RNS Number:5859Y
Warner Estate Holdings PLC
19 June 2007
Part 2 of 2
NOTES TO THE FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
Basis of preparation
The Financial Statements comprise the consolidated financial statements of the
Group for the year ended 31 March 2007 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.
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
The accounting policies are consistent with those applied in the year ended 31
March 2006, as amended to reflect the adoption of the new Standards, Amendments
to Standards and Interpretations which are mandatory for the year ended 31 March
2007. In most cases, these new requirements are not relevant for the Group. This
is the case for the Amendments to IAS 39, IAS 21 and IFRS 4, to the new Standard
IFRS 6, and to the new Interpretations IFRIC 5 and IFRIC 6.
In accordance with the requirements of IFRIC 4 'Determining whether an
arrangement contains a lease', the Group has reviewed its sales and purchase
arrangements to ascertain whether any of them effectively contain a lease with
the Group acting as either lessor or lessee. No changes to the accounting
treatments of the Group's sales and purchase arrangements have been necessary.
The following new Standards and Interpretations have been issued but are not
effective for the year ended 31 March 2007, and have not been adopted early,
IFRS 7 'Financial Instruments: Disclosures' and the related amendment to IAS 1
on capital disclosures, IFRS 8 'Operating Segments', IFRIC 7 'Applying the
Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary
Economies', IFRIC 8 'Scope of IFRS 2', IFRIC 9 'Reassessment of Embedded
Derivatives', IFRIC 10 'Interim Financial Reporting and Impairment', IFRIC 11 '
IFRS 2 - Group and Treasury Share Transactions', and IFRIC 12 'Service
Concession Arrangements'. It is anticipated that the adoption of these new
Standards and Interpretations in future periods will not have a material impact
on the measurement of assets and liabilities included in the financial
statements or the Group's income and expenses. IFRS 7 is expected to result in
additional disclosure about the Group's financial instruments.
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. To the extent that the carrying
amount exceeds the recoverable amount, which is the higher of net realisable
value and value in use, the asset is written down to its recoverable amount. Net
realisable value is the estimated amount at which an asset can be disposed of,
less any direct selling costs.
Value in use is the estimate of the discounted future cash flows generated from
the asset's continued use, including those resulting from its ultimate disposal.
For the purposes of assessing value in use, assets are grouped at the lowest
levels for which there are separately identifiable cash flows.
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 fair value gains 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. The provision
is assessed on a property by property basis taking account of individual cash
flows. Cash flows are discounted using the risk free rate.
(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 the income statement, 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 the income statement
This category has two sub-categories: financial assets held for trading, and
those designated at fair value through the income statement 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 the income statement 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 the income statement' 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.
Transaction costs are capitalised on the balance sheet and are amortised over
the life of the associated borrowing instrument.
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.
(f) Investments in unlisted shares
As required by IAS 36, Impairment of Assets, the Group regularly monitors the
carrying value of its assets. 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.
2. Segmental Reporting
Business Segments
For management purposes the Group is organised into two operating divisions,
Property Investment and Asset Management:
Property Asset Management Unallocated and Group Total
Investment other activities
#'000 #'000 #'000 #'000
Year ended 31 March 2007
Rental and similar income 21,604 - - 21,604
Turnover from property trading activities 5,225 - - 5,225
Cost of sales of property trading activities (4,170) - - (4,170)
Service charge and similar income 4,172 - - 4,172
Service charge expense and similar charges (4,703) - - (4,703)
Net rental and trading income 22,128 - - 22,128
Turnover from asset management activities
Management fee income - 13,939 - 13,939
Performance fee income - 8,484 - 8,484
- 22,423 - 22,423
Asset management expenses - (12,215) - (12,215)
Administrative expenses (3,757) - - (3,757)
Property management expenses (3,778) - - (3,778)
Operating profit before net gain on investments 14,593 10,208 - 24,801
Net gain from fair value adjustments on investment 11,198 - - 11,198
properties
Net gain from fair value adjustments on investments - - 14,124 14,124
Profit on sale of investment properties 1,751 - - 1,751
Profit on sale of investments - - 987 987
Operating profit 27,542 10,208 15,111 52,861
Total assets 469,078 20,617 337,036 826,731
Total liabilities (29,817) (1,620) (47,532) (78,969)
Borrowing, including finance leases (1,500) - (311,028) (312,528)
Net assets 437,761 18,997 (21,524) 435,234
Other segment items:
Capital expenditure 7,988 - - 7,988
Depreciation - - 151 151
Property Asset Management Unallocated and Group Total
Investment 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 - - 16,050 16,050
Profit on sale of investment properties 3,102 - - 3,102
Profit on sale of investments - - 3,024 3,024
Operating profit 50,263 5,824 19,074 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
All turnover and operating profit has arisen from continuing operations.
(a) Rents receivable includes a charge of #367,000 (2006 : #25,000 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 #531,000 (2006 : #348,000).
The parent company is a holding company and does not operate in any segments.
2007 2006
#'000 #'000
Operating profit is stated after charging:
Depreciation - owned assets 151 139
Loss on disposal of plant and equipment - 1
Operating lease charges - properties 643 478
Employee benefits 11,366 7,782
During the year the following amounts were charged to the income statement in
respect of auditors' remuneration:
2007 2006
#'000 #'000
Remuneration to the principal auditor in respect of audit fees:
Statutory audit of the company and consolidated accounts 100 95
Remuneration to the principal auditor in respect of other services:
Statutory audit of subsidiary accounts(1) 372 137
Audit related services(2) 114 181
Non-audit services: Taxation(3) 443 131
1,029 544
(1) These include #132,000 relating to 2006.
(2) These include the cost of the interim audit, audit certifications for debt
covenant purposes and IFRS transition work, of which #50,000 is relating to
2006.
(3) These include #368,000 relating to the conversion to a REIT.
In addition #147,000 was charged by the Auditors for audit services to the joint
ventures (2006: #138,000) and #76,000 for tax work (2006: #135,000). 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.
3. EMPLOYEES
2007 2006
#'000 #'000
Staff costs
Wages and salaries 10,377 7,010
Social security costs 1,118 781
Other pension costs 824 397
12,319 8,188
2007 2006
Number Number
The average number of persons employed during the year was:
Management and administrative 145 73
Repairs and service 53 30
198 103
The parent company had no employees during the year (2006: 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 2007 in respect of these amounted to
#762,000 (2006: #353,000). Pension premiums paid in advance were #181,000
(2006: #70,000).
The Group operated a defined benefit scheme in the UK, The Warner Estate Group
Retirement Benefits Scheme. The costs charged to the income statement for the
year to 31 March 2007 in respect of these amounted to #62,000 (2006: #44,000).
A full valuation was carried out at 1 April 2005. The values at 31 March 2007
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.
Warner Estate PLC employs a building block approach in determining the long term
rate of return on pension plan assets. Historical markets are studied and assets
with higher volatility are assumed to generate higher returns consistent with
widely accepted capital market principles. The assumed long-term rate of return
on each asset class is set out within this note. The overall expected rate of
return on assets is then derived by aggregating the expected return for each
asset class over the actual asset allocation for the Scheme at the 31 March
2007.
The following assumptions were made by the Company:
2007 2006
% per annum % per annum
Discount rate 5.4 4.9
Rate of increase in pensionable salaries 3.7 3.5
Rate of increases to pensions in payment 3.2 2.9
Price inflation 3.2 3.0
Mortality assumptions are based on standard mortality tables which allow for
future mortality improvements. The assumptions are that a member who retires in
2025 at age 65 will live on average for a further 21 years after retirement if
they are male and for a further 24 years after retirement if they are female.
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 2007 rate of
return return 31 March
expected at expected at
31 March 2007 31 March 2006 2006
% #'000 % #'000
Equities 8.0 1,449 7.5 1,338
Fixed interest 5.4 4,199 4.9 4,357
Cash 5.5 197 4.8 125
Total market value of assets 5,845 5,820
Reconciliation of funded status to balance sheet
Value at Value at
31 March 2007 31 March 2006
#'000 #'000
Fair value of Scheme assets 5,845 5,820
Present value of non-insured defined benefit of (2,155) (2,025)
obligations
Liability in respect of insured pensioners (4,068) (4,276)
Liability recognised on the balance sheet (378) (481)
Related deferred tax asset 113 144
Net pension liability (265) (337)
Changes to the present value of the defined benefit obligation
2007 2006
#'000 #'000
Opening defined benefit obligation 6,301 5,397
Current service cost 62 44
Interest cost 302 290
Contributions by plan participants 14 12
Actuarial (profits) / losses on Scheme liabilities* (103) 890
Net benefits paid out (353) (332)
Closing defined benefit obligation 6,223 6,301
*Includes changes to the actuarial assumptions.
Changes to the fair value of Scheme assets
2007 2006
#'000 #'000
Opening fair value of Scheme assets 5,820 5,061
Expected return on assets 316 294
Actuarial (losses) / gains on Scheme assets (81) 671
Contributions by the employer 129 114
Contributions by plan participants 14 12
Net benefits paid out (353) (332)
Closing fair value of Scheme assets 5,845 5,820
Actual return on Scheme assets
2007 2006
#'000 #'000
Expected return on Scheme assets 316 294
Actuarial (losses) / gains on Scheme assets (81) 671
Actual return on Scheme assets 235 965
Analysis of income statement charge
2007 2006
#'000 #'000
Current service cost 62 44
Interest cost 302 290
Expected return on plan assets (316) (294)
Expense recognised in income statement 48 40
Analysis of amounts recognised in statement of recognised income and expense
2007 2006
#'000 #'000
Total actuarial gains / (losses) 22 (219)
Related deferred tax (31) 43
Total loss in statement of recognised income and expense (9) (176)
Cumulative amount of losses recognised in statement of recognised income and expense (168) (159)
History of asset values, defined benefit obligation, surplus / (deficit) in
Scheme and experience gains and losses
2007 2006 2005
#'000 #'000 #'000
Fair value of Scheme assets 5,845 5,820 5,061
Defined benefit obligation (6,223) (6,301) (5,397)
Deficit in Scheme (378) (481) (336)
Experience (losses) /gains on Scheme assets (81) 671 54
Experience (gains) / losses on Scheme liabilities 50 103 4
The estimated amounts of contributions expected to be paid to the Scheme during
2008 are #130,000.
4. 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.
5. PROFIT ON SALE OF INVESTMENT PROPERTIES
2007 2006
#'000 #'000
Surplus over book value and fair value gains:
Investment properties 1,751 3,102
6. PROFIT ON SALE OF INVESTMENTS
2007 2006
#'000 #'000
Surplus over book value:
Listed investments 959 2,975
Unlisted investments 28 98
Other - (49)
987 3,024
7. FINANCE INCOME
2007 2006
#'000 #'000
Income from investments
Dividends from listed investments 123 422
Dividend from unlisted investment 87 -
Distributions from funds (see note 17) 5,989 3,363
6,199 3,785
Interest receivable and similar income:
From joint ventures 1,466 3,540
Other interest 506 977
Other finance income
Expected return on pension scheme assets 316 294
Interest on pension scheme liabilities (302) (290)
14 4
8,185 8,306
8. FINANCE EXPENSE
2007 2006
#'000 #'000
Interest payable on loans and overdrafts 14,002 13,575
Charges in respect of cost of raising finance 8,626 1,732
22,628 15,307
Less: Interest capitalised (1,300) (991)
21,328 14,316
Interest payable under finance leases 132 129
21,460 14,445
Included within interest payable is #645,000 (2006: #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 #8,046,000 relating to debt
reorganisation costs (2006: #46,000).
Interest is capitalised at an average interest rate of 6.72% which is equal to
the average cost of borrowing on the development work at Folkestone.
9. TAXATION
2007 2006
#'000 #'000
Taxation on profit on ordinary activities
UK corporation tax:
Current at 30 % (2006: 30%) 8,047 13,755
(Over) / under provision in respect of prior (2,865) (913)
year's tax charge
5,182 12,842
REIT conversion charge 10,917 -
Deferred taxation (17,787) 3,659
(1,688) 16,501
Reconciliation of taxation charge 2007 2006
Profit on ordinary activities before taxation 67,754 90,956
Tax @ 30% 20,326 27,287
Share of joint ventures' post tax profits (8,147) (6,387)
Share of associates post tax profits - (215)
Net tax on assets sold during the year (1,516) (421)
Dividends received not taxable (37) (127)
Net capital allowances on asset disposals (1,903) (4,290)
Disallowable expenses 845 289
Other differences 24 (39)
Share Scheme timing difference (311) 669
Release of deferred tax in respect of conversion to a REIT (18,250) -
REIT conversion charge 10,917 -
Tax on properties appropriated to investment properties 1,755 -
Net tax on fair value gains of assets (2,528) 648
Adjustment in respect of prior years (2,863) (913)
(1,688) 16,501
10. 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 income statement. Profit attributable
to members includes #2,835,000 (2006: #8,438,000) which has been dealt with in
the accounts of the Company.
11. DIVIDENDS
Group and Company 2007 2006
#'000 #'000
On Ordinary 5p shares
Final 10.0p at 31 March 2006 paid 15 September 2006 5,343 5,065
(Final at 31 March 2005: 9.5p)
Interim 10.0p at 30 September 2006 paid 23 February 2007 5,348 5,069
(Interim at 30 September 2005: 9.5p)
10,691 10,134
A final dividend of 11p per share amounting to a total of #6,172,000 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 2008.
12. EARNINGS PER SHARE
Earnings per share of 129.26p (2006: 140.17p) are calculated on the profit for
the year of #69,425,000 (2006: #74,432,000) and the weighted average of
53,709,342 (2006: 53,100,390) shares in issue throughout the year.
Diluted earnings per share of 127.69p (2006: 138.79p) are calculated on the
profit for the year as above divided by the weighted average number of shares in
issue, being 54,369,516 (2006: 53,628,509) 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:
2007 2006
Earnings per share: weighted average number of shares 53,709,342 53,100,390
Weighted average ordinary shares to be issued under employee 660,174 528,119
incentive arrangements
Diluted earnings per share: weighted average number of shares 54,369,516 53,628,509
13. GOODWILL
#'000
Group
Cost
At 31 March 2006 11,205
Additions 74
At 31 March 2007 11,279
Impairments -
At 31 March 2006 and 31 March 2007 -
Net book value at 31 March 2007 11,279
Net book value at 31 March 2006 11,205
Goodwill is not amortised but is subject to an annual impairment test. The
addition to goodwill during the year of #74,000 was as a result of the
acquisition of JS Real Estate Plc on 14 March 2007. This goodwill is allocated
to the cash generating unit ("CGU") defined as the property investment business
owned by JS Real Estate Plc. The original goodwill of #11,205,000 is allocated
to the 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.
14. INVESTMENT PROPERTIES AND PROPERTIES UNDER THE COURSE OF DEVELOPMENT
Freehold Leasehold Total Properties
Investment Under the
with over Properties Course of
50 years Development
unexpired
#'000 #'000 #'000 #'000
Group
At 31 March 2006 279,533 53,665 333,198 12,261
Acquired during the year from business 117,871 6,645 124,516 -
combinations
Additions 18,500 - 18,500 -
Capital expenditure 517 74 591 7,397
Disposals (30,773) (19,288) (50,061) -
Exchange differences (110) - (110) -
Net gain from fair value adjustments on 11,668 (470) 11,198 -
investment property
AT 31 MARCH 2007 397,206 40,626 437,832 19,658
Additions include #7,425,000 of properties appropriated from inventories during
the year, the balance of inventories were sold during the year. 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 2007.
Investment properties were valued as follows:
#'000
Cushman & Wakefield Healey & Baker 434,844
King Sturge 2,745
Directors' valuation 4,076
441,665
A reconciliation of investment property valuations to the balance sheet carrying
value of property is shown below:
2007 2006
#'000 #'000
Investment property at market value as determined by external valuers and 441,665 332,092
Directors' valuation
Add minimum payment under head leases separately included as a creditor in the 1,501 1,515
balance sheet
Less accrued lease incentives separately accrued as a debtor in the balance (42) (409)
sheet
Less properties treated as finance lease assets (5,292) -
Balance sheet carrying value of investment property 437,832 333,198
Included within investment properties is interest capitalised of #2,291,000 at
31 March 2007 (2006: #991,000).
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 (2006: #Nil)
On an historical cost basis the investment properties which have been included
above at valuation would have been shown at cost as #399,660,000 (2006:
#288,435,000).
Investment properties and properties under the course of development valued at
#451,134,000 are used as security for Group loans.
15. PLANT AND EQUIPMENT
#'000
Group
Cost
At 31 March 2006 1,253
Acquired during the year from business combinations -
Additions 225
Disposals (97)
At 31 March 2007 1,381
Depreciation
At 31 March 2006 788
Charge for year 151
Disposals (97)
At 31 March 2007 842
Net book value at 31 March 2007 539
Net book value at 31 March 2006 465
Plant and equipment include plant, machinery, fixtures, fittings, motor vehicles
and equipment.
16. Investments in joint ventures
Group #'000
Share of joint ventures
At 31 March 2006 103,372
Share of post-tax profits for the year 27,157
Net equity movements 39,910
Net loan movements (18,871)
At 31 March 2007 151,568
2007 2006
#'000 #'000
Unlisted shares at cost 72,834 27,632
Group's share of post acquisition retained profits and 59,794 37,929
reserves
132,628 65,561
Amounts owed by joint ventures 18,940 37,811
151,568 103,372
Included in share of joint ventures' gross assets and liabilities
are:
Agora Radial Bareway Agora Greater Others Total
Shopping Distribution Industrial Max London (h)
Limited Properties Limited Offices
Centres Limited
(a) (c) (d) (f) Limited
(g)
#'000 #'000 #'000 #'000 #'000 #'000 #'000
Year to 31 March 2007
Group share of results
Revenue 8,497 7,017 - 11,307 1,454 - 28,275
Operating profit before net gains on investments 3,626 6,312 (5) 5,330 1,179 16 16,458
Net gain from fair value adjustments on 3,621 7,155 - 6,558 373 - 17,707
investment properties
Profit / (loss) on sale of investment - 374 - - - - 374
properties
Operating profit 7,247 13,841 (5) 11,888 1,552 16 34,539
Net finance expense (4,967) (6,354) - (7,049) (1,247) 92 (19,525)
Change in fair value of derivative financial 10 1,490 - 6,502 711 - 8,713
instruments
Profit / (loss) before income tax 2,290 8,977 (5) 11,341 1,016 108 23,727
Taxation - current 567 8 - - - (92) 483
Taxation - deferred 7,722 3,053 - (4,722) (325) - 5,728
Profit / (loss) after income tax 10,579 12,038 (5) 6,619 691 16 29,938
REIT conversion charge (1,281) (1,515) - - - - (2,796)
Minority interests - - - 15 - - 15
Profit / (loss) for the year 9,298 10,523 (5) 6,634 691 16 27,157
Amounts receivable by Group
Asset management fees 692 758 - 974 34 - 2,458
Performance fees 2,986 - - 3,722 - - 6,708
Interest receivable 543 649 - - 274 - 1,466
Group share of
Non-current assets
Investment properties 132,143 143,742 - 179,029 49,445 - 504,359
Investments in unlisted shares - - - - - 25 25
Finance lease assets - 3,408 - - - - 3,408
Derivative financial assets 1,157 1,200 - 6,554 711 - 9,622
Other non-current assets 402 - - - - - 402
133,702 148,350 - 185,583 50,156 25 517,816
Current assets
Finance lease assets - 243 - - - - 243
Other current assets 5,244 7,337 - 4,845 1,222 3,048 21,696
5,244 7,580 - 4,845 1,222 3,048 21,939
Total assets 138,946 155,930 - 190,428 51,378 3,073 539,755
Non-current liabilities
Deferred income tax liabilities (366) (378) - (6,902) (324) - (7,970)
Borrowings, including finance leases (4,515) (109,975) - (131,907) (39,391) - (285,788)
Other non-current liabilities (1,121) (1,326) - - - - (2,447)
(6,002) (111,679) - (138,809) (39,715) - (296,205)
Current liabilities
Borrowings, including finance leases (72,861) - - - - - (72,861)
Other current liabilities (6,140) (3,626) - (24,538) (1,486) (2,271) (38,061)
(79,001) (3,626) - (24,538) (1,486) (2,271) (110,922)
Total liabilities (85,003) (115,305) - (163,347) (41,201) (2,271) (407,127)
Share of net assets / (liabilities) 53,943 40,625 - 27,081 10,177 802 132,628
Agora Skipper Radial Bareway Industrial Agora Max Others Total
Shopping Distribution Industrial Funds Limited
Offices Limited Properties (f) (h)
Centres Limited Limited 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 8,153 996 4,896 564 284 1,582 (361) 16,114
investments
Net gain from fair value adjustments on 13,936 - 7,856 - - 7,123 - 28,915
investment properties
Net gain from fair value adjustments on - - - - 1,063 - - 1,063
investments
Profit / (loss) on sale of investment 4,023 (810) 892 664 (80) 11 - 4,700
properties
Profit on sale of fixed asset investments - - - - 77 - - 77
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 (1,454) (305) (308) - - 51 - (2,016)
financial instruments
Share of associate's post tax loss - - - - (200) - - (200)
Profit / (loss) before income tax 14,548 (1,605) 8,605 644 312 6,971 (343) 29,132
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 tax 11,746 (1,141) 5,855 591 (109) 4,529 (349) 21,122
Minority interests (4) - - - 185 (12) - 169
Profit / (loss) for the year 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 liabilities (8,087) - (3,518) - - (2,180) - (13,785)
Borrowings, including finance leases (86,181) - (73,731) - - (131,024) - (290,936)
Derivative financial liabilities - - (289) - - - - (289)
(94,268) - (77,538) - - (133,204) - (305,010)
Current liabilities
Deferred income tax liabilities - - - - - - - -
Borrowings, including finance leases (4,704) - - (108) - (7) - (4,819)
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 / (liabilities) 35,408 - 8,388 1,380 - 20,419 (34) 65,561
(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 in 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 and the Group subsequently acquired the remaining 50% interest in
Bareway Industrial Properties Limited.
(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) Greater London Offices Limited was set up on 28 September 2006 and
subsequently acquired Old Broad Street and Central House, London.
(h) Net assets relate to #25k investment in the general partner of Apia
Regional Office Fund and net asset of #777k which is the investment in
smaller joint ventures acquired through Ashtenne.
Joint venture investment properties are valued by DTZ Debenham Tie Leung and CB
Richard Ellis.
All joint ventures are incorporated in the United Kingdom.
Amounts owed by joint ventures comprise:
2007 2006
Group #'000 #'000
Agora Shopping Centres Limited (1,088) 25,687
Radial Distribution Limited - 12,016
Greater London Offices Limited 3,600 -
Bareway Industrial Properties Limited - 108
Agora Max Limited 17,502 -
Others (1,074) -
18,940 37,811
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
Agora Shopping Centres Limited (25,687) (1,088) (26,775)
Agora Max Limited - 17,502 17,502
Radial Distribution Limited (21,715) 9,699 (12,016)
Bareway Industrial Properties Limited (108) - (108)
Greater London Offices Limited - 3,600 3,600
Others - (1,074) (1,074)
(47,510) 28,639 (18,871)
17. INVESTMENTS IN FUNDS
Group #'000
As at 1 April 2006 104,081
Acquired during the year from business combinations -
Additions -
Disposals (472)
Net gain from fair value adjustments 17,013
At 31 March 2007 120,622
Fund Information:
AIF Apia Others Total
(a) (b) (c)
#'000 #'000 #'000 #'000
Year to 31 March 2007
Distributions receivable 2,838 3,130 21 5,989
Net assets at 31 March 2007 687,546 266,537 -
Percentage share at 31 March 2007 6.52% 28.07% -
Group share of net assets 44,828 74,817 977 120,622
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; 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, and #418,000 in May 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. The holding in Apia IV Unit Trust was disposed of in September
2006.
The units held in AIF valued at #25,675,000 and the units in Apia valued at
#44,471,000 are used as security for Group loans.
18. INVESTMENTS IN LISTED AND UNLISTED SHARES
Group Company
2007 2006 2007 2006
#'000 #'000 #'000 #'000
Subsidiary undertakings (a) - - 249,965 113,476
Listed investments (b) 1,045 5,115 - -
Unlisted investments 12,215 - 12,009 -
13,260 5,115 261,974 113,476
(a) SUBSIDIARY UNDERTAKINGS
Shares in Loans to
subsidiary subsidiary Company
undertakings undertakings total
#'000 #'000 #'000
Cost
At 31 March 2006 61,876 51,600 113,476
Additions 136,521 - 136,521
Disposals (32) - (32)
At 31 March 2007 198,365 51,600 249,965
(b) LISTED INVESTMENTS
Group Company
#'000 #'000
Listed on the London Stock Exchange
At 31 March 2006 5,115 -
Additions 209 -
Disposals (4,283) -
Net gain from fair value adjustments 4 -
At 31 March 2007 1,045 -
Group Company
#'000 #'000
Historic cost of listed investments
At 31 March 2007 3,900 -
At 31 March 2006 6,740 -
(c) UNLISTED INVESTMENTS
Group Company
#'000 #'000
At 31 March 2006 - -
Reclassified from Investment in Associates 15,108 15,009
Net movements (2,893) (3,000)
At 31 March 2007 12,215 12,009
19. INVESTMENTS IN ASSOCIATES
Group Company
Bride Hall Other Total Bride Hall
Group Limited Group Limited
#'000 #'000 #'000 #'000
Cost
At 1 April 2006 1,173 509 1,682 1,173
Reclassified as unlisted investment (1,173) (99) (1,272) (1,173)
Share of profits - - - -
Equity movements - (386) (386) -
At 31 March 2007 - 24 24 -
Goodwill arising on acquisition
At 1 April 2006 13,836 - 13,836 13,836
Reclassified as unlisted investment (13,836) - (13,836) (13,836)
At 31 March 2007 - - - -
At 31 March 2007 - 24 24 -
At 1 April 2006 15,009 509 15,518 15,009
20. TRADE AND OTHER RECEIVABLES
Group Company
2007 2006 2007 2006
#'000 #'000 #'000 #'000
Amounts falling due within one
year:
Trade receivables 17,141 2,558 - -
Amounts owed by Group - - 350,390 247,724
undertakings
Other debtors 6,873 12,364 215 167
Lease incentive debtors 9 68 - -
Prepayments and accrued income 5,731 8,106 1,197 1,212
29,754 23,096 351,802 249,103
Amounts falling due after more
than one year:
Lease incentive debtors 33 363 - -
Total trade and other receivables 29,787 23,459 351,802 249,103
21. NET INVESTMENT IN FINANCE LEASES
Group 2007 2006
Gross Unearned Net investment Gross Unearned finance Net
investment in finance income in finance investment in income investment
finance lease lease finance lease in finance
lease
#'000 #'000 #'000 #'000 #'000 #'000
Within one year 292 (283) 9 - - -
Between two 1,168 (915) 253 - - -
and five years
Later than five 20,520 (15,490) 5,030 - - -
years
Total 21,980 (16,688) 5,292 - - -
The Group has leased out an investment property under a finance lease of 64
years in duration. This is accounted for as a finance lease receivable rather
than an investment property and is equal to the total of the discounted future
lease payments and the discounted unguaranteed residual value of the property.
The unguaranteed residual value of the building is #3,059,000. The fair value
of the Group's finance lease receivables approximates to the carrying value.
22. BORROWINGS, INCLUDING FINANCE LEASES
Group Company
2007 2006 2007 2006
#'000 #'000 #'000 #'000
Amounts falling due after more
than one year:
Bank overdrafts 254,991 176,021 119,614 75,915
Bank and other loans 30,234 106,090 - -
Finance lease obligations (see 1,500 1,514 - -
note 23)
286,725 283,625 119,614 75,915
Amounts falling due within one
year:
Bank overdrafts 7 9 - -
Bank and other loans 25,796 1,884 - -
Finance lease obligations (see - - - -
note 23)
25,803 1,893 - -
Total borrowings, including 312,528 285,518 119,614 75,915
finance leases
Cash and cash equivalents (34,333) (98,358) - -
Net borrowings 278,195 187,160 119,614 75,915
Bank loans and overdrafts are secured on properties and listed and unlisted
investments owned by the Group. Other loans are all secured on certain
properties owned by the Group and by floating charges on assets of certain
subsidiary companies.
Group
2007 2006
#'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(a) - 22,351
Repayable otherwise than by instalments in more than five years
11.655% First Mortgage Debenture Stock 2015 (reducing to 9.75% from - 10,000
2009)(a)
9.635% First Mortgage Debenture Stock 2015(a) - 12,471
Redeemable in quarterly instalments of #150,000 maturing 2009:
At an interest rate of 6.29%(a) - 20,000
At an interest rate of 6.89%(a) - 6,229
Redeemable in quarterly instalments maturing 2011 at an interest 25,641 25,983
rate of 1.3% over GILT rate
25,641 97,034
(a) These loans were terminated early due to refinancing and have all been
repaid.
Summary of borrowings
Loans and overdrafts
2007 2006
#'000 #'000
Group
Within one year or on demand 25,824 1,893
Between one and two years 429 13,768
Between two and five years 285,972 222,438
In five years or more - 46,556
312,225 284,655
Future finance costs (1,197) (651)
311,028 284,004
Company
Within one year on demand - -
Between two and five years 119,614 75,915
119,614 75,915
Of the borrowings at 31 March 2007 #25,641,000 were non-recourse loans (2006:
#48,700,000).
23. FINANCE LEASE OBLIGATIONS
Group 2007 2006
#'000 #'000
(a) Minimum lease payments under finance leases fall due:
Not later than one year 120 121
Later than one year and not later than five years 481 484
Later than five years 12,287 12,490
12,888 13,095
Future finance charges on finance leases (11,388) (11,581)
Present value of finance lease liabilities 1,500 1,514
(b) Present value of minimum finance lease obligations:
Not later than one year - -
Later than one year and not later than five years 70 70
Later than five years 1,430 1,444
1,500 1,514
The fair value of the Group's finance lease obligations approximate to the
carrying value.
Finance lease obligations are in respect of leased investment properties.
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
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 are always sufficient working capital
facilities available to meet the requirements of the business. At 31 March
2007, the maturity profile of Group debt showed that the fixed rate debt has a
maturity of more than four 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:
2007 2006
#'000 #'000
Capped rate financial liabilities 100,000 13,669
Fixed rate financial liabilities 85,643 194,968
Floating rate financial liabilities 110,975 -
296,618 208,637
The above balances are net of cash balances of #14,410,000 (2006: #79,018,000)
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:
2007 2006
% %
Weighted average interest rate
Group 6.52 7.37
Joint Ventures 5.74 5.66
Weighted average period for which interest rate is fixed Years Years
Group 4.50 7.08
Joint Ventures 1.24 2.75
Maturity of financial liabilities 2007 2006
#'000 #'000
Group
Within one year or on demand 25,824 1,893
Between one and two years 429 13,768
Between two and five years 285,972 222,438
In five years or more - 46,556
312,225 284,655
Company
Within one year or on demand - -
Between two and five years 119,614 75,915
119,614 75,915
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.
2007 2006
#'000 #'000
Expiring in one year or less:
Total facilities - -
Unutilised - -
Expiring between two and five years:
Total facilities 263,400 137,741
Unutilised 54,383 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 changes to the balance sheet values on
fixed rate debt that would occur if fair values applied. Where no amount is
disclosed in the table below, there is no material difference between the book
value and the fair value.
2007 2007 2007 2006
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) 25,824 24,813 1,011 (7,286)
Assets
Long-term loan notes (over one year) (3,600) (3,373) (227) (535)
Joint ventures
Primary Financial Instruments
Long-term loan notes 3,600 3,373 227 535
The effect on net assets per share of the total fair value adjustment
(#1,011,000 less tax of #303,000) would be an increase of 1.3p pence (2006:
9.6 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:
#19,350,000 swapped at 5.965% fixed to June 2009 (1)
#1,561,000 swapped at 5.88% fixed to March2009 (1)
#100,000,000 capped at 7.25% to June 2007
#150,000,000 capped at 6.25% from June 2007 to June 2012
#25,000,000 callable swap at 4.34% to March 2032 (2)
#25,000,000 callable swap at 4.16% from March 2008 to March 2033 (3)
Joint Ventures:
#175,000,000 swapped at 4.1% to April 2008 (1)
#109,505,000 swapped at 4.5775% to February 2021 (1)
#124,160,000 capped at 5.00% to November 2008 (4)
#124,160,000 swapped at 4.54% from November 2008 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) & (5)
#72,200,000 swapped at 4.49% to October 2023 (1) & (6)
Note (1) The quarterly payment / receipt is the difference between 3 month
LIBOR and the rate quoted
Note (2) Barclays Capital has the right to call the SWAP on 31 March 2009 and
each two year interval thereafter
Note (3) Barclays Capital has the right to call the SWAP on 31 December 2009
and each two year interval thereafter
Note (4) Should LIBOR fall below 4.45% the fixed rate of 4.7% will be charged
Note (5) Should LIBOR fall below 4.18% the fixed rate of 4.68% will be charged
Note (6) Barclays Capital has the right to call the SWAP on 15 October 2011 and
each five year interval thereafter
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 2006 - 1,361
Net additions (709) -
Change in fair value of derivative financial instruments during the year (101) (910)
Fair value at 31 March 2007 (810) 451
25. DEFERRED INCOME TAX
Group Company
2007 2006 2007 2006
#'000 #'000 #'000 #'000
Deferred taxation assets
Deferred taxation arising from unrealised derivative financial 135 408 - -
instruments valuations
Deferred taxation arising from retirement benefit obligations 113 144 - -
Deferred taxation arising from share based payments 1,095 - 1,095 -
1,343 552 1,095 -
Deferred taxation liabilities
Deferred taxation arising from the temporary differences noted below:
Short term temporary differences (31) (108) - -
Capital and industrial buildings allowances claimed on investment - (2,107) - -
properties
Unrealised property and investment valuations (11,783) (27,348) - -
(11,814) (29,563) - -
The movement in deferred tax assets and liabilities during the year is as
follows:
Group Company
Derivative Retirement Share Share
financial benefit Based Based
instruments obligations Payments Total Payments Total
#'000 #'000 #,000 #'000 #,000 #'000
Deferred tax assets at 31 March 2006 408 144 - 552 - -
Charged to income statement (273) - 311 38 311 311
Charged to reserves - (31) 784 753 784 784
Total impact (273) (31) 1,095 791 1,095 1,095
Deferred tax assets at 31 March 2007 135 113 1,095 1,343 1,095 1,095
Unrealised Capital Short-term Group
fair value allowances timing Total
gains differences
#'000 #'000 #'000 #'000
Deferred tax liabilities at 31 March 2006 (27,348) (2,107) (108) (29,563)
Charged to income statement 15,565 2,107 77 17,749
Total impact 15,565 2,107 77 17,749
Deferred tax liabilities at 31 March 2007 (11,783) - (31) (11,814)
26. OTHER PROVISIONS
Share-based Onerous Total
payments contracts
#'000 #'000 #'000
Group
At 31 March 2006 503 12,000 12,503
Charged to consolidated income statement: - - -
Additions during the year - - -
Released during the year (503) (6,666) (7,169)
At 31 March 2007 - 5,334 5,334
Share-based Total
payments
#'000 #'000
Company
At 31 March 2006 503 503
Charged to consolidated income statement: (503) (503)
At 31 March 2007 - -
Provisions have been analysed between current and non-current as follows:
Group Company
2007 2006 2007 2006
#'000 #'000 #'000 #'000
Non-current 5,334 12,503 - 503
Current - - - -
5,334 12,503 - 503
The provision for share-based payments has now been reversed and is accounted
for through movements in equity.
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 remaining lease lengths range between
1 and 13 years.
The provision represents the Directors' estimate of the net cash flows on the
properties.
The key assumptions used are:
Rental growth rate 3.51% per annum
Inflation rate 2.50% per annum
Discount rate 6.50%
27. TRADE AND OTHER PAYABLES
Group Company
2007 2006 2007 2006
#'000 #'000 #'000 #'000
Amounts falling due within one year:
Trade payables 1,266 2,480 316 97
Amounts owed to Group undertakings - - 250,671 97,462
Amounts owed to joint ventures - 4,969 - -
Other taxation and social security 1,805 467 - 35
Other payables 22,930 6,758 20,271 5,000
Accruals and deferred income 20,753 14,895 6,371 1,563
46,754 29,569 277,629 104,157
Amounts falling due after more than one
year:
Other payables 14,238 - - -
Total trade and other payables 60,992 29,569 277,629 104,157
28. SHARE CAPITAL
2007 2006
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 2,675 2,548
Allotted through placing of shares (2007: 3,605,702 shares, 2006: 130 127
2,547,738 shares)
At 31 March (2007: 56,108,210 shares, 2006: 53,502,508 shares) 2,805 2,675
During the year 2,517,648 new Ordinary shares of 5p each were allotted for a
cash consideration of #21,400,000 through a placing of shares at 850p per share
on 31 January 2007. 88,054 new Ordinary shares of 5p each were allotted for a
cash consideration of #275,000 on the exercise of share options; 37,895 at
303.5p per share and 50,159 at 319p per share on 21 February 2007.
At 31 March 2007 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 89,510 shares
At 319p per share between 17 July 2005 and 16 July 2012 100,910 shares
At 367.5p per share between 27 June 2006 and 26 June 2013 182,054 shares
At 495p per share between 8 July 2007 and 7 July 2014 234,055 shares
At 31 March 2007 there were share options to subscribe for Ordinary shares at
nil cost under the Warner Estate Holdings Performance Share Plan as follows:
Between 4 October 2005 and 3 October 2008 142,057 shares
Between 19 January 2006 and 18 January 2009 31,726 shares
Between 26 June 2006 and 25 June 2009 181,681 shares
Between 1 August 2006 and 31 July 2009 4,703 shares
Between 21 February 2007 and 20 February 2010 4,589 shares
29. OTHER RESERVES
Non-distributable Reserves Distributable
Reserves
Share Share Based Revaluation Other *Retained
Premium Payments Reserve Reserve Earnings
Total
#'000 #'000 #'000 #'000 #'000 #'000
Group
At 31 March 2006 19,052 - 112,338 7,996 209,451 348,837
Premium on shares issued 21,311 - - - - 21,311
Retained profit for the year - - - - 69,425 69,425
Realised on disposal of investment properties - - (12,042) - 12,042 -
Realised on disposal of investments - - (1,286) - 1,286 -
Realised on disposal of joint ventures' - - (805) - 805 -
investment properties
Net gain from fair value adjustment on - - 11,198 - (11,198) -
investment properties
Share of joint ventures' net gain from fair - 17,707 (17,707)
value adjustment on investment properties
- - -
Net gain from fair value adjustment on listed - - 4 - (4) -
investments
Net gain from fair value adjustment on unlisted - - 14,120 - (14,120) -
investments
Change in fair value of derivative financial - - 1,011 - (1,011) -
instruments
Change in fair value of joint ventures' - - 8,713 - (8,713) -
derivative financial instruments
Dividends paid - - - - (10,691) (10,691)
Actuarial gains on pension scheme assets - - - - 22 22
Deferred tax movement on pension assets - - - - (31) (31)
Cost of share based payments - 1,004 - - - 1,004
Deferred tax movement on share based payments - 784 - - - 784
At 31 MARCH 2007 40,363 1,788 150,958 7,996 229,556 430,661
*The closing balance on retained earnings reserve includes #265,000 liability (2006: #337,000) stated
after a deferred tax asset of #113,000 (2006: #144,000) in respect of the Group's defined benefit
pension scheme as set out in note 3 to the accounts, and a #1,004,000 liability (2006: #503,000)
stated after a deferred tax asset of #784,000 (2006: #nil) in respect of share based payments.
The key assumptions used in valuing the fair value of share based payments are
as follows
Exercise price #nil
Share price Price at date of grant
Expected term 3 years
Expected volatility(1) 22% for awards granted on 21 February 2007, 19% for
all other awards
Expected dividend yield Dividends paid in the 12 months prior to grant
calculated as a percentage of the share price on the
date of grant
Risk free interest rate Not applicable as exercise price is #nil
(1) Volatility is calculated by looking at the historical share price movements
prior to the date of grant over a period of time commensurate with the expected
term for each award (i.e. 3 years). The formula calculates the ratio of each
day's price to the preceding value, which gives a "dimensionless" figure. The
final step is to calculate the standard deviation of the logs of these ratios
and to annualise this figure.
Non-distributable Reserves Distributable
Reserves
Share Share Based Revaluation Other *Retained
Premium Payments Reserve Reserve Earnings
Total
Company #'000 #'000 #'000 #'000 #'000 #'000
At 31 March 2006 19,052 - 1,023 7,078 174,743 201,896
Premium on shares issued 21,311 - - - - 21,311
Retained loss for the year - - - - 2,835 2,835
Change in fair value of derivative financial - - 121 - (121) -
instruments
Net gain from fair value adjustment on unlisted - - (3,000) - 3,000 -
investments
Dividends paid - - - - (10,691) (10,691)
Cost of share based payments - 1,004 - - - 1,004
Deferred tax movement on share based payments - 784 - - - 784
At 31 MARCH 2007 40,363 1,788 (1,856) 7,078 169,766 217,139
30. INVESTMENT IN OWN SHARES
Group and Company
Number Cost
#'000
At 31 March 2006 278,012 926
Additions 65,074 386
Disposals (155,699) (572)
At 31 March 2007 187,387 740
Additions relate to the Inland Revenue Approved All-Employee Share Ownership
Plan.
Included in investment in own shares are shares relating to the Inland Revenue
Approved All-Employee Share Ownership Plan, as follows:
2007 2006
Number Cost Market Number Cost Market
value value
#'000 #'000 #'000 #'000
Partnership shares purchased by employees, not 29,368 - 250 26,830 - 204
yet vested
Matching and Free shares not yet vested 137,697 740 1,174 104,812 470 796
167,065 740 1,424 131,642 470 1,000
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:
2007 2006
Subsidiary Nature of #'000 #'000
transaction
Cardiff and Provincial Properties Dividend 2,300 500
Limited
Clay Estates Limited Dividend 832 76
Clay Group Limited Dividend - 2,900
Lancaster Holdings Limited Dividend 1,000 2,400
Lancaster Investments Limited Dividend 500 800
Lotkeep Limited Dividend 3,000 3,000
Warner Estate, Limited Dividend 3,000 2,000
Warner Investments Limited Dividend 2,000 324
Balances outstanding between the parent company and its subsidiaries are shown
below:
Amounts owed by Amounts owed to
subsidiaries subsidiaries
2007 2006 2007 2006
Subsidiary #'000 #'000 #'000 #'000
Alliance Holdings Limited - 10 - -
Apia Asset Management Limited 103 130 - -
Ashtenne Holdings Limited - - (16,696) -
Birkby Limited - - (97) -
Cardiff and Provincial Properties - - (15,045) (16,447)
Limited
Clay Estates Limited - - (29,414) (1,781)
Clay Group Limited - 8,843 (1,610) -
Clay Investments Limited - 22 (8,843) -
Clay Property Limited - - (20,459) (25,542)
Industrial Funds Limited - 836 - -
Lancaster Holdings Limited 55,659 61,504 - -
Lancaster Investments (West Bromwich) 2,186 132 - -
Limited
Lancaster Investments Limited 3,321 144 - -
Lotkeep Limited - - (25,713) (25,794)
Mainscene Limited - - (21,314) (13,665)
Market Place (Jersey) Limited - 8 - -
Market Place Holdings (Jersey) Limited - 9 - -
Middleton Jersey One Limited 9 9 - -
Middleton Jersey Two Limited - 8 - -
Park Street Properties Limited 15,094 7 - -
Principal Leasehold Properties Limited 3,015 3,002 - -
Skipper Offices Limited - 1,685 (689) -
Skipper Regional Office Holdings Limited - 5 - -
Vere Street Investments Limited 5,199 5,499 -
Vere Street (Jersey) Limited 438 167 - -
Warner Active Management No 2 Limited - - (3,595) (3,806)
Warner Active Management No 3 Limited 104 - - -
Warner Active Management No 4 Limited 7 - - -
Warner Alliance (Jersey) Limited - 47 - (176)
Warner Estate (AIF) Limited - - (675) -
Warner Estate (Apia) Limited 9,485 - - -
Warner Estate Development (Folkestone) 26 - - -
Limited
Warner Estate (Folkestone) Limited - - (285) -
Warner Estate Investments Limited 34,395 10,304 - -
Warner Estate (Jersey) Limited 8,688 1,646 - -
Warner Estate (Joint Ventures) Limited 92,464 - - -
Warner Estate, Limited 73,946 10,304 - -
Warner Estate Management Limited 13,220 78,828 - -
Warner Estate Property Limited - - (24,006) -
Warner Funds Limited - 14,505 (34,650) -
Warner Industrial Acquisition Limited 33,031 60,257 - -
Warner Industrial Investments Limited - 115 (38,018) (5,608)
Warner Investments Limited - - (9,562) (4,643)
Warner Regional Offices Holdings Limited - 2 - -
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 16. Interest payable on these loans and
management charges, payable by the joint ventures, are also set out in note 16.
32. RECONCILIATION OF OPERATING PROFIT TO NET CASH FLOW
Group Company
2007 2006 2007 2006
#'000 #'000 #'000 #'000
Operating profit before net gains on investments 24,801 25,884 (3,114) (1,921)
Depreciation of plant and equipment 151 139 - -
Loss on sale of plant and equipment - 1 - (49)
Decrease in inventories 3,514 19,292 - -
Decrease / (increase) in trade and other receivables (8,284) 2,682 (212,070) (67,765)
(Decrease) / increase in trade and other payables (14,077) (23,295) 179,280 47,319
Cash generated from operations 6,105 24,703 (35,904) (22,416)
33. CONTINGENT ASSETS
2007 2006
#'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
2007 2006
#'000 #'000
Contingent liabilities in respect of guarantees given by
the Company in respect of borrowings of its subsidiaries
as follows:
Bank overdrafts 136,081 100,108
Other loans - 22,500
136,081 122,608
These liabilities have not been recognised on the balance sheet.
35. OPERATING LEASE COMMITMENTS
2007 2006
#'000 #'000
Group
Annual commitments in respect of operating leases on properties
are as follows:
Within one year 168 -
Expiring between two and five years 791 45
Expiring after five years 1,702 435
2,661 480
36. OPERATING LEASES GRANTED
2007 2006
#'000 #'000
Group
Annual rentals receivable in respect of operating leases on
properties are as follows:
Within one year 80 -
Expiring between two and five years 15 -
Expiring after five years - -
95 -
These relate to the onerous leases in note 26.
37. MINORITY INTEREST
This represents investments held by The FI5 Partnership in Balmcrest Estates
Limited.
38. ACQUISITIONS
The entire share capital of JS Real Estate Plc was acquired on 14 March 2007.
JS Real Estate is principally involved in property investment.
Acquisition of JS Real Estate Plc
Fair value
Book value adjustments Fair value
#'000 #'000 #'000
Net assets / (liabilities) acquired
Investment property 106,277 23,531 129,808
Plant and equipment 24 (24) -
Inventories 1,121 (1,121) -
Trade and other receivables 852 - 852
Cash and cash equivalents 9,743 - 9,743
Borrowings including finance leases (14,091) - (14,091)
Trade and other payables (4,915) (4,408) (9,323)
Current income tax liabilities (137) (269) (406)
98,874 17,709 116,583
Goodwill 74
Consideration 116,657
Satisfied by
100%
Cash consideration 94,684
Directly attributable acquisition costs 2,104
Loan notes payable 19,869
Cash consideration 116,657
JS Real Estate Plc contributed #354,000 to revenue and #259,000 to the Group's
profit before taxation for the period between the date of acquisition and 31
March 2007.
If JS Real Estate Plc had been acquired at 1 April 2006 it would have
contributed #8,199,000 to revenue and #4,540,000 to the Group's profit before
taxation.
On 18 September 2006, the Group acquired the remaining 50% of ordinary share
capital in Bareway Industrial Properties 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.
Bareway Industrial Properties Limited was set up as a 50-50 joint venture with
Barclays Bank and disposed of its properties on 30 November 2005.
Acquisition of remaining 50% of Bareway Industrial Properties Limited
Fair value
Book value adjustments Fair value
#'000 #'000 #'000
Net assets / (liabilities) acquired
Trade and other receivables 51 - 51
Cash and cash equivalents 237 - 237
Trade and other payables (88) - (88)
200 - 200
50% acquired 100
Goodwill -
Consideration 100
Satisfied by
Cash consideration 100
Bareway Industrial Properties Limited contributed #nil to revenue and a profit
of #29,000 to the Group's profit before tax for the period between the date of
acquisition and 31 March 2007.
Cash acquired #'000 #'000
JS Real Estate Plc 9,743
Bareway Industrial Properties 237
Limited
9,980
Cash paid on acquisition:
JS Real Estate Plc (92,864)
Bareway Industrial Properties (100)
Limited
(92,964)
Net cash acquired (82,984)
This information is provided by RNS
The company news service from the London Stock Exchange
END
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