities will be in place during May 2009. Following the sale of the head office at Elder Street and certain investment sales the Group now has approximately £2.6 million of cash. The Board Following the EGM on 9th October, 2008, Derek Lucie-Smith and John Lorimer were appointed to the Board as Chief Executive Officer and Property Director respectively. Both have had a considerable amount of experience in the property sector and the Board has been pleased with their commitment and efforts over this period and feel confident that they will create positive value for shareholders in the future. At the same time Rosemary Chopin-John was appointed as an additional non-executive director. As part of the major reorganisation of your Board which took place to avoid any further conflict between major shareholders that could only adversely affect the Company, Fred Stirling resigned as Chairman and Managing Director on 9th October. Fred has been on the Board of Gresham House for over 40 years and his commitment to Gresham has been unstinting and Gresham's past record of success has reflected his efforts. We can only thank him for his tremendous contribution. At the same time Nick Rowe, Tom Rowe and Richard Lane also resigned and we again extend our thanks for their guidance as non-executive directors. Dividend In order to comply with the Investment Trust rules the Board recommends a payment of a final dividend of 1p per share payable on 26th June, 2009 to shareholders on the register on 29th May, 2009. Share buy back We are not seeking to renew the share buy back authority at the AGM. We will consider doing so later in the year if the share price remains at a material discount to net asset value, however this will require a balance sheet restructuring, shareholder approval and approval from the Takeover Panel (since Derek Lucie-Smith and John Lorimer are directors and, via Parkwood Property Investment LLP, major shareholders of Gresham House plc). Future Strategy A resolution to realise the Company's assets within 5 years and return money to shareholders was carried at the last AGM. Whilst your Board continues with this policy, having regard to the prevailing market conditions and the present uncertainty as to the timing of any market improvement, it will only do so when it considers that fair value can be obtained. The Board's priority is to maximise the return for all shareholders and it will therefore hold investments for such period as proves necessary to achieve this. In addition the Board is seeking other opportunities to enhance shareholder value and to this end we have appointed Evolution Securities as corporate advisers and brokers. Property values have fallen by 8.9% in the first 3 months of 2009 and the market expects further falls before values are stabilized. The Board anticipates rental values declining further during 2009 and into 2010 but believes that the value of the current portfolio can be enhanced through active management on lettings and obtaining valuable planning consents. The Board believes the Group to be in a very viable and resilient position and anticipates exploiting various opportunities in the portfolio during 2009. 29th April, 2009 A. G. Ebel Chairman CHIEF EXECUTIVE'S REPORT When I was appointed CEO in October 2008 the first thing that the executive Board put in place was a business plan for each of the major assets within the Group and to review all the loans, overheads, outstanding litigation and joint ventures to secure the future of your Company. Our strategy is focused on creating additional value beyond our current net asset value. I would like to share the outcome of our deliberations and plans with you. Property Portfolio We found that the potential of the portfolio to add value to most of the properties was realisable within a three year period. Our first priority was to appoint a firm of national valuers to establish our base year end valuation in order to see whether we were able to increase the value of the portfolio going forward. The appointment of King Sturge and their subsequent valuation of the total property portfolio of £28.8 million indicated a considerable provision of £15.7 million was necessary. Whilst commercial property values throughout the country have suffered dramatically in the last 12 months (the IPD Property Index showed a 26.3% drop in 2008), the tertiary industrial sector, which accounts for most of the Group's portfolio, has been worst affected, thus the significant fall in valuation. Whilst the current vacancy level is 47.7% of the portfolio, the directors' estimated rental value of the portfolio is £3,200,000 p.a. as against a current passing rent of £2,125,000 p.a., a 34% difference. Specifically, the value of Deacon Trading Estate (renamed Force 6 Trading Estate) in Newton-le-Willows fell by 45% as a result of the impending lease expiries. However, this 28 acre industrial estate has been allocated by St Helen's Local Authority for a residential and mixed use development and the Board is confident that it will secure a valuable planning consent hopefully within 18 months. Whilst conditional offers on attractive terms have been received, it is the Board's intention not to cede control of the planning process to a third party, but to run the planning application ourselves, with advice from planning consultants. In 2007, the Company announced a conditional sale of Southern Gateway (together with the adjoining site, in which it now has a 50% interest) at £61 million. This was based on securing a retail consent which the current Board accepts is almost certainly unachievable. We are now pursuing all other planning options but the current market conditions have curtailed the viability of any development. As a result our focus is on increasing the rental income by the refurbishment and letting of vacant space and good progress is being made in this respect. In 2007 Wolden Estates Limited entered into a conditional sale of Vincent Lane, Dorking with Linden Limited. As reported in the 2008 Interim Results, planning consent for residential use was refused in July 2008 and discussions are now being held with the planners and potential purchasers about alternative uses, all of which would be value enhancing. At Curtis Road in Dorking, an onerous planning condition that has so far prevented the development of the site is being challenged and Counsel's advice suggests that this should be successful. The construction of Northern Gateway in Knowsley, was completed in October 2008 and agents are seeking either a long term occupational lease or freehold sale of this impressive 143,000 sq.ft. warehouse. Investments The value of the securities portfolio as at 31st December, 2008 totalled £6.688 million compared with £14.265 million a year previously. The principal investments within the portfolio at the year end and the Boards strategy regarding each are as follows: Hallin Marine - this is our principal investment with a year end valuation of £3.1 million and a market value as at 31st March, 2009 of £4.4 million. It is considered that there should be further growth in this investment as it was conservatively valued at a 2.3PE ratio and the earnings appear to be sustainable. We therefore consider that the share price is under-valued and intend to retain the investment pending a price improvement. SpaceandPeople - this investment is the second largest with a value of £714,000 as at 31st December, 2008. The company has produced solid results over the past year and expansion plans for improving market penetration seem to be producing favourable results. We will therefore review this investment in line with their anticipated results. Welsh Industrial Investment Trust - the Company has a 25% share in this authorised investment trust which, as at 31st December, 2008 had a market capitalisation of £2.4 million based on the mid-market price. Your Board is exploring ways of helping the company to expand the asset base in order that this investment can be realised in due course. Unquoted Investments - the value of these investments total £1.1 million as at the year end representing 16.3% of the portfolio. Your Board is reviewing each of these and is working with both Fred Stirling and individual brokers to exploit the maximum value in these holdings over a period of time. As with all such companies some may take longer than others to reach a stage where they can be realised. Litigation The action against a former executive director of the property subsidiaries and Sandfile Limited has now been agreed in principle to the satisfaction of the Board. Whilst details of the settlement cannot be disclosed, the principal benefit is the acquisition of the head lease of the development site in Knowsley which will enable planning consent to be applied for with a view of selling the site over the course of the next 12 months. Joint Venture Our joint venture in the Rayware site has now been renegotiated with our partner Futurist Developments Ltd who has agreed in principle to write off part of its loan in order to put the joint venture on a more viable footing and to amend the terms of the JV Agreement so that all shareholder loans now rank pari passu. At the same time our shareholding in the JV has increased from 35% to 50%. Overheads The head office at Elder Street in London has been sold for a price of £1 million. The net profit, after costs, of £507,000 has been reflected in the 2008 accounts. As a result of the various changes since 9th October, 2008 the business plan does not anticipate any major changes to the overall cost of overheads throughout the Group. Loans and Cash The total bank loan portfolio of £17.9 million is currently under negotiation. A facility letter has been received from the Co-op which extends its existing loans on Southern Gateway and Northern Gateway for a further three years. This has now been approved by the Board, signed and returned. The Royal Bank of Scotland has intimated that it would be prepared to extend the facilities on both Curtis Road, Dorking and Sugarich, Knowsley and also provide an additional facility in respect of the Morgan Stanley loan that is due for repayment in June 2009. It is anticipated that both these loan facilities will be in place during May and will be confirmed to shareholders at the AGM. The cash position has been greatly enhanced as a result of the sale of investments totalling £1.0 million and the sale of the head office in Elder Street. As at 24th April, 2009 cash resources of the Group stood at approximately £2.6 million. Notwithstanding the current market challenges your Board feels confident of adding value for shareholders in the next 12 months. 29th April, 2009 D. Lucie-Smith Further information: Derek Lucie-Smith (Chief Executive Gresham House plc) 020 7590 7500 Brian Hallett (Finance Director Gresham House plc) 01489 570861 Jeremy Ellis (Evolution Securities) 020 7071 4308 GRESHAM HOUSE PLC PRELIMINARY FINAL STATEMENT CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2008 2008 2007 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Income: Dividend and interest income 266 - 266 370 - 370 Rental income 2,451 - 2,451 2,339 - 2,339 Other operating income (6) - (6) 92 - 92 ----- ----- ----- ----- ----- ----- Total Revenue 2,711 - 2,711 2,801 - 2,801 (Losses)/Gains on investments held at fair value - (6,330) (6,330) - 1,000 1,000 Movement in fair value of property investments - (13,512)(13,512) - (4,085) (4,085) Profit on disposal of property, plant and equipment - 507 507 - - - ----- ----- ----- ----- ----- ----- 2,711 (19,335)(16,624) 2,801 (3,085) (284) ----- ----- ----- ----- ----- ----- Operating costs: Property outgoings and impairments (3,291) - (3,291) (1,206) - (1,206) Administrative overheads (1,462) - (1,462) (1,444) - (1,444) ----- ----- ----- ----- ----- ----- (4,753) - (4,753) (2,650) - (2,650) ----- ----- ----- ----- ----- ----- Operating (loss)/profit (2,042)(19,335)(21,377) 151 (3,085) (2,934) Finance costs (927) - (927) (991) - (991) Share of associates operating loss (171) - (171) (169) - (169) ----- ----- ----- ----- ----- ----- Operating loss before taxation (3,140)(19,335)(22,475) (1,009) (3,085) (4,094) Taxation - 848 848 - 655 655 ----- ----- ----- ----- ----- ----- Loss for the period (3,140)(18,487)(21,627) (1,009) (2,430) (3,439) ===== ===== ===== ===== ===== ===== Attributable to:- Equity holders of the parent (2,874)(17,943)(20,817) (993) (1,879) (2,872) Minority interest (266) (544) (810) (16) (551) (567) ----- ----- ----- ----- ----- ----- (3,140)(18,487)(21,627) (1,009) (2,430) (3,439) ===== ===== ===== ===== ===== ===== Basic and diluted earnings per ordinary Share (426.6)p (58.9)p ===== ===== Notes (i)The total column of this statement represents the Group's Income Statement, prepared in accordance with IFRSs. (ii) Dividends - Ordinary shares: proposed final dividend of 1p per share (2007: 5p) payable on 26th June 2009 to shareholders on the register at 29th May 2009 49 244 ===== ===== (iii)The summary of results for the year ended 31st December 2008 does not constitute statutory accounts within the meaning of s240 of the Companies Act 1985. The financial information has been extracted from the Group's full statutory accounts for the year ended 31st December 2008 on which the auditors have given an unqualified audit report. The full statutory accounts are available on the Company's website www.greshamhouse.com and will be posted to shareholders. (iv)Basic and diluted earnings per ordinary share are based on the net loss attributable to equity shareholders of £20,817,000 (2007: £2,872,000), and on 4,879,694 (2007: 4,876,880) ordinary shares being the weighted average number of those in issue during the year. The calculation for diluted earnings per share would have included 8,908 (2007: 18,123) shares deemed to have been issued at nil consideration as a result of options granted but these have not been recognised as they would reduce the loss per share. GRESHAM HOUSE PLC PRELIMINARY FINAL STATEMENT CONSOLIDATED STATEMENT OF CHANGES IN EQUITY YEAR ENDED 31 DECEMBER 2008 Equity attributable Ordinary Share to equity share Share option Capital Retained share- Minority Total capital premium reserve reserve earnings holders interest equity £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 31 Dec 2007 1,219 831 44 48,306 (9,538) 40,862 1,141 42,003 Loss for the period * - - - (17,943) (2,874) (20,817) (810)(21,627) Ordinary dividend paid - - - - (244) (244) - (244) Issue of shares 1 16 - - - 17 - 17 Share based payments - - (2) - 6 4 - 4 ------ ------ ------ ------ ------ ------ ----- ------ Balance at 31 Dec 2008 1,220 847 42 30,363 (12,650) 19,822 331 20,153 ====== ====== ====== ====== ====== ====== ===== ====== YEAR ENDED 31 DECEMBER 2007 Equity attributable Ordinary Share to equity share Share option Capital Retained share- Minority Total capital premium reserve reserve earnings holders interest equity £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 31 Dec 2006 1,219 831 28 49,908 (7,975) 44,011 1,708 45,719 Loss for the period * - - - (1,879) (993) (2,872) (567) (3,439) Ordinary dividend paid - - - - (293) (293) - (293) Reserves transfer - - - 277 (277) - - - Share based payments - - 16 - - 16 - 16 ------ ------ ------ ------ ------ ------ ----- ------ Balance at 31 Dec 2007 1,219 831 44 48,306 (9,538) 40,862 1,141 42,003 ====== ====== ====== ====== ====== ====== ===== ====== * The loss for the period is the total income and expense for the period. GRESHAM HOUSE PLC PRELIMINARY FINAL STATEMENT CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2008 2008 2007 Assets £'000 £'000 Non-current assets Investments - securities 6,688 14,265 Property investments 25,750 38,805 Property, plant and equipment 3 487 ------ ------ Total non-current assets 32,441 53,557 ------ ------ Current assets Trade and other receivables 361 497 Accrued income and prepaid expenses 1,721 674 Other current assets 3,432 5,972 Cash and cash equivalents 1,839 1,337 ------ ------ Total current assets 7,353 8,480 ------ ------ Total assets 39,794 62,037 ------ ------ Current liabilities Trade and other payables 1,702 1,488 Short term borrowings 17,939 7,568 ------ ------ Total current liabilities 19,641 9,056 ------ ------ Total assets less current liabilities 20,153 52,981 Non current liabilities Long term borrowings - 10,130 Deferred taxation - 848 ------ ------ - 10,978 ------ ------ Net assets 20,153 42,003 ====== ====== Capital and reserves Ordinary share capital 1,220 1,219 Share premium 847 831 Share based payments 42 44 Capital reserve 30,363 48,306 Retained earnings (12,650) (9,538) ------ ------ Equity attributable to equity shareholders 19,822 40,862 Minority interest 331 1,141 ------ ------ Total equity 20,153 42,003 ====== ====== Basic net asset value per ordinary share 406.0p 837.9p ====== ====== Diluted net asset value per ordinary share 405.3p 834.8p ====== ====== Notes Basic net asset value per ordinary share is based on Equity attributable to equity shareholders at the year end and on 4,881,880 (2007: 4,876,880) ordinary shares being the number of ordinary shares in issue at the year end. Diluted net asset value per ordinary share is based on Equity attributable to equity shareholders at the year end and on 4,890,788 (2007: 4,895,003)ordinary shares. The number of shares is based upon the number of shares in issue at the year end together with 8,908(2007:18,123) shares deemed to have been issued at nil consideration as a result of options granted. GRESHAM HOUSE PLC PRELIMINARY FINAL STATEMENT CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2008 2008 2008 2007 2007 £'000 £'000 £'000 £'000 Cashflow from operating activities Investment income received 166 193 Interest received 100 177 Rental income received 2,431 2,464 Other cash payments (1,601) (2,344) ------ ------ Net cash generated from operations 1,096 490 Interest paid on property loans (967) (972) ------ ------ (967) (972) ------ ------ Net cash flows from operating activities 129 (482) Cash flows from investing activities Purchase of investments (264) (1,178) Investment in associate (171) (350) Sale of investments 1,511 1,406 Expenditure on investment properties (513) (4,727) Disposal of investment properties 56 2,306 Purchase of developments in hand (260) (932) ------ ------ 359 (3,475) Cash flows from financing activities Repayment of loans (443) (422) Receipt of loans 684 5,018 Share capital issued 17 - Equity dividends paid (244) (293) ------ ------ 14 4,303 ------ ------ Increase in cash and cash equivalents 502 346 Cash and cash equivalents at start of period 1,337 991 Cash and cash equivalents at end of ------ ------ period 1,839 1,337 ====== ====== NOTES TO THE CONSOLIDATED CASHFLOW STATEMENT RECONCILIATION OF OPERATING PROFIT TO OPERATING CASH FLOWS 2008 2007 £'000 £'000 Revenue return before taxation (3,140) (1,009) Interest payable 927 991 Share based payments 4 16 Depreciation of property, plant and equipment 11 13 Share of associates losses 171 169 ------ ------ (2,027) 180 Decrease in current assets 2,869 339 (Decrease)/increase in current liabilities 254 (29) ------ ------ 1,096 490 ====== ====== GRESHAM HOUSE PLC PRELIMINARY FINAL STATEMENT SEGMENTAL REPORTING Property Investment Investment Elimination Consolidated 2008 2007 2008 2007 2008 2007 2008 2007 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Revenue External income 65 211 2,546 2,412 - - 2,611 2,623 Inter - segment income 1,156 1,329 666 89 (1,822) (1,418) - - ----- ----- ----- ----- ----- ----- ----- ----- Total revenue 1,221 1,540 3,212 2,501 (1,822) (1,418) 2,611 2,623 ===== ===== ===== ===== ===== ===== ===== ===== (Loss)/gain on investments at fair value (6,330) 1,000 - - - - (6,330) 1,000 Losses on property investments at fair value - -(13,512)(4,107) - -(13,512) (4,107) Profit on disposal of property, plant and equipment 507 - - - - - 507 - Proceeds of disposal of investment properties - - - 2,306 - - - 2,306 Carrying value of disposal of investment properties - - - (2,284) - - - (2,284) ----- ----- ----- ----- ----- ----- ----- ----- Total income and gains (4,602) 2,540(10,300)(1,584)(1,822) (1,418)(16,724) (462) Segment expenses - - (3,291)(1,206) - - (3,291)(1,206) ----- ----- ----- ----- ----- ----- ----- ----- Segment profit/(loss) (4,602) 2,540(13,591)(2,790)(1,822) (1,418)(20,015)(1,668) ===== ===== ===== ===== ===== ===== Unallocated corporate expenses (1,462)(1,443) ----- ----- Operating loss (21,477)(3,111) Share of associate's loss (171) (169) Interest expense (927) (991) Interest income 100 177 ----- ----- Loss before taxation (22,475)(4,094) ===== ===== All revenue is derived from operations within the United Kingdom. The principal accounting policies adopted by the Group are fundamentally the same as the previous year other than the Basis of preparation note which is reproduced in full below. Full disclosure of the principal accounting policies and related party transactions are included in the financial statements which can be found on the Company's website www.greshamhouse.com. 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 1985 applicable to companies reporting under IFRS. The principal accounting policies adopted are set out below. 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 (u). The financial statements highlight that the Group has loans of £17.9 million due within one year. Based on directors' forecasts of the Group's cash facilities, the Group will require most of these loans to be refinanced as and when they fall due during the course of 2009. These financial statements have been prepared on a going concern basis, which assumes that these loans will be renewed on similar terms. Since the year end the Board has received and signed a facility letter from The Co-operative Bank plc in the sum of £10.6m which extends that banks existing loans to New Capital Developments Ltd and Chartermet Ltd on similar terms and conditions as the existing facilities. In addition, The Royal Bank of Scotland plc has confirmed that it envisages extending its existing facilities to Deacon Industrial Projects Ltd and Knowsley Industrial Property Ltd under similar terms and conditions for a minimum term of two years together with a new facility to Newton Estate Ltd. These loans however will be subject to approval by the bank's credit committee at the appropriate time. In the event that the RBS facilities are not renewed the directors believe that, coupled with its current cash resources of circa £2.6m, the Group has sufficient securities and property assets that could be sold (albeit there may be tax consequences as a result), or alternative sources of finance secured thereon, to repay these loans, the timing of which is uncertain. The financial statements do not include any adjustment that would result in a failure to renew this bank loan or not secure alternative financing within the timescale required. After making enquiries, and having due regard to the above, the directors believe that the Group has access to sufficient working capital for the foreseeable future and therefore remains a going concern.

Companies

Gresham House (GHE)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today