Final Results

RNS Number : 3086I

Northacre PLC

24 July 2012

NORTHACRE PLC (the ''Company'' or ''Group'')

Results for the year ended 29th February 2012

24th July 2012

Northacre PLC today announces its results for the year ended 29^th February 2012.

Heritage

For over 20 years Northacre has successfully designed, developed and marketed over £1.5bn of prime residential sites in London, a track record unrivalled by any other residential developer.

Northacre's development portfolio includes The Lancasters in Bayswater, Park Street in Mayfair and The Vicarage Gate, The Bromptons & Earls Terrace in Kensington & Chelsea, all of which are recognised as some of London's finest and most sought after addresses.

Chairman's Statement

In the 2011/12 financial year we succeeded in placing the business on a better footing for the future, and this is partly reflected in the operating loss resulting from adjustments to our cost base and the costs involved in refinancing our debt. Funding of the Group is now on a more stable basis for the foreseeable future and at a much lower overall cost than in the recent past. This is no mean achievement in an environment of great uncertainty where the impact of the faltering Euro on financial markets has inevitably affected small businesses like ours.

Securing full completion of The Lancasters Development prior to the year end is a milestone achievement. This development has been 6 years in the making and to realise the product of such quality is of great pride to the Group. We continue to enjoy a strong working relationship with our partners on the project, Minerva, who are now under new ownership following their delisting from the market in 2011. We are confident that the few remaining unsold apartments at The Lancasters will be sold in the coming months.

A key focus for the Group is now also The Vicarage Gate development adjacent to Kensington Palace Gardens. We are very excited about bringing this development to reality after planning delays. The market for prime residential in London is more international and, it seems, more sought after than at any time in my experience. This is good to see but makes it extremely challenging to secure new development opportunities, although the Group continues to strive to bring forward the next development. Since the year end, I decided to reduce my involvement in the operational affairs of the Group in order to concentrate more of my time on product design. I have stepped aside as Chief Executive Officer in favour of Ken MacRae, who joined us in June 2011. Ken's background, coming from real estate private equity and finance, has proved invaluable to the Company in the successful refinancing of the Company's existing debts as well as sourcing finance for new development opportunities in a market where funding from traditional sources is virtually non-existent. Ken has been of great support to me during this year and I am looking forward to progressing the Group with Ken at the helm.

Dividend Policy

The Board regards as a strong priority the payment of a dividend to Shareholders just as soon as profits permit. With this in mind, we feel it is helpful to set out our priorities in terms of distributions in the near term.

The Board's intention is that proceeds from our projects will be used in the following way:

I. Repayment of all debt

II. Funding of working capital

III. Dividend distribution to Shareholders

IV. Bonus payments to staff and Directors

While the distribution of a dividend is listed third above, it is the strongest priority of the Board in terms of the distribution of 'surplus' capital, i.e. after all liabilities are settled and sufficient medium-term working capital secured. Currently, we are able to forecast that we ought to be in a position to do this after sufficient proceeds are received from The Lancasters Development, provided no unforeseen events arise.

Final Thoughts

Page 6 of the Report and Accounts (Annual Report and Accounts will be available on our website) carries a photograph of the Tempesta sculpture, created by the renowned sculptor Helaine Blumenfeld, and which we recently unveiled at The Lancasters. The sculpture was funded by the Northacre-Minerva project and represents one of the most significant contributions of public art for a residential development ever made. This inspiring work of art also shows the importance to Northacre of enhancing the living environment as well as producing financially successful developments.

As ever, I am greatly encouraged by the dedication of our people, as we strive to secure further opportunities for the Group in the months and years ahead.

Klas Nilsson

Executive Chairman

Copies of the Annual Report and Accounts will be available at the office of Northacre PLC at 8 Albion Riverside, 8 Hester Road, London SW11 4AX and are available on our website www.northacre.com and are being posted to shareholders who elected to receive hard copies.

Enquiries:

Northacre PLC

Klas Nilsson (Executive Chairman)

Ken MacRae (Chief Executive Officer & Finance Director)

020 7349 8000

Hudson Sandler Limited

Michael Sandler

020 7796 4133

Peel Hunt LLP (Nominated Adviser and Broker)

Capel Irwin

Harry Florry

020 7418 8900

Chief Executive's and Financial Review

Highlights

· Net Asset Value (NAV) increased to 138.99 pence (2011: 92.90 pence)

· Operating loss for the year is £6.5m (2011: £2.8m)

· Total Comprehensive Income for the period is £12.3m (2011: £14.6m)

In the year under review, good progress has been made in the Group on a number of fronts, although we have taken charges to the accounts reflecting operational adjustments and refinancing in the year. These inflated our non-recurring operating costs in 2011 and produced a significant loss for the year, before recognition of the fair value attributable to our financial assets, principally The Lancasters Development profit share entitlement.

In 2011/12 our priorities were to rationalise the business to better match the ongoing projects and improve our operational efficiency, in order to continue providing the best development management service to our partners on The Vicarage Gate and The Lancasters projects, and to consolidate our financing at a lower overall cost of funds. Each of these priorities has now been realised, and I will address these in turn.

Operations

We have reduced the operating cost base of the Group, through headcount reductions where appropriate and through managing administrative costs prudently. As a result, after non-recurring expenses such as loan arrangement costs, redundancy costs and settlements with former Directors, the running costs of the business are lower than in previous years. This will be most accurately reflected in the 2012/13 year and beyond. We have reduced the scale of the architecture business in line with a reduced architecture role on The Lancasters and The Vicarage Gate projects, which has resulted in a reduction in our operating costs. Despite this, we retain a highly capable design management capability to provide the lead on product design and space planning as part of our development management service. The interior design business has a new Managing Director, Daniel Kostiuc. Daniel and his team are making good progress in securing new revenue for the business and we hope to secure new contracts in the remainder of the year.

Developments

Our development management team is engaged on two projects, at The Vicarage Gate and the continuing responsibility at The Lancasters. They are also working to secure new development projects and have bid on several opportunities in the period.

The Lancasters

We completed the construction phase of The Lancasters Development, with our partners, Minerva, during the year. Sales have continued since the year end and only a small number of apartments remain unsold. We expect all remaining apartments will be sold in the coming months. We received an interim dividend of £1.15m in the year and a further £3.0m after year end, making £4.15m in total. These receipts represented the payout of two tiers of the profit share structure. The potential value of profit share from The Lancasters Development is recognised in our accounts at a discounted level, taking into account the unsold units and the time it may take to dispose of these. Further comment on this is made in the Director's report.

Vicarage Gate

Since the year end, we secured planning consent on The Vicarage Gate project and finalised the statutory agreements with the planning authority. The development will provide c41,000 sq ft of net saleable prime residential in a single building of modern lateral apartments in one of the most desirable parts of Kensington, next to Kensington Palace Gardens. Northacre is the appointed development manager for the project. We have overseen completion of the first phase of demolition of the site and construction will commence in the summer, with full completion of the building works expected in late 2014 or early 2015. Although we sold our equity interest in the project, as announced in August 2010, we are entitled to share in the profits after a pre-determined return to the investor. Currently, we forecast a significant profit share coming from this project, dependent on successful delivery.

Funding

With the objective of reducing our cost of funding, we consolidated all external financing with a single loan from a Middle East based funder in October 2011. However, since the year end, we took advantage of the predominance of specialist finance houses in the London market to refinance the facility at a much lower cost of funds, with a vehicle managed by Chenavari Investment Managers. Our funding cost has therefore been lowered to below 20% p.a. This is still high but represents the nature of the funding market at present, where traditional banks have substantially withdrawn from small business lending. We aim to repay this facility entirely as soon as proceeds from our developments permit.

Significant non-recurring items which have inflated the loss

Impairment to Goodwill

Goodwill of £8.8m had been reflected in Northacre's accounts since the business was listed on AIM in September 2000 and, as the Directors are required to ensure that Goodwill reasonably reflects the value that might be achieved through future revenue opportunities. Our revaluation of goodwill has resulted in a charge of £0.8m in the current year.

Loan arrangement and legal fees

Arranging the refinancing of our debt during the year has resulted in a significant charge arising from loan redemption fees, new loan arrangement fees, and legal costs associated with the refinancing.

Review of Financial Results

Headlines

Revenue for the year decreased to £3.0m (2011: £5.7m), reflecting reduced fee income from The Lancasters Development and a lower level of activity in Intarya, which is being addressed and is now improving. We received profit share income from The Lancasters in the year of £1.15m and a further £3.0m after the year end. Net Assets Per Share as at 29th February 2012 is 138.99 pence (2011: 92.90 pence). The Net Asset Value reflects a number of factors, including the reserves and the Board's opinion of the value attributable to the Group's share of profits accruing from The Lancasters Development, in so far as this can be valued considering that the project has not been fully sold. A discount is therefore applied to this reflecting an element of uncertainty attached to the unsold units. Following the valuation the fair value of The Lancasters Development amounted to £40.8m (2011: £21.2m). This valuation is represented by the £42m fair value, less the £1.15m dividend received in the period. Although the loss attributable to equity holders is £7.3m (2011: £4.3m), the consolidated comprehensive income for the period is £12.3m (2011: £14.6m). This reflects the net position for the year after recognising the estimate of value in The Lancasters Development profit share entitlement, slightly discounted as noted above.

Consolidated Income Statement and Consolidated Statement of Comprehensive Income

Revenue for the year decreased to £3.0m (2011: £5.7m). The Group received some profit share during the year, which is shown as investment revenue, supplementing fee income but reported a revenue fall across all of its subsidiaries reflecting the reduced role played on The Lancasters and The Vicarage Gate Developments. Investment income increased to £1.2m (2011: £0.1m). £1.15m of the reported increase represents a first interim dividend received from The Lancasters Development. Administrative expenses were £6.7m (2011: £5.0m) as a result of measures undertaken to reduce overheads and the cost of refinancing debt. In accordance with International Accounting Standards we have made a fair valuation of our investment in The Lancasters Development with reference to secured and forecast sales as at 29th February 2012. The change in fair value reported for the year was an increase of £19.6m (2011: £18.9m).

Consolidated Statement of Financial Position

In accordance with International Accounting Standards, the investments in development projects (classified as available for sale financial assets in the Consolidated Statement of Financial Position) represent, where appropriate, the equity value in each of our secured development schemes and any fair value adjustments. As mentioned above, we have calculated the fair value of our investment at The Lancasters Development and, including this fair value adjustment, the available for sale financial assets amounted to £40.8m (2011: £21.2m).

Outlook

The prime residential market in London has been extraordinarily competitive in the past two years. The increase in prime house prices has been well publicised, with central London values returning to pre-recession levels. Within this environment we are working on securing new development projects and to secure strategic relationships with large central London landowners who can provide development opportunities where Northacre's skills, track record and branding can add significant value. Northacre consists of an excellent group of people who are dedicated to creating great residential places. The entire team are fully committed to the future development of the business.

Ken MacRae

Chief Executive Officer

& Finance Director

Consolidated Income Statement

For the year ended 29^th February 2012

	Note	2012	2011

Continuing Operations		£	£
Group

Group Revenue	3	3,021,353	5,664,484

Cost of sales		(2,068,876)	(3,268,795)

Gross Profit		952,477	2,395,689

Administrative expenses		(6,676,018)	(5,006,077)
Other operating costs:
Exceptional items	4	(756,879)	(193,623)

Group Loss from Operations		(6,480,420)	(2,804,011)

Investment revenue	5	1,177,224	66,192

Other gains/(losses)	6	312,832	(1,355,248)

Finance costs	7	(2,054,269)	(217,995)

Impairment of goodwill	12	(821,043)	-

Loss for the period from continuing operations		(7,865,676)	(4,311,062)

Discontinued Operations
Share of loss from associated undertaking	14(a)	-	(8,971)

Loss before Taxation	8	(7,865,676)	(4,320,033)

Taxation	10	577,204	-

Loss for the period attributable to equity holders of the Company		(7,288,472)	(4,320,033)

Loss per ordinary share
Basic - Continuing and total operations	24	(27.27)p	(16.17)p
Diluted - Continuing and total operations	24	(27.27)p	(16.17)p

Company

Loss for the period attributable to equity holders of the Company	(12,629,475)	(2,341,603)

Consolidated Statement of Comprehensive Income

For the year ended 29^th February 2012

	Note	2012	2011

Continuing Operations		£	£
Group

Loss for the period attributable to equity holders of the Company		(7,288,472)	(4,320,033)

Other comprehensive income:
Changes in fair value of available for sale financial assets	14(b)	19,605,236	18,904,996

Total comprehensive income for the period		12,316,764	14,584,963

Company

Loss for the period attributable to equity holders of the Company		(12,629,475)	(2,341,603)

Other comprehensive income		-	-

Total comprehensive loss for the period	11	(12,629,475)	(2,341,603)

Consolidated Statement of Financial Position

As at 29^th February 2012

	Note	2012	2011
		£	£

Non-Current Assets
Goodwill	12	8,007,417	8,828,460
Property, plant and equipment	13	1,062,598	1,250,948
Investments in associates	14(a)	-	42,168
Available for sale financial assets	14(b)	40,810,580	21,205,344

		49,880,595	31,326,920
Current Assets
Inventories	15	118,006	336,008
Trade and other receivables	16	998,556	863,589
Cash and cash equivalents		916,963	-

		2,033,525	1,199,597


Total Assets		51,914,120	32,526,517

Current Liabilities
Trade and other payables	17	3,558,655	2,683,054
Corporation tax	18	-	-
Borrowings, including lease finance	19	10,513,442	377,251

		14,072,097	3,060,305

Non-Current Liabilities
Borrowings, including lease finance	20	699,602	2,290,555
Provisions for other liabilities	21	-	2,350,000

		699,602	4,640,555


Total Liabilities		14,771,699	7,700,860


Equity
Share capital	25	668,091	668,091
Share premium account		18,552,361	18,552,361
Retained earnings		17,921,969	5,605,205

Total Equity		37,142,421	24,825,657


Total Equity and Liabilities		51,914,120	32,526,517

Company Statement of Financial Position

As at 29^th February 2012

	Note	2012	2011
		£	£

Non-Current Assets
Property, plant and equipment	13	1,055,842	1,238,914
Investments	14(c)	8,007,421	10,090,079

		9,063,263	11,328,993
Current Assets
Trade and other receivables	16	7,412,064	15,037,990
Cash and cash equivalents		753,669	-

		8,165,733	15,037,990


Total Assets		17,228,996	26,366,983


Current Liabilities
Trade and other payables	17	21,150,311	13,718,813
Corporation tax	18	-	-
Borrowings, including lease finance	19	15,767	351,759

		21,166,078	14,070,572

Non-Current Liabilities
Borrowings, including lease finance	20	699,602	2,283,620
Provisions for other liabilities	21	-	2,020,000

		699,602	4,303,620


Total Liabilities		21,865,680	18,374,192


Equity
Share capital	25	668,091	668,091
Share premium account		18,552,361	18,552,361
Retained earnings		(23,857,136)	(11,227,661)

Total Equity		(4,636,684)	7,992,791


Total Equity and Liabilities		17,228,996	26,366,983

Consolidated and Company Statements of Cash Flows

For the year ended 29^th February 2012

	Group		Company

	2012	2011	2012	2011
	£	£	£	£

Cash flows from operating activities
Loss for the period before tax	(7,865,676)	(4,320,033)	(12,876,022)	(2,341,603)
Adjustments for:
Investment revenue	(1,177,224)	(66,192)	(191,575)	(53,945)
Finance costs	2,054,269	217,995	2,003,907	196,127
(Profit)/loss on disposal of investment in associate	(127,832)	105,248	-	-
Share of loss in associate	-	8,971	-	-
Depreciation and amortisation	223,808	102,382	183,072	60,000
Goodwill impairment	821,043	-	-	-
Provision against investments	-	-	2,082,358	-
Decrease/(increase) in inventories	218,002	(287,380)	-	-
(Increase)/decrease in trade and other receivables	(134,967)	1,734,181	7,625,926	38,329
(Decrease)/increase in trade and other payables	(1,474,399)	1,365,548	5,686,498	2,159,442

Cash used in operations	(7,462,976)	(1,139,280)	4,514,164	58,350

Interest paid	(2,054,269)	(217,995)	(2,003,907)	(196,127)
Corporation tax - consortium relief refunded	577,204	-	246,547	-

Net cash (used in)/generated from operating activities	(8,940,041)	(1,357,275)	2,756,804	(137,777)

Cash flows from investing activities
Proceeds from sale of/(purchase of) investment in associate	170,000	-	170,000	(98)
Purchase of plant, property & equipment	(35,458)	(1,031,171)	-	(1,042,697)
Proceeds of sale of available for sale financial assets	-	1,050,877	-	-
Interest received	7,224	13,692	1,875	1,445
Dividends received	1,170,000	52,500	20,000	52,500

Net cash generated from/(used in) investing activities	1,311,766	85,898	191,875	(988,850)

Cash flows from financing activities
Proceeds from borrowings	10,490,740	1,217,849	-	1,217,849
Repayment of borrowings	(1,568,247)	(275,000)	(1,843,247)	(275,000)
Repayment of finance leases	(158,570)	(158,564)	(130,832)	(130,825)

Net cash from financing activities	8,763,923	784,285	(1,974,079)	812,024

Increase/(decrease) in cash and cash equivalents	1,135,648	(487,092)	974,600	(314,603)
Cash and cash equivalents at the beginning of the year	(218,685)	268,407	(220,931)	93,672

Cash and cash equivalents at the end of the year	916,963	(218,685)	753,669	(220,931)

Consolidated and Company Statements of Changes in Equity

For the year ended 29^th February 2012

	Called Up	Share
	Share	Premium	Retained
Group	Capital	Account	Earnings	Total
	£	£	£	£
As at 1^st March 2010	668,091	18,552,361	(8,979,758)	10,240,694

Loss for the period	-	-	(4,320,033)	(4,320,033)

Other Comprehensive Profit for the period:
Changes in fair value of available for sale financial assets	-	-	18,904,996	18,904,996


As at 28^th February 2011	668,091	18,552,361	5,605,205	24,825,657



As at 1^st March 2011	668,091	18,552,361	5,605,205	24,825,657

Loss for the period	-	-	(7,288,472)	(7,288,472)

Other Comprehensive Profit for the period:
Changes in fair value of available for sale financial assets	-	-	19,605,236	19,605,236


As at 29^th February 2012	668,091	18,552,361	17,921,969	37,142,421



	Called Up	Share
	Share	Premium	Retained
Company	Capital	Account	Earnings	Total
	£	£	£	£
As at 1^st March 2010	668,091	18,552,361	(8,886,058)	10,334,394

Total Comprehensive Loss for the period	-	-	(2,341,603)	(2,341,603)


As at 28^th February 2011	668,091	18,552,361	(11,227,661)	7,992,791



As at 1^st March 2011	668,091	18,552,361	(11,227,661)	7,992,791

Total Comprehensive Loss for the period	-	-	(12,629,475)	(12,629,475)


As at 29^th February 2012	668,091	18,552,361	(23,857,136)	(4,636,684)

Notes to the Consolidated Financial Statements

For the year ended 29^th February 2012

1. Principal Accounting Policies

The principal accounting policies are as follows:

Accounting basis and standards

These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union.

The following standards, amendments and interpretations to published standards are mandatory for accounting periods beginning on or after 1^st March 2011 and have been applied to the financial information presented:

· Improvements to IFRSs 2010 - This is the third set of amendments published under the IASBs annual improvements process and incorporates minor amendments to seven standards and interpretations. The amendments are effective for annual periods beginning on or after 1^st January 2011.

· IAS 24 (revised), 'Related party disclosures', issued in November 2009. It supersedes IAS 24 (revised), 'Related party disclosures', issued in 2003. The revised IAS 24 is required to be applied from 1^st January 2011 and clarifies and simplifies the definition of a related party. The Group has applied the revised standard from 1st March 2011 and when applied the Group and the Parent Company have disclosed any transactions between its subsidiaries.

The following new standards, amendments to standards or interpretations are mandatory for the first time for the financial year beginning 1^st March 2011, but are not currently considered to be relevant to the Group (although they may affect the accounting for future transactions and events):

· Amendment to IFRIC 14, 'Prepayments of a minimum funding requirement' issued in November 2009. The amendment permits a voluntary prepayment of a minimum funding requirement to be recognised as an asset.

· IFRIC 19, 'Extinguishing financial liabilities with equity instruments'. This clarifies the requirements of IFRSs when an entity renegotiates the terms of a financial liability with its creditor and the creditor agrees to accept the entity's shares or other equity instruments to settle the financial liability fully or partially.

The following new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year beginning 1^st March 2011 and have not been early adopted:

· Amendment to IFRS 1, 'Presentation of Financial Statements' on Other Comprehensive Income.' The amendment confirms the treatment of borrowing costs relating to qualifying assets for which the commencement date for capitalisation is before the date of transition to IFRSs.

· Amendments to IFRS 7 'Financial Instruments: Disclosures'. These amendments are intended to provide greater transparency around risk exposures when a financial asset is transferred but the transferor retains some level of continuing exposure in the asset. The amendments also require disclosures where transfers of financial assets are not evenly distributed throughout the period. The amendments are effective for annual periods beginning on or after 1^st July 2011.

· IFRS 9, 'Financial instruments', issued in November 2009 and effective from 1^st January 2015. IFRS 9 represents the first phase of the IASB's project to replace IAS 39 'Financial Instruments: Recognition and Measurement'. It sets out the classification and measurement criteria for financial assets and liabilities and requires all financial assets, including assets currently classified under IAS 39 as available for sale, to be measured at fair value through profit and loss unless the assets can be classified as held at amortised cost. Qualifying equity investments held at fair value may have their fair value changes taken through other comprehensive income by election.

· IFRS 10, 'Consolidated Financial Statements'. This standard builds on existing principles by identifying the concept of control as the determining factor in which an entity should be included within the consolidated financial statements. The standard provides additional guidance to assist in determining control where this is difficult to assess.

· IFRS 11, 'Joint arrangements'. This standard establishes principles for financial reporting by parties to a joint arrangement.

· IFRS 12, 'Disclosure of interest in other entities'. This standard includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, structured entities and other off balance sheet vehicles.

· IFRS 13, 'Fair value measurement'. This standard aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements, which are largely aligned between IFRSs and US GAAP, do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRSs or US GAAP.

· IAS 1, 'Other Comprehensive Income'. The main change resulting from these amendments is a requirement for entities to group items presented in other comprehensive income on the basis of whether they are potentially reclassifiable to profit or loss subsequently. The amendments do not address which items are presented in other comprehensive income.

· Amendment to IAS 12, 'Income taxes'. Deferred tax accounting for investment property at fair value' IAS 12 requires an entity to measure the deferred tax relating to an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale. It can be difficult and subjective to assess whether recovery will be through use or through sale when the asset is measured using the fair value model in IAS 40 Investment Property. The amendment provides a practical solution to the problem by introducing a presumption that recovery of the carrying amount will, normally, be through sale.

· IAS 19 (Revised), 'Employee Benefits'. These amendments are intended to provide a clearer indication of an entity's obligations resulting from the provision of defined benefit pension plan and how those obligations will affect its financial position, financial performance and cash flow.

· IAS 27 (Revised), 'Separate Financial Statements' IAS 27 (Revised) has the objective of setting standards to be applied in accounting for investments in subsidiaries, joint ventures, and associates when an entity elects, or is required by local regulations, to present separate (non-consolidated) financial statements.

· IAS 28 (Revised), 'Associates and Joint Ventures' IAS 28 (Revised) prescribes the accounting for investments in associates and sets out the requirements for the application of the equity method when accounting for investments in associates and joint ventures.

· Amendment to IAS 32, 'Offsetting Financial Assets and Liabilities' clarifies that the tax effect of a distribution to holders of equity instruments should be accounted for in accordance with IAS 32.

Business Combinations and Goodwill

Goodwill relating to acquisitions prior to 1^st March 2006 is carried at the net book value on that date and is no longer amortised but is subject to annual impairment review. On acquisition, the assets, liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. Any deficiency of the cost of acquisition below the fair values of the identifiable net assets acquired (i.e. discount on acquisition) is credited to the income statement in the period of acquisition. Goodwill is tested annually for impairment.

Going Concern

The Company and Group currently meet their day-to-day working capital requirements through monies loaned from a third party loan. The Directors expect the new loan facilities agreed after the year end to remain in place for the foreseeable future and to be renewed on equally favourable terms in due course. In particular:

(i) The loan due to Northacre PLC Directors Retirement and Death Benefit Scheme of £699,602 (2011: £750,000) is not repayable until 31^st July 2013. Due to a pension fund split which was signed on 11^th January 2012, the Group repaid £50,398 of the loan. The balance is due to be repaid on 31^st July 2013.

(ii) A Eurobond loan facility of £10,500,000 was agreed with Abu Dhabi Capital Management LLC (''ADCM'') on 20^th October 2011 and drawn down in full on 31^st October 2011. This loan allowed the Group to repay its bankers facility and all Directors and related party loans. A fixed premium of £800,000 was due on signature of the agreement. According to the agreement, the Group had a right to early redemption and after receiving the first dividend payment from The Lancasters Development, the Group repaid £1,051,448 of the loan on 18^th January 2012 plus £76,050 accrued interest. Since the year end the Group secured new financing and the Eurobond was repaid in full on 30^thMay 2012. The total amount repaid was £11,276,653 including interest of £1,828,101.

(iii) A new loan facility of £15,000,000 was agreed with Auster Real Estate Opportunities S.a.r.l. on 1^st May 2012 and £13,000,000 was drawn down on 30^thMay 2012. This loan allowed the Group to repay the ADCM loan and secure more flexible loan terms for the Group. A fixed premium of 2% of the facility amount was due on draw down of the loan. The loan is due to be repaid in 18 months from the date of the draw down unless sufficient dividends are received from The Lancasters Development. If dividends received from The Lancasters Development are greater than the remaining liabilities, the loan will have to be repaid within 5 business days from the date of the dividend distribution.

The Directors have prepared detailed cash flow projections for the period ended 28^th February 2017 making reasonable assumptions about the levels and timings of income and expenditure, and in particular the timing of receipt of certain fees due from major developments. These projections show that the Group can operate within the current available facilities. On this basis the Directors consider it appropriate to prepare the financial statements on a going concern basis.

Significant judgements and estimates of areas of uncertainty

In preparing these financial statements the Directors are required to make judgements and best estimates of the outcome of and in particular, the timing of revenues, expenses, assets and liabilities based on assumptions. These assumptions are based on historical experience and various other factors that are considered reasonable under the various circumstances. The estimates and assumptions are reviewed on a regular basis with any revisions being applied in the relevant period. The material areas where estimates and assumptions are made are:

- The valuation of goodwill

- The valuation of available for sale financial assets

- The status and progress of the developments and projects

Basis of Consolidation

The Group financial statements include the financial statements of the Company and its subsidiary undertakings. The Group's proportion of the voting rights of Lancaster Gate (Hyde Park) Limited increased from to 5% to 25.1% on 30^th June 2010. Lancaster Gate (Hyde Park) Limited continues to be treated as an available for sale financial asset. The Directors do not regard Lancaster Gate (Hyde Park) Limited as an associate because the Directors consider that the Group does not exercise significant influence over its operating and financial activities, despite the fact that the Group holds in excess of 20% of the voting rights in Lancaster Gate (Hyde Park) Limited, because the control of the Board by Minerva PLC, the controlling shareholding they hold and their power to exercise, and actual exercise of, the commercial decision making for Lancaster Gate (Hyde Park) Limited preclude the Group from exercising such influence.

Depreciation

Depreciation on property, plant and equipment is provided at rates estimated to write off the cost or revalued amounts, less estimated residual value, of each asset over its expected useful life as follows:

Leasehold improvements over the period of the lease

Fittings and office equipment 25% straight line

Computer equipment 33 1/3% straight line

Impairment of Assets

Assets that have an indefinite useful life are not subject to amortisation but are instead tested annually for impairment and are subject to additional impairment testing if events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Assets that are subject to depreciation and amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Indicators of impairment are reviewed annually.

An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. Any impairment charge is recognised in profit or loss in the year in which it occurs. When an impairment loss, other than an impairment loss on goodwill, subsequently reverses due to a change in the original estimate, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, up to the carrying amount that would have resulted, net of depreciation, had no impairment loss been recognised for the asset in prior years.

Inventories

Work in progress is valued at the lower of cost and net realisable value. Cost of work in progress includes overheads appropriate to the stage of development. Net realisable value is based upon estimated selling price less further costs expected to be incurred to completion and disposal.

Revenue

Revenue represents amounts earned by the Group in respect of services rendered during the period net of value added tax. Shares in development profits and bonus fees are recognised when the amounts involved have been finally determined. Fees in respect of project management and interior and architectural design are recognised in accordance with the stage of completion of the contract.

Current Taxation

The tax expense for the year represents the total of current taxation and deferred taxation. The charge in respect of current taxation is based on the estimated taxable profit for the year. Taxable profit for the year is based on the profits as shown in profit or loss, as adjusted for items or expenditure, which are not deductible for tax purposes.

The current tax liability for the year is calculated using tax rates, which have either been enacted or substantively enacted at the reporting date.

Deferred Taxation

Deferred tax is provided in full on all temporary differences arising between the tax base of assets and liabilities and their carrying values in the financial statements. The deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of transaction affects neither accounting nor taxable profit or loss.

Deferred tax is determined using tax rates which have been enacted or substantively enacted at the reporting date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. Deferred tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

Leased Assets

Assets held under finance leases and hire purchase contracts are capitalised in the statement of financial position and depreciated over their expected useful lives. The interest element of the rental obligations is charged to profit or loss over the period of the lease on a straight-line basis.

Rentals under operating leases are charged to profit or loss on a straight-line basis over the lease term.

Investments

Fixed asset investments are stated at cost less amounts written off.

Associates

Associates are all entities over which the Group exercise significant influence but does not exercise control. Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost, which includes goodwill identified on acquisition, net of any accumulated impairment loss. The Group's share of its associate's profits or losses after acquisition of its interest is recognised in profit or loss and cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Where the Group's share of losses of an associate equals or exceeds the carrying amount of the investment, the Group only recognises further losses where it has incurred obligations or made payments on behalf of the associate.

Financial Assets

Available for sale financial assets consist of equity investments in other companies where the Group does not exercise either control or significant influence. The investments reflect loans and capital contributions made in respect of projects undertaken with other partners in which the Group will be entitled to an eventual profit share.

Available for sale financial assets are shown at fair value at each reporting date with changes in fair value being shown in Other Comprehensive Income, or at cost less any necessary provision for impairment where a reliable estimate of fair value is not able to be determined.

Pension Scheme Arrangements

The Group operates a money purchase scheme on behalf of two of its Directors. It also contributes to certain Directors' and employees' personal pension schemes. Pension costs charged represent the amounts payable to the schemes in respect of the period.

Foreign currency translation

Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of the transaction. Assets and liabilities are translated at the rate of exchange ruling at the reporting date. Exchange differences are taken into account in arriving at Group operating profit.

Financial Assets

Loans and Receivables

Trade receivables, loans and other receivables are classified as 'trade and other receivables' and are measured at cost less any provisions. Interest income is recognised by applying the appropriate interest rate of the contractual arrangement.

Financial Liabilities

Loans and Payables and Borrowings

Trade payables, other payables and borrowings are classified as 'trade and other payables' and 'borrowings, including lease finance'. These are measured at amortised cost and the interest expense is recognised by applying the appropriate interest rate of the contractual arrangement.

Borrowings

Interest-bearing borrowings are recognised initially at fair value, net of any transaction costs incurred. Borrowings are subsequently stated at amortised cost using the effective interest method with any differences between the proceeds (net of transaction costs) and the redemption value being recognised over the period of borrowings.

All borrowings are classified as current unless the Group has an unconditional right to defer payment of the borrowings until at least twelve months from the reporting date.

2. Capital and Financial Risk Management

The Group manages its capital to ensure that the Group will be able to continue as a going concern, while maximising the return to shareholders through the optimisation of its debt and equity balance.

The capital structure of the Group consists of debt, which includes the borrowings disclosed in notes 19 and 20, cash and cash equivalents and equity attributable to equity holders of the Parent Company, comprising issued capital, share premium account and retained earnings.

The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends payable to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt or increase capital.

The Board regularly reviews the capital structure, with an objective to reduce net debt over time whilst investing in the business.

The Group's activities expose it to a variety of financial risks and those activities involve the analysis, evaluation, acceptance and management of some degree of risk or combination of risks. Taking risk is core to the property business and the operational risks are an inevitable consequence of being in business. The Group's aim is to achieve an appropriate balance between risk and return and minimise potential adverse effects on the Group's performance.

The Group's risk management policies are designed to identify and analyse these risks, to set appropriate risk limits and controls, and to monitor the risks by means of a reliable up-to-date information system. The Group regularly reviews its risk management policies and systems to reflect changes in markets, products and emerging best practice.

Risk management is carried out by the Board of Directors. In addition, the internal financial control board is responsible for the identification of the major business risks faced by the Group and for determining the appropriate course of action to manage those risks. The most important types of risk are credit risk, liquidity and market risk. Market risk includes currency, interest rate and other price risks.

3.	Segmental Information

	Segmental information is presented in respect of the Group's business segments. The business segments are based on the Group's corporate and internal reporting structure. Segment results and assets include items directly attributable to a segment as well as those that can be allocated to a segment on a reasonable basis. The segmental analysis of the Group's business as reported internally to management is as follows:

	Revenue	2012	2011
		£	£
	Principal activities:
	Development management	692,615	969,652
	Interior design	2,192,233	4,249,606
	Architectural design	136,505	445,226

		3,021,353	5,664,484

	Loss before Taxation	2012	2011
		£	£
	Development management	(6,176,058)	(3,048,535)
	Interior design	(818,044)	(475,875)
	Architectural design	(871,574)	(786,652)
		(7,865,676)	(4,311,062)
	Share of loss of associate	-	(8,971)

		(7,865,676)	(4,320,033)

	Assets	2012	2011
		£	£
	Development management	50,795,189	27,482,303
	Interior design	1,075,965	2,794,332
	Architectural design	42,966	2,207,714
		51,914,120	32,484,349
	Share of investment in associate	-	42,168

	Total Assets	51,914,120	32,526,517

	Liabilities	2012	2011
		£	£
	Development management	12,725,626	3,288,677
	Interior design	1,284,968	2,272,268
	Architectural design	761,105	2,139,915

	Total Liabilities	14,771,699	7,700,860

	A geographical analysis of the Group's revenue, assets and liabilities is given below:

	Revenue	2012	2011
		£	£
	United Kingdom	1,925,772	2,595,769
	Ireland	7,563	818,478
	Russia	-	76,930
	Saudi Arabia	874,158	1,240,672
	United Arab Emirates	50,400	532,664
	British Virgin Islands	-	(59,673)
	Thailand	41,251	444,644
	Hong Kong	-	15,000
	Switzerland	122,209	-

		3,021,353	5,664,484

	Included in the revenue above are revenues in respect of customers who account for over 10% of the Group's total revenue.

		2012	2011
		£	£
	Customer A (Interior design)	874,158	1,229,005
	Customer B (Interior design)	515,892	-
	Customer C (Development management)	407,615	780,000
	Customer C (Interior design)	174,311	1,182,767
	Customer D (Interior design)	-	818,478

		1,971,976	4,010,250


	Assets	2012	2011
		£	£

	United Kingdom	51,169,630	31,716,419
	Ireland	2,453	14,065
	United Arab Emirates	10,803	591,417
	Saudi Arabia	731,234	83,022
	Switzerland	-	83,402
	Thailand	-	38,192

		51,914,120	32,526,517


	Liabilities	2012	2011
		£	£

	United Kingdom	4,162,779	6,141,113
	United Arab Emirates	10,503,566	1,517,849
	Hong Kong	2,365	2,365
	USA	2,925	19,505
	Thailand	-	20,028
	Saudi Arabia	100,064	-

		14,771,699	7,700,860

4.	Exceptional Items	2012	2011
		£	£
	Payments to former Directors	756,879	193,623

	Payments to former Directors include compensation for loss of office and payments in respect of the claim by a former Director against the Company for wrongful and unfair dismissal which has been resolved by way of a comprehensive settlement of all claims against the Group, including entitlement to benefits arising from loans made by the Northacre PLC Directors Retirement and Death Pension Scheme to the Company. The Company agreed to waive the former Director's loan account and also pay to him a settlement sum. The payment of these amounts are not due until sufficient profits are received from The Lancasters Development. Please refer to note 9 for detailed Director's remuneration disclosure.

5.	Investment Revenue	2012	2011
		£	£
	Interest received	7,224	13,692
	Dividends received	1,170,000	52,500

		1,177,224	66,192

6.	Other Gains/(Losses)	2012	2011
		£	£
	Loss on disposal of interest in Vicarage Gate Holdings Limited	-	(105,248)
	Profit on disposal of interest in Campden Estates Limited	127,832	-
	Decrease in provision for acquisition of Templeco 643 Limited in lieu of settlement	135,000	-
	Decrease in provision for Northacre PLC Directors Retirement and Death Benefit Scheme profit share	50,000	(1,250,000)

		312,832	(1,355,248)

7.	Finance Costs		2012	2011
			£	£
	Interest on:
		Bank loans and overdrafts	10,325	8,643
		Overdue tax	1,028	1,474
		Tax penalties	32,866	-
		Other loans	2,010,050	207,878

			2,054,269	217,995

8.	Loss Before Taxation	2012	2011
		£	£

	Loss before taxation is stated after charging/(crediting):
	Depreciation and amounts written off property, plant and equipment:
	Owned assets	223,808	102,382
	Operating lease rentals:
	Land and buildings	153,699	331,462
	Foreign exchange loss	148	4,037


	Fees payable to the Company's auditors for:
	- the audit of the Company's annual accounts	39,344	57,241

	Fees payable to the Company's auditors for other services to the Group:
	- the audit of the Company's subsidiaries	25,906	39,220

	Total audit fees	65,250	96,461

	Fees payable to the Company's auditors for:
	- taxation compliance services	13,375	23,750
	- other taxation advisory services	25,311	7,796
	- other services	17,054	16,300

	Total other fees	55,740	47,846

9.	Employees	2012	2011
		Number	Number
	The average weekly number of employees (including Directors) during the year was:
	Office and management	14	15
	Design and management	24	29

		38	44


		2012	2011
	Staff costs for the above employees:	£	£
	Wages and salaries	3,248,121	2,797,222
	Social security costs	432,247	336,591
	Other pension costs - money purchase schemes	183,568	69,850

		3,863,936	3,203,663


	Remuneration in respect of Directors was as follows:	2012	2011
		£	£
	Aggregate emoluments (including benefits in kind)	765,060	496,731
	Consultancy fees	375,000	-
	Compensation for loss of office	65,000	-
	Fees	60,000	55,833

		1,265,060	552,564

	Company contribution to money purchase pension schemes	71,542	51,300


	Remuneration for each Director (including benefits in kind)	2012	2011
		£	£
	K.B. Nilsson	265,340	255,265
	K. MacRae	201,436	-
	M.K. Santilale	361,088	211,466
	M.A. AlRafi	60,000	30,000
	M.F. Williams	30,000	28,333
	E.B. Harris	30,000	27,500
	J. McGivern	317,196	-

		1,265,060	552,564

	Included in the above are consultancy fees of £375,000 which represent amounts accrued but not paid. These amounts will be paid after sufficient dividends are received from The Lancasters Development.
	Remuneration of £60,000 (2011: £30,000) for Director M.A. AlRafi is payable to MTAF Group.
	Remuneration of £30,000 (2011: £27,500) for Director E.B. Harris is payable to EC Harris LLP.


	The amounts above include remuneration in respect of the highest paid Director as follows:	2012	2011
		£	£
	Aggregate emoluments (including benefits in kind)	361,088	255,265
	Company contribution to money purchase pension scheme	5,624	40,860

		366,712	296,125

	The total emoluments of £361,088 (2011: £255,265) above includes: salary of £96,088 (2011: £255,265); compensation for loss of office £65,000 (2011: £nil) and consultancy fees £200,000 (2011: £nil). The consultancy fees of £200,000 are not due to be paid till sufficient dividends from The Lancasters Development are received.

10.	Taxation	2012	2011

		£	£
	(a) Analysis of charge in year
	Current tax:
	Corporation tax at the rate of 26% (2011: 28%)	-	-
	Group relief	(577,204)	-

	Total current tax	(577,204)	-

	(b) Factors affecting the tax charge for the year
	The tax assessed for the year is lower than the standard rate of corporation tax in the UK of 26% (2011: 28%).
	The differences are explained below:
		2012	2011
		£	£
	Loss on ordinary activities before tax	(7,865,676)	(4,320,033)

	Loss on ordinary activities multiplied by the standard rate of
	corporation tax of 26% (2011: 28%)	(2,045,076)	(1,209,609)

	Effects of:
	Expenses not deductible for tax purposes	50,391	49,587
	Depreciation for the period in excess of capital allowances	(26,331)	(17,004)
	Dividends and distributions received	(304,200)	(14,700)
	Utilisation of tax losses	1,391	-
	Share of loss/(profit) of associates	-	2,512
	Loss carried forward	2,323,825	1,189,214
	Group relief	(577,204)	-


	Current tax (credit)/charge for the year	(577,204)	-

	(c) Factors that may affect future tax charges

	No deferred tax asset has been recognised on losses carried forward nor on the origination and reversal of timing differences due to the uncertainty of the timing of taxable profits. The total amount of the unprovided asset is £4,574,968 (2011: £2,251,143).

	The standard rate of corporation tax in the UK changed to 26% from 1^st April 2011.

11. Profit of the Parent Company

	As permitted by section 408 of the Companies Act 2006, the profit or loss element of the Parent Company Income Statement is not presented as part of these financial statements. The Group loss for the financial year of £7,288,472 (2011: £4,320,033) includes a loss of £12,629,475 (2011: £2,341,603), which was dealt with in the financial statements of the Company.

12.	Goodwill
		2012	2011
		£	£

	Cost	14,940,474	14,940,474

	Amortisation and impairment
	At the beginning of the year	6,112,014	6,112,014
	Amortisation charge for the year	-	-
	Impairment charge for the year	821,043	-

	At the end of the year	6,933,057	6,112,014

	Net book value	8,007,417	8,828,460

	The Group performs an annual goodwill impairment review in accordance with IAS 36 'Impairment of Assets' based on its cash generating units (CGUs). The CGU that has associated goodwill allocated to it is the Group as a whole. This is the smallest identifiable group of assets that generate cash inflows to which goodwill is allocated. Although the interior design business is a separate CGU goodwill was not specifically allocated to it when the goodwill arose because it was treated as an integrated business when the Group was originally restructured. The Directors consider that it is now not appropriate to allocate goodwill to this CGU. Recoverable amount In accordance with IAS 36 the recoverable amount of the cash generating unit is calculated, being the higher of value in use and fair value less costs to sell. The fair value less costs to sell of the CGU is determined using cash flow projections derived from the business plan covering a five year period which has been approved by the Board. They reflect the Directors' expectations of the level and timing of revenue, expenses, working capital and operating cash flows, based on past experience and future expectations of business performance particularly future development projects. Discount rates The pre-tax discount rates applied to the cash flow projections are derived from the Group's weighted average cost of capital. The discount rate applied to the years ending 28^th February 2013 and 2014 is 18% reflecting the current cost of the Group's Auster Real Estate Opportunities S.a.r.l loan and for the years ending 28^th February 2015, 2016 and 2017 it is 6% reflecting the future expected cost of capital for the Group. Growth rates Due to the nature of the Group's development business growth rates are not relevant. The cash flow projections assume a 65% probability of winning a level of development projects over the five years and make assumptions on the probability of achieving certain development performance fee criteria. The business growth rates have been assumed to be nil for the Intarya interior design business. Sensitivity analysis The following changes in assumptions would cause the recoverable amount to fall below the current carrying value: • A 0.25% increase in the discount rate to 6.25% for the latter three year period • A 0.0025% decrease in the probability assumption to 64.75% • A 1% decrease in the other interior design revenue cash flows over the five year period

13.	Property, plant and equipment
			Fittings
	Group	Leasehold	and Office	Computer
		Improvements	Equipment	Equipment	Total
	Cost	£	£	£	£
	At 1^st March 2010	-	361,974	465,032	827,006

	Additions	984,217	22,105	24,849	1,031,171
	Transfers	131,217	(131,217)	-	-

	At 28^th February 2011	1,115,434	252,862	489,881	1,858,177

	Additions	-	17,442	21,465	38,907

	Disposals	-	(199,632)	(129,577)	(329,209)

	At 29^th February 2012	1,115,434	70,672	381,769	1,567,875

	Depreciation
	At 1^st March 2010	-	202,280	302,567	504,847

	Charge for the year	-	10,105	92,277	102,382

	At 28^th February 2011	-	212,385	394,844	607,229

	Charge for the year	123,072	15,537	85,199	223,808

	Disposals	-	(196,183)	(129,577)	(325,760)

	At 29^th February 2012	123,072	31,739	350,466	505,277


	Net Book Value
	At 29^th February 2012	992,362	38,933	31,303	1,062,598

	At 28^th February 2011	1,115,434	40,477	95,037	1,250,948

	At 28^th February 2010	-	159,694	162,465	322,159

		Fittings
Company	Leasehold	and Office	Computer
	Improvements	Equipment	Equipment	Total
Cost	£	£	£	£
At 1^st March 2010	-	131,217	180,000	311,217

Additions	1,042,697	-	-	1,042,697
Transfers	131,217	(131,217)	-	-

At 28^th February 2011	1,173,914	-	180,000	1,353,914

Additions	-	-	-	-

At 29^th February 2012	1,173,914	-	180,000	1,353,914


Depreciation
At 1^st March 2010	-	-	55,000	55,000

Charge for the year	-	-	60,000	60,000

At 28^th February 2011	-	-	115,000	115,000

Charge for the year	123,072	-	60,000	183,072

At 29^th February 2012	123,072	-	175,000	298,072


Net Book Value
At 29^th February 2012	1,050,842	-	5,000	1,055,842

At 28^th February 2011	1,173,914	-	65,000	1,238,914

At 28^th February 2010	-	131,217	125,000	256,217


Included above are assets held under finance lease or hire purchase contracts as follows:

	Fittings
Group	and Office	Computer
	Equipment	Equipment	Total
Cost	£	£	£
At 1^st March 2010	11,710	57,799	69,509

Additions	-	-	-

At 28^th February 2011	11,710	57,799	69,509

Additions	-	-	-

Disposals	(9,399)	(1,799)	(11,198)

At 29^th February 2012	2,311	56,000	58,311

Depreciation
At 1^st March 2010	8,482	50,696	59,178

Charge for the year	244	1,014	1,258

At 28^th February 2011	8,726	51,710	60,436

Charge for the year	578	6,089	6,667

Disposals	(7,050)	(1,799)	(8,849)

At 29^th February 2012	2,254	56,000	58,254


Net Book Value
At 29^th February 2012	57	-	57

At 28^th February 2011	2,984	6,089	9,073

At 28^th February 2010	3,228	7,103	10,331

	Fittings
Company	and Office	Computer
	Equipment	Equipment	Total
Cost	£	£	£
At 1^st March 2010	-	180,000	180,000

Additions	-	-	-
Transfers	-	-	-

At 28^th February 2011	-	180,000	180,000

Additions	-	-	-

At 29^th February 2012	-	180,000	180,000


Depreciation
At 1^st March 2010	-	55,000	55,000

Charge for the year	-	60,000	60,000

At 28^th February 2011	-	115,000	115,000

Charge for the year	-	60,000	60,000

At 29^th February 2012	-	175,000	175,000


Net Book Value
At 29^th February 2012	-	5,000	5,000

At 28^th February 2011	-	65,000	65,000

At 28^th February 2010	-	125,000	125,000

14.	Investments

(a)	Interest in Associated Undertaking
	Group	2012	2012	2011	2011
		£	£	£	£
	Cost
	At 1^st March		300		300
	Disposal of interest in associated undertaking		(300)		-

	At 29^th February		-		300

	Group's Share of Undistributed Post Acquisition
	Results of Associated Undertaking
	At 1^st March		41,868		50,839

	Share of undistributed profit	-		2,482
	Taxation	-		(11,453)

			-		(8,971)

	Disposal of interest in associated undertaking		(41,868)		-

	29^th February		-		41,868

	Net Book Value
	29^th February		-		42,168

	On 27^th September 2011 Northacre PLC sold its 25% interest in Campden Estates Limited for a total cash consideration of £170,000 resulting in a profit on disposal of £127,832 with dividends of £20,000 received in the period.


(b)	Available for Sale Financial Assets
	Group	2012	2012	2011	2011
		£	£	£	£

	At 1^st March		21,205,344		3,456,473
	Disposals		-		(1,156,125)
	Increase in fair value	20,755,236		18,904,996
	Dividend received	(1,150,000)		-
	Net movement transferred to/(from) comprehensive income		19,605,236		18,904,996

	At 29^th February		40,810,580		21,205,344

	Group's Share of Results
	Group's share of loss for the year		-		-

	Net Book Value
	At 29^th February		40,810,580		21,205,344

	A fair valuation exercise has been undertaken based predominantly on the Group's expected profit from secured sales on The Lancasters Development as at 29^th February 2012. As at 29^th February 2012 the Group had received £1,150,000 of the expected profits from The Lancasters Development. A second dividend of £3,000,000 was received after the year end.



(c)	Other Investments
		Subsidiary	Associated	Total
	Company	Undertakings	Undertaking
		£	£	£
	Cost
	At 1^st March 2011	14,492,681	300	14,492,981
	Disposals	-	(300)	(300)


	As at 29^th February 2012	14,492,681	-	14,492,681

	Impairment
	At 1^st March 2011	4,402,902	-	4,402,902
	Impairment in the year	2,082,358	-	2,082,358


	As at 29^th February 2012	6,485,260	-	6,485,260


	Net book value as at 29^th February 2012	8,007,421	-	8,007,421


	Net book value as at 28^th February 2011	10,089,779	300	10,090,079

Company	Subsidiary	Associated	Total
	Undertakings	Undertaking
	£	£	£
Cost
At 1^st March 2010	14,492,583	300	14,492,883
Additions	98	-	98


As at 28^th February 2011	14,492,681	300	14,492,981

Impairment
At 1^st March 2010	4,402,902	-	4,402,902
Impairment in the year	-	-	-


As at 28^th February 2011	4,402,902	-	4,402,902


Net book value as at 28^th February 2011	10,089,779	300	10,090,079


Net book value as at 28^th February 2010	10,089,681	300	10,089,981

(d)

Group Shareholdings

The Group has shareholdings in the following companies, all incorporated in England and Wales:

Proportion

Subsidiary undertakings

Holding

held

Nature of Business

Waterloo Investments Limited

Ordinary shares

100%

Development management

services

Intarya Limited

Ordinary shares

100%

Interior design

Northacre Development Management

Ordinary shares

100%

Development management

Services Limited

services

Nilsson Architects Limited

Ordinary shares

100%

Design architects

Northacre Capital (1) Limited

Ordinary shares

100%

Dormant

Northacre Capital (2) Limited *

Ordinary shares

100%

Dormant

Northacre Capital (3) Limited

Ordinary shares

100%

Dormant

Northacre Capital (5) Limited

Ordinary shares

100%

Property development

Northacre Capital (6) Limited *

Ordinary shares

100%

Dormant

Northacre Capital (7) Limited

Ordinary shares

100%

Dormant

Northacre Capital (8) Limited

Ordinary shares

100%

Property development

Northacre Residential Limited *

Ordinary shares

100%

Dormant

Nilsson Design Limited *

Ordinary shares

100%

Dormant

Northacre Land Limited *

Ordinary shares

100%

Dormant

Northacre Holdings Limited *

Ordinary shares

100%

Dormant

Northacre Design Limited *

Ordinary shares

100%

Dormant

Northacre Capital Limited *

Ordinary shares

100%

Dormant

Northcare Management Limited *

Ordinary shares

100%

Dormant

Northcare Management Services Limited *

Ordinary shares

100%

Dormant

Lifestyle (Interiors) Limited *

Ordinary shares

100%

Dormant

Available for sale financial assets

Lancaster Gate (Hyde Park) Limited

Ordinary shares

25.1%

Property development

* These subsidiary undertakings are in the process of being struck off as there has been no trading activity during the prior and current reporting period.

Northacre Capital (8) Limited was incorporated on 26^th September 2011.

15.	Inventories	Group
		2012	2011
		£	£
	Stock	-	11,845
	Work in progress	118,006	324,163

		118,006	336,008

	The Company had no stock or work in progress in either the prior or current reporting period.

16.	Trade and other receivables	Group		Company
		2012	2011	2012	2011
		£	£	£	£
	Trade receivables	136,517	374,511	-	-
	Amounts owed by group undertakings	-	-	7,309,782	6,146,872
	Other receivables	79,831	168,339	79,048	185,659
	Prepayments and accrued income	782,208	320,739	23,234	8,705,459

		998,556	863,589	7,412,064	15,037,990

	At the year end there was no provision for doubtful debts (2011: £216,956).

17.	Trade and other payables	Group		Company
		2012	2011	2012	2011
		£	£	£	£
	Trade payables	304,255	819,788	165,343	375,279
	Amounts owed to group undertakings	-	-	18,632,851	12,334,914
	Social security and other taxes	196,496	530,434	88,029	42,199
	Other payables	1,566,810	228,150	1,451,616	169,924
	Accruals and deferred income	1,491,094	1,104,682	812,472	796,497

		3,558,655	2,683,054	21,150,311	13,718,813

18.	Corporation Tax	Group		Company
		2012	2011	2012	2011
		£	£	£	£
	Corporation Tax	-	-	-	-
		-	-	-	-

19.	Borrowings, including lease finance	Group		Company
	Current Liabilities	2012	2011	2012	2011
		£	£	£	£
	Finance leases	22,702	158,566	15,767	130,828
	Other loans	10,490,740	-	-	-
	Bank overdraft	-	218,685	-	220,931
		10,513,442	377,251	15,767	351,759

	Finance leases are secured on the related assets.
	The bank overdraft facility of £500,000 was repaid on 31^st October 2011 and cancelled on 1^st November 2011.
	Other loans represent the Eurobond loan facility as detailed in note 1. The Eurobond loan facility was secured on all issued share capital of Northacre Capital (5) Limited.

20.	Borrowings, including lease finance	Group		Company
	Non-Current Liabilities	2012	2011	2012	2011
		£	£	£	£
	Loan from pension scheme	699,602	750,000	699,602	750,000
	Director loans	-	693,052	-	693,052
	Other loans	-	824,797	-	824,797
	Finance leases	-	22,706	-	15,771

		699,602	2,290,555	699,602	2,283,620

	The loan from the pension scheme of £699,602 (2011: £750,000) is in respect of the Northacre PLC Directors Retirement and Death Benefit Scheme. The loan is due to be repaid on 31^st July 2013 with interest charged at 4% above the Clearing Bank's base rate. The loan was partially repaid on 11^th January 2011 in order to facilitate the pension fund split. Interest due up until 29^th February 2012 was also paid on 11^th January 2011.

As at 29^th February 2012 the Group and Parent Company had obligations under finance leases that are secured on related assets as set out below:

	Group		Company
	2012	2011	2012	2011
Gross amounts payable:	£	£	£	£
Within one year	22,702	158,566	15,767	130,828
In two to five years	-	22,706	-	15,771

	22,702	181,272	15,767	146,599

Less: finance charges allocated to future periods	(9,457)	(44,751)	(6,372)	(29,324)

	13,245	136,521	9,395	117,275

21.	Provisions for other liabilities	Group		Company
		2012	2011	2012	2011
		£	£	£	£
	Loan settlement costs and profit share payable
	At 1^stMarch	2,350,000	2,350,000	2,020,000	2,020,000
	Payment in year	(625,000)	-	(437,500)	-
	Write back of provision in year	(185,000)	-	(144,500)	-
	Transfer to current liabilities: trade and other payables	(1,540,000)	-	(1,438,000)	-

	At 29^th February	-	2,350,000	-	2,020,000

	On 22^nd June 2010, the Company entered into an agreement to acquire the entire issued share capital of Templeco 643 Limited for a consideration of £1,250,000. The Company acquired Templeco 643 Limited as settlement in lieu of the loan arrangement agreement to share in the profits of The Abingdons Partnership. Of the consideration, two payments of £75,000 each were made on 22^nd June 2010 and 16^th August 2010. The balance of £1,100,000 was due from the proceeds of the dividends from The Lancasters Development. The balance payable was renegotiated to £965,000 payable in instalments. The Group repaid £625,000 on 31^st January 2012, £175,000 on 30^th March 2012, £150,000 on 31^st May 2012 and the balance of £15,000 on 30^th June 2012. A provision of £1,200,000 (2011: £1,250,000) which has been transferred to current liabilities: trade and other payables, represents the profit share payable to the Northacre PLC Directors Retirement and Death Benefit Scheme in relation to sale of Group's interest in The Abingdons Partnership. The amount represents the maximum possible profit share and will be paid from dividends received from The Lancasters Development.

22.	Future financial commitments

	Operating Leases	Group		Company
		2012	2011	2012	2011
		£	£	£	£
		Land & Buildings	Land & Buildings	Land & Buildings	Land & Buildings
	Net amount payable on operating leases which expire:
	Within one year	147,777	103,956	147,777	103,956
	In two to five years	591,900	584,702	591,900	584,702
	In over five years	626,765	774,740	626,765	774,740

		1,366,442	1,463,398	1,366,442	1,463,398


	Group		Company
Operating Leases	2012	2011	2012	2011
	£	£	£	£
	Other	Other	Other	Other
Net amount payable on operating leases which expire:
Within one year	35,247	46,467	12,920	16,320
In two to five years	92,665	144,978	45,220	65,280
In over five years	-	8,160	-	8,160

	127,912	199,605	58,140	89,760

23.

Capital Commitments

At the reporting date there were no outstanding commitments for capital expenditure.

24.

Earnings per Share

Loss per share of 27.27p (2011: 16.17p) is calculated on the loss attributable to Ordinary shares of £7,288,472 (2011: £4,320,033) divided by the weighted number of Ordinary shares in issue during the period.

Computation of basic earnings per share:

2012

2011

Net loss

(£7,288,472)

(£4,320,033)

Weighted average number of shares outstanding

26,723,643

Basic loss per share

(27.27)p

(16.17)p

Diluted loss per share

(27.27)p

(16.17)p

There were no potentially dilutive instruments in issue during the current or preceding year. All amounts shown relate to continuing operations.

25.	Share Capital	2012	2011
		£	£

	Called up, allotted and fully paid:
	26,723,643 Ordinary shares of 2.5p each	668,091	668,091
	Nil 'A' shares of 2.5p each	-	-

		668,091	668,091

26. Contingent Liabilities

A third party brought a claim against a subsidiary Company, Waterloo Investments Limited, regarding payment of a profit share of a completed development. Legal proceedings were commenced by the third party in 2001. The amount claimed is £744,008. Waterloo Investments Limited has counterclaimed against the third party for £333,708 plus interest and costs. No provision has been made in these financial statements for this liability as the Board is of the opinion that there is no prospect that the claim against Waterloo Investments Limited will be successful.

The Company is included in a group registration for VAT purposes and is therefore jointly and severally liable for all other group companies' VAT liabilities amounting to £123,804 (2011: £56,570).

On receipt of sufficient dividends from The Lancasters Development, it is the Board's intention to make the following payments, with this priority:

i. repayment of existing debt including interest

ii. repayment of the pension fund loan and profit share

iii. other accrued liabilities

iv. to pay a dividend to the Company's shareholders.

After retaining sufficient cash to fund future development projects and if, following the payment of dividends as referred to above, there are sufficient retained profits and funds available (which is at present uncertain), the Board then intends to make bonus payments to staff and directors, reflecting the success of The Lancasters Development. Should all expected dividends from The Lancasters Development be received, and there are sufficient cash resources remaining after satisfying the aforementioned priorities including a substantial dividend, the aggregate of these bonus payments could amount to c12.5% of the anticipated total profit share from The Lancasters Development.

27.	Related Party Transactions

	Group

	The Group's related parties as defined by International Accounting Standard 24 (revised), the nature of the relationship and the amount of transactions
	with them during the period were as follows:

		Nature of	2012		2011
	Related Party	Relationship	£	£	£	£	Nature of Transactions

			Total transactions in the year	Balance at the year end	Total transactions in the year	Balance at the year end


	Northacre PLC	1	(3,000)	-	-	3,000	Management fee receivable
	Directors Retirement and						from the Scheme
	Death Benefit Scheme

	Northacre PLC	1	50,398	(699,602)	-	(750,000)	Loan repayable to the Scheme
	Directors Retirement and						by Northacre PLC
	Death Benefit Scheme

	Northacre PLC	1	-	-	275,000	-	Loan repayable to the Scheme by
	Directors Retirement and						Northacre PLC. The loan was repaid
	Death Benefit Scheme						on 26^th June 2010

	Northacre PLC	1	98,883	-	(19,517)	(98,883)	Interest payable to the Scheme on
	Directors Retirement and						the loans to Northacre PLC. All
	Death Benefit Scheme						interest accrued to 29^th February
							2012 was paid on 11^th January 2011 and 29^th February 2012

	Northacre PLC	1	(108,465)	-	18,680	108,465	Disbursements paid by Northacre
	Directors Retirement and						PLC on behalf of the Scheme
	Death Benefit Scheme

	Northacre PLC	1	50,000	(1,200,000)	(1,250,000)	(1,250,000)	Provision in respect of profit share
	Directors Retirement and						to the Scheme in relation to the sale
	Death Benefit Scheme						of Group's interests in The
							Abingdons Partnership and write back of part of that premium

	K.B. Nilsson	2	140,617	-	(27,110)	(140,617)	Amount owed to K.B. Nilsson from
							Northacre PLC. The loan was repaid on 31^st October 2011

	K.B. Nilsson	2	(23,498)	-	(14,474)	(18,697)	Interest payable to K.B Nilsson
							on the loan to Northacre PLC.
							The interest was paid on 31^st October 2011

	K.B. Nilsson	2	-	-	-	-	K.B. Nilsson provided a
							personal guarantee for £570,000 to the Group's bankers as security in respect of all liabilities of the Group to the bank. The guarantee was released on 7^th November 2011

	E.B. Harris	3	20,000	(30,000)	(30,000)	(50,000)	Non-executive Directors fees for
							March 2011 - February 2012 invoiced from E.C. Harris LLP

	M. Williams	4	(30,000)	-	(28,333)	-	Non-executive Directors fees for
							March 2011 - February 2012

	M.A. AlRafi	5	300,000	-	-	(300,000)	Loan repayable to MTAF Group
							(M.A. AlRafi) by Northacre PLC.
							Loan was repaid on 31^st October 2011

	M.A. AlRafi	5	(19,889)	-	(30,230)	(40,559)	Interest payable to MTAF Group
							(M.A. AlRafi) on the £300,000 loan
							to Northacre PLC. Interest was paid on 31^st October 2011


	M.A. AlRafi	5	(390,000)	-	-	-	Premium paid on the early
							redemption of the £300,000 loan to Northacre PLC. Premium was paid
							on 31^st October 2011

	M.A. AlRafi	5	(60,000)	-	1,350	(13,650)	Executive Directors fees for
							March 2011 - February 2012

	M.A. AlRafi	5	350,000	-	(350,000)	(350,000)	Loan repayable to MTAF Group
							(M.A. AlRafi) by Northacre PLC
							including a £50,000 fixed premium.
							Loan was repaid on 31^st October 2011

	M.A. AlRafi	5	(23,493)	-	(2,493)	(2,493)	Interest payable to MTAF Group
							(M.A. AlRafi) on the £350,000 loan
							to Northacre PLC. Interest was paid on 31^st October 2011

	M.A. AlRafi	5	(260,000)	-	-	-	Premium paid on the early
							redemption of the £350,000 loan to Northacre PLC. Premium was paid
							on 31^st October 2011

	M.A. AlRafi	5	-	-	(1,973)	-	Loan repayable to MTAF Group
							(M.A. AlRafi) by Northacre PLC

	A. AlRafi	6	(3,200,000)	-	(800,000)	(800,000)	Loan repayable to A. AlRafi
							by Northacre PLC. Loan was repaid
							on 31^st October 2011

	A. AlRafi	6	(631,169)	-	(24,797)	(24,797)	Interest payable to A. AlRafi on the
							£800,000 loan to Northacre PLC.
							Interest was paid on 31^st October 2011

	A. AlRafi	6	-	-	(100,000)	-	Loan arrangement fee paid to
							A. AlRafi for £2m loan facility

		Nature of Relationships

1		K.B. Nilsson is a trustee and beneficiary of the Northacre PLC Directors Retirement and Death Benefit Scheme.
2		K.B. Nilsson is a Director of the Company.
3		E.B. Harris is a Director of the Company, and a member of E.C. Harris LLP.
4		M. Williams is a Director of the Company.
5		M.A. AlRafi is a Director of the Company.
6		A. AlRafi is the father of M.A. AlRafi.

			Company

			The Directors' and pension fund transactions in the Company are included in the Group disclosure above. In addition to these, the Company has the following related party transactions as defined by International Accounting Standard 24 (revised).


				Nature of	2012		2011
	Related Party			Relationship	£	£	£	£	Nature of Transactions

					Total transactions in the year	Balance at the year end	Total transactions in the year	Balance at the year end

	Group entities			1	321,357	-	791,061	-	Management Fees receivable
									in year from Group
									subsidiaries provided at arm's length

	Group entities			1	(30,417)	-	(69,998)	-	Management Fees payable in
									year to Group subsidiaries
									provided at arm's length
	Nature of Relationships

	1 The Group entities are wholly owned subsidiaries of the Company.


The balances at the reporting date are shown under notes 16 and 17 of the financial statements.

28.	Events after the Reporting Date

	Group

	On 4^th May 2012 Northacre PLC received a second distribution from The Lancasters Development. The total amount received was £2,997,559. Together with the first distribution of £1,150,000 received on 4^thDecember 2011 the Group received to date £4,147,559 of the total expected profits from The Lancasters Development. On 1^st May 2012 Northacre PLC entered into a new loan agreement with Auster Real Estate Opportunities S.a.r.l. established in Luxembourg. The total loan amount is £15m of which £13m was drawn down on the 30^th May 2012. The loan allowed the Group to repay its current Eurobond facility of £10.5m and secure more favourable terms. Interest is charged at 1.5% per month and the loan carries a fixed premium of 2% of the total facility (£260,000) which was paid on drawdown. The loan is due to be repaid upon receipt of sufficient dividends from The Lancasters Development or 18 months from the date of the drawdown, whichever is the earlier.

This information is provided by RNS

The company news service from the London Stock Exchange

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