Half-yearly Report

FOR IMMEDIATE RELEASE 29 August 2013 LONDON & ASSOCIATED PROPERTIES PLC: HALF YEARLY RESULTS TO 30 JUNE 2013 London & Associated Properties plc ("LAP" or the "Company") is a fully listed UK shopping centre and Central London retail property specialist. HIGHLIGHTS * IFRS pre-tax profits increased to Â£10.2 million compared to a Â£0.1 million loss at 30 June 2012 * Net assets rise by 39% to Â£54.7 million against comparative period and by 18% against 2012 year end * Under EPRA net assets increased over 12% to Â£76.0 million from Â£67.6 million a year, equating to 90.5p per share up from 80.4p per share * Rental income further improves to Â£7.8 million compared to Â£7.7 million last year * Voids continue to be minimal - only 1.6% of rental income * Weighted average unexpired lease term at 8.3 years * Sale of two properties for Â£9.48 million completed since period end "Against a backdrop of the continuing challenging retail climate, we are pleased to report that our rental income improved to Â£7.8 million from Â£7.7 million in the first half of 2012. This is testament both to the quality of our retail assets and our intensive management of them." Michael Heller,Chairman, and John Heller, Chief Executive. -more- Contact: London & Associated Properties PLC Tel: 020 7415 5000 John Heller, Chief Executive or Robert Corry, Finance Director Baron Phillips Associates Tel: 020 7920 3161 Baron Phillips HALF YEAR REVIEW There has been a significant improvement in LAP's results for the six months to 30 June 2013: under IFRS, group profit was Â£10.2 million compared with a loss of Â£0.1 million over the same period last year. These numbers have been bolstered by an improvement in the mark-to-market of our long dated swaps. This has resulted in a Â£9.9 million credit to the income statement during the period. Net assets under IFRS have increased by 18% to Â£54.7 million compared with Â£46.5 million at the 31 December 2012 and by almost 40% against the Â£39.3 million at 30 June 2012. Using the EPRA accounting methodology, net assets increased by more than 12% to Â£76.0 million compared to Â£67.6 million 12 months ago. This equates to 90.1p per share (2012: 80.4p per share) using the EPRA accounting methodology. Against a backdrop of the continuing challenging retail climate, we are pleased to report that our rental income improved to Â£7.8 million from Â£7.7 million in the first half of 2012. This is testament both to the quality of our retail assets and our intensive management of them. Voids are still minimal, representing less than 2% (2012: 2%) of rental income. The one significant tenant failure that we suffered over the period was of a retailer that not only continues to trade but is investing in our store, as we will report in more detail below. Our weighted average unexpired lease term (WAULT) continues to be resilient at 8.3 years. Further, if those tenants who have already served notice to renew their leases were included, the WAULT increases to 8.5 years. In July 2013, we completed the disposal of two retail units to the same buyer for Â£9.48 million. These were our property in Chesterfield (majority let to Primark) and the unit on Peascod Street, Windsor that we recently created for Superdry. We have used part of the proceeds to reduce our costs of capital through the repayment of two debentures. The first was for Â£5 million at 11.3% due to expire this year, while the second was for Â£1.7 million at 8.67% due to expire in 2016. The annual saving in interest is Â£712,000 while the properties produced annualised rents of Â£707,000. Our average annualised rate of interest is now 6.27% (2012: 6.48%). Overall our properties continue to trade well. King Edward Court, Windsor, remains well let, and we have completed lettings during 2013 that have maintained our rental levels per square foot. Windsor is one of the few places in the UK where rents have remained strong throughout the recession. Our most recent letting was to Clintons Cards at a stepped rent to Â£92,000 per annum, averaging Â£86,000 per annum, compared to the previous rent there of Â£78,500 per annum. There are two vacant units in Windsor, one resulting from tenant failure and one that we developed last year. Both are now under offer to multiple retailers at levels which support the rental tone of the centre. At Orchard Square, Sheffield, we suffered our most significant tenant failure when Republic went into administration. However, the unit continues to trade following Republic's acquisition by Sports Direct from the administrators, and has now been rebranded as USC. Sports Direct has invested in the fabric of the store, and we are confident that rental levels, which are now based on store turnover, will be similar to the level previously received. Notwithstanding USC's occupation of the unit, we have received interest from a number of national retailers in this space. It is notable that interest in the store came before the announcement in August that the agreement between Sheffield City Council and developers for the Sevenstone retail quarter was being abandoned. This is consistent with our view that our shops in Sheffield would remain the prime fashion stores for the City. The rest of our shops at Orchard Square remain fully occupied and those tenants whose leases are reaching expiry have all served notice to renew them. Our markets in Brixton continue to receive favourable press, and are often quoted as being one of the great success stories of modern retailing. The waiting list for retailers to secure a unit in the market shows no sign of abating which will impact positively on rental income there over the medium term. At Kings Square, West Bromwich, the local authority has commenced its major investment into the landscaping of the town centre. This will particularly benefit our property since much of the focus of this project is in improving the pedestrian access from the new Sandwell College into the town centre, which directs pedestrians through the rear of our shopping centre. The remainder of our portfolio continues to trade in line with expectations. We are in the final stages of renegotiating our loan renewal with Royal Bank of Scotland. There are no other loans due to expire within the next 12 months, and we remain within all our banking covenants. We are in the process of winding up Analytical Ventures, our joint venture with HBOS, as it has come to the end of its five year life. Although originally conceived as a vehicle to acquire retail property from motivated sellers, it only ever acquired a single property in Halifax. We have now exchanged contracts to sell this property for Â£8.1 million. At Langney Shopping Centre, Eastbourne, which we own in joint venture with Columbus Capital Management, the shopping centre suffered a major roof collapse during inclement weather shortly before Christmas. The centre has been repaired and is now open once again for trading. Additionally, we are pleased to report that we have secured planning consent for a 40,000 square feet extension to the eastern end of the shopping centre. Our letting agents are currently negotiating with retailers to pre-let the proposed retail space, and interest to date has been encouraging. London and Associated Management Services Limited ("LAMS"), our asset management subsidiary, continues to generate significant fee income for the group. Working closely with insolvency practitioners from Deloitte, we have managed the Agora portfolio on behalf of Lloyds Banking Group throughout the year to date. Although the assets are challenging, we have achieved considerable success and have sold the first of the shopping centres for a sum in excess of valuation. LAMS' fees for this work have been added to our cash reserves. We are looking for further opportunities to use our asset management expertise. We would also like to welcome Robin Priest to the Board. As shareholders will have read in our earlier announcement, Robin brings a wealth of real estate expertise to LAP, and we all look forward to working with him. While market conditions remain difficult we believe the company is well placed to take full advantage of the upturn. We do not propose to pay an interim dividend as we wish to continue to conserve our cash resources. We would finally like to thank all of the directors, staff and advisers who have contributed to our progress in these challenging times. Sir Michael Heller John Heller Chairman Chief Executive 28 August 2013 Consolidated income statement for the six months ended 30 June 2013 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2013 2012 2012 (unaudited) (unaudited) (audited) Notes Â£'000 Â£'000 Â£'000 Gross rental income Group and share of joint ventures 7,808 7,702 15,827 Surrenders - - (23) Less: joint ventures - share of rental income (309) (325) (638) Revenue 7,499 7,377 15,166 Direct property expenses (616) (598) (1,351) Overheads (1,306) (1,553) (2,514) Property overheads (1,922) (2,151) (3,865) Net rental income 1 5,577 5,226 11,301 Listed investments held for trading 1 1 102 97 Operating profit before financing charges 5,578 5,328 11,398 Finance income 2 28 13 47 Finance expenses 2 (5,748) (5,663) (11,344) Operating (loss)/profit after financing charges (142) (322) 101 Revaluation and other movements, associate and joint ventures Net increase on revaluation of investment properties - - 10,692 Net increase/(decrease) in value of investments held for trading 3 (1) 4 Share of profit/(loss) of joint ventures after tax 29 75 (634) Share of profit of associate after tax 447 482 545 Adjustment to the net present value of interest rate derivatives 6 9,891 (294) (3,085) Profit /(loss)including revaluation and other movements 10,228 (60) 7,623 Income tax 3 (1,932) 72 (354) Profit for the period attributable to the owners of the parent 8,296 12 7,269 Basic earnings per share 4 9.85p 0.01p 8.65p Diluted earnings per share 4 9.85p 0.01p 8.65p The above revenue and operating result relate to continuing operations in the United Kingdom. Consolidated income statement analysis for the six months ended 30 June 2013 30 June 2013 30 June 2012 31 December 2012 per per per income income income statement statement statement Cash Non-cash Cash Non-cash Cash Non-cash items items (unaudited) items items (unaudited) items items (audited) Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Net rental income 5,577 - 5,577 5,226 - 5,226 11,301 - 11,301 Income and gains on investments held for trading 1 - 1 102 - 102 97 - 97 Net change of revaluation of investment properties - - - - - - - 10,692 10,692 Net increase/ (decrease) in value of investments held for trading - 3 3 - (1) (1) - 4 4 Operating profit/ (loss) 5,578 3 5,581 5,328 (1) 5,327 11,398 10,696 22,094 Share of joint ventures and associates 44 432 476 75 482 557 241 (330) (89) Interest rate derivatives (valuation movements) - 9,891 9,891 - (294) (294) - (3,085) (3,085) Net interest (5,720) - (5,720) (5,650) - (5,650) (11,297) - (11,297) (Loss)/ profit before taxation (98) 10,326 10,228 (247) 187 (60) 342 7,281 7,623 Consolidated statement of comprehensive income for the six months ended 30 June 2013 30 June 30 June 31 December 2013 2012 2012 (unaudited) (unaudited) (audited) Â£'000 Â£'000 Â£'000 Profit for the period 8,296 12 7,269 Other comprehensive income: Currency translation in associate (136) (28) (122) Other comprehensive income for the period net of tax (136) (28) (122) Total comprehensive income for the period attributable to owners of the parent 8,160 (16) 7,147 Consolidated balance sheet at 30 June 2013 30 June 30 June 31 December 2013 2012 2012 (unaudited) (unaudited) (audited) Notes Â£'000 Â£'000 Â£'000 Non-current assets Market value of properties attributable to Group 205,421 194,492 205,412 Present value of head leases 28,655 28,659 28,657 Property 5 234,076 223,151 234,069 Plant and equipment 238 334 260 Investments in joint ventures 1,396 2,080 1,337 Investments in associated company 7,418 7,294 7,271 Held to maturity investments 1,939 1,912 1,913 Deferred tax 1,392 3,746 3,324 246,459 238,517 248,174 Current assets Trade and other receivables 4,763 5,080 4,656 Financial assets - investments held for trading 23 14 20 Cash and cash equivalents 8,325 8,617 8,303 13,111 13,711 12,979 Total assets 259,570 252,228 261,153 Current liabilities Trade and other payables (12,745) (13,175) (12,514) Financial liabilities - borrowings (52,609) (48,007) (52,666) (65,354) (61,182) (65,180) Non-current liabilities Financial liabilities - borrowings (86,825) (91,958) (86,924) Interest rate derivatives 6 (24,044) (31,144) (33,935) Present value of head leases on properties (28,655) (28,659) (28,657) (139,524) (151,761) (149,516) Total liabilities (204,878) (212,943) (214,696) Net assets 54,692 39,285 46,457 Equity attributable to the owners of the parent Share capital 8,554 8,554 8,554 Share premium account 4,866 4,866 4,866 Translation reserve in associate (474) (244) (338) Capital redemption reserve 47 47 47 Retained earnings (excluding treasury shares) 42,858 27,483 34,749 Treasury shares (1,159) (1,421) (1,421) Retained earnings 41,699 26,062 33,328 Total shareholders' equity 54,692 39,285 46,457 Net assets per share 7 64.89p 46.77p 55.30p Diluted net assets per share 7 64.87p 46.76p 55.29p Consolidated statement of changes in shareholders' equity for the six months ended 30 June 2013 Retained Earnings Retained Capital Earnings Share Share Translation redemption Treasury ex: treasury Total capital premium reserve reserve Shares shares equity Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Balance at 1 January 2012 8,554 4,866 (216) 47 (1,421) 28,099 39,929 Profit for the period - - - - - 12 12 Other comprehensive income: Currency translation in associate - - (28) - - - (28) Total other comprehensive income - - (28) - - - (28) Total comprehensive income - - (28) - - 12 (16) Transactions with owners: Equity share options in associate - - - - - 2 2 Dividends paid - - - - - (630) (630) Transactions with owners - - - - - (628) (628) Balance at 30 June 2012 (unaudited) 8,554 4,866 (244) 47 (1,421) 27,483 39,285 Balance at 1 January 2012 8,554 4,866 (216) 47 (1,421) 28,099 39,929 Profit for the year - - - - - 7,269 7,269 Other comprehensive income: Currency translation in associate - - (122) - - - (122) Total other comprehensive income - - (122) - - - (122) Total comprehensive income - - (122) - - 7,269 7,147 Transactions with owners: Equity share options in associate - - - - - 11 11 Dividends paid - - - - - (630) (630) Transactions with owners - - - - - (619) (619) Balance at 31 December 2012 (audited) 8,554 4,866 (338) 47 (1,421) 34,749 46,457 Balance at 1 January 2013 8,554 4,866 (338) 47 (1,421) 34,749 46,457 Profit for the period - - - - - 8,296 8,296 Other comprehensive income: Currency translation in associate - - (136) - - - (136) Total other comprehensive income - - (136) - - - (136) Total comprehensive income - - (136) - - 8,296 8,160 Transactions with owners: Equity share options in associate - - - - - 13 13 Disposal of own shares - - - - 62 - 62 Loss on disposal of own shares - - - - 200 (200) - Transactions with owners - - - - 262 (187) 75 Balance at 30 June 2013 (unaudited) 8,554 4,866 (474) 47 (1,159) 42,858 54,692 All of the above are attributable to the owners of the parent. Consolidated cash flow statement for the six months ended 30 June 2013 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2013 2012 2012 (unaudited) (unaudited) (audited) Â£'000 Â£'000 Â£'000 Operating activities Operating profit before financing charges 5,578 5,328 11,398 Depreciation 30 93 188 Profit on disposal of non-current assets (6) (120) (121) Decrease in net current assets 165 1,104 1,257 Cash generated from operations 5,767 6,405 12,722 Income tax - - - Cash inflows from operating activities 5,767 6,405 12,722 Investing activities (Investment)/repayment of loan stock in joint ventures (26) 86 85 Investment in shares in joint ventures (32) - - Property acquisitions and improvements (9) (844) (1,115) Purchase of office equipment and motor vehicles (29) (16) (37) Sale of office equipment and motor vehicles 27 158 194 Interest received 28 13 47 Dividends received from associate and joint ventures 44 75 242 Cash inflows/(outflows) from investing activities 3 (528) (584) Financing activities Sale of treasury shares 62 - - Equity dividends paid - (630) (630) Interest paid (4,753) (4,688) (9,514) Interest paid on obligation under finance leases (859) (156) (1,477) Short term loan from joint ventures - 2,000 2,000 Repayment of medium term bank loan (122) (117) (236) Cash outflows from financing activities (5,672) (3,591) (9,857) Net increase in cash and cash equivalents 98 2,286 2,281 Cash and cash equivalents at beginning of period 5,028 2,747 2,747 Cash and cash equivalents at end of period 5,126 5,033 5,028 Cash and cash equivalents For the purpose of the cash flow statement, cash and cash equivalents comprise the following balance sheet amounts: 30 June 30 June 31 December 2013 2012 2012 (unaudited) (unaudited) (audited) Â£'000 Â£'000 Â£'000 Cash and cash equivalents 8,325 8,617 8,303 Bank overdraft (3,199) (3,584) (3,275) Cash and cash equivalents at end of period 5,126 5,033 5,028 Notes to the half year report for the six months ended 30 June 2013 1. Segmental analysis 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2013 2012 2012 (unaudited) (unaudited) (audited) Â£'000 Â£'000 Â£'000 Net rental income 5,577 5,226 11,301 Other income (listed investments) 1 102 97 2. Finance costs 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2013 2012 2012 (unaudited) (unaudited) (audited) Â£'000 Â£'000 Â£'000 Finance income 28 13 47 Finance expenses: Interest on bank loans and overdrafts (1,068) (1,412) (2,574) Other loans (1,120) (1,052) (2,206) Interest on derivatives adjustment (2,517) (2,204) (4,647) Interest on obligations under finance leases (1,043) (995) (1,917) Total finance expenses (5,748) (5,663) (11,344) 3. Income tax 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2013 2012 2012 (unaudited) (unaudited) (audited) Â£'000 Â£'000 Â£'000 Current tax - - - Deferred tax 1,932 (72) 354 1,932 (72) 354 4. Earnings per share 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2013 2012 2012 (unaudited) (unaudited) (audited) Group profit after tax (Â£'000) 8,296 12 7,269 Weighted average number of shares in issue for the period ('000) 84,247 84,004 84,004 Basic earnings per share 9.85p 0.01p 8.65p Diluted number of shares in issue ('000) 84,247 84,004 84,004 Fully diluted earnings per share 9.85p 0.01p 8.65p 5. Property Properties at 30 June 2013 are included at valuation as at 31 December 2012, plus additions in the period. During the six months ended 30 June 2013 the group had property additions of Â£ 0.009 million (30 June 2012: Â£0.744 million, 31 December 2012: Â£0.972 million). No properties were sold during the six months ended 30 June 2013 (carrying value of properties sold at 30 June 2012: Â£Nil, 31 December 2012: Â£Nil). Since 30 June 2013, the sale of the property in Chesterfield and a shop unit in Windsor were completed for Â£9.475 million, the year-end valuation. 6. Interest rate derivatives The directors have estimated the financial effect of the fair value to the business of the hedging instruments. This has been calculated as the Net Present Value of the difference between the 15 year interest rate, which was 3.02 per cent at 30 June 2013 against the rate payable under the specific hedge. This has given a liability at 30 June 2013 of Â£24,044,000 as shown in the balance sheet. The banks own initial quotations at 30 June 2013 to close each of the hedges were Â£29,159,000. Under IAS 39 the hedges are not deemed to be eligible for hedge accounting and any movement in the value of the hedges is charged directly to the consolidated income statement. The banks have an option to cancel the hedges in November 2014 and January 2015. The cost to the group to cancel the options before November 2014 and January 2015 has been attributed a cost by the bank of Â£ 830,000. It is not the intention of the Directors to exit these instruments and this cost has not been recognised. 7. Net assets per share 30 June 30 June 31 December 2013 2012 2012 (unaudited) (unaudited) (audited) Shares in issue ('000) 84,288 84,004 84,004 Net assets per balance sheet (Â£'000) 54,692 39,285 46,457 Basic net assets per share 64.89p 46.77p 55.30p Shares in issue diluted by outstanding share options ('000) 84,358 84,074 84,074 Net assets after issue of share options (Â£'000) 54,720 39,313 46,485 Fully diluted net assets per share 64.87p 46.76p 55.29p 8. Debentures The group has agreed a restructuring of the Â£5 million First Mortgage Debenture Stock 2018, with repayments of Â£1 million during 2016 and 2017 and the remaining Â£3 million repayable in 2018. Since 30 June 2013 the group has repaid early the Â£5 million First Mortgage Debenture Stock 2013 and Â£1.7 million First Mortgage Debenture Stock 2016. 9. Related party transactions The related parties and the nature of costs recharged are as disclosed in the group's annual financial statements for the year ended 31 December 2012. The group has management fees receivable of Â£68,750 (30 June 2012: Â£103,125, 31 December 2012: Â£172,000) from Bisichi Mining PLC, an associated company. During the period the group paid Â£26,000, for Analytical Ventures Limited's (a joint venture) loan stock at par; increasing the loan stock held to Â£1,934,000 at 30 June 2013. The group, during the period, paid Â£65,000 under an unsecured loan agreement to Langney Shopping Centre Unit Trust (a joint venture) and since 30 June 2013 a further Â£118,750. Interest is receivable at a rate of 12.5 per cent per annum. Since 30 June 2013 the Simon Heller Charitable Settlement has place on deposit with LAP Â£700,000 at an interest rate of 9 per cent per annum refundable on demand. 10. Capital and other commitments The group has capital commitments of Â£Nil as at 30 June 2013 (30 June 2012: Â£ 0.2 million, 31 December 2012: Â£Nil). The group had a commitment to lend a further Â£58,125 under a loan agreement with Langney Shopping Centre Unit Trust. 11. Dividends There is no interim dividend payable for the period (30 June 2012: Nil). 12. Risks and Uncertainties The group's principal risks and uncertainties are reported on page 20 in the 2012 Annual Report. They have been reviewed by the Directors and remain unchanged for the current period. The largest area of estimation and uncertainty in the interim financial statements is in respect of the valuation of investment properties (which are not revalued at the half year) and the valuation of interest rate derivatives. 13. Financial information The above financial information does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. The figures for the year ended 31 December 2012 are based upon the latest statutory accounts, which have been delivered to the Registrar of Companies; the report of the auditor's on those accounts was unqualified and did not contain a statement under Section 498(2) or (3) of the Companies Act 2006. As required by the Disclosure and Transparency Rules of the UK's Financial Services Authority, the interim financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) and in accordance with both IAS 34 'Interim Financial Reporting' as adopted by the European Union and the disclosure requirements of the Listing Rules. The half year results have not been audited or subject to review by the company's auditor. The annual financial statements of London & Associated Properties PLC are prepared in accordance with IFRS as adopted by the European Union. The same accounting policies are used for the six months ended 30 June 2013 as were used for the year ended 31 December 2012. The assessment of new standards, amendments and interpretations issued but not effective, is that these are not anticipated to have a material impact on the financial statements. There is no material seasonal impact on the group's financial performance. Taxes on income in the interim periods are accrued using tax rates expected to be applicable to total annual earnings. The interim financial statements have been prepared on the going concern basis as the Directors are satisfied the group has adequate resources to continue in operational existence for the foreseeable future. 14. Board approval The half year results were approved by the Board of London & Associated Properties PLC on 28 August 2013. Directors' responsibility statement The Directors confirm that to the best of their knowledge: (a) the condensed set of financial statements have been prepared in accordance with applicable accounting standards and IAS 34 Interim Financial Reporting as adopted by the EU; (b) the interim management report includes a fair review of the information required by: (1) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements ; and a description of the principal risks and uncertainties for the remaining six months of the year; and (2) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so. Signed on behalf of the Board on 28 August 2013 Sir Michael Heller Robert Corry Director Director Directors and advisors Directors Executive directors * Sir Michael Heller MA FCA (Chairman) John A Heller LLB MBA (Chief Executive) Robert J Corry BA FCA (Finance Director) Non-executive directors â€ Howard D Goldring BSC (ECON) ACA #â€ Clive A Parritt FCA CF FIIA Robin A Priest * Member of the nomination committee # Senior independent director â€ Member of the audit, remuneration and nomination committees. Secretary & registered office Heather A Curtis ACIS 24 Bruton Place, London W1J 6NE Director of property Mike J Dignan FRICS Registrars & transfer office Capita Registrars Shareholder Services The Registry, 34 Beckenham Road Beckenham, Kent BR3 4TU Telephone 0871 664 0300 (Calls cost 10p per minute + network extras) or +44 208 639 3399 for overseas callers Website: www.capitaregistrars.com E-mail: ssd@capitaregistrars.com Company registration number 341829 (England and Wales) Website www.lap.co.uk E-mail admin@lap.co.uk

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