Annual Financial Report
11 March 2016
ALPHA PYRENEES TRUST LIMITED
("ALPHA PYRENEES TRUST" OR THE "TRUST" OR THE "COMPANY")
ALPHA PYRENEES TRUST POSTS RESULTS FOR THE YEAR ENDED 31 DECEMBER 2015
Alpha Pyrenees Trust Limited, the property company invested primarily in commercial real estate in France, today posts its results for the period from 1 January to 31 December 2015.
The Company has disposed of the majority of its portfolio which has resulted in a loss for the year of £41.3 million, representing a loss per share of 35.1p.
Key points include:
· Nine sales completed during the year for a total of £123.3 million (€167.3 million)
· Three sales completed post balance sheet for a total of £18.4 million (€24.3 million)
· Maturity of borrowings extended to 15 April 2016
· Negative Net Asset Value of 30.9p per share as at 31 December 2015
· Trust has the support of its lender for an orderly realisation of its investment property
· Board does not expect that there will be any value to return to ordinary shareholders
Contact:
Dick Kingston
Chairman, Alpha Pyrenees Trust Limited
01481 231100
Paul Cable
Fund Manager, Alpha Real Capital LLP
020 7391 4700
For more information on the Trust please visit www.alphapyreneestrust.com.
For more information on the Trust's Investment Manager please visit www.alpharealcapital.com.
FORWARD-LOOKING STATEMENTS
These results contain forward-looking statements which are inherently subject to risks and uncertainties because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Forward-looking statements are based on the Board's current view and information known to them at the date of this statement. The Board does not make any undertaking to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Nothing in these results should be construed as a profit forecast.
About the Trust
Alpha Pyrenees Trust Limited ("the Trust" or "the Company") primarily invested in higher-yielding properties in France, particularly in the Ile-de-France region around Paris, focusing on commercial property in the office, industrial, logistics and retail sectors let to tenants with strong covenants. The Trust is pursuing an orderly realisation of its investment property and has the support of its lender in this process.
Dividends
The Trust does not pay dividends.
Listing
The Trust is a closed-ended Guernsey registered investment company which has been declared under the relevant legislation to be an Authorised Closed-Ended Collective Investment Scheme. Its shares are listed on the Official List of the UK Listing Authority and traded on the London Stock Exchange.
Management
The Trust's Investment Manager is Alpha Real Capital LLP ("the Investment Manager"). Control of the Trust rests with the non-executive Guernsey-based Board of Directors.
ISA/SIPP status
The Trust's shares are eligible for Individual Savings Accounts (ISAs) and Self Invested Personal Pensions (SIPPs).
Website
Chairman's Statement
The Investment Manager has been focused on achieving an orderly realisation of the Trust's investment property in a consensual manner in accordance with a formal agreement with Barclays Bank PLC ("Barclays") and on achieving asset sales to support the settlement of the bank borrowings which now mature on 15 April 2016. The Board notes the progress achieved on this front with the sale of eight properties and a sale of part of a property during the year at prices totalling £123.3 million (€167.3 million) with the net proceeds from these sales enabling the repayment of bank borrowings totalling £109.0 million (€150.1 million) as at 31 December 2015. Post balance sheet, the sale of a further three properties in France has been completed at prices totalling £18.4 million (€24.3 million) and a further repayment of £17.6 million (€23.3 million) of bank borrowings was made in February 2016. The Investment Manager is now focused on the sale of the Trust's remaining six properties, three of which are located in France and three in Spain. To further this process the Investment Manager continues to focus on active asset management within the remaining portfolio with particular emphasis on the letting of vacant units to enhance property income and the marketability of the property.
Going concern
Given the current economic environment and the maturation of the Group's bank borrowings on 15 April 2016 the Board will continue to seek the support of its lender in an orderly realisation of its remaining six investment properties with a view to winding up the Group in due course. The accounts are therefore not prepared on a going concern basis.
Results and dividend
Results for the period show a consolidated loss for the year of £41.3 million (loss of 35.1 pence per share). Earnings have been impacted by a combination of losses on the disposal of investment properties, losses on the revaluation of investment properties, tenants' breaks and finance charges.
The Trust does not pay dividends.
Revaluation and Net Asset Value
Investment properties held for sale are included in the consolidated balance sheet at a valuation of £39.3 million (€53.3 million). The properties at Saint Cyr L'Ecole, Champs sur Marne and Ivry-sur-Seine in France and Alcalá de Guadaíra, Écija and Zaragoza in Spain are included at the independent valuation for each property and the properties that were sold post balance sheet, namely, Athis Mons, Aubergenville and Aubervilliers, are included at the contracted sale prices as at the balance sheet date.
As at 31 December 2015, the net asset value per ordinary share is negative 30.9p primarily reflecting the loss in the year incurred on the sale of a significant portion of the Group's investment property portfolio.
Finance Commentary
The Trust's loan facilities with Barclays have been extended to 15 April 2016. The current interest rates will continue to apply to the facilities during the extension period. Arrangement fees (charged at 2% per annum pro-rated), on the initial and new extensions, will be deferred to the new maturity date and will be payable to the extent that the Trust has sufficient cash funds at that time.
As at 31 December 2015, the Trust had total borrowings of £90.4 million (€122.7million) under its facilities with Barclays. As at 31 December 2015, the Trust holds cash of £11.4 million, the majority of which is deposited in trapped bank accounts.
The facility that was used to finance the settlement of the net currency hedge liability is provided in the form of a Euro denominated loan, including rolled up interest, of €26.2 million; interest is charged quarterly at a margin of 10% above three month Euribor and will be rolled up throughout the term. The Trust is permitted to repay the loan at any time after repayment of the senior secured borrowings (€96.5 million). There is a cash-pooling arrangement over the Trust's cash flows from the whole property portfolio to provide further security to the loan but still providing the Trust with working capital for its operations.
The Trust has the support of its lender for an orderly realisation of its remaining property assets and is working under a formal agreement with Barclays to achieve this realisation in a consensual manner. Formal marketing of the Trust's remaining properties has commenced and the Trust will provide further updates on progress in due course.
As previously stated, the Board does not expect that there will be any value to return to ordinary shareholders after repayment of the Trust's bank borrowings has taken place to the extent possible.
Dick Kingston
Chairman
10 March 2016
Property review
Portfolio overview
Following the sales of eight properties and a sale of part of a property in France and Spain in 2015, as at 31 December 2015 the Trust owned six properties in France and three properties in Spain totalling approximately 93,410 square metres (approximately 1.0 million square feet). Following the subsequent sale of three French assets post balance sheet, the Trust owns a residual portfolio of three properties in France and three properties in Spain totalling approximately 33,680 square metres (approximately 362,500 square feet) of commercial real estate. While the properties are generally well located and offer good value accommodation to occupiers, the properties suffer from weak tenant demand at the present time coupled with a high level of vacancy.
The valuation of the nine property portfolio as at 31 December 2015 was approximately £39.3 million (€53.3 million) and the value of the residual six property portfolio at the same date is £21.4 million (€29.0 million).
Property Sales
In addition to the sales of the Burger King unit at Ecija (€187,500) and the Connecta Retail Park at Córdoba (€15.3 million) reported in the half year report the Trust has successfully completed the following sales:
On 8 December 2015 the Trust sold a portfolio of properties in France totalling approximately 127,850 square metres for €142.7 million. The properties included in the portfolio were the Trust's largest property, the Villarceaux-Nozay Business Park let to Alcatel-Lucent, and the Trust's properties at Evreux, Goussainville, Roissy-en-France and Nimes.
On 15 December 2015 the Trust sold its properties located at Fresnes and Mulhouse in France totalling approximately 11,790 square metres for €9.1 million.
Post balance sheet, on 3 February 2016 the Trust sold its properties located at Athis Mons, Aubergenville and Aubervilliers in France totalling approximately 59,730 square metres for €24.3 million.
These sales form part of the orderly realisation process supported by the Trust's lender, Barclays Bank PLC ("Barclays"), and the net proceeds from these sales have been used to reduce the Trust's bank borrowings.
The remaining properties held by the Trust are being actively marketed and the Trust will provide further updates in due course.
Market overview
France
The French economy grew by 1.1% over 2015 compared to 0.2% in 2014. In December 2015, manufacturing output was 1.7% higher year-on-year however the unemployment rate for mainland France in the third quarter of 2015 rose slightly to stand at 10.2%. Household spending showed signs of decreasing towards the end of the year but for the year as a whole increased by 1.8% compared to a decrease of 0.2% in 2014. Inflation remains subdued with the growth rate of the Consumer Prices Index standing at 0.2% per annum at the end of December 2015.
The property investment market saw approximately €23.4 billion invested in commercial real estate in France in 2015. This volume was boosted by a number of larger transactions including several pan-European portfolios and transactions greater than €100 million represented 64% of the total volume. Traditional French investors represented approximately 60% by volume of the market, with the next largest group being North American investors (18%) followed by British investors (6%). Office investment remained the highest volume sector and accounted for €17.0 billion representing 72% of the total investment in France. Logistics and industrial investment grew to €2.1 billion and retail investment reduced to €4.3 billion.
Take-up in the Ile-de-France office market improved in the fourth quarter of 2015 and led to a slight improvement in overall take-up in 2015 to 2.2 million square metres (+1.0% on 2014). The average office rent in Ile-de-France has remained broadly stable at €296 per square metre per annum and the office vacancy rate for the Paris region decreased slightly to 6.9%. Although 2015 saw an increase in the number of speculative development or redevelopment schemes (28 compared to 14 in 2014), future new and redeveloped availability appears to be under control as more than half of developments currently underway in the region have already been pre-let.
Spain
There have been ten consecutive quarters of growth in the Spanish economy and this has resulted in an increase in Gross Domestic Product of 3.5% for 2015. The increase in economic activity combined with reforms to the labour market have resulted in a further decrease in the unemployment rate which stood at 20.9% at the end of the fourth quarter of 2015. The near term outlook for the Spanish economy shows continuing signs of improvement.
Rental indexation
On an annual basis, the INSEE Construction Cost Index, applicable to the Trust's leases in France, remained negative for the third quarter and stood at -1.17% for Q3 2015, the latest published annual indexation base. The Spanish Consumer Price Index, applicable to the Trust's leases in Spain, was running at an annualised rate of 0.0% at the end of December 2015 having been -1.4% as at the end of January 2015.
Sources INSEE/Instituto Nacional de Estadística/CBRE
Paul Cable
For and on behalf of the Investment Manager
10 March 2016
Directors
Dick Kingston (aged 68)
Chairman
Dick Kingston qualified as a Chartered Accountant and was, until December 2006, an executive director of Slough Estates Plc (now SEGRO Plc) ("Slough"), one of the largest London Stock Exchange listed property companies. He was chairman of their continental European real estate activities for his last three years at Slough and Group Finance Director there for nine years up to December 2005. Previously he was Group Financial Controller at Slough for nine years and prior to that was responsible for group financial control at Hawker Siddeley Group.
He was non-executive chairman of listed company Sirius Real Estate Limited and was a non-executive director of Mersey Docks and Harbour Company.
David Rowlinson (aged 53)
Director
David has 30 years' experience in the financial services industry. The majority of David's experience has been gained from working in the fiduciary sector in Guernsey. However, he has also worked in Gibraltar and Switzerland and served in a key role working for an investment management company in Guernsey.
After playing a major part in establishing a large trust company in Guernsey in 1997 which he left in June 2006, David established Liberation Management Limited ("LML") in 2007. David is the Managing Director of LML.
David has been a full member of the Society of Trust and Estate Practitioners since 1994.
David Jeffreys (aged 56)
Director
David Jeffreys qualified as a Chartered Accountant with Deloitte Haskins and Sells in 1985. He works as an independent non-executive director to a number of Guernsey based investment fund companies and managers and is a Guernsey resident.
From 2007 until 2009 David was the Managing Director of EQT Funds Management Limited, the Guernsey management office of the EQT group of private equity funds. He was previously the Managing Director of Abacus Fund Managers (Guernsey) Limited between 1993 and 2004, a third party administration service provider to primarily corporate and fund clients.
In addition to the Company, David is a director of the following listed companies: Alpha Real Trust Limited, PFB Data Centre Fund Limited and Tetragon Financial Group Limited.
Phillip Rose (aged 56)
Director
Phillip Rose is a Fellow of the Securities Institute and holds a Master of Law degree. He has over 30 years' experience in the real estate, funds management and banking industries in Europe, the USA and Australasia. He has been the Head of Real Estate for ABN AMRO Bank, Chief Operating Officer of European shopping centre investor and developer TrizecHahn Europe, Managing Director of retail and commercial property developer and investor Lend Lease Global Investment and Executive Manager of listed fund General Property Trust.
Phillip is currently CEO of Alpha Real Capital LLP.
Serena Tremlett (aged 51)
Director
Serena has over 25 years' experience in financial services, specialising in closed-ended property and private equity funds and fund administration over the last 17 years.
She is a non-executive director on the listed company boards of Alpha Pyrenees Trust, Alpha Real Trust and those of Stenham Property, in addition to various unlisted property and private funds and general partners. Serena was previously company secretary (and a director) of Assura Group, at that time a FTSE 250 company listed on the London Stock Exchange, investing in primary healthcare property and ran Assura's Guernsey head office.
Prior to working for Assura, Serena was head of Guernsey property funds at Mourant International Finance Administration (now State Street) for two years and worked for Guernsey International Fund Managers (now Northern Trust) for seven years where she sat on a number of listed and unlisted fund boards. Since 2008, Serena is co-founder and managing director of Morgan Sharpe Administration, a specialist closed-ended fund administrator.
Directors' and corporate governance report
The Directors present their report and financial statements of the Company and the Group for the year ended 31 December 2015.
Principal activities and status
Since its incorporation on 16 November 2005, the Company, an authorised closed-ended Guernsey registered investment company, has carried on the business of a property investment company, investing in commercial property in France and Spain.
Its shares are listed on the Official List of the UK Listing Authority and have been traded on the London Stock Exchange since 29 November 2005.
Business review, results and dividends
The Chairman's statement contains a review of the Group's business for the year.
The results for the year are set out in the financial statements below.
No dividend was paid during the year under review and the Trust does not pay dividends.
Corporate governance
The Company is authorised by the Guernsey Financial Services Commission ('GFSC') and for this reason is required to follow the principles and guidance set out in the Finance Sector Code of Corporate Governance issued by the GFSC and effective from 1 January 2012 ('Guernsey Code').
As a company with a standard listing on the London Stock Exchange, the Company is not required to comply with the UK Corporate Governance Code ('UK Code'). However, the Board does take into consideration the UK Code in determining its governance procedures whilst also taking into account the size of the Company, the nature of its business and its entirely non-executive board.
The Board
Biographies of the Directors are set out above.
The Directors' interests in shares of the Company as at 31 December 2015 are set out below and there have been no changes in such interests up to the current date:
|
|
Number of ordinary shares 2015 |
Number of ordinary shares 2015 |
|
Dick Kingston |
710,616 |
710,616 |
|
David Jeffreys |
250,000 |
250,000 |
|
Phillip Rose |
1,290,079 |
1,290,079 |
|
David Rowlinson |
- |
- |
|
Serena Tremlett |
121,472 |
121,472 |
Non-executive Directors are not appointed for specified terms. However, appointments of Board members can be terminated at any time without penalty and the Company's Articles of Association ("Articles") require each Director to retire and submit himself/herself to re-election by the shareholders at every third year. In addition, the Board believes that continuity and experience adds to its strength.
The Annual General Meeting of the Company will take place on 29 April 2016. At this meeting, Phillip Rose and David Rowlinson will retire and submit themselves for re-election. The remainder of the Board recommend their re-appointment. Phillip Rose is a member of the Investment Manager and, under the terms of the Company's Prospectus dated 23 November 2005, submits himself for annual re-election.
Individual Directors may seek independent legal advice in relation to their duties on behalf of the Company.
Senior Independent Director
The Board has appointed David Jeffreys as its Senior Independent Director and has agreed that he will be available for discussions with shareholders independently of his peers, to the extent appropriate.
Operations of the Board
The Board's primary role is to review matters which are of strategic importance to the Company, including the following:
1) Setting, and continuing to review, the objectives and strategy of the Company, taking into account market conditions.
2) Reviewing the capital structure of the Company including gearing.
3) Appointing the Investment Manager, administrator and other appropriately skilled service providers; monitoring their effectiveness and performance through regular reports and meetings.
4) Reviewing the Company's performance including net asset value, earnings per share and payment of dividends.
The Board considers these matters at its quarterly meetings.
The Board meets at least four times per annum and on an ad-hoc basis to consider specific issues reserved for decision by the Board including all potential acquisitions and disposals, significant capital expenditure and leasing matters and decisions relating to the Company's financial gearing.
Certain matters relating to the implementation of strategy are delegated either to the Investment Manager or the administrator but the performance of such delegation by these independent agents is regularly monitored by the Board.
At the Board's quarterly meetings it considers papers circulated in advance including reports provided by the Investment Manager and the administrator in its capacity as Company Secretary. The Investment Manager's report comments on:
· The French and Spanish property markets including recommendations for any changes in strategy that the Investment Manager considers may be appropriate.
· Performance of the Group's portfolio and key asset management initiatives.
· Transactional activity undertaken over the previous quarter and being contemplated for the future.
· The Group's financial position including relationships with bankers and lenders.
The administrator provides a quarterly compliance, company secretarial and regulatory report.
Together, these reports enable the Board to assess the success with which the Group's strategy is being implemented, consider any relevant risks (such as the general economic climate) and to consider how they should be properly managed.
Board and Director appraisals
The Board carries out an annual review of its composition and performance (including the performance of individual Directors) and that of its standing committees. Such appraisal includes reviewing the performance and composition of the Board (and whether it has an appropriate mix of knowledge, skills and experience), the relationships between the Board and the Investment Manager and administrator, the processes in place and the information provided to the Board and communication between Board members.
Board meeting attendance
The table below shows the attendance at Board meetings during the year to 31 December 2015:
|
Director |
No of meetings attended |
No of meetings eligible to attend |
|
Dick Kingston |
19 |
30 |
|
David Jeffreys |
29 |
30 |
|
Phillip Rose |
11 |
30 |
|
David Rowlinson |
21 |
30 |
|
Serena Tremlett |
29 |
30 |
Directors' and officers' insurance
An appropriate level of Directors' and Officers' insurance is maintained whereby Directors are indemnified against liabilities to third parties to the extent permitted by Guernsey company law.
Board Committees
The Board has established three standing committees, all of which operate under detailed terms of reference, copies of which are available on request from the Company Secretary.
Audit Committee
The Audit Committee consists of David Jeffreys (Chairman), Dick Kingston, David Rowlinson and Serena Tremlett. The Board is satisfied that David Jeffreys continues to have the requisite recent and relevant financial experience to fulfil his role as Chairman of the Audit Committee.
Role of the Committee
The role of the Audit Committee, which meets at least twice a year, includes:
· The engagement, review of the work carried out by and the performance of the Company's external auditor.
· To monitor and review the independence, objectivity and effectiveness of the external auditor.
· To develop and apply a policy for the engagement of the external audit firm to provide non-audit services.
· To assist the Board in discharging its duty to ensure that financial statements comply with all legal requirements.
· To review the Company's financial reporting and internal control policies and to ensure that the procedures for the identification, assessment and reporting of risks are adequate.
· To review regularly the need for an internal audit function.
· To monitor the integrity of the Company's financial statements, including its annual and half year reports and announcements relating to its financial performance, reviewing the significant financial reporting issues and judgements which they contain.
· To review the consistency of accounting policies and practices.
· To review and challenge where necessary the financial results of the Company before submission to the Board.
The Audit Committee makes recommendations to the Board which are within its terms of reference and considers any other matters as the Board may from time to time refer to it.
Committee meeting attendance
|
Director |
No of meetings attended |
No of meetings eligible to attend |
|
David Jeffreys |
4 |
4 |
|
Dick Kingston |
4 |
4 |
|
David Rowlinson |
3 |
4 |
|
Serena Tremlett |
4 |
4 |
Policy for non audit services
The Committee has adopted a policy for the provision of non-audit services by its external auditor, BDO Limited and reviews and approves all material non-audit related services in accordance with the need to ensure the independence and objectivity of the external auditor. No services, other than audit-related ones, were carried out by BDO Limited during 2015.
Internal audit
The Board relies upon the systems and procedures employed by the Investment Manager and the administrator which are regularly reviewed and are considered to be sufficient to provide it with the required degree of comfort. Resulting from this and the fact that the Group only has one employee, the Board continues to believe that there is no need for an internal audit function, although the Audit Committee considers this annually, reporting its findings to the Board.
Nomination Committee
The Nomination Committee consists of Serena Tremlett (Chairman), David Jeffreys, Dick Kingston, Phillip Rose and David Rowlinson.
The Committee's principal task is to review the structure, size and composition of the Board in relation to its size and position in the market and to make recommendations to fill Board vacancies as they arise and it meets at least annually.
Committee meeting attendance
|
Director |
No of meetings attended |
No of meetings eligible to attend |
|
Serena Tremlett |
1 |
1 |
|
David Jeffreys |
1 |
1 |
|
Dick Kingston |
1 |
1 |
|
Phillip Rose |
1 |
1 |
|
David Rowlinson |
1 |
1 |
Remuneration Committee and attendance
The Remuneration Committee consists of the independent non-executive Directors being David Jeffreys (Chairman), Dick Kingston, David Rowlinson and Serena Tremlett.
The Board has approved formal terms of reference for the Committee and a copy of these is available on request from the Company Secretary.
As the Company comprises only non-executive directors, the Committee's main role is to determine their remuneration within the cap set out in the Company's Articles. The Remuneration Committee met once during 2015.
Remuneration report
The aggregate fees payable to the Directors are limited to £200,000 per annum under the Company's Articles and the annual fees payable to each Director have not changed since the Company's shares were listed in 2005. The fees payable to the Directors are expected to reflect their expertise, responsibilities and time spent on the business of the Company, taking into account market equivalents, the activities and the size of the Company and market conditions. Under their respective appointment letters, each director is entitled to an annual fee together with a provision for reimbursement for any reasonable out of pocket expenses.
During the year the Directors received the following emoluments in the form of fees from the Company:
|
|
Year ending 31 December 2015 £ |
Year ending 31 December 2014 £ |
|
Dick Kingston |
30,000 |
30,000 |
|
David Jeffreys |
23,000 |
23,000 |
|
Phillip Rose |
20,000 |
20,000 |
|
David Rowlinson |
20,000 |
20,000 |
|
Serena Tremlett |
20,000 |
20,000 |
|
Total |
113,000 |
113,000 |
Internal control and risk management
The Board understands its responsibility for ensuring that there are sufficient, appropriate and effective systems, procedures, policies and processes for internal control of financial, operational, compliance and risk management matters in place in order to manage the risks which are an inherent part of business. Such risks are managed rather than eliminated in order to permit the Company to meet its financial and other objectives.
As the Company has only one employee, the Board reviews the internal procedures of both its Investment Manager and its administrator upon which it is reliant. The Investment Manager has a schedule of matters which have been delegated to it by the Board and upon which it reports to the Board on a quarterly basis. These matters include quarterly management accounts and reporting against key financial performance indicators. Further, a compliance report is produced by the administrator for the Board on a quarterly basis.
The Company maintains a risk management framework which considers the non-financial as well as financial risks and this is reviewed by the Audit Committee prior to submission to the Board.
Investment management agreement
The Company has an agreement with the Investment Manager. This sets out the Investment Manager's key responsibilities, which include proposing a property investment strategy to the Board, identifying property investments to recommend for acquisition or sale and arranging appropriate lending facilities. The Investment Manager is also responsible to the Board for all issues relating to property asset management.
Substantial shareholding
Shareholders with holdings of more than three per cent of the issued ordinary shares of the Company as at 19 February 2016 were as follows:
|
Name of investor |
No. of ordinary shares |
% held |
|
Antler Investment Holdings Limited |
21,437,393 |
18.22 |
|
Alpha Real Capital LLP |
9,390,800 |
7.98 |
|
Mr Richard M. Peskin |
6,000,000 |
5.10 |
|
Mrs Rosemary J. Skelley |
5,857,607 |
4.98 |
|
Hargreaves Lansdown Asset Management |
5,804,501 |
4.93 |
|
Barclays Wealth Management (UK) |
5,175,861 |
4.40 |
|
TD Waterhouse Clients |
5,149,369 |
4.38 |
|
Mr J. A. M. Hemming |
4,465,000 |
3.80 |
|
Interactive Investor |
4,425,767 |
3.76 |
Shareholder relations
The Board places high importance on its relationship with its shareholders, with members of the Investment Manager's Investment Committee making themselves available for meetings with key shareholders and sector analysts. Reporting of these meetings and market commentary is received by the Board on a quarterly basis to ensure that shareholder communication fulfils the needs of being useful, timely and effective. One or more members of the Board and the Investment Manager will be available at the Annual General Meeting to answer any questions that shareholders attending may wish to raise.
Directors' Responsibilities Statement
Company law requires the Directors to prepare financial statements for each financial year, which give a true and fair view of the state of affairs of the Company and of the Group at the end of the year and of the profit or loss of the Company and the Group for that year.
In preparing those financial statements, the Directors are required to:
(1) select suitable accounting policies and then apply them consistently;
(2) make judgements and estimates that are reasonable and prudent;
(3) state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;
(4) prepare the financial statements on the going concern basis unless it is appropriate to assume that the Company and Group will not continue in business.
The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and of the Group and to enable them to ensure that the financial statements comply with the Companies (Guernsey) Law, 2008. They are also responsible for safeguarding the assets of the Company and Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors confirm that they have complied with the above requirements in preparing the financial statements.
So far as each of the Directors is aware, there is no relevant information of which the Company's auditor is unaware, and they have taken all the steps they ought to have taken as Directors to make themselves aware of any relevant information and to establish that the Company's auditor is aware of that information.
Going concern
During the year, the Board has made progress in the planned orderly realisation of its investment property and consequent repayment of the bank borrowings. Eight properties were sold during the year achieving sale proceeds amounting to £123.3 million (€167.3 million) which enabled a bank borrowings repayment of £109.0 million (€150.1 million). Three more properties were sold after the year end for £18.4 million (€24.3 million). Given the current economic environment and the maturity of the Group's bank borrowings on 15 April 2016 the Board will continue to seek the support of its lender in an orderly realisation of its remaining six investment properties with a view to winding up the Group in due course. The accounts are therefore not prepared on a going concern basis.
Annual General Meeting
The AGM will be held in Guernsey at 9 a.m. on 29 April 2016 at Old Bank Chambers, La Grande Rue, St Martin's, Guernsey. The meeting will be held to receive the Annual Report and Financial Statements, re-elect Directors and propose the reappointment of the auditor and that the Directors be authorised to determine the auditor's remuneration.
Auditor
BDO Limited has expressed its willingness to continue in office as auditor of the Company.
By order of the Board,
David Jeffreys Serena Tremlett
Director Director
Directors' statement pursuant to the Disclosure and Transparency Rules
Each of the Directors, whose names and functions are listed in the Directors Report confirm that, to the best of each person's knowledge and belief:
· The financial statements, prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group and Company, and
· The Chairman's Statement and the Property Review includes a fair review of the development and performance of the business and the position of the Company and Group and notes 21 and 22 to the financial statements provide a description of the principal risks and uncertainties that they face.
By order of the Board,
David Jeffreys Serena Tremlett
Director Director
.
Corporate responsibility - benefits, risks and controls
The Board has reviewed the Company's Corporate Responsibility Policy and considers this to be appropriate for the Company. The Company's policy is as follows:
Alpha Pyrenees Trust Limited is committed to delivering sustainable investment returns in a way that delivers positive environmental, social and economic benefits. The Company recognises that the way in which buildings are designed, built, managed and occupied, significantly influences their impact on the environment and affected communities and it seeks to manage these issues.
The Company believes that, through the implementation of socially responsible policies, the Company can manage effectively our sustainability related risks, associated with, for example, climate change (more severe and regular floods, increasing storm damage costs and rising energy prices), site contamination and remediation, use of hazardous materials, waste management (rising landfill and disposal costs) and local community relations.
The Company's standard business process ensures that appropriate environmental reports are obtained as part of the due diligence process for property acquisitions and the Company assesses the accessibility of each property acquisition to public transportation.
The Company's managers and appointed agents are required to comply with all relevant laws and regulations affecting the Company's business, and managers are expected to be aware of the environmental issues associated with property investment including environmental health and safety legislation, energy use, pollution and waste management.
Independent auditors' report
To the members of Alpha Pyrenees Trust Limited
We have audited the financial statements of Alpha Pyrenees Trust Limited for the year ended 31 December 2015 which comprise the consolidated and company statements of financial position, the consolidated and company statements of comprehensive income, the consolidated and company statements of cash flows, the consolidated and company statements of changes in equity and the related notes 1 to 22. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
This report is made solely to the company's members, as a body, in accordance with Section 262 of the Companies (Guernsey) Law, 2008. Our audit work is undertaken so that we might state to the parent company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the parent company and the parent company's members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of the directors and auditor
As explained more fully in the Directors' Responsibilities Statement within the Directors' Report, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Financial Reporting Council's Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group's and parent company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non‑financial information in the annual report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent misstatements or inconsistencies we consider the implications for our report.
Opinion on the financial statements
In our opinion the financial statements:
· give a true and fair view of the state of the group's and of the parent company's affairs as at 31 December 2015 and of the group's loss and the parent company's loss for the year then ended;
· have been properly prepared in accordance with IFRSs as adopted by the European Union; and
· have been properly prepared in accordance with the requirements of the Companies (Guernsey) Law, 2008.
Emphasis of matter ‑ Going concern and bank facilities
We draw attention to the disclosures made in note 2 to the financial statements which explains that It is the intention of the Board to seek an orderly disposal of the Group's investment property with a view to winding up the Group in due course and as a consequence the financial statements have therefore been prepared on a basis other than that of a going concern.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies (Guernsey) Law, 2008 requires us to report to you if, in our opinion:
· proper accounting records have not been kept by the parent company; or
· the financial statements are not in agreement with the accounting records; or
· we have failed to obtain all the information and explanations, which, to the best of our knowledge and belief, are necessary for the purposes of our audit.
.......................................................
Richard Michael Searle FCA
For and on behalf of BDO Limited
Chartered Accountants and Recognised Auditor
Place du Pré, Rue du Pré
St Peter Port, Guernsey
Date: 10 March 2016
Consolidated statement of comprehensive income
|
|
For the year ended 31 December 2015 |
For the year ended 31 December 2014 |
|||||
|
|
|
Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue |
Capital |
Total |
|
|
|
|
|
|
|
|
|
|
Income |
|
|
|
|
|
|
|
|
Revenue |
3 |
15,142 |
- |
15,142 |
19,398 |
- |
19,398 |
|
Property operating expenses |
3 |
(5,717) |
- |
(5,717) |
(6,148) |
- |
(6,148) |
|
Net rental income |
|
9,425 |
- |
9,425 |
13,250 |
- |
13,250 |
|
|
|
|
|
|
|
|
|
|
Loss on disposal of investment properties |
11, 12 |
- |
(28,863) |
(28,863) |
- |
(1,400) |
(1,400) |
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
Losses on revaluation of investment properties |
11, 12 |
- |
(13,459) |
(13,459) |
- |
(12,416) |
(12,416) |
|
Investment Manager's fee |
|
(1,380) |
(592) |
(1,972) |
(1,646) |
(706) |
(2,352) |
|
Other administration costs |
5 |
(1,203) |
- |
(1,203) |
(1,395) |
- |
(1,395) |
|
|
|
|
|
|
|
|
|
|
Operating profit/(loss) |
|
6,842 |
(42,914) |
(36,072) |
10,209 |
(14,522) |
(4,313) |
|
|
|
|
|
|
|
|
|
|
Finance income |
4 |
1 |
880 |
881 |
4 |
7,550 |
7,554 |
|
Finance costs |
6 |
(11,832) |
(51) |
(11,883) |
(14,051) |
(206) |
(14,257) |
|
|
|
|
|
|
|
|
|
|
Loss before taxation |
|
(4,989) |
(42,085) |
(47,074) |
(3,838) |
(7,178) |
(11,016) |
|
|
|
|
|
|
|
|
|
|
Taxation |
7 |
- |
5,783 |
5,783 |
- |
(547) |
(547) |
|
|
|
|
|
|
|
|
|
|
Loss for the year |
|
(4,989) |
(36,302) |
(41,291) |
(3,838) |
(7,725) |
(11,563) |
|
|
|
|
|
|
|
|
|
|
Other comprehensive income/(expense) |
|
|
|
|
|
|
|
|
Items that may be reclassified to profit or loss in subsequent periods: |
|
|
|
|
|
|
|
|
Foreign exchange gains/(losses) on translation of foreign operations (translation reserve) |
|
- |
4,697 |
4,697 |
- |
(456) |
(456) |
|
Reclassification of foreign exchange gains/(losses) on translation of foreign operations following disposals |
|
- |
(2,735) |
(2,735) |
- |
- |
- |
|
|
|
|
|
|
|
|
|
|
Other comprehensive income/(expense) for the year |
|
- |
1,962 |
1,962 |
- |
(456) |
(456) |
|
|
|
|
|
|
|
|
|
|
Total comprehensive expense for the year |
|
(4,989) |
(34,340) |
(39,329) |
(3,838) |
(8,181) |
(12,019) |
|
|
|
|
|
|
|
|
|
|
Loss per share - basic & diluted |
9 |
|
|
(35.1)p |
|
|
(9.8)p |
The total column of this statement represents the Group's statement of comprehensive income, prepared in accordance with IFRS as adopted by the European Union. The revenue and capital columns are supplied as supplementary information permitted under IFRS. All items in the above statement derive from continuing operations. All income is attributable to the equity holders of the parent company. There are no non-controlling interests.
The accompanying notes are an integral part of the financial statements.
Consolidated balance sheet
|
|
Notes |
2015 £'000 |
2014 £'000 |
|
|
|
|
|
|
Non-current assets |
|
|
|
|
Investment properties |
11 |
- |
89,543 |
|
|
|
- |
89,543 |
|
Current assets |
|
|
|
|
Investment properties held for sale |
12 |
39,283 |
122,637 |
|
Trade and other receivables |
13 |
6,940 |
6,100 |
|
Cash and cash equivalents |
14 |
11,363 |
12,425 |
|
|
|
57,586 |
141,162 |
|
Total assets |
|
57,586 |
230,705 |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
Trade and other payables |
15 |
(1,955) |
(6,032) |
|
Financial liabilities at fair value through profit or loss |
22 |
- |
(948) |
|
Bank borrowings |
16 |
(91,311) |
(212,858) |
|
Rent deposits |
|
(263) |
(730) |
|
|
|
(93,529) |
(220,568) |
|
|
|
|
|
|
Total assets less current liabilities |
|
(35,943) |
10,137 |
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
Rent deposits |
|
(431) |
(952) |
|
Deferred taxation |
7 |
- |
(6,230) |
|
|
|
(431) |
(7,182) |
|
Total liabilities |
|
(93,960) |
(227,750) |
|
|
|
|
|
|
Net (liabilities)/assets |
|
(36,374) |
2,955 |
|
|
|
|
|
|
Equity |
|
|
|
|
Share capital |
17 |
- |
- |
|
Special reserve |
18 |
113,131 |
113,131 |
|
Translation reserve |
18 |
24,234 |
22,272 |
|
Capital reserve |
18 |
(166,173) |
(129,871) |
|
Revenue reserve |
18 |
(7,566) |
(2,577) |
|
|
|
|
|
|
Total equity |
|
(36,374) |
2,955 |
|
|
|
|
|
|
Net asset value per share |
|
(30.9)p |
2.5p |
The financial statements were approved by the Board of Directors and authorised for issue on 10 March 2016. They were signed on its behalf by:
David Jeffreys Serena Tremlett
Director Director
The accompanying notes are an integral part of the financial statements.
Consolidated cash flow statement
|
|
Notes |
For the year ended 31 December 2015 £'000 |
For the year ended 31 December 2014 £'000 |
|
|
|
|
|
|
Operating activities |
|
|
|
|
Loss for the year |
|
(41,291) |
(11,563) |
|
|
|
|
|
|
Adjustments for : |
|
|
|
|
Loss on disposal of investment properties |
|
28,863 |
1,400 |
|
Losses on revaluation of investment properties |
|
13,459 |
12,416 |
|
Deferred taxation |
|
(5,783) |
547 |
|
Finance income |
|
(881) |
(7,554) |
|
Finance costs |
|
11,883 |
14,257 |
|
|
|
|
|
|
Operating cash flows before movements in working capital |
|
6,250 |
9,503 |
|
|
|
|
|
|
Movements in working capital: |
|
|
|
|
Decrease/(increase) in operating trade and other receivables |
|
3,539 |
(2,571) |
|
(Decrease)/ increase in operating trade and other payables |
|
(4,550) |
3,158 |
|
|
|
|
|
|
Cash generated from operations |
|
5,239 |
10,090 |
|
|
|
|
|
|
Interest received |
|
1 |
4 |
|
|
|
|
|
|
Cash flows from operating activities |
|
5,240 |
10,094 |
|
|
|
|
|
|
Investing activities |
|
|
|
|
Proceeds from disposal of investment properties |
|
114,087 |
11,560 |
|
Capital expenditure |
|
(228) |
(244) |
|
Transfer to cash pooling account |
14 |
(2,700) |
(7,766) |
|
Tenant contribution |
|
- |
(3,719) |
|
|
|
|
|
|
Cash flows from/(used in) investing activities |
|
111,159 |
(169) |
|
|
|
|
|
|
Financing activities |
|
|
|
|
Repayment of borrowings |
|
(108,980) |
- |
|
Bank loan interest paid and costs |
|
(10,419) |
(10,607) |
|
|
|
|
|
|
Cash flows used in financing activities |
|
(119,399) |
(10,607) |
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
(3,000) |
(682) |
|
|
|
|
|
|
Cash and cash equivalents at beginning of year |
|
4,659 |
5,923 |
|
Exchange translation movement |
|
(350) |
(582) |
|
|
|
|
|
|
Cash and cash equivalents at end of year (note 14) |
|
1,309 |
4,659 |
The accompanying notes are an integral part of the financial statements.
Consolidated statement of changes in equity
|
For the year ended 31 December 2014 |
Share capital £'000 |
Special £'000 |
Translation reserve £'000 |
Capital reserve £'000 |
Revenue reserve £'000 |
Total equity £'000 |
|
|
|
|
|
|
|
|
|
At 1 January 2014 |
- |
113,131 |
22,728 |
(122,146) |
1,261 |
14,974 |
|
|
|
|
|
|
|
|
|
Total comprehensive income/(expense) for the year |
|
|
|
|
|
|
|
Loss for the year |
- |
- |
- |
(7,725) |
(3,838) |
(11,563) |
|
Other comprehensive expense |
- |
- |
(456) |
- |
- |
(456) |
|
Total comprehensive expense for the year |
- |
- |
(456) |
(7,725) |
(3,838) |
(12,019) |
|
|
|
|
|
|
|
|
|
At 31 December 2014 |
- |
113,131 |
22,272 |
(129,871) |
(2,577) |
2,955 |
|
|
|
|
|
|
|
|
|
Note 17, 18 |
|
|
|
|
|
|
|
For the year ended 31 December 2015 |
Share capital £'000 |
Special £'000 |
Translation reserve £'000 |
Capital reserve £'000 |
Revenue reserve £'000 |
Total equity £'000 |
|
|
|
|
|
|
|
|
|
At 1 January 2015 |
- |
113,131 |
22,272 |
(129,871) |
(2,577) |
2,955 |
|
|
|
|
|
|
|
|
|
Total comprehensive income/(expense) for the year |
|
|
|
|
|
|
|
Loss for the year |
- |
- |
- |
(36,302) |
(4,989) |
(41,291) |
|
Other comprehensive income |
- |
- |
1,962 |
- |
- |
1,962 |
|
Total comprehensive income/(expense) for the year |
- |
- |
1,962 |
(36,302) |
(4,989) |
(39,329) |
|
|
|
|
|
|
|
|
|
At 31 December 2015 |
- |
113,131 |
24,234 |
(166,173) |
(7,566) |
(36,374) |
|
|
|
|
|
|
|
|
|
Note 17, 18 |
|
|
|
|
|
|
The accompanying notes are an integral part of the financial statements.
Company statement of comprehensive income
|
|
Notes |
For the year ended 31 December 2015 |
For the year ended 31 December 2014 |
||||
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
||
|
|
|
|
|
|
|
|
|
|
Income |
|
|
|
|
|
|
|
|
Revenue |
3 |
- |
- |
- |
7,466 |
- |
7,466 |
|
Total income |
|
- |
- |
- |
7,466 |
- |
7,466 |
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
Investment Manager's fee |
|
(538) |
(230) |
(768) |
(491) |
(210) |
(701) |
|
Other administration costs |
5 |
(505) |
- |
(505) |
(504) |
- |
(504) |
|
Total expenses |
|
(1,043) |
(230) |
(1,273) |
(995) |
(210) |
(1,205) |
|
|
|
|
|
|
|
|
|
|
Operating (loss)/profit |
|
(1,043) |
(230) |
(1,273) |
6,471 |
(210) |
6,261 |
|
|
|
|
|
|
|
|
|
|
Finance income |
4 |
- |
- |
- |
3 |
- |
3 |
|
Finance costs |
6 |
(2) |
(106) |
(108) |
(1) |
(1,084) |
(1,085) |
|
Movement in impairment of amounts receivable from and investments in subsidiary undertakings |
21 |
- |
(2,209) |
(2,209) |
- |
(17,198) |
(17,198) |
|
|
|
|
|
|
|
|
|
|
(Loss)/profit before taxation |
|
(1,045) |
(2,545) |
(3,590) |
6,473 |
(18,492) |
(12,019) |
|
|
|
|
|
|
|
|
|
|
Taxation |
7 |
- |
- |
- |
- |
- |
- |
|
|
|
|
|
|
|
|
|
|
(Loss)/profit for the year |
|
(1,045) |
(2,545) |
(3,590) |
6,473 |
(18,492) |
(12,019) |
|
|
|
|
|
|
|
|
|
|
Total comprehensive (expense)/income for the year |
|
(1,045) |
(2,545) |
(3,590) |
6,473 |
(18,492) |
(12,019) |
The total column of this statement represents the Company's statement of comprehensive income, prepared in accordance with IFRS as adopted by the European Union. The revenue and capital columns are supplied as supplementary information permitted under IFRS. All items in the above statement derive from continuing operations.
The accompanying notes are an integral part of the financial statements.
Company balance sheet
|
|
Notes |
2015 £'000 |
2014 £'000 |
|
|
|
|
|
|
Non-current assets |
|
|
|
|
Investments in subsidiary undertakings |
10 |
- |
151 |
|
Amounts receivable from subsidiary undertakings |
10 |
- |
15 |
|
|
|
- |
166 |
|
|
|
|
|
|
Current assets |
|
|
|
|
Trade and other receivables |
13 |
12 |
5 |
|
Amounts receivable from subsidiary undertakings |
10 |
- |
1,364 |
|
Cash and cash equivalents |
|
36 |
1,801 |
|
|
|
48 |
3,170 |
|
|
|
|
|
|
Total assets |
|
48 |
3,336 |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
Trade and other payables |
15 |
(683) |
(381) |
|
|
|
|
|
|
Total liabilities |
|
(683) |
(381) |
|
|
|
|
|
|
Net (liabilities)/assets |
|
(635) |
2,955 |
|
|
|
|
|
|
Equity |
|
|
|
|
Share capital |
17 |
- |
- |
|
Special reserve |
18 |
113,131 |
113,131 |
|
Capital reserve |
18 |
(139,319) |
(136,774) |
|
Revenue reserve |
18 |
25,553 |
26,598 |
|
|
|
|
|
|
Total equity |
|
(635) |
2, 955 |
The financial statements were approved by the Board of Directors and authorised for issue on 10 March 2016. They were signed on its behalf by:
David Jeffreys Serena Tremlett
Director Director
The accompanying notes are an integral part of the financial statements.
Company cash flow statement
|
|
For the year ended 31 December 2015 £'000 |
For the year ended 31 December 2014 £'000 |
|
|
|
|
|
Cash flows from operating activities |
|
|
|
|
|
|
|
Loss for the year |
(3,590) |
(12,019) |
|
|
|
|
|
Adjustments for : |
|
|
|
Finance costs |
108 |
1,085 |
|
Finance income |
- |
(3) |
|
Interest from subsidiary undertakings |
- |
(7,466) |
|
Movement in impairment of amounts receivable from subsidiary undertakings |
2,209 |
17,198 |
|
|
|
|
|
Operating cash flows before movements in working capital |
(1,273) |
(1,205) |
|
|
|
|
|
(Increase)/decrease in operating trade and other receivables |
(7) |
1 |
|
Increase in operating trade and other payables |
302 |
46 |
|
|
|
|
|
Cash flows used in operations |
(978) |
(1,158) |
|
|
|
|
|
Interest paid |
(2) |
(1) |
|
Interest received |
- |
3 |
|
Interest received from subsidiaries |
22 |
40 |
|
Taxation |
- |
- |
|
|
|
|
|
Cash flows used in operating activities |
(958) |
(1,116) |
|
|
|
|
|
Investing activities |
|
|
|
Loans advanced |
(681) |
(468) |
|
|
|
|
|
Cash flows used in investing activities |
(681) |
(468) |
|
|
|
|
|
Net decrease in cash and cash equivalents |
(1,639) |
(1,584) |
|
|
|
|
|
Cash and cash equivalents at beginning of year |
1,801 |
3,565 |
|
Exchange translation movement |
(126) |
(180) |
|
|
|
|
|
Cash and cash equivalents at end of year |
36 |
1,801 |
The accompanying notes are an integral part of the financial statements.
Company statement of changes in equity
|
For the year ended 31 December 2014 |
Share |
Special |
Capital £'000 |
Revenue reserve £'000 |
Total £'000 |
|
|
|
|
|
|
|
|
At 1 January 2014 |
- |
113,131 |
(118,282) |
20,125 |
14,974 |
|
|
|
|
|
|
|
|
Total comprehensive income/(expense) for the year |
|
|
|
|
|
|
(Loss)/profit for the year |
- |
- |
(18,492) |
6,473 |
(12,019) |
|
Other comprehensive income/(expense) |
- |
- |
- |
- |
- |
|
Total comprehensive (expense)/income for the year |
- |
- |
(18,492) |
6,473 |
(12,019) |
|
|
|
|
|
|
|
|
At 31 December 2014 |
- |
113,131 |
(136,774) |
26,598 |
2,955 |
|
|
|
|
|
|
|
|
Note 17, 18 |
|
|
|
|
|
|
For the year ended 31 December 2015 |
Share |
Special |
Capital £'000 |
Revenue reserve £'000 |
Total £'000 |
|
|
|
|
|
|
|
|
At 1 January 2015 |
- |
113,131 |
(136,774) |
26,598 |
2,955 |
|
|
|
|
|
|
|
|
Total comprehensive income/(expense) for the year |
|
|
|
|
|
|
Loss for the year |
- |
- |
(2,545) |
(1,045) |
(3,590) |
|
Other comprehensive income/(expense) |
- |
- |
- |
- |
- |
|
Total comprehensive expense for the year |
- |
- |
(2,545) |
(1,045) |
(3,590) |
|
|
|
|
|
|
|
|
At 31 December 2015 |
- |
113,131 |
(139,319) |
25,553 |
(635) |
|
|
|
|
|
|
|
|
Note 17, 18 |
|
|
|
|
|
The accompanying notes are an integral part of the financial statements.
Notes to the financial statements
1. General information
The Company is a limited liability, closed-ended investment company incorporated in Guernsey. The address of the registered office is given below. The nature of the Group's operations and its principal activities are set out in the Chairman's statement above. The financial statements were approved and authorised for issue on 10 March 2016 and signed by David Jeffreys and Serena Tremlett on behalf of the Board.
2. Significant accounting policies
A summary of the principal accounting policies is set out below. The policies have been consistently applied to all years presented.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the accounting policies. The areas involving a high degree of judgement or complexity or areas where the assumptions and estimates are significant to the financial statements are disclosed in this note.
Basis of preparation
These financial statements have been prepared in accordance with IFRS, which comprise standards and interpretations approved by the International Accounting Standards Board ("IASB"), and International Accounting Standards and Standards Interpretations Committee's interpretations approved by the International Accounting Standards Committee ("IASC") that remain in effect, and to the extent that they have been adopted by the European Union.
Going concern
During the year, the Board has made progress in the planned orderly realisation of its investment property and consequent repayment of the bank borrowings. Eight properties were sold during the year achieving sale proceeds amounting to £123.3 million (€167.3 million) which enabled a bank borrowings repayment of £109.0 million (€150.1 million). Three more properties were sold after the year end for £18.4 million (€24.3 million). Given the current economic environment and the maturity of the Group's bank borrowings on 15 April 2016 the Board will continue to seek the support of its lender in an orderly realisation of its remaining six investment properties with a view to winding up the Group in due course. The accounts are therefore not prepared on a going concern basis.
a) Adoption of new and revised Standards
A number of standards and interpretations issued by the IASB and the International Financial Reporting Interpretations Committee are effective for the current year. The adoption of these standards has not led to any changes in the Group's accounting policies.
b) Standards and Interpretations in issue and not yet effective
At the date of authorisation of these financial statements, there were a number of standards and interpretations, which have not been applied in these financial statements that were in issue but not yet effective. These are either not relevant to the Company and Group or, given the orderly disposal of investment properties and intended wind up of the Company and Group, are not expected to have a significant impact.
The principal accounting policies adopted are set out below.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and the subsidiary undertakings controlled by the Company, made up to 31 December each year. Control is achieved where the Company has power over the investee, exposure or rights, to variable returns from its involvement with the investee and the ability to use its power to affect the amount of the investor's returns.
The results of subsidiary undertakings acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition or up to the effective date of disposal as appropriate.
When necessary, adjustments are made to the financial statements of subsidiary undertakings to bring their accounting policies used into line with those used by the Group.
All intra-group transactions, balances, income and expenses are eliminated on consolidation.
Presentation of income statement
In order to better reflect the activities of an investment company and in accordance with guidance issued by the Association of Investment Companies ("AIC"), supplementary information, which analyses the income statement between items of a revenue and capital nature, has been presented alongside the statement of comprehensive income.
Revenue recognition
Rental income from investment property leased out under an operating lease is recognised in the statement of comprehensive income on a straight line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the net consideration for the use of the property and are therefore also recognised on the same straight line basis. Rental revenues are accounted for on an accruals basis. Therefore, deferred revenue generally represents advance payments from tenants. Revenue is recognised when it is probable that the economic benefits associated with the transaction will flow to the Group and the amount of revenue can be measured reliably. Upon early termination of a lease by the lessee, the receipt of a surrender premium is immediately recognised as revenue.
The Company's interest income is accrued on a time basis, by reference to the principal outstanding and the effective interest rate applicable. Provisions against recoverability of interest income are recognised as an expense within the movement in impairment of amounts receivable from subsidiary undertakings.
Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Foreign currencies
a) Functional and presentation currency
Items included in the financial statements of each of the Group entities are measured in the currency of the primary economic environment in which the entity operates (the "functional currency"). The consolidated financial statements are presented in Sterling, which is the Company's functional and presentation currency.
b) Transactions and balances
Transactions in currencies other than Sterling are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Gains and losses arising on retranslation are included in net profit or loss for the year.
c) Group companies
The results and financial position of all the Group entities that have a functional currency which differs from the presentation currency are translated into the presentation currency as follows:
(i) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of the balance sheet;
(ii) income and expenses for each statement of comprehensive income are translated at the average exchange rate prevailing in the period; and
(iii) all resulting exchange differences are recognised as a separate component of equity.
On consolidation, the exchange differences arising from the translation of the Company's net investment in foreign entities are taken to other comprehensive income. When a foreign operation is sold, such exchange differences are recognised in the statement of comprehensive income as part of the gain or loss on sale.
The year-end exchange rate used is £1:€1.357 (2014: £1:€1.278) and the average rate for the year used is £1:€1.377 (2014: £1:€1.240).
Operating profit
a) Company
Operating profit includes interest income from subsidiary entities, as reduced by administrative expenses and excludes the movement on impairment of loans from subsidiaries, finance costs and finance income.
b) Group
Operating profit includes net gains or losses on revaluation of investment properties and net gains or losses on disposal of investment properties, as reduced by administrative expenses and property operating costs and excludes finance costs and finance income.
Expenses
All expenses are accounted for on an accruals basis and include fees and other expenses paid to the administrator, the Investment Manager and the Directors.
In respect of the analysis between revenue and capital items presented within the statement of comprehensive income, all expenses have been presented as revenue items except:
(i) expenses which are incidental to the acquisition of an investment property are included within the cost of that property.
(ii) a proportion of the Investment Manager's fee is charged to the capital column in the statement of comprehensive income in order to reflect the Directors' estimated long-term view of the nature of the investment return of the Group.
(iii) realised gains or losses from disposal of investment properties and unrealised gains or losses on revaluation of investment properties;
(iv) foreign exchange losses.
Taxation
The Company is exempt from Guernsey taxation on income derived outside of Guernsey and bank interest earned in Guernsey. A fixed annual fee of £1,200 (2014: £600) is payable to the States of Guernsey in respect of this exemption. No charge to Guernsey taxation arises on capital gains. The Group is liable to foreign tax arising on activities of the overseas subsidiaries. The Company has subsidiary operations in Luxembourg, Belgium, France and Spain.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the statement of comprehensive income because it excludes items of income and expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantially enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible timing differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the year when the liability is settled or the asset realised. Deferred tax is charged or credited in the statement of comprehensive income.
Dividends
Dividends are recognised as a liability in the financial statements in the period in which they become obligations of the Company.
Fair value measurement
The Group measures certain non-financial assets such as investment property, at fair value at the end of each reporting period, using recognised valuation techniques and following the principles of IFRS 13. In addition, fair values of financial instruments measured at amortised cost are disclosed in the financial statements.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
· in the principal market for the asset or liability
or
· in the absence of a principal market, in the most advantageous market for the asset or liability.
The Group must be able to access the principal or the most advantageous market at the measurement date. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs significant to the fair value measurement as a whole:
· Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
· Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
· Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
Investment property
Investment property, which is property held to earn rentals and/or for capital appreciation, is initially recognised at cost being the fair value of consideration given including related transaction costs. After initial recognition at cost, investment properties are carried at their fair values based on half yearly professional valuations made by Knight Frank LLP, with the exception of investment properties that have been disposed of at the time of signing these financial statements. The valuations are in accordance with standards complying with the Royal Institution of Chartered Surveyors Appraisal and Valuation manual and the International Valuation Standards Committee.
Gains or losses arising from changes in the fair value of investment property are included in the statement of comprehensive income in the period in which they arise. Properties are treated as acquired when the Group assumes the significant risks and returns of ownership and as disposed of when these are transferred to the buyer.
Investment property held for sale
Investment properties are classified as held for sale if their carrying amount will be recovered by sale rather than by continuing use in the business. For this to be the case, the property must be available for immediate sale in its present condition, management must be committed to and have initiated a plan to sell the property which, when initiated, was expected to result in a completed sale within twelve months. Property assets that are classified as held for sale are measured at fair value in accordance with IAS 40 Investment Property.
Investment properties held for sale, which, at the time of signing these financial statements, have been disposed of, are valued by the Directors at their selling price, this being the best approximation to their fair value at period end.
Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, which is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors of the Company.
For management purposes, the Group is organised into one main operating segment, which invests in commercial property located in Europe. Accordingly, all significant operating decisions are based upon analysis of the Group as one segment. The financial results from this segment are equivalent to the financial statements of the Group as a whole.
All of the Group's revenue is from entities that are incorporated in Europe.
The Group does not have non-current assets at the balance sheet date. In 2014, total non-current assets located in France amounted to £85.1 million and non-current assets located in Spain amounted to £4.4 million.
With the exception of cash and cash equivalents, which are located in Europe and Guernsey, all of the Group's current assets are located in Europe only.
Revenue from one tenant, Alcatel-Lucent, amounted to £9.0 million in 2015 (2014: £9.1 million). Total revenue from tenants located in France amounted to £14.4 million (2013: £17.9 million) and revenue from tenants located in Spain amounted to £0.8 million (2014: £1.5 million). Please refer to note 21 for further details.
Investment in subsidiaries
Investments in subsidiaries are initially recognised and subsequently carried at cost in the Company's financial statements less, where appropriate, provisions for impairment.
Financial instruments
Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument. The Group shall offset financial assets and financial liabilities if the Group has a legally enforceable right to set off the recognised amounts and interests and intends to settle on a net basis.
(a) Financial assets
The Group's financial assets fall into the categories discussed below, with the allocation depending to an extent on the purpose for which the asset was acquired. The Group has not classified any of its financial assets as held to maturity or as available for sale.
Unless otherwise indicated, the carrying amounts of the Group's financial assets are a reasonable approximation of their fair values.
(i) Loans and receivables
These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through rental leases with tenants (e.g. trade receivables and cash and cash equivalents) but also incorporate other types of contractual monetary assets. They are initially recognised at fair value plus transaction costs that are directly attributable to the acquisition or issue and subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.
The effect of discounting on these financial instruments is not considered to be material.
Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all of the amounts due under the terms of the receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable. For trade receivables, such impairments directly reduce the carrying amount of the impaired asset and are recognised against the relevant income category in the statement of comprehensive income.
Cash and cash equivalents are carried at cost and consist primarily of short term deposits in banks with an original maturity of three months or less.
(ii) Fair value through profit or loss
This category comprised only 'in the money' financial derivatives. They were carried in the balance sheet at fair value with changes in fair value recognised in the statement of comprehensive income.
The fair value of the Group's derivatives was based on valuations as described in note 22.
(iii) Derecognition of financial assets
A financial asset (in whole or in part) is derecognised either:
· when the Group has transferred substantially all the risks and rewards of ownership; or
· when it has neither transferred nor retained substantially all the risks and rewards and when it no longer has control over the asset or a portion of the asset; or
· when the contractual right to receive cash flow has expired.
(b) Financial liabilities
The Group classifies its financial liabilities into one of two categories, depending on the purpose for which the liability was issued and its characteristics.
Unless otherwise indicated, the carrying amounts of the Group's financial liabilities are a reasonable approximation of their fair values.
(i) Fair value through profit or loss
This category comprised only 'out-of-the-money' financial derivatives. They were carried in the balance sheet at fair value with changes in fair value recognised in the statement of comprehensive income.
The fair value of the Group's derivatives was based on the valuations as described in note 22.
(ii) Financial liabilities measured at amortised cost
Other financial liabilities include the following items:
· Trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest rate method.
· Bank borrowings are initially recognised at fair value net of attributable transaction costs incurred. Such interest bearing liabilities are subsequently measured at amortised cost using the effective interest rate method.
(iii) Derecognition of financial liabilities
A financial liability (in whole or in part) is derecognised when the Group has extinguished its contractual obligations, it expires or is cancelled. Any gain or loss on derecognition is taken to the statement of comprehensive income.
(c) Share capital
Financial instruments issued by the Company are treated as equity only to the extent that they do not meet the definition of a financial liability. The Company's ordinary shares are classified as equity instruments. For the purposes of the disclosures given in note 22 the Company considers all its share capital, share premium and all other reserves as equity. The Company is not subject to any externally imposed capital requirements.
(d) Effective interest rate method
The effective interest rate method is a method of calculating the amortised cost of a financial asset or liability and of allocating interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments (including all fees or amounts paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset or liability, or, where appropriate, a shorter period.
Significant accounting estimates and judgements
The Directors make estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
(a) Investment property
The gross property value is the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. Transaction costs normally borne by the seller are not deducted in arriving at gross property value, in accordance with IAS 40. The fair value is calculated by deducting the costs normally borne by the purchaser from the gross property value. Fair value is not intended to represent the liquidation value of the property, which would be dependent upon the price negotiated at the time of sale less any associated selling costs. The fair value is largely based on estimates using property appraisal techniques and other valuation methods. Such estimates are inherently subjective and actual values can only be determined in a sales transaction.
Investment properties held for sale are measured at fair value. The Board determines that a property is available for sale where it is intended and expected to sell within one year from the date of classification as held for sale.
Investment properties held for sale, which, at the time of signing these financial statements, have been disposed of, are valued by the Directors at their selling price, this being the best approximation to their fair value at period end.
The fair value of the Group's investment properties and investment properties held for sale as at 31 December 2015 was £39.3 million (2014: £212.2 million). Refer to notes 11 and 12 for further details.
(b) Income and deferred taxes
The Group is subject to income and capital gains taxes in numerous jurisdictions. Significant judgement is required in determining the total provision for income and deferred taxes. There are many transactions and calculations for which the ultimate tax determination and timing of payment is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded such differences will impact the income and deferred tax provisions in the period in which the determination is made.
The Group's deferred tax liability as at 31 December 2015 was nil (2014: £6.2 million). See note 7 for further details.
(c) Fair value of derivative contracts
The Directors estimated fair values of derivative contracts based on valuation techniques. These techniques were significantly affected by the assumptions used, including discount rates and estimates of future cash flows. The fair value of derivative contracts at the balance sheet date was nil (2014: £0.9 million liability). See note 22 for further details.
3. Revenue
|
|
Group 2015 £'000 |
Company 2015 £'000 |
Group 2014 £'000 |
Company 2014 £'000 |
|
Rental income |
11,885 |
- |
15,530 |
- |
|
Service and management charges |
3,257 |
- |
3,868 |
- |
|
Interest from subsidiary undertakings (note 21) |
- |
- |
- |
7,466 |
|
Total |
15,142 |
- |
19,398 |
7,466 |
Interest from subsidiary undertakings arises from financial assets classified as loans and receivables, it has been calculated using the effective interest rate method and arises on loans that have been impaired as detailed in note 10.
At 31 December 2015, the Group recognised non recoverable property operating expenditure as follows:
|
|
2015 £'000 |
2014 £'000 |
|
Service charge income |
3,257 |
3,868 |
|
Property operating expenditure |
(5,717) |
(6,148) |
|
Non recoverable property operating expenditure |
(2,460) |
(2,280) |
Property operating expenses relating to investment properties that did not generate any rental income were £0.8 million (2014: £0.6 million).
The Group leases out its investment property solely under operating leases. Leases are typically for terms of standard institutional 3/6/9 years in France and 5 + 5 years in Spain. At the balance sheet date, using the exchange rate prevailing at that date, the Group had contracted with tenants for the following future minimum lease payments in respect of leases expiring within the following time periods:
|
|
2015 £'000 |
2014 £'000 |
|
Within one year |
1,829 |
13,900 |
|
In the second to fifth years inclusive |
4,332 |
48,777 |
|
After five years |
785 |
36,763 |
|
Total |
6,946 |
99,440 |
4. Finance income
|
|
Group 2015 £'000 |
Company 2015 £'000 |
Group 2014 £'000 |
Company 2014 £'000 |
|
Bank interest income |
1 |
- |
4 |
3 |
|
Net gains on financial assets and liabilities held at fair value through profit or loss (note 21) |
880 |
- |
7,550 |
- |
|
Total |
881 |
- |
7,554 |
3 |
The Group had interest rate swaps which matured on 10 February 2015.
5. Other administration costs
|
|
Group 2015 £'000 |
Company 2015 £'000 |
Group 2014 £'000 |
Company 2014 £'000 |
|
Accounts and administrative fees |
288 |
152 |
351 |
144 |
|
Non-executive Directors' fees |
113 |
113 |
113 |
113 |
|
Auditors' remuneration for audit services |
98 |
52 |
120 |
58 |
|
Other professional fees |
697 |
188 |
773 |
189 |
|
Staff costs |
7 |
- |
38 |
- |
|
Total |
1,203 |
505 |
1,395 |
504 |
The Group has one employee. The Directors are the only key management personnel of the Group.
6. Finance costs
|
|
Group 2015 £'000 |
Company 2015 £'000 |
Group 2014 £'000 |
Company 2014 £'000 |
|
Interest on bank borrowings |
10,896 |
- |
12,592 |
- |
|
Loan fee amortisation |
900 |
- |
1,426 |
- |
|
Foreign exchange loss |
51 |
106 |
206 |
1,084 |
|
Other charges |
36 |
2 |
33 |
1 |
|
Total |
11,883 |
108 |
14,257 |
1,085 |
Other than net losses on financial liabilities held at fair value through profit or loss, finance costs arise on financial liabilities measured at amortised cost using the effective interest rate method.
7. Taxation
(a) Taxation on profit on ordinary activities
Company
The Company is exempt from Guernsey taxation on income derived outside of Guernsey and bank interest earned in Guernsey. A fixed annual fee of £1,200 (2014: £600) is payable to the States of Guernsey in respect of this exemption. No charge to Guernsey taxation arises on capital gains. The Group is liable to foreign tax arising on activities in the overseas subsidiaries. The Company has subsidiary operations in Luxembourg, Belgium, France and Spain.
Group
The Group's tax position for the year comprises:
|
|
Group 2015 £'000 |
Group 2014 £'000 |
|
Deferred taxation |
|
|
|
France |
(5,783) |
547 |
|
Spain |
- |
- |
|
Total |
(5,783) |
547 |
|
|
|
|
|
Tax expense reconciliation |
|
|
|
Loss for the year |
(47,074) |
(11,016) |
|
|
|
|
|
Loss for the year at the tax rate of 33.33% |
(15,690) |
(3,672) |
|
Less: income not taxable |
(1,155) |
(2,228) |
|
Add: expenditure not taxable |
2,064 |
1,496 |
|
Add: un-provided deferred tax asset movement |
8,998 |
4,951 |
|
Tax charge |
(5,783) |
547 |
Tax at domestic rates applicable to profits in the country concerned
|
|
Group 2015 £'000 |
Group 2014 £'000 |
|
French taxation at 33.33% |
(5,783) |
547 |
|
Spanish taxation at 30% |
- |
- |
(b) Deferred taxation
The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon.
|
|
Revaluation of investment properties £'000 |
Accelerated tax depreciation £'000 |
Tax losses
£'000 |
Interest rate swap
£'000 |
Total
£'000 |
|
At 31 December 2013 |
(15,221) |
30,844 |
(8,334) |
(1,220) |
6,069 |
|
(Credited)/charged to profit or loss |
(2,550) |
2,173 |
(119) |
1,043 |
547 |
|
Charged/(credited) to other comprehensive income |
1,038 |
(1,995) |
525 |
46 |
(386) |
|
At 31 December 2014 |
(16,733) |
31,022 |
(7,928) |
(131) |
6,230 |
|
Charged/(credited) to profit or loss |
1,954 |
(15,160) |
7,301 |
122 |
(5,783) |
|
Charged/(credited) to other comprehensive income |
1,004 |
(2,029) |
569 |
9 |
(447) |
|
At 31 December 2015 |
(13,775) |
13,833 |
(58) |
- |
- |
At the balance sheet date the Company has unused tax losses of £149.6 million (2014: £100.2 million). Due to the unpredictability of future taxable profits, the Directors believe it is not prudent to recognise deferred tax assets in respect of the losses.
The French unused tax losses can be carried forward indefinitely. The Spanish unused tax losses can be carried forward for 18 years.
8. Dividends
The Company did not pay any dividend during the year (2014: nil) and does not pay dividends.
9. Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
|
|
1 January 2015 to 31 December 2015 |
1 January 2015 to 30 June 2015 |
1 January 2014 to 31 December 2014 |
1 January 2014 to 30 June 2014 |
|
Losses after tax per statement of comprehensive income (£'000) |
(41,291) |
(2,844) |
(11,563) |
(10,009) |
|
Basic and diluted losses per share |
(35.1)p |
(2.4)p |
(9.8)p |
(8.5)p |
|
|
|
|
|
|
|
Weighted average number of ordinary shares (000's) |
117,627 |
117,627 |
117,627 |
117,627 |
10. Investment in subsidiary undertakings
A list of the significant investments in subsidiaries, including the name, country of incorporation and the proportion of ownership interest is given below.
|
Name of subsidiary undertaking |
Class of share |
% of class held with voting rights |
Country of |
Principal |
|
Alpha Pyrenees Luxembourg SARL |
Ordinary |
100% |
Luxembourg |
Holding company |
|
Alpha Pyrenees Luxembourg No 2 SARL |
Ordinary |
100% |
Luxembourg |
Holding company |
|
Alpha Pyrenees Belgium SA |
Ordinary |
100% |
Belgium |
Holding company |
|
Alpha Pyrenees Evreux SARL |
Ordinary |
100% |
France |
Holding company |
|
Alpha Pyrenees Athis Mons SARL |
Ordinary |
100% |
France |
Holding company |
|
Alpha Pyrenees Athis Mons SCI |
Ordinary |
100% |
France |
Property investment |
|
Alpha Pyrenees Offices SARL |
Ordinary |
100% |
France |
Holding company |
|
Alpha Pyrenees Offices SCI |
Ordinary |
100% |
France |
Property investment |
|
Alpha Pyrenees Spain SLU |
Ordinary |
100% |
Spain |
Property investment |
|
Alpha Pyrenees Alcalá SLU |
Ordinary |
100% |
Spain |
Property investment |
|
Alpha Pyrenees Ècija SLU |
Ordinary |
100% |
Spain |
Property investment |
The Group's investment properties are held by its subsidiary undertakings.
In December 2015, the Group disposed of five investment properties in France through the sale of property owning subsidiaries, consequently the following four entities are not any longer part of the Group: Alpha Pyrenees Evreux SCI, Alpha Pyrenees Nozay SARL, Alpha Pyrenees Nozay SCI and Alpha Pyrenees Nîmes SARL. These sales have been accounted for as investment properties disposals and not disposals of subsidiaries since the Directors considered that the corporate sales did not meet the definition of a sale of a business.
The Company has made the following loans to its subsidiary undertakings as at 31 December 2015:
|
|
2015 Interest bearing |
2015 Non-interest bearing |
2015 Total |
2014 Interest bearing |
2014 Non-interest bearing |
2014 Total |
|
Loans |
91,795 |
55,128 |
146,923 |
101,639 |
53,163 |
154,802 |
|
Impairment |
(91,795) |
(55,128) |
(146,923) |
(100,735) |
(52,688) |
(153,423) |
|
Total |
- |
- |
- |
904 |
475 |
1,379 |
|
|
2015 Interest bearing |
2015 Non-interest bearing |
2015 Total |
2014 Interest bearing |
2014 Non-interest bearing |
2014 Total |
|||||
|
|
Current |
- |
- |
- |
889 |
475 |
1,364 |
||||
|
|
Non-current |
- |
- |
- |
15 |
- |
15 |
||||
|
|
Total |
- |
- |
- |
904 |
475 |
1,379 |
||||
The loans are denominated in Euros, unsecured and are subject to a range of interest rates, fixed for the term of the relevant loan. At 31 December 2015 the weighted average interest rate was 4.83% (2014: 5.47%).
An impairment of £146.9 million (2014: £153.4 million) has been made against amounts receivable from subsidiary undertakings to reflect the current mark to market impact of the property valuations which have arisen within the Group subsidiaries.
11. Investment properties
|
|
2015 £'000 |
2014 £'000 |
|
Fair value of investment properties at 1 January |
89,543 |
236,920 |
|
Subsequent capital expenditure after acquisition |
217 |
244 |
|
Disposals |
(30,788) |
(8,484) |
|
Movement in rent incentives/initial costs |
(291) |
3,927 |
|
Fair value adjustment in the year |
(13,531) |
(11,771) |
|
Effect of foreign exchange |
(5,867) |
(14,352) |
|
Transfer to investment properties held for sale |
(39,283) |
(116,941) |
|
Fair value of investment properties at 31 December |
- |
89,543 |
The fair value of the Group's investment properties and investment properties held for sale (note 12) at 31 December 2015 and 31 December 2014 has been arrived at on the basis of valuations carried out at that date by Knight Frank LLP, independent valuers not connected to the Group. The portfolio has been valued on a fair value basis as defined by the Royal Institution of Chartered Surveyors Appraisal and Valuation Standards ("RICS").
The approved RICS definition of fair value is "the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date."
During the year, the Group disposed of several of its investment properties. In France, the Group sold Evreux for £3.1 million (€4.2 million), Roissy for £3.3 million (€4.5 million), Goussainville for £5.2 million (€7.1 million), Fresnes for £2.9 million (€3.9 million) and Mulhouse for £3.8 million (€5.1 million). In Spain, the Group sold its Burger King unit at Ecija for £0.1 million (€0.2 million). Further disposals are described in note 12.
The Evreux, Roissy and Goussainville disposals were structured as share deals whilst the other investment properties disposals were asset deals.
As at 31 December 2015, all the Group's remaining investment properties are classified as held for sale.
12. Investment properties held for sale
|
|
2015 £'000 |
2014 £'000 |
|
Investment properties held for sale at 1 January |
122,637 |
11,194 |
|
Subsequent capital expenditure after acquisition |
10 |
- |
|
Disposals |
(109,476) |
(4,269) |
|
Movement in rent incentives/initial costs |
(4,425) |
(29) |
|
Fair value adjustment in the year |
72 |
(645) |
|
Effect of foreign exchange |
(8,818) |
(555) |
|
Transfer from investment properties |
39,283 |
116,941 |
|
Investment properties held for sale at 31 December |
39,283 |
122,637 |
Investment properties held for sale represent the fair value of properties that have been actively marketed for disposal at the balance sheet date.
Investment properties held for sale, which, at the time of signing these financial statements, have been disposed of (Aubervilliers, Aubergenville and Athis Mons in France) have been valued by the Directors at their selling price, this being the best approximation to their fair value at year end (note 22).
During the year, the Group disposed of all three investment properties classified as held for sale in the prior year: in France, Nozay was sold for £90.4 million (€122.7 million) and Nimes for £3.2 million (€4.3 million) and, in Spain, Cordoba for £11.3 million (€15.3 million).
The Nozay and Nimes disposals were structured as share deals whilst the Cordoba sale was an asset deal.
At 31 December 2015, the Group has pledged investment properties held for sale valued at £39.3 million (€53.3 million) (2014: £122.6 million (€156.7 million)) to secure borrowings (note 16).
13. Trade and other receivables
|
|
Group 2015 £'000 |
Company 2015 £'000 |
Group 2014 £'000 |
Company 2014 £'000 |
|
Trade receivables |
197 |
- |
3,911 |
- |
|
Amounts receivable from Property Managing Agents |
674 |
- |
1,359 |
- |
|
Prepayments |
110 |
12 |
377 |
5 |
|
Other receivables |
5,959 |
- |
453 |
- |
|
Total |
6,940 |
12 |
6,100 |
5 |
Other receivables include £5.7 million (€7.7 million) of deferred sale proceeds receivable as part of the transaction completion process for the investment properties disposals described below.
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value. Note 21 provides an ageing of trade receivables along with details of the provision against loans during the year.
14. Cash and cash equivalents
Cash and cash equivalents included in the cash flow statement comprise the following balance sheet amounts:
|
|
2015 |
2014 |
|
Cash at bank in the balance sheet |
11,363 |
12,425 |
|
Cash balance held on the cash pooling account |
(10,054) |
(7,766) |
|
Cash and cash equivalents |
1,309 |
4,659 |
The cash balance held on the cash pooling account is subject to certain restrictions; accordingly this balance has not been classified as cash and cash equivalents for the purposes of the cash flow statement.
In November 2013, the Group entered into a cash pooling arrangement with Barclays Bank PLC over the Group's cash-flows from the whole property portfolio in order to provide further security to Barclays Bank PLC but which provides the Group and the Company with working capital for its operations. The resulting cash pooling account is controlled by Barclays Bank PLC and a cash release mechanism is in place whereby cash is released by Barclays Bank PLC following review of the Group's working capital budget, which is updated quarterly.
15. Trade and other payables
|
|
Group 2015 £'000 |
Company 2015 £'000 |
Group 2014 £'000 |
Company 2014 £'000 |
|
Trade payables |
380 |
62 |
351 |
150 |
|
Deferred income |
339 |
- |
3,704 |
- |
|
Investment Manager's fee payable |
640 |
572 |
585 |
216 |
|
VAT payable |
32 |
- |
698 |
- |
|
Accruals |
564 |
49 |
694 |
15 |
|
Total |
1,955 |
683 |
6,032 |
381 |
Trade payables and accruals primarily comprise amounts outstanding for trade purchases and ongoing costs. The Group has financial risk management policies in place to ensure that all payables are paid within the credit time frame.
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
16. Bank borrowings
|
|
Group 2015 £'000 |
Company 2015 £'000 |
Group 2014 £'000 |
Company 2014 £'000 |
|
Current liabilities: interest payable and bank borrowing |
91,311 |
|
212,858 |
- |
|
Non-current liabilities: bank borrowing |
- |
|
- |
- |
|
Total liabilities |
91,311 |
|
212,858 |
- |
|
|
|
|
|
|
|
The borrowings are repayable as follows: |
|
|
|
|
|
Interest payable |
1,016 |
|
1,723 |
- |
|
On demand or within one year |
90,295 |
|
211,135 |
- |
|
In the second to fifth years inclusive |
- |
|
- |
- |
|
After five years |
- |
|
- |
- |
|
|
91,311 |
|
212,858 |
- |
During the year, the Group sold eight investment properties and part of a property at prices totalling £123.3 million (€167.3 million) with the net proceeds from these sales enabling the repayment of bank borrowings totalling £109.0 million (€150.1 million).
At 31 December 2015, £90.4 million (€122.7 million) (2014: £211.3 million (€270.0 million)) was outstanding on all borrowings. Borrowings are secured over the shares in the Company's operating subsidiaries and mortgages over properties with a total value of £39.3 million (€53.3 million) (2014: £212.2 million (€271.2 million).
The weighted average rate of interest at 31 December 2015 on all fixed rate loans is 5.32% (2014: 5.26%) and 9.85% (2014: 9.73%) on floating rate loans.
The repayment date of all borrowings, originally due on 10 February 2015, was extended twice during 2015 (to 11 May 2015 and to 15 October 2015) and then reset to 15 April 2016, following agreement with Barclays Bank PLC.
The current interest rates will continue to apply to the facilities during the extension period.
Arrangement fees of 2% (per annum pro-rated) are charged on all borrowings from 10 February 2015: these are deferred to the new maturity date and will be payable to the extent that the Group has sufficient cash funds at that time. As at 31 December 2015, the Board consider it probable, based on cash flow forecasts, that there will be insufficient cash funds to settle this amount and hence this represents a contingent liability of €6.3 million (£4.6 million), which has not been recognised in these financial statements.
17. Share capital
Authorised share capital
The Company's authorised share capital is unlimited.
Issued and fully paid
|
|
Number of shares |
|
At 1 January 2014 |
117,627,056 |
|
Shares cancelled/issued during the year |
- |
|
At 31 December 2014 |
117,627,056 |
|
Shares cancelled/issued during the year |
- |
|
At 31 December 2015 |
117,627,056 |
The Company has one class of shares which carry no right to fixed income. All ordinary shares have nil par value.
18. Reserves
The movements in the reserves for the Group and the Company are shown above.
Special reserve
On 9 December 2005, the Royal Court of Guernsey confirmed the reduction of the Company's capital by way of cancellation of the amount standing to the credit of its share premium account on that date. The amount was transferred to the special reserve. The special reserve is a distributable reserve to be used for all purposes permitted under Guernsey company law, including the buyback of shares and payment of dividends.
Translation reserve
The translation reserve contains exchange differences arising on consolidation of the Group's overseas operations. These amounts may subsequently be reclassified to profit or loss.
Capital reserve
The capital reserve contains gains and losses on the disposal of investment properties, and increases and decreases in the fair value of the Group's investment properties and currency swap derivative financial instruments, together with expenses allocated to capital.
Revenue reserve
Any surplus arising from net profit after tax is taken to this reserve, which may be utilised for the buyback of shares and payment of dividends.
19. Events after the balance sheet date
On 3 February 2016, the Group sold three properties in France: Aubervilliers for £11.2 million (€14.8 million), Aubergenville for £3.7 million (€4.9 million) and Athis Mons for £3.5 million (€4.6 million).
20. Related party transactions
Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions. Alpha Real Capital LLP is the Investment Manager to the Company under the terms of the Investment Manager Agreement and is thus considered a related party of the Company.
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.
The Investment Manager is entitled to receive a fee from the Group at an annual rate of 1% of the gross assets of the Group, payable quarterly in arrears; from 1 July 2015, 0.3% is accrued and payable upon assets' realisation. The Investment Manager is also entitled to receive an annual performance fee calculated with reference to total shareholder return ("TSR"), whereby the fee is 20% of any excess over an annualised TSR of 12% and then a further 15% of any excess over 20%; the performance fee is subject to a three year high watermark with a minimum threshold of 100 pence. Details of the investment management fees for the current accounting period are shown on the face of the statement of comprehensive income and any balances outstanding are disclosed separately in note 15.
The Directors of the Company received fees for their services as detailed below.
|
Directors fees |
2015 £'000 |
2014 £'000 |
|
Dick Kingston (Chairman) |
30 |
30 |
|
David Jeffreys |
23 |
23 |
|
Phillip Rose |
20 |
20 |
|
David Rowlinson* |
20 |
20 |
|
Serena Tremlett |
20 |
20 |
|
Total |
113 |
113 |
*David Rowlinson is a director of Antler Investment Holdings Limited ("Antler") and the managing director of Liberation Management Limited, which is a trustee of the Rockmount Purpose Trust that indirectly is a partner of Alpha Real Capital LLP. As such he is considered to be in a position in which he is able to exercise significant influence over the Investment Manager.
Serena Tremlett is also the Managing Director and a major shareholder of Morgan Sharpe Administration Limited, the Company's administrator and secretary. During the year the Company paid Morgan Sharpe Administration Limited fees of £81,000 (2014: £81,000).
Directors' shareholdings in the Company are detailed in the Directors' and corporate governance report.
The following, being partners of the Investment Manager, hold or have an interest in the following shares in the Company at 31 December 2015:
|
|
2015 Number of shares held |
2014 Number of shares held |
|
Rockmount Ventures Limited and ARRCO Limited** |
21,437,393 |
21,437,393 |
|
P. Rose*** |
1,290,079 |
1,290,079 |
|
B. Bauman |
544,809 |
544,809 |
|
B. Frith |
229,078 |
229,078 |
|
K. Devon-Lowe |
108,650 |
24,650 |
**Rockmount Ventures Limited is the parent company of ARRCO Limited. The interest attributed to the two corporate partners represents 21,437,393 shares held by a related party, Antler. As such these companies are considered to be in a position in which they are able to exercise significant influence over the Investment Manager.
***Phillip Rose is the CEO and a partner of the Investment Manager.
At 31 December 2015, Alpha Real Capital LLP, the Investment Manager of the Company, held 9,390,800 shares in the Company (2014: 9,390,800).
Paul Cable, being the Investment Manager's Fund Manager responsible for the Company's investments, holds 84,918 (2014: 84,918) shares in the Company.
21. Financial instruments risk exposure and management
In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note describes the Group's objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements.
There have been no substantive changes in the Group's exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note.
Principal financial instruments
The principal financial instruments used by the Group and Company, from which financial instrument risk arises, are as follows:
|
|
Financial assets and liabilities carrying value |
|||
|
|
Group 2015 £'000 |
Company 2015 £'000 |
Group 2014 £'000 |
Company 2014 £'000 |
|
Current financial assets |
|
|
|
|
|
Trade and other receivables (excluding prepayments) |
6,830 |
- |
5,723 |
- |
|
Cash and cash equivalents |
11,363 |
36 |
12,425 |
1,801 |
|
Amounts receivable from subsidiary undertakings |
- |
- |
- |
1,364 |
|
Total current financial assets |
18,193 |
36 |
18,148 |
3,165 |
|
|
|
|
|
|
|
Non-current financial assets |
|
|
|
|
|
Amounts receivable from subsidiary undertakings |
- |
- |
- |
15 |
|
Total non-current financial assets |
- |
- |
- |
15 |
|
Total financial assets |
18,193 |
36 |
18,148 |
3,180 |
|
|
|
|
|
|
|
Current financial liabilities |
|
|
|
|
|
Trade and other payables (excluding deferred income) |
1,616 |
683 |
2,328 |
381 |
|
Interest rate swap |
- |
- |
948 |
- |
|
Bank borrowings |
91,311 |
- |
212,858 |
- |
|
Rent deposits |
263 |
- |
730 |
- |
|
Total current financial liabilities |
93,190 |
683 |
216,864 |
381 |
|
|
|
|
|
|
|
Non-current financial liabilities |
|
|
|
|
|
Rent deposits |
431 |
- |
952 |
- |
|
Total non-current financial liabilities |
431 |
- |
952 |
- |
|
Total financial liabilities |
93,621 |
683 |
217,816 |
381 |
Net changes in realised and unrealised gains or losses on financial instruments can be summarised as follows:
|
|
Group 2015 £'000 |
Company 2015 £'000 |
Group 2014 £'000 |
Company 2014 £'000 |
|
Net change in realised gains or losses on loans and receivables |
|
|
|
|
|
Interest from subsidiary companies (note 3) |
- |
- |
- |
7,466 |
|
Bank interest income |
1 |
- |
4 |
3 |
|
Impairment of trade and other receivables |
(283) |
- |
(278) |
- |
|
Movement in impairment of amounts receivable from and investments in subsidiary undertakings |
- |
(2,209) |
- |
(17,198) |
|
Total |
(282) |
(2,209) |
(274) |
(9,729) |
|
|
|
|
|
|
|
Net change in unrealised gains and losses on financial assets and liabilities held at fair value though profit or loss |
|
|
|
|
|
Interest rate swaps |
880 |
- |
7,550 |
- |
|
Net gain on financial assets and liabilities held at fair value through profit or loss |
880 |
- |
7,550 |
- |
|
|
|
|
|
|
|
Disclosed as: |
|
|
|
|
|
Finance income (note 4) |
880 |
- |
7,550 |
- |
|
Net gain on financial assets and liabilities held at fair value through profit or loss |
880 |
- |
7,550 |
- |
|
|
Group 2015 £'000 |
Company 2015 £'000 |
Group 2014 £'000 |
Company 2014 £'000 |
|
Interest from subsidiary companies |
- |
- |
- |
7,466 |
|
Bank interest income |
1 |
- |
4 |
3 |
|
Interest on bank borrowings |
(10,896) |
- |
(12,592) |
- |
|
Loan fee amortisation |
(900) |
- |
(1,426) |
- |
|
Total interest (expense)/income |
(11,795) |
- |
(14,014) |
7,469 |
General objectives, policies and processes
The Board has overall responsibility for the determination of the Group's risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group's finance function.
The overall objective of the Board is to set polices that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility. The above financial risk management policies apply equally to the Group and the Company. Further details regarding these policies are set out below.
Credit risk
Credit risk arises when a failure by counterparties to discharge their obligations could reduce the amount of future cash inflows from financial assets on hand at the balance sheet date.
a) Group
The Group's credit risk principally arises from cash and cash equivalents as well as credit exposures with respect to tenants including other receivables. In the event of a default by an occupational tenant, the Group will suffer a rental shortfall and incur additional costs in maintaining, insuring and re-letting the property until it is re-let. General economic conditions may affect the financial stability of tenants and prospective tenants and/or demand for and value of real estate assets. A property advisor monitors the tenants in order to anticipate and minimise the impact of default by occupational tenants. Where possible, tenants' risk is mitigated through rental guarantees.
KDI is the largest tenant within the portfolio representing 39.5% (2014: Alcatel-Lucent for 59.4%) of the annual contracted rent as at 31 December 2015. The property was sold on 3 February 2016 (note 20). Subsequently two tenants account for 52% of the annual contractual rent. The Group meets with the tenants frequently and monitors their financial performance closely.
At 31 December 2015, trade and other receivables past due but not impaired amounted to £0.1 million (2014: £0.1 million).
The carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents the Group's maximum exposure to credit risk without taking into account the value of rent deposits obtained. Details of the Group's receivables are summarised in note 13 of the financial statements.
The Group policy is to maintain its cash and cash equivalent balances with a reasonable diversity of banks. The Board monitors the placement of cash balances on an ongoing basis and has policies to limit the amount of credit exposure to any financial institution. As at 31 December 2015, the Group had spread its cash across six financial institutions and had placed circa 89% in one bank, this mainly representing cash held on the cash pooling account (note 14).
b) Company
The Company's credit risk principally arises from cash and cash equivalents and amounts receivable from subsidiaries. The Company follows the same Group policy with regards to diversification of banking arrangements. Amounts receivable from subsidiaries are of mainly a long term nature and the loans are monitored on a regular basis.
An impairment of £146.9 million (2014: £153.4 million) has been made against amounts receivable from subsidiary undertakings to reflect the current mark to market impact of the investment properties valuations and loss realised on investment properties disposals, which have arisen within the Group's subsidiaries (note 10).
The carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents the Company's maximum exposure to credit risk. Details of the Company's loans and receivables are summarised in notes 10 and 13 of the financial statements.
Liquidity risk
Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatched position potentially enhances profitability, but can also increase the risk of losses. The Group and Company have developed procedures with the object of minimising such losses such as maintaining sufficient cash and other highly liquid current assets and by having in place an adequate amount of committed credit facilities. Cash and cash equivalents are placed with financial institutions on a short term basis reflecting the Group's and Company's desire to maintain a level of liquidity in order to enable timely payments to creditors.
The cash balance held on the cash pooling account is subject to certain restrictions; accordingly this balance has not been classified as cash and cash equivalents for the purposes of the cash flow statement (note 14).
The cash pooling account is controlled by Barclays Bank PLC and a cash release mechanism is in place whereby cash is released by Barclays Bank PLC following review of the Group's working capital budget, which is updated quarterly. This allows the Group to settle its liabilities for working capital requirements in a timely manner.
a) Group
The following table illustrates the contractual maturity analysis of the Group's financial liabilities based, where relevant, on interest rates and exchange rates prevailing at the balance sheet date.
|
2015 |
Within 1 year £'000 |
1-2 years £'000 |
2-5 years £'000 |
Over 5 years £'000 |
Total |
Total carrying amount |
|
Trade and other payables (excluding deferred income) |
1,616 |
- |
- |
- |
1,616 |
1,616 |
|
Rent deposits |
263 |
113 |
114 |
204 |
694 |
694 |
|
Bank borrowings |
91,311 |
- |
- |
- |
91,311 |
91,311 |
|
|
93,190 |
113 |
114 |
204 |
93,621 |
93,621 |
|
2014 |
Within 1 year £'000 |
1-2 years £'000 |
2-5 years £'000 |
Over 5 years £'000 |
Total |
Total carrying amount |
|
Trade and other payables (excluding deferred income) |
2,328 |
- |
- |
- |
2,328 |
2,328 |
|
Rent deposits |
730 |
36 |
489 |
427 |
1,682 |
1,682 |
|
Bank borrowings |
212,858 |
- |
- |
- |
212,858 |
212,858 |
|
|
215,916 |
36 |
489 |
427 |
216,868 |
216,868 |
Given the current economic environment and the maturity of the Group's bank borrowings on 15 April 2016 the Board will continue to seek the support of its lender in an orderly realisation of its remaining six investment properties with a view to winding up the Group in due course. The financial statements are therefore not prepared on a going concern basis.
b) Company
The Company only has trade payables and other payables which are payable within one year.
Market risk
a) Foreign exchange risk
The Group operates in Europe and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to Euros. Foreign exchange risk arises from future commercial transactions, recognised monetary assets and liabilities and net investments in foreign operations.
The Group's policy is, where possible, to allow Group entities to settle liabilities denominated in their functional currency (primarily Euros or Sterling) with the cash generated from their own operations in that currency.
As the property portfolio is acquired and mortgaged in Euros the Board considers it appropriate from a risk perspective to review currency exposure on a net assets basis. For illustrative purposes, therefore, the effect of a strengthening of the Euro by 5 cents would increase Group net assets by £1.3 million (2014: increase by £0.1 million). A weakening of the Euro by 5 cents would decrease net assets by £1.3 million (2014: decrease by £0.1 million).
As the Company impairs its large intercompany loan book to reflect the underlying net asset value of its Group companies, the overall net asset sensitivity of the Company to foreign currency movements is the same as the Group's above.
b) Cash flow and fair value interest rate risk
The Group's principal interest rate risk arises from borrowings.
The Group's cash flow is regularly monitored by the Group's management.
For the Group, an increase of 100 basis points in interest rates would result in an increased post-tax loss of £0.3 million (2014: £0.3 million). A decrease in 100 basis points in interest rates would result in a reduced post-tax loss for the period of £0.3 million (2014: £0.3 million).
For the Company, an increase of 100 basis points in interest rates would not result in a significant change of post-tax loss (2014: £0.1 million decrease). A decrease in 100 basis points in interest rates would not result in a significant change of post-tax loss (2014: £0.1 million increase).
The sensitivity analyses above are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated - for example, change in interest rate and change in market values.
c) Capital risk management
The Group's objectives when managing capital had been to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
As stated in note 2, the Group is not a going concern and the Board will continue to seek the support of its lender in an orderly realisation of its remaining six investment properties in order to repay borrowings and with a view to winding up the Group in due course.
Consistent with others in the industry, the Board monitors capital on the basis of the gearing ratio in the currency in which properties and associated borrowings are held and takes action where appropriate. The key focus is the net leverage ratio which is shown below.
The net leverage ratios at 31 December 2015 and at 31 December 2014 were as follows:
|
|
Group 2015 €'000 |
Group 2014 €'000 |
|
Total borrowings |
122,670 |
270,038 |
|
Less: cash and cash equivalents |
(15,420) |
(15,879) |
|
Net debt |
107,250 |
254,159 |
|
|
|
|
|
Property valuation |
53,307 |
271,166 |
|
|
|
|
|
Net leverage ratio |
201.2% |
93.7% |
The sharp increase in net leverage ratio is mainly due to the investment properties disposals completed during the year 2015.
The Company has no borrowings; all borrowings are by subsidiaries within the Group.
e) Fair values
The following methods and assumptions are used to estimate fair values:
· Cash and short-term deposits, trade receivables, trade payables and other current liabilities approximate their carrying amounts due to the short-term maturities of these instruments.
· The fair value of floating rate borrowings is estimated by discounting future cash flows using rates currently available for debt of similar terms and remaining maturities. The carrying value does not approximate fair value. The fair value of the loans approximates the residual net asset value of the Group of £54.9 million.
· The fair value of fixed rate borrowings is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. The fair value approximates their carrying values gross of unamortised transaction costs.
Note 22 contain details regarding the fair value measurement of the interest rate swaps.
22. Fair value measurement
IFRS 13 requires disclosure of the fair value measurement of the Group's assets and liabilities, the related valuation techniques, the valuations' recurrence and the inputs used to assess and develop those measurements.
The Group discloses fair value measurements by level of the following fair value measurement hierarchy:
· Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
· Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).
· Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).
The level in the fair value hierarchy within which the asset or liability is categorised is determined on the basis of the lowest input that is significant to the fair value measurement. Assets and liabilities are classified in their entirety into one of the three levels.
Investment properties held for sale are valued on a recurring basis: half yearly.
Interest rate swaps, which terminated on 10 February 2015, were valued on a recurring basis: quarterly.
The fair value of the derivative interest rate swap contracts was determined by reference to the mid-point of the yield curves prevailing on the reporting date and represented the net present value of the differences between the contracted rate and the valuation rate when applied to the projected balances to the period from the reporting date to the contracted expiry date.
The Group's valuers derive the fair value by applying the methodology and valuation guidelines as set out by the Royal Institution of Chartered Surveyors in the United Kingdom in accordance with IAS 40. This approach is based on discounting the future net income receivable from properties to arrive at the net present value of that future income stream. Future net income comprises the rent secured under existing leases, less any known or expected non-recoverable costs and the current market rent attributable to vacant units. The consideration basis for this calculation excludes the effects of any taxes on the net income. The discount factors used to calculate fair value are consistent with those used to value similar properties with comparable leases in each of the respective markets. A decrease in the net rental income or an increase in the discount rate will decrease the fair value of the investment property.
Investment properties held for sale, which, at the time of signing these financial statements, have been disposed of (Aubervilliers, Aubergenville and Athis Mons in France) have been valued by the Directors at their selling price, this being the best approximation to their fair value at year end (note 19).
The following table shows an analysis of the fair values of assets and liabilities recognised in the balance sheet by level of the fair value hierarchy described above:
|
31 December 2015 |
Assets and liabilities measured at fair value |
|||
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Assets measured at fair value |
|
|
|
|
|
Investment properties |
- |
- |
39,283 |
39,283 |
|
|
|
|
|
|
|
Liabilities for which fair values are disclosed |
|
|
|
|
|
Current |
|
|
|
|
|
Bank borrowings (note 21 e)) |
- |
- |
(54,937) |
(54,937) |
|
|
|
|
|
|
|
Total |
- |
- |
(15,654) |
(15,654) |
|
31 December 2014 |
Assets and liabilities measured at fair value |
|||
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Assets measured at fair value |
|
|
|
|
|
Investment properties |
- |
- |
212,180 |
212,180 |
|
|
|
|
|
|
|
Liabilities measured at fair value |
|
|
|
|
|
Interest rate swap |
- |
(948) |
- |
(948) |
|
|
|
|
|
|
|
Liabilities for which fair values are disclosed |
|
|
|
|
|
Current |
|
|
|
|
|
Bank borrowings |
- |
(212,858) |
- |
(212,858) |
|
|
|
|
|
|
|
Total |
- |
(213,806) |
212,180 |
(1,626) |
The Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
There were no transfers between level 1 and level 2 fair value measurements.
Movements in level 3 of the fair value measurements, during the year ended 31 December 2015 can be summarised as follows:
|
|
2015 |
2014 |
|
£'000 |
£'000 |
|
|
At 1 January |
212,180 |
248,114 |
|
Acquisitions during the year at cost |
- |
0 |
|
Subsequent capital expenditure after acquisition |
227 |
244 |
|
Disposals |
(134,136) |
(11,353) |
|
Loss recognised in profit or loss |
(6,128) |
(1,400) |
|
Rent incentives movement |
(4,717) |
3,898 |
|
Fair value adjustment |
(13,459) |
(12,416) |
|
Effect of foreign exchange |
(14,684) |
(14,907) |
|
At 31 December |
39,283 |
212,180 |
The fair value of investment properties is based on unobservable inputs and it is therefore disclosed as level 3. The following methods, assumptions and inputs were used to estimate fair values of investment properties:
|
31 December 2015 |
||||||
|
Class of investment properties |
Carrying amount / fair value '000 |
Area (square meters) |
Valuation technique |
Significant unobservable inputs |
Range
|
Weighted average |
|
Europe |
£21,363 |
33,930 |
Income capitalisation |
Gross ERV per sqm p.a. |
€21 / €150 |
€96.2 |
|
|
(€28,990) |
|
|
Net initial yield |
(4.6)% / 0.2% |
(2.5)% |
|
|
|
|
|
Reversionary yield |
9.9% / 12.8% |
10.6% |
|
|
|
|
|
Gross equivalent yield |
9.0% / 11.5% |
9.4% |
|
|
|
|
|
|
|
|
|
Europe |
£17,920 |
59,730 |
Selling price |
- |
- |
- |
|
|
(€24,317) |
|
|
|
|
|
|
31 December 2014 |
||||||
|
Class of investment properties |
Carrying amount / fair value '000 |
Area (square meters) |
Valuation technique |
Significant unobservable inputs |
Range
|
Weighted average |
|
Europe |
£212,180 |
250,180 |
Income capitalisation |
Gross ERV per sqm p.a. |
€24 / €180 |
€91.1 |
|
|
(€271,166) |
|
|
Net initial yield |
(2.1)% / 9.4% |
6.4% |
|
|
|
|
|
Reversionary yield |
5.6% / 12.4% |
7.6% |
|
|
|
|
|
Gross equivalent yield |
7.0% / 10.8% |
8.3% |
The Directors assessed at the balance sheet date whether the Group's investment properties are being exploited according to their highest and best use and they are satisfied that this is the case.
Property risk
The majority of properties have been valued by an independent third party (see note 11) and the fair value has been arrived at on the basis of a sale between a willing buyer and willing seller. Should the Group be required to dispose of its investment properties not as a willing seller the sale proceeds could vary.
Three investment properties are valued based upon the agreed selling price. Their sale completed on 3 February 2016 (note 19).
Liabilities for which fair value is disclosed
The fair value of the Group's borrowings has been determined by reference to what will be realised in an orderly wind up of the Group and hence the amount that will be repaid.
Company
The Company did not have any financial assets or financial liabilities at fair value through profit or loss.
Directors and Trust information
Directors
Dick Kingston (Chairman)
David Jeffreys
Phillip Rose David Rowlinson
Serena Tremlett
Registered office
Old Bank Chambers
La Grande Rue
St Martin's
Guernsey GY4 6RT
Investment Manager
Alpha Real Capital LLP
Level 6, 338 Euston Road
London NW1 3BG
Administrator and secretary
Morgan Sharpe
Administration Limited
Old Bank Chambers
La Grande Rue
St Martin's
Guernsey GY4 6RT
Independent valuers
Knight Frank LLP
55 Baker Street
London W1U 8AN
Independent auditor
BDO Limited
Place du Pré, Rue du Pré
St Peter Port
Guernsey GY1 3LL
Tax advisors
BDO LLP
55 Baker Street
London W1U 7EU
Deloitte LLP
Hill House
1 Little New Street
London EC4A 3TR
Legal advisors in Guernsey
Carey Olsen
PO Box 98
Carey House
Les Banques
St Peter Port
Guernsey GY1 4BZ
Legal advisors in the UK
Norton Rose
3 More London Riverside
London SE1 2AQ
Registrar
Computershare Investor Services (Jersey) Limited
Queensway House
Hilgrove Street
St Helier
Jersey JE1 1ES
Shareholder information
Dividends
Ordinary dividends, if declared, are paid quarterly. Shareholders who wish to have dividends paid directly into a bank account rather than by cheque to their registered address can complete a mandate form for this purpose. Mandates may be obtained from the Group's Registrar. Where dividends are paid directly to shareholders' bank accounts, dividend vouchers are sent directly to shareholders' registered addresses.
Share price
The Company's Ordinary Shares are listed on the London Stock Exchange.
Change of address
Communications with shareholders are mailed to the addresses held on the share register. In the event of a change of address or other amendment, please notify the Company's Registrar under the signature of the registered holder.
Investment Manager
The Company is advised by Alpha Real Capital LLP which is authorised and regulated by the Financial Conduct Authority in the United Kingdom.
Financial Calendar
|
Financial reporting |
Reporting/Meeting dates |
|
Annual results announcement |
11 March 2016 |
|
Annual report published |
1 April 2016 |
|
Annual General Meeting |
29 April 2016 |
|
First trading update statement (Qtr 1) |
3 June 2016 |
|
Half year report |
19 August 2016 |
|
Second trading update statement (Qtr 3) |
11 November 2016 |
This information is provided by RNS
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