FOR IMMEDIATE RELEASE

28 August 2015

LONDON & ASSOCIATED PROPERTIES PLC

HALF YEAR RESULTS TO 30 JUNE 2015

London & Associated Properties PLC is a main market listed group which invests in UK shopping centres and retail property whilst also managing property assets for institutional clients.

It holds a substantial investment in Bisichi Mining PLC (main market listed) which operates coal mines in South Africa and owns UK property investments.

HIGHLIGHTS

• Significant improvement in group performance:
  • Operating profit before interest charges more than tripled to £1.8 million against £0.5 million
  • Pre-tax loss falls to £0.13 million compared to £2.38 million
  • Loss after tax attributable to equity shareholders falls to £0.4 million compared to £1.6 million
• LAP produced a £1.56 million uplift in results as a result of lower interest costs and charges following last year’s refinancing
• Bisichi delivered additional £0.7 million of profit
• Repayment of £1.25 million of £5.0 million debenture stock
• Positive performance from property investments:
  • Completed lettings with £600,000 of annualised rental income
  • Sheffield performed strongly with £380,000 of new lettings and retail element effectively fully let
  • Brixton continues to be fully let with a long waiting list of potential tenants and adjacent proposed developments are expected to have a positive impact on this investment
  • At West Bromwich, the five year extension to Iceland’s lease provides a good springboard to capitalise on the positive lettings momentum achieved so far this year
  • Portfolio voids stand at only 2.6% by estimated rental value
• “With the strengthened balance sheet, agreed finance facilities and a strong and increasing tenant base, LAP   is in a good position to deliver improving results over the next few years,”     Sir Michael Heller, Chairman and John Heller, Chief Executive 

-more-

Contact:

         London & Associated Properties PLC                         Tel: 020 7415 5000
           John Heller, Chief Executive 

         Baron Phillips Associates                                        Tel: 07767 444193
           Baron Phillips

Half year results for the period ended

30 June 2015

half year review

In the six months to 30^th June 2015 the performance of the London & Associated Properties group (‘‘group’’), which includes our interest in Bisichi Mining PLC (‘‘Bisichi’’), has improved significantly. Operating profit before interest charges increased to £1.8 million compared with £0.5 million for the equivalent period last year.  After interest charges the net loss before tax is down to £0.13 million compared with £2.38 million in 2014.

 London & Associated Properties (‘‘LAP’’) benefited from much lower interest charges and costs following last year’s refinancing and termination of the related hedging derivatives. These contributed materially to the £1.56 million improvement in LAP’s results before taxation.   Furthermore, as explained in more detail below, Bisichi achieved a significant turnaround and delivered an additional £0.7 million of profit in the period.

This means that for LAP equity shareholders the attributable after tax loss for the six months has reduced substantially to £0.4 million from £1.6 million in 2014.

In March 2015 the group repaid £1.25 million of the £5.0 million 2018 Prudential Assurance debenture stock.  Although repaying this debenture prior to the end of its term cost an additional £0.16 million, LAP will benefit from a reduction in interest costs of £0.15 million a year.

Directly Owned Property

Shareholders will be aware that retail activity has been higher during the first six months of 2015 than it has been for some time and for LAP this has translated into similarly positive trading.  Since the beginning of this year we have completed lettings with an annualised rental income of £0.6 million, although the impact on our cash flow and profitability will be much higher, as our liability for rates, service charges and insurance on these units ceases once they are occupied.

Sheffield

Orchard Square in Sheffield, our largest directly owned asset, has had a strong 2015 so far and the retail element is effectively fully let once again.  In August 2015, we exchanged contracts with Virgin Money on a significant part of the large front unit that had been previously let to Republic.  Virgin Money has taken a 15 year lease (without tenant breaks) at a rent of £285,000 per annum.  The rent free period is spread over the first five years of the lease which means the unit becomes income producing once we hand it over in September.  Fit out works are currently in progress.

In addition, we are creating a second retail unit with an estimated rental value in excess of £50,000 per annum, plus we have retained the large first floor of the unit and are considering a number of options for it.

Elsewhere in Orchard Square, we completed lettings to Scrivens Opticians at £37,000 per annum and Taking Shape, an Australian fashion chain for plus-sized women at £57,500 per annum.  Both of these lettings are in excess of the previous rental levels. 

As a result of these lettings (and aside from the newly created space) we have only one small external unit which remains vacant, and one inside the centre currently let to a temporary trader, but which is under offer to a national retailer.  Once these are tenanted, the shopping centre will be fully let.

Brixton

Brixton continues to trade exceptionally well. It remains fully let with a long list of retailers waiting for a unit to become available.  In the first half of the year, a new market concept called Pop Brixton opened to the rear of Brixton Village.  This market offers street food and drink plus other retail.  Our experience to date is that it further enhances the pitch of our markets, and has widened Brixton’s catchment area. 

As reported at the year end, this is one of two significant developments directly benefiting our markets.  The Council is looking to create a cultural hub including a theatre and theatre school, a chef school and some 350 homes directly in front of Brixton Village.  Consequently, we remain optimistic about the future performance of this asset.

West Bromwich

We reported at the year-end that Kings Square in West Bromwich experienced a challenging 12 months, but that we could see positive momentum on which we intended to capitalise.  We are pleased to report that this momentum has translated into a number of new lettings and lease renewals, demonstrating that the more difficult times should be behind us. 

The largest single event was a lease extension completed with Iceland, the centre’s anchor tenant.  Its original lease was due to expire in 2018 but has been extended by five years to 2023.  This is an important deal as Iceland is a significant driver of shoppers to the centre.

The remainder of our portfolio is trading as positively as it has for some time with voids of just 2.6% by estimated rental value.

Langney

Shareholders are aware that in 2014 we obtained planning consent to extend Langney Shopping Centre in Eastbourne by 30,000 sq. ft. In the last six months, we have completed the pre-letting of the anchor store of the extension to 99p Stores, the discount retailer, and are in detailed negotiations with a number of retailers for the remaining units there.

Additionally, the Schroder’s fund, which owns the investment, is near the end of its life.  We believe, therefore this is a good time to sell the centre and consequently, Langney is being marketed for disposal.  Investor response has been positive and we expect to conclude the disposal transaction later this year.

Oaktree

Our three shopping centres held in the joint venture with Oaktree Capital Management continue to perform well and we are having considerable success in driving increases in the rental income and occupancy levels.  Since the start of the year, we have carried out new lettings or have under offer units with an annualised rental income of £235,000 per annum.  We have also carried out lease renewals with an annualised rental income of £250,000 per annum.

Bisichi

In the period under review, Bisichi Mining PLC delivered profits before tax of £0.39 million as compared with a loss of £0.31 million in 2014.  This has been achieved, despite weak coal prices, by focusing on keeping production costs low and ensuring adequate levels of production at Black Wattle Colliery, Bisichi’s direct coal mining asset in South Africa.

Coal prices are now below US $57 per tonne, compared to US $85 at the beginning of 2014 and US $120 in 2011. This decline is partially offset by depreciation in the Rand against the US Dollar.  Bisichi will focus on keeping the cost of production low while lower international coal prices prevail.

In addition, Black Wattle has combined the production from its existing reserves with coal received from Blue Nightingale’s new reserves.  Blue Nightingale is a South African black owned and managed company and these reserves are part of an ongoing agreement to purchase Run of Mine coal from them.  The combined total production from the first six months was 838,000 metric tonnes (2014: 690,000 metric tonnes).

Black Wattle continues to perform well under the Quattro Programme which allows junior black-economic empowerment coal producers direct access to Richards Bay Coal Terminal.

Bisichi’s property portfolio which is managed by LAP, continues to perform well with voids of only 2.3% by estimated rental value.

Outlook and general

Our investment in Bisichi will be affected by coal prices and exchange rate variances, but the management continues to manage costs in an effort to maintain the performance going forward.

With the strengthened balance sheet, agreed finance facilities and a strong and increasing tenant base, LAP is in a good position to deliver improving results over the next few years. 

Finally, on behalf of the Board, we would like to thank all our staff for their hard work during the first six months of 2015.

Sir Michael Heller                                                               John Heller
Chairman                                                                                               Chief Executive
27 August 2015

consolidated income statement

for the six months ended 30 June 2015

consolidated statement of comprehensive income

for the six months ended 30 June 2015

consolidated balance sheet

at 30 June 2015

consolidated statement of changes in shareholders’ equity

for the six months ended 30 June 2015

consolidated statement of changes in shareholders’ equity - continued

for the six months ended 30 June 2015

consolidated cash flow statement

for the six months ended 30 June 2015

consolidated cash flow statement - continued

for the six months ended 30 June 2015

notes to the half year results
for the six months ended 30 June 2015

1.     International Accounting Standards (IAS/IFRS)

The financial statements are prepared in accordance with International Financial Reporting Standards and Interpretations in force at the reporting date. These are prepared under the historic cost basis as modified by the revaluation of investment properties and held for trading investments. The application of the following International Financial Reporting Standards effective January 1, 2014, resulted in changes to London & Associated Properties PLC accounting methods and presentation in 2014:

IFRS 10 – Consolidated Financial Statements

IFRS 10 contains a new, comprehensive definition of control.  The new standard replaces the provisions of IAS 27 – Separate Financial Statements (previously “Consolidated and Separate Financial Statements”), which regulates the preparation of consolidated financial statement, as well as SIC 12 Consolidation – Special Purpose Entities.  According to both IAS 27 and IFRS 10, a Group consists of a parent entity and the subsidiaries controlled by the parent.  IFRS 10 provides a new definition of control compared with IAS 27.  This is applied in determining the companies to be consolidated.  “Control” assumes the simultaneous fulfilment of the following three criteria:

      The parent company holds decision–making power over the relevant activities of the investee,

      The parent company has rights to variable returns from the investee, and

      The parent company can use its decision–making power to affect the variable returns.

The introduction of this standard has required a change in accounting policy as follows:

Under IFRS 10, as explained above, it is necessary to consolidate Bisichi from the earliest date at which it is believed by the Board that, under current rules, Bisichi would have been deemed to be controlled by LAP. Having determined the date at which “control” under current IFRS rules occurred, it is necessary to calculate the amount of any goodwill or premium arising on consolidation at that date. Any goodwill or surplus arising at the date of deemed control would have been depreciated over 10 years.  Based on the distribution of all shareholdings in Bisichi the directors have concluded that, with effect from late 1976, Bisichi was under the voting control of LAP and related parties.  Our review of fair values at that date suggests that no material goodwill or reserve would have been created.  However, even if it had been created any such goodwill or reserve would have been written off completely some years ago.  In these circumstances no adjustments are required to the book values of Bisichi assets and liabilities.

As a result of treating Bisichi as a “subsidiary” Dragon also becomes a subsidiary for accounting purposes as each of LAP and Bisichi own 50%of that joint venture business.

The quantitative impact of the changes is set out below:

The Group has taken advantage of the transitional provisions of Consolidated Financial Statements, Joint Arrangements and Disclosure of interests in Other Entities: Transition Guidance (Amendments to IFRS 10, IFRS 11 and IFRS 12) and the tables below show the restated consolidated balance sheet at 30 June 2014.

notes to the half year results - continued

Consolidated balance sheet at 30 June 2014

notes to the half year results - continued

Consolidated income statement for the period ended 30 June 2014

Consolidated statement of comprehensive income for the period ended 30 June 2014

notes to the half year results - continued

6. Property 

Properties at 30 June 2015 are included at valuation as at 31 December 2014, plus additions in the period.

During the six months ended 30 June 2015 the group had property additions of £0.045m (30 June 2014: £Nil, 31 December 2014:  £0.7 million).

No properties were sold during the six months ended 30 June 2015 (carrying value of properties sold at 30 June 2014: £Nil, 31 December 2014: £Nil).

The sale of the discontinued asset of Windsor Shopping Centre in 2014 was for £104.7 million.

7. Interest rate derivatives

At 30 June 2015 the fair value liability was £515,000 as valued by the hedge provider (30 June 2014: £nil, 31 December 2014: £656,000)

Under IFRS 13 the hedges are not deemed to be eligible for hedge accounting and any movement in the value of the hedge is charged directly to the consolidated income statement.

notes to the half year results - continued

9. Related party transactions

The related parties and the nature of costs recharged are as disclosed in the group’s annual financial statements for the year ended 31 December 2014. 

In the six months to 30 June 2015, the group was repaid £208,250 of the unsecured loan by Langney Shopping Centre Unit Trust (a joint venture), leaving a loan balance of £127,000 due.

10. Capital and other commitments

The group has capital commitments of £Nil as at 30 June 2015 (30 June 2014: £Nil, 31 December 2014: £Nil). 

11. Dividends

There is no interim dividend payable for the period (30 June 2014: Nil).

The final dividend in respect of 2014 of 0.156p per share, amounting to £133,000, was paid on 3 July 2015.  As the 2014 final dividend was approved by the shareholders at the Annual General Meeting held on 24 June 2015, it is included as a liability in these interim financial statements.

12. Risks and uncertainties

The group’s principal risks and uncertainties are reported on pages 17 and 18 in the 2014 Annual Report.  They have been reviewed by the Directors and remain unchanged for the current period.

The largest area of estimation and uncertainty in the interim financial statements is in respect of the valuation of investment properties (which are not revalued at the half year) and the valuation of interest rate derivatives. For Bisichi Mining PLC, it also relates to coal mining activities in South Africa and currency movements.

notes to the half year results - continued

13. Financial information

The above financial information does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006.  The figures for the year ended 31 December 2014 are based upon the latest statutory accounts, which have been delivered to the Registrar of Companies; the report of the auditor on those accounts was unqualified and did not contain a statement under Section 498(2) or (3) of the Companies Act 2006.

As required by the Disclosure and Transparency Rules of the UK's Financial Services Authority, the interim financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and in accordance with both IAS 34 'Interim Financial Reporting' as adopted by the European Union and the disclosure requirements of the Listing Rules.

The half year results have not been audited or subject to review by the company's auditor.

The annual financial statements of London & Associated Properties PLC are prepared in accordance with IFRS as adopted by the European Union.  The same accounting policies are used for the six months ended 30 June 2015 as were used for the year ended 31 December 2014.

As stated in the 2014 Annual Report in the group accounting policies on page 49, Bisichi Mining PLC and Dragon Retail Properties Limited are now consolidated with LAP, following the application of IFRS 10.  Accordingly the 30 June 2014 figures are restated as per note 1 and the net impact is that the earnings per share and the net assets per share remained unchanged.

The assessment of new standards, amendments and interpretations issued but not effective, is that these are not anticipated to have a material impact on the financial statements.

There is no material seasonal impact on the group’s financial performance.

Taxes on income in the interim periods are accrued using tax rates expected to be applicable to total annual earnings.

The interim financial statements have been prepared on the going concern basis as the Directors are satisfied the group has adequate resources to continue in operational existence for the foreseeable future.

14. Board approval

The half year results were approved by the Board of London & Associated Properties PLC on 27 August 2015.

directors' responsibility statement               

The Directors confirm that to the best of their knowledge:

(a) the condensed set of financial statements have been prepared in accordance with applicable accounting standards and IAS 34 Interim Financial Reporting as adopted by the EU;

(b) the interim management report includes a fair review of the information required by:

 (1) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements ; and a description of the principal risks and uncertainties for the remaining six months of the year;  and

(2) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

Signed on behalf of the Board on 27 August 2015

Sir Michael Heller                Anil Thapar
Director                                 Director

directors and advisors

Directors
Executive directors
* Sir Michael Heller MA FCA (Chairman)
John A Heller LLB MBA (Chief Executive)
Anil K Thapar FCCA (Finance Director)


Non-executive directors
† Howard D Goldring BSC (ECON) ACA
#†Clive A Parritt  FCA CF FIIA
Robin Priest

* Member of the nomination committee
# Senior independent director
† Member of the audit, remuneration and nomination
committees.


Secretary & registered office
Anil K Thapar FCCA
24 Bruton Place,
London W1J 6NE


Registrars & transfer office
Capita Asset Services
Shareholder Services
The Registry, 34 Beckenham Road
Beckenham, Kent  BR3 4TU

Telephone 0871 664 0300
(Calls cost 10p per minute + network extras, lines are open Mon-Fri 9.00am to 5.30pm)

or +44 (0)203 728 5000 for overseas callers

Website: www.capitaregistrars.com
E-mail: shareholderenquiries@capita.co.uk

Company registration number
341829 (England and Wales)


Website
www.lap.co.uk

E-mail
admin@lap.co.uk