TIDMNLD
RNS Number : 8553S
Nordic Land PLC
17 September 2010
17 September 2010
Nordic Land plc
Preliminary Announcement of Results
For the year ended 31 March 2010
Nordic Land plc ('Nordic Land' or the 'Company', or together with its
subsidiaries, the 'Group') is a Jersey-registered, property investment company
established in April 2007 to invest principally in retail real estate in the
Nordic region including Sweden, Norway and Finland. The Manager is Lathe
Investments (Nordic) LLP.
The Company's shares are traded on the AIM market of the London Stock Exchange,
under the symbol NLD.
HIGHLIGHTS
The Company has announced separately today the proposed sale of its property
portfolio (the "Disposals") subject to shareholder approval. The intention is to
return the estimated net cash proceeds from the Disposals to shareholders and,
subject to further shareholder approval, cancel the Company's admission to
trading on AIM and wind up the Group.
Disposal highlights
Ø Disposals based on a total gross property price of SEK 673 million (GBP 61.2
million at the current exchange rate) (before repaying bank borrowings and
meeting all costs) compared to 31 March valuation of SEK 669 million (GBP60.8
million at the current exchange rate or GBP61.3 million at the 31 March 2010
exchange rate).
Ø Expected total cash return of capital to shareholders of approximately 23
pence per share comprising an initial distribution of approximately 15 pence per
share expected to be paid in December 2010 and a final distribution of
approximately 8 pence per share to be paid on conclusion of the winding up which
is expected to be in the first quarter of 2012.
Ø The expected total cash return to shareholders represents a 53 per cent
premium to the Company's 20 day volume weighted average share price on 16
September 2010 of 15 pence and is 23 per cent lower than the Adjusted NAV (*)as
at 31 March 2010 of 30 pence per share.
Ø Shareholders representing 40 per cent of the Company's issued share capital
have indicated their intention to vote in favour of the Disposal.
Financial highlights
Ø EPRA NAV per share** of GBP0.46 (2009: GBP0.91) and Adjusted NAV of 30 pence
per share.
Ø Portfolio value of SEK 669 million or GBP61.3 million (2009: SEK 761 million
or GBP64.2 million).
Ø Loss for the period attributable to equity shareholders of GBP8.4 million
(2009: loss of GBP3.8 million), mainly due to a loss on revaluation of the
portfolio of GBP9.3 million (2009: loss of GBP3.7 million)
Ø Net cash outflow from operations of GBP0.3 million (2009: outflow of GBP1.0
million) and total cash outflows (before drawdown of borrowings to fund pre-let
development expenditure) of GBP1.8 million (2009: outflow of 1.5 million).
Ø Net available cash as at 31 March 2010 of GBP4.8 million (2009: GBP5.4
million).
Ø Net debt/property gearing ratio as at 31 March 2010 of 81.9% (2009: 69.1%).
Ø Bank loans operating within covenants and mature in April 2012 with an option
for the Group to extend for a further year.
Chairman, Ray Horney commented "These results demonstrate the ongoing
difficulties facing the Nordic Land Group as a sub scale, highly geared property
company with limited cash resources. The Board believes that the proposed
disposals are in the best interests of the Company and its shareholders and
unanimously recommend that shareholders vote in favour of the resolution at the
forthcoming general meeting."
* Adjusted NAV is the EPRA NAV as at 31 March 2010 adjusted to reflect the
changes to the Group's balance sheet which would have arisen if the decision
to sell the Group's properties had been taken prior to 31 March 2010. If this
had been the case, the carrying value of the Group's fixed rate borrowings
would, under IFRS, have been amended in the Group's balance sheet as at 31 March
2010 to include the revised cashflows payable on early settlement of the
borrowings.
** EPRA NAV, the measure recommended by the European Public Real Estate
Association ("EPRA"), is the Net Asset Value per share of the Company adjusted
to exclude the effect of deferred tax relating to the revaluation of investment
properties and the fair value of derivative financial instruments net of
attributable taxation.
For further information please contact:
Nordic Land plc
Ray Horney +44
(0) 1273 775225
SP Angel Corporate Finance LLP
Robert Wooldridge +44 (0)
20 7647 9650
Matrix Corporate Capital LLP
Stephen Mischler +44
(0) 20 3206 7000
Bankside Consultants
Simon Rothschild/Oliver Winters +44 (0) 20
7367 8888
CHAIRMAN'S STATEMENT
I am pleased to provide an update on the Group's strategic developments and also
present the results for the year ended 31 March 2010.
Proposed sale of the Group's properties
The Group has announced today the proposed sale (the "Disposal") of its entire
property portfolio (the "Property Portfolio"), which under the AIM rules is
subject to approval by shareholders. Accordingly, the Board has published a
circular to shareholders giving notice of a general meeting to be held on 7
October 2010 to seek shareholder approval for the proposed Disposal. Provided
shareholders support the Disposal, the directors intend to return the net
proceeds of the Disposal to shareholders as a cash distribution and, subject to
further approval from shareholders, cancel the admission of the trading of the
Company's Shares on AIM and commence the winding up of the Group.
In reaching their decision to pursue the Disposal, the directors have considered
a number of issues facing the Group as set out in more detail below. These
include the strain placed on the Group's cash resources from its ongoing
operational losses and the capital expenditure obligations in respect of the
Property Portfolio. In addition, the Group is exposed to refinancing risks in
connection with its existing Bank Borrowings which mature in April 2012 (with an
option for the Group to extend by one year from that date) at which time the
Group may have to inject significant cash equity into the Property Portfolio
which the directors believe the Group may not be able to fund. As the loan
maturity date approaches or as the Group's cash resources are reduced, so it is
more likely that any attempt to dispose of all or part of the Property Portfolio
would be perceived as forced sales which may reduce the sale proceeds achieved.
These factors, the directors believe, would reduce the equity value available to
Shareholders in the event that the Disposal were not to be pursued.
After repayment of the Group's bank borrowings and associated break fees and
other settlement costs and after allowing for all costs of the Disposal and
estimated future costs of winding up the Group, the proposed Disposal is
expected to leave the Company with net cash resources ("Estimated Net Cash
Resources") of approximately GBP4.6 million which is equivalent to 23 pence per
share. This is a 53 per cent premium to the 20 day volume weighted average price
of the Company's shares on 16 September 2010 of 15 pence.
The Estimated Net Cash Resources are materially lower than the NAV of the
Company as at 31 March 2010 as set out in the financial statements, which is 46
pence per share. This is because, in accordance with IFRS, the NAV of the
Company as at 31 March 2010 is calculated on the basis of the Group's borrowings
being recorded at amortised cost which is consistent with the fact that the
directors had not, at that date, taken the decision to sell the Property
Portfolio. However, had this decision been taken prior to 31 March 2010, then
the carrying value of the Group's borrowings in the financial statements for the
year ended 31 March 2010 would have been amended to include all cashflows
payable on early repayment of these borrowings and the resulting NAV of the
Company as at 31 March 2010 would have been 30 pence per Share. The Estimated
Net Cash Resources represent a 23 per cent discount to this adjusted NAV of the
Company which discount reflects the costs associated with the Disposal and the
winding up of the Group.
The intention is to return the Estimated Net Cash Resources to shareholders by
way of two distributions; an initial distribution in December 2010 of
approximately 15 pence per share and a final distribution of approximately 8
pence per share in the first quarter of 2012 following the release of the
proportion of the sale proceeds placed in escrow to cover any potential warranty
claims.
The calculation of the distributions is based on a number of assumptions
including estimates for the break fees and settlement costs payable to the bank,
exchange rates and costs for the winding up and, accordingly, the actual
distributions may vary from the amounts above. In addition, if the purchasers
bring claims against the escrow monies, the level of the final distribution may
be lower than the amount above.
If the proposed Disposal is approved and the Group completes the sale of the
Property Portfolio the Group's operations will effectively cease. The directors
intend that, if shareholders vote in favour of the Disposal, a subsequent
general meeting of the Company will be called in November 2010 to seek
Shareholder approval for the summary winding up of the Company and the rest of
the Group and the cancellation of the admission to trading on AIM of the
Shares,.
Provided thatthe distributions are made as part of a summary winding up of the
Company, as the directors intend, the directors expect that the distributions
will be treated in the hands of shareholders as capital receipts.
Background to the Proposed Disposals
The decision to recommend the Disposal of the Property Portfolio was taken after
the Board had reviewed the Group's options in the light of the strategic issues
facing the Group. These include:
· The lack of liquidity in the Shares: There is only limited liquidity in
the trading of the Company's shares. This is a reflection of the relatively
small market capitalisation of the Group and the Company's tightly held
shareholdings. This contributes to the shares trading at a large discount to NAV
and causes even small share transactions potentially to result in large price
movements.
· The Group's operational losses: Before taking into account any unrealised
profit or loss from revaluation of the Property Portfolio, the Group is
operationally cashflow negative such that its cash resources, which were GBP4.8
million as at 31 March 2010, are steadily being depleted. The cash outflow from
operations for the year ended 31 March 2010 was GBP0.3 million (2009: outflow
GBP1.0 million). This is due to the Group's lack of scale whereby the cash
generated from owning the Property Portfolio (after financing costs) is exceeded
by the management and administration costs of running the Property Portfolio and
the Group.
· Potential capital expenditure obligations: The directors expect that
significant funds will need to be invested as capital investment in the Property
Portfolio to maintain and improve its properties and meet tenant requirements.
In the year ended 31 March 2010, it invested GBP1.5 million (2009: GBP0.5
million). This potential capital expenditure obligation over the next few years
has been estimated to amount to more than GBP2.7 million. Whilst some of this
expenditure may be discretionary and some of it may be deferred, it may not be
possible to fund the full amount from the Group's existing cash resources. Any
deferral of this expenditure may impact on the capital value of the Property
Portfolio.
· Medium-term refinancing risks: The Property Portfolio is financed by
secured bank loans, which are due to mature in April 2012 with an option for the
Company to extend repayment by a year from that date. The loans have no
loan-to-value covenants and all loans are currently operating within their
interest cover ratio covenants. The Board does not consider refinancing to be a
concern in the short term but, given the decline in property values and the
reduction in the loan to value ratios at which banks are prepared to lend, it is
likely that, when the Group's loans need to be refinanced, significant new
equity will be required. If the Group is not able to raise equity finance in
order to refinance its bank loans, then the banks may enforce their security and
take control of the Property Portfolio which may materially reduce the equity
value available to shareholders.
· Scale of potential future equity fundraising: If the Group were to seek to
raise the additional cash funds that are required for it to refinance its
existing borrowings on maturity by way of an equity fundraising, the scale of
the fundraising required is likely to be greater than the total amount raised by
the Company from shareholders to date and very much more than the Group's
existing market capitalisation. As at 31 March 2010, the Group's borrowings were
90 per cent of the valuation of the Property Portfolio. On the assumption that
refinancing would be secured at a loan to value level of 65 per cent and that
the 31 March 2010 valuation of the Property Portfolio does not change, the
Company would be required to raise additional cash resources of some GBP15
million, which is five times its market capitalisation on 16 September 2010
(based on the 20 day volume weighted average share price) to refinance the
Group's current borrowings. In addition, it is likely that the Company would
also be required to raise further funds to finance both the Group's ongoing
operational losses and the capital expenditure obligations as described above.
The Directors believe that an equity fundraising of this nature would not be
supported by the current holders of a significant proportion of the Company's
Shares.
· Risk of forced sales: The market would be aware of the refinancing risks
described above since details of the Group's borrowings and its cash balances
are disclosed in its financial statements. Accordingly, as the refinancing date
approaches, or as the Group's cash resources are reduced, the more likely it is
that any attempt by the Group to sell the Property Portfolio will be seen as
forced sales, imposed on it by the need to refinance its debt. This may have a
negative impact on the Group's ability to negotiate with prospective purchasers
and may reduce the sale proceeds achieved with a consequential impact on the
equity value available to shareholders.
In reaching its decision to recommend the Disposal to shareholders, the Board
has also considered the possible advantages of not selling the Property
Portfolio now or of selling only part of the Property Portfolio:
· Improvement in the Swedish property market: According to published
research, the Swedish property market reached a low point around the first
quarter of 2009. Since then there has been some improvement with yields falling
and an increase in transaction volumes as investor confidence returns and
financing becomes more available. Nevertheless, valuations remain below peak
levels and further improvements in valuations over the medium term are possible.
However, the directors are concerned that such improvements may not occur on a
sufficient scale and in sufficient time given the Group's refinancing risk and
limited cash resources.
· Reduction in banking break fees: The Group will incur costs of
approximately GBP2.6 million arising from the early repayment of the Group's
borrowings. If the borrowings were repaid closer to the maturity date the break
costs would be lower. Against this, the directors have considered the
operational and capital cash outflows that would be incurred by the Group if the
disposal process were delayed.
· Development potential in the Property Portfolio: The Directors believe
that there is development potential within the Property Portfolio, particularly
at Terminalen property in Helsingborg. However, the directors are concerned that
realising this potential will take time and will require investment in the
properties of an amount in excess of the Group's available cash resources.
Further, the directors are of the opinion that the proposed sale price of
Terminalen reflects the development potential of this site.
· Planning uncertainty at Sickla: The directors have considered the timing
of the sale of Sickla, where the valuation at 31 March 2010 and the proposed
sale price have been depressed by uncertainty over the property's planning
status. The site's current retail use is based on a temporary planning consent
which expires in March 2014 and, following a change in planning law, cannot be
extended. If the Group applied for and was granted permanent permission for
continued retail use on this site, then the value of this property would
increase and the Group could expect to realise a higher sale price. The
directors have been advised that the application will take approximately two
years to be determined. The directors have received conflicting opinions from
property consultants as to the likelihood of a retail planning application being
successful; the Group's property adviser, DTZ, has stated that it believes that
such an application has a good probability of success and the 31 March 2010
valuation included in the financial statements of SEK 42 million (GBP3.8
million) has been determined on this basis; another firm of international
property consultants engaged by the Group to review the valuation of Sickla has
expressed its view that the successful outcome of an application is
significantly less certain which would result in a materially lower valuation.
The proposed sale price is SEK 35 million (GBP3.2 million). The directors have
reached the decision to sell Sickla now after taking into account the
uncertainty of the planning process, the timescale for resolving it and the
benefits to shareholders of disposing of all properties at the same time.
As part of the review of the Group's strategic options, the Board has also
considered and explored mergers or joint ventures with other parties and the
sale of the Group and options to reorganise and simplify the Group's structure.
The Manager and the Board first explored asset disposals in the first half of
2009 as a possible solution to the issues facing the Group, when the sale of
Terminalen was considered, following interest from a major Swedish real estate
investor. The indicative price offered was not at a level which justified a
sale in the view of the Manager and the Board, reflecting subdued real estate
market conditions at the time; accordingly the opportunity was not pursued.
The Board subsequently negotiated an agreement with the Manager in September
2009 (the "New Lathe Agreement") whereby the sale of Terminalen and the
remaining assets would be pursued, subject to favourable market conditions.
Under the New Lathe Agreement, in the event that individual assets were sold,
management fees payable to Lathe under the Management Agreement would be
reviewed; and if all assets were sold, with the proceeds being returned to
shareholders, and Nordic Land were to be wound up, the Management Agreement
would be terminated and no further management fees would be payable. If
shareholders approve the Disposal and the Company subsequently commences the
winding up process, the New Lathe Agreement will result in significant savings
compared to the Management Agreement under which the Company was contracted to
pay a management fee to the Manager until April 2012 at the higher of GBP300,000
or 0.65 per cent of gross consolidated assets per annum; fees paid to the
Manager in the financial year to 31 March 2010 were GBP458,000.
In March 2010, the Board sought the views and advice of several local property
agents in Sweden who stated that sentiment and demand had recovered to a point
where it was possible, in their view, to sell the Group's properties at prices
which should generate a return for Shareholders in excess of the Company's share
price at the time, albeit still below the Company's then published NAV. The
Board appointed DTZ to pursue potential asset disposals and this was announced
by the Company on 12 April 2010.
I would at this point like to express the Board's gratitude to S P Angel
Corporate Finance LLP, our Financial Advisors, who have worked extremely hard
assisting the Board to put together the proposal before you and without whom it
would not have been possible.
Results and Dividend
As at 31 March 2010, the value of the Group's portfolio had decreased by 12 per
cent to SEK 669 million (GBP 61.3 million) from SEK 761 million (GBP64.2
million) at 31 March 2009. The decline in property valuations in local currency
has been partially compensated by the relative strength of Swedish krona against
sterling such that in sterling, the Group's reporting currency, the decline was
5 per cent.
Within this, the valuation of the property at Sicklaon has fallen by 26 per cent
in local currency. This is due to a change in the planning law such that the
property's existing temporary permission for retail use cannot be extended and a
new application to the municipality will have to be made to allow for retail use
beyond March 2014. If the new application is not successful, an alternative use
will have to be found for this site and its value would be significantly lower.
As is described more fully in the Annual Review and the financial statements,
the fall in value as at 31 March 2010 reflects this uncertainty over the
property's long term use.
As a result principally of the reduction in property values the EPRA NAV per
share of the Company has decreased over the period by nearly 50 per cent to 46
pence per share (2009: 91 pence per share).However, had the decision to sell the
Property Portfolio been taken prior to 31 March 2010, then the carrying value of
the Group's borrowings in the financial statements for the year ended 31 March
2010 would have been amended to include all cashflows payable on early repayment
of these borrowings and the resulting NAV of the Company as at 31 March 2010
would have been 30 pence per Share.
Net rental income for the year was GBP3.7 million (2009: GBP3.4 million). The
net loss for the year attributable to shareholders was GBP8.4 million (2009:
loss of GBP3.8 million) after the loss on revaluation of investment properties
of GBP9.3 million (2009: loss of GBP3.7 million) and a tax credit of GBP1.4
million (2009: credit of GBP0.7 million) principally due to deferred tax on the
loss on revaluation of the investment properties.
The net cash flow used in operating activities was GBP0.3 million (2009: outflow
of GBP1.0 million) and, after capital expenditure and further loan drawdowns,
the net decrease in cash and cash equivalents was GBP0.9 million (2009: decrease
of GBP1.5 million). Available cash balances at the year end were GBP4.8 million
(2009: GBP5.3 million).
In line with the statement made at the time of admission to AIM in 2007, no
dividend has been declared.
Relationship with the Manager
Over the last 15 months there have been a number of disagreements between the
Board and the Manager on operational and strategic matters, including the
decision to sell the Property Portfolio, and the relationship between the Board
and the Manager has become increasingly strained.
Given this, the Board felt it necessary to take on the direct management of the
Disposal process. This has resulted in a significant additional workload for the
Board well in excess of what could reasonably be expected from non-executive
directors. Accordingly, and on the recommendation of the Company's advisers, it
has been agreed that the Board will receive additional fees in aggregate of
GBP39,000 for the period from April 2010 to date. Going forward, the Directors
have agreed that, with effect from Completion of the Disposal, their aggregate
annual fees will be reduced to GBP30,000 per annum which is half the existing
level.
The deterioration in the relationship between the Board and the Manager has had
an impact on the efficient operation of the Group to a point where, in the
Board's view, it would be detrimental to the interests of shareholders to allow
the situation to continue. If the proposed Disposal is approved by shareholders
then, following the commencement of the intended winding up of the Company, the
Management Agreement will terminate and the issue will fall away; if not, an
alternative solution would be required involving a change of either the Manager
or the Board.
Board composition
On 13 April 2010, the Company announced the resignation from the Board of the
two executive directors, Ian Knight (who is also the Managing Partner of the
Manager) and Olle Arnoldsson. Since this date, the Board has comprised the
continuing four independent non-executive directors which is consistent with
other AIM listed property companies with an external manager.
The General Meeting
As stated above, the Board has called a general meeting of shareholders to
consider the Disposal on 7 October 2010. If the Disposal is approved, the
directors intend to seek further shareholder approval to cancel the admission of
the Company shares to trading on AIM and wind up the Group. The pressures facing
the Group as described above have led the Board to conclude that the proposed
Disposal represents the best option for the Company and its shareholders.
Accordingly, the Directors unanimously recommend that shareholders vote in
favour of the Resolution.
Shareholders, including those directors who are shareholders, have indicated in
writing to the Company that it is their intention to vote in aggregate 7,946,000
shares, representing 40 per cent of the Company's issued share capital, in
favour of the Resolution.
We look forward to receiving your support at the meeting.
RAY HORNEY
Chairman
17 September 2010
ANNUAL REVIEW
DISPOSAL OF THE PROPERTY PORTFOLIO
As is discussed in the Chairman's Statement, subsequent to the year end the
Group has entered into agreements to sell each of its properties conditional on
shareholder approval and the directors have called a general meeting top seek
shareholder approval for the disposals. If the resolution is adopted, the
intention is to seek further approval to cancel the admission of the Company's
shares to trading on AIM and commence the summary winding up of the Group. The
directors intend to return the net cash proceeds (after repaying the bank
borrowings and other settlement costs payable to the bank and after providing
for the costs of the disposals and the winding up) to shareholders.
Further details of the disposals are set out in note 24 to the financial
statements.
THE NORDIC PROPERTY MARKET
Recent research reports from CBRE state that there is evidence suggesting that
the global economic recovery is beginning to gather some momentum, with more
positive signs emerging in most parts of the world. Asia and the Pacific are
seeing the strongest growth, whilst Europe continues to lag.
Consumer and retailer sentiment is trending upwards as levels of optimism
improve, mirroring the improvement in the overall economic outlook. Equally,
consumers remain cautious about the prospects for employment and incomes. As a
result, greater confidence has generally not yet translated directly into retail
sales growth. Some retailers are still pursuing their strategic expansion
plans, but they too are exhibiting greater caution than in earlier parts of the
decade.
Whilst there has been relatively little change in key lending terms recently,
there are some signs of improving lender confidence.
Whilst slower than over the previous six months or so, prime yields have
continued to fall across many European markets since the start of the year. The
most notable shifts were reported in the office sector, but retail and
industrial yields have also continued to decline. Improved investor sentiment
and a large pool of investors targeting the prime segment of the market is
supporting value recovery. This is in contrast to secondary real estate, the
short term outlook for which remains muted in the current economic climate.
In Sweden, as investor confidence returns, and signs of rents bottoming out are
evident, property yields have started to level off and during the first three
months of the year there has been a downward movement on prime yield levels,
mainly in the office sector. At the same time, the existing yield spread
between prime and secondary properties has widened as the risk of increasing
vacancies and decreasing rents for these properties remains in the coming years.
International investors are now starting to target the Swedish market again.
During the first quarter of 2010 international investors purchased properties
with a value of SEK 2.8 billion. This was an increase of almost 220% over the
prior quarter and the largest registered volume since the last quarter of 2008.
However, the strained debt market continues to affect the level of investment
activity. While the situation has improved gradually since last summer, we are
still far from the credit markets we have been used to since the start of the
financial crisis. Tougher lending conditions in the form of higher interest
margins, lower loan-to-value ratios as well as amortisation requirements have
also become obstacles for many deals.
OUR BUSINESS MODEL
The Group's strategy is to focus on multi-let investment properties with a
strong retail element. This forms the basis of the Group's strategy of seeking
to add value whilst having a well-spread mix of tenants.
The Company's acquisition process is stringent and based on local knowledge. For
each property, and further development thereof, detailed business plans are
prepared to manage risk and to add real value through both development and asset
management.
Acquisition financing is carefully structured to provide sufficient headroom to
operate within loan covenants. Protection against future interest-rate
movements is achieved by fixed-rate funding, which, in turn, matches the timing
of the contracted income flows from occupational leases.
Nordic Land's financial controls are equally rigorous and detailed working
capital forecasts are maintained to assist in the planning of property
acquisitions and subsequent developments.
As far as property operations are concerned, the Group has appointed Lathe
Investments (Nordic) LLP (the "Manager") to manage the Group's properties. The
Group has also engaged local Swedish property professionals, experienced in the
real estate markets, to advise on investment and asset management strategy.
Day-to-day property management and leasing is contracted to DTZ, with offices
throughout Sweden, with whom the Group and the Manager have long-standing
relationships.
The Board meets quarterly to review the Manager's comprehensive management
reports and to make further decisions thereon.
PROPERTY REVIEW
The portfolio comprises three properties in Sweden: Terminalen 1 in Helsingborg,
which is a regionally-important, mixed-use, retail and transport hub serving the
west coast of Sweden and Denmark, a prime-located retail park in Borlänge with
additional development opportunities and a multi-let retail property in an
affluent part of Greater Stockholm.
In total across the portfolio there are some 102 tenants, of which 73% are
municipalities and national multiples, including market leaders such as Willy:s,
Rusta, Scandlines, Sportex, Espresso House, Expert and McDonalds. The quality
and size of the tenant base provides a diversified cashflow as well as opening
up prospects for adding value on lease renewals.
Retail leases in Sweden are typically fairly short, at between three and five
years, although terms may be longer (up to ten years), particularly on new
lettings of larger retail boxes. It is commonplace for retailers to have the
right to renew their leases. Rents are annually indexed to the Consumer Price
Index.
Terminalen 1, Helsingborg ("Terminalen")
This long-leasehold interest was acquired in May 2007 for SEK 540 million
(excluding purchase costs) to reflect an initial yield of 5.7% at purchase.
Helsingborg is a major port city in south-west Sweden, opposite Denmark. The
property itself is in central Helsingborg, unique for the area's transportation
systems, serving rail, road, ferry and bus routes, and in a prime office
location.
The building was constructed in 1991 and is the region's central transport
terminal. It comprises the terminal area (which provides ticket sales, waiting
halls and a passenger link to the main Sweden to Denmark ferry terminal), a
shopping centre with a number of restaurants above, and offices in the 5-6
levels above. The total lettable area is some 19,500 m².
Underneath the building are the main, west-coast-line, railway station and the
town's main bus terminal, both of which the Group owns.
The property has both a multi-storey, roof-top, car park (303 spaces) and a
surface roof-top car park (399 spaces), which benefit from being directly
adjacent to the ferry and train terminals and which together provide a strong
income stream.
In total there are currently some 87 tenants.
The South Harbour area, directly to the south of the property, is to be
redeveloped into a major 'docklands-style' development (called H+), comprising
1,000,000 m2 of land to cater for living, working, studying and leisure
facilities. In addition to the H+ project, the railway will in the future be
underground and thus further enhance the quality of the area. The construction
of the railway tunnel is estimated to start in early 2012, for completion in
2017. These projects would further improve the location around the building and
benefit the property. Terminalen is the 'gateway' property by virtue of its
location and hosting of the major transport links and thus gives Nordic Land the
opportunity to become involved in the development of this area.
The first stage of the refurbishment is now in hand, involving the upgrading of
all lifts together with the replacing and repositioning of escalators leading to
core areas so as to improve people circulation and to create more valuable space
within the building.
Rent recovery levels are very strong and there are no significant arrears or bad
debts.
Lackeraren 3, Borlänge ("Borlange")
This freehold interest was acquired in May 2007 for SEK 140 million (excluding
purchase costs) to reflect an initial yield of 5.8% at purchase.
Borlänge is a major regional town 120 km to the north west of Stockholm with
large corporate employers and a strong local economy. The property itself is
located next to the regionally-dominant Kupolen Shopping Centre.
The property comprises a prime, retail-warehouse park and two small,
free-standing office buildings, all of some 10,000 m², plus a 327-space surface
car park and extensive servicing areas. The income is well secured by major
national retailers including Willy:s and Rusta.
Over the last 12 months the Group has completed the new 1,130 m2 retail unit,
which had been pre-let to Expert, a major Swedish electrical retailer and
acquired additional land so as to meet the required car parking standards. This
project was completed on time and below budget.
The Group is trying to let the empty office space but, due to the current
economic climate, demand is quite limited.
Sicklaön 117, Nacka, Stockholm ("Sickla")
This freehold interest was acquired in September 2007 for SEK 64 million
(excluding purchase costs) to reflect an initial yield of 5.9% at purchase.
The property is well-located in the Sickla shopping quarter which, as the main
retail location for the Nacka community, generates some of the highest sales per
square metre in Sweden. This area is amongst the most affluent regions in
Sweden, featuring high per capita income and strong population growth.
The immediate location benefits from recent and substantial improvements to
local infrastructure. New retail developments and car parking facilities have
recently been completed adjacent to the building.
The property comprises 3,400 m² of retail, storage and office accommodation in
one building, predominantly let to national multiple retailers, plus a villa and
land for re-development.
The existing detailed plan covering this property provides for light industrial
use. The building's existing use as a predominantly retail site is based on a
temporary building permit for retail use which expires at the end of March 2014.
Under new regulations this temporary permit cannot be extended. To continue to
use the property as a retail site, application will need to be made to the local
municipality for approval of a new detailed plan which allows for retail use.
VALUATIONS
As at 31 March 2010, the value of the Group's property portfolio had decreased
by some SEK 92 million from SEK 761 million as at 31 March 2009 to SEK 669
million, a reduction of 12 per cent. Due to the strengthening of the krona
against sterling, the fall in value in sterling was GBP2.9 million to GBP61.3
million a decline of 4.5 per cent compared to the value at 31 March 2009 of
GBP64.2 million.
This follows the completion of its formal year-end valuation, which was carried
out by DTZ, in accordance with the Appraisal and Valuation Standards of RICS:
+------------+---------+-----------+-----------+---------------------+--------+
| Property | | Valuation | Valuation | Increase/(decrease) | % |
| | | as at 31 | as at 31 | | |
| | | March | March | | |
| | | 2010 | 2009 | | |
| | | | | | |
+------------+---------+-----------+-----------+---------------------+--------+
| Terminalen | GBP | 43.8 | 46.4 | (2.6) | (5.6) |
| | million | 478 | 550 | (72) | (13.1) |
| | SEK | | | | |
| | million | | | | |
+------------+---------+-----------+-----------+---------------------+--------+
| | | | | | |
+------------+---------+-----------+-----------+---------------------+--------+
| Borlange | GBP | 13.7 | 13.0 | 0.7 | 5.4 |
| | million | 149 | 154 | (5) | (3.2) |
| | SEK | | | | |
| | million | | | | |
+------------+---------+-----------+-----------+---------------------+--------+
| | | | | | |
+------------+---------+-----------+-----------+---------------------+--------+
| Sickla | GBP | 3.8 | 4.8 | (1.0) | (20.8) |
| | million | 42 | 57 | (15) | (26.3) |
| | SEK | | | | |
| | million | | | | |
+------------+---------+-----------+-----------+---------------------+--------+
| | | | | | |
+------------+---------+-----------+-----------+---------------------+--------+
| Total | GBP | 61.3 | 64.2 | (2.9) | (4.5) |
| | million | 669 | 761 | (92) | (12.1) |
| | SEK | | | | |
| | million | | | | |
+------------+---------+-----------+-----------+---------------------+--------+
| | | | | | |
+------------+---------+-----------+-----------+---------------------+--------+
| Blended | | 6.7% | 6.2% | | |
| yield | | | | | |
+------------+---------+-----------+-----------+---------------------+--------+
Note: SEK:GBP exchange rate was 10.92 as at 31 March 2010 (11.85 as at 31 March
2009).
The fall in the valuation of Sickla of 26 per cent in local currency is largely
due to uncertainty over the property's planning status following a change in the
planning law. The existing detailed plan covering this property provides for
light industrial use. The building's existing use as a predominantly retail site
is based on a temporary building permit for retail use which expires at the end
of March 2014. Under new regulations this temporary permit cannot be extended.
To continue to use the property as a retail site, application will need to be
made to the local municipality to have a new detailed plan approved which is
based on retail use. The Group has not made an application and the outcome of
any such application is uncertain. This uncertainty has contributed to the fall
in the valuation of this property. The directors have received conflicting
advice as to the likelihood of a retail planning application being successful.
The Group's property adviser, DTZ, has stated that it believes that such an
application has a good probability of success and the 31 March 2010 valuation of
SEK 42 million (GBP3.8 million) included in the Group's financial statements has
been determined on this basis. Another firm of international property
consultants engaged by the Group to review the valuation of Sickla has expressed
its view that the successful outcome of an application is significantly less
certain which would result in a materially lower valuation. In the proposed
disposal as discussed in the Chairman's statement, the sale price of Sickla is
SEK 35 million (3.2 million).
In the year to 31 March 2010, the Group has invested GBP1.5 million (2009:
GBP0.5 million) as capital expenditure on the properties.
As described in note 24 to the financial statements, subsequent to the year end,
the Group has entered into agreements to sell each of the properties,
conditional on shareholder approval, based on an aggregate sales price of SEK
673 million (GBP61.2 million at the current exchange rate of 11.0 SEK:GBP).
FINANCIAL REVIEW
Results
Net rental income for the year was GBP3.7 million (2009: GBP3.4 million).
Operating loss for the year was GBP6.9 million (2009: loss of GBP1.6 million),
after allowing for administrative expenses of GBP1.3 million (2009: GBP1.2
million) and the loss on the revaluation of investment properties of GBP9.3
million (2009: loss of GBP3.7 million).
Loss before income tax for the year was GBP9.8 million (2009: loss before income
tax of GBP4.5 million), after allowing for the net interest payable of GBP2.9
million (2009: GBP2.7 million). In 2009, GBP0.3 million was also written off the
fair value of derivative financial instruments.
The tax credit for the year was GBP1.4 million (2009: credit of GBP0.7 million),
principally due to the deferred tax on the revaluation of investment properties.
Loss for the year attributable to equity shareholders was therefore GBP8.4
million (2009: loss after tax of GBP3.8 million). EPRA earnings per share,
excluding the loss on revaluation of investment properties, net of attributable
taxation, was a loss of 2.9 p per share (2009: loss of 2.6 p).
Dividend
As reported in the Chairman's Statement, no dividend has been declared, in line
with the statement made by the directors at the time of Admission.
Cash flow
Net cash flows used in operating activities were GBP0.3 million (2009: outflow
of GBP1.0 million). After allowing for capital expenditure on the development
of investment properties of GBP1.5 million (2009: GBP0.5 million), and the
drawdown under the capital expenditure bank loan facility of GBP0.9 million
(2009: GBPnil), the net decrease in cash and cash equivalents for the year was
GBP0.9 million (2009: decrease of GBP1.5 million). Available cash balances at
the year end were GBP4.8 million (2009: GBP5.3 million).
Statement of financial position
At 31 March 2010 the value of the Group's property portfolio was GBP61.3 million
(2009: GBP64.2 million). After allowing for foreign exchange gains on
retranslation of GBP4.8 million (2009: losses of GBP0.4 million) and capital
expenditure incurred during the year of GBP1.5 million (2009: GBP0.5 million),
the valuation deficit was GBP9.3 million (2009: deficit of GBP3.7 million).
EPRA net asset value per share was as follows:
As at As at
31 March
2010 31 March 2009
Basic net asset value per share GBP0.46 GBP0.84
EPRA net asset value per share GBP0.46
GBP0.91
Adjusted net asset value per share (see note below) GBP0.30
n/a
The directors have calculated an adjusted NAV as at 31 March 2010 which is the
EPRA NAV as at 31 March 2010 adjusted to reflect the changes to the Group's
balance sheet which would have arisen if the decision to sell the Group's
properties had been taken prior to 31 March 2010. If this had been the case, the
carrying value of the Group's fixed rate borrowings would, under IFRS, have been
amended in the Group's balance sheet as at 31 March 2010 to include the revised
cashflows payable on early settlement of the borrowings.
EPRA net asset value per share is a property industry measure which excludes
deferred tax relating to the revaluation of investment properties and the fair
value of derivative financial instruments net of attributable taxation.
Financing
As at 31 March 2010 the Group's net debt totalled GBP50.2 million (2009: GBP44.4
million). The Group's bank borrowings are all secured on the Group's properties
and are operating well within bank loan covenants.
Total borrowings are now SEK 602.7 million (31 March 2009: SEK 592.7 million)
after a SEK 10 million drawdown (GBP0.9 million) to fund the construction of a
new pre-let unit at Borlange. Otherwise, the increase in the sterling
equivalent of the borrowings is due to exchange losses on revaluation.
The capital expenditure facility commitment expired at the end of December 2009.
Future capital expenditure will therefore be funded out of existing cash
resources.
The loans are repayable in April 2012, with an option to extend for a further
year to April 2013.
The weighted-average interest rate on all loans is 5.46% per annum. The
interest rates on loans of SEK 592.7 million are fixed until maturity of the
borrowings in April 2012, with an option to extend for a further year. The
interest rate on the loan of SEK 10 million is variable.
At the year end the net debt/property gearing ratio was 81.9% (2009: 69.1%).
The loans have been accounted for at amortised cost at the statement of
financial position date, in accordance with IFRS, and the fair value is
disclosed in the notes to the accounts (note 15). Nordic Land's only obligation
is to pay interest at fixed and variable rates and repay loans at par value at
maturity. If the loans are repaid before maturity, the Group is liable for break
fees and other costs of settlement to the lender including reimbursing the
lender under an indemnity clause in the fixed rate loan agreements for the cost
of the lender terminating underlying interest rate swaps between it and a third
party.
Loan covenant compliance at 31 March 2010 is as follows:
+--------------------------------+-----+------+-----+
| Property | Interest cover |
+--------------------------------+------------------+
| | |
+--------------------------------+------------------+
| Helsingborg | 125% |
+--------------------------------+------------------+
| Lackeraren | 160% |
+--------------------------------+------------------+
| Sicklaön | 119% |
+--------------------------------+------------------+
| | | | |
+--------------------------------+-----+------+-----+
| Combined - actual | |131% | |
+--------------------------------+-----+------+-----+
| | | | |
+--------------------------------+-----+------+-----+
| Loan covenant | |115% | |
+--------------------------------+-----+------+-----+
There are no covenants in relation to ongoing compliance with, and monitoring
of, loan to value percentages.
All loans are therefore performing within covenant.
Consolidated Financial Statements
Consolidated Statement of Comprehensive Income for the year ended 31 March 2010
+-------------------------------+------+----+-----+----+----+
| | | | |
| | | Year | Year |
| | | ended | ended |
| | | 31 March | 31 |
| | | | March |
| | | 2010 | 2009 |
+-------------------------------+------+----------+---------+
| |Note | GBP000 | GBP000 |
+-------------------------------+------+----------+---------+
| | | | |
+-------------------------------+------+----------+---------+
| Gross rental income | | 5,403 | 5,122 |
+-------------------------------+------+----------+---------+
| Property operating expenses | | (1,747) | (1,723) |
+-------------------------------+------+----------+---------+
| | | | | | |
+-------------------------------+------+----+-----+----+----+
| Net rental income | 5 | 3,656 | 3,399 |
+-------------------------------+------+----------+---------+
| | | | |
+-------------------------------+------+----------+---------+
| Administrative expenses | | (1,262) | (1,238) |
+-------------------------------+------+----------+---------+
| Loss on revaluation of | 11 | (9,252) | (3,721) |
| investment properties | | | |
+-------------------------------+------+----------+---------+
| | | | | | |
+-------------------------------+------+----+-----+----+----+
| Operating loss | 6 | (6,858) | (1,560) |
+-------------------------------+------+----------+---------+
| | | | |
+-------------------------------+------+----------+---------+
| Finance income | 7 | 8 | 191 |
| Finance costs | 8 | (2,963) | (2,862) |
+-------------------------------+------+----------+---------+
| Change in fair value of derivative | | |
| financial | | |
+--------------------------------------+----------+---------+
| Instruments | | - | (272) |
+-------------------------------+------+----------+---------+
| | | | | | |
+-------------------------------+------+----+-----+----+----+
| Loss before income tax | | (9,813) | (4,503) |
+-------------------------------+------+----------+---------+
| Income tax | 9 | 1,414 | 700 |
+-------------------------------+------+----------+---------+
| | | | | | |
+-------------------------------+------+----+-----+----+----+
| | | |
| Loss for the year attributable to | (8,399) | (3,803) |
| equity shareholders | | |
+--------------------------------------+----------+---------+
| | | | | | |
+-------------------------------+------+----+-----+----+----+
| | | | |
+-------------------------------+------+----+-----+----+----+
+-------------------------------+-----+----+----+----+----+
| Other comprehensive | | | |
| income/(loss) | | | |
+-------------------------------+-----+---------+---------+
| Foreign currency translation | | 838 | (178) |
| differences | | | |
+-------------------------------+-----+---------+---------+
| | | | | | |
+-------------------------------+-----+----+----+----+----+
| Total other comprehensive | | | (178) |
| income/(loss) for the year | | 838 | |
+-------------------------------+-----+---------+---------+
| | | | | | |
+-------------------------------+-----+----+----+----+----+
| Total comprehensive loss for | | (7,561) | (3,981) |
| the year | | | |
+-------------------------------+-----+---------+---------+
| | | | | | |
+-------------------------------+-----+----+----+----+----+
| | | | |
+-------------------------------+-----+---------+---------+
| | | | |
+-------------------------------+-----+---------+---------+
| Earnings per share - basic | 10 | (42.3)p | (19.4)p |
| and diluted | | | |
+-------------------------------+-----+---------+---------+
| | | | | | |
+-------------------------------+-----+----+----+----+----+
| | | | |
+-------------------------------+-----+---------+---------+
| EPRA earnings per share - | 10 | (2.9)p | (2.6)p |
| basic and diluted | | | |
+-------------------------------+-----+---------+---------+
| | | | | | |
+-------------------------------+-----+----+----+----+----+
All results are derived from continuing operations.
The notes form part of these audited consolidated financial statements.
Consolidated Statement of Financial Position as at 31 March 2010
+--------------------------------+------+----+-------+---+-------+
| | | 31 | 31 |
| | | March | March |
| | | 2010 | 2009 |
+--------------------------------+------+------------+-----------+
| | Note | GBP000 | GBP000 |
+--------------------------------+------+------------+-----------+
| | | | |
+--------------------------------+------+------------+-----------+
| ASSETS | | | |
+--------------------------------+------+------------+-----------+
| Non-current assets | | | |
+--------------------------------+------+------------+-----------+
| Investment properties | 11 | 61,253 | 64,203 |
+--------------------------------+------+------------+-----------+
| | | | | | |
+--------------------------------+------+----+-------+---+-------+
| | | 61,253 | 64,203 |
+--------------------------------+------+------------+-----------+
| | | | | | |
+--------------------------------+------+----+-------+---+-------+
| Current assets | | | |
+--------------------------------+------+------------+-----------+
| Trade and other receivables | 12 | 393 | 378 |
+--------------------------------+------+------------+-----------+
| Cash and cash equivalents | 13 | 4,767 | 5,336 |
+--------------------------------+------+------------+-----------+
| | | | | | |
+--------------------------------+------+----+-------+---+-------+
| | | 5,160 | 5,714 |
+--------------------------------+------+------------+-----------+
| | | | | | |
+--------------------------------+------+----+-------+---+-------+
| Total assets | | 66,413 | 69,917 |
+--------------------------------+------+------------+-----------+
| | | | | | |
+--------------------------------+------+----+-------+---+-------+
| | | | |
+--------------------------------+------+------------+-----------+
| LIABILITIES | | | |
+--------------------------------+------+------------+-----------+
| Current liabilities | | | |
+--------------------------------+------+------------+-----------+
| Trade and other payables | 14 | 2,323 | 2,154 |
+--------------------------------+------+------------+-----------+
| Income tax provision | | 18 | 19 |
+--------------------------------+------+------------+-----------+
| | | | | | |
+--------------------------------+------+----+-------+---+-------+
| | | | 2,341 | | 2,173 |
+--------------------------------+------+----+-------+---+-------+
| Non-current liabilities | | | | |
+--------------------------------+------+----+-------+-----------+
| Borrowings | 15 | 54,950 | 49,696 |
+--------------------------------+------+------------+-----------+
| Deferred tax liability | 17 | - | 1,403 |
+--------------------------------+------+------------+-----------+
| | | | | | |
+--------------------------------+------+----+-------+---+-------+
| | | 54,950 | 51,099 |
+--------------------------------+------+------------+-----------+
| | | | | | |
+--------------------------------+------+----+-------+---+-------+
| Total liabilities | | 57,291 | 53,272 |
+--------------------------------+------+------------+-----------+
| | | | | | |
+--------------------------------+------+----+-------+---+-------+
| | | | |
+--------------------------------+------+------------+-----------+
| Net assets | | 9,122 | 16,645 |
+--------------------------------+------+------------+-----------+
| | | | | | |
+--------------------------------+------+----+-------+---+-------+
| EQUITY | | | |
+--------------------------------+------+------------+-----------+
| Ordinary share capital | 18 | 199 | 199 |
+--------------------------------+------+------------+-----------+
| Share premium | | 17,523 | 17,523 |
+--------------------------------+------+------------+-----------+
| Foreign currency translation | | 2,697 | 1,859 |
| reserve | | (11,297) | (2,936) |
| Retained earnings | | | |
+--------------------------------+------+------------+-----------+
| | | | | | |
+--------------------------------+------+----+-------+---+-------+
| Total shareholders' equity | | 9,122 | 16,645 |
+--------------------------------+------+------------+-----------+
| | | | | | |
+--------------------------------+------+----+-------+---+-------+
| | | | |
+--------------------------------+------+------------+-----------+
| Net asset value per share - | 19 | GBP0.46 | GBP0.84 |
| basic and diluted | | | |
+--------------------------------+------+------------+-----------+
| | | | |
+--------------------------------+------+------------+-----------+
| EPRA net asset value per share | 19 | GBP0.46 | GBP0.91 |
| - basic and diluted | | | |
+--------------------------------+------+----+-------+---+-------+
The notes form part of these audited consolidated financial statements.
Consolidated Statement of Changes in Equity for the year ended 31 March 2010
+-------------------------------+----------+----------+------+----------+----------+----------+-------+--+----------+-------+--+----------+-----+--+----------+----------+-----+--+----------+
| | Ordinary | Share | Translation Reserve | Retained | Total | |
| | Share Capital | Premium | | Earnings | Equity | |
+-------------------------------+----------------------------+----------------------------------------+---------------------+----------------------+------------------------------+----------+
| | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | |
+-------------------------------+----------------------------+----------------------------------------+---------------------+----------------------+------------------------------+----------+
| | | | | | | |
+-------------------------------+----------------------------+----------------------------------------+---------------------+----------------------+------------------------------+----------+
| Balance at 1 April 2008 | | 192 | | 17,059 | | 2,037 | | 1,258 | | 20,546 | |
+-------------------------------+---------------------+------+---------------------+------------------+-------------+-------+-------------+--------+---------------------+--------+----------+
| Total comprehensive loss for | | | | | | |
| the year | | | | | | |
+-------------------------------+----------------------------+----------------------------------------+---------------------+----------------------+------------------------------+----------+
| Loss for the year | - | - | - | (3,803) | (3,803) | |
+-------------------------------+----------------------------+----------------------------------------+---------------------+----------------------+------------------------------+----------+
| Other comprehensive loss for | | | | | | |
| the year | | | | | | |
+-------------------------------+----------------------------+----------------------------------------+---------------------+----------------------+------------------------------+----------+
| Foreign exchange differences | - | - | (178) | - | (178) | |
+-------------------------------+----------------------------+----------------------------------------+---------------------+----------------------+------------------------------+----------+
| Total comprehensive loss | | - | | - | | (178) | | (3,803) | | (3,981) | |
| for the year | | | | | | | | | | | |
+-------------------------------+----------+-----------------+----------+-----------------------------+--+------------------+--+-------------------+----------+-------------------+----------+
| Transactions with owners, | | | | | | |
| recorded directly in equity | | | | | | |
+-------------------------------+----------------------------+----------------------------------------+---------------------+----------------------+------------------------------+----------+
| Share-based payments | - | - | - | (391) | (391) | |
+-------------------------------+----------------------------+----------------------------------------+---------------------+----------------------+------------------------------+----------+
| Ordinary shares issued at a | 7 | 464 | - | - | 471 | |
| premium | | | | | | |
+-------------------------------+----------------------------+----------------------------------------+---------------------+----------------------+------------------------------+----------+
| Total transactions with | | 7 | | 464 | | - | | (391) | | 80 | |
| owners | | | | | | | | | | | |
+-------------------------------+----------+-----------------+--------------------------------+-------+--+------------------+--+----------------+-------------+----------------+-------------+
| Balance at 31 March 2009 | | 199 | | 17,523 | | 1,859 | | (2,936) | | 16,645 | |
+-------------------------------+----------+-----------------+----------+-----------------------------+--+------------------+--+-------------------+----------+-------------------+----------+
| | | | | | | |
+-------------------------------+----------------------------+----------------------------------------+---------------------+----------------------+------------------------------+----------+
| Total comprehensive loss for | | | | | | |
| the year | | | | | | |
+-------------------------------+----------------------------+----------------------------------------+---------------------+----------------------+------------------------------+----------+
| Loss for the year | - | - | - | (8,399) | (8,399) | |
+-------------------------------+----------------------------+----------------------------------------+---------------------+----------------------+------------------------------+----------+
| Other comprehensive income | | | | | | |
| for the year | | | | | | |
+-------------------------------+----------------------------+----------------------------------------+---------------------+----------------------+------------------------------+----------+
| Foreign exchange differences | - | - | 838 | - | 838 | |
+-------------------------------+----------------------------+----------------------------------------+---------------------+----------------------+------------------------------+----------+
| Total comprehensive | | - | | - | | 838 | | (8,399) | | (7,561) | |
| income/(loss) | | | | | | | | | | | |
| for the year | | | | | | | | | | | |
+-------------------------------+----------+-----------------+----------+-----------------------------+--+------------------+--+-------------------+----------+-------------------+----------+
| Transactions with owners, | | | | | | |
| recorded directly in equity | | | | | | |
+-------------------------------+----------------------------+----------------------------------------+---------------------+----------------------+------------------------------+----------+
| Share-based payments | - | - | - | 38 | 38 | |
+-------------------------------+----------------------------+----------------------------------------+---------------------+----------------------+------------------------------+----------+
| Total transactions with | | - | | - | | - | | 38 | | 38 |
| owners | | | | | | | | | | |
+-------------------------------+----------+-----------------+----------+-----------------------------+--+------------------+--+-------------------+----------+------------------------------+
| Balance at 31 March 2010 | | 199 | | 17,523 | | 2,697 | | (11,297) | | 9,122 |
+-------------------------------+----------+-----------------+----------+-----------------------------+--+------------------+--+-------------------+----------+------------------------------+
| | | | | | | |
+-------------------------------+----------------------------+----------------------------------------+---------------------+----------------------+------------------------------+----------+
| | | | | | | | | | | | | | | | | | | | |
+-------------------------------+----------+----------+------+----------+----------+----------+-------+--+----------+-------+--+----------+-----+--+----------+----------+-----+--+----------+
The notes form part of these audited consolidated financial statements.
Consolidated Statement of Cash Flows for the year ended 31 March 2010
+-----------------------------------+--------+----------+----------+---------+----+----------+--------+
| | | Year ended 31 March | Year ended |
| | | 2010 | 31 March |
| | | | 2009 |
+-----------------------------------+--------+-------------------------------+------------------------+
| | Note | GBP000 | GBP000 |
+-----------------------------------+--------+-------------------------------+------------------------+
| | | | |
+-----------------------------------+--------+-------------------------------+------------------------+
| Cash flows from operating | | | |
| activities | | | |
+-----------------------------------+--------+-------------------------------+------------------------+
| Loss for the year | | (8,399) | (3,803) |
+-----------------------------------+--------+-------------------------------+------------------------+
| Interest receivable | | (8) | (191) |
+-----------------------------------+--------+-------------------------------+------------------------+
| Interest payable and other | | 2,963 | 2,862 |
| finance costs | | | |
+-----------------------------------+--------+-------------------------------+------------------------+
| Income tax | | (1,414) | (700) |
+-----------------------------------+--------+-------------------------------+------------------------+
| Adjustments for non-cash items: | | | |
+-----------------------------------+--------+-------------------------------+------------------------+
| Loss on revaluation of investment | | 9,252 | 3,721 |
| properties | | | |
+-----------------------------------+--------+-------------------------------+------------------------+
| Change in fair value of | | - | 272 |
| derivative financial instruments | | | |
+-----------------------------------+--------+-------------------------------+------------------------+
| Share-based payments | | 38 | 77 |
+-----------------------------------+--------+-------------------------------+------------------------+
| Operating profit before changes in working | | 2,432 | | 2,238 |
| capital | | | | |
+--------------------------------------------+----------+--------------------+---------------+--------+
| Other movements arising from operations: | | |
+--------------------------------------------+-------------------------------+------------------------+
| Increase in trade and other receivables | (15) | (15) |
+--------------------------------------------+-------------------------------+------------------------+
| Increase/decrease in trade and | | 116 | (634) |
| other payables | | | |
+-----------------------------------+--------+-------------------------------+------------------------+
| Tax paid | | (12) | - |
+-----------------------------------+--------+-------------------------------+------------------------+
| Net cash generated from | | | 2,521 | | 1,589 |
| operations | | | | | |
+-----------------------------------+--------+---------------------+---------+----+-------------------+
| Interest received | | 6 | 203 |
+-----------------------------------+--------+-------------------------------+------------------------+
| Interest paid | | (2,845) | (2,760) |
+-----------------------------------+--------+-------------------------------+------------------------+
| Net cash flows used in operating | | | (318) | | (968) |
| activities | | | | | |
+-----------------------------------+--------+---------------------+---------+----+-------------------+
| Cash flows used in investing | | | |
| activities | | | |
+-----------------------------------+--------+-------------------------------+------------------------+
| Development of investment | | (1,474) | (486) |
| properties | | | |
+-----------------------------------+--------+-------------------------------+------------------------+
| Cash flows used in investing | | | (1,474) | | (486) |
| activities | | | | | |
+-----------------------------------+--------+---------------------+---------+----+-------------------+
| Cash flows from financing | | | |
| activities | | | |
+-----------------------------------+--------+-------------------------------+------------------------+
| Net drawdown of borrowings | | 858 | - |
+-----------------------------------+--------+-------------------------------+------------------------+
| Cash flows from financing | | | 858 | | - |
| activities | | | | | |
+-----------------------------------+--------+---------------------+---------+----+-------------------+
| | | (934) | (1,454) |
| Net decrease in cash and cash | | | |
| equivalents | | | |
+-----------------------------------+--------+-------------------------------+------------------------+
| | | | |
+-----------------------------------+--------+-------------------------------+------------------------+
| Opening cash and cash equivalents | | 5,336 | 6,838 |
+-----------------------------------+--------+-------------------------------+------------------------+
| Exchange gains/(losses) on cash | | 365 | (48) |
| balances | | | |
+-----------------------------------+--------+-------------------------------+------------------------+
| Closing cash and cash equivalents | 13 | | 4,767 | | 5,336 |
+-----------------------------------+--------+---------------------+---------+----+-------------------+
| | | | | | | | |
+-----------------------------------+--------+----------+----------+---------+----+----------+--------+
The notes form part of these audited consolidated financial statements.
Notes to the consolidated financial statements
Note 1 General Information
Nordic Land plc ('Nordic Land' or the 'Company', or together with its
subsidiaries, the 'Group') is a Jersey incorporated company which invests
principally in retail property in the Nordic region. The Company was
incorporated on 3 April 2007.
The consolidated financial statements have been prepared for the year ended 31
March 2010. These statements are not statutory accounts and have been extracted
from the full statutory accounts on which the auditors are expected to provide
an unqualified opinion.
Note 2 Basis of preparation
The financial information has been prepared in accordance with International
Financial Reporting Standards ("IFRS") as adopted by the European Union and is
presented in sterling.
The preparation of financial statements in conformity with IFRSs requires
management to make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets and
liabilities, income and expense. The estimates and associated assumptions are
based on historical experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis of
making the judgements about carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates.
Information about significant areas of estimation, uncertainty and critical
judgements in applying accounting policies that have the most significant effect
on the amounts recognised in the financial statements is included in the
following notes:
Note 10 - Investment properties
Note 15 - Borrowings
Note 22 - Share-based payments
The audited consolidated financial statements have been prepared on the
historical cost basis as modified by the revaluation of investment properties,
which are measured at fair value.
The audited consolidated financial statements have been prepared on a going
concern basis which assumes the Group will be able to meet its liabilities as
they fall due. The Group's working capital forecasts show that the Group has
sufficient cash resources to meet its funding requirements over the next 12
months and to continue in operational existence for the foreseeable future. The
Board of Directors is presently seeking to sell all or part of Nordic Land's
portfolio of properties (see note 24).
Adoption of new and revised standards
(a) Standards and amendments to existing standards effective 1 January 2009
The following standards, amendments and interpretations, which became effective
in 2009, are of relevance to the Group:
Standard/interpretation Content
Applicable for financial years
beginning on/after
IAS 1 Presentation of financial statements
1 January 2009
IAS 23 Borrowing costs
1 January 2009
IFRS 7 Amendment: Improving disclosures
about financial instruments
1 January 2009
IFRS 8 Operating segments
1 January 2009
IAS 40 R Investment property
1 January 2009
IFRS 2 Share-based payments -
Vesting conditions and cancellations
1 January 2009
IAS 1, 'Presentation of financial statements'
A revised version of IAS 1 was issued in September 2007. The revised standard
prohibits the presentation of items of income and expenses (that is, 'non-owner
changes in equity') in the statement of changes in equity, requiring 'non-owner
changes in equity' to be presented separately from owner changes in equity in a
statement of comprehensive income. As a result, the Group presents in the
consolidated statement of changes in equity all owner changes in equity; all
non-owner changes in equity are presented in the consolidated statement of
comprehensive income. The adoption of this revised standard impacts only
presentation aspects; therefore, it has no impact on profit/loss or earnings per
share.
IAS 23, 'Borrowing costs'
A revised version was issued in March 2007. Under the revised standard, an
entity is required to capitalise borrowing costs directly attributable to the
acquisition, construction or production of a qualifying asset (one that takes a
substantial period of time to get ready for use or sale) as part of the cost of
that asset. The option of immediately expensing those borrowing costs was
removed. The capitalisation is required for qualifying assets for which the
commencement date for capitalisation is on or after 1 January 2009. The Group
has applied this standard in accordance with the transition provisions but has
had no effect on the reported profit/loss or earnings per share.
Amendment: IFRS 7, 'Improving disclosures about financial instruments'
The IASB published amendments to IFRS 7 in March 2009. The amendment requires
enhanced disclosures about fair value measurements and liquidity risk. In
particular, the amendment requires disclosure of fair value measurements by way
of a three-level fair value measurement hierarchy. In addition to that, the
amendment clarifies that the maturity analysis of liabilities should include
issued financial guarantee contracts at the maximum amount of the guarantee in
the earliest period in which the guarantee could be called; and secondly,
requires disclosure of remaining contractual maturities of financial derivatives
if the contractual maturities are essential for an understanding of the timing
of the cash flows. The entity has to disclose a maturity analysis of financial
assets it holds for managing liquidity risk, if that information is necessary to
enable users of its financial statements to evaluate the nature and extent of
liquidity risk. The adoption of the amendment results in additional disclosures
but does not have an impact on profit/loss or earnings per share.
IFRS 8, 'Operating segments'
IFRS 8 replaces IAS 14, 'Segment reporting', and is effective for annual periods
beginning on or after 1 January 2009. The new standard requires a 'management
approach', under
which segment information is presented on a similar basis to that used for
internal reporting purposes. The effects of adoption by the Group are disclosed
in note 4.
IAS 40, 'Investment property', amendment (and consequential amendment to IAS 16,
'Property, plant and equipment')
The amendments are part of the IASB's annual improvements project published in
May 2008 and are effective from 1 January 2009. Property that is under
construction or development for future use as investment property is brought
within the scope of IAS 40. Where the fair value model is applied, such
property is measured at fair value. However, where fair value of investment
property under construction is not reliably determinable, the property is
measured at cost until the earlier of the date construction is completed and the
date at which fair value becomes reliably measurable.
IFRS 2 Share-based payments - Vesting conditions and cancellations
The amendment deals with two matters. It clarifies that vesting conditions are
service conditions and performance conditions only. Other features of a
share-based payment are not vesting conditions. It also specifies that all
cancellations, whether by the entity or by other parties, should receive the
same accounting treatment. Under IFRS 2, features of a share-based payment that
are not vesting conditions should be included in the grant date fair value of
the share-based payment. The fair value also includes market-related vesting
conditions.
(b) Interpretations and amendments to standards becoming effective in 2009 but
not
relevant to the Group
Standard/interpretation Content
Applicable for financial years
beginning on/after
IAS 32 and IAS 1 Puttable financial instruments and obligations
arising on liquidation
1 January 2009
IFRS 1 and IAS 27 Cost of an investment in a subsidiary, jointly-
controlled entity or associate
1 January 2009
IFRIC 13 Customer loyalty programmes
1 July 2008
IFRIC 16 Hedges of a net investment in a
1 January 2009
Foreign operation
(c) Standards, amendments and interpretations that are not yet effective and
are not expected to have a significant impact on the Group's financial
statements.
Standard/interpretation Content
Applicable for financial years
beginning on/after
IAS 27 Consolidated and separate financial
statements 1 July 2009
IFRS 3 Business combinations
1 July 2009
IFRS 9 Financial instruments
1 January 2013
IAS 24 Related party disclosures
1 January 2011
IAS 32 Classification of rights issue
1 February 2010
IAS 39 Financial instruments: recognition
and measurement - Eligible hedged
items 1 July 2009
IFRS 1 First-time adoption of IFRS's
1 July 2009
IFRIC 17 Distribution of non-cash assets to owners
1 July 2009
IFRIC 18 Transfers of assets from customers
1 July 2009
The standards and interpretations addressed above will be applied, where
relevant, for the purposes of the Group consolidated financial statements with
effect from the dates listed.
Note 3 Significant Accounting Policies
The principal accounting policies adopted in the preparation of the audited
consolidated financial statements are set out below. The accounting policies
have been consistently applied by the Company and its subsidiaries (together the
'Group').
Basis of consolidation
The audited consolidated financial statements incorporate the net assets and
liabilities of the Group at the statement of financial position date and its
results for the year then ended. Results of subsidiaries acquired or disposed
during a period are included from the effective date of acquisition or up to the
effective date of disposal as appropriate. The results of subsidiaries are
included in the consolidated financial statements from the date that control
commences up to the date that control ceases. Control exists when the Company
has the power, directly or indirectly, to govern the financial and operating
policies of an entity so as to obtain benefits from its activities.
All intra-group transactions, balances, income and expenses are eliminated on
consolidation.
A change in the ownership interest of a subsidiary, without a change in control,
is accounted for as an equity transaction.
Functional and presentational currency
Items included in the financial statements of each of the Group's entities are
measured using the currency of the primary economic environment in which the
entity operates (the 'functional currency'). The Group's consolidated financial
statements are presented in sterling, which is also
the parent company's functional and presentational currency.
Share capital
Shares are classified as equity to the extent that they meet the following two
conditions:
(a) they include no contractual obligations upon the Company to deliver cash or
other financial assets or to exchange financial assets or financial liabilities
with another party under conditions that are potentially unfavourable to the
Company; and
(b) where the instrument will or may be settled in the Company's own equity
instruments, it is either a non-derivative that includes no obligation to
deliver a variable number of the Company's own equity instruments or is a
derivative that will be settled by the Company exchanging a fixed amount of cash
or other financial assets for a fixed number of its own equity instruments.
Share issue expenses
The costs incurred by the Company in connection with the issue of shares are
written off against the share premium account.
Share-based payments
Options
The grant-date fair value of options granted to employees of the Manager and
Directors of the Company are recognised as an expense, with a corresponding
increase in equity, over the period that the employees and Directors become
unconditionally entitled to the options. The amount recognised as an expense is
adjusted to reflect the actual number of share options that vest.
Performance carry
The Manager is entitled to receive a performance carry equal to 20 per cent. of
the Total Shareholder Return (defined as the sum of the increase in adjusted net
asset value per share and dividends per share, divided by the adjusted net asset
value per share at the beginning of the relevant financial period) in excess of
8 per cent. per annum for the relevant period, subject to a high watermark, to
which a performance carry relates. This cost will be recorded on an accruals
basis. To the extent it is payable by the issue of shares in the Company, the
cost of such share-based payments is recognised in the consolidated statement of
comprehensive income by reference to the fair value at the date of payment,
together with a corresponding increase in equity.
Revenue
Revenue represents amounts receivable calculated on an accruals basis in respect
of property rental income earned in the normal course of business, net of
sales-related taxes.
Investment property
Investment properties are properties owned or leased by the Group which are held
for long-term rental income and for capital appreciation. Investment property
is initially recognised at cost and re-valued at the statement of financial
position date to fair value, as determined by professionally qualified external
valuers.
Any gain or loss arising from the change in fair value is reported in the
statement of comprehensive income. No depreciation is provided in respect of
investment property.
Borrowing costs associated with direct expenditure on investment properties
under development or undergoing refurbishment are capitalised using the average
rate of interest paid on the relevant debt outstanding until the date of
practical completion.
Sales of investment property are recognised when contracts have been
unconditionally exchanged during the period and the significant risks and
rewards of ownership have been transferred.
Acquisitions of corporate interests in investment property are accounted for on
consolidation as if the Group had acquired the underlying property asset
directly. Accordingly, no goodwill arises on such acquisitions as any
difference between the fair values of the assets acquired and the acquisition
consideration is allocated to the investment property asset, which is subject to
subsequent revaluation under IAS 40.
Impairment of assets
The Group assesses at each reporting date whether there is objective evidence
that an asset may be impaired. If any such indication exists the Group makes an
estimate of the asset's recoverable amount. An asset's recoverable amount is
the higher of the asset's fair value less costs to sell and its value in use and
is determined on an asset by asset basis. When the carrying amount of an asset
exceeds its recoverable amount, the asset is considered impaired and is written
down to its
recoverable amount.
An assessment is made at each reporting date as to whether there is any
indication that previously recognised impairment losses may no longer exist or
may have decreased. If such an indication
exists, the recoverable amount is estimated and the corresponding impairment
loss that was
previously booked is reversed.
Financial instruments
Classification
Management determines the classification of financial instruments at initial
recognition. The Group classifies its financial assets into the following
categories:
· Financial assets at fair value through profit and loss
· Loans and receivables
The Group classifies its financial liabilities into the following categories:
· Financial liabilities at fair value through profit and loss
· Financial liabilities measured at amortised cost
Derecognition
The Group derecognises a financial asset when the contractual rights to the cash
flows from the financial asset expire or it transfers the financial asset and
the transfer qualifies for derecognition in accordance with IAS 39.
A financial liability is derecognised when the obligation specified in the
contract is discharged, cancelled or expired.
Trade and other receivables
Trade and other receivables are reported at their fair value. As trade and
other receivables have a short expected term, they are carried at face value
without discounting. Trade and other receivables are reported at the amount
they are expected to realise after a deduction for doubtful debts, which is made
on a case by case basis.
A provision for impairment is made when there is objective evidence (such as the
probability of insolvency or significant financial difficulties of the debtor)
that the Group will not be able to
collect all the amounts due under the original terms of the invoice. Impaired
debts are derecognised when they are assessed as uncollectable.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and on demand deposits that are
readily convertible to a known amount of cash and are subject to an
insignificant risk of changes in value. In order to be classified as cash and
cash equivalents, the maturity of the cash and cash equivalents instruments is
three months or less at the time of acquisition.
Interest-bearing loans and borrowings
All loans and borrowings are initially recognised at their issue proceeds, net
of issue costs associated with the borrowing.
After initial recognition, interest-bearing loans and borrowings are
subsequently measured at amortised cost using the effective interest method.
Amortised cost is calculated by taking into account any issue costs, and any
discount or premium on settlement. Borrowing costs are recognised on an
accruals basis in the statement of comprehensive income using the effective
interest rate method.
Gains and losses are recognised in the statement of comprehensive income when
the liabilities are derecognised, as well as through the amortisation process.
Derivative financial instruments
The Group may use derivative financial instruments such as interest rate swaps
to hedge its risks associated with interest rate fluctuations. Such derivative
financial instruments are stated at fair value, based on market prices,
estimated future cash flows and forward rates as appropriate. Any gains or
losses arising from changes in fair value are taken directly to the statement of
comprehensive income.
In accordance with its treasury policy, the Group does not hold or issue
derivative financial instruments for trading purposes.
Effective 1 January 2009, the Group adopted the amendment to IFRS 7 for
financial instruments that are measured in the statement of financial position
at fair value. However, the Group does not hold any financial instruments
measured at fair value as at the statement of financial position date.
Trade and other payables
Trade and other payables are non-interest bearing and are reported at their
amortised cost. As trade payables have a short expected term, they are carried
at their face value without discounting.
Taxation
With effect from the 2009 year of assessment, Jersey abolished the exempt
company regime for existing companies. Profit arising in the Company for the
2009 year of assessment and future periods will be subject to tax at the rate of
0%. Prior to 2009 the Company was exempt from taxation under the provisions of
Article 123A of the Income Tax (Jersey) Law 1961 as amended. Certain subsidiary
undertakings are subject to foreign taxes in respect of foreign source income;
provision for such taxes is made on the basis of taxable profits.
Deferred taxation
Deferred income tax is recognised on all temporary differences arising between
the tax bases of assets and liabilities and their carrying amounts in the
financial statements, with the following exceptions:
(a) where the temporary difference arises from the initial recognition of
goodwill or of an asset or liability in a transaction that is not a business
combination that at the time of the transaction affects neither accounting nor
taxable profit or loss;
(b) in respect of temporary differences associated with investments in
subsidiaries, where the timing of the reversal of the temporary difference can
be controlled by the Group and it is probable that the temporary difference will
not reverse in the foreseeable future; and
(c) deferred income tax assets are recognised only to the extent that it is
probable that taxable profit will be available against which the deductible
temporary differences, carry-forward of unused tax assets and unused tax losses
can be utilised.
Deferred income tax assets and liabilities are measured on an undiscounted basis
at the tax rates
that are expected to apply when the related asset is realised or liability is
settled, based on tax rates and laws enacted or substantially enacted at the
statement of financial position date and are expected to apply when the related
deferred tax asset is realised or the deferred tax liability is settled.
Deferred income tax is recognised in the statement of comprehensive income
except when it relates to items that are credited or charged directly to equity,
in which case the deferred tax is also dealt with in equity.
Segmental analysis
The Group has a single geographical and business segment, being investment in
property in the Nordic region.
Management fees
Under the terms of the Management Agreement, the Manager, Lathe Investments
(Nordic) LLP, is entitled to receive an annual management fee dependent on the
consolidated gross assets of the Group. Fees are recorded on an accruals basis.
Foreign currencies
The assets and liabilities of foreign entities are translated into sterling at
the rate of exchange ruling at the statement of financial position date and
their income statements and cash flows are translated at the average rate for
the year. Exchange differences arising from the retranslation of the net
investment in foreign entities are dealt with in reserves. Transactions in
currencies other than the Group's functional currency are recorded at the
exchange rate prevailing at the transaction dates. Foreign exchange gains and
losses resulting from settlement of these transactions and from retranslation of
monetary assets and liabilities denominated in foreign currencies are recognised
in the statement of comprehensive income except when qualifying as hedges, in
which case they are dealt with in reserves.
Note 4 Operating segments
During the year the Group operated in one business segment, being property
investment and development in the Nordic region and as such no further segmental
information is required.
The Board of Directors is charged with setting the Company's investment
strategy. The Directors
have delegated the day to day implementation of this strategy to the Manager but
retain responsibility to ensure that adequate resources of the Company are
directed in accordance with their decisions.
The performance of the Manager is reviewed on a regular basis to ensure
compliance with the policies and legal responsibilities of the Board, and
compliance with the agreed business plans for the individual properties. The
Manager has been given full authority to act on behalf of the Company and to
carry out other actions as appropriate to give effect to the agreed properties'
strategy.
Whilst the Manager may, by delegation from the Board, make the investment
decisions on a day to day basis regarding the individual properties in
accordance with the business plans approved by the Board, any material changes
to the investment strategy have to be approved by the
Board, even though they may be proposed by the Manager. The Board therefore
retains full responsibility as to the major decisions made on an ongoing basis.
The company is domiciled in Jersey but does not generate revenue there. The
Group's revenue is primarily generated from property assets which are held by
Group companies domiciled in Sweden, the same country as that in which the
relevant assets are located. Total revenue from tenants in Sweden is GBP5.4
million (2009: GBP5.1 million).
Revenues are derived from a large number of tenants. There are currently two
tenants who each contribute more than 10% of the Group's revenues, contributing
18% and 12% respectively.
None of the Group's non-current assets are located in Jersey. The total
non-current assets (none of which are financial instruments, deferred tax
assets, employment benefit assets and rights arising under insurance contracts)
located in Sweden is GBP61.3 million (2009: GBP64.2 million).
Note 5 Net rental income
The Group engages in only one class of business activity, being investment in
commercial property. All operations are continuing and are based in the Nordic
region.
Note 6 Operating loss
Operating loss is stated after charging:
+----------------------------------------+-----+------+------+------+
| | 31 March | 31 March |
| | 2010 | 2009 |
+----------------------------------------+------------+-------------+
| | GBP000 | GBP000 |
+----------------------------------------+------------+-------------+
| | | |
+----------------------------------------+------------+-------------+
| Auditors' remuneration for audit and | 84 | 54 |
| non-audit services | | |
+----------------------------------------+------------+-------------+
| | | |
+----------------------------------------+------------+-------------+
| Asset management fees payable to the | 458 | 458 |
| Manager (note 20) | | |
+----------------------------------------+------------+-------------+
| | | |
+----------------------------------------+------------+-------------+
| Directors' basic remuneration | 90 | 90 |
+----------------------------------------+------------+-------------+
| | | |
+----------------------------------------+------------+-------------+
| Share-based payments (note 22) | 38 | 77 |
+----------------------------------------+------------+-------------+
| | | | | |
+----------------------------------------+-----+------+------+------+
| | | | | |
+----------------------------------------+-----+------+------+------+
The analysis of auditors' remuneration is as follows:
+----------------------------------------+----+----------+-----+---------+
| | 31 March | 31 March |
| | 2010 | 2009 |
+----------------------------------------+---------------+---------------+
| | GBP000 | GBP000 |
+----------------------------------------+---------------+---------------+
| | | |
+----------------------------------------+---------------+---------------+
| Audit fees payable to the Company's | 55 | 33 |
| auditors and their associates for the | | |
| audit of the Company's and Group | | |
| financial statements | | |
+----------------------------------------+---------------+---------------+
| Non-audit fees payable to the | | |
| Company's auditors and their | | |
| associates for: | 25 | 17 |
| - Tax services | 4 | 4 |
| - Other services | | |
+----------------------------------------+---------------+---------------+
| Total auditors' remuneration | | 84 | | 54 |
+----------------------------------------+----+----------+-----+---------+
| | | | | |
+----------------------------------------+----+----------+-----+---------+
Note 7 Finance income
+------------------------------------+---------+------+--------+------+
| | 31 March | 31 March |
| | 2010 | 2009 |
+------------------------------------+----------------+---------------+
| | GBP000 | GBP000 |
| | | |
+------------------------------------+----------------+---------------+
| | | |
+------------------------------------+----------------+---------------+
| Interest receivable | 8 | 191 |
+------------------------------------+----------------+---------------+
| | | | | |
+------------------------------------+---------+------+--------+------+
| | | | | |
+------------------------------------+---------+------+--------+------+
Note 8 Finance costs
+----------------------------------+--------+----+-------+----+
| | 31 March | 31 March |
| | 2010 | 2009 |
+----------------------------------+-------------+------------+
| | GBP000 | GBP000 |
+----------------------------------+-------------+------------+
| | | |
+----------------------------------+-------------+------------+
| Interest on bank loans | 2,850 | 2,749 |
+----------------------------------+-------------+------------+
| Other finance costs | 113 | 113 |
+----------------------------------+-------------+------------+
| | | | | |
+----------------------------------+--------+----+-------+----+
| Interest payable and other | 2,963 | 2,862 |
| finance costs | | |
+----------------------------------+-------------+------------+
| | | | | |
+----------------------------------+--------+----+-------+----+
Note 9 Income tax
+----------------------------------+--------+----+-------+----+
| | 31 March | 31 March |
| | 2010 | 2009 |
+----------------------------------+-------------+------------+
| | GBP000 | GBP000 |
+----------------------------------+-------------+------------+
| | | |
+----------------------------------+-------------+------------+
| Current income tax charge | 11 | 10 |
+----------------------------------+-------------+------------+
| Deferred taxation (note 17) | (1,425) | (710) |
+----------------------------------+-------------+------------+
| | | | | |
+----------------------------------+--------+----+-------+----+
| Tax credit | (1,414) | (700) |
+----------------------------------+-------------+------------+
| | | | | |
| | | | | |
| | | | | |
+----------------------------------+--------+----+-------+----+
With effect from 1 January 2009, the income tax rate for companies in Jersey was
reduced from 20% to 0% and exempt company status for new companies was
abolished. The existing exempt company status of the Company and its Jersey
subsidiary remained in place until 31 December 2008 at which time they moved to
a 0% rate of income tax. The current tax (credit)/charge and deferred tax
calculations represent corporate income tax on income arising in Sweden, that is
subject to income tax at 26.3%, and Luxembourg, at 29.63%.
With effect from 6 May 2008, a 3% Goods and Services Tax ("GST") was introduced
under the Goods and Services Tax (Jersey) Law 2007. The Company and its Jersey
subsidiary may apply for international service entity status under the Goods and
Services Tax (International Services Entities) (Jersey) Regulations 2008 on
payment of an annual fee of GBP100 per company and be treated as being outside
the scope of GST. The Company and its Jersey subsidiary have been granted
international service entity status for the years 2009 and 2010.
The tax on the Group's loss before tax differs from the theoretical amount that
would arise using the tax rates applicable to the consolidated entities as
follows:
+---------------------------------------+-------+---------+---------+-------+
| | 31 March | 31 March |
| | 2010 | 2009 |
+---------------------------------------+-----------------+-----------------+
| | GBP000 | GBP000 |
+---------------------------------------+-----------------+-----------------+
| | | |
+---------------------------------------+-----------------+-----------------+
| Loss before tax | (9,813) | (4,503) |
+---------------------------------------+-----------------+-----------------+
| | | |
+---------------------------------------+-----------------+-----------------+
| | | |
| Tax effects on: | | |
| Income tax calculated at the Jersey | - | - |
| income tax rate of 0% | 11 | 10 |
| Taxation of income in other countries | | |
| Deferred taxation arising from | (1,425) | (710) |
| temporary differences in the year | | |
| | | |
+---------------------------------------+-----------------+-----------------+
| | | (1,414) | | (700) |
+---------------------------------------+-------+---------+---------+-------+
| | | |
+---------------------------------------+-----------------+-----------------+
| | | | | |
+---------------------------------------+-------+---------+---------+-------+
Note 10 Earnings per share
Earnings per share and EPRA earnings per share have been calculated, using the
weighted average number of shares in issue during the year of 19,859,561 (2009:
19,645,000), as follows:
+-----------------------------------+--+-------+----+--------+----+-------+----+--------+
| | 31 | 31 | 31 | 31 |
| | March | March | March | March |
| | 2010 | 2010 | 2009 | 2009 |
| | Loss | Earnings | Loss | Earnings |
| | After | per | After | per |
| | tax | share | tax | share |
+-----------------------------------+----------+-------------+------------+-------------+
| | GBP000 | pence | GBP000 | Pence |
+-----------------------------------+----------+-------------+------------+-------------+
| | | | | |
+-----------------------------------+----------+-------------+------------+-------------+
| Loss for the year | (8,399) | (42.3)p | (3,803) | (19.4)p |
+-----------------------------------+----------+-------------+------------+-------------+
| | | | | |
+-----------------------------------+----------+-------------+------------+-------------+
| Loss on revaluation of investment | 9,252 | 46.6p | 3,721 | 18.9p |
| properties | | | | |
+-----------------------------------+----------+-------------+------------+-------------+
| Change in fair value of | - | - | 272 | 1.5p |
| derivative instruments | | | | |
+-----------------------------------+----------+-------------+------------+-------------+
| Deferred tax on revaluation of | (1,425) | (7.2)p | (710) | (3.6)p |
| investment properties | | | | |
+-----------------------------------+----------+-------------+------------+-------------+
| EPRA loss | | (572) | | (2.9)p | | (520) | | (2.6)p |
+-----------------------------------+--+-------+----+--------+----+-------+----+--------+
Basic and diluted earnings per share are the same, as the issued share options
are currently
anti-dilutive.
EPRA earnings per share, excluding the loss on revaluation of investment
properties, the change in fair value of derivative financial instruments and
exceptional items, all net of attributable taxation, is an accepted property
industry measure for reporting recurring profits.
Note 11 Investment properties
+-----------------------------------+----+----+---+-----+
| | As at | As at |
| | 31 | 31 |
| | March | March |
| | 2010 | 2009 |
+-----------------------------------+---------+---------+
| | GBP000 | GBP000 |
+-----------------------------------+---------+---------+
| | | |
+-----------------------------------+---------+---------+
| Opening balance | 64,203 | 67,878 |
+-----------------------------------+---------+---------+
| Capital expenditure on properties | 1,474 | 486 |
+-----------------------------------+---------+---------+
| Foreign exchange gains/(losses) | 4,828 | (440) |
+-----------------------------------+---------+---------+
| Loss on revaluation | (9,252) | (3,721) |
+-----------------------------------+---------+---------+
| | | | | |
+-----------------------------------+----+----+---+-----+
| | 61,253 | 64,203 |
+-----------------------------------+---------+---------+
| | | | | |
+-----------------------------------+----+----+---+-----+
The fair value of investment properties is based on a valuation at 31 March 2010
by DTZ Sweden AB performed in accordance with the Appraisal and Valuation
Standards of RICS, on the basis of market value.
The basis for the valuations included in the audited consolidated financial
statements is based on current market rental yields, expected rental income and
comparable market transactions.
The valuation as at 31 March 2010 includes GBP3.8 million (2009: GBP4.8 million)
for a property at Sickloan. The fall in value is largely due to uncertainty over
the property's planning status following a change in the planning law. The
existing detailed plan covering this property provides for light industrial use.
The building's existing use as a predominantly retail site is based on a
temporary building permit for retail use which expires at the end of March 2014.
Under new regulations this temporary permit cannot be extended. To continue to
use the property as a retail site, application will need to be made to the local
municipality to have a new detailed plan approved which is based on retail use.
The Group has not made an application and the outcome of any such application is
uncertain. This uncertainty has contributed to the fall in the valuation of this
property. The directors have received conflicting advice as to the likelihood of
a retail planning application being successful. The Group's property adviser,
DTZ, has stated that it believes that such an application has a good probability
of success and the 31 March 2010 valuation of GBP3.8 million has been determined
on this basis. Another firm of international property consultants engaged by the
Group to review the valuation of Sicklaon has expressed its view that the
successful outcome of an application is significantly less certain which would
result in a materially lower valuation. In the proposed disposal described below
and in note 24, the sale price of Sickla is 3.2 million.
As described in note 24, subsequent to the year end, the Group has entered into
agreements to sell all its properties, subject to shareholder approval. The sale
consideration is based on aggregate gross property sales prices of SEK 673
million which is equivalent to GBP61.6 million at the year end exchange rate and
GBP61.2 million at the current exchange rate of 11.0 SEK:GBP.
Note 12 Trade and other receivables
+-----------------------------------+----+----+---+----+
| | As at | As at |
| | 31 | 31 |
| | March | March |
| | 2010 | 2009 |
+-----------------------------------+---------+--------+
| | GBP000 | GBP000 |
+-----------------------------------+---------+--------+
| | | |
+-----------------------------------+---------+--------+
| Rental debtors | 255 | 281 |
+-----------------------------------+---------+--------+
| Prepayments and accrued income | 104 | 97 |
+-----------------------------------+---------+--------+
| Other debtors | 34 | - |
+-----------------------------------+---------+--------+
| | | | | |
+-----------------------------------+----+----+---+----+
| | 393 | 378 |
+-----------------------------------+---------+--------+
| | | | | |
+-----------------------------------+----+----+---+----+
The carrying amount of trade and other receivables approximate their fair value.
The Group's credit risk is primarily the risk that a rental debtor will be
unable to pay amounts in full when due, with a maximum exposure equal to the
carrying amount of the debtor. As at
31 March 2010 GBP16,000 (31 March
2009: GBPnil) had been provided against some potential doubtful debts.
Note 13 Cash and cash equivalents
+--------------------------------------+----+------+---+------+
| | As at | As at |
| | 31 March | 31 March |
| | 2010 | |
| | | 2009 |
+--------------------------------------+-----------+----------+
| | GBP000 | GBP000 |
+--------------------------------------+-----------+----------+
| | | |
+--------------------------------------+-----------+----------+
| Cash and cash equivalents | 4,767 | 5,336 |
+--------------------------------------+-----------+----------+
| | | | | |
+--------------------------------------+----+------+---+------+
| | | | | |
+--------------------------------------+----+------+---+------+
Cash and cash equivalents comprise cash held by the Group and short-term
deposits with an original maturity of three months or less. The carrying value
of these assets equals their fair value. The credit risk on liquid funds is
limited because the counterparties are banks with high credit ratings.
Note 14 Trade and other payables
+-----------------------------------+----+----+---+----+
| | As at | As at |
| | 31 | 31 |
| | March | March |
| | 2010 | 2009 |
+-----------------------------------+---------+--------+
| | GBP000 | GBP000 |
+-----------------------------------+---------+--------+
| | | |
+-----------------------------------+---------+--------+
| Accounts payable - trade | 336 | 329 |
+-----------------------------------+---------+--------+
| Deferred income | 1,081 | 879 |
+-----------------------------------+---------+--------+
| Accruals | 906 | 926 |
+-----------------------------------+---------+--------+
| Other creditors | - | 20 |
+-----------------------------------+---------+--------+
| | | | | |
+-----------------------------------+----+----+---+----+
| | 2,323 | 2,154 |
+-----------------------------------+---------+--------+
| | | | | |
+-----------------------------------+----+----+---+----+
The Directors consider that the carrying amount of trade and other payables
approximate to their fair value. All of the above amounts are due and payable
within one year.
Note 15 Borrowings
+-----------------------------------+----+----+---+----+
| | As at | As at |
| | 31 | 31 |
| | March | March |
| | 2010 | 2009 |
+-----------------------------------+---------+--------+
| | GBP000 | GBP000 |
+-----------------------------------+---------+--------+
| | | |
+-----------------------------------+---------+--------+
| Amounts falling due after more | | |
| than one year: | | |
+-----------------------------------+---------+--------+
| Bank loans | 55,178 | 50,013 |
+-----------------------------------+---------+--------+
| Unamortised borrowing costs | (228) | (317) |
+-----------------------------------+---------+--------+
| | | | | |
+-----------------------------------+----+----+---+----+
| | 54,950 | 49,696 |
+-----------------------------------+---------+--------+
| | | | | |
+-----------------------------------+----+----+---+----+
Total borrowings are now SEK 602.7 million (31 March 2009: SEK 592.7 million)
after a SEK 10 million drawdown (GBP0.9 million) to fund the construction of a
new unit development. Otherwise, the increase in the sterling equivalent of the
borrowings is due to exchange losses on revaluation.
The bank loans are secured on the shares of the borrowing subsidiaries and their
investment properties.
The weighted-average interest rate on all loans is 5.46% per annum. The
interest rates on loans of SEK 592.7 million are fixed until maturity of the
borrowings in April 2012, with an option to extend for a further year. The
interest rate on the loan of SEK 10 million is variable.
The loans have been accounted for at amortised cost at the statement of
financial position date, in accordance with IFRS, and the fair value is
disclosed below. Nordic Land's only obligation is to pay interest at fixed and
variable rates and repay loans at par value at maturity. If the loans are repaid
before maturity, the Group is liable for break fees and other costs of
settlement to the lender including reimbursing the lender under an indemnity
clause in the fixed rate loan agreements for the cost of the lender terminating
underlying interest rate swaps between it and a third party.
The Directors estimate that the book value and fair value of the Group's bank
loans are:
+--------------------+--------+---------+---------+--------+
| | Book | Fair | Book | Fair |
| | value | value | value | value |
+--------------------+--------+---------+---------+--------+
| | 31 | 31 | 31 | 31 |
| | March | March | March | March |
| | 2010 | 2010 | 2009 | 2009 |
+--------------------+--------+---------+---------+--------+
| | GBP000 | GBP000 | GBP000 | GBP000 |
+--------------------+--------+---------+---------+--------+
| | | | | |
+--------------------+--------+---------+---------+--------+
| Bank loans | 55,178 | 58,371 | 50,013 | 54,013 |
+--------------------+--------+---------+---------+--------+
Note 16 Financial instruments
Financial risk management objectives and policies
The Group's activities expose it to a variety of market, capital and financial
risks, including:
· market risk (including currency risk, price risk and interest rate risk)
· credit risk
· liquidity risk
The main risks arising from the Group's financial instruments are detailed below
together with the policies adopted by the Board to manage these risks.
These risks are managed by the Group under policies approved by the Board of
Directors. The Group's risk management policies are established to identify and
analyse the risks faced by the
Group, to set appropriate risk limits and controls, and to monitor risks and
adherence to limits. Risk management policies are reviewed regularly to reflect
changes in market conditions and the Group's operational activities.
Financial risks relate to trade and other receivables, trade and other payables,
cash and cash equivalents and borrowings. The Group may also enter into
derivative transactions, primarily fixed interest rate swaps, for the purpose of
managing the interest rate risk arising from funding the acquisition of the
Group's properties.
In accordance with its treasury policy, the Group does not hold or issue
derivative financial instruments for trading purposes.
Capital risk management
The Group's objectives when managing capital are to safeguard the Group's
ability to continue as a going concern in order to provide returns for
shareholders and benefits for other stakeholders and to maintain satisfactory
levels of financial resources to mitigate against financial risk.
The capital structure of the Group consists of a mixture of bank loans, cash and
cash equivalents and retained earnings, all as disclosed in the statement of
financial position. In order to maintain or adjust the capital structure, the
Group may adjust the amount of dividends paid to shareholders, return capital to
shareholders, issue new shares or sell assets to reduce debt.
Consistent with others in the industry, the Group monitors capital on the basis
of the gearing ratio. This ratio is calculated as net debt divided by the value
of the Group's properties. Net debt is calculated as bank loans less cash and
cash equivalents.
The gearing ratio at the year end is as follows:
+--------------------------------------+----+------+---+----------+-----+
| | As at | As at |
| | 31 March | 31 March |
| | 2010 | 2009 |
+--------------------------------------+-----------+--------------------+
| | GBP000 | GBP000 |
+--------------------------------------+-----------+--------------------+
| | | |
+--------------------------------------+-----------+--------------------+
| Bank loans | 54,950 | 49,696 |
+--------------------------------------+-----------+--------------------+
| Cash and cash equivalents | (4,767) | (5,336) |
+--------------------------------------+-----------+--------------------+
| | | | | |
+--------------------------------------+----+------+---+----------------+
| Net debt | 50,183 | 44,360 |
+--------------------------------------+-----------+--------------------+
| | | | | |
+--------------------------------------+----+------+---+----------------+
| | | |
+--------------------------------------+-----------+--------------------+
| Value of investment properties | 61,253 | 64,203 |
+--------------------------------------+-----------+--------------------+
| | | | | |
+--------------------------------------+----+------+---+----------------+
| | | |
+--------------------------------------+-----------+--------------------+
| Net gearing ratio | 81.9% | 69.1% |
+--------------------------------------+-----------+--------------------+
| | | | | |
+--------------------------------------+----+------+--------------+-----+
| | | |
+--------------------------------------+-----------+--------------------+
| Gross gearing ratio | 89.7% | 77.4% |
+--------------------------------------+-----------+--------------------+
| | | | | |
+--------------------------------------+----+------+--------------+-----+
| | | | | | |
+--------------------------------------+----+------+---+----------+-----+
Categories of financial instruments
The Group's financial instruments relate to trade and other receivables, cash
and cash equivalents, trade and other payables and borrowings.
In all cases, the Directors consider that the carrying amount of the Group's
financial instruments approximate to their fair value, except for Borrowings
(see note 15).
Currency risk
The Group operates in the Nordic region and is exposed to foreign exchange risk
arising primarily with respect to the Swedish Krona and Euros. Foreign exchange
risk arises from future commercial transactions, recognised monetary assets and
liabilities and net investment in foreign operations.
The Group's approach to managing its foreign currency exposure is to match, as
far as possible, local currency assets with local currency liabilities. The
Group's policy is not to undertake any speculative currency hedging
arrangements.
At the reporting date the Group had the following exposure, measured as a
proportion of net non-monetary and monetary assets:
As at 31 March 2010 As at 31 March 2009
Currency
Swedish krona
90.4% 81.9%
Euro
(0.2%) (0.1%)
The following table sets out the Group's total exposure to foreign currency risk
and the net exposure to foreign currencies of monetary assets and liabilities:
+---------+----------+-------------+----------+----------+-------------+----------+
| | Monetary | Monetary | Net | Monetary | Monetary | Net |
| | assets | liabilities | exposure | assets | liabilities | exposure |
+---------+----------+-------------+----------+----------+-------------+----------+
| | 2010 | 2010 | 2010 | 2009 | 2009 | 2009 |
+---------+----------+-------------+----------+----------+-------------+----------+
| | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 |
+---------+----------+-------------+----------+----------+-------------+----------+
| | | | | | | |
+---------+----------+-------------+----------+----------+-------------+----------+
| Swedish | 4,058 | 57,135 | (53,077) | 2,550 | 53,119 | (50,569) |
| krona | | | | | | |
+---------+----------+-------------+----------+----------+-------------+----------+
| Euro | 2 | 20 | (18) | 7 | 19 | (12) |
+---------+----------+-------------+----------+----------+-------------+----------+
Amounts in the above table are based on the carrying value of the monetary
assets and liabilities.
Foreign exchange sensitivity analysis
At 31 March 2010, had sterling strengthened/weakened by 5% in relation to all
currencies, with all other variables held constant, net assets attributable to
shareholders, with a corresponding effect on profit and loss, would have
decreased/increased by the amounts shown below.
+-----------------------------------+----+----+---+----+
| | As at | As at |
| | 31 | 31 |
| | March | March |
| | 2010 | 2009 |
+-----------------------------------+---------+--------+
| | GBP000 | GBP000 |
+-----------------------------------+---------+--------+
| | | |
+-----------------------------------+---------+--------+
| Swedish krona | 424 | 649 |
+-----------------------------------+---------+--------+
| Euro | (1) | (1) |
+-----------------------------------+---------+--------+
| | | | | |
+-----------------------------------+----+----+---+----+
| | 423 | 648 |
+-----------------------------------+---------+--------+
| | | | | |
+-----------------------------------+----+----+---+----+
Interest rate risk management
As the Group does not have any derivative financial instruments there is no
sensitivity on profit or net assets in relation to interest rate risk
management. The only sensitivity is in relation to the fair value of the bank
loans.
If the Group were to repay the fixed rate loans before maturity it is liable for
the costs of settlement to the lender including reimbursing the lender under an
indemnity clause in the fixed rate loan agreements for the cost of the lender
terminating underlying interest rate swaps between it and a third party.
Nordic Land's only obligation is to pay interest at fixed and variable rates and
repay loans at par value at maturity. If the loans are repaid before maturity,
the Group is liable for break fees and other costs of settlement to the lender
including reimbursing the lender under an indemnity clause in the fixed rate
loan agreements for the cost of the lender terminating underlying interest rate
swaps between it and a third party.
The Group is exposed to property price and property rental risks. The Group is
not exposed to the price risk with respect to financial instruments as it does
not hold any equity securities.
Credit risk is the risk that a counterparty will be unable to pay amounts in
full when due and relates principally to trade and other receivables and cash
and cash equivalents.
The Directors believe there is no significant credit risk to the Group as the
rental debtors are not reliant on a single rental contract or customer. The
Group also ensures that rental contracts are made with customers with an
appropriate credit history.
The Directors also believe there is no significant risk associated with the cash
and cash equivalents balance as the banks are reputable multinational corporate
banks which are regulated in various jurisdictions. Cash deposits are held with
approved financial institutions with high credit ratings.
With respect to credit risk arising from the other financial assets of the
Group, the Group's exposure to credit risk arises from default of the
counterparty, with a maximum exposure equal to the carrying amount of these
instruments.
Liquidity risk
The Directors limit the Group's liquidity risk by ensuring that sufficient cash
resources are available to fund its working capital requirements and that
committed bank facilities are available to fund its development project capital
expenditure programme.
The contractual maturities of financial liabilities are disclosed in note 14
regarding Trade and other payables, and note 15 regarding Borrowings.
Note 17 Deferred tax liability
The following are the major deferred tax liabilities recognised during the year:
+-------------+--------+----+----------+----------+---+----------+------+--+----------+---------+---+----------+----------+---+----------+----------+--+
| | Revaluation | | Accelerated | | Total | | Revaluation | | Accelerated | | Total as at |
| | of | | tax | | as at | | of | | tax | | 31 March |
| | investment | | depreciation | | 31 | | investment | | depreciation | | 2009 |
| | properties | | as at 31 | | March | | properties | | as at 31 | | |
| | as at 31 | | March 2010 | | 2010 | | as at 31 | | March 2009 | | |
| | March 2010 | | | | | | March 2009 | | | | |
+-------------+-------------+----------+--------------+----------+---------+----------+-------------+----------+--------------+----------+-------------+
| | GBP000 | | GBP000 | | GBP000 | | GBP000 | | GBP000 | | GBP000 |
+-------------+-------------+----------+--------------+----------+---------+----------+-------------+----------+--------------+----------+-------------+
| | | | | | | | | | | | |
+-------------+-------------+----------+--------------+----------+---------+----------+-------------+----------+--------------+----------+-------------+
| At | | | | | | | | | | | |
| start | 279 | | 1,124 | | 1,403 | | 1,305 | | 833 | | 2,138 |
| of | | | | | | | | | | | |
| year | | | | | | | | | | | |
+-------------+-------------+----------+--------------+----------+---------+----------+-------------+----------+--------------+----------+-------------+
| Acquired | | | | | | | - | | - | | - |
+-------------+-------------+----------+--------------+----------+---------+----------+-------------+----------+--------------+----------+-------------+
| Charge | | | | | | | | | | | |
| to | (1,589) | | 164 | | (1,425) | | (999) | | 289 | | (710) |
| Income | | | | | | | | | | | |
+-------------+-------------+----------+--------------+----------+---------+----------+-------------+----------+--------------+----------+-------------+
| Foreign | | | | | | | | | | | |
| exchange | | | | | | | | | | | |
| differences | (84) | | 106 | | 22 | | (27) | | 2 | | (25) |
+-------------+-------------+----------+--------------+----------+---------+----------+-------------+----------+--------------+----------+-------------+
| | | | | | | | | | | | | | | | | | |
+-------------+--------+----+----------+----------+---+----------+------+--+----------+---------+---+----------+----------+---+----------+----------+--+
| At the | | | | | | | | | | | |
| end of | (1,394) | | 1,394 | | - | | 279 | | 1,124 | | 1,403 |
| the | | | | | | | | | | | |
| year | | | | | | | | | | | |
+-------------+-------------+----------+--------------+----------+---------+----------+-------------+----------+--------------+----------+-------------+
| | | | | | | | | | | | | | | | | | |
+-------------+--------+----+----------+----------+---+----------+------+--+----------+---------+---+----------+----------+---+----------+----------+--+
Note 18 Ordinary share capital
As at
As at
31 March 2010 31 March 2009
GBP000
GBP000
Authorised
250,000,000 ordinary shares of GBP0.01 each 2,500 2,500
Issued and fully paid
19,859,561 (2009: 19,859,561)
ordinary shares of GBP0.01 each
199 199
Note 19 Net asset value per share
Net asset value per share has been calculated by dividing the net assets
attributable to the equity shareholders of the Company by the number of ordinary
shares in issue at the year end of 19,859,561 (2009: 19,859,561).
+-------------------------------------+----+----+----+-------+
| | As at | As at |
| | 31 | 31 |
| | March | March |
| | 2010 | 2009 |
+-------------------------------------+---------+------------+
| | GBP000 | GBP000 |
+-------------------------------------+---------+------------+
| | | |
+-------------------------------------+---------+------------+
| Net assets | 9,122 | 16,645 |
+-------------------------------------+---------+------------+
| Adjust for: | | |
+-------------------------------------+---------+------------+
| Deferred tax on investment | | - | | 1,403 |
| properties | | | | |
+-------------------------------------+----+----+----+-------+
| | | | | |
+-------------------------------------+----+----+----+-------+
| | | | | |
+-------------------------------------+----+----+----+-------+
| EPRA net assets | 9,122 | 18,048 |
+-------------------------------------+---------+------------+
| | | | | |
+-------------------------------------+----+----+----+-------+
| | | | | |
+-------------------------------------+----+----+----+-------+
| Net asset value per share | GBP0.46 | GBP0.84 |
+-------------------------------------+---------+------------+
| | | | | |
+-------------------------------------+----+----+----+-------+
| | | | | |
+-------------------------------------+----+----+----+-------+
| EPRA net asset value per share | GBP0.46 | GBP0.91 |
+-------------------------------------+---------+------------+
| | | | | |
+-------------------------------------+----+----+----+-------+
EPRA net asset value per share is the net asset value per share of the Company
adjusted to exclude the effect of deferred tax relating to the revaluation of
investment properties and the fair value of derivative financial instruments net
of attributable taxation.
Basic and diluted net asset value per share are the same, as the issued share
options are currently anti-dilutive.
Note 20 Related party transactions
The following related party transactions were conducted during the year:
a) asset management fees of GBP458,000 (2009: GBP458,000) have been charged in
accordance with the management agreement. The Manager receives a fee of 0.65%
based on the consolidated gross assets of the Group;
b) the cost of legal fees incurred by the Manager in connection with a dispute
concerning and the renegotiation of the management agreement amounting to
GBP26,000 (2009: GBPnil) have been reimbursed to it by the Group; and
c) a performance fee is payable to the Manager equal to 20% of the Total
Shareholder Return in excess of 8% in any relevant period, subject to a high
watermark. At 31 March 2010, this amounted to GBPnil (2009: GBPnil). Payment
of the performance fee consists of not more than 50% in cash and not less than
50% in new shares in the Company.
Note 21 Group entities
Details of all of the Group's subsidiaries at 31 March 2010 are as follows:
Place of
Proportion of Proportion of
incorporation
ownership voting power
interest held
% %
Nordic Land Holdings Limited Jersey
100 100
Nordic Land Holding (Luxembourg) Sàrl Luxembourg 100
100
Nordic Land (Luxembourg) Sàrl Luxembourg
100 100
Nordic Land Finance (Luxembourg) Sàrl Luxembourg 100
100
Nordic Land AB Sweden
100 100
Nordic Land Terminalen AB Sweden
100 100
Nordic Land Borlänge AB Sweden
100 100
Nordic Land Sicklaön Holding AB Sweden
100 100
Each of the undertakings listed above is engaged in investment in retail
property.
Note 22 Share-based payments
On 25 July 2007 the Company established a share option programme (the 'Nordic
Land Share Option Plan') that entitles Directors and representatives of the
Manager to purchase shares in the Company. The share-based payment scheme is
equity settled by the award of options to acquire ordinary shares.
The number and weighted-average exercise prices of share options are as follows:
+--------------------------+----------+----------+----------+----+----------+----------+----------+----------+----+
| | Weighted | | | | Weighted | | |
| | average | | | | average | | |
| | exercise | | Number of | | exercise | | Number of |
| | price | | options | | price | | options 2009 |
| | 2010 | | 2010 | | 2009 | | |
+--------------------------+----------+----------+---------------+----------+----------+----------+---------------+
| | | | | | | | |
+--------------------------+----------+----------+---------------+----------+----------+----------+---------------+
| Outstanding at 1 April | | | 383,736 | | | | 455,686 |
+--------------------------+----------+----------+---------------+----------+----------+----------+---------------+
| Granted during the | 106 | | - | | 106 | | 23,984 |
| period | p | | | | p | | |
+--------------------------+----------+----------+---------------+----------+----------+----------+---------------+
| Lapsed during the period | 106 | | - | | 106 | | (95,934) |
| | p | | | | p | | |
+--------------------------+----------+----------+---------------+----------+----------+----------+---------------+
| | | | | | | | | | |
+--------------------------+----------+----------+----------+----+----------+----------+----------+----------+----+
| Outstanding at 31 March | | | 383,736 | | | | 383,736 |
+--------------------------+----------+----------+---------------+----------+----------+----------+---------------+
| | | | | | | | | | |
+--------------------------+----------+----------+----------+----+----------+----------+----------+----------+----+
The Nordic Land Share Option Plan is open to certain Directors of the Company,
employees and partners of the Manager and any local property adviser as engaged
by a member of the Group, at the discretion of the Directors.
Options over 23,984 shares were granted, as a reallocation of previously issued
share options, on 27 March 2008 at an exercise price of 106 p. The first day on
which these options may be exercised is 27 March 2010; the last day on which the
options may be exercised is 26 March 2018.
Options over 455,686 shares were granted in the period ended 31 March 2008. The
first day on which those options may be exercised is 6 September 2009; the last
day on which the options may be exercised is 5 September 2017. Options for
95,934 shares, which had been issued to a former partner of the Manager, have
since lapsed.
The options are not subject to performance conditions. If the options remain
unexercised after a period of 10 years from the date of grant, the options
expire. Options are normally forfeited if the optionholder leaves the Group or
the Manager before the options vest.
In accordance with IFRS 2 'Share-based Payment', the fair value of
equity-settled share-based payments is determined at the date of grant and is
expensed on a straight-line basis over the vesting period, based on the Group's
estimate of options that will eventually vest. Fair value was calculated using
the standard Black-Scholes pricing model, by an external third party
professional, with the following inputs:
· Share price 106
p
· Exercise price 106
p
· Expected volatility 33%
· Expected option life 6 years
· Expected dividend yield 0%
· Risk-free interest rate 5.1%
Expected volatility is estimated by considering historic average share price
volatility for a group of comparable companies within the same sector and with a
similar market capitalisation as the Company.
The aggregate of the fair values of the outstanding options is GBP173,000 (2009:
GBP135,000).
The total share-based payment charge relating to shares of the Company is:
31 March 2010 31 March 2009
GBP000
GBP000
Share options
38 77
Total
38
77
Note 23 Capital commitments
Future capital expenditure, contracted for and approved by the Directors, but
not provided for in these consolidated financial statements, is as follows:
+-------------------------------------+---------------------+-------+----+-------+
| | As at | As at |
| | 31 | 31 |
| | March | March |
| | 2010 | 2009 |
+-------------------------------------+-----------------------------+------------+
| | GBP000 | GBP000 |
+-------------------------------------+-----------------------------+------------+
| | | |
+-------------------------------------+-----------------------------+------------+
| Contracted for | 598 | 1,357 |
+-------------------------------------+-----------------------------+------------+
| Authorised but not contracted for | 1,093 | 1,032 |
+-------------------------------------+-----------------------------+------------+
| | | | | |
+-------------------------------------+---------------------+-------+----+-------+
| Total | | 1,691 | | 2,389 |
+-------------------------------------+---------------------+-------+----+-------+
| | | | | |
+-------------------------------------+---------------------+-------+----+-------+
Of the GBP598,000 (2009: GBP1,357,000) contracted capital expenditure, GBPnil
(2009: GBP987,000) relates to obligations to develop investment property and
GBP598,000 (2009: GBP370,000) relates to enhancements.
Note 24 Events after the date of the statement of financial position
On 12 April 2010 the Company announced that it had appointed DTZ to explore the
sale of all or part of the Group's property portfolio.
On 17 September 2010, the Company announced that its subsidiary, Nordic Land AB,
had entered into agreements to sell the companies which own each of the Group's
properties, subject to shareholder approval. The Company has called a general
meeting of shareholders to take place on 7 October 2010 to consider a resolution
to approve the disposals Further information is contained in the circular sent
to shareholders dated 17 September 2010.
The disposals are based on the following gross property sales prices:
+----------------------------+----+------+---+-------+----------+--------+----------+
| Property | Original | Valuation | Disposal price | Disposal |
| | cost | as at 31 | | price |
| | (excl | March | | |
| | purchase | 2010 | | |
| | costs) | | | |
+----------------------------+-----------+-----------+-------------------+----------+
| | SEK m | SEK m | SEK m | GBP m |
+----------------------------+-----------+-----------+-------------------+----------+
| | | | | |
+----------------------------+-----------+-----------+-------------------+----------+
| Terminalen 1, Helsingborg | 540 | 478 | 490 | 44.5 |
+----------------------------+-----------+-----------+-------------------+----------+
| Lackeraren 3, Borlänge | 140 | 149 | 148 | 13.5 |
+----------------------------+-----------+-----------+-------------------+----------+
| Sicklaön 117 | 63 | 42 | 35 | 3.2 |
+----------------------------+-----------+-----------+-------------------+----------+
| | | | | |
+----------------------------+-----------+-----------+-------------------+----------+
| Total | | 743 | | 669 | | 673 | 61.2 |
+----------------------------+----+------+---+-------+----------+--------+----------+
| | | | | | | | |
+----------------------------+----+------+---+-------+----------+--------+----------+
Note: GBP amounts transalated at an exchange rate of SEK 11.0:GBP 1
Under the terms of the sale agreements, SEK 17.5 million (GBP1.6 million) of the
gross sale proceeds will be placed in escrow accounts to meet potential warranty
claims brought against Nordic Land AB by the purchasers. If no claims are
brought, the escrow amounts will be released at the end of the respective escrow
periods being October 2011 for SEK 15 million and February 2012 for SEK 2.5
million.
The Directors have stated that if the disposals and the other resolutions are
approved the net cash resources of the Company, after repaying the bank
borrowings and the break fees and other settlement costs to the bank and after
meeting all costs of the disposal and of the winding up, will be returned to
shareholders. The total return to shareholder is expected to be approximately 23
pence per share. The directors intend to make an initial distribution in
December 2010 of approximately 15 pence per share and a final distribution on
conclusion of the winding up of approximately 8 pence per share in the first
quarter of 2012.
The calculation of the distributions is based on a number of assumptions
including estimates for the cost of certain break costs payable to the bank,
exchange rates and costs for the winding up and, accordingly, the actual
distributions may vary from the amounts above. In addition, if the purchasers
bring claims against the escrow amounts under the warranties or indemnities in
the sale agreements the amount of the final distribution may be lower than the
amount above.
As disclosed more fully in the Chairman's statement, the disposal costs include
additional fees payable to the directors of GBP39,000.
If the resolution to approve the disposal is not approved, an abort fee of
GBP0.2 million is payable by the Group to DTZ, the sales agent in Sweden.
Note 25 Contingent Liabilities
As at 31 March 2010, the Group had no contingent liabilities (2009: nil).
Note 26 Annual Report
The Annual Report for the year ended 31 March 2010 will be sent to shareholders
in due course and will be available on the Company's website: www.nordicland.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR GGURCBUPUPUQ
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