Half-yearly Report

FOR IMMEDIATE RELEASE 29 August 2014 LONDON & ASSOCIATED PROPERTIES PLC: HALF YEARLY RESULTS TO 30 JUNE 2014 London & Associated Properties PLC (`LAP' or the `Company'), is a fully listed retail property investor and asset manager. HIGHLIGHTS * Completion of new Â£45 million debt financing * Substantial reduction in cost of debt - down from 7.58% to the current 5.48% * Long-dated swaps terminated * Group's future underpinned by strength of income with weighted average unexpired lease term of 8.2 years * Portfolio performing well: * Sheffield - vacant space under offer with new leases agreed at Â£80 Zone A * Brixton - demand for space driving income; plans for expansion under consideration * LAMS trading strongly and looking to expand through further joint ventures "We are delighted that LAP is now on a secure footing with both long term financing in place and a very strong income base. We have a new and positive banking relationship and trading conditions are improving. We therefore look to the future with confidence." Sir 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: 07767 444193 Baron Phillips HALF YEAR REVIEW We are pleased to report on a successful first half of the year. We have achieved a significant strengthening of the LAP Balance Sheet, following the refinancing of our short term bank debt and the termination of our long dated swaps. This has resulted in a substantial reduction in LAP's average cost of debt from 7.58% at 31 December 2013 to 5.48% today. We have put in place a five year Â£45 million non-recourse financing, provided by Santander (as senior lender) and Europa Capital Mezzanine Ltd (as mezzanine lender), replacing the short term Royal Bank of Scotland (RBS) facilities. The senior facility is fully hedged with 50% being swapped at a rate of 2.25% and the remaining 50% covered by a cap at the same level. This means that currently the debt has a blended interest rate of 4.79%. We actually completed our new financing on 1 July 2014, the day after the half year accounting period ended. This has had a significant effect on the Group Balance Sheet and to enable shareholders to understand the impact, we have included a pro-forma Balance Sheet showing the adjusted position at 1 July. The key changes are that the Group now has a positive net current assets position and an extra Â£3.5 million of cash. LAP's long term debt now has three components: the new Â£45 million financing expiring in July 2019; and two debentures, one for Â£10 million, expiring in August 2022 and one for Â£5 million of which Â£1 million is repayable in August 2016, Â£1 million in August 2017 and the balance of Â£3 million in August 2018. We believe this places the Group in a very secure position for the medium term as we look to acquire new investments either on our own or in joint ventures. Our half year results have been affected by two exceptional factors. First, we incurred significant expenses in re-financing the RBS facilities; and second, we spent Â£25.3 million on the termination of the long dated swaps which we had used to hedge our loans from RBS and Lloyds Bank. We had provided for this anticipated cost in our 2013 year-end figures, based on the mark-to-market value quoted by the banks at that date. The reduction in the reference interest rates post the year-end meant that the provision we had made was lower than the mark-to-market settlement at the time the swaps were actually terminated. Consequently a further Â£1.1 million has been charged against income in the period. We are confident that LAP will trade strongly now that our legacy financing issues have been removed. The Group's future is underpinned by the strength of our income, with our weighted average unexpired lease term (WAULT) continuing to be a resilient 8.2 years. Further, if this is adjusted to exclude tenants whose leases have expired but who continue to trade, WAULT rises to 9.0 years. Group income is also enhanced by the increasingly successful performance of London & Associated Management Services Ltd (LAMS), our asset management business. We now own Â£87.5 million of retail property directly, although we manage and have financial interests in some Â£240 million of property in total, including joint ventures and the portfolio of Bisichi Mining PLC, our associated company. At Orchard Square, Sheffield, we are pleased to report that we have agreed terms with River Island at Â£495,000 per annum on a new 10 year lease with a break clause (with penalty) at the fifth year. The other large unit which fronts on to Fargate had previously been let to USC (formerly Republic) but became vacant earlier this year as that retailer reduced its number of units significantly. We have received a number of offers on this unit. We are confident that it will be re-let and income producing in the near future. We will update shareholders in due course. In addition, we have recently placed under offer two units inside the centre to exciting and established retailers at Â£80 Zone A, while both Waterstones and Clarks have renewed their leases - also at Â£80 Zone A. Not only have these new leases established a rental tone in the Orchard Centre but they have also strengthened the long term income now being generated. Our two markets in Brixton continue to go from strength to strength. Income growth is being driven by the extended waiting list, which now comprises over 200 traders. The local authority has commenced consultation on a new framework for enhancing Brixton as a town centre, and, as our markets are considered to be the principal focal point, we would consider investing to expand them. Indeed, together with Groupe Geraud, we have held initial discussions with adjacent land owners. The remainder of our directly held portfolio is trading satisfactorily and voids remain at a low level. Demand from retailers has continued to show encouraging signs, and we are confident that we will continue to trade in line with expectations. Our joint ventures, which are managed by LAMS, are trading well. The larger of the two is that with Oaktree Capital Management, which owns and operates three substantial shopping centres: the Vancouver Quarter in Kings Lynn; the Rushes in Loughborough; and the Kingsgate centre in Dunfermline, Scotland. We are pleased to report that in the first half of the year we have enhanced the income of all three centres, with additional annual lettings of over Â£700,000 in total. We are also considering a number of asset management opportunities within these centres and will report more fully when these have been progressed further. The other joint venture is in Langney, near Eastbourne, with Schroders' Columbus Capital Management Limited. As we reported previously, the roof collapsed in December 2012 in heavy rain and consequently much of the last year has been spent dealing with the repercussions of that. I am pleased to report that these issues are now behind us and the centre is trading well. Our plans to extend this centre are well progressed and planning consent has been granted. We have placed the anchor store under offer and are looking to agree terms for pre-lets on a number of other units. We continue to look to expand this aspect of LAP's business. LAMS has been asked on several occasions to join bidding teams to acquire further investments that we will asset manage in addition to investing equity in. I hope to be able to announce further success in this area in the future. Last month we announced that Robert Corry, LAP's Finance Director, had decided to retire after more than 22 years with the Company. He has played an integral role in the management team over that time and in particular he helped to secure our new finance facilities. We would like to thank him for his contribution to LAP's success and wish him well in his retirement. We are delighted that LAP is now on a secure footing with both long term financing in place and a very strong income base. We have a new and positive banking relationship and trading conditions are improving. We therefore look to the future with confidence. Sir Michael Heller John Heller Chairman Chief Executive 28 August 2014 Consolidated income statement for the six months ended 30 June 2014 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2014 2013 2013 (unaudited) (unaudited) (audited) Notes Â£'000 Â£'000 Â£'000 Gross property income 3,745 3,761 8,229 Net revenue from property 1 1,023 1,701 2,979 Listed investments held for trading 1 1 1 2 Results before finance costs and 1,024 1,702 2,981 valuation movements Finance income 2 31 28 59 Finance expenses 2 (2,389) (2,582) (5,616) Interest derivatives break costs 2 (1,117) - - Results before valuation movements (2,451) (852) (2,576) Non-cash changes in valuation of assets and liabilities Net decrease on revaluation of investment - - (488) properties Net increase in value of investments held 1 3 3 for trading Share of profit/(loss) of joint ventures 289 (10) 99 after tax Share of (loss)/profit of associate after (95) 447 151 tax Adjustment to interest rate derivatives 6 - 4,124 4,419 Results including revaluation and other (2,256) 3,712 1,608 movements Attributable to discontinued operations* 69 6,516 (461) (Loss)/profit for the period before (2,187) 10,228 1,147 taxation Income tax 3 589 (1,932) 2,326 (Loss)/profit for the period attributable (1,598) 8,296 3,473 to the owners of the parent Basic earnings per share 4 (1.89)p 9.85p 4.12p Diluted earnings per share 4 (1.89)p 9.85p 4.12p *The results previously reported in the six months ended 30 June 2013 have been reclassified to reflect discontinued operations. Consolidated statement of comprehensive income for the six months ended 30 June 2014 30 June 30 June 31 December 2014 2013 2013 (unaudited) (unaudited) (audited) Â£'000 Â£'000 Â£'000 (Loss) / profit for the period (1,598) 8,296 3,473 Other comprehensive income: Currency translation in associate (50) (136) (320) Other comprehensive income for the period net (50) (136) (320) of tax Total comprehensive income for the period (1,648) 8,160 3,153 attributable to owners of the parent Consolidated balance sheet at 30 June 2014 1 July 30 June 30 June 31 December 2014* 2014 2013 2013 (unaudited) (unaudited) (unaudited) (audited) Â£'000 Notes Â£'000 Â£'000 Â£'000 pro-forma Non-current assets Market value of properties 87,449 87,449 205,421 87,449 attributable to Group Present value of head 4,593 4,593 28,655 4,597 leases Property 92,042 5 92,042 234,076 92,046 Plant and equipment 197 197 238 203 Investments in joint 2,897 2,897 1,396 2,607 ventures Investments in associated 6,681 6,681 7,418 6,986 company Held to maturity 2,200 2,200 1,939 2,200 investments Deferred tax 6,249 6,249 1,392 5,651 110,266 110,266 246,459 109,693 Current assets Assets held for sale - - - 126,590 Trade and other 4,184 4,184 4,763 3,356 receivables Financial assets - 24 24 23 23 investments held for trading Cash and cash equivalents 7,562 3,939 8,325 6,990 11,770 8,147 13,111 136,959 Total assets 122,036 118,413 259,570 246,652 Current liabilities Liabilities associated - - - (111,523) with assets held for sale Trade and other payables (10,714) (10,357) (12,745) (10,255) Financial liabilities - (359) (40,464) (52,609) (45,918) borrowings (11,073) (50,821) (65,354) (167,696) Non-current liabilities Financial liabilities - (58,234) (14,863) (86,825) (15,056) borrowings Interest rate derivatives - 6 - (24,044) (9,569) Present value of head (4,593) (4,593) (28,655) (4,597) leases on properties (62,827) (19,456) (139,524) (29,222) Total liabilities (73,900) (70,277) (204,878) (196,918) Net assets 48,136 48,136 54,692 49,734 Equity attributable to the owners of the parent Share capital 8,554 8,554 8,554 8,554 Share premium account 4,866 4,866 4,866 4,866 Translation reserve in (708) (708) (474) (658) associate Capital redemption reserve 47 47 47 47 Retained earnings 36,262 36,262 42,858 38,084 (excluding treasury shares) Treasury shares (885) (885) (1,159) (1,159) Retained earnings 35,377 35,377 41,699 36,925 Total shareholders' equity 48,136 48,136 54,692 49,734 Net assets per share 56.96p 7 56.96p 64.89p 59.00p Diluted net assets per 56.96p 7 56.96p 64.87p 59.00p share *Balance Sheet amended as at 1 July to reflect the refinancing of the term loan. Consolidated statement of changes in shareholders' equity for the six months ended 30 June 2014 Retained Retained Earnings Translation Capital Earnings ex: Share Share reserve in redemption Treasury treasury Total capital premium associate reserve Shares shares equity Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Balance at 1 8,554 4,866 (338) 47 (1,421) 34,749 46,457 January 2013 Profit for the - - - - - 8,296 8,296 period Other comprehensive income: Currency - - (136) - - - (136) translation in associate Total other - - (136) - - - (136) comprehensive income Total comprehensive - - (136) - - 8,296 8,160 income Transactions with owners: Equity share - - - - - 13 13 options in associate Disposal of own - - - - 62 - 62 shares Loss on disposal of - - - - 200 (200) - own shares Transactions with - - - - 262 (187) 75 owners Balance at 30 June 8,554 4,866 (474) 47 (1,159) 42,858 54,692 2013 (unaudited) Balance at 1 8,554 4,866 (338) 47 (1,421) 34,749 46,457 January 2013 Profit for the year - - - - - 3,473 3,473 Other comprehensive income: Currency - - (320) - - - (320) translation in associate Total other - - (320) - - - (320) comprehensive income Total comprehensive - - (320) - - 3,473 3,153 income Transactions with owners: Equity share - - - - - 62 62 options in associate Disposal of own - - - - 62 - 62 shares Loss on disposal of - - - - 200 (200) - own shares Transactions with - - - - 262 (138) 124 owners Balance at 31 8,554 4,866 (658) 47 (1,159) 38,084 49,734 December 2013 (audited) Balance at 1 8,554 4,866 (658) 47 (1,159) 38,084 49,734 January 2014 Loss for the period - - - - - (1,598) (1,598) Other comprehensive income: Currency - - (50) - - - (50) translation in associate Total other - - (50) - - - (50) comprehensive income Total comprehensive - - (50) - - (1,598) (1,648) income Transactions with owners: Equity share - - - - - 16 16 options in associate Acquisition of own - - - - (88) - (88) shares Disposal of own - - - - 228 - 228 shares Loss on disposal of - - - - 134 (134) - own shares Dividends paid - - - - - (106) (106) Transactions with - - - - 274 (224) 50 owners Balance at 30 June 8,554 4,866 (708) 47 (885) 36,262 48,136 2014 (unaudited) All of the above are attributable to the owners of the parent. Consolidated cash flow statement for the six months ended 30 June 2014 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2014 2013 2013 (unaudited) (unaudited) (audited) Â£'000 Â£'000 Â£'000 Operating activities Net revenue from property - continuing 1,023 1,701 2,979 operations Net revenue from property - discontinued 316 3,876 6,557 operations Listed investments held for trading 1 1 2 Depreciation 18 30 54 Profit on disposal of non-current assets - (6) (21) (Increase) / decrease in receivables (378) (198) 792 (Decrease) / increase in payables (1,499) 363 471 Cash generated from operations (519) 5,767 10,834 Income tax paid - - - Cash (outflow) / inflows from operating (519) 5,767 10,834 activities Investing activities (Investment)/repayment in shares and loan - (58) 409 stock in joint ventures Investment in shares held to maturity - - (2,200) Property acquisitions and improvements - (9) (34) Sale of properties - discontinued operations 102,663 - 9,310 Purchase of office equipment and motor (13) (29) (33) vehicles Sale of office equipment and motor vehicles - 27 57 Interest received - continuing operations 11 28 41 Interest received - discontinued operations 7 - - Dividends received from associate and joint 44 44 177 ventures Cash inflows from investing activities 102,712 3 7,727 Financing activities Purchase of treasury shares (88) - - Sale of treasury shares 228 62 62 Equity dividends paid (106) - - Interest paid - continuing operations (2,992) (2,568) (3,314) Interest paid - discontinued operations (623) (2,185) (5,990) Interest paid on obligation under finance (155) (109) (269) leases - continuing operations Interest paid on obligation under finance (544) (750) (1,786) leases - discontinued operations Debenture stock break costs paid - - - (545) discontinued operations Interest rate derivative break costs - (10,686) - - continuing operations Interest rate derivative break costs - (14,599) - - discontinued operations Short term loan from joint ventures and - - 700 related parties Repayment of debenture stocks - discontinued - - (6,700) operations (Repayment) / drawdown of short term bank (4,089) - - loans Repayment of medium term bank loan - (127) (122) (247) continuing operations Repayment of medium term bank loan - (70,000) - - discontinued operations Cash outflows from financing activities (103,781) (5,672) (18,089) Net (decrease) / increase in cash and cash (1,588) 98 472 equivalents Cash and cash equivalents at beginning of 5,500 5,028 5,028 period Cash and cash equivalents at end of period 3,912 5,126 5,500 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 2014 2013 2013 (unaudited) (unaudited) (audited) Â£'000 Â£'000 Â£'000 Cash and cash equivalents 3,939 8,325 6,990 Bank overdraft (27) (3,199) (1,490) Cash and cash equivalents at end of period 3,912 5,126 5,500 Notes to the half year report for the six months ended 30 June 2014 1. Segmental analysis 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2014 2013 2013 (unaudited) (unaudited) (audited) Â£'000 Â£'000 Â£'000 Net property income 1,023 1,701 2,979 Other income (listed investments) 1 1 2 2. Finance costs 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2014 2013 2013 (unaudited) (unaudited) (audited) Â£'000 Â£'000 Â£'000 Finance income 31 28 59 Finance expenses: Interest on bank loans and overdrafts (928) (612) (1,659) Other loans (796) (764) (1,559) Interest on derivatives adjustment (510) (1,042) (2,111) Interest on obligations under finance (155) (164) (287) leases (2,389) (2,582) (5,616) Interest derivatives break costs (1,117) - - Total finance expenses (3,506) (2,582) (5,616) 3. Income tax 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2014 2013 2013 (unaudited) (unaudited) (audited) Â£'000 Â£'000 Â£'000 Current tax (9) - - Deferred tax 598 (1,932) 2,326 589 (1,932) 2,326 Notes to the half year report continued 4. Earnings per share 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2014 2013 2013 (unaudited) (unaudited) (audited) Group (loss)/profit after tax (Â£ (1,598) 8,296 3,473 '000) Weighted average number of shares in 84,494 84,247 84,266 issue for the period ('000) Basic earnings per share (1.89)p 9.85p 4.12p Diluted number of shares in issue 84,494 84,247 84,266 ('000) Fully diluted earnings per share (1.89)p 9.85p 4.12p 5. Property Properties at 30 June 2014 are included at valuation as at 31 December 2013, plus additions in the period. During the six months ended 30 June 2013 the group had property additions of Â£ nil (30 June 2013: Â£0.009 million, 31 December 2013: Â£0.014 million). No properties were sold during the six months ended 30 June 2014 (carrying value of properties sold at 30 June 2013: Â£Nil, 31 December 2013: Â£9.475 million). The Â£104.7 million cash for the sale of the Windsor Shopping Centre, the discontinued assets, was received on 17 January 2014. 6. Interest rate derivatives All hedging instruments at the year-end were repaid by April 2014. 7. Net assets per share 30 June 30 June 31 December 2014 2013 2013 (unaudited) (unaudited) (audited) Shares in issue ('000) 84,508 84,288 84,288 Net assets per balance sheet (Â£'000) 48,136 54,692 49,734 Basic net assets per share 56.96p 64.89p 59.00p Shares in issue diluted by 84,528 84,358 84,288 outstanding share options ('000) Net assets after issue of share 48,146 54,720 49,734 options (Â£'000) Fully diluted net assets per share 56.96p 64.87p 59.00p 8. Bank loans The group repaid in May 2014 the balance of its secured Â£47 million revolving credit facility. This was replaced with a short term secured bank loan of Â£40.1 million. On 1 July 2014 the group repaid the Â£40.1 million loan and replaced with a new secured Â£45 million five year term financing package. Taking account of the hedging of interest rates on the senior facilities and the fixed interest rate on the mezzanine facilities this has a current blended interest rate of 4.79%. Following the sale of King Edward Court, Windsor in January 2014, the Â£70 million term bank loan was repaid. Notes to the half year report continued 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 2013. The group has management fees receivable of Â£68,750 (30 June 2013: Â£68,750, 31 December 2013: Â£137,500) from Bisichi Mining PLC, an associated company. The group, during the period, was repaid Â£64,250 of the unsecured loan by Langney Shopping Centre Unit Trust (a joint venture). 10. Capital and other commitments The group has capital commitments of Â£Nil as at 30 June 2014 (30 June 2013: Â£ Nil, 31 December 2013: Â£Nil). 11. Dividends There is no interim dividend payable for the period (30 June 2013: Nil). The final dividend in respect of 2013 of 0.125p per share, amounting to Â£106k, was paid on 4 July 2014. As the 2013 final dividends was approved by the shareholders at the Annual General Meeting held on 10 June 2014, it is included as a liability in these interim financial statements. 12. Risks and Uncertainties The group's principal risks and uncertainties are reported on page 15 in the 2013 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 2013 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 2014 as were used for the year ended 31 December 2013. 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 2014. 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 2014 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 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 Registrars & transfer office Capita Asset Services Shareholder Services The Registry, 34 Beckenham Road Beckenham, Kent BR3 4TU Telephone 0871 664 0300 (Calls cost 10p per minute + network extras, lines are open Mon-Fri 9.00am to 5.30pm) or +44 208 639 3399 for overseas callers Website: www.capitaregistrars.com E-mail: shareholderenquiries@capita.co.uk Company registration number 341829 (England and Wales) Website www.lap.co.uk E-mail admin@lap.co.uk

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