RNS Number : 1210E
Westcity PLC
24 September 2008
WESTCITY PLC
CHAIRMAN'S STATEMENT
UNAUDITED RESULTS FOR THE HALF YEAR ENDED 30 June 2008
It has been a very challenging and difficult 6 months. Market conditions remain extremely uncertain and volatile which is reflected in
our financial performance. It is a time of unchartered territories with massive write downs of real estate values worldwide. There is a mood
of increased caution amongst investors in all asset classes. Financial liquidity is at an all time low and there is a softening of prime
yields throughout European markets.
As a result, the Company incurred a loss after tax for the period under review of �4,843,000(2007: profit �214,000) principally due to
the Company's share of an impairment provision of �4,066,000 as determined by the Board of Directors of The Stonehage Westcity Property Fund
( "Fund") as set out below .
The Company's major asset is its investment in the Fund which is carried at fair value. The assets of the Fund were professionally
valued at December 2007 and professional valuations will again be undertaken at December 2008. In the light of prevailing market conditions
and the uncertain outlook, the Fund's directors have reassessed the fair value of the Fund's investments as at 30 June 2008 resulting in a
decrease of approximately 22% of the portfolio's real estate values. This impacted negatively on the Company's profit and loss account in an
amount of �4,066,000
The Company's loss after tax can be summarised as follows:
- Due to the reassessment by the Fund's directors of the fair value of the Funds real estate assets at 30 June 2008, the Company's fair
value of its investment in the Fund was reduced by �4,066,000 less an amount of �1,586,000 in respect of a foreign exchange gain in respect
of the Company's investment in the Fund, and by �183,000 being the Company's share of other net revenues of the Fund ,all resulting in a net
write down of �2,297,000 in the carrying value of the Fund.
- In addition a foreign exchange loss of �1,441,000 was incurred as a result of a forward exchange contract used to hedge the Fund
investment against the Euro. As previously reported this hedging contract has now been settled and closed.
- Finally, overheads exceeded revenue by �1,105,000.
REVIEW OF OPERATIONS
The above factors have resulted in the Fund aborting numerous transactions, which has led the Fund to be cash positive, with 43% of its
net equity held in cash. As a result, the Fund is placed in a very strong position to take advantage of opportunities when market conditions
stabilise.
External market conditions have resulted in much lower levels of investment by the Fund so that the Company's fee revenues have failed
to meet expectations. In order to counter this shortfall, the Company has taken decisive actions to reduce its cost base going forward
without compromising its ability to service its existing contractual obligations.
The Company owns 34% of the Fund and is property adviser to the Fund. An update of the Fund's investments is set out as follows.
German Commercial Portfolio
Against a background of economic slowdown and heightened uncertainty, the Fund's German portfolio presents many challenges. Our
priorities are focused on maximising and safeguarding income, minimising voids and achieving rental growth where possible in a softening
market. New property and asset managers have been appointed with a far more proactive and reliable approach. This has already resulted in
cost savings, better tenant communications and a number of new leases. Whilst active asset management initiatives will continue to be the
focus of our attention, we are constantly reviewing the overall business strategy and are monitoring our banking covenants and relationships
very closely.
German Residential Portfolio
This Signature specialist residential fund in Berlin is also experiencing a softening of yields and is being very closely monitored as
operating expenses need to be reduced in line with original forecasts. Again, management activity is centred on cost containment and revenue
maximisation through vacancy minimisation and rental increases wherever achievable.
Russia Rutley
The Russia Rutley Fund currently holds approximately 70% of its available investment funds in cash and is reviewing a number of
interesting opportunities.
Greenwich
Planning permission was granted in June 2008 for the development of 129 residential units and approximately 2,500 square meters of prime
retail space. Whilst the short / medium term outlook for residential property remains negative, the site is of the highest quality and until
normal market conditions return we will continue to review our options. The site is currently rent producing with very little expenditure
being incurred.
Queen's Wharf
The Queen's Wharf site, located on the River Thames adjacent to the Hammersmith Bridge, is a prime development site enjoying excellent
river views. The Company, together with our joint venture partners, Byrne Estates Limited, continue to progress with our planning
application and are hopeful of a successful outcome in the New Year.
Care Homes
The Fund has a small investment in two properties which are awaiting planning permission. Once this has been received, we will seek to
trade out of these investments and take advantage of opportunities as they arise.
Portland
This is a real estate securities fund. It invests mainly in public equity securities, debt securities, derivatives and exchange traded funds
in the real estate sector. Since its launch in June 2007, the Fund's investment in Portland has produced a negative net performance of
3.42%. This investment is part of the Fund's liquid portfolio and we are currently assessing our options with respect to this investment.
OUTLOOK
Although the Fund's portfolio is well balanced the uncertainties plaguing global markets dictate extreme caution. To this end, our
priority has shifted from portfolio expansion to intensive asset management. With its high level of liquidity the Fund remains extremely
well placed to benefit once markets show clear signs of stabilising and high quality opportunities present themselves.
This change in focus and outlook due to external market forces will result in reduced income to the Company from levels originally
anticipated and the second half has seen management continuing to reduce its cost base accordingly. As a result, the Company is expecting to
produce a loss for the second half of the year. However, excluding any further impact of changes in the valuation of the Fund, this loss is
anticipated to be below that recorded in the second half of 2007, and lower than the loss reported for the six months to 30 June 2008.
Management is hopeful that its cost reduction initiatives undertaken this year will enable the Company to face 2009 with greater
confidence.
DIVIDEND
No dividend will be paid on the ordinary shares in respect of the period under review (2007: NIL).
Ira Rapp
Executive Chairman
September 2008
WESTCITY PLC
CONDENSED CONSOLIDATED INCOME STATEMENT
UNAUDITED RESULTS FOR THE HALF YEAR ENDED 30 June 2008
Unaudited Unaudited Audited
results results results
for the for the for
6 months 6 months the year
to to ended
30 June 30 June 31
2008 2007 December
2007
�'000 �'000 �'000
REVENUE 432 816 1,132
Finance revenue 90 179 335
Employee benefits expense (1,250) (1,015) (2,312)
Depreciation and amortisation expense (19) (17) (36)
Other expenses (407) (337) (912)
Profit / (loss) on Investment held at (2,297) 166 1,570
fair value through profit and loss
Share of profits of equity accounted 49 15 69
investments
(Loss) / profit on forward exchange (1,441) 407 (1,550)
contract
Profit on sale of Hixon land - - 100
(LOSS) / PROFIT BEFORE TAX (4,843) 214 (1,604)
Income taxes - - -
(LOSS) / PROFIT FOR THE PERIOD (4,843) 214 (1,604)
ATTRIBUTABLE TO EQUITY HOLDERS OF THE
PARENT
Basic earnings per share (0.65)p 0.29p (2.12)p
Diluted earnings per share (0.59)p 0.27p (2.12)p
WESTCITY PLC
CONDENSED CONSOLIDATED Balance Sheet
AS AT 30 June 2008
Unaudited Unaudited Audited
30 June 30 June 31December
2008 2007 2007
Notes �'000 �'000 �'000
NON-CURRENT ASSETS
Property, plant and equipment 50 79 70
Equity accounted investments 171 69 123
Other financial assets 18,840 24,234 21,138
19,061 24,382 21,331
CURRENT ASSETS
Trade and other receivables 526 1,148 413
Prepayments 58 77 34
Cash and cash equivalents 512 1,048 4,787
1,096 2,273 5,234
TOTAL ASSETS 20,157 26,655 26,565
CURRENT LIABILITIES
Trade and other payables 350 289 403
Financial liability on forward - - 1,550
exchange contract
Provisions 6 55 55 55
405 344 2,008
NON-CURRENT LIABILITIES
Provisions 6 374 430 405
374 430 405
TOTAL LIABILITIES 779 774 2,413
NET ASSETS 19,378 25,881 24,152
SHAREHOLDERS' EQUITY
Called up share capital 7 743 743 743
Share premium account - - -
Share based payments reserve 8 390 232 321
Other capital reserves 8 25,589 25,589 25,589
Retained earnings 8 (7,344) (683) (2,501)
19,378 25,881 24,152
WESTCITY PLC
condensed CONSOLIDATED Cash Flow Statement
FOR THE half YEAR ENDED 30 June 2008
Unaudited Unaudited Audited
6 months 6 months year to
to to 31December
30 June 30 June 2007
2008 2007
Notes �'000 �'000 �'000
Net cash flows from operating 9 (4,365) (1,297) (2,190)
activities
Investing activities
Interest received 90 179 334
Purchase of property, plant and - (65) (88)
equipment
Net cash flows used in investing 90 114 246
activities
Financing activities
Amounts repaid by related - 4,500
entities
Net cash flows used in financing - - 4,500
activities
Net increase/(decrease) in cash (4,275) (1,183) 2,556
and cash equivalents
Cash and cash equivalents at 1 4,787 2,231 2,231
January
Cash and cash equivalents at 30 512 1,048 4,787
June/ 31 December
WESTCITY PLC
CONdensed conSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE HALF YEAR ENDED 30 June 2008
Share based payment
reserve Other capital
�'000 reserves
Issued Capital Share premium �'000 Retained earnings Total Equity
�'000 �'000 �'000 �'000
At 1 January 2007 743 - 131 25,488 (796) 25,566
Total income and expense for - - - - 214 214
the period
Share based payment - - 101 - - 101
Adjustment relating to - - - 101 (101) -
previous capital reduction
At 30 June 2007 / 1st July
2007 743 - 232 25,589 (683) 25,881
Total income and expense for
the period - - - - (1,818) (1,818)
Share based payment - - 89 - 89
At 31 December 2007 / 1st 743 - 321 25,589 (2,501) 24,152
January 2008
Total income and expensefor - - - - (4,843) (4,843)
the period
Share based payment - - 69 - - 69
At 30 June 2008 743 - 390 25,589 (7,344) 19,378
WESTCITY PLC
NOTES TO the CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 June 2008
1. BASIS OF PREPARATION
The condensed financial statements have been prepared using accounting policies consistent with International Financial Reporting
Standards and in accordance with International Accounting Standards (IAS) 34 Interim Financial Reporting and have not been audited for the
period under review.
The financial information contained in this document does not constitute statutory accounts within the meaning of Section 240 of the
Companies Act 1985.
The financial information for the year ended 31st December 2007 is extracted from the audited financial statements for that year on
which the auditors gave an unqualified report and which did not give a statement under Section 237 (2) or 237 (3) of the Companies Act
1985.
A copy of these 2007 financial statements has been filed with the Registrar of Companies.
The Group prepares its consolidated financial statements in accordance with IFRS, and the statements have been prepared using the
accounting policies set out in the Group's 2007 statutory accounts.
2. SIGNIFICANT ACCOUNTING POLICIES
The condensed financial statements have been prepared on a historical cost basis or fair value basis as appropriate.
The same accounting policies, presentation and methods of computation are followed in these condensed financial statements as were
applied in the preparation of the Group's financial statements for the year ended 31 December 2007.
3. SEGMENT INFORMATION
The Group operates from one geographical segment being the UK and Channel Islands. The Group has one business segment being that of
property related investment, development and management in respect of properties and opportunities within the UK and Europe.
4. DIVIDENDS
No dividends were paid or declared in the period (June 2007: Nil, December 2007: Nil).
5. EARNINGS PER ORDINARY SHARE
Basic earnings per ordinary share has been calculated on the Group's loss attributable to shareholders of �4,843,000 (June 2007 profit:
�214,000, December 2007 loss: �1,604,000) and on the weighted average number of ordinary shares in issue during the period which was
74,299,301 (June 2007: 74,299,301, December 2007: 74,299,301).
Diluted earnings per ordinary share has been calculated on the Group's loss attributable to shareholders of �4,843,000 (June 2007
profit: �214,000, December 2007 loss: �1,604,000) and on the weighted average number of ordinary shares in issue during the period which was
81,784,478 (June 2007: 78,925,497, December 2007: 78,955,491).
6. PROVISIONS
Pension Scheme Onerous property leases
deficit
Total
�'000 �'000 �'000
Provision at 1 January 2008 250 210 460
Provision utilised - 31 31
Provision at 30 June 2008 250 179 429
Current - 55 55
Non-current 250 124 374
250 179 429
Provisions for liabilities
Provision is made in these financial statements for all material liabilities including any legal claims which are expected to
materialise and a lease liability which has materialised on premises formerly occupied by a Group company.
The Directors have considered the adequacy of provisions for product liability, property lease liabilities which have materialised,
trade disputes and environmental issues relating to disposed businesses and consider that adequate provision has been made, or sufficient
funds held in escrow, to meet any contingent costs.
7. SHARE CAPITAL
There were no changes to the issued share capital of the Company during the period.
8. RESERVES
Group Share based payments Other capital reserves Retained earnings
reserve
�'000 �'000 �'000
At 1 January 2008 321 25,589 (2,501)
Share based payment 69 - -
Other movements - - -
Retained (loss) profit for the - - (4,843)
period
At 30 June 2008 390 25,589 (7,344)
Nature and purpose of other reserves
Share based payments reserve
The share based payments reserve is used to recognise the fair value of options expensed but not exercised.
8. RESERVES Continued
Other capital reserves
The other capital reserves arose following the cancellation of amounts included in the capital redemption reserve and share premium
account. The other capital reserves are not to be treated as representing realised profits of the Company and will be treated as an
undistributable reserve for the purposes of section 264 of the Companies Act 1985, as it may apply to the Company, for so long as any debts
of or claims against the Company as at 11 October 2006 shall remain outstanding.
9. NET CASH OUTFLOW FROM OPERATING ACTIVITIES
Unaudited Unaudited Audited
6 months 6 months Year to 31
to 30 June to 30 June December
2008 2007 2007
�'000 �'000 �'000
Operating (loss) / profit before tax (4,843) 214 (1,604)
Loss on sale of property, plant and - - 13
equipment
Depreciation 20 17 37
Share based payments expense - 101 190
Share of profits of equity accounted (49) (15) (34)
investment
Dividend from equity accounted 69 35 -
investment
(Increase)/decrease in the fair value 2,297 (166) (1,570)
of investments
Finance income (90) (179) (335)
(Increase)/decrease in receivables (111) (1,029) (296)
(Increase)/decrease in prepayments (24) (21) 22
(Decrease)/increase in payables (1,602) (225) 1,440
Increase/(decrease) in provisions (32) (29) (53)
(4,365) (1,297) (2,190)
10. GROUP FINANCIAL COMMITMENTS
The Group had no commitments under non-cancellable operating leases at the period end.
11. CONTINGENT LIABILITIES
Indemnities and warranties
The Group continues to have contingent liabilities in connection with indemnities and warranties given to the purchasers of its former
businesses. As no claims have been made under these indemnities and warranties, the Directors are unable to quantify these potential
liabilities.
Property lease liabilities
The Group continues to have contingent liabilities in connection with the property leases of its former businesses, for which it is
exposed to lease obligations in the event of an assignee's default. The remaining lengths of these leases range from 2 to 7 years. Whilst
all assignees continue to meet their obligations under these leases, the current annual rent obligations (which may be subject to periodic
reviews), before allowing for any mitigating activities, for all such leases are approximately �352,000 per annum.
No provision has been made in respect of these contingent matters.
Loan facility
The Company secured a two year loan facility from Chapman International Investment Ltd, the Company's largest shareholder on 4th June
2008. The Company has granted Chapman a charge over 5 million units in the Fund, as security for the loan. The loan is repayable at the end
of the 2 year period.
The facility will only be drawn down to the extent that the Company's remaining cash resources for working capital are insufficient.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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