RNS Number:0154Z
Westbury Property Fund Limited
28 February 2006
The Westbury Property Fund Limited
Annual Report and Consolidated Financial Statements
For the year from 1 January 2005 to 31 December 2005
Chairman's Statement
For the 12 months to 31 December 2005
I have pleasure in presenting the Annual Report and Consolidated Financial
Statements for the year ended 31 December 2005. This has been another
successful year for The Westbury Property Fund with strong portfolio performance
from both the balanced and venture portfolios.
I am pleased to report the audited net asset value per share due to Ordinary
Shareholders was 127.91p at 31 December 2005 which compares favourably with
105.25p at 31 December 2004. This represents a 21.5% improvement over the year
and is net of property acquisition costs, dividends paid and an accrual for the
Investment Manager's performance fee.
Dividends
The Board declared quarterly dividends on Ordinary Shares at the rate of 1.5p
per quarter, totalling 6p in respect of the year to 31 December 2005.
The Board has also declared and paid four quarterly dividends during the year
for each Income Share totalling 8p, fulfilling Income Shareholders' entitlement
to receive a fixed preferential dividend of 8% per annum over the life of the
Income Shares.
Net Asset Value
The Ordinary Shares are entitled to the assets of the Company after satisfaction
of all debt and other liabilities of the Company including the entitlement of
Income Shares.
The Company made a profit after taxation of #14,173,798 for the year (#7,563,311
in 2004). This figure is after the payment of all property acquisition costs and
the costs of running the Company, bank debt interest, dividends paid to Income
Shareholders, and a provision for the Investment Manager's performance fee
accrued in the year.
The Company had just over #50m of new funds to invest during 2005 and I am
delighted to report that this was successfully invested during the year (the
acquisition of two assets concluded shortly after the year end). It was the
Investment Manager's intention to target the London and the South East areas. I
am pleased that more than 75% of monies invested were placed in these areas
where there has been, and continues to be, particularly strong demand from other
property investors.
The Company's investment properties have been independently valued by Knight
Frank. These valuations are updated on a quarterly basis.
Bank Borrowings
As at 31 December 2005, the Company had fixed rate borrowings with Bradford &
Bingley amounting to #63m currently drawn down and fixed at an average
all-in-cost of 5.9% per annum until 25 June 2009. The Company has a further
#2.8m drawn down under its revolving facility which is set at a floating rate.
On a blended basis, the Company's all in cost of bank debt is approximately 5.9%
per annum.
The Investment Manager, with the Board's support, has instigated a prudent
rebasing of the security values on which the original debt package was based
using the portfolio values as at the end of September 2005 together with an
increase in the facility limit. On completion of this renegotiation, in January
2006, an additional circa #40m has been released for investment during 2006.
This will be targeted towards a blend of London and South East assets and
venture portfolio opportunities. The Investment Manager will, of course,
consider other opportunities outside these geographical limits on their merits
and on a case-by-case basis.
Over the medium term, the Company intends to maintain its gearing within a range
of 55% - 65% and whilst the interest rate outlook remains relatively stable, the
Company's policy is not to expose itself to any material interest rate risk.
Property Portfolio
As at 31 December 2005, the Company had a direct, or balanced, property
portfolio of 19 properties with an aggregate valuation of #127.6m. the includes
the Company's share of Mid City Place, a joint venture investment which has all
the characteristics of a balanced portfolio investment but is accounted for as a
joint venture in the financial statements. The Company now has 59 tenancies, a
total annualised rent roll at the year end of circa #7.8m and a weighted average
lease length of over 10.5 years.
The portfolio offers investors a balanced and diversified exposure to the UK
property market in terms of sector, region and tenant ability to meet the
financial commitments under their lease obligations.
Venture Property Investments
I am delighted that two further equity investments in joint ventures with other
experienced investors have been made during the year. One of these completed
shortly after the year end. The aggregate equity investment made was #2.92m.
Two profitable disposals have also been made from this portfolio during 2005,
which generated a combined #1.38m net profit on the Company's #2.24m aggregate
initial investment.
Furthermore, the Company made a #1.1m investment for a 50% stake in a joint
venture company which owns a health and fitness centre, in February 2006.
Each of the two remaining joint ventures which were held throughout the year are
separately capitalised and all debt arranged in each venture has been structured
on a non-recourse basis to the Company. The aggregate cost of the Company's
existing equity investments in these joint ventures amounts to some #1.1m and
the Company has made loans of a further #1.3m to one of these joint ventures.
The investments comprise a mixed-use development scheme in central Liverpool and
a storage and facilities handling business operating from a strategically
located site in Runcorn.
The investment horizon for these investments varies from two to five years and
if the forecast returns are achieved, there will be a significant uplift in the
net asset value due to Ordinary Shareholders. Further investments will be made
as opportunities present themselves.
Real Estate Investment Trusts (REITs)
There has been an increasing amount of discussion both within the industry and
in the press concerning the introduction of Real Estate Investment Trusts.
Although a revised draft consultation paper was issued by the Government at the
end of 2005, it appears that new legislation will be published in the Summer
2006 Finance Bill with conversion to REITs possible in January 2007 at the
earliest.
Unlike all UK domiciled quoted property companies, the Company already enjoys
many of the benefits of tax transparency. There is no capital gains tax for
Guernsey companies and all returns to shareholders are distributed gross.
The Board will continue to monitor the progress of legislation and will act in
shareholders' interests in meeting the challenges and opportunities of REITs if
appropriate.
Outlook
The commercial property market remains strong with 2005 seeing further yield
compression boosted by the considerable and unabated weight of money pursuing
investment opportunities and the continued expectation of rental growth.
Investor preference for property over equities and bonds has continued although
there are signs that equity markets are finding increasing favour.
At the start of 2006 there appears to be continued appetite from all areas of
the market for property opportunities which suggests further yield compression
will drive performance. Latest UK economic indicators suggest a moderation in
economic activity and a slowdown in consumer spending and confidence, despite a
generally reasonable Christmas trading period. This may have an impact on
future interest rate movements which are likely to remain relatively flat or
trend downward during the year which may positively impact on commercial
property values. Recent downward shifts in long term interest rates, since the
beginning of the year, seem to support this view.
The Board remains cautious as to the sustainability of continued rising capital
values as it seems unlikely that continued double digit returns will be seen
going forward. We do not however believe there will be a "hard landing", rather
a softening of property returns towards single digit levels. I believe the
Company to be well placed to meet its objectives through the mix of a high
quality, balanced portfolio with an attractive blended unexpired term and
exposure to each of the main property sectors, combined with exciting
opportunities within the venture portfolio.
Board of Directors
It is with great regret that I report the untimely and premature death of my
Board colleague Peter Dickson, who died following a boating accident whilst on
holiday abroad. Peter was a very effective member of the Board who undertook an
active role in the direction of the Company and his presence, experience and
participation in the running of the Company will, I know, be sorely missed. I
wish to take this opportunity to pass on the Board's sincere condolences and
support to Peter's wife and two sons at this very difficult time.
Under my direction, the Board has recently instigated a search to find a
suitable replacement for Peter and an appointment will be made in due course.
Shareholder Communication
In addition to the Annual and Interim Reports, the Investment Manager publishes
a Quarterly Performance Report on the activities of the Company. This is
distributed to shareholders by email. Any shareholder who does not currently
receive this document and wishes to do so should contact info@berringtonfm.com.
Rodney Baker-Bates
Chairman
27 February 2006
Investment Manager's Report
For the 12 months to 31 December 2005
Investment Objective and Policy
The Company's investment objective is to achieve income and capital growth
primarily from a diversified portfolio of commercial properties located in the
UK. The Company's investment policy is to acquire good quality properties let
on long leases to strong tenants so as to provide an income yield at least
sufficient to pay the Income Share dividend and otherwise to provide good
prospects for growth in both rental income and capital value for the long term
benefit of the Ordinary Shareholders.
To achieve this, the Investment Manager engages the services of very experienced
property fund managers and property company professionals, in order to utilise
these individual talents and experience into a highly effective team serving the
Company.
Performance
I am pleased to report that, after all costs incurred in running the Company and
after all dividends paid to shareholders, the net asset value has increased by
21.5% over the year. Taking account of the dividend this represents a total
return to Ordinary Shareholders over the year of 27.2%.
The performance of the underlying property portfolio, as measured by IPD, has
also remained strong with the Company achieving a Total Annual Return of 21.9%
for 2005. This placed the Company eighth out of the 64 funds in its peer group
and compares favourably with the Company's benchmark, the IPD Monthly Index,
which returned 18.4% for the year.
On a three year basis (to December 2005), the Company outperformed the Company's
benchmark return of 16.1% per annum by 2.3% per annum, placing the Company ninth
out of a peer group of 53 over the period.
Activity - Balanced Portfolio
During 2005, seven acquisitions have been concluded with the purchase of two
further assets completing shortly after the year end. These acquisitions total
#51.6m and reflect a blended net initial yield of 6.7%. In line with the
current strategic focus of the Company, more than 75% of monies were invested in
London and the South East.
As at 31 December 2005, the property portfolio was independently valued,
substantially by Knight Frank, at #127.6m. This includes the Company's share of
Mid City Place, a joint venture investment which is treated as part of the
Balanced Portfolio for fund management purposes. The portfolio produces an
aggregate rent roll of circa #7.8m per annum and a blended yield of circa 5.8%.
At the year end the Company's balanced property portfolio contained 19
properties diversified across the retail, office and industrial sectors. The
properties were let to 59 tenants and the portfolio as a whole had a weighted
average lease length of over 10.5 years.
The Company made the following acquisitions during 2005:
A multi-let shopping centre in Debden, Essex which was purchased for #3.3m,
reflecting a net initial yield of 7.2%. The scheme presents a number of asset
enhancement and redevelopment opportunities which are currently progressing
well.
The Company acquired a Business Park in Peterlee, County Durham for #7.1m,
reflecting a net initial yield of 8.2%. A re-gear and extension of the
principal lease on the park was concluded shortly after purchase which generated
added value to the investment. The property was valued at #8.6m on 31 December
2005. On 2 February 2006, the Company announced that it had completed the sale
of one unit and exchanged contracts to sell the remaining three units on the
Business Park for an aggregate sale price of #8.8m. On completion the sales will
generate a net profit after all costs of circa #1m, achieved over a 12 month
hold period.
Two industrial units in the predominant industrial area of Chelmsford were
purchased for #3.5m, on a net initial yield of 6.7% rising to over 8% on the
expiry of a concessionary rent granted to one of the tenants. Not only does the
investment present an attractive yield profile but offers a number of value
adding opportunities going forward which are currently being progressed.
The Company acquired a 94,000 sq ft industrial unit in Park Royal, London for
#10.1m on a seven year sale and leaseback based off a reversionary day one rent.
The investment offers good growth prospects and the purchase reflected an
attractive net initial yield of 7.3%.
In line with the Company's strategic focus, three investments have been made in
central London during 2005. A 19.7% equity stake in Mid City Place, High
Holborn, London was acquired for #9.8m, reflecting an underlying property net
initial yield of circa 6%. The building is a prime 350,000 sq ft office and
retail development with excellent growth prospects and the potential to add
value through lease re-gearing initiatives. Although the investment is a joint
venture, the Company's investment in Mid City Place has been treated as a
balanced portfolio investment as its characteristics are such.
In addition, two acquisitions (one completing shortly after the year end) have
been made in Soho Square, London WC1, totalling #11.4m. The blended net initial
yield of circa 6% represents an attractive yield in a market that is attracting
substantial investor interest. The buildings, one single let and the other
multi let, offer the opportunity to benefit from the strong levels of rental
growth anticipated in the West End.
The Company also acquired a 38,000 sq ft industrial unit on a six acre site at
Royal Portbury Dock, Bristol. The acquisition was made by way of a sale and
leaseback on a 20 year lease (with a 15 year break option) with a minimum fixed
increase at first review. The price paid, #3.95m, reflected an attractive net
initial yield of 7.8%.
In February 2006, the Company concluded the purchase of the long leasehold
interest in a part vacant, multi-let industrial estate in Hayes, Middlesex, for
#2.51m. The estate offers good growth prospects and there are a number of asset
enhancement opportunities to explore.
The sale of the Company's holding at Meadowcourt III, Sheffield also concluded
during the year. The sale price achieved, #3.95m reflected a premium of #0.25m
over the most recent valuation.
During the year, a profitable re-gear of the lease over the Swindon property was
achieved and a favourable rent review settled at the industrial holding in
Liverpool which has set a new tone for forthcoming reviews on the estate.
I am pleased to report that the target set at the start of 2005 to be fully
invested by the end of the year was successfully achieved. A number of asset
enhancement initiatives across the balanced portfolio remain ongoing and should
generate added value for the portfolio going forward.
Activity - Venture Portfolio
Venture property investments are an important component of the long term
performance of the Company's Ordinary Shares. The Company's venture investments
have been structured to provide strong returns within a relatively short time
horizon, typically two to five years, so as to complement the performance of the
balanced portfolio. All of the venture investments are in special purpose
companies or limited liability partnerships where any debt secured by those
entities is entirely non-recourse to the Company.
We have seen considerable activity in the venture portfolio during 2005 and
continue to review opportunities for inclusion in the portfolio. We are pleased
to report that one acquisition has been concluded with the purchase of a further
opportunity completing shortly after the year end for an aggregate consideration
of #2.92m. The Company has also made two profitable realisations of investments
held within the venture portfolio. The sales generated an aggregate 62% level
of profit, after all costs, of #1.38m on the Company's combined investment of
#2.24m.
The Company made the following acquisitions during 2005:
Westar Limited and Westar 2 Limited
The Company has acquired a 50% stake for #1.97m (#2.2m including costs) in a JV
company set up to acquire and hold a 150,000 sq ft retail warehouse unit on a
7.25 acre site at the Metro Centre, Gateshead. The property is leased to ILVA
Furniture, a Danish furniture retailer who is a new entrant into the United
Kingdom furniture market, for a 20 year term with fixed uplifts at each rent
review.
Endeavour Ware Limited
The Company exchanged contracts to make a #0.95m investment in return for a
47.5% stake in a joint venture company set up to acquire land and buildings at
Watton Road, Ware, Hertfordshire. The acquisition completed shortly after the
year end. The property presents a number of asset enhancement opportunities
which are being actively progressed. Other investors in the scheme include
Barlows Holdings Limited, Skybound Limited and Endeavour 2 UK Limited, who are
also the retained asset manager.
Westbury Fitness Limited
Post the year end, the Company invested #1.1m for a 50% stake in a joint venture
that has acquired an 80,000 sq ft purpose built health and fitness centre
located on Willerby Business Park, Willerby, Hull. The property is leased to
Total Fitness UK, for a minimum further 22 years with a fixed uplift at the
first rent review.
The Company made the following transactions during 2005:
WPL Estates Limited
The Company disposed of its interest in WPL Estates, the joint venture company
set up to hold a large industrial property fronting the North Circular Road,
Edmonton in north London. The sale crystallised a profit, after all costs, of
#0.74m on its initial investment of #1.14m and was achieved over a nine month
period.
Orton Shopping Centre Limited Liability Partnership
The Company also disposed of its 33.3% interest in the Orton Shopping Centre,
Peterborough. The sale generated a net profit after all costs of #0.64m based
on the initial investment of #1.1m made in October 2003.
An update on progress made in achieving business plan with the Company's
existing investments is detailed below:
Ropewalks One Limited Liability Partnership
In September 2003, the Company invested in a limited liability partnership in
exchange for a circa 50% interest in the acquisition and development of a mixed
use scheme in the centre of Liverpool. The development will consist of a
medical centre and 55 predominantly two bedroom apartments. The medical centre
has been pre-sold to The Medical Property Investment Fund Limited and most of
the apartments have also been pre-sold. Completion of the project is now
scheduled for March 2006. As at 31 December 2005, the Company had committed via
equity and loan capital a total of #976,000.
Westlink Investment Syndicate LLP
In 2004, the Company acquired a 50% stake in Westlink Investment Syndicate LLP
which in turn is the major shareholder in a North West based storage and
facilities handling business. The business operates from a large site with
road, rail, sea and inland waterway access. In seeking to redevelop the site,
the Syndicate made two tactical acquisitions during 2005 in purchasing a parcel
of land abutting the existing site together with Weston Point Studios Limited.
These strategic acquisitions are integral for access purposes to the future
development of the overall site and it remains the Company's intention to
further expand the operating activities of Weston Point Studios as well as the
freight handling activities of the Westlink Group. If the scheme proceeds, it
is intended the development will be for units for the Westlink Group's own
occupation rather than letting and sale. This is due to the significantly higher
income which can be derived from storage and handling, as opposed to merely
letting the new units, and in view of the demand for such services from large
companies located nearby the site. Discussions with British Waterways, the
freehold owner of the site, remain ongoing. As at 31 December 2005, the Company
had committed via equity and loan capital a total of #1.9m.
Outlook
The UK property market experienced another year of strong performance in 2005.
There appears to be no sign of the flow of money earmarked for investment in the
UK property market abating which could indicate continued downward pressure on
yields during 2006. This, combined with strengthening occupier markets and a
lack of any significant development pipeline, should mean continued
strengthening of market conditions, albeit at a potentially more subdued level
than 2005 with some nervousness emerging that the market may be reaching its
peak.
Overall, the Company has had a good year, profitably trading two venture
investments and one asset from the balanced portfolio as well as successfully
investing the monies raised at the end of 2004. Performance continues to be
strong, placing the Fund towards the top of its peer group, thereby
strengthening the Company's attraction to investors.
If further interesting opportunities present themselves over the coming months,
it is an objective of the Company to further expand its equity base.
Richard Burrell
Berrington Fund Management Limited
27 February 2006
Report of the Directors
The Directors of The Westbury Property Fund Limited ("the Company") and its
subsidiaries (together "the Group") are pleased to submit the Audited
Consolidated Financial Statements of the Group for the year from 1 January 2005
to 31 December 2005.
Investment Policy
The primary investment objective of the Group is to achieve income and capital
growth primarily from a diversified portfolio of commercial properties situated
in the United Kingdom. The Company also invests up to 10% of its gross assets
in property related venture investments.
Listing
The Capital and Income Shares of the Company were admitted to the Official List
of The London Stock Exchange on 18 April 2002 and to the Official List of The
Channel Islands Stock Exchange on 18 April 2002. On 20 December 2004 the
Company's Ordinary Shares were admitted to the Official List of The London Stock
Exchange and The Channel Islands Stock Exchange.
Share Issue and Conversion
Following a share placing and open offer, 21,296,399 Ordinary Shares were issued
on 20 December 2004. In addition 15,576,462 Income Shares were converted into
16,744,699 Ordinary Shares and 8,927,207 Capital Shares were converted into
12,453,454 Ordinary Shares also on that date. On 7 January 2005, the remaining
888,939 issued Capital Shares were compulsorily converted into a further
1,240,073 Ordinary Shares.
Results
The results for the year are shown in the Consolidated Statement of Operations
on page 22.
Dividend
During the year the Company has declared and paid the following interim
distributions to its Income Shareholders:
Dividend Number Date Declared Rate
First interim 31 March 2005 2.0p
Second interim 30 June 2005 2.0p
Third interim 30 September 2005 2.0p
On 20 December 2005 the Directors declared a final distribution of 2.0p.
During the year the Company has declared and paid the following interim
dividends to its Ordinary Shareholders:
Dividend Number Date Declared Rate
First interim 31 March 2005 1.5p
Second interim 30 June 2005 1.5p
Third interim 30 September 2005 1.5p
On 20 December 2005 the Directors declared a final dividend of 1.5p.
Directors' and Other Interests
The current Directors of the Company are listed on page 15. In addition, Peter
Dickson served as a Director during the year until his death on 30 December
2005.
The following Directors including persons connected with them held the following
number of shares at 31 December 2005:
Name Number of Ordinary % of Issued Number of Income % of Issued Income
Shares Ordinary Shares Shares Shares
R. Baker-Bates 279,000 0.54 - -
W. Kay 43,110 0.08 - -
T. Chesney 10,000 0.02 - -
None of the Directors had a service contract with the Company during the year.
As at 31 December 2005, Berrington Fund Management Limited was interested in
812,000 Ordinary Shares.
Corporate Governance
As a Guernsey incorporated company, the Company is not required to comply with
the Code of Best Practice published by the Committee on the Financial Aspects of
Corporate Governance (the "Combined Code"). However, the Directors place a high
degree of importance on ensuring that high standards of Corporate Governance are
maintained.
Going Concern
The Directors believe it is appropriate to adopt the going concern basis in
preparing the financial statements as, after due consideration, the Directors
consider that the Group has adequate resources to continue in operational
existence for the foreseeable future.
Substantial Shareholdings
At 14 February 2006, Directors were aware that the following shareholders owned
3% or more of the issued Ordinary Shares of the Company.
Number of Ordinary % of Ordinary
Shares Shares
Artemis High Income Fund 2,511,666 4.85
Butterfield Private Bank 2,122,269 4.10
BWD Rensburg Clients 1,640,531 3.17
City Asset Management Clients 2,497,083 4.83
Invesco Perpetual High Income Fund 2,243,273 4.34
Invesco Perpetual Income Fund 4,860,953 9.40
Rathbone Investment Management Clients 2,740,901 5.30
SMA Plc 3,225,000 6.23
St James Place UK Public Co 5,155,000 9.96
Directors' Responsibilities
The Directors are responsible for preparing financial statements for each
financial period which give a true and fair view of the state of affairs of the
Group and of the profit or loss of the Group for that period and are in
accordance with applicable laws. In preparing those financial statements the
Directors are required to:-
* select suitable accounting policies and apply them consistently;
* make judgements and estimates that are reasonable and prudent; and
* prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
Group and to enable them to ensure that the financial statements comply with the
Companies (Guernsey) Law, 1994. They are also responsible for safeguarding the
assets of the Group and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The Directors are responsible for ensuring that the Report of the Directors and
other information included in the Annual Report is prepared in accordance with
applicable company law. They are also responsible for ensuring that the Annual
Report includes information required by the Listing Rules of the Financial
Services Authority.
Status for Taxation
The Income Tax Authority in Guernsey has granted the Company exemption from
Guernsey income tax under the Income Tax (Exempt Bodies) (Guernsey) Ordinance
1989 and the income of the Company may be distributed or accumulated without
deduction of Guernsey income tax. Exemption under the above mentioned Ordinance
entails payment by the Company of an Annual Fee of #600.
The property subsidiaries are subject to United Kingdom tax on income arising on
investment properties, after deduction of their debt financing costs and
allowable expenses.
Auditors
Ernst & Young LLP have indicated their willingness to continue in office.
Tim Chesney, Director
Iain Stokes, Director
27 February 2006
Independent Auditor's Report to the Members of
The Westbury Property Fund Limited
We have audited the Group's financial statements for the year ended 31 December
2005 which comprise the Consolidated Statement of Operations, Consolidated
Balance Sheet, Consolidated Statement of Changes in Equity, Consolidated Cash
Flow Statement and the related notes 1 to 25. These financial statements have
been prepared under the accounting policies set out therein.
This report is made solely to the Company's members, as a body, in accordance
with Section 64 of the Companies (Guernsey) Law, 1994. Our audit work has been
undertaken so that we might state to the Company's members those matters we are
required to state to them in an auditors' report and for no other purpose. To
the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Company's members as a body, for our
audit work, for this report, or for the opinions we have formed.
Respective Responsibilities of Directors and Auditors
The Directors are responsible for the preparation of the financial statements in
accordance with applicable Guernsey law as set out in the Statement of
Directors' Responsibilities.
Our responsibility is to audit the financial statements in accordance with
relevant legal and regulatory requirements, International Standards on Auditing
(UK and Ireland) and the Listing Rules of the Financial Services Authority.
We report to you our opinion as to whether the financial statements give a true
and fair view and are properly prepared in accordance with the Companies
(Guernsey) Law 1994. We also report to you if, in our opinion, the Directors'
Report is not consistent with the financial statements, if the Company has not
kept proper accounting records or if we have not received all the information
and explanations we require for our audit or if information specified by the
Listing Rules regarding Directors' transactions with the Group is not disclosed.
We read the other information contained in the Annual Report and consider
whether it is consistent with the Audited Financial Statements. This other
information comprises the Chairman's Statement, Investment Manager's Report,
Directors' Profiles, Management and Administration and Report of the Directors.
We consider the implications for our Report if we become aware of any apparent
misstatements or material inconsistencies with the financial statements. Our
responsibilities do not extend to any other information.
Basis of Audit Opinion
We conducted our audit in accordance with International Standards on Auditing
(UK and Ireland) issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements. It also includes an assessment of the
significant estimates and judgments made by the Directors in the preparation of
the financial statements, and of whether the accounting policies are appropriate
to the Group's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
Opinion
In our opinion the financial statements give a true and fair view, in accordance
with International Financial Reporting Standards, of the state of affairs of the
Group as at 31 December 2005 and of its profit for the year then ended; and have
been properly prepared in accordance with the Companies (Guernsey) Law 1994.
Ernst & Young LLP
Guernsey, Channel Islands
27 February 2006
Consolidated Statement of Operations
For the year from 1 January 2005 to 31 December 2005
1/01/2005 1/01/2004
to to
31/12/2005 31/12/2004
Notes # #
Income
Rent receivable 6,371,690 5,183,813
Bank and other interest 1,221,726 242,245
Total Income 7,593,416 5,426,058
Expenses
Interest payable and similar charges, including
distributions on Income Shares 5 3,514,939 4,364,636
Investment Manager's fees 3 (i) 1,535,996 923,947
Performance fee 3 (i) 987,323 444,671
Legal and professional fees 172,315 232,325
Share reorganisation expenses 2,284 413,086
Property management expenses 245,007 160,838
Administration fee 3 (ii) 119,497 91,366
Directors' fees 4 111,951 68,542
General expenses 140,146 168,610
Bank charges 18,102 23,423
Audit fees 62,327 33,006
Tax consultancy fees 18,102 23,465
Total Expenses 6,927,989 6,947,915
Net profit/(loss) before investment result 665,427 (1,521,857)
Realised gain on sale of properties 763,133 768,107
Realised gain on sale of investments 1,380,681 752,357
Movement in unrealised gain on revaluation of properties 10 11,418,613 7,564,704
Share of profits of associates and joint ventures 70,203 -
Net profit for the year 14,298,057 7,563,311
Taxation 7 4,259 -
Share of associates and joint ventures taxation 120,000 -
Profit attributable to equity holders 14,173,798 7,563,311
Dividends on Ordinary Shares 6 2,447,118 -
Profit transferred to reserves 11,726,680 7,563,311
Basic and diluted profit per Ordinary Share 8 27.41p -
Basic and diluted profit per equivalent Ordinary Share 8 - 54.04p
All items in the above statement are derived from continuing operations. The
accompanying notes form an integral part of the financial statements
Consolidated Balance Sheet
as at 31 December 2005
31/12/2005 31/12/2004
Notes # #
Non-current Assets
Property 10 116,873,062 73,485,000
Investments in associates and joint ventures 11 14,883,260 3,240,954
131,756,322 76,725,954
Current Assets
Cash and cash equivalents 6,395,313 27,354,108
Debtors 13 4,135,452 1,504,789
10,530,765 28,858,897
Total Assets 142,287,087 105,584,851
Current Liabilities
Creditors 14 5,478,795 2,689,233
Non-current Liabilities
Long term loan 15 65,484,804 43,327,942
Income Shares 16 5,148,110 5,119,036
70,632,914 48,446,978
Total Liabilities 76,111,709 51,136,211
Net Assets 66,175,378 54,448,640
Represented by:
Capital and Reserves
Share capital 17 5,173,462 5,138,349
Share premium 18 39,698,503 39,733,558
Reserves 19 21,303,413 9,576,733
Issued capital and reserves 66,175,378 54,448,640
Net Asset Value per Ordinary Share 20 127.91p 105.25p
The financial statements were approved at a meeting of the Board of Directors
held on 27 February 2006 and signed on its behalf by:
Tim Chesney, Director
Iain Stokes, Director
The accompanying notes form an integral part of the financial statements
Company Balance Sheet
as at 31 December 2005
31/12/2005 31/12/2004
Notes # #
Non-current Assets
Investments in subsidiary companies 9 21,094,802 14,000,001
Loans to subsidiary companies 12 84,924,751 57,126,463
106,019,553 71,126,464
Current Assets
Cash and cash equivalents 6,233,206 20,520,882
Other debtors 39,768 10,699
6,272,974 20,531,581
Total Assets 112,292,527 91,658,045
Current Liabilities
Creditors 14 2,048,850 1,087,031
Non-current Liabilities
Long term loan 15 65,484,804 43,327,942
Income Shares 16 5,148,110 5,119,036
70,632,914 48,446,978
Total Liabilities 72,681,764 49,534,009
Net Assets 39,610,763 42,124,036
Represented by:
Capital and Reserves
Share capital 17 5,173,462 5,138,349
Share premium 18 39,698,503 39,733,558
Reserves 19 (5,261,202) (2,747,871)
Issued capital and reserves 39,610,763 42,124,036
The financial statements were approved at a meeting of the Board of Directors
held on 27 February 2006 and signed on its behalf by:
Tim Chesney, Director
Iain Stokes, Director
The accompanying notes form an integral part of the financial statements
Consolidated Statement of Changes in Equity
For the year from 1 January 2005 to 31 December 2005
Share Share Retained Reserves
Capital Premium Earnings
# # # #
Balance at 1 January 2005 5,138,349 39,733,558 9,576,733 54,448,640
On conversion of Capital Shares 35,107 (35,107) - -
Issue of Ordinary Shares 6 52 - 58
Dividends on Ordinary Shares - - (2,447,118) (2,447,118)
Profit attributable to equity holders - - 14,173,798 14,173,798
Balance at 31 December 2005 5,173,462 39,698,503 21,303,413 66,175,378
Share Share Retained Reserves
Premium Earnings
Capital
# # # #
Balance at 1 January 2004 981,615 8,387,893 2,013,422 11,382,930
On Conversion of Capital Shares 352,625 (352,625) - -
On conversion of Income Shares 1,674,469 13,450,982 - 15,125,451
Issue of Ordinary Shares 1,210,189 19,166,759 - 20,376,948
Share issue expenses 919,451 (919,451) - -
Profit attributable to equity holders - - 7,563,311 7,563,311
Balance at 31 December 2004 5,138,349 39,733,558 9,576,733 54,448,640
The accompanying notes form an integral part of the financial statements
Consolidated Cash Flow Statement
For the year from 1 January 2005 to 31 December 2005
1/01/2005 1/01/2004
to to
31/12/2005 31/12/2004
Notes # #
Operating Activities
Rent received 6,413,029 4,722,186
Bank and other interest received 528,855 242,245
Expenses paid (2,606,878) (1,609,823)
Interest paid and similar charges, including distributions on Income (3,440,497) (3,849,254)
Shares
Net cash inflow/(outflow) from operating activities 21 894,509 (494,646)
Investing Activities
Purchase of investments (2,646,476) (1,640,937)
Proceeds from sale of investments 2,930,698 2,752,357
Net loans advanced to investments (10,595,644) 1,338,983
Purchase of properties (35,072,874) (6,237,112)
Sales of properties 3,866,558 5,497,293
Net cash (outflow)/inflow from investing activities (41,517,738) 1,710,584
Financing Activities
Issue of Ordinary Shares 58 21,296,399
Issue costs paid on issuance of Ordinary Shares - (919,451)
Dividends paid on Ordinary Shares (2,447,118) -
Draw down of long term loan 22,328,000 2,500,000
Additional loan issue costs (216,506) -
Net cash inflow from financing activities 19,664,434 22,876,948
(Decrease)/increase in cash and cash equivalents (20,958,795) 24,092,886
Cash and cash equivalents at 1 January 27,354,108 3,261,222
Cash and cash equivalents at 31 December 6,395,313 27,354,108
The accompanying notes form an integral part of the financial statements.
Notes to the Financial Statements
For the year from 1 January 2005 to 31 December 2005
1. Operations
The Westbury Property Fund Limited is a closed-ended investment Company
incorporated in Guernsey whose investment objective is to achieve income and
capital growth primarily from a diversified portfolio of commercial properties
situated in the United Kingdom. The Group also invests up to 10% of its gross
assets in property related venture investments. The Group has no employees.
2. Principal Accounting Policies
Basis of Preparation
The financial statements of the Group have been prepared in conformity with
International Financial Reporting Standards ("IFRS") issued by the International
Accounting Standards Board, interpretations issued by the International
Financial Reporting Interpretations Committee and applicable legal and
regulatory requirements of Guernsey Law, and reflect the following policies:
Convention
The financial statements have been prepared on a going concern basis under the
Historical Cost Convention except for the measurement at fair value of
investment properties.
Basis of Consolidation
The Group financial statements consolidate the financial statements of The
Westbury Property Fund Limited and its subsidiary undertakings, Westbury
Properties Limited, Westbury (Yorkshire) Limited, Westbury (Hull) Limited, WPL
Ventures Limited, WPL Investments Limited and Endeavour Guernsey Limited, drawn
up to 31 December 2005.
Investments in Associates
The Group's investments in associates are accounted for under the equity method
of accounting. An associate is an entity in which the Group has significant
influence and which is neither a subsidiary nor a joint venture.
Under the equity method, investments in the associates are carried in the
balance sheet at cost plus post-acquisition changes in the Group's share of net
assets of the associates. After application of the equity method, the Group
determines whether it is necessary to recognise additional impairment loss with
respect to the Group's net investment in the associates. The consolidated
statement of operations reflects the share of the results of operations of the
associates. Where there has been a change recognised directly in the equity of
the associates, the Group recognises its share of any changes and discloses
this, when applicable, in the statement of changes in equity.
The financial statements of the associates are prepared for the same reporting
year as the Group or with a maximum difference of no more than three months,
using consistent accounting policies.
Investments in Joint Ventures
The Group has interests in joint ventures which are jointly controlled entities.
A joint venture is a contractual arrangements whereby two or more parties
undertake an economic activity that is subject to joint control, and a jointly
controlled entity is a joint venture that involves the establishment of a
separate entity in which each venturer has an interest. The Group recognises its
interest in joint ventures using equity accounting. The equity accounting method
is described in the 'Investments in Associates' accounting policy above.
Segmental Reporting
The Directors are of the opinion that the Group is engaged in a single segment
of business, being property investment and related business. The Group invests
in commercial properties and property related ventures situated in the United
Kingdom.
Impact of revisions to International Financial Reporting Standards
The following International Financial Reporting Standards have been revised for
periods commencing 1 January 2005 and have been adopted by the Group:
* IAS1 Presentation of financial statements
* IAS8 Accounting policies, changes in accounting estimates and errors
* IAS10 Events after the balance sheet date
* IAS17 Leases
* IAS24 Related party disclosures
* IAS27 Consolidated and separate financial statements
* IAS28 Investments in associates
* IAS31 Interests in joint ventures
* IAS32 Financial instruments: Disclosure and presentation
* IAS33 Earnings per share
* IAS39 Financial instruments: Recognition and measurement
* IAS40 Investment property
These revised standards have not had an impact on the Group's equity.
Income
Interest receivable is included in the financial statements on an accruals
basis. Rental income is included in the financial statements on an accruals
basis and is shown gross of any UK income tax.
Expenses
All expenses are accounted for on an accruals basis.
Issue Costs
The original placing expenses incurred amounted to #1,646,234 of which #251,000
related to bank loan issue costs. The remainder was allocated on a pro-rata
basis to the Capital and Income Shares, as follows:
Capital Shares #446,638
Income Shares #948,596
Bank Loan #251,000
The placing expenses allocated to the Capital Shares were written off in full
against the share premium account.
The placing expenses allocated to the Income Shares and Bank Loan are being
amortised through the Consolidated Statement of Operations over the term of
these instruments.
The placing expenses incurred in December 2004 in relation to the Ordinary
Shares amounted to #919,451 and have been written off in full against the share
premium account.
Associated share reorganisation costs amounting to #2,284 (2004 - #413,086) have
been expensed in the Consolidated Statement of Operations in the year.
The proportion of the unamortised original placing expenses allocated to those
Income Shares which were converted into Ordinary Shares in December 2004,
amounting to #451,011, were written off against the Income Share account in the
balance sheet at 31 December 2004.
Investments in Subsidiary Companies
The investments in subsidiary companies are included in the Company Balance
Sheet at cost.
Property - Freehold
Freehold properties are initially recognised at cost, being the fair value of
consideration given, including transaction costs associated with the property.
After initial recognition, freehold properties are measured at fair value, with
unrealised gains and losses recognised in the Consolidated Statement of
Operations. Fair value is based upon the open market valuations of the
properties as provided by Knight Frank, a firm of independent chartered
surveyors, as at the balance sheet date.
Property - Long Leasehold
Long leasehold properties are accounted for as freehold properties and, after
initial recognition at cost, are measured at fair value (on the same basis as
freehold properties above).
Loans to Subsidiary Companies
Unsecured subordinated loans to subsidiary companies are accounted for as
originated loans under IFRS in the Company balance sheet. These loans are
accounted for on an amortised cost basis with intercompany interest being
recognised under the effective interest rate method. These loans are reviewed
regularly for impairment.
Cash and Cash Equivalents
Cash on hand and deposits in banks are carried at cost. Cash and cash
equivalents are defined as cash in hand, demand deposits, and highly liquid
investments readily convertible to known amounts of cash and subject to
insignificant risk of changes in value. For the purposes of the Consolidated
Cash Flow Statement, cash and cash equivalents consist of cash in hand and
deposits in banks.
Bank Loans and Borrowings
All bank loans and borrowings are initially recognised at cost, being the fair
value of the consideration received, less issue costs where applicable. After
initial recognition, all interest-bearing loans and borrowings are subsequently
measured at amortised cost. Amortised cost is calculated by taking into account
any discount or premium on settlement.
Income Shares
Income Shares, which exhibit characteristics of liabilities, are recognised as
liabilities in the Balance Sheet in accordance with International Accounting
Standard 32. Income Shares are initially recognised at cost, being the fair
value of the consideration received, less issue costs. After initial
recognition, Income Shares are subsequently measured at amortised cost. The
corresponding distributions on these shares are charged as interest expense in
the Consolidated Statement of Operations over the term of these shares and are
accrued for from the date they are declared.
3. Material Agreements
(i) Under the terms of an appointment made by the Board on 11 January 2002,
Westbury Fund Management Limited was appointed as Investment Manager to
the Company. The Investment Management Agreement was novated to Berrington
Fund Management Limited ("BFML") on 30 September 2003. With effect from 11
January 2002 the Investment Manager is paid a fee of 0.1% of Gross Assets
(including the total amount available under the loan facility) per
calendar month payable monthly in arrears. In addition, BFML is entitled
to receive a performance fee of 15% of any return above an 8% per annum
(compound) hurdle as stated in the Prospectus. Provision is made in the
financial statements for the amount of performance fee accrued to date
based on the year end net asset value of the Group. The Investment
Manager's fees for 2005 include accrued performance fees amounting to
#987,323 (2004 - #444,671). The Investment Management Agreement is
terminable by the Company on 36 months' notice, save in circumstances
where the Group's performance, as measured annually by reference to the
Investment Property Databank ("IPD"), is consistently materially below the
IPD Monthly Benchmark. In such circumstances the agreement can be
terminated by the Company, at the discretion of the Board, on six months'
notice.
The Investment Manager has sub-delegated the management of the investment
properties to Insight Investment Management Limited and Barlows Asset
Management Limited.
(ii) Under the terms of an Administration Agreement dated 11 January 2002, the
Company appointed Guernsey International Fund Managers Limited ("GIFM") as
Administrator, Secretary and Channel Islands Stock Exchange Sponsor. This
agreement was terminated with effect from 1 May 2004.
The Company entered into an Administration Agreement dated 28 April 2004
with Mourant Guernsey Limited ("Mourant") under which Mourant agreed to
provide services to the Company as Administrator and Secretary to the
Company. For the period from 1 May 2004 to 30 November 2004, Mourant was
paid on a fixed fee basis of #75,000 per annum. From 1 December 2004,
Mourant is entitled to an annual fee calculated as to 0.09% on the first
#100m of Gross Assets and 0.07% of Gross Assets on the next #50m, subject to an
annual minimum of #75,000 per annum and such fees being invoiced monthly in
arrears.
The Company also entered into a Sponsorship Agreement dated 4 May 2004 with
Mourant Capital Markets Services Limited ("MCMS") under which MCMS agreed to
provide services to the Company in relation to the Company's listing on The
Channel Islands Stock Exchange.
4. Directors' Fees 1/01/2005 1/01/2004
to to
31/12/2005 31/12/2004
During the year each of the Directors was entitled to the following # #
fees:
R. Baker-Bates (Chairman) 28,000 20,000
T. Chesney 20,000 15,000
P. Dickson 20,000 15,000
W. Kay 20,000 15,000
I. Stokes 23,951 3,542
111,951 68,542
5. Interest Payable and Similar Charges 1/01/2005 1/01/2004
to to
31/12/2005 31/12/2004
# #
Long term loan:
Interest payable 2,983,485 2,574,692
Non-utilisation and related fees 34,945 23,632
Amortisation of loan issue costs 45,368 28,714
Other interest 333 -
Income Shares:
Distributions paid (Note 6) 421,734 1,622,617
Amortisation of issue costs 29,074 114,981
3,514,939 4,364,636
6. Distributions Paid on Income Shares 1/01/2005 1/01/2004
No. of to to
Income Rate 31/12/2005 Rate 31/12/2004
Shares pence # pence #
First interim distribution paid 18 April 2005 5,271,678 2.00 105,434 2.00 416,963
Second interim distribution paid 18 July 2005 5,271,678 2.00 105,433 2.00 416,963
Third interim distribution paid 18 October 5,271,678 2.00 105,433 2.00 416,963
2005
Fourth interim distribution paid 30 January 5,271,678 2.00 105,434 2.00 371,728
2006 (i)
Distributions paid and payable (Note 5) 8.00 421,734 8.00 1,622,617
(i) The fourth interim distribution declared on 31 December 2004 was
calculated on a time apportioned basis in respect of those Income Shares
which were converted into Ordinary Shares in December 2004.
Dividends Paid on Ordinary Shares 1/01/2005 1/01/2004
No. of to to
Ordinary Rate 31/12/2005 Rate 31/12/2004
Shares pence # pence #
First interim dividend paid 18 April 2005 (i) 51,734,625 1.50 895,080 - -
Second interim dividend paid 18 July 2005 51,734,625 1.50 776,019 - -
Third interim dividend paid 18 October 2005 51,734,625 1.50 776,019 - -
Dividends paid 4.50 2,447,118 - -
(i) The first interim dividend was calculated on a time apportioned basis being
#119,061 from 18 to 31 December 2004 and #776,019 from 1 January to 31
March 2005.
(ii) A fourth interim dividend of 1.50p was declared on 20 December 2005 and
paid on 30 January 2006.
7. Taxation
The Company and its Guernsey registered subsidiaries, Westbury Properties
Limited and Endeavour Guernsey Limited, have obtained exempt company status in
Guernsey under the terms of the Income Tax (Exempt Bodies) (Guernsey) Ordinance
1989 so that they are exempt from Guernsey taxation on income arising outside
Guernsey and on bank interest receivable in Guernsey. Each Company is,
therefore, only liable to a fixed fee of #600 per annum. The Directors intend
to conduct the affairs of these Guernsey registered companies such that they
continue to remain eligible for exemption.
Westbury Properties Limited and Endeavour Guernsey Limited are subject to United
Kingdom income tax on income arising on the investment properties, after
deduction of debt financing costs, allowable expenses and capital allowances.
WPL Investments Ltd and WPL Ventures Limited are subject to taxation in
Guernsey. The taxation charge of #4,259 arises in Guernsey.
8. Basic and Diluted Profit per Ordinary Share
The basic and diluted profit per Ordinary Share is based on profit attributable
to equity holders for the year of #14,173,798 and on 51,710,843 weighted average
number of Ordinary Shares in issue during the year.
The basic and diluted profit per equivalent Ordinary Share in 2004 is based on
profit attributable to equity holders for the year of #7,563,311 and on
13,996,352 Ordinary Shares, being the weighted average number of equivalent
Ordinary Shares in issue during the year.
9. Investments in Subsidiary Companies
The Company owns the whole of the issued Ordinary Share capital of Westbury
Properties Limited, specially formed to act as the property investment holding
company for the Group, and WPL Ventures Limited, an investment holding company,
both of which are incorporated and registered in Guernsey.
31/12/2005 31/12/2004
# #
Westbury Properties Limited 21,094,800 13,999,999
WPL Ventures Limited 2 2
21,094,802 14,000,001
Westbury Properties Limited owns the whole of the issued Ordinary Share capital
of WPL Investments Limited and Endeavour Guernsey Limited, both of which are
property and related investment companies and are incorporated and registered in
Guernsey, and of the following United Kingdom registered companies:
- Westbury (Yorkshire) Limited (dormant)
- Westbury (Hull) Limited (dormant)
10. Property
Properties are stated at fair value, which has been determined based on
valuations performed by Knight Frank as at 31 December 2005, on the basis of
open market value, supported by market evidence, in accordance with
International Valuation Standards.
31/12/2005 31/12/2004
Consolidated # #
At 1 January 73,485,000 64,479,348
Additions at cost 35,072,874 6,170,134
Disposals (3,103,425) (4,729,186)
Movement in unrealised gain on revaluation of properties 11,418,613 7,564,704
At 31 December 116,873,062 73,485,000
At the time of original Admission to The London Stock Exchange, one asset,
Admiral Retail Park, Eastbourne, represented more than 15% of the gross assets
of the Group. In order to comply with section 21.27 (e) of the FSA Listing
Rules, a Put Option Agreement was entered into, and subsequently in 2003, was
exercised under which the Group sold one of the units at Admiral Retail Park to
Barlows Holdings Limited for a consideration of #3.75m. Under this agreement
Barlows Holdings Limited also benefits from a 25% share of the profit arising on
any sale of the whole of the retail park (including the unit owned by them).
During the year ended 31 December 2005, the Group has complied with Sections
21.27 (f) to 21.27 (i) of the FSA Listing Rules.
11. Investments in associates and joint ventures
Business Year End Issued Residence Percentage of
Ordinary nominal value of
Shares of #1 issued shares held
each by Westbury Property
Fund Ltd
Ropewalks One LLP 30 September n/a UK 50% after the
promoter's
performance related
profit share
Orton Shopping Centre LLP 30 September n/a UK 33% after the
promoter's
performance related
profit share. The
Group disposed of
its interest in the
year.
WPL Estates Limited 31 December 900,000 Guernsey 50%. The Group
disposed of its
interest in the
year.
Westlink Investment Syndicate LLP 30 November n/a UK 50%
DV3 Mid City Ltd 31 December 10,000 BVI 19.73%
Westar Limited 31 December 10,000 Guernsey 50%
Westar 2 Limited 31 December 10,000 Guernsey 50%
Endeavour Ware Limited* 31 December 10,000 Guernsey 47.5%
* Acquired a property and commenced trading post year end.
The above investments comprise:
Business 2005 Group 2005 Company 2005 Group 2005 Company
# # # #
Cost of shares or member's capital 1,537,358 2,549,998
Loans 13,395,699 690,956
Share of accumulated profits, revaluation (49,797) 0
gains/(deficits) and taxation
14,883,260 0 3,240,954 0
The following information is given in respect of the Group's share of all
associates and joint ventures:
2005 Group 2004 Group
# #
Fixed Assets 69,618,671 5,976,629
Current Assets 6,781,090 2,021,387
76,399,761 7,998,0160
Liabilities due within one year 7,358,472 1,208,456
Liabilities due after one year 66,956,253 4,014,594
74,314,725 5,223,050
Share of net assets 2,085,036 2,774,966
Add back loans 13,395,699 690,956
Adjustment for provisions made (597,475) (224,968)
Carrying amount of associates and joint ventures 14,883,260 3,240,954
Share of associate's revenue and profit:
Revenue 5,334,725 1,111,104
(Loss) (95,204) (101,590)
The movement on investments in associates and joint ventures during the year was
as follows:
2005 Group 2004 Group
# #
Balance at 01 January 3,240,954 4,939,001
Acquired in year 2,646,476 1,640,937
Disposal proceeds (2,390,698) (2,752,357)
Net loans advanced/(repaid) 10,595,644 (1,338,984)
Profits realised 1,380,681 752,357
Share of accumulated profits, (49,797) 0
revaluation gains/(deficits) and taxation
Balance at 31 December 14,883,260 3,240,954
12. Loans to Subsidiary Companies
2005 2004
# #
Westbury Properties Limited 84,278,960 55,246,301
WPL Ventures Limited 645,791 1,880,162
84,924,751 57,126,463
At the year end, unsecured subordinated loans outstanding were #84,278,960 (2004
- #55,246,301) with Westbury Properties Limited and #645,791 (2004 - #1,880,162)
with WPL Ventures Limited, in support of property acquisitions and related
ventures. Interest charged for the year, included within the loan balances,
amounted to #5,505,737 (2004 - #4,689,559) on the Westbury Properties Limited
loan and #50,421 (2004 - #76,765) on the WPL Ventures Limited loan. The loans
are repayable in 2010 and interest is charged on the loans at the fixed rate for
that period plus a margin of 3% (2004 - 3%).
13. Debtors
31/12/2005 31/12/2004
Consolidated # #
VAT recoverable 152,699 -
Other debtors 222,103 11,451
Rent receivable 2,757,779 1,493,338
Property purchase deposits 310,000 -
Interest receivable 692,871 -
4,135,452 1,504,789
14. Creditors 31/12/2005 31/12/2004
# #
Consolidated
Other taxation 95,222 95,222
Amounts payable in respect of investment properties purchased - 50,522
Investment Manager's fees 134,237 -
Performance fee accrual 1,431,994 444,671
VAT - 204,048
Other creditors 452,160 324,697
Income distributions 105,434 -
Rent deposits 381,875 -
Interest payable and similar charges 272,542 -
Property management expenses 93,390 6,992
Administration fee 10,311 9,503
Audit and taxation fee 49,000 35,000
Rents received in advance 2,452,630 1,146,850
5,478,795 2,689,233
Company
Investment Manager's fees including performance fee accrual 1,566,231 444,671
Administration fee 10,311 9,503
Audit fee 10,000 20,000
Income distributions 105,434 371,728
Interest payable and similar charges 272,542 -
Other creditors 84,332 241,129
2,048,850 1,087,031
15. Long Term Loan
31/12/2005 31/12/2004
Consolidated and Company # #
Long term loan at 1 January 43,500,000 41,000,000
Amount drawn down in year 26,000,000 2,500,000
Amount repaid in year (3,672,000) -
Total loan drawn down at 31 December 65,828,000 43,500,000
Allocation of loan issue costs (251,000) (251,000)
Additional loan issue costs (216,506) -
Amortisation of loan issue costs - prior years 50,228 50,228
Amortisation of loan issue costs - 2004 28,714 28,714
Amortisation of loan issue costs - 2005 45,368 -
65,484,804 43,327,942
The Company has a loan facility agreement with Bradford & Bingley PLC which
increased during the year from #46,000,000 to #73,000,000. As at 31 December
2005, the Company had drawn down #65,828,000 (2004 - #43,500,000) under this
agreement leaving an undrawn balance of #7,172,000. This loan is due for
repayment on 31 December 2010. Of the loan, #63,000,000 (2004 - #37,500,000) is
fixed at interest rates averaging 5.9% until 25 June 2009.
The fair value of the loan at 31 December 2005 was approximately #66,785,000
(compared with the principal of #65,828,000).
During the year, the Company's bank borrowings were subject to the following
financial covenants:
* Loan to value ratio - the aggregate outstanding loan to current valuation of
investment properties should not exceed the following percentages:-
Up to 2nd Anniversary 80%
From 2nd to 4th Anniversary 75%
From 4th to 6th Anniversary 70%
From 6th Anniversary to final repayment 65%
* Quarterly rental cover - net rental income shall be at least 140% of loan
interest payable.
* Period of occupational leases - at least 45% of net rental income shall arise
from occupational leases with unexpired terms of eight years or more.
* No single property shall exceed #25 million.
The Company has been in compliance with the financial covenants throughout the
year.
16. Income Shares
31/12/2005 31/12/2004
Consolidated and Company # #
As at 1 January 5,119,036 20,129,506
15,576,462 shares converted to Ordinary Shares - (15,576,462)
Allocation of unamortised issue costs to converted shares - 451,011
Amortisation of issue costs 29,074 114,981
As at 31 December 5,148,110 5,119,036
In accordance with International Financial Reporting Standards, the Income
Shares are treated as a liability as described under Accounting Policies in Note
2.
The Income Shares are entitled to a fixed preferential distribution of 8% per
annum over the life of the Income Shares and are due to be redeemed by the
Company on 31 March 2010 at their issue price together with arrears of
distribution (if any).
The fair value of the Income Shares at 31 December 2005 was #5,956,996 (2004 -
#5,587,978) based on a market offer price of 113p (2004 - 106p) per share.
17. Share Capital
31/12/2005 31/12/2004
Authorised share capital - Capital Shares # #
Authorised at 1 January - 888,939 shares of 10p each 88,894 5,000,000
Reduction during the year (88,894) (4,911,106)
Authorised at 31 December - nil - 88,894
Authorised share capital - Ordinary Shares
Authorised at 1 January - 218,839,381 shares of 10p 21,883,938 -
each
Authorised during the year - 21,883,938
Authorised at 31 December - 218,839,381 shares of 10p each 21,883,938 21,883,938
Authorised share capital - Deferred Shares
Authorised at 1 January - 1,000 shares of 0.1p each 1 -
Authorised during the year - 1
Authorised at 31 December - 1,000 shares of 0.1p each 1 1
31/12/2005 31/12/2004
Number of Share Number of Share
Shares Capital Shares Capital
# #
Capital Shares of 10p each issued and fully paid
Balance at 1 January 888,939 888,894 9,816,146 981,615
Converted to Ordinary Shares in the year (888,939) (88,894) (8,927,207) (892,721)
Balance at 31 December - - 888,939 88,894
31/12/2005 31/12/2004
Number of Share Number of Share
Shares Capital Shares Capital
# #
Ordinary Shares of 10p each issued and fully paid
Balance at 1 January 50,494,552 5,049,455 - -
Issued during the year 52 6 21,296,399 2,129,640
Issued on the conversion of Capital Shares to 1,240,017 124,001 12,453,454 1,245,345
Ordinary Shares in the year
Issued on conversion of Income Shares to - - 16,744,699 1,674,470
Ordinary Shares in the year
Balance at 31 December 51,734,625 5,173,462 50,494,552 5,049,455
Total share capital at 31 December 51,734,625 5,173,462 51,383,491 5,138,349
The balance of Capital Shares were compulsorily converted into Ordinary Shares
in January 2005 giving rise to a total of 51,734,625 Ordinary Shares in issue.
Voting Rights
Ordinary Shareholders are entitled to vote at all general meetings.
The Deferred Shares have no voting rights.
Dividends
After the payment of the fixed cumulative preference distribution of the Income
Shares, the Ordinary Shareholders are entitled to the balance of profit made
available for distribution by the Company.
The Deferred Shares carry no entitlement to dividends or other distributions out
of the profits of the Group.
Capital Entitlement
The Ordinary Shareholders are entitled to all capital once the holders of Income
Shares have been paid their entitlement of #1 of capital per Income Share.
The Deferred Shareholders are entitled to the repayment of the amounts paid up
on the Deferred Shares after payment in respect of each Ordinary Share and #1m.
18. Share Premium
31/12/2005 31/12/2004
# #
Share premium at 1 January 39,733,558 8,387,893
Proceeds on Ordinary Shares issued - 19,166,759
Arising on conversion of Income Shares - 13,450,982
Utilised on conversion of Capital Shares (35,055) (352,625)
Share issue expenses - (919,451)
Share premium at 31 December 39,698,503 39,733,558
19. Reserves Profit and Loss Reserves
31/12/2005 31/12/2004
# #
Consolidated
Reserves at 1 January 9,576,733 2,013,422
Profit attributable to equity holders 14,173,798 7,563,311
Dividends on Ordinary Shares (2,447,118) -
Reserves at 31 December 21,303,413 9,576,733
Company
Reserves at 1 January (2,747,871) (1,910,554)
Net loss for the year (66,213) (837,317)
Dividends on Ordinary Shares (2,447,118) -
Reserves at 31 December (5,261,202) (2,747,871)
20. Net Asset Value per Ordinary Share
The net asset value per Ordinary Share is based on the net assets attributable
to the Ordinary Shareholders of #66,175,378 (2004 - #54,448,640) and on
51,734,625 (2004 - 51,734,569) Ordinary Shares in issue at the balance sheet
date including the converted equivalent of the residual Capital Shares converted
in January 2005.
21. Note to the Consolidated Cash Flow Statement
1/01/2005 1/01/2004
to to
31/12/2005 31/12/2004
# #
Reconciliation of net profit/(loss) before investment result to net cash
inflow/(outflow) from operating activities:
Net profit/(loss) before investment result 665,427 (1,521,857)
UK taxation charge (4,259) -
Adjustment for non-cash items:
Amortisation of Income Share issue costs 29,074 114,981
Amortisation of loan issue costs 45,368 28,715
(Increase) in debtors (2,630,663) (879,161)
Increase in creditors 2,789,562 1,762,676
Net cash inflow/(outflow) from operating activities 894,509 (494,646)
22. Financial Instruments and Properties
The Group holds cash and liquid resources as well as having debtors and
creditors that arise directly from its operations. The Group has not entered
into any derivative transactions during the year under review.
The main risks arising from the Group's financial instruments and properties are
market price risk, credit risk, liquidity risk and interest rate risk. The
Board regularly reviews and agrees policies for managing each of these risks and
these are summarised below.
Market Price Risk
The Group's exposure to market price risk is comprised mainly of movements in
the value of the Group's investment in property. Property and property related
assets are inherently difficult to value due to the individual nature of each
property. As a result, valuations are subject to uncertainty. There is no
assurance that the estimates resulting from the valuation process will reflect
the actual sales price even where a sale occurs shortly after the valuation
date.
Rental income and the market value for properties are generally affected by
overall conditions in the local economy, such as growth in gross domestic
product, employment trends, inflation and changes in interest rates. Changes in
gross domestic product may also impact employment levels, which in turn may
impact the demand for premises. Furthermore, movements in interest rates may
also affect the cost of financing for real estate companies.
Both rental income and property values may also be affected by other factors
specific to the real estate market, such as competition from other property
owners, the perceptions of prospective tenants of the attractiveness,
convenience and safety of properties, the inability to collect rents because of
the bankruptcy or the insolvency of tenants or otherwise, the periodic need to
renovate, repair and release space and the costs thereof, the costs of
maintenance and insurance, and increased operating costs.
The Directors monitor market value by having independent valuations carried out
quarterly by Knight Frank.
Credit Risk
Credit risk is the risk that an issuer or counterparty will be unable or
unwilling to meet a commitment that it has entered into with the Group. In the
event of a default by an occupational tenant, the Group will suffer a rental
income shortfall and incur additional costs, including legal expenses, in
maintaining, insuring and re-letting the property.
Liquidity Risk
Liquidity risk is the risk that the Group will encounter in realising assets or
otherwise raising funds to meet financial commitments. Investments in property
are relatively illiquid, however, the Group has tried to mitigate this risk by
investing in desirable properties in prime locations.
Interest Rate Risk
The Group's exposure to market risk for changes in interest rates relates
primarily to the Group's long-term debt obligations. The Group's policy is to
manage its interest cost using fixed rate debt.
The interest rate profile of the Group at 31 December 2005 is as follows:
Total Variable Assets on which Weighted average
rate no interest is interest rate
received per annum
# # # %
Financial assets
Properties 116,873,062 - 116,873,062 -
Investment in associates and joint 14,883,260 - 14,883,260 -
ventures
Non-current assets 131,756,322 - 131,756,322 -
Cash and cash equivalents 6,395,313 6,395,313 - 4.1
Debtors 4,135,452 - 4,135,452 -
Total assets as per Balance Sheet 142,287,087 6,395,313 135,891,774
Total Variable Fixed Liabilities on Weighted Weighted
rate rate which no average average
interest is interest until
paid rate maturity
per annum
# # # # % Years
Financial liabilities
Bank loans 65,484,804 2,828,000 62,656,804 - 5.9 5
Income Shares 5,148,110 - 5,148,110 - 8 5
Creditors 5,478,795 - - 5,478,795 - -
Total liabilities as
per Balance Sheet 76,111,709 2,828,000 67,804,914 5,478,795
The interest rate profile of the Group at 31 December 2004 was as follows:
Total Variable Assets on Weighted
Rate which no average
interest is interest rate
received
per annum
# # # %
Financial assets
Properties 73,485,000 - 73,485,000 -
Investments 3,240,954 - 3,240,954 -
Non-current assets 76,725,954 - 76,725,954 -
Cash and cash equivalents 27,354,108 27,354,108 - 3.5
Debtors 1,504,789 - 1,504,789 -
Total assets as per Balance Sheet 105,584,851 27,354,108 78,230,743
Total Variable Fixed Liabilities on Weighted Weighted
Rate Rate which no average average
interest is interest rate until
paid per annum maturity
# # # # % Years
Financial liabilities
Bank loans 43,327,942 6,000,000 37,327,942 - 6.11 6
Income Shares 5,119,036 - 5,119,036 - 8.00 6
Creditors 2,689,233 - - 2,689,233 - -
Total liabilities as
per
Balance Sheet 51,136,211 6,000,000 42,446,978 2,689,233
23. Commitments and Contingencies
At the year end, the Group had a commitment to invest a further #885,000 in the
Westlink Investment Syndicate LLP and #825,000 in Endeavour Ware Ltd.
24. Related Parties
Included in property management expenses is an amount of #156,283 (2004 -
#123,526) payable to Barlows Holdings Limited, a shareholder in the Company, in
accordance with their property management agreement with the Company's
subsidiary.
Barlows Holdings Limited also has an interest in Ropewalks One LLP, Westlink
Investment Syndicate LLP and Endeavour Ware Limited.
The Group was charged administration fees of #119,497 (2004 - #53,250) by
Mourant Guernsey Limited, #10,311 (2004 - #9,503) of which was outstanding at
the balance sheet date. Iain Stokes, who is a Director of the Company, is also a
Director of Mourant Guernsey Limited.
The Company was charged investment managers fees totalling #1,535,996 (2004 -
#923,947) by Berrington Fund Management Limited, #134,237 (2004 - nil) of which
was outstanding at the balance sheet date. At the year end Berrington Fund
Management Limited held 812,000 Ordinary Shares in the Company.
Provision has been made for a performance fee payable to Berrington Fund
Management Limited, in respect of the year ended 31 December 2005 of #987,323
(2004 - #444,671).
Ropewalks One LLP, of which WPL Ventures Ltd is a member, exchanged contracts
for the sale of part of its development to MPIF Holdings Ltd, a subsidiary of
The Medical Property Investment Fund Limited, which is also managed by
Berrington Fund Management Limited, for #4,031,000.
Ropewalks One LLP sold one apartment, at full market price, to Iain Stokes for
completion in 2006. Iain Stokes had paid a 10% deposit of #16,800 at 31 December
2004 and 2005.
25. Post Balance Sheet Events
The Company's bank facility was increased from #73m to #115m in January 2006.
The Company invested #1.1m, for a 50% stake in a joint venture that has acquired
a health and fitness centre, in February 2006. The Company acquired a multi-let
industrial estate in Hayes, Middlesex, for #2.51m in February 2006. The Company
exchanged contracts for the sale of its property in Peterlee for #8.8m in
February 2006. A fourth interim dividend of 1.5p on the Ordinary Shares was paid
on 30 January 2006
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UBSBRNURUUAR_SN_RNS0154Z_SU_RNSTEST_XX_070159.2966_RZ__RT_R.xRoute.001
~
Westbury Property Fund (LSE:WPFI)
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Westbury Property Fund (LSE:WPFI)
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