Final Results

RNS Number : 9841J

Palace Capital PLC

19 June 2014

 



PALACE CAPITAL PLC

("Palace Capital" or the "Company")

FINAL RESULTS FOR THE 14 MONTHS ENDED 31 MARCH 2014

PORTFOLIO VALUE LEAPS AS PALACE CAPITAL

CROWNS TRANSFORMATIONAL YEAR

Palace Capital, the AIM listed commercial real estate company today announces its results for the fourteen months ended 31 March 2014.  As announced previously the Company's year end has changed from 31 January to 31 March, extending the accounting period to fourteen months.

Highlights

·     Completion of £39.25 million Sequel Property Portfolio acquisition

·     Acquisition supported by a £23.5 million fund raise

Property revaluation exercise

·     The Company's investment property value at 31 March 2014 was £59.4 million

o  Net Asset Value per share as at 31 March 2014: £3.56

o  Prior to the revaluation the Net Asset value was £28.81m as on acquisition last October equating to £2.31 per share

Asset Management

·     Significant progress made on reducing irrecoverable outgoings

·     Property disposals completed above book value at Gelderd Point in Leeds and Tolworth in South London

·     Three lease renewals concluded after the financial period at Milton Keynes, Coventry and Bristol

Financing

·     Loans to Book value at 31 March 2014 was 31.9% (2013: 59.6%)

·     Net debt reduced from £21.2 million to £18.5 million at 31 March 2014

Dividend

·     Dividend of 2p per share paid.  A further 2.5p per share proposed to be paid in July, subject to shareholder's approval

Stanley Davis, the Chairman of Palace Capital said:

"Palace Capital has been completely  transformed.  Last October we had a market capitalisation of under £1 million.  Since then we have completed the Sequel Property Portfolio acquisition and an equity fundraising.  The team has worked hard to improve the returns from the portfolio and I am delighted to report that we have grown our Net Asset position to £44.3 million. 

"The portfolio was independently valued at 31 March 2014.  We are particularly pleased that the NAV per share has increased to £3.56 from £2.31 reported in the last published accounts.  We are confident that this will continue to grow.  Not only have the investment markets continued to improve since March 2014, but many local economies outside London are strengthening, which is encouraging occupiers to spend money on their premises.  This is leading to competition for the best space.   This calendar year we have completed a number of transactions that will have added further value to the properties in the portfolio.

" I am really proud of our team in delivering such stellar results in such a short time. We have made tremendous progress and we are very excited about our future prospects."

The Annual Report for the 14 months to 31 March 2014, which includes a notice of annual general meeting of the Company to be held on 21 July 2014, will be posted to shareholders today and a copy will be available on the Company's website at www.palacecapitalplc.com shortly.

For further information contact:

Palace Capital Plc	Tel. [phone]
Stanley Davis, Non-executive Chairman
Neil Sinclair, Managing Director
Allenby Capital Limited (Nominated Adviser & Joint Broker)	Tel. [phone]
Nick Naylor, Corporate Finance
Arden Partners plc (Joint Broker)	Tel: [phone]
Christopher Hardie, Corporate Finance
Broker Profile (Financial PR)	Tel. [phone]
Simon Courtenay
Tamsin Shephard

CHAIRMANS STATEMENT

I am very pleased to report our results for the fourteen month period ended 31 March 2014 showing the Group has made a consolidated profit of £21,233,885 (2013: loss £157,722).

As announced previously our year end has changed to 31 March and our results are for the fourteen month period.

REVIEW OF THE BUSINESS AND FUTURE OUTLOOK

This has been a transformational period for the Company which up to last October had a market capitalisation of under £1m. The significant acquisition was that of the Sequel Portfolio from Quintain Estates and Development PLC and Buckingham Properties Limited which comprised 24 properties around the UK. The gross income at the time was circa £6.45m per annum but the net income was reduced to circa £5m per annum due to 15% of the portfolio being vacant so the owners had to bear the brunt of empty rates, service charges and insurance shortfall. After inspecting all the properties the directors decided that this provided a golden opportunity of putting into effect our expertise in active management. This focused on letting or selling vacant property so as to reduce irrecoverable expenditure and increase income, as well as extending short term leases.

During the year the Company continued to actively manage the Hockenhull Estates portfolio which has performed well. A very small shop which has become vacant is our only void in this portfolio.  We have a great deal of interest in it and we are very confident of an early letting.

Portfolio activity:

Our particular skill is with properties which have early lease expiries or break clauses and managing them to become better and more secure investments. We have recently concluded three transactions after our financial year end which will be earnings and value enhancing.

We own three freehold office buildings in Milton Keynes. One comprising approximately 14,500 sq ft net lettable, is currently let to Northgate Information Solutions UK Ltd on a lease expiring in March 2021 with a tenant's option to break in March 2016 at a current rent payable of £167,500 per annum exclusive of rates.

The other two comprising 14,434 sq ft & 23,897 sq ft net lettable were let to Rockwell Automation Ltd on leases expiring in December of this year whereby no rent would have been payable over the last six months as the tenants options to break effective in August 2013 were not activated.

Contracts have now been exchanged where, with an investment by the Company of £2.43m, the two buildings will be refurbished to an agreed specification and an agreed amount of furniture will be supplied. Soon after completion of these works, programmed for the end of December of this year,  Rockwell Automation Ltd will take new full repairing and insuring leases of both buildings for a term of 12 years with provision for upward only rent reviews at the end of the 4^th and 8^th years at an aggregate rental of £398,916 per annum exclusive. We will thus have turned two potentially empty buildings into well let investments to a valued tenant with considerable opportunity for growth. The rent payable is only £10.40 per sq ft which is very modest by current standards.

The second transaction concerns Courtauld House and Staybrite House situated on the Foleshill Enterprise Park, Coventry. Courtauld House is a freehold factory building, completed in 1999, of circa 75,000 sq ft which was let to Bowater Building Products Ltd on a lease expiring in August 2024 at a rental of £397,500 per annum exclusive, but with the right of the tenant to determine the lease in August of this year subject to a rent penalty. The tenant did exercise the right to determine the lease but works to improve the building are being carried out and it has been let to Brose Ltd, part of a large German group, for a term of ten years with a tenant's option to break at the end of the fifth year at a rental of £325,000 per annum exclusive.

Staybrite House, which is also on the Foleshill Enterprise Park and completed in 1999, is a long leasehold office building which is still let to Bowater Building Products until August of this year but they have exercised the option to break, albeit with a rent penalty, and they are currently complying with their Schedule of Dilapidations and improving the building. Agents have now been instructed to let the building when the works are completed. There has been a considerable upturn of the West Midlands economy and we are confident of an early letting.

The third and final transaction is at Stratton House, Bristol where we have 26,140 sq.ft of offices which was let to a subsidiary of Balfour Beatty at a rental of £162,500 per annum which expired this month. Contracts have now been signed for the renewal of the lease to Balfour Beatty Group Ltd for a term of five years at an initial rental of £81,500 per annum for the first year, £162,500 per annum for the second and third years, with a tenant's option to break at the end of the third year. Maintaining income has been our continuing focus.

We have already announced the sales at above book value of Gelderd Point, Leeds a vacant 20,500 sq ft office building and Argent House, Tolworth a vacant 12,000 sq ft office building both of which had been empty for some time. In addition we also sold the Bonded Warehouse, Atlantic Wharf, Cardiff a mainly vacant 17,375 sq ft office building also above book value. We also carried out a number of small lettings and sales at Meadow Court, Sheffield, Argent Court, Tolworth, Point Four Industrial Estate, Avonmouth and most recently at Sandringham House, Harlow.

Hudson House, York

We believe this 103,000 sq ft office building has very considerable potential. It is not only situated adjacent to York Station but York is one of the fastest growing cities in the UK. It not only adjoins George Stephenson House an 80,000 sq ft office building but also the new 140,000 sq ft offices of City of York Council. We have let a further 15,000 sq ft on short term leases so boosting income and reducing irrecoverable expenditure. At the same time we have appointed a professional team to plan a major refurbishment. We are examining all the proposed uses and although it is early days we are excited about the prospects for this asset.

Borrowings

Since acquiring the Sequel Portfolio and disposing of a number of mainly vacant assets we have reduced the level of bank borrowings from £21.2m to £18.5m.  Based on the revaluation to which I refer below, it leaves us with a very comfortable level of gearing.

Strategy Update

During the year we have continued to seek property portfolios either directly or corporately in order to grow the scale of the Company.  We have looked at a number of opportunities but in the Board's view most of them did not provide a sufficient return which we could recommend to our shareholders.  That said we have identified a proposition which does meet with our criteria and we have entered detailed discussions with the vendors.  There can be no guarantee that a transaction will reach fruition but we will keep shareholders updated appropriately.

Portfolio Valuation

We stated in our second interim statement that we were instructing valuers to provide an update on both the Sequel Portfolio and the Hockenhull Estates Portfolio having regard to the considerable economic upturn that has taken place particularly in the last 12 months. We have already referred to the properties that have been sold but we are pleased to state that as at 31 March 2014 the remaining part of the Sequel Portfolio has been valued at £55.99m whilst the Hockenhull Estates portfolio has been valued at £2.23m. With a healthy cash balance of £5.1m and borrowings of £18.5m, our net asset position was £44.3m representing a net asset value per share of £3.56. This compares to £2.31 stated in our second interim accounts for the twelve months ended 31 January 2014 which was based on an August 2013 valuation.

Dividend

In the Company's Admission Document dated 2 October 2013, the Board stated its intention to recommend the payment of a dividend of 4p per share in respect of the period from completion of the acquisition of the Sequel Portfolio to 31 March 2014.  In view of the progress made 2p per share was paid on 7 May 2014 to those shareholders on the register on 4 April 2014. Subject to shareholders' approval at our annual general meeting on 21 July 2014, we recommend the payment of a further 2.5p per share and not 2p per share (as previously stated) on 31 July 2014 to those shareholders on the register on 11 July 2014.

Outlook

I am really proud of our team in delivering such stellar results in such a short time. We have made tremendous progress and we are very excited about our future prospects.

Stanley Davis

Chairman

19 June 2014

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the 14 month period ended 31 March 2014

		14 month period ended 31 March 2014	Year ended 31 January 2013
		£	£
Revenue                 - Continuing operations		213,666	199,785
- Acquisition		3,038,152	-
		3,251,818	199,785
Cost of sales		(648,181)	(5,442)
Gross profit		2,603,637	194,343
Administrative expenses		(648,790)	(225,403)
Costs of acquisition		(516,569)	-
Gains on revaluation of investment property portfolio		19,500,531	-
Profit on disposal of investment properties		786,616	-
Continuing operations		78,967	(31,060)
Acquisition		21,646,458	-
Operating profit/(loss)		21,725,425	(31,060)
Other interest receivable and similar income		20,519	105
Finance costs		(593,200)	(113,733)
Profit/(loss) before taxation		21,152,744	(144,688)
Tax payable on profit/(loss) on ordinary activities		81,141	(13,034)
Profit/(loss) after taxation for the year Attributable to equity holders of the parent		21,233,885	(157,722)
Other comprehensive income for the year		-	-
Total comprehensive income for the year		21,233,885	(157,722)
Attributable to:
Equity holders of the parent		21,233,885	13,957
EARNINGS PER SHARE Basic		431.6p	(49.9)p
Diluted		401.3p	(49.9)p

All results in the current and preceding financial year derive from continuing operations.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

For the 14 month period ended 31 March 2014

		31 March 2014	31 January 2013
		£	£
Non-current assets
Goodwill		5,910	5,910
Investment properties		59,440,168	2,015,000
Tangible fixed assets		205	447
Trade and other receivables		539,995	-
		59,986,278	2,021,357
Current assets
Trade and other receivables		1,936,795	29,483
Deferred tax		100,000	-
Cash at bank and in hand		5,123,337	38,696
		7,160,132	68,179
Total Assets		67,146,410	2,089,536
Current liabilities
Trade and other payables		(4,171,382)	(140,507)
Redeemable preference shares		-	(65,000)
Creditors: amounts falling due within one year		(4,171,382)	(205,507)
Net current assets/(liabilities)		2,988,750	(137,328)
Non-current liabilities
Borrowings		(17,384,179)	(1,762,374)
Obligations under finance leases		(1,215,055)	-
Net assets		44,375,794	121,655
Capital and reserves
Called up share capital		1,528,438	315,938
Share premium account		21,856,482	110,395
Capital redemption reserve		65,000	-
Convertible loan notes - equity		27,934	27,934
Share based payments		75,000	13,333
Retained earnings		20,822,940	(345,945)
Equity - attributable to the owners of the parent		44,375,794	121,655

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the 14 month period ended 31 March 2014

	Share Capital	Share Premium	Share based payments	Capital redemption reserve	Convertible loan notes equity	Retained earnings	Total equity
	£	£	£	£	£	£	£
At 31 January 2012	315,938	110,395	3,333	-	27,934	(188,223)	269,377
Loss for the year	-	-	-	-	-	(157,722)	(157,722)
Share based payments	-	-	10,000	-	-	-	10,000
Total comprehensive income	-	-	10,000	-	-	(157,722)	(147,722)
At 31 January 2013	315,938	110,395	13,333	-	27,934	(345,945)	121,655
Profit for the period	-	-	-	-	-	21,233,885	21,233,885
Warrants issued on raising of share capital (Note 10)		(50,000)	50,000	-	-	-	-
Share based payments	-	-	11,667		-	-	11,667
Total comprehensive income	-	-	61,667	-	-	21,233,885	21,295,552
Issue of ordinary share capital	1,212,500	21,796,087	-	-	-	-	23,008,587
Redemption of preference share capital	-	-	-	65,000	-	(65,000)	-
At 31 March 2014	1,528,438	21,856,482	75,000	65,000	27,934	20,822,940	44,375,794

For the purpose of preparing the consolidated financial statement of the Group, the share capital represents the nominal value of the issued share capital of Palace Capital.

Share premium represents the excess over nominal value of the fair value consideration received for equity shares net of expenses of the share issue.

Share based payments reserve comprises the fair value of options and performance share rights recognised as an expense. Upon exercise of options or performance share rights, any proceeds received are credited to share capital. The share-based payment reserve remains as a separate component of equity.

The convertible loan note equity reserve represents the difference between the proceeds from issuing the convertible loan notes and the fair value assigned to the liability component at the date of issue.

The capital redemption reserve represents the value of preference shares capital redeemed.

CONSOLIDATED STATEMENT OF CASH FLOWS

For the 14 month period ended 31 March 2014

			14 month period ending 31 March 2014	Year ending 31 January 2013
			£	£
OPERATING ACTIVITIES Net cash inflow/(outflow) from operating activities			1,297,372	(7,304)
Interest received			20,519	105
Preference share dividends paid			(18,124)	-
Interest paid			(410,775)	(99,599)
			(408,380)	(99,494)
TAXATION
Corporation tax paid			(13,250)	-
INVESTING ACTIVITIES
Payments to acquire subsidiary undertaking			(1)	-
Purchase of investment property			(750,000)	-
Proceeds from disposal of investment property			3,282,147	-
Adjustments to fixed assets			-	135
Net cash flow from investing activities			2,532,146	135
FINANCING ACTIVITIES
Other loans repaid			(550,000)	-
Bank loans repaid			(20,716,126)	(19)
Issue of new share capital			23,008,587	-
Redemption of Preference shares			(65,000)	-
Capital element of finance lease rental payments			(708)	-
Net cash flow from financing activities			1,676,753	(19)
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS			5,084,641	(106,682)
Cash and cash equivalents at beginning of the year			38,696	145,378
Cash and cash equivalents at the end of the year			5,123,337	38,696

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

BASIS OF PREPARATION

The financial information set out above is abridged and does not constitute the Company's statutory financial statements for the 14 month period ended 31 March 2014. The financial information has been extracted from the Group financial statements which have been prepared in accordance with International Financial Reporting Standards (IFRS) and interpretations adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006.  These financial statements are for the 14 month period 1 February 2013 to 31 March 2014 and are presented in pounds sterling ("GBP").

The financial statements have been prepared under the historical cost basis, as modified by valuing financial assets and financial liabilities at fair value through the Statement of Comprehensive Income.

1          SEGMENTAL REPORTING

For the purpose of IFRS 8, the chief operating decision maker ("CODM") takes the form of the Board of Directors. The Directors opinion of the business of the Group is as follows.

The principal activity of the Group was to invest in entities operating within the property sector.

Based on the above considerations, there is considered to be one reportable segment. The internal and external reporting is on a consolidated basis with transactions between Group companies eliminated on consolidation. Therefore the financial information of the single segment is the same as that set out in the consolidated statement of comprehensive income, the consolidated statement of changes in equity, the consolidated statement of financial position and cashflows.

Geographical segments

The following tables present revenue regarding the Group's geographical segments for the periods ended 31 March 2014 and 31 January 2013.

14 month period ended 31 March 2014	United Kingdom	Total
	£	£
Rents received from investment properties	3,178,285	3,178,285
Management fees and other income	73,533	73,533
	3,251,818	3,251,818

Year ended 31 January 2013	United Kingdom	Total
	£	£
Rents received from investment properties	199,785	199,785
	199,785	199,785

2          Reconciliation of OPERATING PROFIT

Reconciliation of operating profit/(loss) to cash outflows from operating activities

	14 month period ending 31 March 2014	Year ended 31 January 2013
	£	£
Profit/(loss) before taxation	21,152,744	(144,688)
Finance income	(21,519)	(105)
Finance costs	593,200	113,733
Gains on revaluation of investment property portfolio	(19,500,531)	-
Profit on disposal of investment properties	(786,616)	-
Depreciation	242	223
Share based payments	11,667	10,000
(Increase) /decrease in receivables	(982,382)	6,190
Increase in payables	829,567	7,343
Net cash inflow/(outflow) from continuing operating activities	1,297,372	(7,304)

3          TAXATION

	14 month period ending 31 March 2014	Year ended 31 January 2013
	£	£
Current income tax charge	18,859	15,937
Over provided in prior year	-	(2,903)
Deferred tax	(100,000)	-
Tax charge/(credit)	(81,141)	13,034

	14 month period ending 31 March 2014	Year ended 31 January 2013
	£	£
Profit/(loss) on ordinary activities before tax	21,152,744	(144,688)
Based on profit for the period:
Tax at 23.0% (2013: 24.3%)	4,865,131	(35,159)
Effect of:
Expenses not deductible for tax purposes	142,518	9,527
Over provision in prior year	-	(2,903)
Gains on revaluation of investment property portfolio	(4,485,122)	-
Profit on sale of investment properties	(180,922)	-
Capital allowances in excess of depreciation	(45,258)	-
Other adjustments	(5,372)	4,766
Deferred tax	(100,000)
Losses used in the period	(272,116)	-
Losses not utilised	-	36,803
Tax charge/(credit) for the period	(81,141)	13,034

Deferred taxes at 31 March relates to the following:

	31 March 2014	31 January 2013
	£	£
Deferred tax assets
Losses available to carry forward	100,000	-
Deferred tax asset	100,000	-

At 31 March 2014, the Group had tax losses of £1,225,952 (2013: £740,665) available to carry forward to future periods. A deferred tax asset of £100,000 has been recognised as it is expected to be utilised in the foreseeable future and a deferred tax asset of £157,450 (2013: £177,760) has not been recognised in the financial statements due to the uncertainty as to whether it can be utilised against future profits.

4          EARNINGS PER SHARE

The calculation of earnings per ordinary share is based on the following profits/(losses) and number of shares:

	14 month period ending 31 March 2014		Year ending 31 January 2013
		£	£
Profit/(loss) for the period		21,233,885	(157,722)

Weighted average number of shares for basic profit/(loss) per share		4,920,006		315,938
Weighted average number of shares for diluted profit/(loss) per share		5,291,256		507,531
EARNINGS PER ORDINARY SHARE; Basic	431.6p		(49.9)p
Diluted	401.3p		(49.9)p

In accordance with IAS 38 where there is a loss for the year, there is no dilutive effect from share options and therefore there is no difference between the basic and diluted loss per share.

5          INTANGIBLE FIXED ASSETS

					Goodwill £
Cost
At 1 February 2012 and 2013					5,910
On acquisitions					-
Carrying Value at 31 March 2014					5,910

6          Investment Properties

			Freehold Investment properties	Leasehold Investment properties	Total £
At 1 February 2013 and 1 February 2012			2,015,000	-	2,015,000
Arising on acquisition of subsidiary undertaking			27,295,547	12,374,621	39,670,168
Additions			750,000	-	750,000
Gains on revaluation of investment property			14,684,984	4,815,547	19,500,531
Disposals			(2,495,531)	-	(2,495,531)
At 31 March 2014			42,250,000	17,190,168	59,440,168

Investment properties are stated at fair value as determined by the Directors.  The fair value of the Group's property portfolio is based upon external valuations and is inherently subjective.  The fair value represents the amount at which the assets could be exchanged between a knowledgeable, willing buyer and a knowledgeable, willing seller in an arms-length transaction at the date of valuation, in accordance with International Accounting Standard 13.  The fair value of each of the properties has been assessed by the directors.  In determining the fair value of investment properties, the directors make use of historical and current market data as well as existing lease agreements

As a result of the level of judgement used in arriving at the market valuations, the amounts which may ultimately be realised in respect of any giving property may differ from the valuations shown in the statement of financial position.

A reconciliation of the valuations carried out by the external valuers to the carrying values shown in the balance sheet was as follows:

			2014	2013
			£	£
Scanlans Consultant Surveyors LLP			2,230,000	2,015,000
Cushman & Wakefield LLP			55,990,000	-
Adjustment in respect of minimum payment under head leases separately included as a liability in the balance sheet			1,220,168	-
			59,440,168	2,015,000

Investment properties with a carrying value of £58,220,000 (2013: £2,015,000) are subject to a first charge to secure the Group's bank loan amounting to £18,532,318 (2013: £1,199,981).

The historical cost of the Group's investment properties, at the cost the properties were acquired by the relevant subsidiary undertaking, as at 31 March 2014 was £60,015,591 (2013: £1,430,336).

The historical cost of the Group's investment properties based on the fair value of the assets acquired as at 31 March 2014 was £38,801,663 (2013: £1,817,500).

7          TANGIBLE FIXED ASSETS

					IT and fixtures and fittings £
At 1 February 2012					805
Adjustment to additions					(135)
At 1 February 2013					670
Additions					-
At 31 March 2014					670
Depreciation
At 1 February 2012					-
Provided during the year						223
At 1 February 2013					223
Provided during the year					242
At 31 March 2014					465
Net book value at 31 March 2014					205
Net book value at 31 January 2013					447

8          TRADE AND OTHER RECEIVABLES

			31 March 2014	31 January 2013
			£	£
Current
Trade receivables			1,499,278	15,477
Less: allowance for doubtful trade receivables			(88,946)	-
Other taxes			36,925	3,774
Other debtors			71,806	-
Prepayments			417,732	10,232
			1,936,795	29,483

			31 March 2014	31 January 2013
			£	£
Non-Current
Prepayments			539,995	-
			539,995	-

Movements in the provision for impairment of trade receivables were as follows:

			31 March 2014	31 January 2013
			£	£
Arising on acquisition			107,443	-
Utilised in the period			(49,362)	-
Provisions increased			30,865	-
			88,946	-

As at 31 March, the analysis of trade receivables that were past due but not impaired is as follows:

			31 March 2014	31 January 2013
			£	£
Not yet due			398,974	14,769
0-30 days			866,900	-
31-60 days			346	-
61-90 days			12,604	-
91 - 102 days			42,706	-
More than 120 days			88,802	708
			1,410,332	15,477

9          REDEEMABLE PREFERENCE SHARES

The 65,000 £1 redeemable preference shares were redeemed on 31 January 2014 at par.  The redeemable preference shares provided for a fixed cumulative dividend at a rate of 9% per annum which accrues on a daily basis. The preference shares do not confer a right to attend, speak or vote at any general meeting of the company.  Preference share dividends amounting to £18,124 (2013: £nil) were paid during the period.  Included in accruals and deferred income are accrued preference dividends of £nil (2013: £11,700).

10        TRADE AND OTHER PAYABLES

			31 March 2014	31 January 2013
			£	£
Convertible loan notes			-	60,000
Trade payables			338,812	10,500
Bank loans			1,199,959	-
Other taxes			827,280	2,651
Income tax			7,468	1,859
Other payables			46,103	-
Accruals and deferred income			1,751,760	65,497
			4,171,382	140,507

11        BORROWINGS

			31 March 2014	31 January 2013
			£	£
Current
Bank loans			1,199,959	-
Non-current liabilities
Convertible loan notes			290,619	284,893
Loan notes			-	277,500
Bank loans			17,093,560	1,199,981
Total Non-current liabilities			17,384,179	1,762,374
Total borrowings			18,584,138	1,762,374

			31 March 2014	31 January 2013
			£	£
Non-current liabilities
Bank loans			17,332,360	1,199,981
Amortised borrowing costs			(238,800)	-
			17,093,560	1,199,981

The maturity profile of the Group's debt was as follows

			31 March 2014	31 January 2013
			£	£
Within one year			1,199,959	-
From one to two years			300,000	1,199,981
From two to five years			17,332,360	577,500
			18,832,319	1,777,481

Included within bank loans is an amount of £1,199,959 (2013: £1,199,981) which is secured on the investment properties in the Hockenhull portfolio.  Interest is charged at a rate of 5% above the 1 month Libor rate with a minimum rate of 6% and is payable monthly.  The loan is repayable on 30 September 2014.

Included within bank loans is an amount of £17,332,360 (2013: £nil) which is secured on the investment properties in the Signal portfolio.  Interest is charged at a rate of 3.75% above the 1 month Libor rate and is payable monthly.  The loan is repayable on 21 October 2016.

The loan notes amounting to £277,500 which were provided by Stanley Davis, a director of the company, were repaid during the year.  Interest was charged at a rate of 5% above the 1 month Libor rate fixed for each interest period.  The interest accrued during the period amounted to £12,590 (2013: £16,696). 

The convertible loan notes of £300,000 (2013: £300,000) were provided by a pension scheme of which Stanley Davis is a beneficiary at an interest rate of 4%.  The liability component of this loan amounted to £290,619, (2013 - £284,893).  The interest accrued during the period amounted to £13,940 (2013 - £12,003).  The loan is repayable on 3 October 2015 but can be converted to ordinary shares at any time at an exercise price of 225p per share.

12        CONVERTIBLE LOAN NOTES

Loan notes amounting to £300,000 are convertible at the option of the loan note holder into ordinary shares of the Company at any time between the date of issue of the loan notes and their maturity date of 3 October 2015 at 225p per share.

The effective rate of interest used to calculate the interest charged on the loan notes to the income statement was 6%.  If the loan notes have not been converted, they will be redeemed on their maturity date at par.  Interest of 4% per annum will be paid quarterly up until that date.

In addition, there were convertible loan notes amounting to £60,000 which were repaid during the year.  These loans were convertible at a rate of 225p per share, at the option of the loan note holders and at any time prior to redemption.  No interest was payable on the loan notes.

There were no transaction costs incurred on the issue of these loan notes. The proceeds from the issue of the convertible loan notes have been split between the liability element and an equity component, representing the fair value of the embedded option to convert the liability into equity of the Group as follows:

	31 March 2014 £	31January 2013  £		31 March 2014 £	31 January 2013 £
Convertible loan notes issued	300,000	300,000		-	60,000
Equity component	(21,197)	(21,197)		-	(6,737)
Liability component at date of issue	278,803	278,803		-	53,263
Interest charged	41,728	22,002		-	6,737
Interest payable	(29,912)	(15,912)		-	-
	290,619	284,893		-	60,000

13        POST BALANCE SHEET EVENT

On 2 June 2014 the company agreed to repay the convertible loan note amounting to £300,000 provided by a pension scheme in which Stanley Davis is a beneficiary.

 

END

 

 

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