Preliminary Results for the y

RNS Number : 5630X

London & Stamford Property Ltd

26 June 2008

 



 

26 June 2008 

LONDON & STAMFORD PROPERTY LIMITED

PRELIMINARY RESULTS FOR THE YEAR TO 31ST MARCH 2008

London & Stamford Property Limited ('London & Stamford Property' or 'the Company'), a newly formed closed-ended investment company based in Guernsey, today announce preliminary results for the year to 31st March 2008.

Financial Highlights 

5 months to 31 March 2008
Net rental income	£1.25m
Profit for the period	£0.4m
Investment properties	£49.4m
Cash deposits	£243.6m
Debt drawn	£22.8m
Net assets	£277.9m
Net assets per share	97.5p
Earnings per share	0.14p
Adjusted earnings per share*	0.89p
Proposed dividend per share (payable 19 September 2008)	1.6p
* Excludes revaluation of properties and deferred tax

• Commenced trading November 2007

• Raised £248m on listing

• Initial £150m debt facility of which £22.8m drawn

• JV with Cavendish for further £200m signed (April 2008)

• Well positioned with equity and existing credit line

• Sold Belgium portfolio for £21.8m

• No new equity yet invested in the market

• Treasury management programme in place 

• Enlarged management team now in place

Raymond Mould, the Non-executive Chairman of London & Stamford Property, said: 

'Since the commencement of trading, we have not yet made any new acquisitions, because we believe that market conditions have yet to reach a level where new investment makes good sense for shareholders. 

We remain convinced that opportunities for investment in the UK will present themselves and to this end, we have sought to increase our firepower with a joint venture agreement with Cavendish Limited, a wholly owned subsidiary of a major Gulf institution. We believe that this additional resource, together with the Company's existing capital and available debt facilities, gives London & Stamford Property Limited far greater investment reach in the future. Large transactions are weakened by the difficulties in the credit market and being able to stretch for them is an opportunity for us.

I believe we remain extremely well placed to take advantage of opportunities in this market. I am certain they will arise in the near future and look forward to that with some confidence.'

For further information contact:
London & Stamford Property Limited	Tel: [phone]
Mandy Trotter, Company Secretary
KBC Peel Hunt	Tel: [phone]
Capel Irwin / Deon Veldtman
Gavin Anderson & Company	Tel: [phone]
Richard Constant / James Benjamin / Anthony Hughes

Notes to Editors

London & Stamford Property is advised by LSI Management LLP ('LSIM') which has a highly experienced management team. The principal partners of LSIM include Raymond Mould, Patrick Vaughan and Humphrey Price who are also non-executive directors of London & Stamford Property. 

London & Stamford Property has acquired London & Stamford Investments Ltd, which was founded in 2005 by Raymond Mould, Patrick Vaughan and Humphrey Price together with the General Electric Pension Trust ('GEPT'). The Company is the exclusive commercial property holding vehicle of the three founders. All three founders have been involved in the property sector for over 30 years and have a strong track record of anticipating and exploiting opportunities that arise from cycles in the property market. The three founders have been involved in two listed and one unlisted property companies and in a number of funds during this period, including the development and flotation of their former, highly successful businesses, Arlington Securities PLC and Pillar Property PLC.

The Board believes that the rising cost of capital and low property yields will bring about a

marked correction in values to return to a more normal yield/capital cost relationship. All

sectors of the UK and overseas commercial property markets will be considered.

London & Stamford Property is listed on AIM (LSP.L). Further information on London & Stamford Property is available from the Company's website www.londonandstamford.com.

Chairman's statement

This is my first statement since the commencement of trading of London & Stamford Property Limited last November. We have not yet made any new acquisitions, because we believe that market conditions have yet to reach a level where new investment makes good sense for shareholders. We believe that moment is approaching, however, and remain vigilant.

Raymond Mould 

Chairman

Results

Profit for the five months was £405,000, after charging £3.6 million deficit on revaluation of investment properties and after crediting £1.4 million of deferred tax. Earnings adjusted for these items would be £2.6 million. 

Net assets at 31 March 2008 were £277.9 million, equivalent to 97.5p per share, which is virtually unchanged from that applicable at Listing.

The Board recommends a dividend of 1.6p per share. Under IFRS dividends are accounted for in the period in which they are declared and therefore this payment will be included in next year's accounts. 

Review of the market

In the Placing Document last year, we expressed the view that the UK property market had reached unsustainable levels and that we expected a major correction in yields. We did not fully anticipate the severity of that correction, but, as is now apparent, the market has shown significant falls in values over the last eight months and at the date of this statement values are still declining. What was not foreseen at the time of the Company's Listing, was the extent of the problems in the financial markets, and the considerable adverse impact this has had on property markets. 

We believe that the ongoing difficulties surrounding the availability of finance at affordable rates and in sufficient size is and will continue to harm values in the property market. A further important factor which is now also taking place is a weakening in the economy and, consequently, a weakening in the occupational market and slow down of tenant demand. Rental growth is acknowledged to have disappeared for the time being. These factors lead us to believe that there will continue to be downward pressure on property values, leading us to remain extremely cautious in considering investment in new property transactions. We think that in general and in the short term the market is still too expensive, since yields for anything but secondary property remain below the cost of capital.

The scenario of falling values, tightening credit lines and weakening tenant demand has provided us with a number of opportunities which we have carefully investigated over the past months. To date, our advisor, LSI Management LLP, has not found any opportunities, corporate or direct, which they believe they can fully recommend to us as able to deliver appropriate, positive returns. 

We are conscious of perhaps giving the impression of inaction, but we have no intention of investing shareholders funds in property transactions at the wrong time and at the wrong price. In other words, we will not become forced buyers. In the meantime, we have been very careful in the management of our cash resources to ensure that the risk is minimised and returns are maximised. Our investment strategy remains to invest in appropriate properties as and when we believe adequate returns can be achieved.

Since we started trading in November, we have sold our Belgian retail portfolio, where we believe that there was little potential for growth. There has been some positive progress on developments in our very small core portfolio acquired at inception, although its valuation has not quite been immune from the general fall in the market. During the initial IPO marketing process last autumn, we referred to opportunities we were invited to review in China and Turkey. After considerable research and investigation, at no cost to the Company, we concluded that we should not proceed further with an investment in China. We remain interested in the Turkish retail market, but only if we can find a suitable local partner and operate on very favourable financial conditions, which so far have not been apparent.

We remain convinced that opportunities for investment in the UK will present themselves and to this end, we have sought to increase our firepower. Since the year end, we have entered into a joint venture agreement with Cavendish Limited, a wholly owned subsidiary of a major Gulf institution. Under this agreement, Cavendish will provide co-investment funds up to £200 million of equity. We believe that this additional resource, together with the Company's existing capital and available debt facilities, gives London & Stamford Property Limited far greater investment reach in the future, and we believe that investment reach is crucial in being able to seek and to secure the best transactions. Large transactions are weakened by the difficulties in the credit market and being able to stretch for them is an opportunity for us.

Our property adviser, LSI Management LLP, has increased its management team over the past eight months, to give us more resources to apply in the search for suitable investments and to strengthen their ability to undertake the relevant due diligence. I believe we remain extremely well placed to take advantage of opportunities in this market. I am certain they will arise in the near future and look forward to that with some confidence.

H R Mould

Chairman

26 June 2008

Group and Company 
Income Statements

For the 5 months ended 31 March 2008	Note	Group £000	Company £000
Gross rental income		808	-
Property outgoings	11	442	-
Net rental income		1,250	-
Administrative expenses		(3,364)	(1,111)
Loss on revaluation of investment properties		(3,589)	-
Loss on sale of investment properties		(36)	-
Loss on sale of subsidiaries	13	(17)	-
Operating loss	1	(5,756)	(1,111)
Finance income	2	5,772	5,679
Finance costs	2	(874)	(20)
Change in fair value of derivative financial investments	2	(181)	-
(Loss)/profit before tax		(1,039)	4,548
Taxation	3	1,444	-
Profit for the period		405	4,548
Earnings per share
Basic and diluted	5	0.14p

All amounts relate to continuing activities.

Group and Company 
Balance Sheets

At 31 March 2008	Note	Group 2008 £000	Company 2008 £000
Non-current assets
Investment properties	6	49,370	-
Investment in subsidiaries and joint ventures	7	-	34,919
Deferred tax assets	3	1,190	-
		50,560	34,919
Current assets
Trade and other receivables	8	8,036	4,999
Other financial assets		61,500	61,500
Cash and cash equivalents	9	182,112	180,467
		251,648	246,966
Total assets		302,208	281,885
Current liabilities
Trade and other payables	10	1,364	240
		1,364	240
Non-current liabilities
Borrowings		21,825	-
Derivative financial instruments		181	-
Provisions	11	940	-
		22,946	-
Total liabilities		24,310	240
Net assets		277,898	281,645
Equity
Called up share capital	12	28,500	28,500
Special reserve		248,597	248,597
Retained earnings		801	4,548
Total equity		277,898	281,645
Net asset value per share	16	97.5p

The financial statements were approved and authorised for issue by the Board of Directors on 26 June 2008 and were signed on its behalf by

L R H Grant                      H J M Price

Director                              Director

Group and Company 
Statements of Changes in Equity

Group

	Share capital £000	Share premium account £000	Special reserve £000	Retained earnings £000	Total £000
Profit for the period and total recognised income and expense	-	-	-	405	405
Issue of ordinary share capital	28,500	248,597	-	-	277,097
Cancellation of share premium	-	(248,597)	248,597	-	-
Share-based payment	-	-	-	396	396
At 31 March 2008	28,500	-	248,597	801	277,898

Company

	Share capital £000	Share premium account £000	Special reserve £000	Retained earnings £000	Total £000
Profit for the period and total recognised income and expense	-		-	4,548	4,548
Issue of ordinary share capital	28,500	248,597	-	-	277,097
Cancellation of share premium	-	(248,597)	248,597	-	-
Share-based payment	-	-	-	-	-
At 31 March 2008	28,500	-	248,597	4,548	281,645

Group and Company 
Cash Flow Statements

For the period to 31 March 2008	Note	Group 2008 £000	Company 2008 £000
Cash flows from operating activities
(Loss)/profit before tax		(1,039)	4,548
Adjustments for non-cash items:
Loss on revaluation of investment properties		3,589	-
Loss on sale of investment properties		36	-
Loss on sale of subsidiaries		17	-
Share-based payment		396	-
Net finance income		(4,717)	(5,659)
Cash flows from operations before changes in working capital		(1,718)	(1,111)
Change in trade and other receivables		(1,358)	(26)
Change in trade and other payables		(779)	240
Change in provisions		(625)	-
Cash flows from operations		(4,480)	(897)
Interest received		3,544	3,451
Interest paid		(667)	(20)
Financial arrangement fees paid		(145)	-
Cash flows from operating activities		(1,748)	2,534
Investing activities
Purchase of subsidiary undertakings net of cash acquired		1,284	(231)
Capital expenditure on investment properties		(1,469)	-
Sale of subsidiary undertakings net of cash disposed of	13	21,866	-
Sale of investment property		(27)	-
Purchase of short-term financial deposits		(61,500)	(61,500)
Cash flows from investing activities		(39,846)	(61,731)
Financing activities
Proceeds from share issue		239,664	239,664
New borrowings		22,820	-
Repayment of borrowings		(38,778)	-
Cash flows from financing activities		223,706	239,664
Net increase in cash and cash equivalents		182,112	180,467
Cash and cash equivalents at beginning of period		-	-
Cash and cash equivalents at end of period		182,112	180,467

Notes forming part of the Financial Statements 

The following notes are an extract from the Company's Annual Report and Financial Statements for the period to 31 March 2008 which has been prepared in accordance with International Financial Reporting Standards and upon which an unqualified audit report has been given;

1 (Loss)/profit from operations

For the period to 31 March 2008	Group 2008 £000	Company 2008 £000
This has been arrived at after charging:
Property advisor management fees	1,932	580
Directors' fees	83	83
Share-based payment expense	758	-
Auditors' remuneration:
Audit of the Group and Company Financial Statements	83	40
Fees payable to the Company's auditors for other services to the Group:
- Statutory audit of subsidiary accounts	15	-
- IFRS conversion advice	15	15
- Taxation advice	61	-
- Taxation compliance work	22	-
- Fees in connection with the Company's admission to AIM and acquisition of the existing group	140	140

Fees are paid to certain non-executive Directors who are not members of LSI Management LLP, the Property Advisor to the Group. The Company has no employees.

397,000 shares were issued to two members of the Property Advisor for their services as Directors of the former London and Stamford Investments Limited Group (which was acquired by the Company on 30 October 2007 as stated in note 7) in settlement for the acquisition. As the issue was conditional upon the Company's admission to AIM and subsequent placing, and was disproportionate to the value of their existing holding, it has been treated as a post acquisition share-based expense of the Group. The expense is calculated using the market price of the shares at the date of grant which is considered to approximate to their fair value. The corresponding entry has been credited to equity

2 Finance income and costs

For the period to 31 March 2008	Group  2008  £000	Company  2008  £000
Finance income
Interest on short-term deposits	5,772	5,679
	5,772	5,679
Finance costs
Interest on bank loans	757	20
Amortisation of loan issue costs	117	-
Fair value loss on derivative financial instruments	181	-
	1,055	20

3 Taxation 

Group only

For the period to 31 March 2008	Group  2008  £000
The tax expense for the period comprises:
Current tax
UK corporation tax on loss for the period	-
	-
Deferred tax
Change in deferred tax in the period	(1,444)
	(1,444)

The tax assessed for the period varies from the standard rate of corporation tax in the UK. The differences are explained below:

For the period to 31 March 2008	Group  2008  £000
Loss before tax	(1,039)
Loss at the standard rate of corporation tax in the UK of 28%	(290)
Effects of:
Expenses not deductible for tax purposes	119
Tax effect of income not subject to tax	(1,273)
Total tax expense for the period	(1,444)

Deferred tax asset/(liability)

	Revaluation  surplus	Other temporary  and deductible  differences	Losses	Total
Acquired on acquisition of subsidiary	(1,807)	-	1,553	(254)
Credited/(charged) during the period in the income statement	1,226	40	178	1,444
At 31 March 2008	(581)	40	1,731	1,190

Deferred tax on the revaluation surplus is calculated on the basis of the chargeable gains that would crystallise on the sale of the investment property portfolio as at 31 March 2008. The calculation takes account of available indexation on the historic cost of the properties and any available capital losses.

The Group does not have unprovided deferred tax assets.

4 Dividends

	Group  £000	Company  £000
Ordinary dividends
Proposed final dividend of 1.6p per share for 2008	4,560	4,560

The proposed final dividend is subject to approval at the Annual General Meeting on 18 September 2008 and, in accordance with International Financial Reporting Standards has not been included as a liability in these financial statements. The final dividend is payable on 19 September 2008 to ordinary shareholders on the register at the close of business on 4 July 2008 and will be recognised as an appropriation of retained earnings in 2009.

5 Earnings per share

Earnings per share is calculated on a weighted average of 285,000,000 ordinary shares of 10p each in issue throughout the period and is based on profits attributable to ordinary
shareholders of £405,000.

There are no potentially dilutive or anti-dilutive share options in the period.

Adjusting earnings for the effects of revaluing investment properties and deferred taxation, results in attributable profits of £2,550,000 or 0.89p per share.

6 Investment properties

Group only

	Freehold  £000	Long  leasehold  £000	Total  £000
Acquisitions	62,111	12,627	74,738
Other capital expenditure	1,351	118	1,469
Disposals	(19,978)	(3,270)	(23,248)
Revaluation movement	(2,544)	(1,045)	(3,589)
At 31 March 2008 at valuation	40,940	8,430	49,370

At 31 March 2008, the Group's investment properties in the United Kingdom were externally valued by CB Richard Ellis Limited, Chartered Surveyors. The valuations were undertaken in accordance with the Royal Institution of Chartered Surveyors' Appraisal and Valuation Standards on the basis of market value. Market value represents the estimated amount for which a property would be expected to exchange at the date of valuation between a willing buyer and willing seller in an arm's length transaction. A deduction is made to reflect purchasers' acquisition costs.

The historical cost of all of the Group's investment properties at 31 March 2008 was £52,959,000

7 Acquisitions

On 30 October 2007 the Company entered into a Share Exchange Agreement pursuant to which it acquired the entire issued share capital of London & Stamford Investments Limited for £37.5 million settled in full by issuing 37,500,000 shares at £1 per share. Direct costs of acquisition amounted to £231,000 and called up share capital issued but unpaid amounted to £2,812,500 which has been excluded from the cost of acquisition. The net assets acquired were as follows:

	Book value of net assets acquired  £'000	Fair value of net assets acquired  £'000
Non-current assets
Investment property	74,738	74,738
Current assets
Trade and other receivables	1,625	1,625
Deferred tax asset	1,553	1,553
Cash and cash equivalents	1,515	1,515
Current liabilities
Trade and other payables	(2,362)	(2,362)
Non-current liabilities
Borrowings	(38,778)	(38,778)
Provisions	(1,565)	(1,565)
Deferred tax liabilities	(1,807)	(1,807)
Net assets acquired	34,919	34,919
Goodwill on acquisition		-
Cost of acquisition		34,919

8 Trade and other receivables

	Group  £000	Company  £000
Trade receivables	275	-
Amounts receivable on property sales	1,050	-
Called up share capital issued but unpaid on acquisition of subsidiary	2,745	2,745
Interest receivable	2,228	2,228
Prepayments and accrued income	871	26
Other receivables	867	-
At 31 March 2008	8,036	4,999

All amounts under debtors fall due for payment in less than one year.

As part of the issue of the 37.5 million ordinary shares on the acquisition of London & Stamford Investments Limited ('LSI'), 2,812,500 ordinary shares are subject to a claw back based on the valuation of certain investment property owned by the LSI Group at the date of acquisition. In accordance with the acquisition agreement, the affected shareholders have an option to make up the shortfall by making a cash payment to the Company. On 31 March 2008 the Company and these individual shareholders entered into a contractual obligation to contribute the cash in the event of a valuation shortfall. Of the £2,812,500 shortfall,
£2,745,000 remains outstanding at 31 March 2008 and is disclosed as called up share capital unpaid.


At 31 March 2008 there were no amounts which were past due and no amounts which were impaired. There is no provision for impairment of trade receivables as at 31 March 2008 as the risk of impairment of the amounts outstanding is not considered to be significant.

9 Cash and cash equivalents

Cash and cash equivalents include £1,012,000 retained in rent and restricted accounts which are not readily available to the group for day to day commercial purposes

10 Trade and other payables

	Group  £000	Company  £000
Trade payables	263	-
Rent received in advance	281	-
Accrued interest	405	-
Other payables	45	-
Other accruals and deferred income	370	240
At 31 March 2008	1,364	240

11 Provisions 

Group only

	Enhanced management  fees  £'000
On acquisition of subsidiary	1,565
Credited to the income statement	(625)
At 31 March 2008	940

Under the terms of various management agreements, the Group has an obligation to pay an 'enhanced management fee' to third parties, following the disposal of its interests in certain investment properties, or the completion of defined property strategies for other investment properties.

Provision has been made in the consolidated balance sheet for the anticipated enhanced management fees to be paid by the Group, based on the carrying values of properties held at the balance sheet date. This is considered to be a reasonable and prudent basis on which to make provision for these obligations. Provision is made on a property by property basis and only arises in respect of properties that have been subject to upward revaluation movements above their historic cost.

The provisions are made in the relevant subsidiaries' financial statements that reflect the upward revaluation movements referred to above.

The movement in the period has been credited to property outgoings in the income statement.

12 Share capital

Group and Company

	31 March  2008  Number	31 March  2008  £000
Authorised
Ordinary shares of 10p each	500,000,000	50,000

	31 March  2008  Number	31 March  2008  £000
Issued, called up and fully paid
Ordinary shares of 10p each	285,000,000	28,500

The Company was incorporated on 1 October 2007 with authorised share capital of 500,000,000 ordinary shares of 10p each. On incorporation two ordinary shares of 10p each were issued for cash at a subscription price of £1 per ordinary share.

On 30 October 2007 the Company issued a further 37,499,998 10p ordinary shares as consideration for the acquisition of the entire issued share capital of London & Stamford Investments Limited (see note 7).

On 7 November 2007 the Company's ordinary shares were admitted to trading on AIM and immediately thereafter 247,500,000 10p ordinary shares were allotted following a placing at 100p per share.

13 Disposals

In November 2007 the Group disposed of its Belgian subsidiary LSI Retail NV. The loss on disposal in the period was £17,000. Net assets disposed of amounted to £21,883,000 and consisted primarily of investment property valued at £22,189,000, cash balances of £314,000 and other net liabilities of £620,000. The cash consideration received in full settlement amounted to £21,866,000.

14 Related party transactions and balances

Group

Mr H R Mould, Mr P L Vaughan and Mr H J M Price are designated members of LSI Management LLP, the property advisor to the Group. The property advisor received £1.9 million for the services of property management during the period. At 31 March 2008, none of the fee remained outstanding.

Mr P Firth is managing director of Butterfield Fund Services (Guernsey) Limited the Company's administrator. Butterfield Fund Services (Guernsey) Limited received £29,000 in payment of administration services during the period. At 31 March 2008 £18,000 remained outstanding and is reflected in the year end creditor balance.

Transactions between the Company and its subsidiaries which are related parties have been eliminated on consolidation.

Company

During the period the Company received nil by way of intra-group dividends and nil in intra-group interest. Amounts advanced by the Company to subsidiary undertakings are unsecured and repayable on demand. No advances were made in the period.

15 Events after the balance sheet date

On 23 April 2008 the Company entered into a new joint venture with Cavendish Limited, a wholly owned subsidiary of a major Gulf institution. Cavendish will provide co-investment funds of up to £200 million.

16 Net Asset Value

Net asset value per share is based on Group net assets at 31 March 2008 of £277,898,000 and the number of ordinary shares in issue at that date of 285 million.

 

END

 

 

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