Half Yearly Report

RNS Number : 9168W

Northacre PLC

29 November 2010

 

 

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

Interim Report for the six months ended 31st August 2010

29th November 2010

Northacre PLC today announces its interim results for the six months ended 31^st August 2010.

Northacre is the brand behind many of London's landmark addresses. Over the last twenty years Northacre has revived significant areas of Westminster, Kensington and Chelsea, developing in the most sought after locations in the capital for both local and international purchasers.

Northacre's revival philosophy, together with its brand and track record of delivery, are key components to unlocking the Northacre premium that consistently outperforms all market comparables.

Northacre's reputation for creating prestigious, award-winning residences from existing properties is unrivalled.

Chairman's Statement

The period under review has seen further consolidation for the Group in terms of resources and finance. The residential sector continues to suffer from a shortage in bank finance and this has unfortunately impacted on the pipeline of new development opportunities.

However, despite these challenging times, I remain confident that the new approaches we have received in the last year will result in a new development opportunity being secured in the near future.

The Lancasters continues to progress well in terms of both sales and construction programmes. First phase completion remains on course for Spring 2011 with practical completion due in Summer 2011. To date we have sold 55% of the area at anticipated values and I am confident that the remaining units will achieve at least similar values.

As announced on 3rd August 2010, we disposed of our interest in Vicarage Gate. Following the sale of our interest, the Group continues to provide development management, architectural and interior design services together with an incentivised profit share participation. I am pleased to report that we have commenced with our partners Kokomo Beach PTE Ltd the improvement to the design and programme for Vicarage Gate. We anticipate a favourable outcome to these discussions with a view to commence construction on this site next year. 

Our Subsidiaries have also performed well in the period and in particular our Interior Design subsidiary, Intarya, has continued to perform strongly in the period with the completion of the highly acclaimed show apartment at The Lancasters.

Outlook

We have consolidated our business over the last year and I am confident that Northacre will continue as the number one name in the prime residential sector. The current business climate continues to be a challenge for the prime residential market as this has had a knock on effect on the banking sector and consumer confidence. Nevertheless I am confident that our brand and unrivalled track record will stand us in good stead for the future.

Financial Review

The restriction on senior debt lending for residential development continues to impact on the quantum of new prime residential schemes in Central London. Northacre remains focused on delivering The Lancasters scheme next year with sales and construction progressing well and on programme.

As demonstrated by the recent sales activity at The Lancasters, with a further 21% of sales secured since year-end, the prime residential sector is continuing to show signs of recovery. Although we continue to be cautious of this upturn in the market, we are confident that the Group's unrivalled track record and skill base will allow us to get through these challenging times.

Review of Results

Headlines

Net Assets per share is 101.54 pence (2009: 37.04 pence). Net comprehensive income for the year is £16,895,282 (2009: loss £1,977,453) with a loss per share attributable to equity holders of 4.73 pence (2009: loss 7.40 pence).

Consolidated Statement of Comprehensive Income

Group turnover for the six months period increased by 6% to £2,987,439 (2009: £2,814,710). The Group's interior design subsidiary, Intarya, reported revenue growth by 24% to £2,038,318 (2009: £1,645,677). However, the absence of new development opportunities has resulted in reduced fee income of £949,121 (2009: £1,169,033) for the development management and architectural services in the period.

Administration costs for the six months decreased to £2.6m (2009: £2.9m) as a result of the measures taken at the beginning of the year. Further cost saving measures will continue to be implemented as appropriate and be reviewed on an on-going basis.

In accordance with International Accounting Standards we have made a fair valuation of our investment at The Lancasters with reference to secured sales as at 31st August 2010. This has been reflected in the results for the period.

Consolidated Statement of Financial Position

In accordance with International Accounting Standards, the investments in joint ventures (classified as available for sale financial assets in the Consolidated Statement of Financial Position) represent, where appropriate, the cash equity invested 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 and this is reflected in these results.

Including this fair value adjustment the available for sale financial assets amounted to £20.5m (2009: £1.89m). In line with our Joint Venture agreement with Minerva Plc, Northacre is entitled to profits from The Lancasters based on the following sliding scale:

Profits up to 10% of Project Costs		5%
Profits between 10% and 15% of Project Costs		20%
Profits between 15% and 20% of Project Costs		40%
Profits above 20% of Project Costs		50%

As announced on 3rd August 2010 the Group disposed of its interest in the Vicarage Gate scheme to our new joint venture partners, Kokomo Beach Pte Limited. The proceeds have been fully utilised in reducing the Group's debt position. Following the sale of our interest, the Group continues to provide development management, architectural and interior design services together with an incentivised profit share participation.

Financing

The Group's activities continue to be funded by a mixture of equity, cash and bank borrowings with the aim of maximising shareholder value. However given the restriction of senior debt finance from the banks for the residential market, the majority of the funding in the near future is likely to consist of equity investment rather than traditional debt finance.

Despite the continuing difficult economic climate, the Board is committed to expanding the Northacre brand further into prime Central London by seeking appropriate new development opportunities that meet our investment criteria.

Copies of the Interim Report are available on our website www.northacre.com 

ENQUIRIES:

NORTHACRE PLC               020 7349 8000

Klas Nilsson                                      Chairman and Chief Executive

Manish Santilale                               Finance Director

KBC PEEL HUNT                  020 7418 8900

Capel Irwin

Consolidated Interim Statement of Comprehensive Income (Unaudited)

For the six months ended 31st August 2010

			6 Months		6 Months		Year
			ended		ended		ended
	Note		31.8.2010		31.8.2009		28.2.2010
			Unaudited		Unaudited		Audited
			£'000		£'000		£'000
Group Revenue	2		2,987		2,815		6,225
Cost of sales			(1,478)		(1,175)		(2,483)
Gross Profit			1,509		1,640		3,742
Administrative expenses			(2,604)		(2,959)		(6,235)
Other operating income			-		3		3
Group Loss from Operations			(1,095)		(1,316)		(2,490)
Investment revenue			28		(43)		(27)
Other losses			(97)		(588)		(1,311)
Finance costs			(100)		(37)		(121)
Share of profit from associated undertakings			-		-		7
Loss before Taxation	2		(1,264)		(1,984)		(3,942)
Taxation			-		7		7
Loss for the period attributable
to equity holders of the Company			(1,264)		(1,977)		(3,935)
Other comprehensive income:
Changes in fair value of available for sale financial assets			18,160		-		2,299
Total comprehensive income/(loss) for the period			16,896		(1,977)		(1,636)
Loss per ordinary share
Basic			(4.73)p		(7.40)p		(14.72)p
Diluted			(4.73)p		(7.40)p		(14.72)p

Other than the disposal of the Group's interest in Vicarage Gate Holdings Limited there were no acquisitions or disposals of any activities in the period.

Summarised Consolidated Interim Statement of Financial Position (Unaudited)

For the six months ended 31st August 2010 

					31.8.2010		31.8.2009		28.2.2010
					Unaudited		Unaudited		Audited
			Note		£'000		£'000		£'000
Non-Current Assets
Goodwill					8,828		8,828		8,828
Property, plant and equipment					290		286		322
Investments in associates					51		44		51
Available for sale financial assets					20,461		1,896		3,456
					29,630		11,054		12,657
Current Assets
Inventories					734		37		49
Trade and other receivables					2,054		3,168		2,598
Cash and cash equivalents					-		-		268
					2,788		3,205		2,915
Total Assets					32,418		14,259		15,572
Current Liabilities
Trade and other payables					2,694		2,506		2,567
Borrowings, including lease finance					336		409		434
					3,030		2,915		3,001
Non-Current Liabilities
Borrowings, including lease finance					1,152		1,446		1,231
Provisions for other liabilities					1,100		-		1,100
					2,252		1,446		2,331
Total Liabilities					5,282		4,361		5,332
Equity
Share capital					668		668		668
Share premium account					18,552		18,552		18,552
Retained Earnings					7,916		(9,322)		(8,980)
Total Equity					27,136		9,898		10,240
Total Equity and Liabilities					32,418		14,259		15,572

Summarised Consolidated Interim Statement of Cash Flows (Unaudited)

For the six months ended 31st August 2010

				6 Months		6 Months		Year
				ended		ended		ended
				31.8.2010		31.8.2009		28.2.2010
				Unaudited		Unaudited		Audited
				£'000		£'000		£'000
Cash flows from operating activities
(Loss) for the period before tax				(1,264)		(1,984)		(3,942)
Adjustments for:
Investment revenue				(28)		43		27
Finance costs				100		37		121
Loss on disposal of investment				-		-		723
Share of (profit) in associate				-		-		(7)
Write down cost of investment				97		588		588
Depreciation and amortisation				55		57		112
(Increase)/decrease in working capital				(14)		662		1,132
Cash used in operations				(1,054)		(597)		(1,246)
Interest paid				(100)		(37)		(121)
Tax refunded				-		7		7
Net cash used in operating activities				(1,154)		(627)		(1,360)
Cash flows from investing activities
Acquisition of interest in available for sale financial assets				-		(11)		(11)
Purchase of property, plant and equipment				(23)		(236)		(328)
Proceeds from sale of available for sale financial assets				1,058		-		1,265
Interest received				8		(63)		(56)
Dividends received				20		20		30
Net cash generated from/(used in) investing activities				1,063		(290)		900
Cash flows from financing activities
Proceeds from borrowings				-		-		300
Proceeds from finance leases				-		265		483
Repayment of borrowings				(275)		-		(275)
Repayment of finance leases				(79)		(34)		(143)
Net cash (outflow)/inflow from financing activities				(354)		231		365
Decrease in cash and cash equivalents				(445)		(686)		(95)
Cash and cash equivalents at beginning of period				268		363		363
Cash and cash equivalents at end of the period				(177)		(323)		268
Cash and cash equivalents at 31 August 2010 and 31 August 2009 represent bank overdrafts repayable on demand and are as included within 'Borrowings including lease finance' in the Consolidated Interim Statement of Financial Position.

Notes to the Unaudited Interim Financial Statements

For the six months ended 31st August 2010

1.              Basis of Preparation and Accounting Policies

Basis of Preparation

The interim financial information for the six months ended 31 August 2010 and 31 August 2009 is unaudited. The interim financial information was approved by the Board of Directors on 29 November 2010.

The statutory financial statements for the year ended 28 February 2010, prepared under International Financial Reporting Standards (IFRS), have been reported on by the Group auditors and delivered to the Registrar of Companies. The audit report was unqualified and did not contain a statement under s498 of the Companies Act 2006.

These accounts have been prepared in accordance with International Accounting (IAS) 34 'Interim Financial Reporting'.

The interim financial information does not constitute statutory financial statements within the meaning of the Companies Act 2006.

Accounting Policies

The accounting policies adopted are consistent with those applied as at 28 February 2010 and those that the Directors expect to be adopted as at 28 February 2011. They are set out in full in the financial statements for the year ended 28 February 2010.

Going Concern

The Company and Group meet their day-to-day working capital requirements partly through monies loaned from the Northacre PLC Directors Retirement and Death Benefit Scheme, partly from the Group's bankers and partly from other loans. The Directors expect the facilities currently agreed 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 the Northacre PLC Directors Retirement and Death Benefit Scheme of £750,000 is not due for repayment until 31 July 2013.

(ii)    The Group's bankers have agreed revised facilities with a review on 28 February 2011.

(iii)   A loan facility of £300,000 was made available by the Director Mohamed AlRafi on 16 October 2009. The loan is not repayable until dividends from the Lancasters Development are received.

(iv)   An additional loan facility of £300,000 was made available by the Director Mohamed AlRafi on 4 August 2010. The loan is repayable within 6 months with the fixed premium of £50,000.

(v)    A loan facility of £114,000 was made available by the Director Klas Nilsson in September 2009. The loan has no fixed date of repayment.

(vi)   An additional loan facility of £80,000 was made available by the Director Klas Nilsson in July 2010. The loan has no fixed date of repayment.

The Directors have prepared detailed cash flow projections up to 28 February 2012 making reasonable assumptions about the levels and timing 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 available facilities. On this basis the Directors consider it appropriate to prepare this interim financial information 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 thereof, 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:

o The valuation and recoverability of goodwill

o The book value of fixed assets and depreciation

o The value of available for sale financial assets        

o The status and progress of the developments and projects                     

Basis of Consolidation

The Group accounts include the accounts of the Company and its subsidiary undertakings, together with the Group's share of the results of associates.

Revenue  

Turnover 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.

Notes to the Unaudited Interim Financial Statements

For the six months ended 31st August 2010 (Continued)

1.              Basis of Preparation and Accounting Policies (Continued)

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 the Statement of Comprehensive Income, or at cost less any necessary provision for impairment where a reliable estimate of fair value is not able to be determined.

Goodwill

Goodwill is determined by comparing the amount paid on the acquisition of a business and the aggregate fair value of its separable net assets and is reviewed annually for impairment and adjusted appropriately to reflect the true value as at that date.

Financial Risk Management

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.

Notes to the Unaudited Interim Financial Statements

For the six months ended 31st August 2010 (Continued)

2	Segmental Information
	The Group's primary operating segments are business segments.  The segmental analysis of the Group's business was derived from its principal activities as follows:
	Revenue				6 Months ended		6 Months ended		Year ended
					31.8.2010		31.8.2009		28.2.2010
					Unaudited		Unaudited		Audited
					£'000		£'000		£'000
	Development management				619		631		1,855
	Interior design				2,038		1,646		3,815
	Architectural design				330		538		555
					2,987		2,815		6,225
	Loss before Taxation				6 Months		6 Months		Year
					ended		ended		ended
					31.8.2010		31.8.2009		28.2.2010
					Unaudited		Unaudited		Audited
					£'000		£'000		£'000
	Development management				(951)		(1,775)		(3,261)
	Interior design				(90)		(74)		194
	Architectural design				(223)		(135)		(882)
					(1,264)		(1,984)		(3,949)
	Share of profit of associate				-		-		7
					(1,264)		(1,984)		(3,942)
	Assets
					31.8.2010		31.8.2009		28.2.2010
					Unaudited		Unaudited		Audited
					£'000		£'000		£'000
	Development management				26,420		8,517		9,494
	Interior design				3,763		2,956		3,646
	Architectural design				2,184		2,742		2,381
					32,367		14,215		15,521
	Investments in associate				51		44		51
					32,418		14,259		15,572
	Liabilities
					31.8.2010		31.8.2009		28.2.2010
					Unaudited		Unaudited		Audited
					£'000		£'000		£'000
	Development management				3,759		935		1,100
	Interior design				908		2,227		2,647
	Architectural design				615		1,199		1,585
					5,282		4,361		5,332

 

END

 

 

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