RNS Number:8522E
Warner Estate Holdings PLC
20 June 2006
PART 2
NOTES TO THE FINANCIAL STATEMENTS
1. TRANSITION TO IFRS
In previous years, Warner Estate Holdings PLC ('Warner Estate' or the 'Group')
has prepared its financial statements under UK Generally Accepted Accounting
Principles ('UK GAAP'). Under European legislation, all companies listed in the
European Union ('EU') are required to prepare consolidated financial statements
under International Financial Reporting Standards as adopted by the EU ('IFRS')
for financial periods beginning on or after 1 January 2005. As a result the
Group is required to prepare its consolidated financial statements in accordance
with IFRS. These are the Group's first full financial statements under IFRS.
This report is prepared in accordance with the transitional provisions set out
in IFRS 1 - 'First-time Adoption of International Financial Reporting Standards'
in order to provide a starting point for reporting under IFRS. The date of
transition to IFRS is 1 April 2004 and all information in these financial
statements has been restated to reflect the Group's adoption of IFRS.
The Group has also adopted International Accounting Standards (IAS) 32
"Financial Instruments: Disclosure and Presentation" and IAS 39 "Financial
Instruments: Recognition and Measurement" from 1 April 2004.
Advantage has been taken of certain exemptions afforded by IFRS 1 "First-time
adoption of International Financial Reporting Standards" as follows:
* The accounting for business combinations prior to 1 April 2004 has not been
amended; and
* The Group has applied IFRS 2 "Share-based Payment" retrospectively only to
awards made after 23 June 2003 that had not vested at the balance sheet
date.
Details with respect to the Group's transition from UK GAAP to IFRS, including
accounting policies used, reconciliations and descriptions of the effect of the
transition on the Group's net income, equity and cash flows are provided in the
section "Reconciliations between IFRS and UK GAAP".
2. ACCOUNTING POLICIES
Basis of preparation
The Financial Statements comprise the consolidated financial statements of the
Group for the year ended 31 March 2006 and have been prepared in accordance with
International Financial Reporting Standards and IFRIC interpretations endorsed
by the European Union ("EU") and with those parts of the Companies Act 1985
applicable to companies reporting under IFRS.
The basis of accounting and format of presentation is subject to change
following any further interpretative guidance that may be issued by the
International Accounting Standards Board ("IASB") and the International
Financial Reporting Interpretation Committee ("IFRIC") from time to time.
Additionally, IFRS is being applied in the United Kingdom and in a large number
of countries simultaneously for the first time. Furthermore, due to a number of
new and revised standards included within the body of standards that comprise
IFRS, there is not yet a significant body of established practice on which to
draw in forming options regarding interpretation and application. Accordingly,
practice is continuing to evolve.
The consolidated financial statements have been prepared under the historical
cost convention, as modified by the revaluation of certain assets and
liabilities, which are carried at fair value, and in accordance with those IFRS
standards and IFRIC interpretations issued and effective or issued and early
adopted as at the time of preparing these accounts.
The parent company's financial statements have also been prepared in accordance
with IFRS, as applied in accordance with the provisions of the Companies Act
1985. The Directors' have taken advantage of the exemption offered by Section
230 of the Companies Act not to present a separate income statement for the
parent company.
The preparation of financial statements in conformity with IFRS requires the use
of certain critical accounting estimates. It also requires management to
exercise judgment in the process of applying the Group's accounting policies.
Although these estimates are based on management's best knowledge of the amount,
events or actions, actual results ultimately may differ from those estimates.
Standards, interpretations and amendments to published standards that are not
yet effective
Certain new standards, amendments and interpretations to existing standards have
been published that are mandatory for the Group's accounting periods beginning
on or after 1 April 2006 or later periods but which the Group has not early
adopted, as follows:
IFRS 7, Financial Instruments: Disclosures, and a complementary amendment to IAS
1, Presentation of Financial Statements - Capital Disclosures (effective from 1
January 2007
IFRS 7 introduces new disclosures to improve the information about financial
instruments. It requires the disclosure of qualitative and quantitative
information about exposure to risks arising from financial instruments,
including specified minimum disclosures about credit risk, liquidity risk and
market risk, including sensitivity analysis to market risk. It replaces IAS 30,
Disclosures in the Financial Statements of Banks and Similar Financial
Institutions, and disclosure requirements in IAS 32, Financial Instruments:
Disclosure and Presentation. It is applicable to all entities that report under
IFRS. The amendment to IAS 1 introduces disclosures about the level of an
entity's capital and how it manages capital. The Group assessed the impact of
IFRS 7 and the amendment to IAS 1 and concluded that the main additional
disclosures will be the sensitivity analysis to market risk and the capital
disclosures required by the amendment of IAS 1. The Group will apply IFRS 7 and
the amendment to IAS 1 from annual periods beginning 1 April 2006.
IFRIC 8, Scope of IFRS 2 (effective from 1 May 2006)
IFRIC 8 is not relevant as the only share-based payments issued by the Group are
in relation to employee services which are already accounted for in accordance
with IFRS 2.
Consolidation
(a) Subsidiary undertakings
Subsidiaries are all entities over which the Group has the power to govern the
financial and operating policies generally accompanying a shareholding of more
than one half of the voting rights.
The existence and effect of potential voting rights that are currently
exercisable or convertible are considered when assessing whether the Group
controls another entity. Subsidiaries are fully consolidated from the date on
which control is transferred to the Group. They are de-consolidated from the
date control ceases. All inter-company transactions, balances and unrealised
gains on transactions between Group companies are eliminated upon consolidation.
(b) Interests in joint ventures
Interests in jointly controlled entities are accounted for using the equity
method. Unrealised gains and losses on transactions between the Group and its
joint ventures are eliminated to the extent of the Group's interest in the joint
ventures. The Group's share of profit of joint ventures represents the Group's
share of the joint venture's profit after tax.
(c) Associates
Investments in associates are accounted for using the equity method. Associates
are all entities over which the Group is in the position to exercise significant
influence but not control, generally accompanying a shareholding of between 20%
and 50% of the voting rights. The Group's share of profit of associates
represents the Group's share of the associates profit before tax. The above
principles regarding joint ventures are also applicable to associated
undertakings.
Segment reporting
The Group's primary reporting format is business activity, being property
investment and asset management.
A business segment is a group of assets and operations engaged in providing
products or services that are subject to risks and returns that are different
from those of other business segments.
Plant and equipment
Plant and equipment is initially measured at cost. After initial recognition,
the fixed assets are carried at cost less subsequent depreciation and
impairment. Cost includes expenditure that is directly attributable to the
acquisition of the items.
Subsequent costs are included in the asset's carrying amount or recognised as a
separate asset, as appropriate, only when it is probable that the future
economic benefits associated with the item will flow to the Group and the cost
of the item can be measured reliably. All other repairs and maintenance are
charged to the income statement during the financial period in which they are
incurred.
Plant and equipment is depreciated by equal annual instalments over their
estimated useful lives of between three and ten years and are carried at
historic cost less accumulated depreciation.
Where the carrying amount of a fixed asset is greater than its estimated
recoverable amount, it is written down immediately to its recoverable amount.
Recoverable amount is the higher of fair value less costs to sell and value in
use and is determined for an individual asset. After initial recognition, the
item is carried at its cost less any accumulated depreciation and any
accumulated impairment losses.
Goodwill
Business combinations are accounted for by applying the purchase method. The
excess of the cost of the business combination over the acquirer's interest in
the net fair value of the identifiable assets, liabilities and contingent
liabilities, recognised in accordance with IFRS 3, Business Combinations,
constitutes goodwill, and is recognised as an asset. Goodwill on acquisition of
subsidiaries is included in "Goodwill". Goodwill on acquisition of associates
is included in "Investments in associates". After initial recognition, goodwill
is measured at cost less any accumulated impairment losses, until disposal or
termination of the previously acquired business (including planned disposal or
termination where there are indications that the value of the goodwill has been
permanently impaired), when the profit or loss on disposal or termination will
be calculated after charging the book amount of any such goodwill through the
income statement. Goodwill arising on acquisitions before 1 April 2004, the
date of transition to International Financial Reporting Standards, has been
retained at the previous UK GAAP amounts, subject to being tested for impairment
at that date.
Assets that have an indefinite useful life are not subject to amortisation and
are tested annually for impairment.
Assets that are subject to amortisation are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the
asset's carrying amount exceeds its recoverable amount. The recoverable amount
is the higher of an asset's fair value less costs to sell and value in use. For
the purposes of assessing impairment, assets are grouped at the lowest levels
for which there are separately identifiable cash flows (cash-generating units).
The assets' residual values and useful lives are reviewed, and adjusted if
appropriate, at each balance sheet date.
Investment property
(a) Initial recognition
Property that is held for long-term rental yields or for capital appreciation or
both, and that is not occupied by the Group, is classified as investment
property.
Investment property comprises freehold land, freehold buildings, land held under
operating leases and buildings held under finance leases. When the Group begins
to redevelop an existing investment property for continued future use as an
investment property, the property remains an investment property and is
accounted for as such.
When the Group begins to redevelop an existing investment property with a view
to sale, the property is transferred to trading properties and held as a current
asset. The property is re-measured to fair value as at the date of the transfer
with any gain or loss being taken to profit or loss. The re-measured amount
becomes the deemed cost at which the property is then carried in trading
properties.
Property that is being constructed or developed for future use as an investment
property, but which has not previously been classified as such, is classified as
properties under the course of development within assets under course of
development. This is recognised initially at cost but is subsequently
re-measured to fair value at each reporting date. Any gain or loss on
re-measurement is taken direct to equity unless any loss in the period exceeds
any net cumulative gain previously recognised in equity. In the latter case, the
amount by which the loss in the period exceeds the net cumulative gain
previously recognised is taken to profit or loss. On completion, the property is
transferred to investment property with any final difference on re-measurement
accounted for in accordance with the foregoing policy.
Land held under operating leases is classified and accounted for as investment
property when the rest of the definition of investment property is met. In such
cases, the operating lease is accounted for as if it were a finance lease.
Investment property is measured initially at its cost, including related
transaction costs.
(b) Fair value
After initial recognition, investment property is carried at fair value. Fair
value is based on active market prices, adjusted, if necessary, for any
difference in the nature, location or condition of the specified asset. If this
information is not available, the Group uses alternate valuation methods such as
recent prices on less active markets or discounted cash flow projections. These
valuations are performed in accordance with the guidance issued by the
International Valuation Standards Committee. These valuations are reviewed at
each financial reporting period end by external valuers. Investment property
that is being redeveloped for continuing use as investment property, or for
which the market has become less active, continues to be measured at fair value.
The fair value of investment property reflects, among other things, rental
income from current leases and assumptions about rental income from future
leases in the light of current market conditions.
The fair value also reflects, on a similar basis, any cash outflows that could
be expected in respect of the property.
Some of those outflows are recognised as a liability, including finance lease
liabilities in respect of land classified as investment property; others,
including contingent rent payments, are not recognised in the financial
statements.
(c) Subsequent expenditure
Subsequent expenditure is charged to the asset's carrying amount only when it is
probable that future economic benefit associated with the item will flow to the
Group and the cost of the item can be measured reliably. All repairs and
maintenance costs are charged to the income statement during the financial
period in which they are incurred. Gross borrowing costs associated with direct
expenditure on properties under development or undergoing major refurbishment
are capitalised. With specific developments, the amount capitalised is the
gross interest incurred on those borrowings less any investment income arising
on their temporary investment. Interest is capitalised as from the commencement
of the development work until the date of practical completion. The
capitalisation of finance costs is suspended if there are prolonged periods when
development activity is interrupted. Interest is also capitalised on the
purchase cost of a site or property acquired specifically for redevelopment in
the short term but only where activities necessary to prepare the asset for
redevelopment are in progress.
(d) Changes and transfers
Changes in fair values are recorded in the income statement for investment
properties.
If an investment property becomes owner-occupied, it is reclassified as
property, plant and equipment, and its fair value at the date of
reclassification becomes its cost for accounting purposes. Property that is
being constructed or developed for future use as investment property is
classified as properties under the course of development and stated at cost
until construction or development is complete, at which time it is reclassified
and subsequently accounted for as investment property.
Inventories
Property inventories are stated at the lower of cost and estimated net
realisable value. No interest is capitalised within inventories. Properties
that are acquired and subsequently developed for future sales are reclassified
as inventories at their deemed cost, which is the carrying amount at the date of
reclassification. They are subsequently carried at the lower of cost and net
realisable value. Net realisable value is the estimated selling price in the
ordinary course of business less cost to complete redevelopment and selling
expenses.
Cash and cash equivalents
Cash and cash equivalents comprises cash balances, deposits held at call with
banks and other short-term highly liquid investments 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. Bank
overdrafts are disclosed in current and non-current liabilities.
Employee benefits
The Group accounts for pensions under IAS 19 'Employee Benefits'. In respect of
defined benefit pension schemes, obligations are measured at discounted present
value while scheme assets are measured at their fair value.
The operating and financing costs of such plans are recognised separately in the
income statement. Service costs are spread systematically over the working lives
of the employees concerned with the charge for the period included in operating
costs in the income statement.
Financing costs are recognised in the periods in which they arise and are
included in interest expense. Actuarial gains and losses arising from either
experience differing from previous actuarial assumptions or changes to those
assumptions are recognised immediately in the statement of recognised income and
expense.
Contributions to defined contribution schemes are expensed as incurred.
Income taxes
The charge for current taxation is based on the results for the year as adjusted
for items which are non-assessable or disallowed. It is calculated using rates
that have been enacted or substantively enacted by the balance sheet date. Tax
payable upon realisation of fair value gains recognised in prior periods is
recorded as a current tax charge with a release of the associated deferred tax.
Deferred tax is provided using the balance sheet liability method in respect of
temporary differences between the carrying amount of assets and liabilities in
the financial statements and the corresponding tax bases used in computation of
taxable profit with the exception of deferred tax on revaluation surpluses where
the tax basis used is the accounts historic cost. Provision is made for
temporary differences between the carrying value of assets and liabilities in
the consolidated financial statements and the values used for tax purposes.
Temporary differences are not provided for when they arise from initial
recognition of assets and liabilities that do not affect accounting or taxable
profit.
When distributions are controlled by the Group, and it is probable the temporary
difference will not reverse in the foreseeable future, deferred tax which would
arise on the distribution of profits realised in subsidiaries, associates and
joint ventures is provided in the same period as the liability to pay the
distribution is recognised in the financial statements.
Deferred tax is determined using tax rates that have been enacted or
substantially enacted by the balance sheet date and are expected to apply when
the related deferred tax asset is realised or the deferred tax liability is
settled. It is recognised in the income statement except when it relates to
items credited or charged directly to equity, in which case the deferred tax is
also dealt with in equity.
Deferred tax assets are recognised to the extent that it is probable that future
taxable profit will be available against which the temporary differences can be
utilised.
Deferred tax assets and liabilities are offset only when they relate to taxes
levied by the same authority, with a legal right to set off and when the group
intends to settle them on a net basis.
Provisions
Provisions are recognised when the Group has a present legal or constructive
obligation as a result of past events, it is more likely than not that an
outflow of resources will be required to settle the obligation, and the amount
has been reliably estimated.
Where the Group, as lessee, is contractually required to restore a leased
property to an agreed condition, prior to release by a lessor, provision is made
for such dilapidation costs as they are identified.
(a) Onerous contracts
Provision is made in respect of costs incurred on vacant leasehold properties or
for leasehold properties sublet at a level which renders the properties
loss-making over the length of the lease, being the net cash outflow committed
to be incurred over the lives of the leases. Any increase or decrease in the
provision is taken to the income statement each financial period. Since these
provisions have only been held for a period of three months, the movement in the
provision only reflects the net amount which has been utilised. The provision
will be valued by discounting net future cash flows at the next balance sheet
date.
(b) Share-based payments
The cost of granting share options and other share based remuneration to
employees and directors is recognised through the income statement with
reference to the fair value at the date of the grant. The Group has used the
Black-Scholes option valuation model and a stochastic model to establish the
relevant costs. The resulting values are amortised through the income statement
over the vesting period of the options and other grants. The charge is reversed
if it appears probable that applicable performance criteria will not be met.
Own shares held in connection with employee share plans or other share based
payment arrangements are treated as treasury shares and deducted from equity.
No profit or loss is recognised in the income statement on their sale, re-issue
or cancellation.
Revenue recognition
Revenue is measured at the fair value of the consideration received or
receivable and is stated net of sales taxes and value added taxes. Revenue
includes 'Rental and similar income', 'Turnover from property trading
activities', 'Service charge and similar income' and 'Turnover from asset
management activities'. Revenue is recognised as follows:
(a) Rental and similar income
Rental income from operating lease income is recognised on a straight-line basis
over the lease term.
When the Group provides incentives to its customers, the cost of incentives are
recognised over the lease term, on a straight-line basis, as a reduction of
rental income.
(b) Service charge and similar income
Service and management charge income is recognised on a gross basis in the
accounting period in which the services are rendered. Where the Group is acting
as an agent, the commission rather than gross income is recorded as revenue.
(c) Income from investments
Dividend income from investments is recognised when the shareholders' rights to
receive payment have been established.
(d) Income from property trading
Profits or losses arising from the sale of trading and investment properties are
included in the income statement of the Group where an exchange of contracts has
taken place under which any outstanding conditions are entirely within the
control of the Group. Profits or losses arising from the sale of trading and
investment properties are calculated by reference to their carrying value and
are included in operating profit.
(e) Income from asset management activities
Management fees earned are calculated on an accruals basis. Asset management
income is recognised in the accounting period in which the services are
rendered.
Leases
(a) A Group company is the lessee
(i) Operating lease - leases in which substantially all risks and rewards of
ownership are retained by another party, the lessor, are classified as operating
leases. Payments, including prepayments, made under operating leases (net of any
incentives received from the lessor) are charged to the income statement on a
straight-line basis over the period of the lease.
(ii) Finance lease - leases of assets where the Group has substantially all the
risks and rewards of ownership are classified as finance leases. Finance leases
are capitalised at the lease commencement date at the lower of the fair value of
the leased property and the present value of the minimum lease payments. Each
lease payment is allocated between the liability and finance charges so as to
achieve a constant rate on the finance balance outstanding.
The corresponding rental obligations, net of finance charges, are included in
current and non-current borrowings. The interest element of the finance cost is
charged to the income statement over the lease period so as to produce a
constant periodic rate of interest on the remaining balance of the liability for
each period. The investment properties acquired under finance leases are carried
at the fair value.
(b) A Group company is the lessor
(i) Operating lease - properties leased out under operating leases are included
in investment property in the balance sheet.
(ii) Finance lease - when assets are leased out under a finance lease,
the present value of the lease payments is recognised as a receivable. The
difference between the gross receivable and the present value of the receivable
accrues as finance income. Lease income is recognised over the term of the lease
using the net investment method before tax, which reflects a constant periodic
rate of return.
Financial instruments and hedging activities
Derivatives
IAS 32 and IAS 39 have been adopted as at 1 April 2004.
The Group uses derivatives to help manage its interest rate and foreign exchange
rate risk. In accordance with its treasury policy, the Group does not hold or
issue derivatives for trading purposes.
Derivatives are recognised at fair value. The method of recognising the
resulting gain or loss depends on whether the derivative is designated as a
hedging instrument, and if so, the nature of the hedge relationship.
Hedge accounting
Where a financial instrument is designated as a hedge, the Group formally
documents the relationship between the hedging instrument and the hedged item as
well as its risk management objectives and its strategy for undertaking the
various hedging transactions. The Group also documents its assessment, both at
hedge inception and on an ongoing basis, of whether the derivatives that are
used in the hedging transactions are highly effective in offsetting the changes
in fair values or cash flows of the hedged items.
Where hedge accounting requirements were not met, changes in fair value of
derivatives are recognised through the income statement.
Investments
The Group classifies its investments in the following categories: financial
assets at fair value through profit or loss, loans and receivables,
held-to-maturity investments, and available-for-sale financial assets. The
classification depends on the purpose for which the investments were acquired.
Management determines the classification of its investments at initial
recognition and reviews this designation at each reporting date.
(a) Financial assets at fair value through profit or loss
This category has two sub-categories: financial assets held for trading, and
those designated at fair value through profit or loss at inception. A financial
asset is classified in this category if acquired principally for the purpose of
selling in the short term or if so designated by management. Derivatives are
also classified as held for trading unless they are designated as hedges. Assets
in this category are classified as current assets if they are either held for
trading or are expected to be realised within 12 months of the balance sheet
date.
(b) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They arise when
the Group provides money, goods or services directly to a debtor with no
intention of trading the receivable. They are included in current assets, except
for maturities greater than 12 months after the balance sheet date. These are
classified as non-current assets. Loans and receivables are included in trade
and other receivables in the balance sheet.
Purchases and sales of investments are recognised on trade-date - the date on
which the Group commits to purchase or sell the asset. Investments are initially
recognised at fair value plus transaction costs for all financial assets not
carried at fair value through profit or loss. Investments are derecognised when
the rights to receive cash flows from the investments have expired or have been
transferred and the Group has transferred substantially all risks and rewards of
ownership. Available-for-sale financial assets and financial assets at fair
value through profit and loss are subsequently carried at fair value.
Realised and unrealised gains and losses arising from changes in the fair value
of the 'financial assets at fair value through profit or loss' category are
included in the income statement in the period in which they arise.
The fair values of quoted investments are based on current bid prices. If the
market for a financial asset is not active (and for unlisted securities), the
Group establishes fair value by using valuation techniques. These include the
use of recent arm's length transactions, reference to other instruments that are
substantially the same, discounted cash flow analysis, and option pricing models
refined to reflect the issuer's specific circumstances.
The Group assesses at each balance sheet date whether there is objective
evidence that a financial asset or a group of financial assets is impaired.
Trade and other receivables
Trade receivables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method, less provision
for impairment. A provision for impairment in trade receivables is established
when there is objective evidence that the Group will not be able to collect all
amounts due according to the original terms of receivables. The amount of the
provision is the difference between the asset's carrying amount and the present
value of estimated future cash flows, discounted at the effective interest rate.
The changes to the provision are recognised in the income statement.
Borrowings
Borrowings are initially recognised at the fair value of consideration received,
net of transaction costs incurred. Borrowings are subsequently stated at
amortised cost; any difference between the proceeds (net of transaction costs)
and the redemption value is recognised in the income statement over the period
of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the Group has an
unconditional right to defer settlement of the liability for at least 12 months
after the balance sheet date.
Share capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options
are shown in equity as a deduction, net of tax, from the proceeds. Incremental
costs directly attributable to the issue of new shares or options, or for the
acquisition of a business, are included in the cost of acquisition as part of
the purchase consideration.
Where any Group company purchases the Company's equity share capital (treasury
shares), the consideration paid, including any directly attributable incremental
costs (net of income taxes) is deducted from equity attributable to the
Company's equity holders until the shares are cancelled, reissued or disposed
of. Where such shares are subsequently sold or reissued, any consideration
received, net of any directly attributable incremental transaction costs and the
related income tax effects, is included in equity attributable to the Company's
equity holders.
Critical accounting policies and judgements
The preparation of the Consolidated Financial Statements requires management to
make estimates and assumptions that affect the reported amounts of revenues,
expenses, assets and liabilities, and disclosure of contingencies at the date of
the Consolidated Financial Statements. If in the future such estimates and
assumptions, which are based on management's best judgement at the date of the
Consolidated Financial Statements, deviate from the actual circumstances, the
original estimates and assumptions will be modified, as appropriate, in the
period in which the circumstances change. The following policies are considered
to be of greater complexity and / or particularly subject to the exercise of
judgement.
(a) Goodwill
As required by IAS 36, Impairment of Assets, the Group regularly monitors the
carrying value of its assets, including goodwill. Impairment reviews compare
the carrying values to the present value of future cash flows that are derived
from the relevant asset or cash-generating unit. These reviews therefore depend
on management estimates and judgements, in particular in relation to the
forecasting of future cash flows and the discount rate applied to the cash
flows.
(b) Post-employment benefits
Application of IAS 19, Employee Benefits, requires the exercise of judgement in
relation to setting the assumptions used by the actuaries in assessing the
financial position of each scheme. The Group determines the assumptions to be
adopted in discussion with its actuaries, and believe these assumptions to be in
line with IAS generally accepted practice.
(c) Provisions
The Group carries balance sheet provisions in respect of onerous contracts and
dilapidations amongst other exposures. Judgement is involved in assessing the
exposure in these area and hence in setting the level of the required
provisions.
(d) Estimate of fair value of investment properties
The best evidence of fair value is current prices in an active market for
similar lease and other contracts. In the absence of such information, the
Group determines the amount within a range of reasonable fair value estimates.
In making its judgement, the Group considers information from a variety of
sources including:
i) current prices in an active market for properties of a different
nature, condition or location (or subject to different lease or other
contracts), adjusted to reflect those differences;
ii) recent prices of similar properties in less active markets, with
adjustments to reflect any changes in economic conditions since the date of the
transactions that occurred at those prices; and
iii) discounted cash flow projections based on reliable estimates of future
cash flows, derived from the terms of any existing lease and other contracts,
and (where possible) from external evidence such as current market rents for
similar properties in the same location and condition, and using discount rates
that reflect current market assessments of the uncertainty in the amount and
timing of the cash flows.
(e) Principal assumptions for management's estimation of fair value of
investment properties
If information on current or recent prices of assumptions underlying the
discounted cash flow approach investment properties are not available, the fair
values of investment properties are determined using discounted cash flow
valuation techniques. The Group uses assumptions that are mainly based on
market conditions existing at each balance sheet date.
The principal assumptions underlying management's estimation of fair value are
those related to: the receipt of contractual rentals; expected future market
rentals; void periods; maintenance requirements; and appropriate discount rates.
These valuations are regularly compared to actual market yield data, and
actual transactions by the Group and those reported by the market.
The expected future market rentals are determined on the basis of current market
rentals for similar properties in the same location and condition.
3. SEGMENTAL REPORTING
Business Segments
For management purposes the Group is organised into two operating divisions,
Property investment and Asset management:
Property Asset Unallocated and Group Total
Investment Management other activities
#'000 #'000 #'000 #'000
Year ended 31 March 2006
Rental and similar income 24,003 - - 24,003
Turnover from property trading activities 31,167 - - 31,167
Cost of sales of property trading activities (24,584) - - (24,584)
Service charge and similar income 2,972 - - 2,972
Service charge expense and similar charges (3,591) - - (3,591)
Net rental and trading income 29,967 - - 29,967
Turnover from asset management activities
Management fee income - 6,065 - 6,065
Performance fee income - 3,271 - 3,271
- 9,336 - 9,336
Asset management expenses - (3,512) - (3,512)
Administrative expenses (2,390) - - (2,390)
Property management expenses (7,517) - - (7,517)
Operating profit before net gain on investments 20,060 5,824 - 25,884
Net gain from fair value adjustments on investment 27,101 - - 27,101
properties
Net gain from fair value adjustments on investments - 14,968 1,082 16,050
Profit on sale of investment properties 3,102 - - 3,102
Profit on sale of investments - 98 2,926 3,024
Operating profit 50,263 20,890 4,008 75,161
Total assets 361,886 223,477 133,160 718,523
Total liabilities (26,799) (24,577) (27,709) (79,085)
Borrowing, including finance leases (1,514) - (284,004) (285,518)
Net assets 333,573 198,900 (178,553) 353,920
Other segment items:
Capital expenditure 9,255 - - 9,255
Depreciation - - 139 139
Property Asset Unallocated Group Total
Investment Management and other
activities
#'000 #'000 #'000 #'000
Year ended 31 March 2005
Rental and similar income 26,521 - - 26,521
Turnover from property trading activities 12,446 - - 12,446
Costs of sales of property trading activities (10,788) - - (10,788)
Service charge and similar income 2,170 - - 2,170
Service charge expense and similar charges (2,773) - - (2,773)
Net rental and trading income 27,576 - - 27,576
Turnover from asset management activities
Management fee income - 2,265 - 2,265
Performance fee income - 1,650 - 1,650
- 3,915 - 3,915
Asset management expenses - (1,437) - (1,437)
Administrative expenses (1,755) - - (1,755)
Property management expenses (4,453) - - (4,453)
Operating profit before net gain on investments 21,368 2,478 - 23,846
Net gain from fair value adjustments on investment 21,871 - - 21,871
properties
Net gain from fair value adjustments on investments - - 2,397 2,397
Profit on sale of investment properties 2,260 - - 2,260
Profit on sale of investments - - - -
Operating profit 45,499 2,478 2,397 50,374
Total assets 337,999 106,873 134,037 578,909
Total liabilities (22,697) (5,378) (14,572) (42,647)
Borrowings, including finance leases (1,515) - (262,392) (263,907)
Net assets 313,787 101,495 (142,927) 272,355
Other segment items:
Capital expenditure 74 - - 74
Depreciation - - 109 109
All turnover and operating profit has arisen from continuing operations.
(a) Rents receivable includes a charge of #25,000 (2005 : #803,000 income)
which represents the net effect of rent allocated to rent free periods and
the write off of previous adjustments due to the sale of investment
properties.
(b) Service charge and similar income includes monies received from tenants in
respect of service charge costs the tenants bear on their properties.
Service charge costs not recovered ("void costs") are included within
service charge expense and similar charges of #348,000 (2005 : #603,000
restated).
2006 2005
#'000 #'000
Operating profit is stated after charging:
Depreciation 139 109
Loss on disposal of plant and equipment 1 1
Operating lease charges - properties 478 454
Employee benefits 576 429
During the year the following amounts were charged to the profit and loss
account in respect of auditors' remuneration:
2006 2005
#'000 #'000
Audit services (Company: #232,000 (2005: #139,000)) 232 150
Audit related services(1) 181 24
Non-audit services: Taxation 131 171
544 345
(1) These include the cost of the interim audit, audit certifications for debt
covenant purposes and IFRS transition work.
In addition #138,000 was charged by the Auditors for audit services to the joint
ventures (2005: #149,000) and #135,000 for tax work (2005: #194,000). In 2006
#150,000 was charged by the Auditors for tax and accounting work to the joint
ventures in connection with the setting up of the new unit trusts.
During the year, #115,000 was charged by the Auditors for work related to the
acquisition of Ashtenne Holdings PLC.
4. EMPLOYEES
2006 2005
#'000 #'000
Staff costs
Wages and salaries 7,010 4,391
Social security costs 781 498
Other pension costs 397 342
8,188 5,231
2006 2005
Number Number
The average number of persons employed during the year was:
Management and administrative 73 45
Repairs and service 30 21
103 66
The parent company had no employees during the year (2005: Nil).
RETIREMENT BENEFIT OBLIGATIONS
The Group operates and contributes to pension schemes for certain Directors and
employees and makes some discretionary allowances. The costs charged to the
income statement for the year to 31 March 2006 in respect of these amounted to
#397,000 (2005: #342,000). Pension premiums paid in advance were #70,000
(2005: #70,000).
The Group operated a defined benefit scheme in the UK, The Warner Estate Group
Retirement Benefits Scheme. A full valuation was carried out at 1 April 2005.
The values at 31 March 2006 were updates of the 1 April 2005 valuation carried
out by a qualified independent actuary.
It has been agreed with the Trustees that the Group contributes 26.8% of
pensionable salary plus #68,000 per annum.
The discount rate used to calculate the funding target is equal to the yield on
fixed interest gilts of appropriate term at the valuation date plus 2% per annum
for active and deferred members over the period to retirement. The inflation
assumption is derived from the difference between the yield on fixed interest
gilts and the yield on indexed-linked gilts at the valuation date.
The following assumptions were made by the Company:
2006 2005
% per annum % per annum
Discount rate 4.9 5.5
Rate of increase in pensionable salaries 3.5 3.4
Rate of increases to pensions in payment 2.9 2.8
Price inflation 3.0 2.8
Mortality assumptions are based on standard actuarial tables.
The market value of the assets of the Scheme together with the expected rates of
return at the beginning and end of the year were as follows:
Long-term Value at 31 Long-term Value at
rate of March 2006 rate of
return return 31 March
expected at expected at
31 March 2006 31 March 2005 2005
% #'000 % #'000
Equities 7.5 1,338 7.8 906
Fixed interest 4.9 4,357 5.5 4,032
Cash 4.8 125 5.0 123
Total market value of assets 5,820 5,061
Reconciliation of funded status to balance sheet
Value at Value at
31 March 2006 31 March 2006
#'000 #'000
Fair value of Scheme assets 5,820 5,061
Present value of non-insured defined benefit of (2,025) (1,449)
obligations
Liability in respect of insured pensioners (4,276) (3,948)
Liability recognised on the balance sheet (481) (336)
Related deferred tax asset 144 101
Net pension liability (337) (235)
Changes to the present value of the defined benefit obligation
2006 2005
#'000 #'000
Opening defined benefit obligation 5,397 5,373
Current service cost 44 42
Interest cost 290 288
Contributions by plan participants 12 12
Actuarial losses on Scheme liabilities* 890 4
Net benefits paid out (332) (322)
Closing defined benefit obligation 6,301 5,397
*Includes changes to the actuarial assumptions
Changes to the fair value of Scheme assets
2006 2005
#'000 #'000
Opening fair value of Scheme assets 5,061 4,926
Expected return on assets 294 279
Actuarial gains on Scheme assets 671 54
Contributions by the employer 114 112
Contributions by plan participants 12 12
Net benefits paid out (332) (322)
Closing fair value of Scheme assets 5,820 5,061
Actual return on Scheme assets
2006 2005
#'000 #'000
Expected return on Scheme assets 294 279
Actuarial gains on Scheme assets 671 54
Actual return on Scheme assets 965 333
Analysis of income statement charge
2006 2005
#'000 #'000
Current service cost 44 42
Interest cost 290 288
Expected return on plan assets (294) (279)
Expense recognised in income statement 40 51
Analysis of amounts recognised in statement of recognised income and expense
2006 2005
#'000 #'000
Total actuarial (losses) / gains (219) 50
Related deferred tax 43 (33)
Total (loss) / gain in statement of recognised income and expense (176) 17
Cumulative amount of (losses) / gains recognised in statement of recognised income (159) 17
and expense
History of asset values, defined benefit obligation, surplus / (deficit) in
Scheme and experience gains and losses
2006 2005
#'000 #'000
Fair value of Scheme assets 5,820 5,061
Defined benefit obligation (6,301) (5,397)
Deficit in Scheme (481) (336)
Experience gains on Scheme assets 671 54
Experience losses on Scheme liabilities (890) (4)
The estimated amounts of contributions expected to be paid to the Scheme during
2007 are #163,000.
5. DIRECTORS' REMUNERATION
A summary of Directors' remuneration, including disclosures required by the
Companies Act 1985 and those specified by the Financial Services Authority, is
contained in the Report and Accounts which will be published in due course.
6. PROFIT ON SALE OF INVESTMENT PROPERTIES
2006 2005
#'000 #'000
Surplus over book value and fair value gains:
Investment properties 3,102 1,711
Arising on disposal of properties into joint ventures - 549
3,102 2,260
7. PROFIT ON SALE OF INVESTMENTS
2006 2005
#'000 #'000
Surplus over book value:
Listed investments 2,975 -
Unlisted investments 98 -
Other (49) -
3,024 -
The profit on sale of listed investments of #2.975million has arisen on the
disposal of the Group's investment in East Surrey Holdings plc for a
consideration of #14million in November 2005.
8. FINANCE INCOME
2006 2005
#'000 #'000
Income from investments
Dividends from listed investments 422 533
Distributions from funds (see note 18) 3,363 -
3,785 533
Interest receivable and similar income:
From joint ventures 3,540 5,842
Other interest 977 323
Other finance income
Expected return on pension scheme assets 294 -
Interest on pension scheme liabilities (290) -
4 -
8,306 6,698
9. FINANCE EXPENSE
2006 2005
#'000 #'000
Interest payable on bank loans and overdrafts, mortgages 13,575 14,239
and other loans:
Charges in respect of cost of raising finance 1,732 458
15,307 14,697
Less: Interest capitalised (991) -
14,316 14,697
Interest payable under finance leases 129 242
14,445 14,939
Other finance cost
Expected return on pension scheme assets - (279)
Interest on pension scheme liabilities - 288
- 9
14,445 14,948
Included within interest payable is #222,000 (2005: #222,000) in respect of
amortisation of the fair value adjustment to the debt acquired from the former
Winglaw Group Limited on 1 March 2000, and #46,000 relating to debt
reorganisation costs (2005: #1,164,000).
Interest is capitalised at an average interest rate of 6.48% which is equal to
the average cost of borrowing on the development work at Folkestone.
10. TAXATION
2006 2005
#'000 #'000
Taxation on profit on ordinary activities
UK corporation tax:
Current at 30 % (2005: 30%) 13,755 3,982
(Over) / under provision in respect of prior (913) 116
year's tax charge
12,842 4,098
Deferred taxation 3,659 6,109
16,501 10,207
Reconciliation of taxation charge 2006 2005
Profit on ordinary activities before taxation 90,956 55,163
Tax @ 30% 27,287 16,548
Share of joint ventures' post tax profits (6,387) (3,817)
Share of associates post tax profits (215) -
Net tax on assets sold during the year (421) (653)
Dividends received not taxable (127) (185)
Net capital allowances on asset disposals (4,290) (520)
Disallowable expenses 289 117
Other differences (39) 216
Share Scheme timing difference 669 -
Net tax on fair value gains of assets 648 (1,615)
Adjustment in respect of prior years (913) 116
16,501 10,207
11. PROFIT OF WARNER ESTATE HOLDINGS PLC
The Company has taken advantage of the exemption provided by Section 230 of the
Companies Act 1985 from presenting its own profit and loss account. Profit
attributable to members includes #8,438,000 (2005: #7,696,000) which has been
dealt with in the accounts of the Company.
12. DIVIDENDS
Group and Company 2006 2005
#'000 #'000
On Ordinary 5p shares
Final 9.5p at 31 March 2005 paid 5 September 2005 (Final at 31 5,065 4,418
March 2004: 8.75p)
Interim 9.5p at 30 September 2005 paid 21 February 2006 (Interim 5,069 4,423
at 30 September 2004: 8.75p)
10,134 8,841
A final dividend of 10.0p per share amounting to a total of #5,336,000 is
proposed by the Board. The dividend proposed is not accounted for until it has
been approved at the Annual General Meeting. The amount will be accounted for as
an appropriation of revenue reserves in the year ending 31 March 2007.
13. EARNINGS PER SHARE
Earnings per share of 140.17p (2005: 89.2p) are calculated on the profit for
the year of #74,432,000 (2005: #44,954,000) and the weighted average of
53,100,390 (2005: 50,399,047) shares in issue throughout the year.
Diluted earnings per share of 138.79p (2005: 88.59p) are calculated on the
profit for the year as above divided by the weighted average number of shares in
issue, being 53,628,509 (2005 : 50,707,241) after the dilutive impact of share
options granted.
A reconciliation of the weighted average number of shares used to calculate
earnings per share and to that used to calculate diluted earnings per share is
shown below:
2006 2005
Earnings per share: weighted average number of shares 53,100,390 50,399,047
Weighted average ordinary shares to be issued under employee 528,119 308,194
incentive arrangements
Diluted earnings per share: weighted average number of shares 53,628,509 50,707,241
14. GOODWILL
#'000
Group
Cost
At 31 March 2005 -
Additions 11,205
At 31 March 2006 11,205
Impairments -
At 31 March 2006 -
Net book value at 31 March 2006 11,205
The goodwill was as a result of the acquisition of the remaining 50% of
Industrial Funds Limited as shown in Note 37. Goodwill is not amortised but is
subject to an annual impairment test. The goodwill of #11,205,000 is allocated
to the cash generating unit ("CGU") defined as the fund management business
owned by Industrial Funds Limited. The recoverable amount of the CGU has been
calculated based on the value-in-use calculations. These calculations use cash
flow projections based on financial projections approved by management covering
a five year period.
15. INVESTMENT PROPERTIES AND PROPERTIES UNDER THE COURSE OF DEVELOPMENT
Freehold Leasehold Total Properties
with over Investment Under the
50 years Properties Course of
unexpired Development
#'000 #'000 #'000 #'000
Group
At 31 March 2005 276,169 51,568 327,737 -
Acquired during the year from business combinations 21,804 - 21,804 -
Additions 48,323 - 48,323 3,200
Capital Expenditure 30 164 194 9,061
Disposals (89,941) (2,020) (91,961) -
Net gain from fair value adjustments on investment 23,148 3,953 27,101 -
property
At 31 March 2006 279,533 53,665 333,198 12,261
The properties under the course of development relate to the Group's investment
in a shopping centre development at Folkestone.
Properties purchased within twelve months of the balance sheet date are included
at Directors' valuation. The remainder of the Group's investment portfolio was
valued externally principally by Cushman & Wakefield Healey & Baker on an open
market basis in accordance with the recommended guidelines of the Royal
Institution of Chartered Surveyors as at 31 March 2006.
Investment properties were valued as follows:
#'000
DTZ Debenham Tie Leung 7,675
Cushman & Wakefield Healey & Baker 275,561
King Sturge 533
Directors' valuation 48,323
332,092
A reconciliation of investment property valuations to the balance sheet carrying
value of property is shown below:
2006 2005
#'000 #'000
Investment property at market value as determined by external valuers and 332,092 326,593
Directors' valuation
Add minimum payment under head leases separately included as a creditor in the 1,515 1,515
balance sheet
Less accrued lease incentives separately accrued as a debtor in the balance sheet (409) (371)
Balance sheet carrying value of investment property 333,198 327,737
Included within investment properties is interest capitalised of #991,000 at 31
March 2006 (2005 : #Nil).
All repairs and maintenance costs are charged to the income statement during the
financial period in which they are incurred. Therefore, no costs in respect of
repairs and maintenance are included within the above figures (2005: #Nil)
On an historical cost basis the investment properties which have been included
above at valuation would have been shown at cost as #288,435,000 (2005:
#288,094,000).
16. PLANT AND EQUIPMENT
#'000
Group
Cost
At 31 March 2005 996
Acquired during the year from business combinations 104
Additions 154
Disposals (1)
At 31 March 2006 1,253
Depreciation
At 31 March 2005 649
Charge for year 139
At 31 March 2006 788
Net book value at 31 March 2006 465
Net book value at 31 March 2005 347
Plant and equipment include plant, machinery, fixtures, fittings, motor vehicles
and equipment.
17. INVESTMENTS IN JOINT VENTURES
Group #'000
Share of joint ventures
At 31 March 2005 102,517
Share of post-tax profits for the year 21,291
Net equity movements 15,415
Net loan movements (35,851)
At 31 March 2006 103,372
2006 2005
#'000 #'000
Unlisted shares at cost less amounts written off 27,632 11,040
Group's share of post acquisition retained profits and reserves 37,929 17,815
65,561 28,855
Amounts owed by joint ventures 37,811 73,662
103,372 102,517
Included in share of joint ventures' gross assets and liabilities
are:
Agora Skipper Radial Bareway Industrial Agora Max Others Total
Shopping Offices Distribution Industrial Funds Limited
Centres Limited Limited Properties Limited (f) (g)
Limited
(a) (b) (c) (d) (e)
#'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000
Year to 31 March 2006
Group share of results
Revenue 14,178 2,086 5,372 686 3,962 2,863 1,261 30,408
Operating profit before net
gains on investments 8,153 996 4,896 564 284 1,582 (361) 16,114
Net gain from fair value
adjustments on investment
properties 13,936 - 7,856 - - 7,123 - 28,915
Net gain from fair value
adjustments on investments - - - - 1,063 - - 1,063
Profit / (loss) on sale of
investment properties 4,023 (810) 892 664 (80) 11 - 4,700
Profit on sale of fixed asset - - - - 77 - - 77
investments
Operating profit 26,112 186 13,644 1,228 1,344 8,716 (361) 50,869
Net finance expense (10,110) (1,486) (4,731) (584) (832) (1,796) 18 (19,521)
Change in fair value of
derivative financial
instruments (1,454) (305) (308) - - 51 - (2,016)
Share of associate's post tax - - - - (200) - - (200)
loss
Profit / (loss) before income 14,548 (1,605) 8,605 644 312 6,971 (343) 29,132
tax
Taxation - current (1,067) (375) (321) (320) (421) (262) (6) (2,772)
Taxation - deferred (1,735) 839 (2,429) 267 - (2,180) - (5,238)
Profit / (loss) after income 11,746 (1,141) 5,855 591 (109) 4,529 (349) 21,122
tax
Minority interests (4) - - - 185 (12) - 169
Profit / (loss) for the period 11,742 (1,141) 5,855 591 76 4,517 (349) 21,291
Amounts receivable by Group
Asset management fees 1,082 150 596 68 57 208 840 3,001
Performance fees 1,947 - - - - - - 1,947
Interest receivable 674 537 516 370 1,443 - - 3,540
Group share of
Non-current assets
Investment properties 122,561 - 81,802 - - 171,179 - 375,542
Investments in unlisted shares - - - - - - 25 25
Finance lease assets - - 4,085 - - - - 4,085
Deferred income tax assets - - 87 - - - - 87
Derivative financial assets 1,147 - - - - 51 - 1,198
Other non-current assets 272 - - - - - - 272
123,980 - 85,974 - - 171,230 25 381,209
Current assets
Finance lease assets - - 250 - - - - 250
Other current assets 25,812 - 4,245 2,000 - 9,449 4,063 45,569
25,812 - 4,495 2,000 - 9,449 4,063 45,819
Total assets 149,792 - 90,469 2,000 - 180,679 4,088 427,028
Non-current liabilities
Deferred income tax (8,087) - (3,518) - - (2,180) - (13,785)
liabilities
Borrowings, including finance (86,181) - (73,731) - - (131,024) - (290,936)
leases
Derivative financial - - (289) - - - - (289)
liabilities
(94,268) - (77,538) - - (133,204) - (305,010)
Current liabilities
Deferred income tax - - - - - - - -
liabilities
Borrowings, including finance (4,704) - - (108) - (7) - (4,819)
leases
Other current liabilities (15,412) - (4,543) (512) - (27,049) (4,122) (51,638)
(20,116) - (4,543) (620) - (27,056) (4,122) (56,457)
Total liabilities (114,384) - (82,081) (620) - (160,260) (4,122) (361,467)
Share of net assets / 35,408 - 8,388 1,380 - 20,419 (34) 65,561
(liabilities)
Effective Group share 50% 50% 50% 50% 50% 50% 50%
Potential recourse to the Nil Nil Nil Nil Nil Nil Nil
Group
Agora Skipper Radial Bareway Others Total
Shopping Offices Distribution Industrial
Centres Limited Limited Properties
(a) (b) (c) Limited
(d)
#'000 #'000 #'000 #'000 #'000 #'000
Year to 31 March 2005
Group share of results
Turnover 12,593 5,743 4,374 818 - 23,528
Operating profit before net gains on 9,510 4,599 3,932 726 - 18,767
investments
Net gain from fair value adjustments 8,295 1,673 2,679 883 - 13,530
on investment properties
Profit on sale of investment 5,152 263 - - - 5,415
properties
Operating profit 22,957 6,535 6,611 1,609 - 37,712
Net finance expense (9,724) (4,990) (4,724) (676) - (20,114)
Change in fair value of derivative (764) (658) 19 - - (1,403)
financial instruments
Profit before income tax 12,469 887 1,906 933 - 16,195
Taxation - current (544) 175 (36) (24) - (429)
Taxation - deferred (2,546) 741 (970) (267) - (3,042)
Profit for the year 9,379 1,803 900 642 - 12,724
Amounts receivable by Group
Asset management fees 1,116 551 520 78 - 2,265
Performance fees 1,650 - - - - 1,650
Interest receivable 1,031 2,875 1,503 433 - 5,842
Group share of
Non-current assets
Investment properties 190,896 87,410 76,931 10,801 - 366,038
Finance lease assets - - 5,384 - - 5,384
Deferred income tax assets - - 11 - - 11
Derivative financial assets 2,601 305 54 - - 2,960
Other non-current assets 290 - - 11 - 301
193,787 87,715 82,380 10,812 - 374,694
Current assets
Finance lease assets - - 289 - - 289
Other current assets 5,461 1,965 2,563 693 - 10,682
5,461 1,965 2,852 693 - 10,971
Total assets 199,248 89,680 85,232 11,505 - 385,665
Non-current liabilities
Deferred income tax liabilities (6,351) (839) (1,013) (267) - (8,470)
Borrowing including finance leases (126,228) (83,054) (78,824) - - (288,106)
Derivative financial liabilities - - (35) - - (35)
(132,579) (83,893) (79,872) (267) - (296,611)
Current liabilities
Borrowings including finance leases (35,490) - - (9,823) - (45,313)
Other current liabilities (8,008) (3,420) (2,827) (631) - (14,886)
(43,498) (3,420) (2,827) (10,454) - (60,199)
Total liabilities (176,077) (87,313) (82,699) (10,721) - (356,810)
Share of net assets 23,171 2,367 2,533 784 - 28,855
Effective Group share 50% 50% 50% 50% 50%
Potential recourse to the Group Nil Nil Nil 7,150 Nil
(a) Agora Shopping Centres was set up on 5 March 2003 and subsequently
acquired the Pyramids, Birkenhead on 25 June 2003 and The Grange, Birkenhead on
30 September 2004. On 7 March 2006, The Pyramids, Birkenhead and The Grange,
Birkenhead were disposed of into the Agora Max joint venture group.
(b) Skipper Offices Limited was set up on 23 July 2003. In June 2005, the
properties were disposed of into the Apia Regional Offices Fund and the Group
subsequently acquired the remaining 50% interest of Skipper Offices Limited.
(c) Fairway Industrial Limited was set up on 29 August 2003 and changed its
name to Radial Distribution Limited on 14 October 2004.
(d) Bareway Industrial Properties Limited was set up on 29 August 2003. In
November 2005, the properties were disposed of into the Ashtenne Industrial
Fund.
(e) Industrial Funds Limited was set up in March 2005 and completed the
acquisition of Ashtenne Holdings PLC on 13 July 2005. On 1 December 2005, the
Group acquired the remaining 50% interest.
(f) Agora Max Limited was set up on 16 September 2005 and subsequently
acquired The Pallasades, Birmingham on 25 October 2005. The Pyramids and The
Grange, both in Birkenhead, were acquired from Agora Shopping Centres on 7 March
2006.
(g) Net assets relate to #25k investment in the general partner of Apia
Regional Office Fund and a net liability of #59k which is the investment in
smaller joint ventures acquired through Ashtenne.
Joint venture investment properties are valued by DTZ Debenham Tie Leung.
Amounts owed by joint ventures comprise:
2006 2005
Group #'000 #'000
Agora Shopping Centres Limited 25,687 25,687
Skipper Offices Limited - 29,916
Radial Distribution Limited 12,016 12,675
Bareway Industrial Properties Limited 108 5,384
37,811 73,662
During the year the transactions on the loan accounts between the Group and the
joint ventures were as follows:
Repaid Loaned Total
#'000 #'000 #'000
Skipper Offices Limited (29,916) - (29,916)
Radial Distribution Limited (659) - (659)
Bareway Industrial Properties Limited (6,984) 1,708 (5,276)
(37,559) 1,708 (35,851)
18. INVESTMENTS IN FUNDS
Group #'000
As at 1 April 2005 -
Acquired during the year from business combinations 23,105
Additions 66,910
Disposals (902)
Net gain from fair value adjustments 14,968
At 31 March 2006 104,081
Fund information:
AIF Apia Others Total
(a) (b) (c)
#'000 #'000 #'000 #'000
Year to 31 March 2006
Distributions receivable 1,468 1,886 9 3,363
Net assets at 31 March 2006 546,780 223,774 -
Percentage share at 31 March 2006 7.09% 28.77% -
Group share of net assets 38,752 64,374 955 104,081
(a) The Group invested #12,000,000 in the Ashtenne Industrial Fund in
August 2005 which is included in additions. A #23,105,000 investment was
acquired on the purchase of the remaining 50% of Industrial Funds Limited.
(b) Apia was set-up on 7 June 2005 and the Group invested an initial
#44,088,000. A further #10,000,000 was invested in December 2005, of which
#902,000 was disposed of in March 2006. It is treated as an investment rather
than an associate as the Group does not have the power to exert significant
control as a Trustee which is independent of the Group is responsible for the
strategic decisions of the unit trust and the Group's investment holding in the
unit trust will continue to reduce over the short-term.
(c) This relates to minority interest holdings in Apia IV Unit Trust, Agora
Max Unit Trust, Agora Max Birkenhead Unit Trust and The Pallasades Birmingham
Unit Trust which were acquired during the year.
The units held in AIF valued at #13,235,000 are used as security for group
loans.
19. INVESTMENTS IN LISTED AND UNLISTED SHARES
Group Company
2006 2005 2006 2005
#'000 #'000 #'000 #'000
Subsidiary undertakings (a) - - 113,476 113,476
Listed investments (b) 5,115 15,518 - -
5,115 15,518 113,476 113,476
(a) SUBSIDIARY UNDERTAKINGS
Shares in Loans to
subsidiary subsidiary Company
undertakings undertakings total
#'000 #'000 #'000
Cost
At 31 March 2005 and 31 March 2006 61,876 51,600 113,476
(b) LISTED INVESTMENTS
Group Company
#'000 #'000
Listed on the London Stock Exchange
At 31 March 2005 15,518 -
Disposals (11,485) -
Net gain from fair value adjustments 1,082 -
At 31 March 2006 5,115 -
Group Company
#'000 #'000
Historic cost of listed investments
At 31 March 2006 6,689 -
At 31 March 2005 7,013 -
Included within listed investments above is the investment in McKay Securities
PLC of #3,898,000 which is used as security for group loans..
20. INVESTMENTS IN ASSOCIATES
Associates Group Company
Bride Hall Other Total Bride Hall
Group Limited Group Limited
#'000 #'000 #'000 #'000
Cost
At 1 April 2005 1,491 - 1,491 1,491
Acquired during the year from business - 9,185 9,185 -
combinations (a)
Share of profits 677 38 715 677
Equity movements (995) (8,714) (9,709) (995)
At 31 March 2006 1,173 509 1,682 1,173
Goodwill arising on acquisition
At 1 April 2005 3,836 - 3,836 3,836
Additions (b) 10,000 - 10,000 10,000
At 31 March 2006 13,836 - 13,836 13,836
At 31 March 2006 15,009 509 15,518 15,009
At 1 April 2005 5,327 - 5,327 5,327
(a) These are investments in associates acquired through the acquisition of
the Industrial Funds Group which consist of a 33.3% share in Ashtenne Industrial
(General Partner) Limited, and a 17% share of the t3 Partnership, which
subsequently disposed of its assets, repaid any outstanding loans and made an
equity distribution of its profits.
(b) The additional #10million payment was made during the year under the
terms of the original acquisition of the 25% stake in Bride Hall Group Limited.
The share of profits and net assets of Bride Hall Group Limited have been
obtained from audited statutory accounts for the year ended 30 September 2005,
and management accounts for the three months ended 31 December 2005.
21. TRADE AND OTHER RECEIVABLES
Group Company
2006 2005 2006 2005
#'000 #'000 #'000 #'000
Amounts falling due within one year:
Trade receivables 2,558 1,514 - -
Amounts owed by Group undertakings - - 247,724 167,742
Other debtors 12,364 2,051 167 482
Lease incentive debtors 68 67 - -
Prepayments and accrued income 8,106 5,419 1,212 1,114
23,096 9,051 249,103 169,338
Amounts falling due after more than one
year:
Lease incentive debtors 363 350 - -
Total trade and other receivables 23,459 9,401 249,103 169,338
22. BORROWINGS, INCLUDING FINANCE LEASES
Group Company
2006 2005 2006 2005
#'000 #'000 #'000 #'000
Amounts falling due after more than one
year:
Bank overdrafts 176,021 97,994 75,915 -
Bank loans 58,020 73,668 - -
Mortgages and other loans 48,070 22,461 - -
Finance lease obligations (see note 23) 1,514 1,515 - -
283,625 195,638 75,915 -
Amounts falling due within one year:
Bank overdrafts 9 8,719 - 48,238
Bank loans 1,500 2,250 - -
Mortgages and other loans 384 57,300 - -
Finance lease obligations (see note 23) - - - -
1,893 68,269 - 48.238
Total borrowings, including finance 285,518 263,907 75,915 48,238
leases
Cash and cash equivalents (98,358) (109,366) - -
Net borrowings 187,160 154,541 75,915 48,238
Bank loans and overdrafts are secured on properties and listed and unlisted
investments owned by the Group. Mortgages and other loans are all secured on
certain properties owned by the Group and by floating charges on assets of
certain subsidiary companies.
During the year the Group repaid a loan amounting to #43,730,000 acquired with
Industrial Funds Limited.
Group
2006 2005
#'000 #'000
Repayable otherwise than by instalments between two and five years
Loan repayable in 2009 at an interest rate of 1.0% over LIBOR 22,351 -
Repayable otherwise than by instalments in more than five years
Loan repayable in 2009 at an interest rate of 1.0% over LIBOR - 24,904
11.655% First Mortgage Debenture Stock 2015 (reducing to 9.75% from 10,000 10,000
2009)
9.635% First Mortgage Debenture Stock 2015 12,471 12,461
Mortgage repayable in 2019 at an interest rate of 0.9% over LIBOR - 50,000
(a)
44,822 97,365
Other mortgages and loans
Redeemable in quarterly instalments of #250,000 maturing 2006: - 21,427
Redeemable in quarterly instalments of #150,000 maturing 2009:
At an interest rate of 6.29% 20,000 20,000
At an interest rate of 6.89% 6,229 10,454
Redeemable in quarterly instalments of #125,000 maturing 2014 at an - 4,597
interest rate of 9.15% (a)
Redeemable in quarterly instalments of #74,000 maturing 2014 at an - 2,703
interest rate of 9.06% (a)
Redeemable in quarterly instalments maturing 2011 at an interest 25,983 -
rate of 1.3% over GILT rate
97,034 156,546
(a) These loans were terminated early due to refinancing and have all been
repaid.
Summary of borrowings
Bank loans and overdrafts Other borrowings
2006 2005 2006 2005
#'000 #'000 #'000 #'000
Group
Within one year or on demand 1,509 10,969 384 57,346
Between one and two years 13,362 22,000 406 -
Between two and five years 221,076 149,895 1,362 -
In five years or more - - 46,556 22,500
235,947 182,864 48,708 79,846
Future finance costs (397) (233) (254) (85)
235,550 182,631 48,454 79,761
Company
Within one year or on demand - 48,238 - -
Between two and five years 75,915 - - -
75.915 48,238 - -
Of the borrowings at 31 March 2006 #48,700,000 were non-recourse loans (2005:
#55,358,000).
23. FINANCE LEASE OBLIGATIONS
2006 2005
#'000 #'000
(a) Minimum lease payments under finance leases fall due:
Not later than one year - -
Later than one year and not later than five years - -
Later than five years 1,514 1,515
1,514 1,515
Future finance charges on finance leases - -
Present value of finance lease liabilities 1,514 1,515
(b) Present value of minimum finance lease obligations:
Not later than one year - -
Later than one year and not later than five years - -
Later than five years 1,514 1,515
1,514 1,515
Finance lease obligations are in respect of leased investment property.
Finance lease liabilities are effectively secured as the rights to the leased
asset revert to the lessor in the event of default.
24. DERIVATIVE FINANCIAL INSTRUMENTS
IAS 32 and IAS 39 have been adopted as at 1 April 2004.
TREASURY POLICY
The Group enters into derivative transactions such as interest rate swaps and
caps in order to manage the financial risks arising from the Group's activities.
The main financial risks arising from the Group's financing structure are
interest rate risk, liquidity risk and market price risk. The policies for
managing each of these risks and the principal effects of these policies on the
results for the year are set out below.
INTEREST RATE RISK
One quarter of the Group's debt is fixed and the remainder is floating. The
floating debt is either linked to LIBOR or the Base Rate. The Group's policy is
to eliminate substantially all the exposure to interest rate fluctuations in
order to provide certainty over the amount of interest payable both in the
short-term and the long-term, given the current level of borrowings.
LIQUIDITY RISK
The Group's policy is to ensure that there is always sufficient working capital
facilities available to meet the requirements of the business. At 31st March
2006, the maturity profile of Group debt showed that the fixed rate debt has a
maturity of more than five years and the floating rate debt will mature between
two to five years. The revolving credit facilities are for three years each,
the intention being to renew these facilities and extend them for a further
three years before they mature. The effect is to minimise any refinancing risk.
Capital expenditure to be incurred by the Group is funded through the revolving
credit facilities. In the Joint Ventures, capital expenditure is funded through
dedicated capital expenditure facilities. This policy ensures that adequate
funds are always available to meet any capital expenditure commitments as and
when they fall due.
MARKET PRICE RISK
The Group is exposed to market price risk through interest rate movements. As
demonstrated in the section on Hedging in the Finance Review, the Group's policy
is to substantially eliminate the risk arising from changes in interest rates by
hedging the floating rate debt to provide certainty as to how much the interest
cost will be, such that in the long term any fluctuations in interest rates will
have little or no impact on reported profits. The Group is, however, exposed to
market price risk in respect of the fair value of its fixed rate financial
instruments.
FOREIGN CURRENCY RISK
The Group had no material foreign currency exposure.
CREDIT RISK
The Group has no significant concentration of credit risk as exposure is spread
over a large number of counterparties.
The credit risk in liquid funds and derivative financial instruments is limited
due to the counterparties being banks with high credit ratings assigned by
international credit rating agencies. As at the balance sheet date the book
value of loans (see note 22) and the fair values of swaps and caps approximates
the maximum credit risk the Group is exposed to.
FINANCIAL LIABILITIES
The interest rate profile of the Group's financial liabilities at 31 March after
taking account of interest rate instruments taken out by the Group was:
2006 2005
#'000 #'000
Capped rate financial liabilities 13,669 85,574
Fixed rate financial liabilities 194,968 90,654
208,637 176,228
The above balances are net of cash balances of #79,018,000 (2005: #86,482,000)
which can be offset under the Group's borrowing arrangements.
The benchmark rate for determining interest payments for the floating rate
financial liabilities was LIBOR/base rate depending upon the facility.
The weighted average interest rate on the fixed rate debt and the average
maturity of that debt was as follows:
2006 2005
% %
Weighted average interest rate
Group 7.37 8.01
Joint Ventures 5.66 4.89
Weighted average period for which interest rate is fixed Years Years
Group 7.08 5.16
Joint Ventures 2.75 3.60
Maturity of financial liabilities 2006 2005
#'000 #'000
Group
Within one year or on demand 1,893 68,315
Between one and two years 13,768 22,000
Between two and five years 222,438 149,895
In five years or more 46,556 22,500
284,655 262,710
Company
Within one year or on demand - 48,238
Between two and five years 75,915 -
75,915 48,238
Borrowing facilities
The Group has various borrowing facilities that were not fully utilised at the
year end in which the conditions for utilising those facilities were met.
2006 2005
#'000 #'000
Expiring in one year or less:
Total facilities - 73,073
Unutilised - 52,842
Expiring between two and five years:
Total facilities 137,741 -
Unutilised 43,691 -
Fair values of financial assets and liabilities
Financial assets and liabilities comprise long-term borrowings and other
payables, derivative instruments, cash, receivables and investments.
The table below sets out by category the book values and the fair values of the
Group's financial assets and liabilities. Where no amount is disclosed in the
table below, there is no material difference between the book value and the fair
value.
2006 2006 2006 2005
Book Value Fair Value Difference Difference
between book and between book and
fair values fair values
#'000 #'000 #'000 #'000
Group
Primary Financial Instruments
Liabilities
Fixed long-term debt (over one year) 75,008 82,294 (7,286) (8,500)
Assets
Financial assets
Long-term loan notes (over one year) (25,591) (25,056) 535 (990)
Fixed rate loan - - - (67)
Joint ventures
Primary Financial Instruments
Long-term loan notes 25,591 25,056 (535) 990
Fixed rate loan - - - 34
The effect on net assets per share of the total fair value adjustment
(#7,286,000 less tax of #2,186,000) would be a decrease of
9.6 pence (2005 : 11.8 pence).
The calculation of the fair values has been arrived at as follows:
Debt has been calculated by discounting cash flows at prevailing rates of
interest.
The equity assets have been valued at bid price.
Interest rate swaps have been valued at the relevant current active market rate
for such swaps.
Interest rate derivatives to manage interest rate profile are analysed as
follows:
Group:
#9,000,000 swapped at 7.52% fixed to February 2007 (1)
#19,350,000 swapped at 5.965% fixed to June 2009 (1)
#2,254,688 swapped at 5.88% fixed to March2009 (1)
#100,000,000 capped at 7.25% to June 2007
#90,000,000 callable swap at 3.50% to September 2006 (2)
#90,000,000 callable swap at 4.19% from September 2006 to March 2016 (2)
Joint Ventures:
#175,000,000 swapped at 4.1% to April 2008 (1)
#109,505,000 swapped at 4.5775% to February 2021 (1)
#10,000,000 capped at 6.00% to October 2006 (1)
#124,160,000 capped at 5.00% to November 2008 (3)
#124,160,000 swapped at 4.54% to February 2021 (1)
#94,640,000 swapped at 4.96% to December 2009 (1)
#27,040,000 capped at 5.5% to December 2009 (1) & (4)
Note (1) The quarterly payment / receipt is the difference between 3 month
LIBOR and the rate quoted
Note (2) RBS has the right to call the SWAP on 30th September 2006 and each
quarter end thereafter
Note (3) Should LIBOR fall below 4.45% the fixed rate of 4.7% will be charged
Note (4) Should LIBOR fall below 4.18% the fixed rate of 4.68% will be charged
Gains and Losses on Derivatives held to Manage Debt
The Group uses interest rate derivatives to manage its interest rate profile.
Changes in the fair value of these derivatives are recognised in the income
statement. An analysis of these derivatives and gains / (losses) thereon is as
follows:
Derivative Derivative
financial financial
assets liabilities
#'000 #'000
Fair value at 31 March 2005 (11) 1,162
Change in fair value of derivative financial instruments during the year 11 199
Fair value at 31 March 2006 - 1,361
25. DEFERRED INCOME TAX
Group Company
2006 2005 2006 2005
#'000 #'000 #'000 #'000
Deferred taxation assets
Deferred taxation arising from unrealised derivative 408 349 - -
financial instruments valuations
Deferred taxation arising from retirement benefit 144 101 - -
obligations
552 450 - -
Deferred taxation liabilities
Deferred taxation arising from the temporary differences
noted below:
Short term temporary differences (108) (23) - -
Capital and industrial buildings allowances claimed on (2,107) (3,763) - -
investment properties
Unrealised property and investment valuations (27,348) (16,326) - -
(29,563) (20,112) - -
The movement in deferred tax assets and liabilities during the year is as
follows:
Derivative Retirement Group
financial benefit Total
instruments obligations
#'000 #'000 #'000
Deferred tax assets at 31 March 2005 349 101 450
Charged to income statement 59 - 59
Charged to reserves - 43 43
Total impact 59 43 102
Deferred tax assets at 31 March 2006 408 144 552
Unrealised Capital Short-term Group
property and allowances timing Total
revaluation differences
surpluses
#'000 #'000 #'000 #'000
Deferred tax liabilities at 31 March 2005 (16,326) (3,763) (23) (20,112)
Charged to income statement (4,930) 1,297 (85) (3,718)
Acquired during the year from business (6,092) 359 - (5,733)
combinations
Total impact (11,022) 1,656 (85) (9,451)
Deferred tax liabilities at 31 March 2006 (27,348) (2,107) (108) (29,563)
26. PROVISIONS FOR OTHER LIABILITIES AND CHARGES
Share-based Onerous Total
payments contracts
#'000 #'000 #'000
Group
At 31 March 2005 128 - 128
Charged to consolidated income statement: 375 - 375
Additions during the year - 13,750 13,750
Released during the year - (1,750) (1,750)
At 31 March 2006 503 12,000 12,503
Share-based Total
payments
#'000 #'000
Company
At 31 March 2005 128 128
Charged to consolidated income statement: 375 375
At 31 March 2006 503 503
Provisions have been analysed between current and non-current as follows:
Group Company
2006 2005 2006 2005
#'000 #'000 #'000 #'000
Non-current 12,503 128 503 128
Current - - - -
12,503 128 503 128
The provision for share-based payments represents the cost of granting share
options and other share-based remuneration to employees and Directors. The
charge is reversed if it appears probable that applicable performance criteria
will not be met.
The onerous lease provision is made in relation to onerous leases on properties
which are vacant or sublet at a level which renders the properties loss-making
over the remaining life of the lease. The provision represents the Directors'
estimate of the net cash flows on the properties.
27. TRADE AND OTHER PAYABLES
Group Company
2006 2005 2006 2005
#'000 #'000 #'000 #'000
Amounts falling due within one year:
Trade payables 2,480 1,335 97 46
Amounts owed to Group undertakings - - 97,462 50,734
Amounts owed to joint ventures 4,969 4,965 - -
Other taxation and social security 467 791 35 103
Other creditors 6,758 938 5,000 -
Accruals and deferred income 14,895 10,762 1,563 896
29,569 18,791 104,157 51,779
28. SHARE CAPITAL
2006 2005
Group and Company #'000 #'000
Authorised
60,000,000 Ordinary shares of 5p 3,000 3,000
Allotted, called up and fully paid
Ordinary shares of 5p
At 1 April 2,548 2,548
Allotted through placing of shares (2,547,738 shares) 127 -
At 31 March (2006: 53,502,508 shares, 2005: 50,954,770 shares)
2,675 2,548
During the year 2,547,738 new Ordinary shares of 5p each were allotted for a
cash consideration of #13,757,785 through a placing of shares at 540p per share
on 5 April 2005.
At 31 March 2006 there were share options to subscribe for Ordinary shares under
the Warner Estate Holdings 1995 Share Option Scheme as follows:
At 303.5p per share between 16 August 2004 and 15 August 2011 127,405 shares
At 319p per share between 17 July 2005 and 16 July 2012 156,687 shares
At 367.5p per share between 27 June 2006 and 26 June 2013 308,631 shares
At 495p per share between 8 July 2007 and 7 July 2014 247,288 shares
29. OTHER RESERVES
Non-distributable Reserves Distributable
Reserves
Share Revaluation Other *Retained
Premium Reserve Reserve Earnings Total
#'000 #'000 #'000 #'000 #'000
Group
At 31 March 2005 5,559 70,966 7,996 186,701 271,222
Premium on shares issued 13,493 - - - 13,493
Retained profit for the year - - - 74,432 74,432
Realised on disposal of investment properties - (14,167) - 14,167 -
Realised on disposal of investments - (11,211) - 11,211 -
Realised on disposal of joint ventures' investment - (4,803) - 4,803 -
properties
Net gain from fair value adjustment on investment - 27,101 - (27,101) -
properties
Share of joint ventures' net gain from fair value
adjustment on investment properties - 28,915 - (28,915) -
Net gain from fair value adjustment on listed - 969 - (969) -
investments
Net gain from fair value adjustment on unlisted - 14,968 - (14,968) -
investments
Share of joint ventures' net gain from fair value
adjustment on investments - 1,063 - (1,063) -
Change in fair value of derivative financial - (51) - 51 -
instruments
Change in fair value of joint ventures' derivative - (1,412) - 1,412 -
financial instruments
Dividends paid - - - (10,134) (10,134)
Actuarial losses on pension scheme assets - - - (219) (219)
Deferred tax movement on pension assets - - - 43 43
AT 31 MARCH 2006 19,052 112,338 7,996 209,451 348,837
*The closing balance on the profit and loss account includes #337,000 liability (2005 : #235,000) stated after a
deferred tax asset of #144,000 (2005 : #101,000) in respect of the Group's defined benefit pension scheme as
set out in note 4 to the accounts.
Non-distributable Reserves Distributable
Reserves
Share Revaluation Other *Retained
Premium Reserve Reserve Earnings Total
Company #'000 #'000 #'000 #'000 #'000
At 31 March 2005 5,559 934 7,078 176,528 190,099
Premium on shares issued 13,493 - - - 13,493
Retained profit for the year - - - 8,438 8,438
Change in fair value of derivative financial - 89 - (89) -
instruments
Dividends paid - - - (10,134) (10,134)
AT 31 MARCH 2006 19,052 1,023 7,078 174,743 201,896
The Company's distributable reserves include #108,309,000 (2005: #108,309,000)
derived from capital profits in subsidiary undertakings.
30. INVESTMENT IN OWN SHARES
Group and Company
Number Cost
#'000
At 31 March 2005 532,200 1,667
Additions 28,214 139
Disposals (282,402) (880)
At 31 March 2006 278,012 926
Included in investment in own shares are shares relating to the Inland Revenue
Approved All-Employee Share Ownership Plan, as follows:
2006 2005
Number Cost Market Number Cost Market
value value
#'000 #'000 #'000 #'000
Partnership shares purchased by 26,830 - 204 28,122 - 155
employees, not yet vested
Matching and Free shares not 104,812 470 796 100,226 404 552
yet vested
131,642 470 1,000 128,348 404 707
The vesting of Matching and Free shares is conditional on meeting the conditions
of the scheme which are summarised on in the Report and Accounts which will be
published in due course.
31. DIRECTORS' INTERESTS AND RELATED PARTY TRANSACTIONS
Transactions between the company and subsidiaries, which are related parties,
have been eliminated on consolidation for the Group.
Compensation of key management personnel is disclosed in the Report and Accounts
which will be published in due course.
Transactions between the parent company and its subsidiaries are shown below:
2006 2005
Subsidiary Nature of transaction #'000 #'000
Cardiff and Provincial Properties Limited Dividend 500 500
Clay Estates Limited Dividend 76 -
Clay Group Limited Dividend 2,900 3,800
Lancaster Holdings Limited Dividend 2,400 1,500
Lancaster Investments Limited Dividend 800 1,000
Lotkeep Limited Dividend 3,000 -
Mainscene Limited Dividend - 800
Warner Estate, Limited Dividend 2,000 1,200
Warner Investments Limited Dividend 324 1,200
Balances outstanding between the parent company and its subsidiaries are shown
below:
Amounts owed by Amounts owed to
subsidiaries subsidiaries
2006 2005 2006 2005
Subsidiary #'000 #'000 #'000 #'000
Alliance Holdings Four Limited - 4 - -
Alliance Holdings Limited 10 10 - -
Alliance Holdings One Limited - 4 - -
Alliance Holdings Three Limited - 4 - -
Alliance Holdings Two Limited - 4 - -
Apia Asset Management Limited 130 25 - -
Cardiff and Provincial Properties Limited - - (16,447) (3,197)
Clay Estates Limited - 19 (1,781) -
Clay Group Limited 8,843 5,943 - -
Clay Investments Limited 22 23 - -
Clay Property Limited - - (25,542) (25,542)
Hulburds (Sittingbourne) Limited - 4 - -
Industrial Funds Limited 836 - - -
Lancaster Holdings Limited 61,504 64,269 - -
Lancaster Investments (West Bromwich) Limited 132 71 - -
Lancaster Investments Limited 144 4,083 - -
Lotkeep Limited - 2,375 (25,794) -
Mainscene Limited - - (13,665) (6,009)
Market Place (Jersey) Limited 8 8 - -
Market Place Holdings (Jersey) Limited 9 10 - -
Middleton Jersey One Limited 9 9 - -
Middleton Jersey Two Limited 8 8 - -
Park Street Properties Limited 7 7 - -
Principal Leasehold Properties Limited 3,002 2 - -
Skipper Holdings Four Limited - 3 - -
Skipper Holdings One Limited - 3 - -
Skipper Holdings Three Limited - 3 - -
Skipper Holdings Two Limited - 3 - -
Skipper Offices Limited 1,685 - - -
Skipper Regional Office Holdings Limited 5 5 - -
Vere Street (Jersey) Limited 167 167 - -
Vere Street Investments Limited 5,499 - - (2,501)
Warner Active Management No 2 Limited - 12 (3,806) -
Warner Active Management No 3 Limited - - - -
Warner Alliance (Jersey) Limited 47 20 (176) -
Warner Estate (Folkestone) Limited - 1,629 - -
Warner Estate (Jersey) Limited 1,646 363 - -
Warner Estate, Limited 10,304 29,124 - -
Warner Estate Management Limited 78,828 9,802 - -
Warner Funds Limited 14,505 49,300 - -
Warner Industrial Acquisition Limited 60,257 115 - -
Warner Industrial Investments Limited 115 309 (5,608) -
Warner Investments Limited - - (4,643) (12,634)
Warner Regional Offices Holdings Limited 2 2 - -
Warner Shopping Centre (Jersey) Limited - - - (851)
No fees were paid in respect of contracts, which provided services in the
ordinary course of business to the Group, and in which Directors have or had
interests.
During the year there were loan transactions between the Group and joint
ventures, as set out in note 17. Interest payable on these loans and
management charges, payable by the joint ventures, are also set out in note 17.
32. RECONCILIATION OF OPERATING PROFIT TO NET CASH FLOW
Group Company
2006 2005 2006 2005
#'000 #'000 #'000 #'000
Operating profit before net gains on investments 25,884 23,846 (1,921) (1,424)
Depreciation of plant and equipment 139 109 - -
Loss on sale of plant and equipment 1 1 (49) -
Decrease in inventories 19,292 9,242 - -
Decrease / (increase) in trade and other receivables 2,682 (782) (67,765) (3,274)
(Decrease) / increase in trade and other payables (23,295) 1,604 47,319 (1,537)
Cash generated from operations 24,703 34,020 (22,416) 313
33. CONTINGENT ASSETS
2006 2005
#'000 #'000
Potential performance fees arising under joint venture agreements
Agora Shopping Centres 5,000 -
Radial Distribution 1,000 -
6,000 -
These assets have not been recognised on the balance sheet.
34. CONTINGENT LIABILITIES
2006 2005
#'000 #'000
Contingent liabilities in respect of guarantees given by the
Company in respect of borrowings of its subsidiaries as follows:
Bank overdrafts 100,108 58,475
Mortgage debenture and loans 22,500 79,846
Bank loans of joint ventures - 14,300
122,608 152,621
These liabilities have not been recognised on the balance sheet.
35. OPERATING LEASE COMMITMENTS
2006 2005
#'000 #'000
Group
Annual commitments in respect of operating leases on properties are as
follows:
Expiring between two and five years 45 -
Expiring after five years 435 454
480 454
36. MINORITY INTEREST
This represents investments held by The FI5 Partnership in Balmcrest Estates
Limited.
37. ACQUISITIONS
Industrial Funds Limited was set up as a 50-50 joint venture with Anglo Irish
Bank and acquired the entire share capital of Ashtenne Holdings PLC on 31 May
2005.
Ashtenne Holdings PLC is principally involved in property fund management.
Acquisition of Ashtenne Holdings PLC by Industrial Fund Limited
Fair value
Book value adjustments Fair value
#'000 #'000 #'000
Net assets / (liabilities) acquired
Investment property 30,288 2,408 32,696
Plant and equipment 105 - 105
Investments in joint ventures (114) - (114)
Investment in funds 20,815 1,053 21,868
Investments in associates 6,748 3,015 9,763
Inventories 13,338 9,771 23,109
Trade and other receivables 7,386 3,516 10,902
Cash and cash equivalents 38,660 - 38,660
Borrowings including finance leases (460) - (460)
Deferred income tax liabilities - (6,092) (6,092)
Trade and other payables (10,169) (2,008) (12,177)
Current income tax liabilities (3,013) 1,547 (1,466)
Minority interests (4,592) (406) (4,998)
98,992 12,804 111,796
50% acquired 55,898
Goodwill 5,219
Consideration 61,117
Satisfied by
100% 50%
Cash consideration 119,742 59,871
Directly attributable acquisition costs 2,493 1,246
Cash consideration 122,235 61,117
On 1 December 2005, the Group acquired the remaining 50% of ordinary share
capital in Industrial Funds Limited (and its subsidiaries), which had previously
been accounted for as a joint venture. On the acquisition date 100% of the net
liabilities were brought on to the balance sheet.
Acquisition of remaining 50% of Industrial Funds Limited
Fair value
Book value adjustments Fair value
#'000 #'000 #'000
Net assets / (liabilities) acquired
Goodwill 10,439 (10,439) -
Investment property 21,804 - 21,804
Plant and equipment 104 - 104
Investments in joint ventures 290 - 290
Investments in funds 23,105 - 23,105
Investments in associates 9,185 - 9,185
Inventories 21,996 - 21,996
Trade and other receivables 15,083 - 15,083
Cash and cash equivalents 12,633 - 12,633
Borrowings including finance leases (41,824) (1,994) (43,818)
Deferred income tax liabilities (5,731) - (5,731)
Trade and other payables (61,438) - (61,438)
Current income tax liabilities (1,768) 598 (1,170)
Minority interests (3,315) - (3,315)
563 (11,835) (11,272)
50% acquired (5,636)
Goodwill 5,986
Consideration 350
Satisfied by
Cash consideration 350
Total goodwill relating to acquisition of Ashtenne
Holdings PLC
Initial acquisition treated as a joint venture 5,219
Acquisition of remaining 50% of Industrial Funds Limited 5,986
Goodwill 11,205
On 30 June 2005, the Group acquired the remaining 50% of ordinary share capital
in Skipper Offices Limited (and its subsidiaries), which had previously been
accounted for as a joint venture. On the acquisition date 100% of the net
liabilities were brought on to the balance sheet.
Skipper Offices Limited was set up as a 50-50 joint venture with Royal Bank of
Scotland and disposed of its properties to the Apia Regional Offices Fund on 7
June 2005.
Acquisition of remaining 50% of Skipper Offices Limited
Fair value
Book value adjustments Fair value
#'000 #'000 #'000
50% net assets / (liabilities) acquired
Trade and other receivables 5,893 - 5,893
Cash and cash equivalents 10,401 - 10,401
Trade and other payables (15,545) - (15,545)
Current income tax liabilities (581) - (581)
168 - 168
50% acquired 84
Goodwill -
Consideration 84
Satisfied by
Cash consideration 84
Skipper Offices Limited contributed #nil to revenue and a loss of #10,000 to the
Group's profit before tax for the period between the date of acquisition and 31
March 2006.
Cash acquired #'000 #'000
Industrial Funds Limited 12,633
Skipper Offices Limited 10,401
23,034
Cash paid on acquisition:
Industrial Funds Limited (350)
Skipper Offices Limited (84)
(434)
Net cash acquired 22,600
38. DETAILED TRANSITION TO IFRS
BASIS OF PREPARATION
This financial information has been prepared on the basis of management's
interpretation of IFRS currently. It is possible that conventions which differ
from our current interpretation will evolve generally within the property
sector, and IFRS are subject to ongoing amendment; accordingly, the amounts
disclosed in this note may be subject to revision.
PRESENTATION OF FINANCIAL STATEMENTS UNDER IFRS
Under IFRS, with effect from 1 April 2004, the Group has prepared its financial
statements in accordance with IAS 1 - 'Presentation of financial statements'.
Where IAS 1 does not provide definitive guidance on presentation, for example in
relation to aspects of the income statements, the Group proposes to adopt a
format consistent, where possible, with UK GAAP. The presentation of the
primary statements are likely to develop over time through industry practice.
Key changes include:
* The 'profit and loss account' is renamed the 'income statement'.
* All assets and liabilities are required to be analysed between current and
non-current items.
* Deferred tax assets have been presented separately from
deferred tax liabilities.
* A 'statement of recognised income and expense' replaces the
'statement of group total recognised gains and losses'.
UK GAAP comparative information has been reformatted to reflect IFRS reporting
requirements.
OVERVIEW OF IMPACT
The principal changes arising from the adoption of IFRS for the financial
statements under review are:
* Property revaluations - surpluses and deficits on investment properties are
shown in the income statement, rather than as a movement in reserves.
* Deferred tax - is provided in respect of property valuation
surpluses and is accrued as a deferred tax liability. Under UK GAAP, no
deferred tax provision was made in respect of property revaluation surpluses.
* Share based payments - the fair value of share options and
other share based payments is recognised as an expense through the income
statement over the vesting period.
* Goodwill - positive goodwill is no longer amortised, but is now subject to
an impairment review.
* Head leases - where the Group is the lessee of a finance lease arrangement,
the rental obligations have been capitalised and shown as a liability on the
balance sheet.
* Lease incentives - are amortised over the term of the lease, in each case
typically longer than under UK GAAP, which was to the first rent
review.
MAIN CHANGES IN ACCOUNTING UNDER IFRS
IAS 40 - INVESTMENT PROPERTY
Under this standard, investment property is recognised in the accounts at fair
value, with fair value gains and losses being taken directly to the income
statement rather than to the revaluation reserve as was the case under UK GAAP.
Accumulated revaluation surpluses relating to the investment properties at the
date of transition to IFRS have been reallocated to retained earnings. This
treatment does not, however, have any impact on the distributable profits.
Full provision for tax on the valuation surpluses has been provided under IAS
12.
IAS 12 - INCOME TAXES
This standard requires full provision to be made for deferred income tax on
temporary differences. The main difference compared to the deferred tax
provided under UK GAAP is that provision has been made in full for the deferred
income tax arising from the revaluation of investment properties. The deferred
income tax has been calculated on the basis that the gain (or loss) on the
properties will be realised through the income generated by holding the
properties. The tax base for each property has been compared to the valuation
for that property.
Since the deferred income tax liabilities have been calculated on the basis of
continued use of the properties, no account has been taken of the way in which
properties may be sold or of the tax which the Group would expect to be payable
on the sale of the properties in practice. Indexation allowance which would be
available to further reduce the taxable capital gains when properties subject to
UK corporation tax are sold has similarly not been taken into account.
Deferred income tax is provided as appropriate on the other adjustments which
have been made to convert the UK GAAP accounts to IFRS.
IAS 31 - FINANCIAL REPORTING OF INTERESTS IN JOINT VENTURES
Under UK GAAP, the Group accounted for interests in joint ventures under the
equity accounting method. Under IFRS, IAS 31 allows companies to make a
one-time choice as to whether joint ventures will be accounted under the equity
method or proportionally consolidated.
The Group has opted for the equity accounting method of joint venture assets and
liabilities as this is consistent with past treatment and, more closely reflects
the substance of the Group's joint venture arrangements. Therefore, the Group's
share of individual assets and liabilities of the joint venture are shown as one
line in the balance sheet and income statement.
IFRS 2 - SHARE BASED PAYMENTS
Under IFRS 2, the fair value of share options and other share based payments is
recognised as an expense through the income statement over the vesting period.
The Group has elected to apply the IFRS 1, share-based payment transition
exemption, therefore the Group has applied IFRS 2 from 1 January 2004 to those
options that were issued after 7 November 2002 but have not vested by 1 January
2005.
IFRS 3 - BUSINESS COMBINATIONS
Under IFRS 3, goodwill on acquisition is no longer amortised, but is held at its
UK GAAP carrying value at the transition date, or acquisition date, as
appropriate, and is then subject to impairment review at each reporting date.
Under IFRS, the acquisition of properties, whether by outright purchase or by
corporate acquisition, are carefully considered on a case by case basis to
determine whether they are, in substance, an acquisition of assets or a
business.
The Group has elected to apply the IFRS 1, business combination transition
exemption, therefore the Group has not applied IFRS 3 retrospectively to past
business combinations transition exemption.
IFRS 17 - LEASES
Under UK GAAP, leases to occupational tenants were almost invariably treated as
operating leases, because the risks and rewards in the underlying freehold were
usually assessed as remaining with the landlord. However, while IAS 17 is based
on a similar principle, it lists a number of situations that individually or in
combination would require a lease to be classified as a finance lease and, in
particular, it requires an entity to consider land and buildings separately,
even if the occupational lease is of the property as a whole and does not make
such a distinction. This means that it is more likely that a lease term could
be viewed as being for the major part of the economic life of an asset,
resulting in finance lease classification of the building element.
The Group has carefully reviewed each of its leases and has concluded that the
lease classification and treatment under UK GAAP is consistent with IFRS.
Where an investment property is itself subject to a head or ground lease, that
head lease must be treated as if it were a finance lease and accounted for
accordingly. In total only thirteen properties are affected, of which three are
held by joint ventures leading to the recognition of a finance lease liability
and an increase in the carrying value of the Group's investment properties.
SIC 15 - OPERATING LEASE INCENTIVES
Under SIC 15, the cost of rent free periods and other incentives given to
tenants under operating leases must be spread over the term of the lease rather
than, as under UK GAAP, to the first review to market rents.
Further, there are no transitional provisions, so that incentives granted before
the UK standard came into effect have now been brought back into account. This
will therefore change the timing but not the aggregate amount recognised in
relation to lease incentives.
For the investment property business, the changes amount to a minor
reclassification between rent and revaluation surpluses in the income statement
and, in the balance sheet, between investment properties and receivables.
IAS 32 AND IAS 39
HEDGE ACCOUNTING
Where a financial instrument is designated as a hedge, the Group formally
documents the relationship between the hedging instrument and the hedged item as
well as its risk management objectives and its strategy for undertaking the
various hedging transactions. The Group also documents its assessment, both at
hedge inception and on an ongoing basis, of whether the derivatives that are
used in the hedging transactions are highly effective in offsetting the changes
in fair values or cash flows of the hedged items.
Where hedge accounting requirements are not met, changes in fair value of
derivatives are recognised through the income statement.
INVESTMENTS
Investments will be carried at fair value on the balance sheet, with changes in
the fair value being recognised either in the income statement or in equity and
recycled through the income statement when the investments are realised, as
appropriate. Under UK GAAP these investments were carried at the lower of cost
and market value.
OTHER FINANCIAL INSTRUMENTS
Movements in the fair value of those derivative financial instruments which are
not accounted for as hedging instruments are recognised on the face of the
income statement and not by way of a note, as is the case under UK GAAP.
BORROWINGS
The version of IAS 39 adopted by the European Union limits the option to carry
borrowings at their fair values, and consequently, for the time being, the Group
will continue to include borrowings in the balance sheet at amortised cost. The
fair value of borrowings will be disclosed under IAS 32, as is the case under UK
GAAP.
EXEMPTIONS FROM FULL RETROSPECTIVE APPLICATION
The Group has applied the following optional exemptions from retrospective
application:
(a) Share based payment transaction exemption
The Group has elected to apply this exemption. The Group has applied IFRS 2
from 1 April 2004 to those options that were issued after 7 November 2002 but
that have not vested by 1 January 2005.
(b) Designation of previously recognised financial instruments
The Group has elected to apply this exemption. Therefore, financial instruments
will be designated at the date of transition as at fair value through profit or
loss or as available-for-sale.
The following optional exemptions from retrospective application are not
applicable to the Group;
(c) Fair value as deemed cost exemption
(d) Cumulative translation difference exemption
(e) Business combinations exemption
(f) Employee benefits exemption
(g) Compound financial instruments
(h) Assets and liabilities of subsidiaries, associates and joint ventures
exemption
(i) Insurance contracts exemption
(j) Decommissioning liabilities included in the cost of property, plant and
equipment exemption
(k) Fair value measurement of financial assets or liabilities at initial
recognition
EXCEPTIONS FROM FULL RETROSPECTIVE APPLICATION
The Group has applied the following mandatory exception from retrospective
application:
(a) Estimates exception
Estimates under IFRS at 1 April 2004 should be consistent with estimates made
for the same date under previous GAAP, unless there is evidence that those
estimates were in error.
RECONCILIATIONS BETWEEN IFRS AND UK GAAP
RECONCILIATION OF CONSOLIDATED IFRS BALANCE SHEET AT 31 MARCH 2005
Events
after
Previously Share balance Investments
reported base sheet Income Lease in Financial Investment Restated
under UK payments date taxes Leases incentives associates instruments property Total under
GAAP* IFRS 2 IAS 10 IAS 12 IAS 17 SIC 15 IAS 28 IAS 39 IAS 40 adjustments IFRS
#'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000
ASSETS
Non-current
assets
Investment 326,593 - - - - (371) - - 1,515 1,144 327,737
property
Other 347 - - - - - - - - - 347
tangible
assets
Invest 111,250 - - (7,023) (3,568) (190) - 2,048 - (8,733) 102,517
ments
in
joint
ventures
Invest 21,135 - - - - - (5,327) (290) - (5,617) 15,518
ments
in
listed
and
unlisted
shares
Investment - - - - - - 5,327 - - 5,327 5,327
in
associates
Deferred 101 - - - - - - 349 - 349 450
income
tax assets
Derivative - - - - - - - 11 - 11 11
financial
assets
Trade - - - - - 350 - - - 350 350
and other
receivables
459,426 - - (7,023) (3,568) (211) - 2,118 1,515 (7,169) 452,257
Current
assets
Inventory 8,235 - - - 8,235
Trade and 9,597 - - - - (235) - (311) - (546) 9,051
other
receivables
Cash and 22,884 - - - - - - 86,482 - 86,482 109,366
cash
equivalents
40,716 - - - - (235) - 86,171 - 85,936 126,652
Total 500,142 - - (7,023) (3,568) (446) - 88,289 1,515 78,767 578,909
assets
Liabilities
Non-current
liabilities
Borrow (114,008) - - - - - - (80,115) (1,515) (81,630) (195,638)
ings,
including
finance
leases
Derivative - - - - - - - (1,162) - (1,162) (1,162)
financial
liabilities
Deferred (3,786) - - (16,326) - - - - - (16,326) (20,112)
income
tax
liabilities
Retirement (336) - - - - - - - - - (336)
benefit
obligations
Provisions - (128) - - - - - - - (128) (128)
for
other
liabilities
and
charges
(118,130) (128) - (16,326) - - - (81,277) (1,515) (99,246) (217,376)
Current
liabilities
Borrow (61,902) - - - - - - (6,367) - (6,367) (68,269)
ings,
including
finance
leases
Trade (23,638) - 4,847 - - - - - - 4,847 (18,791)
and
other
payables
Current (2,197) - - - - (11) - 90 - 79 (2,118)
income
tax
liabi
lities
(87,737) - 4,847 - - (11) - (6,277) - (1,441) (89,178)
Total (205,867) (128) 4,847 (16,326) - (11) - (87,554) (1,515) (100,687) (306,554)
liabi
lities
Net 294,275 (128) 4,847 (23,349) (3,568) (457) - 735 - (21,920) 272,355
assets
EQUITY
Capital
and
reserves
attri
butable
to
the
Company's
equity
holders
Share 2,548 - - - - - - - - - 2,548
capital
Reserves 293,142 (128) 4,847 (23,349) (3,568) (457) - 735 - (21,920) 271,222
Invest (1,667) - - - - - - - - - (1,667)
ment in
own
shares
Equity 294,023 (128) 4,847 (23,349) (3,568) (457) - 735 - (21,920) 272,103
share
holders'
funds
Minority 252 - - - - - - - - - 252
interest
Total 294,275 (128) 4,847 (23,349) (3,568) (457) - 735 - (21,920) 272,355
equity
Notes a b c d e f g h
*Reformatted to reflect IFRS reporting requirements
RECONCILIATIONS BETWEEN IFRS AND UK GAAP
RECONCILIATION OF CONSOLIDATED IFRS INCOME STATEMENT FOR THE YEAR ENDED 31 MARCH 2005
Events
after
Previously Share balance Investments
reported base sheet Income Lease in Financial Investment Restated
under UK payments date taxes Leases incentives associates instruments property Total under
GAAP* IFRS 2 IAS 10 IAS 12 IAS 17 SIC 15 IAS 28 IAS 39 IAS 40 adjustments IFRS
#'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000
Rental and 26,387 - - - - 134 - - - 134 26,521
similar
income
Turnover 12,446 - - - - - - - - - 12,446
from
property
trading
activities
Cost of (10,788) - - - - - - - - - (10,788)
sales of
property
trading
activities
Service 2,170 - - - - - - - - - 2,170
charge
and similar
income
Service (2,773) - - - - - - - - - (2,773)
charge
expense and
similar
income
Net rental 27,442 - - - - 134 - - - 134 27,576
and
trading
income
Turnover 3,915 - - - - - - - - - 3,915
from
asset
management
activities
Cost of (1,437) - - - - - - - - - (1,437)
sales of
asset management
activities
Net income 2,478 - - - - - - - - - 2,478
from
asset
management
activities
Adminis (1,660) (95) - - - - - - - (95) (1,755)
trative
expenses
Property (4,695) - - - - - - - 242 242 (4,453)
expenses
Operating 23,565 (95) - - - 134 - - 242 281 23,846
profit
before net
gains
on
investments
Net gain from - - - - - (273) - - 22,144 21,871 21,871
fair value
adjustments on
investment
property
Net gain from - - - - - - - 2,397 - 2,397 2,397
fair value
adjustments on
fixed asset
investments
Profit on sale 2,260 - - - - - - - - - 2,260
of investment
property
Operating 25,825 (95) - - - (139) - 2,397 22,386 24,549 50,374
profit
Finance 6,698 - - - - - - - - - 6,698
income
Finance (14,706) - - - - - - - (242) (242) (14,948)
expense
Change in fair - - - - - - - 315 - 315 315
value of
derivative
financial
instruments
Share of joint 4,723 - - (4,521) (805) (36) - (982) 14,345 8,001 12,724
venture post
tax
profits
Profit before 22,540 (95) - (4,521) (805) (175) - 1,730 36,489 32,623 55,163
income tax
Taxation - (4,117) - - - - (7) - 26 - 19 (4,098)
current
Taxation - (290) - - (5,698) - - - (121) - (5,819) (6,109)
deferred
Profit for 18,133 (95) - (10,219) (805) (182) - 1,635 36,489 26,823 44,956
the
year
Attributable
to:
Equity 18,131 (95) - (10,219) (805) (182) - 1,635 36,489 26,823 44,954
holders
Minority 2 - - - - - - - - - 2
interests
Notes a b c d e f g h
*Reformatted to reflect IFRS reporting requirements
RECONCILIATIONS BETWEEN IFRS AND UK GAAP
RECONCILIATION OF COMPANY IFRS BALANCE SHEET AT 31 MARCH 2005
Events
Share after
Previously base balance
reported payments sheet Investments Financial Total Restated
under UK IFRS 2 date IAS in associates instruments adjustments under IFRS
GAAP* #'000 #'000 10 #'000 IAS 28 #'000 IAS 39 #'000 #'000 #'000
ASSETS
Non-current assets
Investments in joint - - - - - - -
ventures
Investments in listed 118,803 - - (5,327) - (5,327) 113,476
and unlisted shares
Investment in associate - - - 5,327 - 5,327 5,327
Derivative financial - - - - 11 11 11
assets
118,803 - - - 11 11 118,814
Current assets
Trade and other 181,649 - (12,000) - (311) (12,311) 169,338
receivables
Current income tax 2,883 - - - 90 90 2,973
assets
184,532 - (12,000) - (221) (12,221) 172,311
Total assets 303,335 - (12,000) - (210) (12,210) 291,125
Liabilities
Non-current liabilities
Provisions for other - (128) - - - (128) (128)
liabilities and charges
- (128) - - - (128) (128)
Current liabilities
Borrowings, including (48,238) - - - - - (48,238)
finance leases
Trade and other (56,626) - 4,847 - - 4,847 (51,779)
payables
(104,864) - 4,847 - - 4,847 (100,017)
Total liabilities (104,864) (128) 4,847 - - 4,719 (100,145)
Net assets 198,471 (128) (7,153) - (210) 7,491 190,980
EQUITY
Capital and reserves
attributable to the
Company's equity
holders
Share capital 2,548 - - - - - 2,548
Reserves 197,590 (128) (7,153) - (210) 7,491 190,099
Investment in own (1,667) - - - - - (1,667)
shares
Total equity 198,471 (128) (7,153) - (210) (7,491) 190,980
Notes a b f g
*Reformatted to reflect IFRS reporting requirements
RECONCILIATIONS BETWEEN IFRS AND UK GAAP
RECONCILIATION OF CONSOLIDATED IFRS BALANCE SHEET AT 1 APRIL 2004
Events
after
Previously Share balance Investments
reported base sheet Income Lease in Financial Investment Restated
under UK payments date taxes Leases incentives associates instruments property Total under
GAAP* IFRS 2 IAS 10 IAS 12 IAS 17 SIC 15 IAS 28 IAS 39 IAS 40 adjustments IFRS
#'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000
ASSETS
Non-current
assets
Investment 317,453 - - - - (208) - - 3,038 2,830 320,283
properties
Plant and 429 - - - - - - - - - 429
equipment
Investments 89,012 - - (2,596) (2,763) (154) - 3,030 - (2,483) 86,529
in
joint
ventures
Invest 13,371 - - - - - - (250) - (250) 13,121
ments
in
listed
and
unlisted
shares
Deferred 134 - - - - - - 469 - 469 603
income
tax assets
Derivative - - - - - - - 234 - 234 234
financial
assets
Trade - - - - - 191 - - - 191 191
and
other
receivables
420,399 - - (2,596) (2,763) (171) - 3,483 3,038 991 421,390
Current
assets
Inven 17,477 - - - - - - - - - 17,477
tories
Trade
and other 9,580 - - - - (100) - (449) - (549) 9,031
receivables
Cash and
cash 16,647 - - - - - - 72,406 - 72,406 89,053
equivalents
43,704 - - - - (100) - 71,957 - 71,857 115,561
Total
assets 464,103 - - (2,596) (2,763) (271) - 75,440 3,038 72,848 536,951
Liabilities
Non-current
liabilities
Borrow (155,061) - - - - - - (3,038) (3,038) (158,099)
ings,
including
finance
leases
Derivative - - - - - - - (1,562) - (1,562) (1,562)
financial
liabilities
Deferred (3,496) - - (10,628) - - - - - (10,628) (14,124)
income
tax
liabi
lities
Retirement (447) - - - - - - - - - (447)
benefit
obligations
Provisions - (33) - - - - - - - (33) (33)
for
other
liabilities
and
charges
(159,004) (33) - (10,628) - - - (1,562) (3,038) (15,261) (174,265)
Current
liabi
lities
Borrow (36,146) - - - - - - (72,406) - (72,406) (108,552)
ings,
including
finance
leases
Trade (21,413) - 4,458 - - - - - - 4,458 (16,955)
and
other
payables
Current
income (1,289) - - - - (4) - 65 - 61 (1,228)
tax
liabi
lities
(58,848) - 4,458 - - (4) - (72,341) - (67,887) (126,735)
Total (217,852) (33) 4,458 (10,628) - (4) - (73,903) (3,038) (83,148) (301,000)
liabi
lities
Net
assets 246,251 (33) 4,458 (13,224) (2,763) (275) - 1,537 - (10,300) 235,951
EQUITY
Capital
and
reserves
attri
butable
to
the
Company's
equity
holders
Share
capital 2,548 - - - - - - - - - 2,548
Reserves 245,392 (33) 4,458 (13,224) (2,763) (275) - 1,537 - (10,300) 235,092
Invest
ment in (1,689) - - - - - - - - - (1,689)
own shares
Total
equity 246,251 (33) 4,458 (13,224) (2,763) (275) - 1,537 - (10,300) 235,951
Notes a b c d e f g h
*Reformatted to reflect IFRS reporting requirements
RECONCILIATIONS BETWEEN IFRS AND UK GAAP
RECONCILIATION OF COMPANY IFRS BALANCE SHEET AT 1 APRIL 2004
Events
after
Previously Share base balance Restated
reported payments sheet date Financial Total Under
under UK GAAP IFRS 2 IAS 10 instruments adjustments IFRS
* #'000 #'000 #'000 IAS 39 #'000 #'000 #'000
ASSETS
Non-current assets
Investments in joint 3,968 - - - - 3,968
ventures
Investments in listed and 113,476 - - - - 113,476
unlisted shares
Derivative financial - - - 234 234 234
assets
117,444 - - 234 234 117,678
Current assets
Trade and other 173,058 - (10,000) (449) (10,449) 162,609
receivables
Current income tax assets 1,701 - - 65 65 1,766
174,759 - (10,000) (384) (10,384) 164,375
Total assets 292,203 - (10,000) (150) (10,150) 282,053
Liabilities
Non-current liabilities
Provisions for other - (33) - - (33) (33)
liabilities and charges
- (33) - - (33) (33)
Current liabilities
Borrowings, including (36,538) - - - - (36,538)
finance leases
Trade and other payables (57,837) - 4,458 - 4,458 (53,379)
(94,375) - 4,458 - 4,458 (89,917)
Total liabilities (94,375) (33) 4,458 - 4,425 (89,950)
Net assets 197,828 (33) (5,542) (150) (5,725) 192,103
EQUITY
Capital and reserves
attributable to the
Company's equity holders
Share capital 2,548 - - - - 2,548
Reserves 196,969 (33) (5,542) (150) (5,725) 191,244
Investment in own shares (1,689) - - - - (1,689)
Total equity 197,828 (33) (5,542) 150 (5,725) 192,103
Notes a b g
*Reformatted to reflect IFRS reporting requirements
RECONCILIATIONS BETWEEN IFRS AND UK GAAP
NOTES TO THE IFRS RECONCILIATIONS
(a) IFRS 2 - Share based payments
Share option plans are fair valued at the date of grant and costs taken to the
income statement over the vesting period. IFRS 1 transitional exemption has
been applied. A corresponding release from equity means that there is no effect
on the balance sheet or NAV.
(b) IAS 10 - Events after balance sheet date
Only dividends actually declared at balance sheet date should be provided for,
therefore proposed dividends have been reversed, and are reinstated on payment.
(c) IAS 12 - Income taxes
Provision is now made for the deferred tax liability associated with the
revaluation of investment properties. This was not required under UK GAAP.
Capital gains tax which was previously charged directly to reserves is now
included in the income statement, but this has no impact on net assets.
(d) IAS 17 - Leases
This adjustment represents those leases that have been classified as finance
lease assets.
(e) Statements of Investment Circular (SIC) 15 - Lease incentives
Lease incentives are now amortised over the lease term rather than to the first
rent review. As the value of lease incentives is included within the property
valuation, investment property and reserves have been adjusted by the value of
the lease incentive debtor to prevent double counting.
(f) IAS 28 - Investments in associates
Under IFRS an investment in associate is where the investor has the power to
exercise significant influence. Previously under UK GAAP an investor had to
actually exercise significant influence. Therefore the investment in Bride Hall
was previously treated as a fixed asset investment, and has now been equity
accounted.
(g) IAS 32 & 39 - Financial instruments
Financial assets and liabilities such as interest rate swaps and caps, have been
included in the balance sheet at fair value. Investments are carried at fair
value on the balance sheet.
(h) IAS 40 - Investment Property
Investment property valuation movements and tax thereon has been taken through
the income statement.
Investment property head leases, which are deemed finance leases, the rental
obligations are capitalised and shown as a corresponding finance lease creditor.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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Wt Wner Usd (LSE:WNER)
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Wt Wner Usd (LSE:WNER)
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