TIDMREO
RNS Number : 9502I
Real Estate Opportunities PLC
23 June 2011
23 June 2011
REAL ESTATE OPPORTUNITIES PLC
("REO" or the "Group")
Preliminary results for the year ended 28 February 2011
Successful completion of balance sheet restructuring:
- Formal agreement reached with holders of the 7.5% Convertible
Unsecured Loan Stock and the Zero Dividend Preference Shares
whereby liabilities of approximately GBP246 million were converted
into equity
- Agreement reached with banks to extend the Battersea Power
Station loan facility on terms previously announced
- Agreement reached with the holder of the Series A and Series B
loan notes to defer all principal and interest payments due until
31 August 2011
- The Group continues its engagement with NAMA on the
formalisation of the legal terms, following signing of Memorandum
of Understanding
Significant progress made towards planning permission for
Battersea Power Station:
- Resolution to grant planning permission by Wandsworth Council,
Mayor of London and the Secretary of State for Communities and
Local Government, with Section 106 agreement anticipated in near
future
- Process to identify the development partner(s) for Battersea
Power Station and agree terms is approaching finalisation of a
shortlist of potential investors
- Transfer of Battersea Power Station from REO into a new
Battersea Power Station Shareholder Vehicle Ltd ("BPSSV"),
following agreement with stakeholders on 12 May 2011
Market conditions remain challenging:
- Decrease in portfolio value since February 2010, with total
portfolio valuation at GBP1,004 million, down 8.5%. Irish property
values may be impacted by the potential abolition of upward only
rent reviews
- Battersea Power Station valuation up 17.2% from GBP425 million
to GBP498 million since February 2010
- Property income of GBP34 million in the twelve months to 28
February 2011, reduced from GBP44 million for the fourteen months
ended 28 February 2010, due to a combination of reduced reporting
period, lease restructuring, impact of upward rent reviews
retrospectively applied in previous period and negative currency
translation impact
- Loss after tax reduced to GBP77 million, from GBP828 million
for the fourteen months ended 28 February 2010 due principally to
lower impairment provisions on property portfolio
- Loss per share reduced to 23.1 pence, from loss per share of
248.2 pence for the fourteen months ended 28 February 2010
- Cash balances at GBP31 million (includes cash equivalents and
restricted cash), from GBP39 million at 28 February 2010
Continued strong operational performance:
- Investment portfolio continues to perform strongly,
underpinned by prime locations and high quality tenants:
-- Annualised rent roll of EUR40.1 million on Irish investment
portfolio (2010: EUR41.1 million)
-- 92% rent roll prepaid quarterly
-- 90% of rent subject to upward only reviews
-- Occupancy levels at 95%, arrears at 4%
-- Rent weighted average lease length of 12 years
Ray Horney, Chairman, said: "We have made substantial progress
over the last year. The successful completion of the restructuring
of the balance sheet in May 2011 and the significant progress made
towards securing planning permission for Battersea Power Station
represents the first, important step in determining the Group's
future. However, while there are satisfactory underlying trends
with the operating performance, challenges do of course remain. The
agreement with NAMA, following signature of the Memorandum of
Understanding (MOU), will secure the short term funding
requirements of the business. However, there remains the
significant task, in a difficult trading environment, of realising
or refinancing assets in order to repay the liabilities owed to
NAMA and other creditors.
Your Board is working to achieve this outcome over the next few
years."
Contacts:
Real Estate Opportunities Tel: +44(0) 20 7501 0688
Rob Tincknell, Director
Treasury Holdings (Investment Adviser) Tel: +353 1 618 9300
John Bruder, Managing Director (Ireland)
Niall O'Buachalla, Group Finance Director
Finsbury Group Tel: +44 (0) 20 7251 3801
Gordon Simpson
Arif Shah
Matrix Corporate Capital Tel +44 (0)20 3206 7000
Paul Fincham
Jonathan Becher
Murray Consultants Tel: + 353 1 498 0300
Ed Micheau
CHAIRMAN'S STATEMENT
The period from 1 March 2010 has seen considerable progress made
with the successful implementation of the balance sheet
restructuring of the Group and towards the receipt of planning
permission for Battersea Power Station, which provides the Group
with renewed optimism for the future. These are major achievements
for the Group.
Restructuring
On 11 April 2011, the Group announced the final terms of the
Restructuring, whereby the liabilities due to the holders of both
the Group's 7.5% Convertible Unsecured Loan Stock ("CULS") and the
Zero Dividend Preference Shares ("ZDPs") would be converted into
equity of the newly formed Battersea Power Station Shareholder
Vehicle Ltd ("BPSSV") and REO.
The resolutions in respect of the above proposals were
overwhelmingly approved by each class of stakeholder at
Extraordinary General Meetings held on 5 May 2011. The
Restructuring became effective on 12 May 2011, with the listings of
the CULS and ZDPs on the Official List (standard category)
subsequently cancelled on that date and approximately 111 million
additional Ordinary Shares in Real Estate Opportunities plc ("REO")
admitted to the Official List (standard category).
The holder of the Series A and Series B loan notes (the
"Oriental Loan Notes/OLNs") has also agreed to a standstill
arrangement whereby repayment of the OLNs will be deferred until 31
August 2011 or beyond, if the Battersea Power Station loan
facilities referred to below are similarly extended, subject to
certain conditions. The obligations under the OLNs have also been
transferred from REO to BPSSV.
The Group has also renegotiated the loan facilities relating to
Battersea Power Station with both Lloyds Banking Group (previously
Bank of Scotland) and the National Asset Management Agency ("NAMA")
(previously Bank of Ireland), extending the existing facility to 31
August 2011. Currently, these facilities can be called on demand.
The relevant guarantees under the loan facilities have also been
transferred to BPSSV.
Battersea Power Station
As previously announced, the Group's planning application on the
Battersea Power Station project has now been approved by Wandsworth
Council, the Mayor of London and the Secretary of State for
Communities and Local Government. Final grant of planning
permission as represented by the Section 106 agreement between the
Group, Wandsworth Council and Transport for London is anticipated
in the near future.
The Group continues to engage with prospective investors
identified during the global investment roadshow with the aim of
introducing a long term equity partner(s) into the newly formed
Battersea Power Station vehicle. After generating a significant
degree of interest from prospective investors, the process of
identifying the development partner(s) for Battersea Power Station
and agreeing terms is approaching finalisation of a shortlist of
potential investors. Successful completion of this process and the
subsequent capital injection will allow the Group to repay and/or
refinance the OLNs and the existing Battersea Power Station loan
facilities and facilitate the procurement of development
finance.
Construction of Phase 1 of the development is scheduled to
commence in 2012 with completion in 2016. The remaining phases,
including the first ever privately funded extension to the tube
network in Central London, are scheduled for completion
thereafter.
NAMA
The Group submitted a comprehensive business plan in May 2010
for review by NAMA. The initial evaluation process resulted in a
signed Memorandum of Understanding ("MOU") in December 2010, the
terms of which are non-binding. The terms include the consolidation
and renewal of loan facilities and the provision of working
capital. NAMA will monitor the Group's subsequent performance to
ensure that it adheres to targets contained in the MOU and, subject
to further negotiations, binding facility agreements are expected
to be entered into in the near future
Property Portfolio & Business Activity
The value of the property portfolio as at 28 February 2011
amounted to GBP1,004 million, a reported decrease of 8.5% from the
28 February 2010 valuation of GBP1,097 million. This reported
decrease in the portfolio valuation is principally due to a
revaluation adjustment, which has been further impacted by the fact
that the Euro has weakened significantly against Sterling in the
past year.
The Group's UK portfolio, which is primarily comprised of
Battersea Power Station, increased by 16.4% in the year, whilst the
Irish portfolio values declined on average by 21.3% in the year,
primarily due to negative revaluation adjustment.
Despite current market conditions, the Group's investment
portfolio continues to perform strongly, with occupancy levels at
95% and a rent weighted average lease length of 12 years.
In February 2011, the Group announced that it had entered into
an agreement for lease with Tullow Oil plc for a total of 48,000 sq
ft in the Central Park development in Leopardstown, Dublin, which
represented a doubling in size of the existing rental space
currently occupied by the tenant in the same development.
In July 2010, the Group successfully completed a rent review,
determined at arbitration, with Marks & Spencer (Patrick
Street, Cork), resulting in a significant increase on the previous
rent, with the new rent being effective from July 2009.
REO's strategy of focussing on quality tenants in locations and
formats with good occupier appeal has delivered high occupancy
levels and a strong operational performance. The Group continues to
pro-actively manage its investment portfolio, with no material
defaults to date. This combination of prime office/retail locations
and high quality, diversified tenants such as Vodafone, Merrill
Lynch, KPMG, Tullow Oil plc and Marks & Spencer, has ensured
that the Group's investment portfolio continues to post strong
operational results.
A prudent approach towards the timing of the Group's development
pipeline continues to be adopted, with construction completed on
only one development project, Montevetro, during the year. On 8
April 2011, the Group completed the sale of Montevetro, Dublin's
tallest commercial office building, to Google for GBP85.2 million,
resulting in an accounting profit of GBP31 million, having recorded
an impairment provision in previous periods.
As evidenced by the recent successful planning decision in
Sligo, the Group continues to seek appropriate planning permissions
within its current development portfolio as part of its long term
development strategy.
Listings
On 17 February 2011, the listing category of REO on the Official
List of the UK Listing Authority changed from a premium to a
standard listing. On 16 March 2011, the Company also cancelled its
listings of ordinary shares and CULS on the Official Lists of both
the Irish Stock Exchange and the Channel Islands Stock Exchange.
Following the successful completion of the balance sheet
restructuring on 12 May 2011, the listings of the CULS and ZDPs on
the Official List (standard category) were subsequently cancelled
on that date and approximately 111 million additional Ordinary
Shares in REO were admitted to the Official List (standard
category).
Outlook
The Board is pleased at the successful completion of the balance
sheet restructuring of the Group's debt and the significant
progress made towards securing planning permission on its Battersea
Power Station development.
However, the Group's portfolio and performance continues to be
impacted as a consequence of ongoing concerns over Ireland's
banking system and sovereign debt. These are matters principally
beyond our control. The provision of the assistance programme by
the EU/IMF to the Irish government will result in spending cuts and
tax increases which may impact adversely on future economic growth
in Ireland, the outlook for which remains subdued (1). Uncertainty
also surrounds the potential introduction of legislation by the
Irish government in respect of upward only rent provisions in
existing leases.
While significant progress has been made in the past twelve
months including completion of the balance sheet restructuring,
various resolutions to grant planning permission on Battersea Power
Station and a signed Memorandum of Understanding (MOU) with NAMA,
the Group remains faced with the task of repaying and/or
refinancing significant financial liabilities to various creditors.
The Board is working to achieve this outcome over the next few
years.
(1) OECD: Ireland - Economic Forecast Summary (25 May 2011)
INVESTMENT ADVISER'S REPORT
INVESTMENT PORTFOLIO
Despite ongoing concerns in the commercial and retail property
sectors, REO's investment portfolio continues to perform strongly,
as evidenced by high occupancy rates remaining of 95% and only 4%
of rent roll in arrears, resulting in an annualised rent roll of
EUR40.1 million on the Irish investment portfolio. Rent weighted
average lease length is approximately 12 years. Property income in
the twelve months ended 28 February 2011 was GBP34 million, reduced
from GBP44 million for the fourteen months ended 28 February 2010,
due to a combination of factors including reduced reporting period,
lease restructuring, impact of upward rent reviews retrospectively
applied in previous period and negative currency translation
impact.
By focussing on high occupancy levels and quality tenants in
locations and formats with strong occupier appeal, the Group
continues to pro-actively manage its investment portfolio, with no
material defaults to date. This combination of prime office/retail
locations and high quality, diversified tenants such as Vodafone,
Merrill Lynch, KPMG, Tullow Oil plc and Marks & Spencer, has
ensured that the Group's investment portfolio continues to post
strong operational results.
As noted in the Chairman's Statement, the Group successfully
completed a rent review, determined at arbitration, with Marks
& Spencer (Patrick Street, Cork), resulting in a significant
increase on the previous rent, with the new rent being effective
from July 2009.
The increased rental space taken by Tullow Oil plc in the
Central Park development in Leopardstown, Dublin, which represents
a doubling in size of the existing rental space currently occupied
by the tenant in the same development, is further evidence of the
Group's ability to secure quality tenants in prime locations.
DEVELOPMENT PORTFOLIO
Battersea Power Station
As outlined in the Chairman's Statement, the Group has made
significant progress towards securing planning permission on the
above project, with construction of Phase 1 of the development
scheduled to commence in 2012, with completion in 2016.
The process to introduce an equity partner(s) into the new
Battersea Power Station Shareholder Vehicle Limited, BPSSV, is
approaching finalisation of a shortlist of potential investors,
following a high level of interest generated by the global
investment roadshow.
The development, which represents the largest ever scheme
undertaken in Central London, will act as a catalyst for the
regeneration of the Nine Elms Opportunity Area and is expected to
generate approximately 15,000 new jobs and training opportunities
for the area. The scheme will also include a new underground
station on the proposed extension of the Northern Line from
Kennington to Nine Elms and Battersea.
Irish Development Portfolio
Progress within the Irish development portfolio in the period
includes:
Montevetro
REO's development of the 15-storey landmark building, which is
Dublin's tallest commercial office building, commenced in March
2008 and completed in January 2011. Discussions between REO's
investment adviser, Treasury Holdings, and Google began in early
2010 about Google taking a lease of the building but subsequently
developed into discussions for an outright sale.
Initial exchange of contracts took place on 17 February 2011
with completion of the sale, for a price of GBP85.2 million, which
was satisfied in cash, in April 2011.
Central Park
As noted above, the FTSE 100 index listed, international oil and
gas exploration company, Tullow Oil plc, is to lease a total of
48,000 sqft in Number One, Central Park in Leopardstown, Dublin,
which is a state of the art office block.
Central Park, which is REO's prime suburban development, is home
to a range of blue chip clients including Vodafone, Tullow Oil plc,
Ulster Bank (Royal Bank of Scotland), Volkswagen Bank, Lease Plan
and Merrill Lynch. The opening of the LUAS Green line extension in
October 2010 improves access to the city centre, further enhancing
the location's importance in providing high quality commercial
accommodation for blue chip corporates.
Despite the absence of current development projects, REO
continues to actively pursue appropriate planning permissions on
various projects in Ireland, as evidenced by the recent receipt of
local authority planning for a 232,000 sqft private hospital and
rehabilitation facility, along with 260 car park spaces, in Sligo,
which represents Phase 1 of this development.
Sustainability
Through its role as investment adviser and portfolio manager for
REO, Treasury Holdings, which has been a carbon neutral company
since 2007, promotes environmental protection and sustainability
across all aspects of REO's property portfolio via the
implementation and use of environmentally friendly materials and
renewable energy initiatives.
Many REO developments, such as Montevetro and Central Park, have
set very high environmental standards and the provision of
sustainable buildings, such as these, offer competitive advantages
to corporate tenants through lower operating costs and better
indoor environmental quality, thereby allowing tenants to
demonstrate progress towards corporate environmental
objectives.
The Battersea Power Station development will lead the way in
delivering a highly sustainable development, through the creation
of a mixed use community, new public transport provided by the
Northern Line Extension and ground breaking environmental measures.
The project includes a CCHP energy centre generating 30MW of
electricity which, together with other efficiency measures, will
enable the Power Station to become zero carbon and the rest of the
development to be low carbon, saving approximately 65% of CO2
emissions across the entire site.
VALUATIONS
The value of the portfolio as at 28 February 2011 amounted to
GBP1,004 million, a reported decrease of 8.5% from the 28 February
2010 valuation of GBP1,097 million.
Valuation Methodology
Investment properties and investment properties under
development are stated at fair value in accordance with GAAP at 28
February 2011 and have been valued by independent property
valuers.
Valuation Valuation
Feb '10 Feb '11 %
'000 '000 Change
----------------------------- ------ ---------- ---------- --------
Irish Investment Properties Euro 526,061 446,080 -15.2%
----------------------------- ------ ---------- ---------- --------
Irish Properties under
development Euro 217,811 139,587 -35.9%
----------------------------- ------ ---------- ---------- --------
Irish Properties Euro 743,872 585,667 -21.3%
----------------------------- ------ ---------- ---------- --------
UK Properties GBP 433,380 504,625 16.4%
----------------------------- ------ ---------- ---------- --------
Irish Investment Properties: The value of Irish investment
properties has declined on average by 15.2% in the twelve months to
28 February 2011, which is broadly consistent with decreases in
capital values as disclosed by SCS IPD index in the intervening
period.
Irish Development Properties: The value of Irish properties
under development, which are classified as sites in the course of
development, has decreased on average by 35.9% in the twelve months
to 28 February 2011. Market sentiment continues to be negatively
weighted in the development sector during the period under review
due to high levels of uncertainty as the market waits to assess the
operational impact of NAMA, together with the absence of liquidity
in the banking sector.
UK Properties: The value of the UK property portfolio has
increased by 16.4% in the 12 months to 28 February 2011. This is
primarily due to significant progress made towards securing
planning permission on the Battersea Power Station development.
Pending the introduction of a third party investor into the
newly formed Battersea Power Station Shareholder vehicle,
construction of Phase 1 of the development is scheduled to commence
in 2012, with completion in 2016.
FINANCIAL REVIEW
Valuations & Net Asset Value ("NAV")
As noted above, the value of the portfolio as at 31 August 2010
amounted to GBP1,004 million, a reported decrease of 8.5% since 28
February 2010.
The deficit on the consolidated shareholders' funds at 28
February 2011 is GBP801 million (28 February 2010: GBP722 million
deficit) - the effect of the recently completed balance sheet
restructuring will see this deficit reduce to GBP559 million.
The consolidated net deficit of the Group under the EPRA
guidelines is GBP718 million at 28 February 2011 (28 February 2010
EPRA net deficit: GBP595 million).
Diluted EPRA deficit per share was -215.1p as at 28 February
2011, representing an increase in the deficit from -178.2p at 28
February 2010.
Profit & Loss
Property income amounted to GBP34 million in the twelve months
to 28 February 2011, representing a decrease from GBP44 million in
the prior fourteen month period primarily due to reduced reporting
period, lease restructuring, impact of upward rent reviews
retrospectively applied in previous period and negative currency
translation impact. After valuation losses and operating expenses,
the reported operating loss was GBP45 million (14 months ended 28
February 2010: GBP816 million). Net financial expenses were GBP46
million in the year (14 months ended 28 February 2010: GBP112
million), whilst accounting profits on disposal of investments in
China Real Estate Opportunities plc and the Montevetro development
property were GBP26 million and GBP31 million respectively, having
recorded impairment provisions in respect of both items in previous
periods. This has resulted in a REO loss after taxation for the
period of GBP77 million (14 months ended 28 February 2010: GBP828
million), including an income tax credit of GBP14 million.
Administrative expenses in the year to 28 February 2011 have
increased significantly in comparison to the prior period due
principally to professional fees incurred in respect of the balance
sheet restructuring.
Cash
As at 28 February 2011, the Group had cash, cash equivalents and
restricted cash of GBP31 million (28 February 2010: GBP39
million).
Debt & Gearing
Overall debt level, which includes OLNs, CULS and ZDPs, amounted
to GBP1,733 million at 28 February 2011. Bank loans amounting to
GBP1,029 million have matured or will mature during the next twelve
months. However, the successful completion of the recent balance
sheet restructuring, which resulted in the equitisation of debt
owing to the holders of the CULS and the ZDPs into shares in REO
and the newly formed Battersea shareholder vehicle, BPSSV, will
reduce financial indebtedness to GBP1,499 million.
The Group continues to work closely with other lenders, which
exist outside NAMA's remit, to renew debt facilities where
required.
Going Concern
The Group's future operating performance will be affected by
general economic, financial and business conditions, many of which
remain beyond the Group's control.
At 28 February 2011, the Group's borrowings totalled GBP1.73
billion and in addition there were interest and finance accruals of
GBP67.7 million. At that date, the Group had an investment and
development portfolio which it valued at GBP1 billion, together
with cash and cash equivalents of GBP5.7 million, and restricted
cash of GBP25.8 million. The deficit on shareholders' funds was
GBP801 million. At 28 February 2011, the Group had aggregate bank
loans of GBP1.03 billion classified as current liabilities.
In addition, the Group had obligations of GBP380 million due to
the holders of its CULS, ZDPs and the OLNs, all of which were due
to mature in May 2011. The liabilities due to holders of the CULS
and ZDPs amounted to GBP100.9 million and GBP133.1 million
respectively, with a principal amount of GBP146.3 million due to
the holder of the OLNs at 28 February 2011. Interest payments of
GBP7.6 million and GBP17 million due at 28 February 2011 to the
holders of the CULS and OLNs respectively were not made at this
date. Based on its current financial position, and as previously
announced, the Group would have been unable to repay those
instruments on their maturity.
However, as of 12 May 2011, the Group has successfully completed
a financial restructuring of these liabilities which also enables
the transfer of the Battersea Power Station asset into the newly
formed entity, BPSSV. The terms of the financial restructuring
include the deferral of all principal and interest payments due on
the OLNs until 31 August 2011 and the novation of those liabilities
into BPSSV. The restructuring involves an equitisation of the CULS
and ZDPs into equity in BPSSV and REO.
The Group has also renegotiated the loan facilities relating to
Battersea Power Station with both Lloyds Banking Group (previously
Bank of Scotland) and NAMA (previously Bank of Ireland), extending
the existing facility to 31 August 2011. Currently, these
facilities can be called on demand.
The Group submitted a comprehensive business plan in May 2010
for review by NAMA. The initial evaluation process resulted in a
signed Memorandum of Understanding ("MOU") in December 2010, the
terms of which are non-binding. The terms include the consolidation
and renewal of loan facilities and the provision of working
capital. NAMA will monitor the Group's subsequent performance to
ensure that it adheres to targets contained in the MOU and, subject
to further negotiations, binding facility agreements are expected
to be entered into in the near future.
The key assumptions made in preparing the Group's cashflow for
the period to 22 June 2012 include:
-- The completion of binding facility agreements with NAMA based
on signed MOU in the near future to address:
(a) interest payments
(b) renewal by NAMA of bank facilities in the amount of GBP829
million
(c) the provision by NAMA of working capital facilities
(d) the provision by NAMA of financial support to cover certain
operating cash requirements
-- The renewal by non-NAMA banks of facilities in the amount of
GBP525 million on broadly similar terms.
-- Planning permission for the proposed development of Battersea
Power Station will be granted in the near future. Resolutions to
grant planning permission by Wandsworth Council, the Mayor of
London and the Secretary of State for Communities and Local
Government have been received, with final grant of planning
permission as represented by Section 106 agreement anticipated in
the near future.
-- The process undertaken to identify and agree terms with an
equity partner(s) is approaching finalisation of a shortlist of
potential investors which, when complete, will lead to the
introduction of an equity partner(s) on the Battersea development
providing all project financing and repayment of certain
liabilities.
The Group may also investigate the possibility of raising
further capital after its debt facilities have been renegotiated
and its interest in Battersea Power Station has been
restructured.
Based on the Group's current cashflow and the key assumptions
noted above, the Board believes that the Group will have sufficient
cash and cash equivalents to meet its liquidity requirements for at
least twelve months from the date of approval of this report.
The Directors of the Company have concluded that the above
factors represent material uncertainties. Failure to achieve the
above assumptions and objectives could cast significant doubt on
the Group's ability to continue as a going concern and it may
therefore be unable to realise its assets and discharge its
liabilities in the normal course of business.
However, having discussed the assumptions and basis of
preparation supporting the Group's cash flow projections, together
with the advanced status of negotiations with the Group's key
lenders, along with the progress made in restructuring of the
Group's Balance Sheet and the significant progress made towards
securing planning permission on Battersea Power Station, the
Directors of the Company have a reasonable expectation that the
Group will be able to meet its liabilities as they fall due for the
foreseeable future.
On this basis, the Directors consider it appropriate to prepare
the financial statements on a going concern basis. No adjustment
which would result from a change in the going concern basis of
preparation has been included in the financial statements.
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties that face the business
include the following:
Economy
The global banking crisis and economic slowdown has had a
significant negative impact upon Ireland's economy which, since
last 2008, has suffered the largest contraction in gross domestic
product of any developed country. Recent concerns over Ireland's
banking system and government finances have led to increasing
yields on Irish sovereign debt and have curtailed the Irish
government's ability to borrow in the international money markets.
This culminated in the Irish government approaching its European
Union partners and the International Monetary Fund in late November
2010 to request financial assistance.
On 1 December 2010, the Irish government published the EU/IMF
Agreement Document detailing an EUR85 billion assistance programme
to support the Irish banking system and provide ongoing financial
support to the Irish state. The provision of the assistance
programme is conditional upon the Irish government implementing
austerity measures including spending cuts and tax increases aimed
at lowering Ireland's budget deficit. These spending cuts and tax
increases may impact upon future economic growth in Ireland, the
outlook for which remains negative.
The concentration of the Group's property portfolio in Ireland
means that the Group is particularly exposed to the ongoing
weakness of the Irish economy and its impact upon Ireland's
property market. Lower tenant demand, failure to renew expiring
leases, tenant defaults and falling demand for development assets
will continue to pose a material risk to the Group's business,
operational results and financial health.
Liquidity
Despite the recent successful completion of the balance sheet
restructuring, the Group is reliant upon the ongoing support of
NAMA and other lenders, which will continue until one or more of
the following key initiatives have been concluded:
-- execution of legally binding documentation with NAMA;
-- further asset disposals from the Irish property portfolio,
the timing of which will be subject to conditions in the Irish
property market; and
-- further financial restructuring initiatives.
Failure to successfully complete such initiatives and/or renew
bank facilities expiring in the next twelve months would have
material adverse consequences for the Group, thereby casting doubt
on its ability to continue as a going concern.
Financial sector - Lenders & NAMA
As noted above, the ongoing Irish economic crisis, culminating
in the EU/IMF assistance programme, has curtailed the ability of
both the Irish government and the Irish banking system to borrow
funds in the international money markets. Therefore, liquidity
remains largely absent from the market.
The Group's ability to raise funds for development activity on
favourable terms depends on a number of factors including general
economic, political and capital market conditions and credit
availability from commercial lenders. Another global liquidity
crisis could significantly increase the cost of available funding
or lead to serious difficulties in refinancing the Group's current
debt levels. The Group could also be forced to sell further assets,
which may not be under the best conditions, in order to meet
payment obligations.
Property Valuations & NAV
The severe recession in the Irish economy has been accompanied
by significant falls in the value of properties across the Irish
market. Continuing inactivity in the Irish property market, the
potential enactment of retrospective abolition of upward only rent
reviews on existing leases and the ongoing absence of new lending
facilities, has also led to difficulty in conducting realistic
property valuations.
Ongoing volatility in the global financial system has created a
significant degree of turbulence in commercial real estate markets
on a worldwide basis. Furthermore, the lack of liquidity in the
capital markets means that it may be very difficult for the Group
to achieve further property sales in the short-term.
Further potential declines in the value of the Group's portfolio
may result in a further reduction to shareholders' funds, which
currently show a deficit of GBP801 million - the effect of the
recently completed balance sheet restructuring will see this
deficit reduce to GBP559 million.
The consolidated net deficit of the Group under the EPRA
guidelines is GBP718 million at 28 February 2011 (28 February 2010:
net deficit of GBP595 million).
Interest Rates
Interest costs represent a substantial expense to the Group,
which uses interest rate swaps to manage its exposure to fixed and
floating rates. The continuing difficulties experienced in the
banking sector and scarcity of credit may result in lenders seeking
increased margins and there is a risk that future interest costs
may be higher. If the Group fails to meet margin calls under such
interest rate swaps it may be precluded from using interest rate
swaps to manage its exposure.
Approval of Preliminary Announcement
The financial information contained in this preliminary
announcement is not the statutory financial statements of the
company, drawn up in accordance with the Companies (Jersey) Law
1991 (as amended). The Directors approved the preliminary
announcement in respect of the financial year ended 28 February
2011 on 22 June 2011.
We understand that our auditors, KPMG, will be drawing attention
as an emphasis of matter without qualifying their report with
regards to disclosures in Note 2 (a).
Contents page
Consolidated and company statement of financial position
Consolidated and company statement of comprehensive income
Consolidated and company statement of changes in equity /
deficit
Consolidated statement of cash flows
Notes
1. Reporting entity
2. Basis of preparation
3. Significant accounting policies
4. Determination of fair values
5. Financial risk management
6. Investment property and investment property under
development
7. Net asset value per share
8. Investment in associates
9. Other investments
10. Investment in subsidiary undertakings
11. Trade and other receivables
12. Cash and cash equivalents
13. Interest bearing loans and borrowings
14. Deferred tax assets and liabilities
15. Trade and other payables
16. Share capital and reserves
a. Share capital
b. Dividends
c. Reserves
17. Segment reporting
18. Provisions against investment in subsidiary companies and
Intercompany Loans
19. Management fees
20. Other expenses
21. Financial income and expense
22. Group taxation
23. Earnings per share
24. Financial instruments
a) Credit risk
b) Liquidity risk
c) Interest rate risk
d) Currency risk
e) Fair value
25. Contingencies, guarantees and capital commitments
26. Related parties
27. Post balance sheet events
28. Pro forma Balance sheet post restructuring
29. Subsidiary undertakings
Consolidated and company statement of financial position
As at 28 February 2011
In thousands of pounds sterling
28 28 28 28
February February February February
Note 2011 2010 2011 2010
--------- --------- --------- ---------
Group Group Company Company
--------- --------- --------- ---------
Assets
--------- --------- --------- ---------
Investment properties 6 401,469 514,995 - -
--------- --------- --------- ---------
Investment properties under development 6 602,613 582,440 - -
--------- --------- --------- ---------
Trade and other receivables 11 5,460 6,072 - -
--------- --------- --------- ---------
Derivative financial instruments 24(b) - 19 - -
--------- --------- --------- ---------
Deferred tax assets 14 764 1,451 - -
--------- --------- --------- ---------
Restricted cash 12 4,925 6,731 - -
--------- --------- --------- ---------
Total non-current assets 1,015,231 1,111,708 - -
--------- --------- --------- ---------
Trade and other receivables 11 68,565 7,348 1 -
--------- --------- --------- ---------
Assets classified as held for
sale 9 - 27,680 - -
--------- --------- --------- ---------
Derivative financial instruments 24(b) - 30 - -
--------- --------- --------- ---------
Cash and cash equivalents 12 5,690 21,100 190 333
--------- --------- --------- ---------
Restricted cash 12 20,874 11,016 - -
--------- --------- --------- ---------
Total current assets 95,129 67,174 191 333
--------- --------- --------- ---------
Total assets 1,110,360 1,178,882 191 333
--------- --------- --------- ---------
Liabilities
--------- --------- --------- ---------
Interest-bearing loans and borrowings 13 324,253 650,053 - 101,101
--------- --------- --------- ---------
Trade and other payables 15 889 968 - -
--------- --------- --------- ---------
Derivative financial instruments 24(b) 65,214 39,706 - -
--------- --------- --------- ---------
Deferred tax liabilities 14 12,923 26,385 - -
--------- --------- --------- ---------
Total non-current liabilities 403,279 717,112 - 101,101
--------- --------- --------- ---------
Interest-bearing loans and borrowings 13 1,409,105 1,070,972 247,150 147,786
--------- --------- --------- ---------
Trade and other payables 15 93,841 50,271 25,730 12,102
--------- --------- --------- ---------
Derivative financial instruments 24(b) 4,834 62,150 - -
--------- --------- --------- ---------
Total current liabilities 1,507,780 1,183,393 272,880 159,888
--------- --------- --------- ---------
Total liabilities 1,911,059 1,900,505 272,880 260,989
--------- --------- --------- ---------
Net liabilities (800,699) (721,623) (272,689) (260,656)
--------- --------- --------- ---------
Equity
--------- --------- --------- ---------
Issued share capital 16(a) 3,340 3,338 3,340 3,338
--------- --------- --------- ---------
Share premium 16(c) 216 12 216 12
--------- --------- --------- ---------
Reserves - other 16(c) 1,480 1,480 1,480 1,480
--------- --------- --------- ---------
Currency reserve 16(c) 101,167 77,075 - -
--------- --------- --------- ---------
Retained losses (906,902) (803,528) (277,725) (265,486)
--------- --------- --------- ---------
Total deficit attributable to
equity holders of the parent (800,699) (721,623) (272,689) (260,656)
--------- --------- --------- ---------
Net deficit value per ordinary
share
--------- --------- --------- ---------
Basic (pence) 7 (239.7) (216.2)
--------- --------- --------- ---------
Diluted (pence) 7 (239.7) (216.2)
--------- --------- --------- ---------
EPRA (pence) 7 (215.1) (178.2)
--------- --------- --------- ---------
The accompanying notes are an integral part of these financial
statements.
Consolidated and company statement of comprehensive income
For the year ending 28 February 2011 (In thousands of pounds
sterling)
14 Month 14 Month
Year Period Year Period
Ended 28 Ended 28 Ended 28 Ended 28
February February February February
Note 2011 2010 2011 2010
--------- --------- -------- ---------
Continuing operations Group Group Company Company
--------- --------- -------- ---------
Property income 17 33,598 43,863 - -
--------- --------- -------- ---------
Valuation losses on investment
properties and on investment
properties under development 6 (122,540) (810,666) - -
--------- --------- -------- ---------
Profit on disposal of investment
properties and on investment
property under development 6 30,965 505 - -
--------- --------- -------- ---------
Profit on disposal of asset
held for sale 9 26,233 - - -
--------- --------- -------- ---------
Management fee 19 (2,143) (4,017) - -
--------- --------- -------- ---------
Administrative expenses 20 (12,158) (6,826) (6,308) (1,468)
--------- --------- -------- ---------
Impairment of listed investment 9 - (40,300) - -
--------- --------- -------- ---------
Other income 1,029 1,039 510 23
--------- --------- -------- ---------
Provision against carrying
value in subsidiaries and Intercompany
lending 18 - - (11,391) (380,622)
--------- --------- -------- ---------
Results from operating activities (45,016) (816,402) (17,189) (382,067)
--------- --------- -------- ---------
Financial income 21 7,850 1,281 23,514 4,812
--------- --------- -------- ---------
Financial expenses 21 (53,902) (113,300) (18,564) (32,934)
--------- --------- -------- ---------
Net finance (costs) / income (46,052) (112,019) 4,950 (28,122)
--------- --------- -------- ---------
Share of loss of associate 8 - (593) - -
--------- --------- -------- ---------
Loss before income tax (91,068) (929,014) (12,239) (410,189)
--------- --------- -------- ---------
Income tax credit 22 13,927 101,248 - -
--------- --------- -------- ---------
Loss for the year (77,141) (827,766) (12,239) (410,189)
--------- --------- -------- ---------
Loss attributable to:
--------- --------- -------- ---------
Owners of the company (77,141) (828,628) (12,239) (410,189)
--------- --------- -------- ---------
Non-controlling interest - 862 - -
--------- --------- -------- ---------
Loss for the year (77,141) (827,766) (12,239) (410,189)
--------- --------- -------- ---------
Other
Comprehensive
Income
--------- --------- -------- ---------
Foreign currency translation
differences
--------- --------- -------- ---------
- attributable to subsidiaries 21 24,092 (26,544) - -
--------- --------- -------- ---------
- attributable to associate 21 - (13,579) - -
--------- --------- -------- ---------
Share of other reserve movement
in associate - (3,267) - -
--------- --------- -------- ---------
Other comprehensive income
/ (loss) for the year / period,
net of income tax 24,092 (43,390) - -
--------- --------- -------- ---------
Total comprehensive loss for
the year / period (53,049) (871,156) (12,239) (410,189)
--------- --------- -------- ---------
Total comprehensive loss attributable
to:
--------- --------- -------- ---------
Owners of the company (53,049) (872,018) (12,239) (410,189)
--------- --------- -------- ---------
Non-controlling interest - 862 - -
--------- --------- -------- ---------
Total comprehensive loss for
the year / period (53,049) (871,156) (12,239) (410,189)
--------- --------- -------- ---------
Loss per ordinary share
--------- --------- -------- ---------
Basic (pence) 23 (23.1) (248.2)
--------- --------- -------- ---------
Diluted (pence) 23 (23.1) (248.2)
--------- --------- -------- ---------
The accompanying notes are an integral part of these financial
statement
Consolidated and company statement of changes in deficit /
equity
For the year ended 28 February 2011
In thousands of pounds sterling
Total equity
reserves
attributable
Share Share Other Currency Retained to Non-controlling
Group capital premium reserve reserve earnings shareholders interest Total
------------------ -------- -------- --------- --------- ---------- ------------- ---------------- ----------
Balance at 1
March 2010 3,338 12 1,480 77,075 (803,528) (721,623) - (721,623)
------------------ -------- -------- --------- --------- ---------- ------------- ---------------- ----------
Reclassification
(note 9) - - 14,157 26,233 (40,390) - - -
------------------ -------- -------- --------- --------- ---------- ------------- ---------------- ----------
Restated Balance 3,338 12 15,637 103,308 (843,918) (721,623) - (721,623)
------------------ -------- -------- --------- --------- ---------- ------------- ---------------- ----------
Total
comprehensive
income
------------------ -------- -------- --------- --------- ---------- ------------- ---------------- ----------
Loss for the year - - - - (77,141) (77,141) - (77,141)
------------------ -------- -------- --------- --------- ---------- ------------- ---------------- ----------
Other
comprehensive
income
------------------ -------- -------- --------- --------- ---------- ------------- ---------------- ----------
Foreign currency
translation
differences - - - 24,092 - 24,092 - 24,092
------------------ -------- -------- --------- --------- ---------- ------------- ---------------- ----------
Realisation on
transfer of
associate to
assets available
for sale - - - - - - - -
------------------ -------- -------- --------- --------- ---------- ------------- ---------------- ----------
Total other
comprehensive
income - - - 24,092 - 24,092 - 24,092
------------------ -------- -------- --------- --------- ---------- ------------- ---------------- ----------
Total
comprehensive
income - - - 24,092 (77,141) (53,049) - (53,049)
------------------ -------- -------- --------- --------- ---------- ------------- ---------------- ----------
Reclassified to
Profit (note 9) - - (14,157) (26,233) 14,157 (26,233) - (26,233)
------------------ -------- -------- --------- --------- ---------- ------------- ---------------- ----------
Transactions with
owners recorded
directly in
equity
------------------ -------- -------- --------- --------- ---------- ------------- ---------------- ----------
Contribution by
and distribution
to owners
------------------ -------- -------- --------- --------- ---------- ------------- ---------------- ----------
Conversion of
loan stock 2 204 - - - 206 - 206
------------------ -------- -------- --------- --------- ---------- ------------- ---------------- ----------
Total
transactions
with owners 2 204 - - - 206 - 206
------------------ -------- -------- --------- --------- ---------- ------------- ---------------- ----------
Balance at 28
February 2011 3,340 216 1,480 101,167 (906,902) (800,699) - (800,699)
------------------ -------- -------- --------- --------- ---------- ------------- ---------------- ----------
Consolidated and company statement of changes in deficit /
equity
For the 14 month period ended 28 February 2010
In thousands of pounds sterling
Total equity
reserves
attributable
Share Share Other Currency Retained to Non-controlling
Group capital premium reserves reserve earnings shareholders interest Total
--------------- -------- -------- --------- --------- ---------- ------------- ---------------- ----------
Balance at 1
January 2009 3,338 1 18,904 143,431 (15,290) 150,384 (862) 149,522
--------------- -------- -------- --------- --------- ---------- ------------- ---------------- ----------
Total
comprehensive
income
--------------- -------- -------- --------- --------- ---------- ------------- ---------------- ----------
Loss for the
period - - - - (828,628) (828,628) 862 (827,766)
--------------- -------- -------- --------- --------- ---------- ------------- ---------------- ----------
Other
comprehensive
income
--------------- -------- -------- --------- --------- ---------- ------------- ---------------- ----------
Foreign
currency
translation
differences - - - (40,123) - (40,123) - (40,123)
--------------- -------- -------- --------- --------- ---------- ------------- ---------------- ----------
Share of
reserve
movement -
associate - - (3,267) - - (3,267) - (3,267)
--------------- -------- -------- --------- --------- ---------- ------------- ---------------- ----------
Realisation on
transfer of
associate to
assets
available for
sale (note
9) - - (14,157) (26,233) 40,390 - - -
--------------- -------- -------- --------- --------- ---------- ------------- ---------------- ----------
Total other
comprehensive
income - - (17,424) (66,356) 40,390 (43,390) - (43,390)
--------------- -------- -------- --------- --------- ---------- ------------- ---------------- ----------
Total
comprehensive
income - - (17,424) (66,356) (788,238) (872,018) 862 (871,156)
--------------- -------- -------- --------- --------- ---------- ------------- ---------------- ----------
Transactions
with owners
recorded
directly in
equity
--------------- -------- -------- --------- --------- ---------- ------------- ---------------- ----------
Contribution
by and
distribution
to owners
--------------- -------- -------- --------- --------- ---------- ------------- ---------------- ----------
Conversion of
loan stock - 11 - - - 11 - 11
--------------- -------- -------- --------- --------- ---------- ------------- ---------------- ----------
Total
transactions
with owners - 11 - - - 11 - 11
--------------- -------- -------- --------- --------- ---------- ------------- ---------------- ----------
Balance at 28
February
2010 3,338 12 1,480 77,075 (803,528) (721,623) - (721,623)
--------------- -------- -------- --------- --------- ---------- ------------- ---------------- ----------
Consolidated and company statement of changes in deficit /
equity
For the year ended 28 February 2011
In thousands of pounds sterling
Total equity
reserves
attributable
Share Share Redemption Retained to
Company capital premium reserve earnings shareholders
--------------- ---------- --------- ----------- ---------- -------------
Balance at 1
March 2010 3,338 12 1,480 (265,486) (260,656)
--------------- ---------- --------- ----------- ---------- -------------
Total
comprehensive
income
--------------- ---------- --------- ----------- ---------- -------------
Loss for the
year - - - (12,239) (12,239)
--------------- ---------- --------- ----------- ---------- -------------
Other
comprehensive
income - - - - -
--------------- ---------- --------- ----------- ---------- -------------
Total
comprehensive
income - - - (12,239) (12,239)
--------------- ---------- --------- ----------- ---------- -------------
Transactions
with owners
recorded
directly in
equity
--------------- ---------- --------- ----------- ---------- -------------
Contribution
by and
distribution
to owners
--------------- ---------- --------- ----------- ---------- -------------
Conversion of
loan stock 2 204 - - 206
--------------- ---------- --------- ----------- ---------- -------------
Total
transactions
with owners 2 204 - - 206
--------------- ---------- --------- ----------- ---------- -------------
Balance at 28
February
2011 3,340 216 1,480 (277,725) (272,689)
--------------- ---------- --------- ----------- ---------- -------------
Consolidated and company statement of changes in deficit /
equity
For the 14 month period ended 28 February 2010
In thousands of pounds sterling
Total equity
reserves
attributable
Share Share Redemption Retained to
Company capital premium reserve earnings shareholders
--------------- ---------- --------- ----------- ---------- -------------
Balance at 1
January 2009 3,338 1 1,480 144,703 149,522
--------------- ---------- --------- ----------- ---------- -------------
Total
comprehensive
income
--------------- ---------- --------- ----------- ---------- -------------
Loss for the
period - - - (410,189) (410,189)
--------------- ---------- --------- ----------- ---------- -------------
Other
comprehensive
income - - - - -
--------------- ---------- --------- ----------- ---------- -------------
Total
comprehensive
income - - - (410,189) (410,189)
--------------- ---------- --------- ----------- ---------- -------------
Transactions
with owners
recorded
directly in
equity
--------------- ---------- --------- ----------- ---------- -------------
Contribution
by and
distribution
to owners
--------------- ---------- --------- ----------- ---------- -------------
Conversion of
loan stock - 11 - - 11
--------------- ---------- --------- ----------- ---------- -------------
Total
transactions
with owners - 11 - - 11
--------------- ---------- --------- ----------- ---------- -------------
Balance at 28
February
2010 3,338 12 1,480 (265,486) (260,656)
--------------- ---------- --------- ----------- ---------- -------------
The accompanying notes are an integral part of these financial
statements.
Consolidated statement of cash flows
For the year ended 28 February 2011
In thousands of pounds sterling
14 Month
Year Ended Period
28 Feb Ended 28
Note 2011 Feb 2010
---------- ---------
Cash flows from
operating activities
---------- ---------
Loss for the period (77,141) (827,766)
---------- ---------
Adjustments for:
---------- ---------
Net financial expense 21 46,052 112,019
---------- ---------
Change in fair value of investment properties
and investment properties under development 6 122,540 810,666
---------- ---------
Profit on disposal of investment property
under development 6 (30,965) (505)
---------- ---------
Impairment of listed investment 9 - 40,300
---------- ---------
Profit on disposal asset held for resale 9 (26,233) -
---------- ---------
Share of loss in associate 8 - 593
---------- ---------
Income tax credit 22 (13,927) (101,248)
---------- ---------
20,326 34,059
---------- ---------
Decrease in trade and other receivables 1,102 7,231
---------- ---------
Decrease in trade and other payables (781) (2,482)
---------- ---------
Income tax refund 23 979
---------- ---------
Net cash from operating activities 20,670 39,787
---------- ---------
Cash flows from
investing activities
---------- ---------
Proceeds from sale of investment property
and investment properties under development 7,999 3,716
---------- ---------
Additions to investment properties and
investment properties under development (49,330) (60,714)
---------- ---------
Proceeds from sale of listed investment 27,680 -
---------- ---------
Interest received 249 1,131
---------- ---------
Movement in restricted cash (8,053) 18,669
---------- ---------
Cash flows from investing activities (21,455) (37,198)
---------- ---------
Cash flows from
financing activities
---------- ---------
Proceeds from bank borrowings 36,002 49,433
---------- ---------
Net payments to financial institutions (34,298) (38,515)
---------- ---------
Repayment of bank borrowings (4,686) (6,841)
---------- ---------
Interest paid (9,907) (37,983)
---------- ---------
Cash flows from financing activities (12,889) (33,906)
---------- ---------
Net decrease in cash and cash equivalents (13,674) (31,317)
---------- ---------
Cash and cash equivalents at start of
period 21,100 55,503
---------- ---------
Effect of exchange rate fluctuations
on cash held (1,736) (3,086)
---------- ---------
Cash and cash equivalents at end of year
/ period 5,690 21,100
---------- ---------
The accompanying notes are an integral part of these financial
statements.
1. Reporting Entity
Real Estate Opportunities plc (the "Company") is a property
company incorporated in Jersey. The registered address of the
company is Ogier House, The Esplanade, St. Helier, Jersey, JE4 9WG.
The consolidated financial statements of the Company for the year
ended 28 February 2011 (previous financial period was 14 months to
February 2010) comprise the Company and its subsidiaries (together
referred to as the "Group") and the Group's interest in
associates.
These consolidated financial statements were approved by the
Board of Directors on 22 June 2011.
2. Basis of Preparation
(a) Going Concern
The Group's future operating performance will be affected by
general economic, financial and business conditions, many of which
remain beyond the Group's control.
At 28 February 2011, the Group's borrowings totalled GBP1.73
billion and in addition there were interest and finance accruals of
GBP67.7 million. At that date, the Group had an investment and
development portfolio which it valued at GBP1 billion, together
with cash and cash equivalents of GBP5.7 million, and restricted
cash of GBP25.8 million. The deficit on shareholders' funds was
GBP801 million. At 28 February 2011, the Group had aggregate bank
loans of GBP1.03 billion classified as current liabilities.
In addition, the Group had obligations of GBP380 million due to
the holders of its CULS, ZDPs and the OLNs, all of which were due
to have matured in May 2011. The liabilities due to holders of the
CULS and ZDPs amounted to GBP100.9 million and GBP133.1 million
respectively, with a principal amount of GBP146.3 million due to
the holder of the OLNs at the 28 February 2011. Interest payments
of GBP7.6 million and GBP17 million due at 28 February 2011 to the
holders of the CULS and OLNs respectively were not made at this
date. Based on its current financial position, and as previously
announced, the Group would have been unable to repay those
instruments on their maturity.
However, as of 12 May 2011, the Group has successfully completed
a financial restructuring of these liabilities which also enables
the transfer of the Battersea Power Station asset into a newly
formed entity, Battersea Power Station Shareholder Vehicle Limited,
BPSSV. The terms of the financial restructuring include the
deferral of all principal and interest payments due on the OLNs
until 31 August 2011 and the novation of those liabilities into
BPSSV. The restructuring involves an equitisation of the CULS and
ZDPs into equity in BPSSV and Real Estate Opportunities plc.
The Group has also renegotiated the loan facilities relating to
Battersea Power Station with both Lloyds Banking Group (previously
Bank of Scotland) and NAMA (previously Bank of Ireland), extending
the existing facility to 31 August 2011. Currently, these
facilities can be called on demand.
The Group submitted a comprehensive business plan in May 2010
for review by NAMA. The initial evaluation process resulted in a
signed Memorandum of Understanding ("MOU") in December 2010, the
terms of which are non-binding. The terms include the consolidation
and renewal of loan facilities and the provision of working
capital. NAMA will monitor the Group's subsequent performance to
ensure that it adheres to targets contained in the MOU and, subject
to further negotiations, binding facility agreements are expected
to be entered into in the near future.
The key assumptions made in preparing the Group's cash flow for
the period to 22 June 2012 include:
-- The completion of binding facility agreements with NAMA based
on signed MOU in the near future to address:
(a) interest payments
(b) renewal by NAMA of bank facilities in the amount of GBP829
million
(c) the provision by NAMA of working capital facilities
(d) the provision by NAMA of financial support to cover certain
operating cash requirements
-- The renewal by non-NAMA banks of facilities in the amount of
GBP525m on broadly similar terms.
-- Planning permission for the proposed development of Battersea
Power Station will be granted in the near future. Resolutions to
grant planning permission by Wandsworth Council, the Mayor of
London and the Secretary of State for Communities and Local
Government have been received, with final grant of planning
permission as represented by Section 106 agreement anticipated in
the near future.
-- The process undertaken to identify and agree terms with an
equity partner(s) is approaching finalisation of a shortlist of
potential investors which, when complete, will lead to the
introduction of an equity partners(s) on the Battersea development
providing all project financing and repayment of certain
liabilities.
The Group may also investigate the possibility of raising
further capital after its debt facilities have been renegotiated
and its interest in Battersea Power Station has been
restructured.
Based on the Group's current cash flow and the key assumptions
noted above, the Board believes that the Group will have sufficient
cash and cash equivalents to meet its liquidity requirements for at
least twelve months from the date of approval of this report.
The Directors of the Company have concluded that the above
factors represent material uncertainties. Failure to achieve the
above assumptions and objectives could cast significant doubt on
the Group's ability to continue as a going concern and it may
therefore be unable to realise its assets and discharge its
liabilities in the normal course of business.
However, having discussed the assumptions and basis of
preparation supporting the Group's cash flow projections, together
with the advanced status of negotiations with the Group's key
lenders, along with the progress made in restructuring of the
Group's Balance Sheet and the significant progress made towards
securing planning permission on Battersea Power Station, the
Directors of the Company have a reasonable expectation that the
Group will be able to meet its liabilities as they fall due for the
foreseeable future.
On this basis, the Directors consider it appropriate to prepare
the financial statements on a going concern basis. No adjustment
which would result from a change in the going concern basis of
preparation has been included in the financial statements.
(b) Statement of compliance
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the EU.
(c) Basis of measurement
The consolidated financial statements are prepared on the
historical cost basis except for the following material items:
-- derivative financial instruments are measured at fair
value;
-- available-for-sale financial assets are measured at fair
value; and
-- investment properties and investment properties under
development are measured at fair value.
The methods used to measure fair values are discussed further in
note 4.
(d) Functional and presentation currency
The Company's functional currency and the presentation currency
for the Group is pounds Sterling. All financial information is
presented in pounds Sterling, rounded to the nearest thousand,
unless otherwise indicated.
(e) Use of estimates and judgements
The preparation of financial statements in conformity with IFRSs
requires management to make judgements, estimates and assumptions
that affect the application of policies and reported amounts of
assets and liabilities, income and expenses. The estimates and
associated assumptions are based on experience and various other
factors that are believed to be reasonable under the circumstances.
Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the year
in which the estimate is revised if the revision affects only that
period or in the period of the revision and future periods if the
revision affects both current and future years.
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
consolidated financial statements is included in the following
notes:
-- Note 2 (a) - Going Concern
-- Note 6 - Investment property and investment property under
development
-- Note 14 - Deferred tax assets and liabilities
-- Note 24(b) - Derivative financial instruments
(f) Changes in accounting policies
With effect from 1 March 2010, the Group changed its accounting
policies in the following areas:
(i) Accounting for Business Combinations
From 1 March 2010, where they arise the Group has applied IFRS3
Business Combinations (2008) in accounting for business
combinations. The change in accounting policy has been applied
prospectively and has no material impact on earnings per share.
Business combinations will be accounted for using the acquisition
method as at the acquisition date, which is the date on which
control is transferred to the Group. Control is the power to govern
the financial and operating policies of an entity so as to obtain
benefits from its activities. In assessing control, the Group takes
into consideration potential voting rights that currently are
exercisable.
Costs relating to the acquisition, other that those associated
with the issue of debt or equity securities, that the Group incurs
in connection with a business combination are expensed as
incurred.
(ii) Accounting for acquisitions of non-controlling
interests
From 1 March 2010, the Group has applied IAS27 Consolidated and
Separate Financial Statements (2008) in accounting for acquisitions
of non-controlling interest. The change in accounting policy has
been applied prospectively and has no impact on earnings per share.
Acquisitions of non-controlling interests are accounted for as
transactions with owners in their capacity as owners and therefore
no goodwill or negative goodwill is recognised as a result of such
transactions. The adjustments to non-controlling interests are
based on a proportionate amount of the net assets of the
subsidiary.
3. Significant accounting policies
The accounting policies set out below have been consistently
applied to all periods presented in these consolidated financial
statements, and have been consistently applied by Group entities,
except as explained in note 2(f) which addresses changes in
accounting policies.
(a) Basis of consolidation
(i) Subsidiaries
Subsidiaries are entities controlled by the Company. 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. In assessing control,
potential voting rights that presently are exercisable are taken
into account. The financial statements of subsidiaries are included
in the consolidated financial statements from the date that control
commences until the date that control ceases.
(ii) Associates
Associates are those entities for which the Group has
significant influence, but not control, over the financial and
operating policies. The consolidated financial statements include
the Group's share of the comprehensive income of associates on an
equity accounted basis, from the date that significant influence
commences until the date that significant influence ceases. When
the Group's share of losses exceeds its interest in an associate,
the Group's carrying amount is reduced to nil and recognition of
further losses is discontinued except to the extent that the Group
has incurred legal or constructive obligations for such losses or
made payments on behalf of an associate.
(iii) Transactions eliminated on consolidation
Intragroup balances, and any unrealised gains and losses or
income and expenses arising from intragroup transactions, are
eliminated in preparing the consolidated financial statements.
Unrealised gains arising from transactions with associates and
jointly controlled entities are eliminated to the extent of the
Group's interest in the entity. Unrealised losses are eliminated in
the same way as unrealised gains, but only to the extent that there
is no evidence of impairment.
(iv) Business combinations
From 1 March 2010, the Group has applied IFRS 3 Business
Combinations (2008) in accounting for business combinations. The
change in accounting policy has been applied prospectively and has
had no material impact on reported earnings. Business combinations
are accounted for using the acquisition method as at the
acquisition date, which is the date on which control is transferred
to the Group. Control is the power to govern the financial and
operating policies of an entity so as to obtain benefits from its
activities. In assessing control, the Group takes into
consideration potential voting rights that currently are
exercisable.
Acquisitions prior to 1 March 2010;
For acquisitions prior to 1 March 2010, goodwill represents the
excess of the cost of the acquisition over the Group's interest in
the recognised amount (generally fair value) of the identifiable
assets, liabilities and contingent liabilities of the acquiree.
When the excess was negative, a bargain purchase gain was
recognised immediately in profit or loss. Transaction costs, other
than those associated with the issue of debt or equity securities,
that the Group incurred in connection with business combinations
were capitalised as part of the cost of the acquisition.
Acquisitions on or after 1 March 2010;
For acquisitions on or after 1 March 2010, the Group measures
goodwill at the acquisition date as:
-the fair value of the consideration transferred; plus
-the recognised amount of any non-controlling interests in the
acquiree; plus if the business combination is achieved in stages,
the fair value of the existing equity interest in the acquiree;
less
-the net recognised amount (generally fair value) of the
identifiable assets acquired and liabilities assumed.
When the excess is negative, a bargain purchase gain is
recognised immediately in profit or loss.
The consideration transferred does not include amounts related
to the settlement of pre-existing relationships. Such amounts are
generally recognised in profit or loss. Costs related to the
acquisition, other than those associated with the issue of debt or
equity securities, that the Group incurs in connection with a
business combination are expensed as incurred. Any contingent
consideration payable is recognised at fair value at the
acquisition date.
(b) Foreign currency
(i) Foreign currency transactions
Transactions in foreign currencies are translated to Sterling at
the foreign exchange rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies
at the reporting date are translated to Sterling at the foreign
exchange rate ruling at that date. Foreign exchange differences
arising on translation are recognised in the profit and loss for
the period.
(ii) Financial statements of foreign operations
The assets and liabilities of foreign operations, including fair
value adjustments arising on consolidation, are translated to
Sterling at the foreign exchange rate ruling at the reporting date.
The revenues and expenses of foreign operations are translated at
rates approximating the foreign exchange rates ruling at the dates
of the transactions. Foreign exchange differences arising on
retranslation are recognised directly in a separate component of
other comprehensive income and recognised in the profit and loss
account when a subsidiary or associate is disposed of.
(c) Financial instruments
(i) Non-derivative financial assets
The Group initially recognises loans and receivables and
deposits at fair value on the date that they are originated.
Financial assets (including those designated at fair value through
profit and loss) are recognised initially at fair value on the
trade date at which the Group becomes a party to the contractual
provisions of the instrument.
The Group derecognises a financial asset when the contractual
rights to the cash flows from the asset expire, or it transfers the
right to receive the contractual cash flows on the financial asset
in a transaction in which substantially all the risks and rewards
of ownership of the financial asset are transferred. Any interest
in transferred financial assets that is created or retained by the
Group is recognised as a separate asset or liability.
Loans and receivables
Loans and receivables are financial assets with fixed or
determinable payments that are not quoted in an active market. Such
assets are recognised initially at fair value plus any directly
attributable transaction costs. Subsequent to initial recognition
loans and receivables are measured at amortised cost using the
effective interest method, less any impairment losses.
Loans and receivables comprise trade and other receivables.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call
deposits with original maturities of three months or less. Bank
overdrafts that are repayable on demand and form an integral part
of the Group's cash management are included as a component of cash
and cash equivalents for the purpose of the statement of cash
flows.
Restricted cash
Restricted cash comprises restricted cash deposits which are
restricted until the fulfilment of certain conditions pursuant to
underlying loan agreements.
Available-for-sale financial assets
Financial instruments held by the Group are classified as being
available-for-sale and are stated at fair value, with any resultant
gain or loss recognised directly in other comprehensive income
except where they are regarded as impairment losses in which case
they are recognised in the profit and loss account. When these
investments are derecognised, the cumulative gain or loss
previously recognised directly in other comprehensive income is
recognised in the profit and loss account.
The fair value of financial instruments classified as held for
trading and available-for-sale is their quoted bid price at the
reporting date. If the market for a financial asset is not active,
the Company establishes fair value by using a valuation technique
for example recent arms length transactions or discounted cash flow
analysis.
Financial instruments classified as held for trading or
available-for-sale investments are recognised (derecognised) by the
Group on the date it commits to purchase (sell) the investments
(trade date accounting).
(ii) Non-derivative financial liabilities
The Group initially recognises debt securities issued and
subordinated liabilities on the date that they are originated.
Financial liabilities (including liabilities designated at fair
value through profit or loss) are recognised initially on the trade
date at which the Group becomes a party to the contractual
provisions of the instrument.
The Group derecognises a financial liability when its
contractual obligations are discharged or cancelled or expire.
Financial liabilities are recognised initially at fair value
plus any directly attributable transaction costs. Subsequent to
initial recognition these financial liabilities are measured at
amortised cost using the effective interest method.
Financial assets and liabilities are offset and the net amount
presented on the statement of financial position when, and only
when, the Group has a legal right to offset the amounts and intends
either to settle on a net basis or to realise the asset and settle
the liability simultaneously.
(iii) Share capital
Financial instruments issued by the Group are treated as equity
(i.e. forming part of Shareholders' funds) only to the extent that
they meet the following conditions:
-- They include no contractual obligations on the Group 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 group; and
-- 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.
To the extent that this definition is not met, the proceeds of
issues are classified as a financial liability. Finance payments
associated with financial liabilities are dealt with as part of
financial expenses.
Ordinary share capital
Ordinary shares are classified as equity. External costs
directly attributable to the issue of new shares are shown as a
deduction in equity from the proceeds.
Preference share capital
Preference share capital is classified as a liability if it is
redeemable on a specific date or at the option of the shareholders
or if dividend payments are not discretionary. Dividends on
preference share capital classified as liabilities are recognised
in the profit and loss as interest expense.
(iv) Derivative financial instruments
The Group uses derivative financial instruments to hedge its
exposure to interest rate risks arising from financing and
investment activities. In accordance with its treasury policy, the
Group does not hold or issue derivative financial instruments for
trading purposes. As the Group's derivatives do not qualify for
hedge accounting they are accounted for as trading instruments.
Derivative financial instruments are recognised initially at
fair value, represented by cost. Subsequent to initial recognition,
derivative financial instruments are stated at fair value. The gain
or loss on remeasurement to fair value is recognised immediately in
profit or loss.
The fair value of interest rate swaps is the estimated amount
that the Group would receive or pay to terminate the swap at the
reporting date, taking into account current interest rates and the
current creditworthiness of the swap counterparties.
(d) Investment property
Investment properties are properties which are held either to
earn rental income, for capital appreciation or for both.
Investment properties are measured at fair value. External,
independent valuers, having an appropriate recognised professional
qualification and recent experience in the location and category of
property being valued, value the portfolio. The fair values are
based on market values, being the estimated amount for which a
property could be exchanged on the date of valuation between a
willing buyer and a willing seller in an arm's length transaction
after proper marketing wherein the parties had each acted
knowledgeably, prudently and without compulsion.
Any gain or loss arising from a change in fair value is
recognised in the income statement. Rental income from investment
property is accounted for as described in accounting policy
(i).
If an investment property becomes owner-occupied, then it is
reclassified as property, plant and equipment and its fair value at
the date of reclassification becomes its cost for accounting
purposes. When the Group begins to redevelop an existing investment
property for continued future use as investment property, the
property remains an investment property, which is measured at fair
value, and is not reclassified as property, plant and equipment
during the redevelopment.
(e) Investment property under development
Property that is being constructed or developed for future use
as investment property is classified as investment property under
development (development projects) and stated at fair value.
All costs directly associated with the purchase and construction
of a property and all subsequent capital expenditures for the
development qualifying as acquisition costs are capitalised.
Subsequent expenditure is included in the carrying amount of the
property when it is probable that future economic benefits
associated with them will flow to the Group and the cost of the
item can be measured reliably.
Any gain or loss arising from a change in fair value is
recognised in the income statement. Rental income from investment
property under development is accounted for as described in
accounting policy (i).
Borrowing costs are capitalised if they are directly
attributable to the acquisition or construction of a qualifying
asset. Capitalisation of borrowing costs commences when the
activities to prepare the asset are in progress and expenditures
and borrowing costs are being incurred. Capitalisation of borrowing
costs may continue until the assets are substantially ready for
their intended use. If the resulting carrying amount of the asset
exceeds its recoverable amount, an impairment loss is recognised.
The capitalisation rate is arrived at by reference to the actual
rate payable on borrowings for development purposes or, with regard
to that part of the development cost financed out of general funds,
to the average rate. The capitalisation of finance costs is
suspended if there are prolonged periods when development is
interrupted.
(f) Impairment
The carrying amounts of the Group's assets, other than
investment property (see accounting policy (d)), and deferred tax
assets (see accounting policy (k)), are reviewed at each reporting
date to determine whether there is any indication of impairment. If
any such indication exists, the asset's recoverable amount is
estimated.
An impairment loss is recognised whenever the carrying amount of
an asset exceeds its recoverable amount. Impairment losses are
recognised in the profit or loss account.
The amount of the cumulative loss that is recognised in profit
or loss is the difference between the acquisition cost and current
fair value, less any impairment loss on that financial asset
previously recognised in the income statement.
(i) Calculation of recoverable amount
The recoverable amount of the Group's receivables carried at
amortised cost is calculated as the present value of estimated
future cash flows, discounted at the original effective interest
rate (i.e., the effective interest rate computed at initial
recognition of these financial assets). Receivables with a short
duration are not discounted.
The recoverable amount of other assets is the greater of their
fair value and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to
the asset. For an asset that does not generate largely independent
cash inflows, the recoverable amount is determined for the
cash-generating unit to which the asset belongs.
(ii) Reversals of impairment
An impairment loss in respect of a receivable carried at
amortised cost is reversed if the subsequent increase in
recoverable amount can be related objectively to an event occurring
after the impairment loss was recognised.
If the fair value of a debt instrument classified as
available-for-sale increases and the increase can be related
objectively to an event occurring after an impairment loss was
recognised in profit or loss, then up to an amount that reverses
the impairment loss is reversed, with the amount of the reversal
recognised in profit or loss.
In respect of other assets, an impairment loss is reversed if
there has been a change in the estimates used to determine the
recoverable amount.
An impairment loss is reversed only to the extent that the
asset's carrying amount does not exceed the carrying amount that
would have been determined, net of depreciation or amortisation, if
no impairment loss had been recognised.
(g) Dividends
Dividends on preference shares classified as a liability are
recognised as a liability and expensed on an accrual basis. Other
dividends on equity instruments are recognised as a liability in
the period in which they are declared.
(h) Provisions
A provision is recognised, when the Group has a present legal or
constructive obligation as a result of a past event, and it is
probable that an outflow of economic benefits will be required to
settle the obligation. If the effect is material, provisions are
determined by discounting the expected future cash flows at a
pre-tax rate that reflects current market assessments of the time
value of money and, when appropriate, the risks specific to the
liability.
A provision for onerous contracts is recognised when the
expected benefits to be derived by the Group from a contract are
lower than the unavoidable cost of meeting its obligations under
the contract.
(i) Revenue
Rental income
Rental income from investment property is recognised in the
income statement on a straight-line basis over the term of the
lease. Lease incentives, including rent free periods and payments
to tenants, are allocated to the income statement on a straight
line basis over the lease term.
(j) Expenses
(i) Service costs and property operating expenses
Service costs for service contracts entered into and property
operating expenses are expensed as incurred.
(ii) Net financing costs
Net financing costs comprise interest payable on borrowings
calculated using the effective interest rate method, interest
receivable on funds invested, changes in the fair value of
financial assets and liabilities at fair value through profit and
loss and foreign exchange gains and losses.
Interest income is recognised in profit or loss as it accrues,
using the effective interest method.
(k) Income tax
Income tax on the profit or loss for the periods presented
comprises current and deferred tax. Income tax is recognised in
profit or loss except to the extent that it relates to items
recognised directly in equity, in which case it is recognised in
equity.
Current tax is the expected tax payable on the taxable income
for the year, using tax rates enacted or substantively enacted at
the balance sheet date, and any adjustment to tax payable in
respect of previous years.
Deferred tax is provided using the balance sheet liability
method, providing for temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes. The following temporary
differences are not provided for those arising from: the initial
recognition of assets or liabilities that affects neither
accounting nor taxable profit, the initial recognition of goodwill
and differences relating to investments in subsidiaries to the
extent that they will probably not reverse in the foreseeable
future. The amount of deferred tax provided is based on the
expected manner of realisation or settlement of the carrying amount
of assets and liabilities, using tax rates enacted or substantively
enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the asset can be utilised. Deferred tax assets are reduced to
the extent that it is no longer probable that the related tax
benefit will be realised.
Additional income taxes that arise from the distribution of
dividends are recognised at the same time as the liability to pay
the related dividend.
(l) Segment reporting
An operating segment is a component of the Group that engages in
business activities from which it may earn revenues and incur
expenses, including revenue and expenses that relate to
transactions with any of the Group's other components. All
operating segments' operating results are reviewed regularly by the
Board of Directors to make decisions about resources to be
allocated to the segments and assess their performance, and for
which discrete financial information is available (see note
17).
(m) New standards and interpretations not yet adopted
A number of new standards, amendments to standards, and
interpretations are not yet effective for the year ended 28
February 2011, and have not been applied in preparing these
consolidated financial statements. These new standards, amendments
and interpretations are either not expected to have a material
impact on the consolidated financial statements once applied or are
still under assessment:
- Amendment to IFRS 3 - Business Combinations (1 July 2010)
- Amendment to IFRS 7 - Financial Instruments: Disclosures (1
January 2011 and 1 July 2011)
- IFRS 9 - Financial Instruments: Classification and Measurement
(1 January 2013)
- Amendment to IAS 1 - Presentation of Financial Statements (1
January 2011)
- Amendment to IAS 24 - Related Party Disclosures (1 January
2011)
- Amendment to IAS 27 - Consolidated and Separate Financial
Statements (1 July 2010)
- Amendment to IAS 32 - Financial Instruments: Presentation (1
February 2010)
- Amendment to IAS 34 - Interim Financial Reporting (1 January
2011)
- IFRIC Interpretation 14 - Amendments to IAS 19 - The limit on
a Defined Benefit Asset, Minimum Funding Requirements and their
interaction (1 January 2011)
- IFRIC Interpretation 19 - Extinguishing Financial Liabilities
with Equity Instruments (1 July 2010)
4. Determination of fair values
A number of the Group's accounting policies and disclosures
require the determination of fair value, for both financial and
non-financial assets and liabilities. Fair values have been
determined for measurement and / or disclosure purposes based on
the following methods. When applicable, further information about
the assumptions made in determining fair values is disclosed in the
notes specific to that asset or liability.
(a) Property
An external independent valuation company, having appropriate
recognised professional qualifications and recent experience in the
location and category of property being valued, values the Group's
investment and development properties each year. The fair values
are based on market values, being the estimated amount for which a
property could be exchanged on the date of the valuation between a
willing buyer and a willing seller in an arm's length transaction
after proper marketing wherein the parties had each acted
knowledgeably and willingly.
(i) Investment property
In the absence of current prices in an active market, the
valuations are prepared by considering the aggregate of the
estimated cash flows expected to be received from renting out the
property. A yield that reflects the specific risks inherent in the
net cash flows then is applied to the net annual cash flows to
arrive at the property valuation.
Valuations reflect, where appropriate, the types of tenants
actually in occupation or responsible for meeting lease commitments
or likely to be in occupation after letting vacant accommodation,
the allocation of maintenance and insurance responsibilities
between the Group and the lessee, and the remaining economic life
of the property. When rent reviews or lease renewals are pending
with anticipated reversionary increases, it is assumed that all
notices, and when appropriate counter notices, have been served
validly and within the appropriate time.
(ii) Investment property under development
Properties classified as sites in the course of development were
valued according to market value having due regard to the
anticipated value on completion less the necessary investment to
complete the development, with due allowance for risk and
uncertainty. The valuations include significant estimates
concerning the timing and quantum of developments, estimated
realisable values for developed properties and the costs of
construction. There are significant judgements in determining the
fair value of investment property under development.
(b) Investment in equity and debt securities
The fair value of financial assets at fair value through profit
or loss, held to maturity investment and available-for-sale
financial assets is determined by reference to their quoted closing
bid price at the reporting date. The fair value of held-to-maturity
investments is determined for disclosure purposes only.
(c) Trade and other receivables
The fair value of trade and other receivables is estimated as
the present value of future cash flows, discounted at the market
rate of interest at the reporting date. This fair value is
determined for disclosure purposes.
(d) Derivatives
The fair value of interest rate swaps is based on broker quotes.
Those quotes are tested for reasonableness by discounting the
estimated future cash flows based on the terms of maturity of each
contract and using market interest rates for a similar instrument
at the measurement date.
Fair values include the credit risk of the instrument and
include adjustments to take account of the credit risk of the Group
entity and counterparty where appropriate.
(e) Non-derivative financial liabilities
Fair value, which is determined for disclosure purposes, is
calculated based on the present value of future principal and
interest flows, discounted at the market rate of interest at the
reporting date. In respect of the liability component of
convertible notes, the market rate of interest is determined by
reference to similar liabilities that do not have a conversion
option. For finance leases the market rate of interest is
determined by reference to similar lease agreements.
5. Financial Risk Management
The Group has exposure to the following risk arising from use of
financial instruments:
-- Credit risk
-- Liquidity risk
-- Market risk
-- Operational risk
This note presents information about the Group's exposure to
each of the above risks, the Group's objectives, policies and
processes for measuring and managing risk, and the Group's
management of capital. Further quantitative disclosures are
included throughout these consolidated financial statements.
Risk Management Framework
The Board of Directors has overall responsibility for the
establishment and oversight of the Group's risk management
framework. The Group's risk management policies are established to
identify and analyse the risk faced by the Group, to set
appropriate risk limits and controls, and to monitor risks and
adherence to limits. Risk management policies and systems are
reviewed regularly to reflect changes in market conditions and the
Group's activities. Information is sought by the Board routinely
(debt portfolio and cash flow projections) to enable it to evaluate
those risks.
The Group's Audit Committee oversees how management monitors
compliance with the Group's risk management policies and procedures
and reviews the adequacy of the risk management framework in
relation to the risks faced by the Group.
Capital Management
The Group's capital management objectives are:
1. to safeguard the Group's ability to continue as a going
concern;
2. to grow the assets of the Group and create value for
investors;
3. maintain significant financial resources to mitigate against
financial risk; and
4. restore a strong capital base so as to maintain investor,
credit and market confidence and to sustain future development of
the business
The Group tries to set the amount of capital in proportion to
risk. The Group manages the capital structure and makes adjustments
to it in light of changes in economic conditions and the risk
characteristics of the underlying assets.
Following the fall in property values at 28 February 2011, the
Group has a significant deficit on its' shareholders equity. The
Group is endeavouring to deal with this situation through efficient
cash management, the successful completion of the financial
position restructuring and seeking fresh sources of finance. These
projects include the search for equity partner or partners at the
entity level, such as Battersea, and in the longer term, the
introduction of fresh capital into the Group itself.
The directors consider that the Group's capital is made up of
share capital and reserves as set out in the statement of changes
in equity. There are no externally imposed capital requirements for
the Company or any of its subsidiaries.
Credit Risk
Credit risk is the risk of financial loss to the Group if a
customer, or counterparty to a financial instrument, fails to meet
its contractual obligations. The Group's maximum exposure to credit
risk is the carrying amount of financial assets recorded in the
financial statements. The Group's credit risk is attributable to
its trade and other receivables, cash and cash equivalents, listed
investments and derivative financial instruments.
(i) Cash and cash equivalents
The Group limits its exposure to credit risk on its investments
by placing cash with banks having an S&P rating of AA- or
greater. The Group also retains the option of using the banks
covered by the Irish government guarantee scheme.
Certain cash balances are restricted and remain with
institutions in accordance with the terms of the restrictions.
In relation to unrestricted cash balances, no more than 20% of
the total cash that management view as unrestricted is to be placed
in any one bank, subject to allowing the 20% to be exceeded if the
balance in any one bank is GBP3 million or less.
(ii) Trade and other receivables
Trade and other receivables relate mainly to the Group's tenants
and other property related activities. The Group's exposure to
credit risk is influenced by the individual characteristics of each
tenant. The demographics of the Group's customer base, including
the default risk of the industry and the country, in which the
customers operate, has less of an influence on credit risk. During
the year a rental committee was formed which meets weekly to review
and monitor tenant arrears. There are no significant concentrations
of credit risk with a single tenant as the Group has a large number
of quality tenants who are paying their rentals in advance and some
properties are rented subject to deposits, which are included in
restricted cash, so that in the event of non-payment the Group has
recourse to this deposit.
As a result of the deteriorating economic circumstances over the
last number of years, the Group has established an allowance for
impairment that represents its estimate of incurred losses in
respect of rental debtors. This allowance has been provided by the
Directors following a detailed review of the ageing of rental
debtors taking into account the economic circumstances of the
counterparty and the likelihood of recovery, see note 24(a).
Liquidity risk
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due. The Group's policy
on managing liquidity is to ensure that it has sufficient sources
of funding and committed bank facilities in place to meet
contractual maturities of financial liabilities, including interest
payments and to fund investment opportunities, see also note
24(b).
The turmoil in the banking markets and the reduction in the
Group's asset values have restricted liquidity and the prospect for
sourcing cash readily. As a result the Group is in discussion with
its existing lenders about restructuring the terms of their
facilities to improve both short term and long term cash flow,
refer to Going Concern note 2(a).
Market Risk
Market risk is the risk that changes in market prices, such as
foreign exchange rates, interest rates and equity prices will
affect the Group's income or the value of its holdings of financial
instruments. The objective of market risk management is to manage
and control market risk exposures within acceptable parameters,
while optimising return.
The Goup uses derivatives in order to manage certain market
risks. All such transactions are carried out within guidlines set
by the Board.
Note 6. Investment property and investment property under
development
In thousands of pounds sterling
Investment
Investment properties
Properties under development Total
Valuation at 1 March 2010 514,995 582,440 1,097,435
Additions 2,137 100,746 102,883
Disposals (3,432) (40,583) (44,015)
Deficit on revaluation (91,236) (31,304) (122,540)
Currency translation adjustment (20,995) (8,686) (29,681)
----------- ------------------ ---------
Valuation at 28 February 2011 401,469 602,613 1,004,082
----------- ------------------ ---------
Properties held in
UK 21,125 483,500 504,625
Ireland 380,344 119,113 499,457
----------- ------------------ ---------
401,469 602,613 1,004,082
----------- ------------------ ---------
Investment
Investment properties
Properties under development Total
Valuation at 1 January 2009 946,920 963,262 1,910,182
Additions 4,333 90,962 95,295
Disposals - (3,211) (3,211)
Deficit on revaluation (378,447) (432,219) (810,666)
Currency translation adjustment (57,811) (36,354) (94,165)
----------- ------------------ ---------
Valuation at 28 February 2010 514,995 582,440 1,097,435
----------- ------------------ ---------
Properties held in
UK 45,380 388,000 433,380
Ireland 469,615 194,440 664,055
----------- ------------------ ---------
514,995 582,440 1,097,435
----------- ------------------ ---------
(a) Irish Property Portfolio
The valuations of the Group's freehold and leasehold interests
in the Irish investment properties and investment properties under
development were carried out by DTZ Sherry FitzGerald and CB
Richard Ellis, qualified professional valuers, acting in the
capacity of External Valuer. Each of the valuations was carried out
in accordance with the Royal Institute of Chartered Surveyors
('RICS') Valuation Standards and IAS 40 "Investment Properties".
The valuations were carried out as at 28 February 2011 and the
properties are stated at Market value.
The valuers have used the following key assumptions
-- Market Value means: 'the estimated amount for which a
property should exchange on the date of valuation between a willing
buyer and a willing seller in an arms length transaction after
proper marketing wherein the parties had each acted knowledgeably,
prudently and without compulsion'.
-- The Market Value of Investment Properties has been primarily
derived using comparable market transactions on arm's length terms
to estimate rentals and an assessment of market sentiment. The
aggregate of the net annual rents receivable from the properties
and, where relevant, associated costs, have been analysed at
equivalent yields of between 4.4% to 9.25%, which reflect the risks
inherent in the net cash flows. Valuations reflect, where
appropriate, the type of tenants actually in occupation or likely
to be in occupation after letting of vacant accommodation and the
market's perception of their creditworthiness and the remaining
useful life of the property.
-- The Market Value of investment properties under development,
which are all classified as sites in the course of development and
are expected to be developed between 2011 and 2025, were derived
having regard to the anticipated value on completion less the
necessary investment to complete the development, (where
appropriate using yields ranging from 7.25% to 8.5%), with due
allowance for risk and uncertainty or where appropriate comparable
market transactions on an arm's length basis and an assessment of
market sentiment. As a result of the changes the total fair value
of Irish investment properties under development have decreased by
approximately 38%.
-- Given the significant fall in rents in both retail and office
that has continued over the last 12 months, a number of properties
in the portfolio are considered to be over-rented. To account for
this, the element of over-rent has been valued at a higher yield
than the element of core income to take account of the fact that
the tenants are paying in excess of market yields. The premium
applied was between 25 and 100 basis points.
(b) UK Property Portfolio
At 28 February 2011 the freehold interests in the properties
known as Battersea Power Station and 88 Kirtling Street were valued
by King Sturge LLP, acting as external valuers. The freehold and
leasehold interest in properties known as Stewarts Road and Brooks
Court were valued by GVA Grimley Ltd. The valuations were carried
out in accordance with the Valuation Standards published by the
Royal Institute of Chartered Surveyors ("RICS") and the
requirements of International Accounting Standard 40 "Investment
Properties".
The properties known as Battersea Power Station and 88 Kirtling
Street and which have a value of GBP498 million are respectively
classified as investment properties under development and
investment properties. They were valued to Market Value having
regard to the anticipated value on completion less the necessary
investment to complete the development, with due allowance for risk
and uncertainty.
The Valuers' opinion of market value was primarily derived using
comparable recent market transactions on arms length terms as well
as the residual method valuation. Buildings within the development
which would normally be valued on the basis of estimated trading
receipts, such as hotels and licensed premises have been valued
having regard to the potential net income generated by the use of
the properties, capitalised with reference to comparable market
transactions.
In preparing advice on Battersea Power Station and 88 Kirtling
Street, the valuers were provided with professional assistance from
the Group's architects, cost consultants, planning consultants and
legal advisors.
The valuation dated 22 March 2011 is subject to various
assumptions contained within the valuation report, of particular
significance are the following Special Assumptions: that the local
transport infrastructure is improved via an extension to the
Northern Line; that debt funding is available for a project of this
size on commercially acceptable terms; that there is a limit on
Section 106 costs at GBP228m and a provision of 517 affordable
housing units; the size of which can be adjusted according to
market requirements. These assumptions are all material to the
valuation of the property. The valuation figure reported should not
be read in isolation and should be considered in the context of the
full valuation report and the assumptions and special assumptions
set out therein.
The properties known as Stewarts Road and Brooks Court and which
have a value of GBP6.625 million are classified as investment
properties, and were valued at Market Value having regard to the
estimated amount a property should exchange on the date of the
valuation between a willing buyer and willing seller in an arms
length transaction after proper marketing wherein the parties had
each acted knowledgeably, prudently and without compulsion. The
valuers' opinion of Market Value was primarily derived using
comparable recent market transactions on arms length terms.
The primary source of evidence for valuations should be recent,
comparable market transactions on arms length terms. The current
economic environment means that there have been few transactions
for the types of property owned by the Group. Consequently, there
is a greater degree of uncertainty in respect of the figures
reported by our valuers. Until the number and consistency of
comparable transactions increases, this situation is likely to
remain the same.
(c) Loan Interest Capitalised
Included in the gross value, before impairments, of investment
property under development is loan interest of GBP171.1 million (28
February 2010: GBP130.9 million).
(d) Project Management and Development Fees
Included in additions for the year are project development and
project management fees payable to Treasury Holdings of GBP13
million (28 February 2010: GBP14.9 million). See notes 19 and 26
for further details.
(e) Security
The Group's properties are secured against interest bearing
loans and borrowings as detailed in note 13.
(f) Disposals
During the year, the Group disposed of an investment property
under development for a gross consideration of GBP85.2 million of
which there was an amount payable to a third party of GBP18.3
million. The group thus realised a profit in the year on this
transaction of GBP30.6 million. During the period ended 28 February
2010, the Group disposed of an investment property under
development and realised a profit of GBP0.5 million.
During the year the Group disposed of two investment properties
and realised a profit of GBP0.3 million. There were no disposals of
investment properties in the comparative period.
Note 7. Net asset value per share
In thousands of pounds sterling
(i) Basic and diluted net
deficit value 2011 2010
--------- ---------
Net deficit value attributable to shareholders (800,699) (721,623)
--------- ---------
Number of ordinary shares in issue (000's)
at reporting date 334,010 333,804
--------- ---------
Basic and diluted net deficit value per share
(Pence) (239.7) (216.2)
--------- ---------
(ii) EPRA net deficit value 2011 2010
Net deficit value (800,699) (721,623)
Fair value of financial instruments 70,048 101,807
Deferred tax 12,159 24,934
--------- ---------
EPRA net deficit value (718,492) (594,882)
Number of ordinary shares in issue (000's)
at reporting date 334,010 333,804
--------- ---------
EPRA net deficit value per share (Pence) (215.1) (178.2)
--------- ---------
At 28 February 2011 and 28 February 2010 there was no difference
between basic and diluted NAV per share as the effect of all
potentially dilutive securities was anti-dilutive.
The EPRA NAV per share excludes the mark to market adjustment on
derivative financial instruments and deferred taxation on
revaluations.
Note 8. Investment in associates
In thousands of pounds sterling
Movement in investment in associates:
CREO plc Other Total
------------------------------- ----------------- ---------------- ------------------
2011 2010 2011 2010 2011 2010
------------------------------- ------ --------- ------ -------- ------- ---------
At the beginning of the year
/ period - 85,309 - - - 85,309
------------------------------- ------ --------- ------ -------- ------- ---------
Shares acquired for cash - - - 110 - 110
------------------------------- ------ --------- ------ -------- ------- ---------
Adjustment for decrease in
proportional shareholding - (3,154) - - - (3,154)
------------------------------- ------ --------- ------ -------- ------- ---------
Share of loss for the year /
period - (483) - (110) - (593)
------------------------------- ------ --------- ------ -------- ------- ---------
Foreign exchange translation
differences attributable to
associate - (13,579) - - - (13,579)
------------------------------- ------ --------- ------ -------- ------- ---------
Share of other reserve
movement of associate - (113) - - - (113)
------------------------------- ------ --------- ------ -------- ------- ---------
Transfer to assets classified
as available for sale (note
9) - (67,980) - - - (67,980)
------------------------------- ------ --------- ------ -------- ------- ---------
At end of year / period - - - - -
------------------------------- ------ --------- ------ -------- ------- ---------
During the year ended 28 February 2011, the parent company
disposed of its investment in China Real Estate Opportunities plc
("CREO"). This had been reclassified to assets held for resale in
the previous period.
On 16 September 2009 a Group company purchased one third of the
shares in two Irish companies, Rushrid Limited and Lakoca Limited,
(referred to under the "other" column above) from a third party.
The remaining two thirds of both companies are held by Treasury
Holdings, a related company, and consequently the Group has
accounted for its interest in both companies as investments in
associates at both 28 February 2011 and 28 February 2010. Neither
of these companies entered into any transactions during the
period.
Summary of financial information for CREO, not adjusted for
percentage of ownership held by the Group
Profit
Current Non-current Total Current Non-current Total /
2010 Ownership assets assets assets liabilities liabilities liabilities Revenues Expenses (loss)
--------------- ---------- -------- ------------ ------- ------------ ------------ ------------ --------- --------- --------
China Real
Estate
Opportunities
plc ("CREO") 16.93% - - - - - - 55,907 (58,760) (2,853)
--------------- ---------- -------- ------------ ------- ------------ ------------ ------------ --------- --------- --------
Company 2011 2010
---- --------
At the beginning of the year/period - 30,711
---- --------
Disposal - (30,711)
---- --------
At end of year / period - -
---- --------
During the period ended 28 February 2010, the parent Company
disposed of its investment in China Real Estate Opportunities plc
("CREO") to other group companies realising a loss of GBP12.5
million on the transaction.
Note 9. Other investments
In thousands of pounds sterling
(a) Assets classified as held for sale
Group 2011 2010
Valuation at start of the year / period 27,680 -
Transfer from investment in associate
(note 8) - 67,980
Impairment loss on remeasurement of
CREO shares - (40,300)
Disposal (27,680) -
-------- --------
Valuation at end of the year / period - 27,680
-------- --------
On 8 March 2010 CREO announced a tender offer inviting
shareholders to sell their shares in CREO at a price of GBP3.30 per
share. The Group sold its shares in CREO on 22 March 2010 realising
cash of GBP27.7 million.
A gain on sale of GBP26.2 million in the current year has been
recognised as follows:
Group 2011
Carrying amount of investment sold 27,680
Proceeds on disposal (27,680)
Foreign currency translation reserve
reclassified to profit or loss 26,233
Gain on disposal of investment 26,233
--------
The Group's investment in CREO at 28 February 2010 was carried
at its net realisable value and was presented as held for sale
following the commitment of the Group's management to sell the
shares held in CREO.
Amounts of currency and other reserve relating to the associate
were presented with retained earnings in the previous period.
During the current period they have been presented separately and
re-classified to profit on disposal of the associate.
(b) Other listed investments
Company and Group 2011 2010
Valuation at start of the year / period - 190
Disposal - (190)
Valuation at end of the year / period - -
---- -----
During the period ended 28 February 2010 all of the other listed
investments of the Group were disposed of, realising a profit of
GBP0.05 million.
Note 10. Investment in subsidiary undertakings
In thousands of pounds sterling
Company
2011 2010
---- ---------
At start of the year / period - 296,800
---- ---------
Additions in the year / period - 942
---- ---------
Provision against carrying value in subsidiaries
(note 18) - (297,742)
---- ---------
At end of the year / period - -
---- ---------
There has been no movement in the carrying value of the
Company's investment in subsidiaries in the current year and they
continue to be carried at nil.
During the period ended 28 February 2010 the Company increased
its investment in Decocter Limited by GBP0.04 million and in
Havenview Investments Limited by GBP0.9 million. In the same period
a provision of GBP297.7 million was made against the carrying value
of all Group Companies to write down their carrying value to their
estimated recoverable amount of GBPnil.
Details of the Group's subsidiary undertakings are set out in
note 29.
Note 11. Trade and other receivables
In thousands of pounds sterling
Trade and other receivables Group Group Company Company
- current 2011 2010 2011 2010
------ ----- ------- -------
Trade receivables 1,177 2,448 - -
------ ----- ------- -------
Deferred lease incentives 340 304 - -
------ ----- ------- -------
Unbilled income 1,106 1,198 - -
------ ----- ------- -------
Other receivables and prepayments 63,223 554 1 -
------ ----- ------- -------
Other loans 2,719 2,844 - -
------ ----- ------- -------
68,565 7,348 1 -
------ ----- ------- -------
Trade and other receivables
- non current
------ ----- ------- -------
Deferred lease incentives 5,460 6,072 - -
------ ----- ------- -------
5,460 6,072 - -
------ ----- ------- -------
Included in other receivables and prepayments is an amount of
GBP63.2 million which was due at year end in relation to a property
disposal, (see note 6(f)).
Note 12. Cash and cash equivalents
In thousands of pounds sterling
Group Group Company Company
2011 2010 2011 2010
Cash at bank 2,075 8,647 190 333
Bank deposit balances 3,615 12,453 - -
------ ------ ------- -------
Total cash and cash equivalents
in the statement of cash flows 5,690 21,100 190 333
------ ------ ------- -------
Restricted cash - non current 4,925 6,731 - -
Restricted cash - current 20,874 11,016 - -
------ ------ ------- -------
Total restricted cash 25,799 17,747 - -
------ ------ ------- -------
Total cash 31,489 38,847 190 333
------ ------ ------- -------
At 28 February 2011, there were restricted cash deposits of
GBP25.8 million (28 February 2010: GBP17.7m). Of this amount, GBP21
million was restricted until the fulfilment of certain conditions
pursuant to underlying loan agreements, an amount of GBP4.5 million
was held by a solicitor in relation to proceeds on disposal of
investment property under development (note 6(f)) , and certain
other amounts were held as lease deposits from tenants.
Note 13. Interest bearing loans and borrowings
In thousands of pounds sterling
Group Group Company Company
2011 2010 2011 2010
--------- --------- ------- -------
Non-current liabilities
--------- --------- ------- -------
Bank loans secured on Irish property
assets (i) 4,453 93,442 - -
--------- --------- ------- -------
7.5% Convertible Unsecured Loan
Stock (ii) - 101,101 - 101,101
--------- --------- ------- -------
Senior loan (iii) 319,800 333,391 - -
--------- --------- ------- -------
Zero dividend preference share (vi) - 122,119 - -
--------- --------- ------- -------
324,253 650,053 - 101,101
--------- --------- ------- -------
Current liabilities
--------- --------- ------- -------
Bank loans secured on Irish property
assets (i) 768,852 680,288 - -
--------- --------- ------- -------
6.324% Series A and B secured loan
notes (iv) 146,255 147,786 146,255 147,786
--------- --------- ------- -------
7.5% Convertible Unsecured Loan
Stock (ii) 100,895 - 100,895 -
--------- --------- ------- -------
Zero dividend preference share ("ZDP")
(vi) 133,100 - - -
--------- --------- ------- -------
Bank loans secured on UK property
assets (v) 260,003 242,898 - -
--------- --------- ------- -------
1,409,105 1,070,972 247,150 147,786
--------- --------- ------- -------
(i) The bank loans on Irish properties are secured by floating
charges over the Castle Market Holdings Limited Group (CMH) and
Havenview Investments Limited Group, fixed charges over the Irish
investment properties and investment properties under development
amounting to GBP1,094 million, a guarantee and indemnity from the
Company and various other guarantees from Mr John Ronan, Treasury
Holdings and certain subsidiaries. The majority of the loans have
now been transferred from the Irish guaranteed banks to the
National Asset Management Agency (NAMA).
Of the GBP769 million bank loans secured on Irish properties
which are current, GBP716 million are loans with NAMA participating
banks which have been transferred to NAMA. The Company has signed a
Memorandum of Understanding with NAMA (the terms of which are
non-binding) which allows for these loans to be rolled over on
broadly similar terms and it is the Director's expectation that
some of the above interest bearing loans and borrowings may
subsequently be re-classified as non-current liabilities.
(ii) Interest on the 7.5% Convertible Unsecured Loan Stock 2011
("CULS") is payable by equal half yearly instalments on 28 February
and 31 August each year. The CULS units are ordinarily convertible
at the option of the holder between 1 April and 30 April in each
year to 2011 on the basis of one ordinary share for each CULS unit
converted. During the year 205,668 CULS were converted to ordinary
shares (see note 16).
As referred to in the Chairman's Statement and in note 27, on 11
April 2011, the Group announced the final terms of the
Restructuring, whereby the liabilities due to the holders of the
CULS will be converted into equity of the newly formed Battersea
Power Station Shareholder Vehicle ("BPSSV") and REO.
(iii) Pursuant to a Senior Loan Agreement (the 'Senior Loan')
entered into between CMH CMBS Borrower Limited (the 'Borrower'), a
wholly owned subsidiary of CMH (a subsidiary of the Group), and
Opera Finance (CMH) plc (the 'Issuer'), the Issuer entered into an
agreement to advance the proceeds of a EUR375million Commercial
Mortgage Backed Floating Rate Note repayable in 2013 to the
Borrower. The Issuer, a special purpose vehicle, is not a CMH group
company.
The Senior Loan constitutes a limited recourse obligation of the
Borrower as to principal and full recourse obligation of the
Borrower as to interest and is secured by, among other things, a
first legal mortgage over 14 properties held by CMH subsidiaries.
Interest is payable quarterly in arrears.
The Senior Loan is due for repayment in full by the Borrower in
January 2013.
(iv) Pursuant to an agreement to purchase the shares in
companies owning the Battersea Power Station on 29 December 2006
the Company issued GBP100million 6.324% Series A Secured Loan Notes
due for repayment in 2011 and GBP50million 6.324% Series B Secured
Loan Notes due for repayment in 2011. At year end the book value of
these loans was GBP146.3 million, as result of principal repayments
in the current and prior years.
The Series A and Series B Notes (the 'Loan Notes') are due for
repayment on 31 May 2011. The principal repayments due at the 28
February 2011 were GBP6.1million (28 February 2010: GBP3million).
Interest on the Series B notes is payable twice yearly in arrears
on 28 February and 31 August. Interest on the series A notes is
made by amortising half yearly payments to 28 February 2011.
Certain loan interest and capital on the 6.324% Series A and B
(the "OLNs") loan notes remains outstanding at the year end. The
holder of the OLNs has also agreed to a standstill arrangement
whereby repayment of the OLNs and related accrued interest costs
will be deferred until 31 August 2011 or beyond, if the Battersea
Power Station loan facilities referred to below are similarly
extended, subject to certain conditions. The obligations under the
OLNs have also been novated to BPSSV as part of the
restructuring.
(v) The Sterling loan facility agreements with Lloyds Banking
Group and NAMA are for the purpose of financing the companies
owning the Battersea Power Station and related properties. These
loans are guaranteed by the Company and certain subsidiaries of the
Group. The borrowings are secured by debentures over the assets of
the subsidiary companies.
During the year the Sterling loan facilities of GBP260m were
extended to 31 August 2011. Currently, these facilities can be
called on demand.
(vi) As referred to in the Chairman's report and in the Post
Balance Sheet Events note 27 on 11 April 2011, the Group announced
the final terms of the Restructuring, whereby the liabilities due
to the holders of the ZDPs and CULs will be converted into equity
of the newly formed Battersea Power Station subsidiary ("BPSSV")
and REO Plc.
Note 14. Deferred tax assets and liabilities
In thousands of pounds sterling
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the
following:
Assets Liabilities Net
2011 2010 2011 2010 2011 2010
Derivative financial
instruments (764) (1,451) - - (764) (1,451)
Investment property and
investment property under
development - - 12,923 26,385 12,923 26,385
----- ------- ------ ------ ------ -------
(764) (1,451) 12,923 26,385 12,159 24,934
----- ------- ------ ------ ------ -------
Movement in temporary differences during the period:
Investment
property
Derivative and investment
financial property
instruments under development Total
------------ ------------------ ---------
At 1 March 2010 (1,451) 26,385 24,934
------------ ------------------ ---------
Recognised in income statement
(note 22) 622 (12,283) (11,661)
------------ ------------------ ---------
Foreign currency movements 65 (1,179) (1,114)
------------ ------------------ ---------
At 28 February 2011 (764) 12,923 12,159
------------ ------------------ ---------
At 1 January 2009 (5,818) 140,150 134,332
------------ ------------------ ---------
Effect of rate change
(note 22) - 17,912 17,912
------------ ------------------ ---------
Recognised in income statement
(note 22) 3,979 (122,425) (118,446)
------------ ------------------ ---------
Foreign currency movements 388 (9,252) (8,864)
------------ ------------------ ---------
At 28 February 2010 (1,451) 26,385 24,934
------------ ------------------ ---------
Unrecognised deferred tax assets and liabilities
Deferred tax assets have not been recognised in respect of the
following items:
2011 2010
------- -------
Tax losses 34,454 28,963
------- -------
Revaluation of investment properties
and investment properties under development 103,034 71,563
------- -------
Derivative financial instruments 9,196 15,197
------- -------
146,684 115,723
------- -------
Deferred tax assets have not been recognised in respect of these
items because it is not probable that future taxable profits will
be available against which the Group can utilise the benefits
therefrom.
There were no unrecognised deferred tax liabilities at 28
February 2011 (28 February 2010: GBPnil).
Note 15. Trade and other payables
In thousands of pounds sterling
Group Group Company Company
Trade and other payables - current 2011 2010 2011 2010
------ ------ ------- -------
Interest and other finance related
accruals 67,665 18,760 24,607 11,567
------ ------ ------- -------
Capital accruals 12,311 9,874 - -
------ ------ ------- -------
Other creditors and accruals 9,686 10,583 1,123 535
------ ------ ------- -------
Income received in advance 2,433 7,066 - -
------ ------ ------- -------
Current tax payable 1,746 3,988 - -
------ ------ ------- -------
93,841 50,271 25,730 12,102
------ ------ ------- -------
Trade and other payables - non
current
------ ------ ------- -------
Provisions 889 968 - -
------ ------ ------- -------
889 968 - -
------ ------ ------- -------
Income received in advance, decreased by GBP4.2m in respect of
the release of a non-refundable deposit on a transaction which did
not complete in the period.
The provisions relate to an onerous contract arrangement whereby
the Group is committed to making lease certain payments.
Note 16. Share capital and reserves
In thousands of pounds sterling
16 (a) Share capital
2011 2010
----- -----
Authorised
----- -----
842,244,218 ordinary shares of 1p 8,422 8,422
----- -----
Allotted, called up and fully paid
----- -----
334,009,584 (2010: 333,803,916) ordinary
shares of 1p 3,340 3,338
----- -----
Presented as equity:
334,009,584 (2010: 333,803,916) ordinary
shares of 1p 3,340 3,338
----- -----
Transactions - current period
On 17 August 2010 205,668 ordinary shares (period ended 28
February 2010: 11,100 shares) were issued on the conversion of
205,668 GBP1 convertible unsecured loan notes at par.
Transactions - prior period
On 14 February 2008, a scheme of arrangement was approved ("the
scheme") by the Royal Court of Jersey in order to cancel the ZDP
shares and issue in exchange New ZDP shares in REO Securities
Limited, a subsidiary of the Company. On 18 February 2008, REO
Securities Limited was listed on the London Stock Exchange and
57,755,782 New ZDP shares were issued at 0.001p per New ZDP share.
These new ZDP shares were issued on a one for one basis in exchange
for the cancelled ZDP shares in the Company.
Although the ZDP shares are entitled to pre-determined capital
repayment on the ZDP repayment date, being 31 May 2011, this is not
guaranteed.
In order for REO Securities Limited to have sufficient assets to
repay the ZDP shares, Real Estate Opportunities plc and REO
Securities Limited entered into an arrangement pursuant to an
Undertaking Agreement whereby the net assets of Real Estate
Opportunities plc will effectively be made available to meet the
repayment entitlement of the ZDP shares on the Repayment Date, 31
May 2011.
Pursuant to the Undertaking Agreement, Real Estate Opportunities
plc agreed to contribute to REO Securities Limited (by way of gift,
capital contribution or otherwise) such an amount as will result in
REO Securities Limited having sufficient assets to satisfy the then
current or, as the case may be, final capital entitlement of the
ZDP shares on the Redemption Date or any earlier winding up of REO
Securities Limited.
The impact of the scheme on share premium and retained earnings
is described in note 16(c).
The rights attached to the ZDP shares are set out in note
13.
In addition their separate approval as a class is required for
certain proposals which would be likely to affect their position,
including any material change in the Company's investment policy,
any variation of the winding up provisions in its Articles of
Association or any issue of shares, or securities convertible or
exchangeable into shares, other than where the Ordinary Share Test
(as defined in the Articles of Association) is satisfied.
In addition as set out in Note 27, the Group confirmed the terms
of a restructuring which will result in the extinguishment of the
ZDP liabilities in exchange for the issue of shares in REO Plc and
in its newly formed subsidiary Battersea Special Shareholder
Vehicle Limited ("BPSSV").
If the Company was wound up, the ordinary shareholders would be
entitled to the surplus assets of the company after payment of all
liabilities.
Holders of Ordinary Shares are entitled to attend and vote at
all general meetings of the Company.
16 (b) Dividends
There were no dividends declared or paid in the year ended 28
February 2011 or in the comparative financial period.
16 (c) Reserves
(i) Share premium
Pursuant to a scheme in 2008, the entire amount of share capital
standing to the credit of the Company's share premium account was
cancelled and used to eliminate the deficit in the Company's
revenue reserves. The impact of this was to reduce share premium by
GBP405.7 million and to increase the Company's retained earnings by
GBP405.7 million.
In the year, the only movement to the share premium account
arose from the conversion of 205,668 convertible unsecured loan
notes (14 month period ended 28 February 2010: 11,100 convertible
unsecured loan notes) into Ordinary Share Capital (note 16a).
(ii) Other reserves
Other reserves consist of a redemption reserve of GBP1.48
million (2010: GBP1.48 million) which comprises the nominal value
of Ordinary Shares repurchased.
(iii) Currency translation reserve
The translation reserve comprises all foreign exchange
differences arising from the translation of the financial
statements of foreign operations. The increase in the translation
reserve arises as a result of translating the financial statements
of the group's Irish subsidiaries which are in a net liability
position. The functional currency of these subsidiaries is the
Euro, which depreciated by some 4.68% against Sterling during the
year (28 February 2010, depreciation of 6.7%).
Amounts of currency and other reserve relating to the associate
were presented with retained earnings in the previous period.
During the current period they have been presented separately and
re-classified to profit on disposal of the associate.
Note 17. Segment reporting
In thousands of pounds sterling
As required by IFRS 8, Operating Segments, the segment analysis
below follows the information provided to the Board of Directors -
which is the chief operating decision maker (CODM). The Group's
identified reportable segments are the geographical locations in
which it operates, analysed between investment properties and
investment properties under development, which are generally
managed by separate teams.
The relevant revenue, assets and capital expenditure are set out
below. Liabilities are managed on a group basis and not provided by
reportable segment to the CODM.
(a) Information about reportable segments
Investment Investment
As at 28 February 2011 properties properties
& for 12 months to 28 Investment under Investment under
February 2011 properties development properties development
Ireland UK Total
Revenue for year 32,082 - 1,516 - 33,598
Profit on disposal of
investment properties
and investment
properties under
development in the
year 289 30,563 113 - 30,965
Valuation
(losses)/gains on
properties for year (68,836) (74,425) (22,400) 43,121 (122,540)
Property assets as at
28 February 2011 380,344 119,113 21,125 483,500 1,004,082
Capital expenditure for
year 1,920 48,368 217 52,378 102,883
As at 28
February
2010 &
for 14
month
period to Investment Investment
28 properties properties
February Investment under Investment under
2010 properties development properties development
Ireland UK Total
Revenue for period 41,812 - 2,051 - 43,863
Profit on disposal of
investment properties
and investment properties
under development in the
period 505 - - - 505
Valuation losses on properties
for period (317,906) (428,699) (60,541) (3,520) (810,666)
Property assets as at
28 February 2010 469,615 194,440 45,380 388,000 1,097,435
Capital expenditure for
period 2,808 48,797 1,525 42,165 95,295
(b) Reconciliation of reportable segment profit or loss
14 Month
Period
Year Ended Ended
Feb Feb
2011 2010
Group Group
Revenue
Total revenue for reported segments 33,598 43,863
Profit or loss
Valuation losses on properties (122,540) (810,666)
Profit on disposal of investment properties and
investment properties under development 30,965 505
---------- ----------
Total loss per reportable segments (57,977) (766,298)
---------- ----------
Other profit or loss - unallocated amounts
Other income 1,029 1,039
Management fee (2,143) (4,017)
Administrative expenses (12,158) (6,826)
Other expenses - (40,300)
Financial income 7,850 1,281
Financial expenses (53,902) (113,300)
Profit on disposal of asset held for resale 26,233 -
Share of loss of associate - (593)
---------- ----------
Consolidated loss before income tax (91,068) (929,014)
---------- ----------
Included in total segment revenue is rental income from 3
tenants in the Irish segment each of whom contribute more than 10%
of total revenue.
(c) Reconciliation of reportable segment assets
2011 2010
Group Group
Investment property and investment property under
development 1,004,082 1,097,435
Total assets for reported segments
Derivative financial instruments - 19
Trade and other receivables 5,460 6,072
Deferred tax assets 764 1,451
Restricted cash 4,925 6,731
--------- ---------
Total non current assets 1,015,231 1,111,708
--------- ---------
Other current assets - unallocated amounts
Assets classified as held for sale - 27,680
Trade and other receivables 68,565 7,348
Derivative financial instruments - 30
Cash and cash equivalents 5,690 21,100
Restricted cash 20,874 11,016
--------- ---------
Total current assets 95,129 67,174
--------- ---------
Total Assets 1,110,360 1,178,882
--------- ---------
Note 18. Provision against subsidiary companies and intercompany
loans
In thousands of pounds sterling
Company
2011 2010
------ -------
Provision against carrying
value in subsidiaries (note
10) - 297,742
------ -------
Provision against intercompany
lending 11,391 82,880
------ -------
11,391 380,622
------ -------
During the year a provision of GBP11.4 million (period ended 28
February 2010; GBP82.9 million) was made against the carrying value
of loans to Group companies. The impact of which was to write down
their carrying value to GBPnil, their estimated recoverable
amount.
During the period ended 28 February 2010 a provision of GBP297.7
million was made against the carrying value of all Group companies
to write down their carrying value to their estimated recoverable
amount of GBPnil, (note 10).
Note 19. Management fees
In thousands of pounds sterling
2011 2010 2011 2010
----- ----- ------- -------
Group Group Company Company
----- ----- ------- -------
Management fee 2,143 4,017 - -
----- ----- ------- -------
2,143 4,017 - -
----- ----- ------- -------
Treasury Holdings acts as Investment Adviser to the Group in
relation to the Irish Property Portfolio and as Investment Adviser
to the Group's Global Property Assets (the Property Portfolio
excluding the Irish Property Portfolio). Both agreements continue
until terminated by either party on 12 months written notice or on
shorter notice in the event of breach of contract or insolvency.
Under the agreements Treasury Holdings is entitled to receive:
(i) a Base Fee which is generally payable quarterly in arrears
at the rate of 0.5% per annum of the value of the Group's assets.
This amounted to GBP2.1 million for the year (2010: GBP4
million).
(ii) a Performance Fee in respect of the year ended 28 February
2011 based on the percentage increase in total net asset value of
the ordinary shares in the Company in the period. The performance
fee for the year was GBPnil (2010: GBPnil).
(iii) a Development Fee based on 1.5% of the actual construction
costs from the commencement date for each and every property
designated as a Development Property to be paid quarterly in
arrears in equal proportions over the period of the development.
Any shortfall or overpayment shall be paid/repaid on submission of
a final statement based on actual construction costs. The
development fees for the year were GBP10.9 million (2010:
GBP13million). These costs have been capitalised into the
investment properties under development (note 6(d)).
(iv) a Project Management Fee based on 1.5% of the actual
construction costs from the commencement date for each and every
property designated as a Development Property to be paid quarterly
in arrears in equal proportions over the period of the development.
Any shortfall or overpayment shall be paid/repaid on submission of
a final statement based on actual construction costs. The project
management fees for the year were GBP2.1 million (2010: GBP1.9
million).These costs have been capitalised into the investment
properties under development (note 6(d)).
Note 20. Other expenses
In thousands of pounds sterling
14 Month 14 Month
Year Ended Period Ended Year Ended Period Ended
Feb 2011 Feb 2010 Feb 2011 Feb 2010
---------- ------------- ---------- -------------
Group Group Company Company
---------- ------------- ---------- -------------
General expenses 6,314 5,362 1,096 1,052
---------- ------------- ---------- -------------
Directors' fees (see
below) 250 292 250 292
---------- ------------- ---------- -------------
Auditor's remuneration
---------- ------------- ---------- -------------
- for audit services 265 283 139 50
---------- ------------- ---------- -------------
- for tax advisory
services 268 310 128 50
---------- ------------- ---------- -------------
- for other services 43 36 41 -
---------- ------------- ---------- -------------
Other professional fees 5,018 543 4,654 24
---------- ------------- ---------- -------------
12,158 6,826 6,308 1,468
---------- ------------- ---------- -------------
Other professional fees increased in the year because of the
Group incurring certain costs in respect of the certain costs in
respect of the restructuring of the group.
The fees of the Directors of the Company for the year and
previous period were as follows:
14 Month
Year Ended Period Ended
Feb Feb
---------- -------------
2011 2010
---------- -------------
Non-executive
---------- -------------
R Horney 80 93
---------- -------------
R Barrett 15 18
---------- -------------
K Jenkins 35 41
---------- -------------
JP Jenkinson 35 41
---------- -------------
G Milne 35 41
---------- -------------
M Richardson 35 41
---------- -------------
G Leech (resigned) - 8
---------- -------------
R Tincknell 15 9
---------- -------------
250 292
---------- -------------
The Directors' fees authorised by the Articles of Association
are up to a maximum of GBP500,000 per annum.
On 26 June 2009 Mr Leech resigned from the board. On the same
date Mr Tincknell was appointed to the board.
Note 21: Financial income and expense
In thousand of pounds sterling
14 Month 14 Month
Year Ended Period Ended Year Ended Period Ended
Feb 2011 Feb 2010 Feb 2011 Feb 2010
---------- ------------- ---------- -------------
Group Group Company Company
---------- ------------- ---------- -------------
(a) Recognised in income
statement
---------- ------------- ---------- -------------
Interest income on bank
deposits 158 1,231 - 1
---------- ------------- ---------- -------------
Dividends receivable
from subsidiary
undertakings - - 19,503 -
---------- ------------- ---------- -------------
Net gain on disposal of
available for sale
assets - 50 - 50
---------- ------------- ---------- -------------
Other interest income 64 - - -
---------- ------------- ---------- -------------
Fair value movement on
derivatives 7,628 - - -
---------- ------------- ---------- -------------
Foreign exchange gain - - 4,011 4,761
---------- ------------- ---------- -------------
Finance income 7,850 1,281 23,514 4,812
---------- ------------- ---------- -------------
Other interest and
finance charges (12,244) (55) - -
---------- ------------- ---------- -------------
Interest expense on bank
loans repayable, other
than by instalment,
wholly within 5 years (39,984) (27,895) - -
---------- ------------- ---------- -------------
Interest expense on
Senior Loan repayable,
other than by
instalment, wholly
within 5 years (13,688) (13,964) - -
---------- ------------- ---------- -------------
Interest on 7.5%
Convertible Unsecured
Loan Stock 2011 (7,583) (8,843) (7,583) (8,843)
---------- ------------- ---------- -------------
Interest on 6.324%
Series A and B loan
notes 2011 (9,791) (11,268) - -
---------- ------------- ---------- -------------
Interest in respect of
Zero Dividend
Preference shares (10,981) (11,624) - -
---------- ------------- ---------- -------------
Interest on intercompany
advance - - (10,981) (11,624)
---------- ------------- ---------- -------------
Fair value movements on
derivatives - (41,538) - -
---------- ------------- ---------- -------------
Cash payment on
derivatives (20,681) (38,515) - -
---------- ------------- ---------- -------------
Net loss on disposal of
available for sale
assets - - - (12,467)
---------- ------------- ---------- -------------
Finance expense (114,952) (153,702) (18,564) (32,934)
---------- ------------- ---------- -------------
Interest and finance
charges capitalised 61,050 40,402 - -
---------- ------------- ---------- -------------
(53,902) (113,300) (18,564) (32,934)
---------- ------------- ---------- -------------
Net finance (expense) /
income recognised in
income statement (46,052) (112,019) 4,950 (28,122)
---------- ------------- ---------- -------------
The above financial
income and expense
including cash payments
on derivatives includes
the following in respect
of assets/(liabilities)
not at fair value
through income
statement
---------- ------------- ---------- -------------
Total interest income on
financial assets 222 1,281 23,514 4,812
---------- ------------- ---------- -------------
Total interest expense
on financial
liabilities (including
interest capitalised) (114,952) (112,164) (18,564) (32,934)
---------- ------------- ---------- -------------
(b) Recognised directly
to equity
---------- ------------- ---------- -------------
Foreign currency
translation
differences 24,092 (40,123) - -
---------- ------------- ---------- -------------
Finance income /
(expense) recognised
directly to equity 24,092 (40,123) - -
---------- ------------- ---------- -------------
Attributable to:
---------- ------------- ---------- -------------
- Equity holders of the
company 24,092 (40,123) - -
---------- ------------- ---------- -------------
Finance income / (
expense) recognised in
other comprehensive
income, net of tax 24,092 (40,123) - -
---------- ------------- ---------- -------------
Note 22. Group taxation
In thousands of pounds sterling
14 Month
Year Ended Period
28 Feb Ended
2011 Feb 2010
---------- ---------
(a) Recognised in the income statement
---------- ---------
Current tax expense
---------- ---------
Current year credit (2,266) (714)
---------- ---------
Deferred tax
---------- ---------
Fair value movement of derivatives 622 3,979
---------- ---------
Effect of change in tax rates - 17,912
---------- ---------
Valuation losses on investment properties
and on investment properties under
development (12,283) (122,425)
---------- ---------
(11,661) (100,534)
---------- ---------
Income tax credit (13,927) (101,248)
---------- ---------
Share of income tax credit of equity
accounted investees - (787)
---------- ---------
Total income tax credit (13,927) (102,035)
---------- ---------
2011 2011 2010 2010
------------------------------------- ------- -------- ------ ---------
(b) Reconciliation of effective tax
rate
------------------------------------- ------- -------- ------ ---------
Loss for the year / period (77,141) (827,766)
------------------------------------- ------- -------- ------ ---------
Total income tax credit (13,927) (102,035)
------------------------------------- ------- -------- ------ ---------
Loss excluding income tax (91,068) (929,801)
------------------------------------- ------- -------- ------ ---------
Notional tax on profit before tax,
calculated at the rate applicable
to the profits in the jurisdiction
concerned 34.3% (31,195) 21.9% (203,990)
------------------------------------- ------- -------- ------ ---------
Non-deductible expenses (4.2%) 3,860 (0.8%) 7,420
------------------------------------- ------- -------- ------ ---------
Unutilised tax losses (4.3%) 3,904 (0.4%) 3,430
------------------------------------- ------- -------- ------ ---------
Over provision in prior period - (28) 0.1% (596)
------------------------------------- ------- -------- ------ ---------
Change in tax rates during the year - - (1.9%) 17,912
------------------------------------- ------- -------- ------ ---------
Losses forward utilised 8.8% (8,018) - -
------------------------------------- ------- -------- ------ ---------
Temporary differences not recognised (19.3%) 17,550 (7.9%) 73,789
------------------------------------- ------- -------- ------ ---------
Current tax credit for the year (13,927) (102,035)
------------------------------------- ------- -------- ------ ---------
Income of the Company is subject to taxation in Jersey at a rate
of 0% and capital gains of the Company are outside the scope of
taxation in Jersey for the financial periods to 28 February 2010
and 28 February 2011.
The Company and its Jersey subsidiaries have all been granted
international service entity status for the years 2010 and 2011 and
following payment of an annual fee of GBP100 per company will be
treated as being outside the scope of Goods and Services Tax.
Note 23: Earnings per share
In thousands of pounds sterling
(i) Basic and diluted loss per
share 2011 2010
Loss attributable to equity holders (77,141) (828,628)
Weighted average number of ordinary shares
Issued shares at beginning of year 333,804 333,798
-------
Effect of shares issued during the year 103 6
------- -------
Weighted average number of ordinary shares (000's) 333,907 333,804
------- -------
Loss per share (pence) (23.1) (248.2)
------- -------
For the year ended 28 February and the period ended 28 February
2010 there was no difference between basic and diluted loss per
share as the effect of all potentially dilutive securities was
anti-dilutive.
(ii) EPRA loss per share 2011 2010
-------- ---------
Loss attributable to equity holders (77,141) (828,628)
-------- ---------
Revaluation movement on investment properties
and on investment properties under development 122,540 810,666
-------- ---------
Movement in fair value of derivative financial
instruments (7,628) 41,538
-------- ---------
Profit on disposal of investment property under
development (30,965) (505)
-------- ---------
Deferred tax (11,661) (100,534)
-------- ---------
EPRA loss (4,855) (77,463)
-------- ---------
Weighted average number of ordinary shares (000's) 333,907 333,804
------- -------
EPRA loss per share (pence) (1.5) (23.2)
------- -------
The European Public Real Estate Association (EPRA) issued Best
Practice Policy Recommendations in October 2010, which gives
guidelines for performance measures. The EPRA earnings excludes
investment property and investment property under development
revaluations, gains on disposals, movements on derivative financial
instruments and their related tax consequences.
Note 24. Financial instruments
(A) Credit risk
In thousands of pounds sterling
The maximum exposure to credit risk at year / period end
was:
Group Group Company Company
2011 2010 2011 2010
------- ------ ------- -------
Assets classified as held
for sale - 27,680 - -
------- ------ ------- -------
Cash current balances 2,075 8,647 190 333
------- ------ ------- -------
Cash deposit balances 3,615 12,453 - -
------- ------ ------- -------
Restricted cash 25 ,779 17,747 - -
------- ------ ------- -------
Derivative financial instruments - 49 - -
------- ------ ------- -------
Trade and other receivables 68,225 6,591 1 -
------- ------ ------- -------
99,694 73,167 191 333
------- ------ ------- -------
Included in trade and other receivables are rental debtors with
the following aged profile:
2011 2011 2011 2010 2010 2010
Group Gross Impairment Net Gross Impairment Net
------ ----------- ----- ------ ----------- -----
Not past due 65 (2) 63 1,003 - 1,003
------ ----------- ----- ------ ----------- -----
Past due 0-120 days 693 (140) 553 1,113 (148) 965
------ ----------- ----- ------ ----------- -----
Past due > 120 days 1,413 (852) 561 1,674 (1,194) 480
------ ----------- ----- ------ ----------- -----
2,171 (994) 1,177 3,790 (1,342) 2,448
------ ----------- ----- ------ ----------- -----
Management have considered whether there is any
over-concentration of debtors and following a detailed review are
satisfied that there is not.
The movement in the allowance for impairment in respect of loans
and receivables during the year was as follows:
Group 2011 2010
----- -----
Balance at start of year
/ period 1,342 -
----- -----
Impairment in year / period 563 1,342
----- -----
Written off / reversed
in year / period (911) -
----- -----
Balance at end of year
/ period 994 1,342
----- -----
Note 24. Financial instruments
(B) Liquidity risk
In thousands of pounds sterling
The table below represents the maturity profile of contracted
undiscounted cash flows of financial liabilities based on the
earliest date on which the Group can be required to pay. The table
includes both interest and principal flows. Where the interest
payable is not fixed, the amount disclosed has been determined by
reference to the projected interest rates implied by the yield
curve at the reporting date. Where payment obligations are in
foreign currencies, the spot exchange rate ruling at the balance
sheet date is used.
Debt Repayment schedule as at
28 February 2011 - Group
---------- -------- ----- ----- ----- ------
Non-derivative
financial Carrying Contractual > 5
liabilities amount cash flows 2011 2012 2013 2014 2015 Years
------------------- ---------- ------------ ---------- -------- ----- ----- ----- ------
Zero Dividend
Preference shares
(average interest
rate 8.6%) 133,100 136,021 136,021 - - - - -
---------- ------------ ---------- -------- ----- ----- ----- ------
Convertible Loan
Stock (fixed
interest rate
7.5%) 100,895 102,787 102,787 - - - - -
---------- ------------ ---------- -------- ----- ----- ----- ------
Series A and B
Secured Loan notes
(fixed interest
rate 6.324%) 146,255 171,808 171,808 - - - - -
---------- ------------ ---------- -------- ----- ----- ----- ------
Variable rate debt 219,895 231,384 231,384 - - - - -
---------- ------------ ---------- -------- ----- ----- ----- ------
Variable rate debt
fixed with
interest rate
swaps 1,133,213 1,173,567 844,179 323,986 129 129 129 5,015
---------- ------------ ---------- -------- ----- ----- ----- ------
Provisions 889 891 37 37 37 37 37 706
---------- ------------ ---------- -------- ----- ----- ----- ------
Trade and other
payables 91,408 91,408 91,408 - - - - -
---------- ------------ ---------- -------- ----- ----- ----- ------
1,825,655 1,907,866 1,577,624 324,023 166 166 166 5,721
------------------- ---------- ------------ ---------- -------- ----- ----- ----- ------
Debt Repayment schedule as at 28 February
2011 - Company
----- ----- ----- ----- ------
Non-derivative
financial Carrying Contractual > 5
liabilities amount cash flows 2011 2012 2013 2014 2015 Years
----------------- --------- ------------ -------- ----- ----- ----- ----- ------
Convertible Loan
Stock (fixed
interest rate
7.5%) 100,895 102,787 102,787 - - - - -
--------- ------------ -------- ----- ----- ----- ----- ------
Series A and B
Secured Loan
notes (fixed
interest rate
6.324%) 146,255 171,808 171,808 - - - - -
--------- ------------ -------- ----- ----- ----- ----- ------
Trade and other
payables 25,730 25,730 25,730 - - - - -
--------- ------------ -------- ----- ----- ----- ----- ------
272,880 300,325 300,325 - - - - -
----------------- --------- ------------ -------- ----- ----- ----- ----- ------
See also note 18 in respect of post year end restructuring of
these debts.
The following table indicates the periods in which the cash
flows associated with derivatives are expected to occur.
Expected
> 5 cash Carrying
2011 2012 2013 2014 2015 Years flows amount
------ ---------
Interest
rate swaps
liability 35,591 33,355 21,021 18,088 1,073 - 109,128 70,048
--------- ---------
2011
------
Included in current liabilities 4,834
------
Included in non-current liabilities 65,214
------
Balance at end of year 70,048
------
All derivatives relate to fixed interest rate swaps and the
weighted average interest rate, based on the maturity date of the
underlying loan is:
2011 2012 2013 2014 2015 > 5 Years Total
Fixed Rate of
Derivatives 7.2% 4.8% - - - 5.8% 6.4%
Debt Repayment schedule as at
28 February 2010 - Group
---------- -------- -------- ----- ----- ------
Non-derivative
financial Carrying Contractual > 5
liabilities amount cash flows 2010 2011 2012 2013 2014 Years
------------------- ---------- ------------ ---------- -------- -------- ----- ----- ------
Zero Dividend
Preference shares
(average interest
rate 8.6%) 122,119 136,021 - 136,021 - - - -
---------- ------------ ---------- -------- -------- ----- ----- ------
Convertible Loan
Stock (fixed
interest rate
7.5%) 101,101 110,580 7,583 102,997 - - - -
---------- ------------ ---------- -------- -------- ----- ----- ------
Series A and B
Secured Loan notes
(fixed interest
rate 6.324%) 147,786 171,143 171,143 - - - - -
---------- ------------ ---------- -------- -------- ----- ----- ------
Variable rate debt
fixed with
interest rate
swaps 1,210,289 1,329,339 925,276 42,766 355,769 289 289 4,950
---------- ------------ ---------- -------- -------- ----- ----- ------
Variable rate debt 141,844 155,199 82,570 72,629 - - - -
---------- ------------ ---------- -------- -------- ----- ----- ------
Provisions 968 968 38 38 38 38 38 778
---------- ------------ ---------- -------- -------- ----- ----- ------
Trade and other
payables 46,283 46,283 46,283 - - - - -
---------- ------------ ---------- -------- -------- ----- ----- ------
1,770,390 1,949,533 1,232,893 354,451 355,807 327 327 5,728
------------------- ---------- ------------ ---------- -------- -------- ----- ----- ------
Debt Repayment schedule as at 28 February
2010 - Company
-------- ----- ----- ----- ------
Non-derivative
financial Carrying Contractual > 5
liabilities amount cash flows 2010 2011 2012 2013 2014 Years
----------------- --------- ------------ -------- -------- ----- ----- ----- ------
Convertible Loan
Stock (fixed
interest rate
7.5%) 101,101 110,580 7,583 102,997 - - - -
--------- ------------ -------- -------- ----- ----- ----- ------
Series A and B
Secured Loan
notes (fixed
interest rate
6.324%) 147,786 171,143 171,143 - - - - -
--------- ------------ -------- -------- ----- ----- ----- ------
Trade and other
payables 12,102 12,102 12,102 - - - - -
--------- ------------ -------- -------- ----- ----- ----- ------
260,989 293,825 190,828 102,997 - - - -
----------------- --------- ------------ -------- -------- ----- ----- ----- ------
The following table indicates the periods in which the cash
flows associated with derivatives are expected to occur.
Expected
> 5 cash Carrying
2010 2011 2012 2013 2014 Years flows amount
------ ----------
Interest rate
swaps
assets 30 10 9 - - - 49 49
---------- ----------
Interest rate
swaps
(liability) (68,748) (24,002) (18,169) (239) (239) (253) (111,650) (101,856)
---------- ----------
(111,601) (101,807)
---------- ----------
Disclosed as: 2010
---------
Included in current assets 30
---------
Included in non-current assets 19
---------
Included in current liabilities (62,150)
---------
Included in non-current liabilities (39,706)
---------
Balance at end of year (101,807)
---------
All derivatives relate to fixed interest rate swaps and the
weighted average interest rate is:
2010 2011 2012 2013 2014 > 5 Years Total
Fixed rate of
derivatives 6.5% 6.5% 4.0% 0.0% 0.0% 5.8% 5.8%
Note 24. Financial instruments
(C) Interest rate risk
In thousands of pounds sterling
The Group finances its operations through a mixture of retained
profits, bank borrowings, senior loan, secured loan notes,
Convertible Unsecured Loan Stock and Zero Dividend Preference
shares. The Group borrows in the desired currencies at both fixed
and floating rates and uses interest rate instruments to generate
the desired interest rate profile and to manage the Group's
exposure to interest rate fluctuations. Clear guidelines exist for
the Group's ratio of fixed to variable rate debt and management
regularly reviews the interest profile against these guidelines. At
28 February 2011, 85% (28 February 2010: 89%) of the Group's
financial liabilities were at effective fixed rates, as the Group
has entered into interest rate swap agreements on some of its
variable rate debt, and the remainder were at floating rates of
interest.
Upward movements in interest rates, associated with higher
interest rate expectations, increases the value of the Group's
interest rate swaps that provide protection against such moves. The
converse is true for downward movements in the yield curve.
Interest rate profile
including effect of Group Group Company Company
derivatives 2011 2010 2011 2010
-------------------------- --------- --- ----------- ----------- ------- -------
Fixed rate
liabilities
--------------------- --- --------- --- ----------- ----------- ------- -------
Convertible Unsecured Loan Stock
fixed at 7.5% 100,895 101,101 100,895 101,101
------------------------------------- ------ ----------- ----------- ------- -------
Series A and B Secured Loan notes
fixed at 6.324% 146,255 147,786 146,255 147,786
------------------------------------- ------ ----------- ----------- ------- -------
Zero Dividend Preference shares 133,100 122,119 - -
---------------------------------------------- ----------- ----------- ------- -------
Total liabilities at fixed rates 380,250 371,006 247,150 248,887
------------------------------------- ------ ----------- ----------- ------- -------
Fixed rate assets
-------------------------- --------- --- ----------- ----------- ------- -------
Cash on deposit (3,615) (12,453) - -
-------------------------- ---------------- ----------- ----------- ------- -------
Restricted cash (25,799) (17,747) - -
-------------------------- ---------------- ----------- ----------- ------- -------
Total assets at fixed
rates (29,414) (30,200) - -
-------------------------- ---------------- ----------- ----------- ------- -------
Net liabilities at fixed
rates 350,836 340,806 247,150 248,887
---------------------------------------------- ----------- ----------- ------- -------
Derivatives 1,258,498 1,274,785 - -
---------------------------------------------- ----------- ----------- ------- -------
Subtotal 1,609,334 1,615,591 247,150 248,887
------------------------------------- ------ ----------- ----------- ------- -------
Weighted average interest rate of the
fixed rate financial liabilities 6.2% 6.2% - -
------------------------------------- ------ ----------- ----------- ------- -------
Weighted average period for which
interest rates on the fixed
financial liabilities are fixed
(years) 0.25 1.25 - -
------------------------------------- ------ ----------- ----------- ------- -------
Variable rate
liabilities
--------------------- --- --------- --- ----------- ----------- ------- -------
Euro Senior loan 319,800 333,391 - -
---------------------------------------------- ----------- ----------- ------- -------
Sterling bank loans 260,003 242,898 - -
---------------------------------------------- ----------- ----------- ------- -------
Euro bank loans 773,305 773,730 - -
---------------------------------------------- ----------- ----------- ------- -------
Derivative financial
instruments (swapped at
rates between 2.8% and
5.685%) (1,258,498) (1,274,785) - -
-------------------------- ---------------- ----------- ----------- ------- -------
Total liabilities at
variable rates 94,610 75,234 -
-------------------------- ---------------- ----------- ----------- ------- -------
Variable rate assets
-------------------------- --------- --- ----------- ----------- ------- -------
Cash at bank (2,075) (8,647) (190) (333)
-------------------------- ---------------- ----------- ----------- ------- -------
Net liabilities at variable
rates 92,535 66,587 (190) (333)
---------------------------------------------- ----------- ----------- ------- -------
1,701,869 1,682,178 246,960 248,554
------------------------------------------ ----------- ----------- ------- -------
The Group has interest rate swaps with a nominal value of
GBP1,259 million (28 February 2010: GBP1,275 million) maturing
within the next five years (see ageing analysis). Under these
swaps, the Group pays interest at variable rates of EURIBOR and
LIBOR plus a margin and receives interest at fixed rates between
2.8% and 5.685%.
Sensitivity Analysis
At 28 February 2011, it is estimated that an increase of one
percentage point in variable interest rates would have increased
the Group's annual loss before tax by GBP0.9 million (28 February
2010: increase of GBP0.7 million) and a decrease of one percentage
point in interest rates would have decreased the Group's loss
before tax by GBP0.9 million (28 February 2010: decrease of GBP0.7
million). There would have been no effect on amounts recognised
directly to equity. The sensitivity has been calculated by applying
the interest rate change to the variable borrowings, net of
interest rate swaps, at the period end.
Note 24. Financial instruments
(D) Currency risk
In thousands of pounds sterling
The Group is not exposed to transactional foreign currency risk.
However, the Group is exposed to foreign currency risk on assets,
liabilities and earnings that are denominated in a currency other
than Sterling.
The Group has two significant overseas subsidiary groups, Castle
Market Holdings Limited 'CMH' and Havenview Investments Limited
("Havenview"), both located in Ireland. Both of these groups have
assets, liabilities, revenues and expenses that are denominated in
Euro and consequently can be significantly affected by movements in
the Euro/Sterling exchange rate
The table below shows the carrying amounts of the Group's Euro
denominated assets and liabilities in Sterling.
2011 2010 2008
Sterling Sterling Sterling
----------- ----------- -----------
Assets 760,826 972,343 1,646,923
----------- ----------- -----------
Liabilities (1,336,763) (1,538,347) (1,421,412)
----------- ----------- -----------
Net balance sheet
exposure (575,937) (566,004) 225,511
----------- ----------- -----------
The following significant exchange rates applied during the
year
Reporting date spot
2011 2010 2008
EURO/GBP - rate at year end 1.1726 1.1202 1.0499
Euro (depreciation) / appreciation for the year (4.68%) (6.70%) 23.01%
----------------------------------------------- ---------- --------- ------
Sensitivity analysis
The Euro has depreciated by 4.7% against Sterling during the
year ending 28 February 2011. A 10% strengthening of Sterling
against the Euro at 28 February 2011 would have decreased equity
for the period by the amounts shown below. This analysis assumes
other variables, in particular interest rates, remain constant.
The analysis is performed on the same basis for the period ended
28 February 2010.
In thousands of pounds Sterling
2011 2011 2010 2010
Equity Loss Equity Loss
10% Strengthening 57,594 - 50,527 -
A 10% weakening of Sterling against the Euro would have had an
equal but opposite effect to the amount shown above, on the basis
that all other variables remain constant. As highlighted above,
foreign exchange movements do not have any impact on the results
for the year, as all foreign exchange movements are translational
in nature and are therefore reflected in equity.
Note 24. Financial instruments
(E) Fair value
In thousands of pounds sterling
The fair values together with the carrying amounts shown on the
balance sheet are as follows:
Group 2011 2010
--------------------------
The fair values of
financial assets
and liabilities,
together with
carrying amounts
shown in the
statement of
financial
position, are as Carrying Fair Carrying
follows: amount Value amount Fair Value
------------ ------------ ------------
Liabilities carried
at amortised cost
------------ ------------ ------------
Convertible
Unsecured Loan
stock fixed at
7.5% (100,895) (10,846) (101,101) (21,231)
------------ ------------ ------------
Series A and B
Secured Loan Notes
fixed at 6.324% (146,255) (141,745) (147,786) (161,792)
------------ ------------ ------------
Zero Dividend
Preference shares (133,100) (6,209) (122,119) (11,551)
------------ ------------ ------------ ------------
Sterling loans (260,003) (249,559) (242,898) (246,117)
------------ ------------ ------------ ------------
Euro Senior loan (319,800) (293,580) (333,391) (324,706)
------------ ------------ ------------
Bank and other
loans (773,305) (773,305) (773,730) (773,730)
------------ ------------ ------------ ------------
Trade and other
payables (92,297) (92,297) (47,251) (45,251)
------------ ------------ ------------ ------------
(1,825,655) (1,567,541) (1,768,276) (1,584,378)
------------ ------------ ------------ ------------
Liabilities carried
at fair value
------------ ------------ ------------ ------------
Derivative
financial
instruments (70,048) (70,048) (101,856) (101,856)
------------ ------------ ------------ ------------
(70,048) (70,048) (101,856) (101,856)
------------ ------------ ------------ ------------
Assets carried at
amortised cost
------------ ------------ ------------
Trade and other
receivables 68,225 68,225 6,592 6,592
------------ ------------ ------------ ------------
Bank current
balances 2,075 2,075 8,647 8,647
------------ ------------ ------------ ------------
Bank deposits
balances 3,615 3,615 12,453 12,453
------------ ------------ ------------ ------------
Restricted cash 25,779 25,779 17,747 17,747
------------ ------------ ------------ ------------
99,694 99,694 45,439 45,439
------------ ------------ ------------ ------------
Assets carried at
fair value
------------ ------------ ------------ ------------
Derivative
financial
instruments - - 49 49
------------ ------------ ------------ ------------
Listed investments
- held for sale - - 27,680 27,680
------------ ------------ ------------ ------------
- - 27,729 27,729
------------ ------------ ------------ ------------
Company 2011 2010
-----------------------
The fair values of financial
assets and liabilities,
together with carrying
amounts shown in the
statement of financial Carrying Fair Carrying
position, are as follows: amount Value amount Fair Value
---------- ---------- -----------
Liabilities carried at
amortised cost
---------- ---------- -----------
Convertible Unsecured Loan
stock fixed at 7.5% (100,895) (10,846) (101,101) (21,231)
---------- ---------- -----------
Series A and B Secured Loan
Notes fixed at 6.324% (146,255) (141,745) (147,786) (161,792)
---------- ---------- -----------
Trade and other
payables (25,730) (25,730) (12,102) (12,102)
---------- ---------- ---------- -----------
(272,880) (178,321) (260,989) (195,125)
---------- ---------- ---------- -----------
Assets carried at amortised
cost
---------- ---------- -----------
Trade and other
receivables 1 1 - -
---------- ---------- ---------- -----------
Bank current balances 190 190 333 333
---------- ---------- ---------- -----------
191 191 333 333
---------- ---------- ---------- -----------
Assets carried at
fair value
---------- ---------- ---------- -----------
Listed investments - - - -
- held for sale
---------- ---------- ---------- -----------
- - - -
---------- ---------- ---------- -----------
Interest rates used to determine fair values
2011 2010
------------ ----------
Derivatives 0.995%-2.67% 0.6%-2.8%
------------ ----------
Loans and borrowings 4.37%-8.49% 4.8%-5.75%
------------ ----------
Fair value hierarchy
The table below analyses financial instruments carried at fair
value, by valuation method. The different levels have been
identified as follows:
Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities
Level 2: inputs other than quoted prices included within Level
1, that are observable for the asset or liability
Level 3: inputs for the asset or liability that are not based on
observable market data (unobserved inputs)
28 February 2011 Level 1 Level 2 Total
---------------------- --------- --------- ---------
Derivative financial
liabilities - (70,048) (70,048)
---------------------- --------- --------- ---------
- (70,048) (70,048)
-------------------------------- --------- ---------
28 February 2010 Level 1 Level 2 Total
------------------------- -------- ---------- ----------
Held for sale financial
assets 27,680 - 27,680
------------------------- -------- ---------- ----------
Derivative financial
instruments - 49 49
------------------------- -------- ---------- ----------
27,680 49 27,729
------------------------- -------- ---------- ----------
Derivative financial
liabilities - (101,856) (101,856)
------------------------- -------- ---------- ----------
- (101,856) (101,856)
------------------------- -------- ---------- ----------
Note 25. Contingencies, guarantees and capital commitments
In thousands of pounds sterling
(a) Capital commitments
Future capital expenditure, contracted for and approved by the
Directors, but not provided for in these financial statements, is
as follows:
2011 2010
----- ------
Contracted for 4,571 47,535
----- ------
Authorised not contracted 23 -
----- ------
4,594 47,535
----- ------
These commitments are expected to be settled in the following
financial year.
(b) Financial guarantees
Where the Company enters into financial guarantee contracts to
guarantee the indebtedness of other companies within its Group, the
Group considers these to be insurance arrangements, and accounts
for them as such. In this respect, the Group treats the guarantee
contract as a contingent liability until such time as it becomes
probable that the Group will be required to make a payment under
the guarantee.
The Group has no other outstanding guarantees or financial
commitments.
(c) Contingencies
There are no contingencies in the Group, the outcome of which
could have a material effect on the Group's financial position.
Note 26. Related parties
(a) Transactions with related parties by the Group
The Group has related party relationships with its subsidiaries
(see note 29).
Treasury Holdings acts as investment advisor for all of the
Group's property assets. The terms upon which Treasury Holdings
were appointed are set out in note 19.
Pursuant to the Investment Advisor Agreement, Treasury Holdings
earned an investment management fee of GBP2.1 million for the year
ended 28 February 2011 (2010: GBP4.0m). Project development and
project management fees of GBP13 million for the year ended 28
February 2011 (2010: GBP14.9 million) were paid to a company within
the Treasury Holdings Group. The project development and management
fees are capitalised in the period they are incurred. Unpaid fees
amounted to GBP3.6 million at 28 February 2011 (28 February 2010:
GBP3.8 million).
Fees of GBP697,000 (2010: GBP608,000) in respect of accounting
and administrative services, taxation advice, legal advice and
investor relations were payable to Treasury Holdings in respect of
agreements with the Company. Fees unpaid at 28 February 2011
amounted to GBP178,000 (28 February 2010 GBP152,000).
There was no performance fee payable during the period ended 28
February 2011 (28 February 2010: GBPnil)
(b) Transactions with related parties by the Company
In the year ended 28 February 2011, fees totalling GBP309,333
(28 February 2010: GBP309,333) were recharged by the Company to
Group Companies for various services provided.
During the year ended 28 February 2011, the Company provided a
net amount of GBP11.3 million (28 February 2010: GBP82.8 million)
by way of funding to group companies. These amounts have been
provided for in full at the year-end as detailed in note 18.
Note 27. Post balance sheet events
(a) Group Restructuring
As referred to in the Chairman's Statement, significant progress
has been made in the restructuring of the Group.
On 11 April, the Group announced the final terms of the
Restructuring, whereby the liabilities due to the holders of both
the Group's 7.5% CULS and the ZDPs will be converted into equity of
the newly formed Battersea Power Station Shareholder Vehicle
("BPSSV") and REO.
The resolutions in respect of the above proposals were
successfully approved by each class of stakeholder at Extraordinary
General Meetings held on 5 May 2011. The Restructuring became
effective on 12 May, with the listings of the CULS and ZDPs on the
Official List (standard category) subsequently cancelled on that
date and approximately 111million additional Ordinary Shares in
Real Estate Opportunities plc ("REO") admitted to the Official List
(standard category).
The holder of the Oriental Loan Note (OLNs) has also agreed to a
standstill arrangement whereby repayment of the OLNs will be
deferred until 31 August 2011 or beyond, if the Battersea Power
Station loan facilities referred to below are similarly extended,
subject to certain conditions. The obligations under the OLNs have
also been novated to BPSSV.
Note 28 highlights the impact on the group's position as at 28
February 2011.
(b) Battersea Power Station Planning Permission
As previously announced, the Group's planning application on the
Battersea Power Station project has now been approved by Wandsworth
Council, the Mayor of London and the Secretary of State for
Communities and Local Government. Final grant of planning
permission as represented by the Section 106 agreement between the
Group, Wandsworth Council and Transport for London, is anticipated
in the near future.
(c) Purchase of Site Adjoining Battersea Power Station
On the 27 May 2011 the purchase of a site adjoining Battersea
Power Station for a consideration of GBP4m was completed. The
completion follows exchange of contracts in December 2008 and the
successful completion of remediation on the site.
Note 28 Pro-forma Balance Sheet Post Restructuring
(in thousands of pounds sterling)
Set out below is the pro forma financial information of the
Group as of the 28 February 2011 to reflect the proposed Phase 1 of
the restructuring plan. This pro-forma financial information is
based on the financial statements for the year to 28 February 2011
and has been prepared on the basis of the notes set out below to
illustrate the effect of the issue of the New Shares to the CULS
Holders and ZDP Holders and the novation of certain assets and
liabilities into BPSSV.
The pro forma financial information is shown for illustrative
purposes only to indicate how the restructuring as referred to in
Note 27 might have affected the financial position of the Group as
of 28 February 2011 if it had occurred on that date.
The pro forma financial information addresses a hypothetical
situation and, therefore, does not represent the Group's actual
financial position or results following the issue of the new shares
and warrants to the CULS Holders and ZDP Holders under the terms of
a debt for equity swap.
Reo REO Group
Consolidated Reo Group (excluding BPSSV)
Group at Pre Non Share Post Post
Restructuring Equitisation Equitisation Professional Controlling Based Restructuring Restructuring
28.2.11 of CUL of ZDP Fees Interest Payment 28.2.11 28.2.11 BPSSV
---------------- -------------- ------------- ------------- ------------- ------------ -------- -------------- ------------------ ------
Note 1 2 3 4 5
---------------- -------------- ------------- ------------- ------------- ------------ -------- -------------- ------------------ ------
Investment
Property and
Investment
Property under
development 1,004 1,004 499 505
---------------- -------------- ------------- ------------- ------------- ------------ -------- -------------- ------------------ ------
Cash 31 31 30 1
---------------- -------------- ------------- ------------- ------------- ------------ -------- -------------- ------------------ ------
Other Assets 76 3 79 75 4
---------------- -------------- ------------- ------------- ------------- ------------ -------- -------------- ------------------ ------
Debt
---------------- -------------- ------------- ------------- ------------- ------------ -------- -------------- ------------------ ------
CULs (101) 101 - - -
---------------- -------------- ------------- ------------- ------------- ------------ -------- -------------- ------------------ ------
ZDPs (133) 133 - - -
---------------- -------------- ------------- ------------- ------------- ------------ -------- -------------- ------------------ ------
OLN (146) (146) - (146)
---------------- -------------- ------------- ------------- ------------- ------------ -------- -------------- ------------------ ------
Interest
Bearing loans
and
Borrowings (1,353) (1,353) (1,093) (260)
---------------- -------------- ------------- ------------- ------------- ------------ -------- -------------- ------------------ ------
Total Debt (1,733) 101 133 (1,499) (1,093) (406)
---------------- -------------- ------------- ------------- ------------- ------------ -------- -------------- ------------------ ------
Liabilities
(Current & Non
Current)
---------------- -------------- ------------- ------------- ------------- ------------ -------- -------------- ------------------ ------
Fair value of
swaps (70) (70) (48) (22)
---------------- -------------- ------------- ------------- ------------- ------------ -------- -------------- ------------------ ------
Loan Interest (55) 8 (47) (30) (17)
---------------- -------------- ------------- ------------- ------------- ------------ -------- -------------- ------------------ ------
Other creditors
& accruals (54) (3) (57) (39) (18)
---------------- -------------- ------------- ------------- ------------- ------------ -------- -------------- ------------------ ------
Total other
Liabilities (179) 8 (3) (174) (117) (57)
---------------- -------------- ------------- ------------- ------------- ------------ -------- -------------- ------------------ ------
Net
(Liabilities)
/ Assets (801) 109 133 (3) - 3 (559) (606) 47
---------------- -------------- ------------- ------------- ------------- ------------ -------- -------------- ------------------ ------
Equity
---------------- -------------- ------------- ------------- ------------- ------------ -------- -------------- ------------------ ------
Share Capital,
Share Premium
& Warrants 4 2 1 7 7 44
---------------- -------------- ------------- ------------- ------------- ------------ -------- -------------- ------------------ ------
Other Reserve 1 5 3 2 11 8 3
---------------- -------------- ------------- ------------- ------------- ------------ -------- -------------- ------------------ ------
Currency
Reserve 101 101 101 -
---------------- -------------- ------------- ------------- ------------- ------------ -------- -------------- ------------------ ------
Non Controlling
Interest (22) 1 (21) - -
---------------- -------------- ------------- ------------- ------------- ------------ -------- -------------- ------------------ ------
Retained Losses (907) 102 129 (3) 22 (657) (722) -
---------------- -------------- ------------- ------------- ------------- ------------ -------- -------------- ------------------ ------
Net (Deficit) /
Asset
attributable
to equity
holders (801) 109 133 (3) - 3 (559) (606) 47
---------------- -------------- ------------- ------------- ------------- ------------ -------- -------------- ------------------ ------
Notes
1. This adjustment reflects the issue of New Shares to the CULS
Holders in settlement of principal and unpaid interest totalling
GBP109 million. This adjustment represents the settlement of
outstanding principal totalling GBP101 million, unpaid interest of
GBP8 million, the issuance of New Shares at fair value, with the
resultant gain of GBP102 million.
2. This adjustment reflects the issue of New Shares to the
holders of ZDP Shares, reflecting a debt for equity swap totalling
GBP133 million. This adjustment represents the settlement of the
outstanding principal totalling GBP133 million the issuance of New
Shares at fair value with the resultant gain of GBP129 million.
3. The costs associated with the issue of the New Shares as set
out in notes 2 and 3 above are expected to be GBP3 million, and
will be payable in cash.
4. This adjustment reflects the recognition of non controlling
interests in BPSSV through the issuance of ordinary shares in BPSSV
. Following the completion of the issuance of the ordinary shares
in BPSSV, the Group will own 54 per cent. of the issued ordinary
share capital in BPSSV and non controlling interests will own 46
per cent of the issued ordinary share capital. The adjustment
recorded against non controlling interests reflects the recognition
of 46 per cent of the net assets attributable to BPSSV at 28
February 2011.
5. Is a share based payment payable to Treasury Holdings for
services to be provided in respect of Phase 2 of the
restructuring.
Note 29. Subsidiary undertakings
The Company holds directly or indirectly 100% of the ordinary shares,
unless otherwise indicated, of the following subsidiary undertakings:
Subsidiary Activity Registered and
incorporated
and place of
incorporation
Real Estate Opportunities Investment Property Investment Jersey
Properties Limited
Real Estate Opportunities Holdings Investment Jersey
Limited
Jermyn Investment Properties Limited Holding company England and
Wales
Jermyn Investment Co Limited * Dormant England and
Wales
Jermyn Investment Company Holdings Holding company England and
Limited * Wales
ELP Properties Limited * Holding company England and
Wales
Lakebridge Commercial * Holding company Ireland
REO Securities Limited Holding Company Jersey
Coolred Limited Property investment Ireland
Mainford Limited Property investment Ireland
Montevetro I Limited Property development Ireland
Montevetro II Limited Property development Ireland
OKPTH Limited Property investment Ireland
Swinwood Limited Property development Ireland
Kensell Green Limited Property investment Ireland
and development
Castle Market Holdings Limited
Subsidiary Undertakings
Castle Market Holdings Limited * Holding company Ireland
Abbono Limited * Property investment Ireland
and development
Achnasheen CMBS (Propco) Limited * Property investment Ireland
Alhans Limited * Property investment Ireland
and development
Allenspark Limited * 50% Property investment Ireland
and development
Alleycastle Limited * Property investment Ireland
and development
Beckton Properties Limited * Property investment Ireland
and development
Belcherstown Limited * Property Investment Ireland
Benreef Limited * Property development Ireland
Bluetide Limited * Investment holding Ireland
Bluetone Properties Limited * Property investment Ireland
and development
Bobbio (Propco) Limited * Investment holding Ireland
Bobbio CMBS (Propco) Limited * Property investment Ireland
Bracadale Limited * Dormant Ireland
Bracadale CMBS (Propco) Limited * Property investment Ireland
and development
Candourity Limited * Property investment Ireland
and development
Candourity CMBS (Propco) I Limited Property investment Ireland
*
and development
Candourity CMBS (Propco) II Limited Property investment Ireland
*
Carlovent Limited * Property investment Ireland
and development
Clarabrook Limited * Property investment Ireland
and development
Colata Investments Limited * Property investment Ireland
and development
Cragthorn Limited * Dormant Ireland
Cragthorn CMBS (Propco) Limited * Property investment Ireland
Croftwalk Limited * Dormant Ireland
Cubette Limited * Holding company Ireland
Decocter Limited * Investment holding Jersey
Diamond Bay Limited * Property investment Ireland
Eltisey (Propco) Limited * Investment holding Ireland
Eurodelta Limited * Investment holding Ireland
Everglade Properties Limited * Property development Ireland
Glamorama Limited * Property investment Ireland
and development
Grimsdale Limited * Property trading Ireland
Hakaton Limited * Property investment Ireland
and development
Hartsley Limited * Dormant Ireland
Hartsley CMBS (Propco) Limited * Property investment Ireland
and development
Haybrook Limited * Property investment Ireland
and development
Lornabay Limited * Property investment Ireland
and development
Lowestoft Limited * 50% Property development Ireland
Marske (Propco) Limited * Property investment Ireland
Marske CMBS (Propco) Limited * Property investment Ireland
and development
Mattingley Limited * Property development Ireland
Movard Limited * Property development Ireland
Myrmidon (Propco) Limited * Dormant Ireland
Myrmidon CMBS (Propco) Limited * Property investment Ireland
and development
Oceanrock Limited * Property investment Ireland
Parshall Limited * 50% Property development Ireland
Pewley (Propco) Limited * Property investment Ireland
Pewley CMBS (Propco) Limited * Property investment Ireland
Radtip Properties Limited * 50% Property investment Ireland
and development
Sencode Limited * Investment holding Ireland
Simcrest Limited * Property investment Ireland
Soapstone Limited * Property investment Ireland
and development
Streamglen Limited * Property investment Ireland
Tandoori Rooms (Propco) Limited Investment holding Ireland
Tandoori Rooms CMBS (Propco) Limited Property investment Ireland
*
Tapfield Limited * Property investment Ireland
and development
Tenderbrook Limited * Property investment Ireland
and development
Temple Holdings (Dublin) Limited * Property investment Ireland
and development
Trobatch CMBS (Propco) Limited * Property investment Ireland
Volpine Limited* Property management Ireland
Westmoreland Property Company Investment holding Ireland
(Propco) Limited *
Westmoreland Property Company Investment holding Ireland
CMBS (Propco) Limited *
Whimple (Propco) Limited * Property investment Ireland
Whimple CMBS (Propco) Limited * Property investment Ireland
Wintertide Limited * Property investment Ireland
and development
Yoda Limited * Property investment Ireland
Havenview Investments Limited
subsidiary undertakings
Havenview Investments Limited Holding Company Ireland
Ballymun Shopping Centre Limited* Property investment Ireland
and development
Eltisey Limited* Property investment Ireland
and development
Eltisey Two Limited* Property investment Ireland
and development
Lillesbrook Limited* Dormant Ireland
Pageflyer Limited* Property investment Ireland
Pageflyer Two Limited Property investment Ireland
Redswan Limited* Property Development Ireland
Rigol Limited* 50% Property investment Ireland
and development
Sarahosta Limited* Property investment Ireland
Silkbay Limited* Property investment Ireland
and development
Twynholm Limited* Property investment Ireland
and development
Battersea Power Station Subsidiary Undertakings
Headland Developments Limited * Property development British Virgin
Islands
Halcyon Estates Limited * Property development British Virgin
Islands
Kemp Town Limited * Property development British Virgin
Islands
Lambhill Properties Limited * Property development British Virgin
Islands
Oasis Park Limited * Property development British Virgin
Islands
West Hotel Development Limited * Property development British Virgin
Islands
Utilities Centre Development Limited Property development British Virgin
* Islands
Car Parks Development Limited * Property development British Virgin
Islands
Lattice Building Development Limited Property development British Virgin
* Islands
East Hotel Development Limited * Property development British Virgin
Islands
Theatre Development Limited * Property development British Virgin
Islands
Twist Building Development Limited Property development British Virgin
* Islands
Power Station Development Limited Property development British Virgin
* Islands
REO (Bund) Limited Property investment Jersey
and development
REO (Powerstation) Limited * Property investment Jersey
and development
REO (Site Assembly) Holdco Limited Property investment Jersey
and development
REO (Site Assembly) Limited * Property investment Jersey
and development
REO (Stewarts Road) Holdco Limited Investment Jersey
*
REO (Stewarts Road) Limited * Investment Jersey
REO (8 Brooks Court) Holdco Limited Investment Jersey
*
REO (8 Brooks Court) Limited * Investment Jersey
REO (88 Kirtling Street) Holdco Property investment Jersey
Limited *
and development
REO (88 Kirtling Street) Limited * Property investment Jersey
and development
REO (2 Battersea Park Road) Holdco Investment Jersey
Limited *
REO (2 Battersea Park Road) Limited Investment Jersey
*
* indirect holdings
Allenspark Limited, Lowestoft Limited, Parshall Limited and Radtip
Properties Limited have been treated as subsidiary undertakings
as the Group exercises dominant influence over the operating and
financial policies.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR PGUGWQUPGGRP
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