Final Results

RNS Number : 9867G

Wynnstay Properties PLC

13 June 2013

 



Wynnstay Properties PLC

Preliminary Results for Year Ended 25th March 2013

CHAIRMAN'S STATEMENT

I am pleased to report that your company has enjoyed another successful year in its core commercial property activities despite the continuing challenging economic environment to which I referred when I wrote to you at this time last year. The portfolio has continued to be actively managed and we continue to search out good quality investments that will add value for shareholders, in terms of income and capital value, in the medium to longer term.

Overview of financial performance

Against this background, the financial performance for the year may be summarised as follows:

	Change	2013	2012
Property income	+8.3%	£1,628,000	£1,503,000
Profit before movement in fair value of investment properties and taxation	(4.7)%	£1,103,000	£1,158,000
Earnings/(loss) per share		(7.1p)	4.3p
Dividends per share, paid and proposed:	+2.8%	10.8p	10.5p
Net asset value per share:	(3.9)%	438p	456p
Net gearing	(9.7)%	40.6%	50.3%

Property income increased to £1.63 million from £1.5 million last year, reflecting the benefit of new streams of rental income from the latest additions to our portfolio, namely the two retail warehouse units at Lewes and the office premises at Surbiton. The purchases completed in March and April 2012 respectively, profit before the movement in fair value of the investment properties fell marginally to £1,103,000 reflecting in part the lower profits than in the preceding year from selling property. During the year, we sold our industrial unit at Alton at a capital gain of £100,000 whereas in 2012 we sold two properties at a gain of £346,000. The income from the two new purchases has more than compensated for the loss of income from the sale of the Alton property.

Earnings per share were reduced compared to the previous year due to the reduction in the value of the portfolio mentioned below. As I have explained in previous reports, accounting rules now require any positive or negative movements in the value of the portfolio to be reflected both in the statement of comprehensive income (thus affecting earnings) as well as in the statement of financial position (thus affecting net asset value). This means that, especially in a small company such as Wynnstay, modest changes (up or down) in the value of the portfolio from year to year can have a dramatic impact on earnings per share, even though the impact on net asset value is far less pronounced, with a reduction of 3.9%.

Property Management and Portfolio

Once again, it has been a busy year on the management side. We have been successful in reletting, renewing or varying 13 leases across the portfolio. In addition to those mentioned in my interim statement concerning Aylesford, Heathfield, Norwich, St Neots and Uckfield, I am pleased to say that we have renewed or extended leases for two units at the Oakcroft Business Park at Chessington as well as two further units at Aylesford, our industrial unit at Aldershot, one of the industrial units at Uckfield and the retail premises at Shirley. The terms agreed in some cases have had to reflect current market conditions, resulting in shorter leases or lower rents but your Board is content that the agreements reached are the best achievable.

In this connection and as I have previously noted, we believe that strong, positive relationships with our tenants are important and we continue to work closely with them to understand their current and future needs and thus to reduce the incidence of vacant premises and have visibility of possible tenant defaults arising in the portfolio, with their attendant costs and loss of income.

On the other hand, economic conditions facing many of our tenants are very tough, and I regret to report that our longstanding tenant at Hertford, a firm of printers, went out of business late last year. The premises have been subject to some minor refurbishment works prior to re-letting and are now being offered in the market. Whilst there has been some interest for a variety of possible uses, it may well be some time before they become income producing. This business failure, together with a prudent view of other tenants with a poor payment record, has resulted in our first significant bad debt for many years of £28,000 which is reflected in this years accounts together with the refurbishment costs of about £20,000.

Apart from the acquisition of the office premises in Surbiton early in the year already referred to above, we did not make any other acquisitions during the year although a number of proposals were actively considered. Towards the very end of the year, we considered several interesting potential purchases and I am pleased to report that we negotiated terms and completed the purchase on one of them in the second half of May. Crown Close Industrial Estate in Hailsham, East Sussex is an estate of seven small industrial units, let to predominantly locally established businesses. We paid £905,000 and with passing rents of £83,000 it shows an attractive yield of gross 9.2% and 8.7% net. This estate fits well with our other industrial estate holdings in the area of Heathfield and Uckfield. At the time of writing, we have a number of other possible acquisitions under active consideration and I hope to have further news of these for you in due course.

Portfolio Valuation

As at 25 March 2013, our Independent Valuers, Sanderson Weatherall, have undertaken the annual valuation of the company's portfolio at £17,700,000, representing a modest fall, on a like-for-like basis of £937,000 or 5.5%, over the valuation at the end of the prior year. Although disappointing, the Board consider this to be a satisfactory outcome given the continuing uncertainties affecting the commercial property market and broader economic conditions.

Following the revaluation, as at the year-end, the industrial sector within the portfolio accounted for 60% by value, with the retail and office elements comprising 18% and 22% respectively.

Borrowings and Gearing

Total borrowings at the year-end were £5.4 million (2012 - £7.2 million) and net gearing at the year-end was 40.6% compared to 50.3% last year. The lower borrowings reflect loan repayments made following the disposal of our Alton and Twickenham properties.

As you may recall, the five-year term of our borrowing facility of £8.5 million with Svenska Handelsbanken expires in December 2013. Having tested the market, we have received an indicative offer from them for a new five year facility of £10 million, the main terms of which have been agreed in principle with the detailed agreements currently being under negotiation. The Board have no reason to suppose that this facility will not be taken up, and will announce an update on the Regulatory News Service and the company's website as and when the paperwork is finalised.

The Company benefits from the historically very low levels of interest payable under our existing borrowing facility where the rate of interest is variable and is linked to LIBOR. As most businesses negotiating with their bankers have found, the margins over LIBOR sought by lenders have increased substantially over those available in 2008 and this will be reflected in our new facility. However, the Board considers that an increased facility of £10 million on the main terms agreed in principle, is in the best interest of the Company for its further development. As regards the prevailing outlook for interest rates generally, according to most commentators, there seems to be limited prospect of an increase in rates in the immediate future.

Costs

Our property costs this year were significantly less than in the prior year, mainly due to the saving in one-off costs relating to the Twickenham site and the payment of business rates on vacant premises in that year. Tight control has resulted in administrative costs also being lower than in the previous year.

Dividend

The Directors are recommending a total dividend for the year of 10.8p per share being a modest increase over the 10.5p paid in the last year. An increased interim dividend of 3.4p per share was paid in December 2012 and the Board has considered carefully whether the final dividend for the year should also be increased, but has decided against doing so. However, assuming favourable conditions at the end of the half year, they will consider increasing the interim dividend for payment in December 2013, with a view to achieving a better balance between the interim and final dividends. Accordingly, subject to approval of Shareholders at the Annual General Meeting, a final dividend of 7.6p per share will be paid on 16th July 2013 to Shareholders on the register on 21st June 2013.

Outlook

As in most recent years, the uncertain prospects for the recovery of the United Kingdom economy inevitably affect our business and this is reflected in the reduced value of the portfolio and, in some cases, in the terms that we are able to agree with tenants of our properties as well as in the increased risks of tenant defaults and the costs of empty properties. However, your Company continues to perform well in all the circumstances and to offer opportunities for future progress. We will continue to make changes to the portfolio which will remove properties that are less able to deliver income and capital growth and add properties that will improve the quality of our earnings and the value of our assets in the longer term, with a view to delivering a better income stream and net asset value for Shareholders.

Unsolicited approaches to Shareholders

Shareholders are reminded that unsolicited approaches regarding their shares may be from fraudsters. If you are in any doubt, please refer to my letter enclosed with last year's Annual Report (also available on our website: www.wynnstayproperties.co.uk) or to the website of the Financial Conduct Authority (www.fca.org.uk/consumers/ scams).

Annual General Meeting

Our Annual General Meeting will be held at the Royal Automobile Club on Thursday 11th July 2013. As always, I would encourage as many Shareholders as possible to attend so that they can both take part in the formal business and meet the Board and other Shareholders informally before and after the meeting and discuss the Company's activities.

Colleagues and Advisers

Finally I would like to thank our two executive directors - Paul Williams, our Managing Director, and Toby Parker, our Finance Director - who manage your company's business with great skill and perseverance as well as good humour. The two executive directors and I, as your Chairman, benefit from the substantial commercial property experience of our two non-executive directors - Charles Delevingne and Terence Nagle. I would like to thank all four of them, as well as our advisers, for their support over the past year.

Philip G.H. Collins

Chairman

13th June 2013

STATEMENT OF COMPREHENSIVE INCOME FOR YEAR ENDED 25TH MARCH 2013

	Notes	2013 £'000		2012 £'000
Property Income		1,628		1,503
Property Costs	2	(125)		(182)
Administrative Costs	3	(384)		(389)
		1,119		932
Movement in fair value of: Investment Properties	9	(937)		(866)
Profit on Sale of Investment Property		100		346
Operating Income		282		412
Investment Income	5	1		3
Finance Costs	5	(117)		(123)
Income before Taxation		166		292
Taxation	6	(359)		(175)
(Loss)/Income after Taxation		(193)		117
Basic and diluted earnings per share	8	(7.1p)		4.3p

The company has no items of other comprehensive income.

STATEMENT OF FINANCIAL POSITION 25TH MARCH 2013

	Notes	2013 £'000		2012 £'000
Non Current Assets
Investment Properties	9	17,700		16,965
Investments	12	3		3
		17,703		16,968
Current Assets Accounts Receivable	14	191		319
Cash and Cash Equivalents		571		966
		762		1,285
Non Current Assets held for Sale	13	-		2,324
Current Liabilities Accounts Payable	15	(816)		(808)
Bank Loans Payable	16	(5,396)		-
Income Taxes Payable		(380)		(217)
		(6,592)		(1,025)
Net Current (Liabilities)/Assets		(5,830)		2,584
Total Assets Less Current Liabilities		11,873		19,552
Non-Current Liabilities Bank Loans Payable	16	-		(7,187)
Deferred Taxation	17	-		(6)
Net Assets		11,873		12,359
Capital and Reserves
Share Capital	18	789		789
Treasury Shares		(1,570)		(1,570)
Share Premium Account		1,135		1,135
Capital Redemption Reserve		205		205
Retained Earnings		11,314		11,800
		11,873		12,359

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 25TH MARCH 2013

	2013 £'000		2012 £'000
Cashflow from operating activities
Income before taxation	166		292
Adjusted for: Depreciation	-		6
Allowance for trade receivables	28		-
Decrease in fair value of investment properties	937		866
Interest income	(1)		(3)
Interest expense	117		123
Profit on disposal of investment properties	(109)		(346)
Changes in: Trade and other receivables	100		(293)
Trade and other payables	14		51
Income taxes paid	(208)		(248)
Interest paid	(117)		(123)
Net cash from operating activities	936		325
Cashflow from investing activities Interest and other income received	1		3
Purchase of investment properties	(1,672)		(1,330)
Sale of investment properties	2,424		1,641
Net cash from investing activities	753		314
Cashflow from financing activities Dividends paid	(293)		(286)
Repayments on bank loans	(2,850)		(1,605)
Drawdown on bank loans	1,059		1,337
Net cash from financing activities	(2,084)		(554)
Net (decrease)/increase in cash and cash equivalents	(395)		85
Cash and cash equivalents at beginning of period	966		881
Cash and cash equivalents at end of period	571		966

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 25th MARCH 2013

YEAR ENDED 25 MARCH 2013
	Share Capital	Capital Redemption Reserve	Share Premium Account	Treasury Shares	Retained Earnings	Total
	£ 000	£ 000	£ 000	£ 000	£ 000	£ 000
Balance at 26 March 2012	789	205	1,135	(1,570)	11,800	12,359
Total comprehensive income for the year	-	-	-	-	(193)	(193)
Dividends - note 7	-	-	-	-	(293)	(293)
Balance at 25 March 2013	789	205	1,135	(1,570)	11,314	11,873
YEAR ENDED 25 MARCH 2012
	Share Capital	Capital Redemption Reserve	Share Premium Account	Treasury Shares	Retained Earnings	Total
	£ 000	£ 000	£ 000	£ 000	£ 000	£ 000
Balance at 26 March 2011	789	205	1,135	(1,570)	11,969	12,528
Total comprehensive income for the year	-	-	-	-	117	117
Dividends - note 7	-	-	-	-	(286)	(286)
Balance at 25 March 2012	789	205	1,135	(1,570)	11,800	12,359

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 25TH MARCH 2013

1.         ACCOUNTING POLICIES

Wynnstay Properties Plc is a public limited company incorporated and domiciled in England and Wales. The principal activity of the Company is property investment, development and management. The Company's ordinary shares are traded on the Alternative Investment Market. The Company's registered number is 00022473.

Basis of Preparation

The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the EU. The financial statements have been presented in Pounds Sterling being the functional currency of the Company. The financial statements have been prepared under the historical cost basis modified for the revaluation of investment properties, financial assets and financial liabilities measured at fair value through profit or loss, and investments.

The financial statements comprise the results of the Company drawn up to 25th March each year.

(a) New Interpretations and Revised Standards Effective for the year ended 25th March 2013

The Directors have adopted all new and revised standards and interpretations issued by the International Accounting Standards Board ("IASB") and the International Financial Reporting Interpretations Committee ("IFRIC") of the IASB that are relevant to the operations and effective for accounting periods beginning on or after 26th March 2013.

(b) Standards and Interpretations in Issue but not yet Effective

The International Accounting Standards Board ("IASB") and International Financial Reporting Interpretations Committee ("IFRIC") have issued revisions to a number of existing standards and new interpretations with an effective date of implementation after the date of these financial statements.

It is not anticipated that the adoption of these revised standards and interpretations will have a material impact on the figures included in the financial statements in the period of initial application other than the following revisions to existing standards.

IFRS 13: Fair Value Measurement - The standard outlines a single framework for measuring fair value and the required disclosure thereof when required or permitted by other International Financial Reporting Standards. The standard is unlikely to impact the fair value measurement of assets and liabilities that are currently recognised at fair value, however there will be greater disclosure given.

The standard is effective for accounting periods beginning on or after 1st January 2013.

Key Sources of Estimation Uncertainty

The preparation of the financial statements requires management to make judgements, estimates and assumptions that may affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses.

Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period. The key sources of estimation uncertainty that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year are those relating to the fair value of investment properties.

Investment Properties

All the Company's investment properties are revalued annually and stated at fair value at 25th March. The aggregate of any resulting surpluses or deficits are taken to profit or loss.

Non-current assets are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification. Non-current assets classified as held for sale are measured at the lower of the assets' previous carrying amount and fair value less cost to sell.

Depreciation

In accordance with IAS 40, freehold investment properties are included in the Statement of Financial Position at fair value, and are not depreciated.

Other plant and equipment is recognised at cost and depreciated on a straight line basis calculated at annual rates estimated to write off each asset over its useful life of 5 years.

Disposal of Investments

The gains and losses on the disposal of investment properties and other investments are included in the statement of comprehensive income in the year of disposal.

Property Income

Property income represents the value of accrued charges under operating leases for rental of the Company's properties. Revenue is measured at the fair value of the consideration receivable. All income is derived in the United Kingdom.

Taxation

The tax expense represents the sum of the tax currently payable and deferred tax. Current tax is the expected tax payable on the taxable income for the year based on the tax rate enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of prior years. Taxable profit differs from income before tax because it excludes items of income or expense that are deductible in other years, and it further excludes items that are never taxable or deductible.

Deferred taxation is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profits, and is accounted for using the statement of financial position liability method. Deferred tax liabilities are recognised for all taxable temporary differences (including unrealised gains on revaluation of investment properties) and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

The Company provides for deferred tax on investment properties by reference to the tax that would be due on the sale of the investment properties. Deferred tax is calculated at the rates that are expected to apply in the period when the liability is settled, or the asset is realised. Deferred tax is charged or credited in the statement of comprehensive income, including deferred tax on the revaluation of investment property.

Trade and Other Accounts Receivable

Trade and other receivables are initially measured at fair value as reduced by appropriate allowances for estimated irrecoverable amounts. All receivables do not carry any interest and are short term in nature.

Cash and Cash Equivalents

Cash comprises cash at bank and on demand deposits. Cash equivalents are short term (less than three months from inception), repayable on demand and are subject to an insignificant risk of change in value.

Trade and Other Accounts Payable

Trade and other payables are initially measured at fair value. All trade and other accounts payable are not interest bearing.

Pensions

Pension contributions towards employees' pension plans are charged to the statement of comprehensive income as incurred. The pension scheme is a defined contribution scheme.

2.         PROPERTY COSTS

.		2013 £'000		2012 £'000
	Rents payable	4		5
	Empty rates	7		44
	Twickenham costs	1		66
	Property management	43		18
		55		133
	Legal fees	22		39
	Agents fees	20		10
	Allowance for trade receivables	28		-
		125		182

3.         ADMINISTRATIVE COSTS

.		2013 £'000		2012 £'000
	Rents payable - operating lease rentals	18		17
	General administration, including staff costs	330		329
	Auditors' remuneration:  Audit fees	32		32
	Tax services	4		5
	Depreciation and amortisation	-		6
		384		389

4.         STAFF COSTS

		2013 £'000		2012 £'000
	Staff costs, including Directors, during the year were as follows:
	Wages and salaries	170		167
	Social security costs	22		18
	Other pension costs	10		10
		202		195

Details of Directors' emoluments, totalling £180,479 (2012: £180,479), are shown in the Report of the Directors.

	No.		No.
The average number of employees, including Directors, engaged wholly in management and administration was:	5		5
The number of Directors for whom the Company paid pension benefits during the year was:	1		1

5.         FINANCE COSTS (NET)

		2013 £'000		2012 £'000
	Interest payable on bank loans	117		123
	Less: Bank interest receivable	(1)		(3)
		116		120

6.         TAXATION

		2013 £'000		2012 £'000
	(a) Analysis of the tax charge for the year:
	UK Corporation tax at 24% (2012: 26%)	380		225
	Deferred tax - temporary differences	(6)		(50)
	Overprovision in previous year	(15)		-
	Current tax charge for the year	359		175
	(b) Factors affecting the tax charge for the year: Net Income before taxation	166		292
	Current Year: Corporation tax thereon at 24% (2012 - 26%)	40		76
	Expenses not deductible for tax purposes	7		14
	Excess of capital allowances over depreciation	(5)		-
	Investment loss on fair value allowable	225		225
	Investment gain not taxable	(24)		(90)
	Investment gain taxable	137		-
		380		225

7.         DIVIDENDS

		2013 £'000		2012 £'000
	Final dividend paid in year of 7.6p per share (2012: 7.6p per share)	206		206
	Interim dividend paid in year of 3.2p per share (2012: 2.9p per share)	87		80
		293		286

The Board recommends the payment of a final dividend of 7.6p per share, which will be recorded in the Financial Statements for the year ending 25th March 2014.

8.         EARNINGS PER SHARE

Basic earnings per share are calculated by dividing (Loss)/Income after Taxation attributable to Ordinary Shareholders of (£193,000) (2012: income £117,000) by the weighted average number of 2,711,617 (2012:2,711,617) ordinary shares in issue during the period. There are no instruments in issue that would have the effect of diluting earnings per share.

9.         INVESTMENT PROPERTIES

		2013 £'000		2012 £'000
	Investment Properties
	Balance at 25th March 2012	19,289		20,120
	Additions	1,672		1,330
	Disposals	(2,324)		(1,295)
		18,637		20,155
	Revaluation Deficit	(937)		(866)
	Balance at 25th March 2013	17,700		19,289
Less:
Assets Held for Sale (note 13)		2,324		1,295
Balance at 25th March 2012
Additions		-		2,324
Disposals		(2,324)		(1,295)
Balance at 25th March 2013		-		2,324
Investment properties at 25th March 2013		17,700		16,965

The Company's freehold investment properties were valued at £17,700,000 by Independent Valuers, Sanderson Weatherall, as at 25th March 2013, in accordance with the RICS Appraisal and Valuation Standards, on the basis of Market Value, defined as:

"The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm's-length transaction, after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion".

Freehold investment properties, including assets held for sale (Note 13), would have been shown at an historical cost of £16,980,940 (2012: £15,187,400) if revaluations had not been undertaken.

10.        OTHER PROPERTY, PLANT AND EQUIPMENT

	2013 £'000		2012 £'000
Cost
Balance at 25th March 2012 and at 25th March 2013	47		47
Depreciation
Balance at 25th March 2012	47		41
Charge for the Year	-		6
Balance at 25th March 2013	47		47
Net Book Values at 25th March 2012 and 25th March 2013	-		-

11.        OPERATING LEASES RECEIVABLE

	2013		2012
	£'000		£'000
The future minimum lease payments receivable under non-cancellable operating leases which expire:
Not later than one year	1,366		1,361
Between 2 and 5 years	2,583		2,646
Over 5 years	1,141		144
	5,090		4

Rental Income recognised in the statement of comprehensive income amounted to £1,628,000 (2012:

£1,503,000)

Typically, the properties were let for a term of between 5 and 15 years at a market rent with rent reviews every 5 years. The above maturity analysis reflects future minimum lease payments receivable to the next break clause in the operating lease. The properties are leased on terms where the tenant has the responsibility for repairs and running costs for each individual unit with a service charge payable to cover common services provided by the landlord on certain properties.

12.        INVESTMENTS

		2013 £'000		2012 £'000
	Quoted investments	3		3

13.        NON CURRENT ASSETS HELD FOR SALE

		2013 £'000		2012 £'000
	Investment properties held for sale	-		2,324

In the March 2012 accounts, the company anticipated that it would sell two commercial properties within the current financial year and as a result, these properties were reclassified as held for sale. In May 2012, the Company completed on the sale of a development site at Twickenham; the industrial unit in Alton was sold in August 2012. The Company does not anticipate selling any properties in the next year.

14.        ACCOUNTS RECEIVABLE

		2013 £'000		2012 £'000
	Trade receivables	182		8
	Other receivables	9		8
		191		319

Trade receivables include an allowance for bad debts of £28,000 (2012: £nil).

15.        ACCOUNTS PAYABLE

		2013 £'000		2012 £'000
	Trade payables
	Other creditors	125		150
	Accruals and deferred income	671		624
		816		808

16.        BANK LOANS PAYABLE

		2013 £'000		2012 £'000
	Bank loan: repayable on 17 December 2013
	Current position	5,396		-
	Non-current position	-		7,187
		5,396		7,187

Interest is being charged at 1.25% per annum over LIBOR on the loan until 17th December 2013.

The loan facility is secured by fixed charges over a number of freehold land and buildings owned by the Company, which at the year end had a combined value of £13,380,000 (2012: £13,443,800). The undrawn element of the loan facility available at 25th March 2013 was £3.1million (2012: £1.3million). Since the loan is repayable on 17th December 2013, the loan is treated as a current liability in these accounts. The Company has received an indicative offer to renew the loan facility for a further five years. The main terms have been agreed in principle with the detailed agreements currently under negotiation.

17.        DEFERRED TAX

The movement in the deferred tax liability during the year is as follows:

	Deferred tax on property revaluation £'000
At 26th March 2012	6
Release of provision for the year	(6)
At 25th March 2013	-

A deferred tax asset of £291,751 (2012: £nil) has not been recognised, as the Directors believe it is unlikely that there will be suitable taxable profits in the foreseeable future from which the future reversal of the underlying timing differences can be deducted.

18.        SHARE CAPITAL

		2013 £'000		2012 £'000
	Ordinary Shares of 25p each:
	Authorised	2,000		2,000
	Allotted, Called Up and Fully Paid	789		789
	All shares rank equally in respect of Shareholder rights.

In March 2010, the company acquired 443,650 Ordinary shares of Wynnstay Properties Plc from Channel Hotels and Properties Ltd at a price of £3.50 per share. These shares, representing in excess of 14% of the total shares in issue, are held in Treasury.

19.        FINANCIAL INSTRUMENTS

The objective of the Company's policies is to manage the Company's financial risk, secure cost effective funding for the Company's operations and to minimise the adverse effects of fluctuations in the financial markets on the value of the Company's financial assets and liabilities, on reported profitability and on the cash flows of the Company.

At 25th March 2013 the Company's financial instruments comprised borrowings and cash at bank and in hand, with short term receivables and short term payables excluded from IFRS 7. The main purpose of these financial instruments was to raise finance for the Company's operations. Throughout the period under review, the Company has not traded in any other financial instruments and the fair value of the Company's financial assets and liabilities at 25th March 2013 is not materially different from their book value. The Board reviews and agrees policies for managing each of these risks and they are summarised below:

Credit Risk

The risk of financial loss due to a counterparty's failure to honour its obligations arises principally in connection with property leases and the investment of surplus cash.

Tenant rent payments are monitored regularly and appropriate action is taken to recover monies owed or, if necessary, to terminate the lease. Funds may be invested and loan transactions contracted only with banks and financial institutions with a high credit rating.

The Company has no significant concentration of credit risk associated with trading counterparties (considered to be over 5% of net assets) with exposure spread over a large number of tenancies.

Concentration of credit risk exists to the extent that at 25th March 2013 and 2012, current account and short term deposits were held with two financial institutions, Svenska Handelsbanken AB and C Hoare & Co. Maximum exposure to credit risk on cash and cash equivalents at 25th March 2013 was £571,000 (2012: £966,000).

Currency Risk

As the Company's assets and liabilities are denominated in Pounds Sterling, there is no exposure to currency risk.

Interest Rate Risk

The Company is exposed to cash flow interest rate risk as it currently borrows at floating interest rates. The Company monitors and manages its interest rate exposure on a periodic basis. The Company finances its operations through a combination of retained profits and bank borrowings.

Interest Rate Sensitivity

Financial instruments affected by interest rate risk include loan borrowings and cash deposits. The analysis below shows the sensitivity of the statement of comprehensive income and equity to a 0.5% change in interest rates:

	0.5% decrease in interest rates		0.5% decrease in interest rates
	2013	2012	2013	2012
	£'000	£'000	£'000	£'000
Impact of net interest payable - gain/(loss)	27	36		(36)
Impact of net interest receivable - (loss)/gain	(3)	(5)	3	5
Total impact on pre tax profit and equity	24	31	(24)	(31)

The net exposure of the Company to interest rate fluctuations was as follows:

	2013	2012
	£'000	£'000
Floating rate borrowings (bank loans)	(5,396)	(7,187)
Less: cash and cash equivalents	571	966
	(4,825)	(6,221)

Fair Value of Financial Instruments

Except as detailed in the following table, management consider the carrying amounts of financial assets and financial liabilities recognised at amortised cost approximate to their fair value.

	2013 Book Value £'000	2013 Fair Value £'000	2012 Book Value £'000	2012 Fair Value £'000
Interest bearing borrowings (note 16)	(5,396)	(5,411)	(7,187)	(7,037)
Total	(5,396)	(5,411)	(7,187)	(7,037)

Categories of Financial Instruments

	2013		2012
	£'000		£'000
Financial assets:
Quoted investments	3		3
Loans and receivables	191		319
Cash and cash equivalents	571		966
Total financial assets	765		1,288
Non-financial assets	17,700		19,289
Total assets	18,465		20,577
Financial liabilities at amortised cost:	6,592		8,212
Non-financial liabilities	-		6
Total liabilities	6.592		8,218
Shareholders' equity	11,873		12,359
Total shareholders' equity and liabilities	18,465		20,577

The only financial instruments measured subsequent to initial recognition at fair value as at 25th March are quoted investments. These are included in level 1 in the IFRS 7 hierarchy as they are based on quoted prices in active markets.

Capital Management

The primary objectives of the Company's capital management are:

-     to safeguard the Company's ability to continue as a going concern, so that it can continue to provide returns for shareholders: and

-     to enable the Company to respond quickly to changes in market conditions and to take advantage of opportunities.

Capital comprises Shareholders' equity plus net borrowings. The Company monitors capital using loan to value and gearing ratios. The former is calculated by reference to total net debt as a percentage of the year end valuation of, the investment property portfolio. Gearing ratio is the percentage of net borrowings divided by Shareholders' equity. Net borrowings comprise total borrowings less cash and cash equivalents.

The Company's policy is that the loan to value ratio should not exceed 60% and that the gearing ratio should not exceed 100%.

	2013 £'000		2012 £'000
Net borrowings and overdraft	5,396		7,187
Cash and cash equivalents	(571)		(966)
Net borrowings	4,825		6,221
Shareholders' equity	11,873		12,359
Investment properties	17,700		19,289
Loan to value ratio	27.3%		32.3%
Net gearing ratio	40.6%		50.3%

20.        STATEMENT OF CASH FLOWS

	Analysis of Net Debt	25th March	Cash	26th March
		2013 £'000	Movement £'000	2012 £'000
	Cash and cash equivalents	(571)	395	(966)
	Bank loan due after more than one year	5,396	(1,791)	7,187
	Net Debt	4,825	(1,396)	6,221

21.        COMMITMENTS UNDER OPERATING LEASES

Future rental commitments at 25th March 2013 under non-cancellable operating leases are as follows:-

	2013		2012
	£'000		£'000
Within one year	22		15
Between two to five years	3		7
	25		22

22.        RELATED PARTY TRANSACTIONS

The Company has entered into an agreement with I. F. M. Consultants Ltd, a company owned and controlled by T.J.C. Parker, a Director of the Company, for that company to provide certain consultancy services. During the year to 25th March 2013, I.F.M. Consultants Ltd was paid £36,648 (2012: £36,648). There were no other related party transactions other than with the Directors, which have been disclosed under Directors' Emoluments in the Report of the Directors on page 8.

23.        EVENTS AFTER THE END OF THE REPORTING PERIOD

On 20 May 2013, the company completed the purchase of an industrial estate comprising seven units in Hailsham, East Sussex for £905,000. This was financed from the Company's own resources together with an increase in bank borrowings under our facility of £600,000.

24.        SEGMENTAL REPORTING

	Industrial		Retail		Office		Total
	2013 £'000	2012 £'000	2013 £'000	2012 £'000	2013 £'000	2012 £'000	2013 £'000	2012 £'000
Rental Income	1,068	1,020	195	214	365	269	1,628	1,503
Loss on property investments at fair value	(162)	(866)	(685)	-	(90)	-	(937)	(866)
Total income and gain/(loss)	905	154	(490)	214	275	269	691	637
Property expenses	(125)	(182)	-	-	-	-	(125)	(182)
Segment (loss)/profit	779	(28)	(490)	214	275	269	565	455
Unallocated corporate expenses							(384)	(389)
Profit on sale of investment property	100	267	-	-	-	79	100	346
Operating income							282	412
Interest expense (all relating to property loans)							(117)	(123)
Interest income and other income							1	3
Income before taxation							166	292

Other information	Industrial		Retail		Office		Total
	2013 £'000	2012 £'000	2013 £'000	2012 £'000	2013 £'000	2012 £'000	2013 £'000	2012 £'000
Segment assets	10,588	13,036	3,275	3,960	3,837	2,293	17,700	19,289
Segment assets held as security	6,268	7,191	3,275	3,960	3,837	2,293	13,380	13,444

 

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