TIDMTHG
RNS Number : 2998G
Terrace Hill Group PLC
05 June 2013
Terrace Hill Group PLC
("Terrace Hill" or the "Group" or the "Company")
HALF-YEAR RESULTS SHOW SIGNIFICANT OPERATIONAL AND FINANCIAL
PROGRESS FOLLOWING TRANSFORMATIONAL PERIOD
Terrace Hill Group plc (AIM: THG), a leading UK property
development and investment group, today announces its results for
the six months ended 31 March 2013 (the "Period").
Highlights
Financial highlights:
-- EPRA Net Asset Value (NAV) per share increased by 3.0% to
29.2 pence (30 September 2012: 28.3 pence) while EPRA Triple NAV
per share increased by 4.6% to 28.1 pence (30 September 2012: 26.8
pence).
-- Increase in revenue profit to GBP9.5 million(1) compared to
GBP0.2 million in the six month period ended 31 March 2012 and
GBP11.8 million for the full year to 30 September 2012.
-- IFRS profit before tax increased to GBP10.2 million compared
to GBP1.8 million for the year ended 30 September 2012.
-- Significant progress on strategy of reducing the Group's level of debt and gearing, with:
-- net debt reduced by GBP36.8 million to GBP10.4 million during the Period; and
-- EPRA gearing at 16.8% at 31 March 2013, down from 78.2% at 30
September 2012 and 28.9% on a look-through basis compared with
142.1% at 30 September 2012.
Operational highlights:
-- 919 units of the Group's and associate's residential assets
sold for GBP70.8 million, including a GBP68.0 million portfolio
sold to Places for People, largely completing the sale of the
Group's residential portfolio.
-- Three new foodstores comprising 189,265 sq ft of aggregate
floor area completed at Sunderland, Sedgefield and Skelton, all
pre-let and forward funded for a total capital value of GBP64.6
million. Another four substantial foodstores are in the planning
process as well as further opportunities in the pipeline.
-- Acquisition of the remaining 47 residential assets post
Period-end from Terrace Hill Residential PLC, resulting in a
release of GBP1.8 million of a previous GBP6.0 million provision.
These assets are expected to be sold over the next 12 to 18
months.
-- Completion of GBP91.0 million forward funding agreement with
Legal & General for the Group's 1,104-bed student accommodation
scheme in Southampton with the development due for delivery in June
2014.
-- Plans well advanced to develop a GBP30.0 million leisure
complex in Darlington town centre, which will include a nine-screen
cinema, an 80-bedroom hotel and six restaurant units.
-- Completion of 135,000 sq ft office building with 25,300 sq ft
of residential space at Howick Place in Victoria. Start on site at
the 29,000 sq ft office and retail development at Conduit Place
expected this summer.
-- Pre-sale and development agreement secured with Kondor to
develop a 60,000 sq ft warehouse at the Group's Christchurch
Business Park in Dorset.
(1) Profit before tax and valuation movements on investment and
development properties and before contributions from our joint
venture and associated undertakings.
Commenting, Robert Adair, Chairman of Terrace Hill, said: "The
first half of the year has been transformational for Terrace Hill
both in terms of significantly improving the Group's financial
position and in the delivery of a very solid operational
performance. In line with our previously stated strategy, we have
almost entirely completed the sale of our residential assets, which
not only had a major positive impact on our levels of gearing and
debt, but also allowed us to focus almost solely on our development
projects where we have also made very strong progress. This,
coupled with the sales and forward funding agreements we have
transacted, gives me great confidence for the future prospects of
the Group and I believe we now have a very solid base from which to
deliver sustainable growth for shareholders."
Philip Leech, Chief Executive of Terrace Hill, added: "We are
now undoubtedly one of the market leaders of foodstore developments
in the UK, with an impressive track record of completed schemes and
a strong pipeline of sites in planning or under review. However, I
am also pleased that we have been very active in other market
sectors. We recently completed construction of a substantial
central London office and residential development, with a further
project in Mayfair due to start in the summer. In Southampton, we
are on site building a major new student accommodation scheme,
which we have already pre-let and forward sold, while in Darlington
we expect to begin construction of a significant leisure complex
later this year."
For further information, please visit www.terracehill.co.uk or
contact:
+44 (0)20 7631
Terrace Hill Group plc 1666
Robert Adair, Chairman
Philip Leech, Chief Executive
Jon Austen, Group Finance Director
Oriel Securities Limited (Nominated Adviser +44 (0)20 7710
and Broker) 7600
Gareth Price
Mark Young
+44 (0)20 7831
FTI Consulting 3113
Richard Sunderland
Stephanie Highett
Faye Walters terracehill@fticonsulting.com
Chairman's statement
It gives me great pleasure to announce our financial results for
the six months ended 31 March 2013, during which time we have made
significant progress both operationally and financially. We have
sold the majority of the group's remaining residential assets,
mostly in a single transaction for a total consideration of GBP68.0
million, which has led to a significant reduction in the overall
level of debt and gearing. In addition good progress has been made
with the foodstore development programme with the recent completion
of three large supermarkets. We have also completed forward funding
with Legal & General Property of our 1,104-unit student
accommodation scheme in Southampton.
The group made a pre-tax revenue profit (which is profit before
valuation movements and contributions from associates) in the
six-month period of GBP9.5 million compared with a revenue profit
of GBP11.8 million for the year ended 30 September 2012. The
group's IFRS profit before tax of GBP10.2 million for the period is
significantly ahead of the equivalent figure of GBP1.8 million for
the year ended 30 September 2012. This strong performance results
from the completion of the Sunderland foodstore transaction, the
forward funding of the Southampton student accommodation scheme and
good progress with other foodstore projects.
The group's EPRA Net Asset Value (NAV) has increased by 3.0% to
29.2 pence per share at 31 March 2013 (28.3 pence per share at 30
September 2012) and our EPRA Triple NAV has risen by 4.6% to 28.1
pence per share at 31 March 2013 (26.8 pence per share at 30
September 2012). The EPRA NAV includes adjustments to reflect the
market value of the group's development properties where value is
above cost and the EPRA Triple NAV makes an adjustment for
goodwill.
As I predicted in my last statement which accompanied our 2012
annual results, we have continued to be very successful in reducing
the level of debt within the group. Transactions during the period
have enabled us to achieve a significant reduction in net debt in
the period of GBP36.8 million. This has had the effect of
substantially reducing our gearing as a percentage of our EPRA Net
Assets to 16.8% at 31 March 2013 (78.2% at 30 September 2012) and
on a look-through basis to 28.9% at 31 March 2013 compared with
142.1% at 30 September 2012.
Since the period end, the group has completed the purchase of
the remaining GBP5.3 million residential assets from its associate,
Terrace Hill Residential PLC, which enabled the group to negotiate
a favourable settlement with its lender over the group's guarantee
exposure. This settlement resulted in a release of GBP1.8 million
of its previous GBP6.0 million provision, which has been reflected
in these results. The group proposes to sell the remaining assets
to owner occupiers and investors over the next 12 to 18 months.
Foodstore development continues to form an important part of the
group's development programme and since our last reported results
we have completed three new stores at Sunderland, Sedgefield and
Skelton. These were all pre-let and forward funded for a total
capital value of GBP64.6 million. We have another four substantial
foodstores in the planning process and a large pipeline of new
opportunities. We continue to experience good demand for the right
sized store in the right locations despite some retailers declaring
a slowdown in the expansion of large format stores and expect this
sector to continue to provide strong growth for the group.
In January, we completed the forward funding of our student
accommodation scheme in Southampton with Legal & General
Property for GBP91.0 million. The development will comprise 1,104
units and has been pre-let in its entirety to Southampton
University for a 38-year term and the scheme is due for completion
by June 2014. This has proved to be a profitable venture for us and
we are looking at further development opportunities in the thriving
student housing sector.
Leisure is another sector where we are seeing strong occupier
demand. In Darlington we are planning a town centre leisure complex
which will include a nine-screen cinema, an 80-bedroom hotel and a
number of restaurant units. We intend to submit a planning
application shortly with a view to completing the scheme by the end
of 2014. We are also working on a number of similar leisure
development opportunities in other parts of the country.
Capital and rental values in central London continue to rise and
we should benefit from this at our schemes at Howick Place in
Victoria and Conduit Street in Mayfair. The construction of Howick
Place has now completed and strong interest is being shown in the
135,000 sq ft of offices by occupiers. At Conduit Street we expect
to make a start on site this summer and are already experiencing
strong demand for the retail element of the 29,000 sq ft
development. We continue to evaluate new opportunities in central
London; however, it is a fiercely competitive market and
challenging to find good value. We believe that interest will start
to return to prime regional markets in which the group has always
been strong and where we are alive to opportunities.
Finally, at our industrial development in Christchurch, Dorset
we are developing a 60,000 sq ft turnkey distribution facility for
Kondor. This is the second building we have developed for Kondor at
the site and largely completes the Christchurch scheme.
Outlook
I am delighted that we have completed the sale of our interest
in the majority of our residential assets and the consequent
reduction in the group's level of gearing and debt. This, coupled
with the very strong progress being made across a range of
development projects and sectors, gives me great confidence for the
future prospects of the group. The last period has been
transformational in terms of the group's financial position, which
provides us with a solid base from which to provide our
shareholders with sustainable growth.
Robert F M Adair
Chairman
5 June 2013
Business review
Operations
Residential Investment
The period under review has been defined by the completion of
the sale of the vast majority of our residential assets being all
the wholly owned properties and most of those in our joint venture,
Terrace Hill Residential PLC ("THR"). These sales comprised a total
of 919 units for a sum of GBP70.8 million. The majority of the
properties were sold in a single portfolio transaction to Places
for People for GBP68.0 million, following on from last year's sale
of another portfolio to Akelius for GBP75.35 million, leaving THR
with just 52 units valued at GBP5.9 million. Since the end of the
period under review, THR has sold a number of these units on the
open market and the group has purchased the remainder of the
properties for a consideration of GBP5.3 million which was
determined by independent valuers. We intend to sell these
remaining properties over the next 12 to 18 months to owner
occupiers and investors. In completing these sales we have largely
fulfilled our strategy of exiting the residential investment sector
ahead of our anticipated schedule and at an aggregate loss of
GBP0.7 million to book value. This has had a dramatic impact on our
overall level of debt and net gearing, which are explained in more
detail in the finance review below and it has also allowed us to
completely refocus our business on our core strength of commercial
development.
Foodstores
We are now undoubtedly one of the market leaders of foodstore
developments in the UK, with an impressive track record of
completed schemes and a strong pipeline of sites in planning or
under review. Despite the public announcement by Tesco of the
slowdown of their expansion of large format stores, we are finding
that there remains good demand from all the main grocery retailers
for the right sized store in the right location. There are still
large geographical gaps in the portfolios of Sainsbury's, Asda,
Morrisons and Waitrose who are dwarfed by Tesco, which still
dominates the UK grocery market with about double the market share
of its nearest rival, Asda. This is demonstrated by Sainsbury's
revealing that around 22% of the UK population do not live within a
15-minute drive of a Sainsbury's store and that they have less than
5% market share in 35% of UK postcodes. It is also interesting to
note that whilst online grocery sales are increasing, the rate of
home deliveries is static and that therefore Click & Collect is
becoming a significant feature of online grocery sales. This not
only provides convenience for customers but is significantly
cheaper for the grocers to fulfil as it eliminates delivery costs.
In summary, it is therefore clear that "Clicks" require "Bricks"
and that the growth of large format foodstores remains an important
part of most food retailer's strategies.
Since the end of the period under review we have completed three
new foodstores: two for Sainsbury's at Sunderland and Sedgefield
and one for Asda at Skelton in Cleveland. These comprise an
aggregate floor area of 189,265 sq ft and a total capital value of
GBP64.6 million. These investments have all been sold by the
group.
In Kent we expect our planning application for a 99,653 sq ft
Sainsbury's at Herne Bay to go before the planning committee in the
summer this year. On Teesside we will be submitting a planning
application in the middle of June for a 125,000 sq ft Sainsbury's
store along with a public house for Marston's, a KFC and a coffee
bar. Also at Midsomer Norton in Somerset and Prestwich in Greater
Manchester we have ongoing discussions with occupiers with a view
to submitting planning applications later in the year.
At St Austell in Cornwall our planning application for a 70,000
sq ft foodstore on a council-owned site was refused by the planning
committee despite the planning officer's recommendation for
approval. We are currently considering our options for appeal
against this decision.
We are continuing to appraise a large number of new foodstore
sites and are confident of securing new opportunities in the near
future.
Central London offices/mixed use
Our investment in the development at Howick Place in Victoria
completed during the period and the majority of the 25,300 sq ft of
residential has now been let or sold. There is a good level of
occupier interest in the 135,000 sq ft of office space and we are
confident of securing lettings in the near future.
At Conduit Street, where we are acting as development managers
on a 29,000 sq ft office and retail scheme, we expect a start on
site during the summer with completion programmed for the end of
2014. Both office and retail rents continue to grow in Mayfair and
there is an outstanding level of demand for well-let investments.
We expect this development to perform above initial
expectations.
Mayflower Halls, Southampton
In July 2012 we obtained detailed planning consent for a
1,104-bed student residential scheme on our site in the centre of
Southampton and at the same time pre-let the development in its
entirety to Southampton University. Since then we have entered into
an agreement with Legal & General Property to forward fund and
purchase the completed development for approximately GBP91.0
million. Construction is underway and completion is scheduled for
June 2014. This successful and profitable scheme has led us to
actively pursue new opportunities in the thriving student
accommodation market.
Leisure Development, Darlington
We have entered into a conditional contract with Darlington
Borough Council, the town centre site's landowners, to develop a
leisure complex which will include a nine-screen cinema, an
80-bedroom hotel and six restaurant units. Terms have been agreed
with Vue Cinemas and Whitbread and we intend to submit a planning
application in mid-2013, with anticipated completion of the GBP30.0
million development towards the end of 2014. There is strong demand
from occupiers in the leisure sector and we are evaluating a number
of similar opportunities across the country.
Christchurch
A 60,000 sq ft industrial development is being carried out for
Kondor on one of the last remaining plots of land at the site. The
construction is being funded by Kondor which will also ultimately
own the building. This follows an earlier development we carried
out for Kondor and the very successful development and sale of 17
smaller industrial units at this site.
Finance
Financial results and Net Asset Value
The group's EPRA NAV increased by 3.0% to GBP62.0 million (29.2
pence per share) from GBP60.3 million (28.3 pence per share) at 30
September 2012 and our IFRS NAV also increased by 17.8% in the
six-month period ended 31 March 2013 to GBP59.1 million (27.9 pence
per share) from GBP50.2 million (23.7 pence per share) at 30
September 2012.
EPRA NAV is a key performance indicator for the group as it
reflects the market value of our development properties and is
therefore a better indicator of the true value of the group,
whereas the IFRS NAV includes those properties at the lower of cost
and net realisable value.
During the period, our EPRA NAV increased due to the following
reasons:
-- 1.1 pence per share increase from development profits less recurring overheads; and
-- 0.9 pence per share increase resulting from the part release
of our provision for financial guarantee for debts of
associate,
and decreased for the following reasons:
-- 0.5 pence per share decrease arising from the movement in
value and sales of our residential investment properties; and
-- 0.6 pence per share decrease in other movements including tax.
Statement of comprehensive income
Revenue for the six-month period ended 31 March 2013
includes:
(i) recognition of revenue under foodstore construction contracts of
GBP18.3 million in respect of our sites at Sunderland, Skelton and
Sedgefield;
(ii) recognition of revenue in respect of the student accommodation scheme
at Southampton of GBP15.6 million;
(iii) rental income of GBP1.6 million; and
(iv) sales income of GBP3.6 million in respect of the sales of completed
developments.
Rental income of GBP0.5 million and related costs of GBP0.8
million are included in revenue and direct costs in respect of the
group's head office in London, where it owns a head lease.
Direct costs include directly attributable costs in respect of
those revenue items mentioned above. Administrative expenses for
the six-month period ended 31 March 2013 amounted to GBP2.5 million
(2012 full year: GBP4.9 million).
The group incurred a loss of GBP1.1 million on the disposal of
the majority of its wholly owned residential investment properties,
GBP0.8 million of which was in respect of the write-off of the
goodwill previously recognised in respect of the residential
activities of the group. The group has now sold substantially all
of its residential properties.
Following the sale by its associate Terrace Hill Residential PLC
of substantially all of its assets, the group was able to negotiate
a favourable position with regard to its bank guarantee exposure,
leading to a reduction of GBP1.8 million in its provision such that
the total amount provided at 31 March 2013 is now GBP4.2
million.
Finance income less finance costs amounted to GBP0.9 million
(2012 full year: GBP1.5 million). The group paid GBP1.0 million of
interest in the period of which GBP0.2 million was in respect of
projects where work is currently underway and which has been
capitalised. There are no abnormal items in the current period.
The group's tax charge for the period of GBP1.4 million (2012
full year: GBP0.1 million) reflects principally the deferred tax
charge arising on the recognition of profit under IFRS on the
Southampton site.
Balance sheet
The group's IFRS net assets at 31 March 2013 were GBP59.1
million, an increase of 17.8% on the amount reported at 30
September 2012 of GBP50.2 million. Investment properties fell from
GBP15.2 million at 30 September 2012 to GBP0.4 million at 31 March
2013 due principally to the sale of substantially all of the
group's wholly owned residential investment properties as mentioned
above. Development properties fell from GBP70.3 million at 30
September 2012 to GBP57.4 million at 31 March 2013 principally due
to the sale of the Southampton site as a consequence of the forward
funding agreement with Legal & General Property. Trade and
other receivables have increased by GBP2.6 million to GBP19.9
million at 31 March 2013 due principally to the inclusion in the
results of the sales of the Southampton site and two foodstores
(Skelton and Sedgefield) where under IFRS, profit is recognised
ahead of the receipt of cash, the balance sheet reflecting amounts
still owed under those contracts. Sunderland reached practical
completion in the first half of 2013 and all related cash was
received by 31 March 2013; however, amounts due in respect of
Skelton and Sedgefield were received after the period end.
The group's gearing has improved considerably and net debt as a
percentage of EPRA net assets was 16.8% at 31 March 2013 compared
with 78.2% at 30 September 2012. The amount of net debt has also
reduced substantially to GBP10.4 million at 31 March 2013 from
GBP47.2 million at 30 September 2012. The group's look-through net
gearing, which includes its share of the net debt in those joint
ventures and associated undertakings in which it has ongoing
liabilities, fell substantially from 142.1% at 30 September 2012 to
28.9% at 31 March 2013. The group's net debt, including its share
of joint ventures and associated undertakings as above, also fell
sharply, from GBP85.7 million at 30 September 2012 to GBP17.9
million at 31 March 2013.
Financial resources and capital management
The group funds itself through its equity capital, cash and debt
facilities. As the group has not raised new equity capital for some
time, the group focuses its attention on the management of its cash
and debt position. The group is not subject to externally imposed
capital requirements and meets its objectives for managing its
capital by ensuring that it operates within the constraints imposed
by the availability of cash and debt and by ensuring that it meets
the various financial covenants that apply to its debt. The group
regards its gearing ratios as key ratios for the purposes of
managing its financial resources and the 24-month cash forecast as
a key management tool. Comments on both these items are elsewhere
in this review.
Our net debt reduced in the period by GBP36.8 million. This was
largely due to the completion of a forward funding agreement on our
Southampton site, the sale of substantially all of our wholly owned
residential property and the completion of our Sunderland foodstore
project with the receipt of all remaining proceeds all of which
generated strong cash inflows for the group.
The group has GBP22.5 million of outstanding loan re-financings
to complete in 2013, of which GBP4.7 million is credit approved for
extension from 12 to 18 months and is awaiting documentation. We
have opened discussions with the other relevant lenders and are
confident that we shall negotiate new, extended maturities in the
same way that we have done successfully in the past.
The average maturity of group debt is now 8.1 months with a
weighted average margin of 3.3%, with the weighted maturity
extending to 25.4 months if we take into account loans where the
expected terms have been agreed but not yet documented. The average
maturity of joint ventures and associated undertaking debt is now
8.1 months with a weighted average margin of 3.1%.
The group continues to monitor interest rates closely and
continues to believe that the risk on the upside is limited. As a
result, only 11.9% of group debt is hedged at an all-in rate of
3.75% until August 2015. 11% of joint venture debt was hedged at
1.15% and expired in April 2013.
The group held large cash balances at 31 March 2013 which are
earmarked for further investment in our development projects and
the running costs of the business. The group monitors its cash
resources and future cash flows very closely through its
comprehensive 24-month rolling cash forecast. The group regularly
updates the cash forecast and stress tests the underlying
assumptions to ensure that the group has sufficient resources to
execute its strategy for the foreseeable future.
Since the period end, the group has agreed to purchase the
remaining assets owned by its associate, Terrace Hill Residential
PLC, at open market value of GBP5.3 million, financed through a new
bank loan of GBP4.6 million and equity. The group agreed to do this
to facilitate a negotiation with the lenders to Terrace Hill
Residential PLC with whom the group had a guarantee exposure, which
as reported above has led to a reduction in the provision made by
the group of GBP1.8 million. The group's guarantee exposure of
GBP4.2 million has also been financed by a new bank loan repayable
over 15 months. The group is planning an orderly disposal of the
residential assets and expects to have completed the sale of these
assets over the next 12 to 18 months. On a pro-forma basis, the
group's net gearing increases to 29.1% as a consequence of this
transaction and decreases to 28.7% on a look-through basis.
Summary of debt position
31 March 30 September
2013 2012
--------------------------------------------------------- --------- -------------
Net debt GBP10.4m GBP47.2m
Net gearing 16.8% 78.2%
Net debt including share of joint venture and associated GBP17.9m GBP85.7m
undertaking debt
Total net gearing 28.9% 142.1%
Loan to value 17.1% 49.2%
--------------------------------------------------------- --------- -------------
The net gearing and loan to value percentages shown above are in
relation to our EPRA NAV. The majority of joint venture and
associated undertaking debt is of limited recourse to the
group.
Debt expiry profile
On balance Off balance
sheet sheet*
GBPm GBPm
----------------------------------------------- ----------- ------------
Bank loans and overdraft repayable in one year 25.8 7.2
Bank loans repayable in more than one year 3.1 0.3
----------------------------------------------- ----------- ------------
Total 28.9 7.5
----------------------------------------------- ----------- ------------
*Group share
Calculation of EPRA NAV and EPRA Triple NAV (Unaudited)
31 March 2013 30 September 2012
--------------------------- -----------------------------
Number Number
of Pence of
shares per shares Pence
GBP'000 000s share GBP'000 000s per share
-------------------------------- -------- -------- ------- ---------- -------- -----------
Net Asset Value 59,133 211,971 27.90 50,213 211,971 23.69
Revaluation of property held
as current assets 2,896 10,026
Shares to be issued under
LTIP 12 595 12 595
-------------------------------- -------- -------- ------- ---------- -------- -----------
EPRA NAV 62,041 212,566 29.19 60,251 212,566 28.34
-------------------------------- -------- -------- ------- ---------- -------- -----------
Increase % 3.0%
Goodwill (2,365) (3,188)
-------------------------------- -------- -------- ------- ---------- -------- -----------
EPRA triple NAV 59,676 212,566 28.07 57,063 212,566 26.84
-------------------------------- -------- -------- ------- ---------- -------- -----------
Increase % 4.6%
-------------------------------- -------- -------- ------- ---------- -------- -----------
Philip Leech Jon Austen
Chief executive Group finance
director
5 June 2013
Independent review report
to Terrace Hill Group plc
Introduction
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 31 March 2013 which comprises the unaudited
consolidated statement of comprehensive income, the unaudited
consolidated statement of changes in equity, the unaudited
consolidated balance sheet, the unaudited consolidated cash flow
statement and related explanatory notes.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Directors' responsibilities
The interim report, including the financial information
contained therein, is the responsibility of and has been approved
by the directors. The directors are responsible for preparing the
interim report in accordance with the rules of the London Stock
Exchange for companies trading securities on AIM which require that
the half-yearly report be presented and prepared in a form
consistent with that which will be adopted in the company's annual
accounts having regard to the accounting standards applicable to
such annual accounts.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Our report has been prepared in accordance with the terms of our
engagement to assist the company in meeting the requirements of the
rules of the London Stock Exchange for companies trading securities
on AIM and for no other purpose. No person is entitled to rely on
this report unless such a person is a person entitled to rely upon
this report by virtue of and for the purpose of our terms of
engagement or has been expressly authorised to do so by our prior
written consent. Save as above, we do not accept responsibility for
this report to any other person or for any other purpose and we
hereby expressly disclaim any and all such liability.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity", issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 31
March 2013 is not prepared, in all material respects, in accordance
with the rules of the London Stock Exchange for companies trading
securities on AIM.
BDO LLP
Chartered Accountants and Registered Auditors
London
United Kingdom
5 June 2013
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
Unaudited consolidated statement of comprehensive income
for the six months ended 31 March 2013
Unaudited Unaudited
six months Audited six months
to year to to
31 March 30 September 31 March
2013 2012 2012
Notes GBP'000 GBP'000 GBP'000
------------------------------------------------ ------ ------------ -------------- ------------
Revenue 39,308 66,965 16,375
Direct costs (26,340) (52,150) (12,827)
------------------------------------------------ ------ ------------ -------------- ------------
Gross profit 12,968 14,815 3,548
------------------------------------------------ ------ ------------ -------------- ------------
Administrative expenses (2,528) (4,747) (2,928)
Goodwill impairment (823) (148) (46)
------------------------------------------------ ------ ------------ -------------- ------------
Total administrative expenses (3,351) (4,895) (2,974)
Loss on disposal of investment properties (326) (570) (507)
Impairment of associated undertakings
and joint ventures 5 - (219) (3,960)
Reversal of/(increase in) provision
for financial guarantee for debts of
associate 1,811 (5,094) -
(Loss)/profit on revaluation of investment
properties 4 (11) (530) 129
------------------------------------------------ ------ ------------ -------------- ------------
Operating profit/(loss) 11,091 3,507 (3,764)
Finance income 161 261 160
Finance costs (1,104) (1,768) (1,144)
Share of joint venture and associated
undertakings post tax profit/(loss) 5 43 (200) (3,615)
------------------------------------------------ ------ ------------ -------------- ------------
Profit/(loss) before tax 10,191 1,800 (8,363)
Tax (1,360) (58) (869)
------------------------------------------------ ------ ------------ -------------- ------------
Profit/(loss) from continuing operations/total
comprehensive income/(loss) 8,831 1,742 (9,232)
------------------------------------------------ ------ ------------ -------------- ------------
Attributable to:
Equity holders of the parent 8,831 1,742 (9,232)
------------------------------------------------ ------ ------------ -------------- ------------
8,831 1,742 (9,232)
------------------------------------------------ ------ ------------ -------------- ------------
Basic earnings per share 2 4.19p 0.83p (4.38)p
Diluted earnings per share 2 4.18p 0.82p (4.38)p
------------------------------------------------ ------ ------------ -------------- ------------
Unaudited consolidated balance sheet
at 31 March 2013
Unaudited Audited Unaudited
31 March 30 September 31 March
2013 2012 2012
Notes GBP'000 GBP'000 GBP'000
------------------------------------------- ----- --------- ------------- ---------
Non-current assets
Investment properties 4 420 15,178 16,245
Property, plant and equipment 112 145 167
Investments in equity accounted associates
and joint venture 5 1,000 1,000 1,000
Other investments 5 4,279 4,279 4,279
Intangible assets 2,365 3,188 3,290
Deferred tax assets 5,407 6,467 4,841
------------------------------------------- ----- --------- ------------- ---------
13,583 30,257 29,822
------------------------------------------- ----- --------- ------------- ---------
Current assets
Development properties 6 57,389 70,284 72,805
Trade and other receivables 7 19,908 17,251 18,331
Cash and cash equivalents 18,494 5,999 1,424
------------------------------------------- ----- --------- ------------- ---------
95,791 93,534 92,560
------------------------------------------- ----- --------- ------------- ---------
Total assets 109,374 123,791 122,382
------------------------------------------- ----- --------- ------------- ---------
Non-current liabilities
Bank loans 8 (3,141) (12,466) (41,331)
Other payables - - (5,315)
Deferred tax liabilities (1,151) (851) -
------------------------------------------- ----- --------- ------------- ---------
(4,292) (13,317) (46,646)
------------------------------------------- ----- --------- ------------- ---------
Current liabilities
Trade and other payables (12,981) (10,537) (18,199)
Other payables - guarantee (4,200) (6,011) -
Current tax liabilities (3,016) (3,014) (3,109)
Bank overdrafts and loans 8 (25,752) (40,699) (14,963)
------------------------------------------- ----- --------- ------------- ---------
(45,949) (60,261) (36,271)
------------------------------------------- ----- --------- ------------- ---------
Total liabilities (50,241) (73,578) (82,917)
------------------------------------------- ----- --------- ------------- ---------
Net assets 59,133 50,213 39,465
------------------------------------------- ----- --------- ------------- ---------
Equity
Called up share capital 4,240 4,240 4,240
Share premium account 18,208 18,208 43,208
Own shares (609) (609) (609)
Capital redemption reserve 849 849 849
Merger reserve 7,088 7,088 7,088
Retained earnings 29,357 20,437 (15,311)
------------------------------------------- ----- --------- ------------- ---------
Total equity 59,133 50,213 39,465
------------------------------------------- ----- --------- ------------- ---------
Unaudited consolidated statement of changes in equity
for the six months ended 31 March 2013
Capital
Share Share Own redemption Merger Retained
capital premium shares reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- -------- -------- -------- ----------- -------- --------- --------
Balance at 1 October 2011 4,240 43,208 (609) 849 7,088 (6,642) 48,134
Total comprehensive profit
for the period - - - - - 1,742 1,742
Share-based payment - - - - - 337 337
Capital reduction - (25,000) - - - 25,000 -
--------------------------- -------- -------- -------- ----------- -------- --------- --------
Balance at 30 September
2012 4,240 18,208 (609) 849 7,088 20,437 50,213
Total comprehensive profit
for the period - - - - - 8,831 8,831
Share-based payment - - - - - 89 89
--------------------------- -------- -------- -------- ----------- -------- --------- --------
Balance at 31 March 2013 4,240 18,208 (609) 849 7,088 29,357 59,133
--------------------------- -------- -------- -------- ----------- -------- --------- --------
Unaudited consolidated cash flow statement
for the six months ended 31 March 2013
Unaudited Unaudited
six months Audited six months
to year to to
31 March 30 September 31 March
2013 2012 2012
GBP'000 GBP'000 GBP'000
----------------------------------------------------- ----------- ------------- -----------
Cash flows from operating activities
Profit/(loss) before taxation 10,191 1,800 (8,363)
Adjustments for:
Finance income (161) (261) (160)
Finance costs 1,104 1,768 1,144
Share of joint venture and associated undertakings
post tax (profit)/loss (43) 200 3,615
(Reversal of)/increase in provision for financial
guarantee for debts of associate (1,811) 5,094 -
Depreciation charge 24 59 31
Impairment charge 823 148 46
Loss/(profit) on revaluation of investment
properties 11 530 (129)
Impairment of associated undertakings and joint
ventures - 219 3,960
Loss on disposal of investment properties 326 570 507
Share-based payment charge 89 337 563
----------------------------------------------------- ----------- ------------- -----------
Cash flows from operating activities before
change in working capital 10,553 10,464 1,214
Decrease in property inventories 13,157 3,289 369
Increase in trade and other receivables (2,657) (7,334) (11,171)
Increase/(decrease) in trade and other payables 2,444 (3,475) 3,985
----------------------------------------------------- ----------- ------------- -----------
Cash generated/(absorbed) by operations 23,497 2,944 (5,603)
Finance costs paid (997) (4,380) (2,857)
Finance income received 161 261 160
Tax paid - (59) -
----------------------------------------------------- ----------- ------------- -----------
Net cash flows from operating activities 22,661 (1,234) (8,300)
----------------------------------------------------- ----------- ------------- -----------
Investing activities
Sale of investment property and tangible fixed
assets 14,484 5,115 4,769
Purchase of tangible fixed assets (7) (28) (21)
----------------------------------------------------- ----------- ------------- -----------
Net cash flows from investing activities 14,477 5,087 4,748
----------------------------------------------------- ----------- ------------- -----------
Financing activities
Borrowings drawn down - 10,426 3,208
Borrowings repaid (24,643) (19,824) (11,575)
----------------------------------------------------- ----------- ------------- -----------
Net cash flows from financing activities (24,643) (9,398) (8,367)
----------------------------------------------------- ----------- ------------- -----------
Net increase/(decrease) in cash and cash equivalents 12,495 (5,545) (11,919)
Cash and cash equivalents at 1 October 2012 5,998 11,543 11,543
----------------------------------------------------- ----------- ------------- -----------
Cash and cash equivalents at 31 March 2013 18,493 5,998 (376)
----------------------------------------------------- ----------- ------------- -----------
Cash at bank and in hand at 31 March 2013 18,494 5,999 1,424
Bank overdraft at 31 March 2013 (1) (1) (1,800)
----------------------------------------------------- ----------- ------------- -----------
Cash and cash equivalents at 31 March 2013 18,493 5,998 (376)
----------------------------------------------------- ----------- ------------- -----------
Notes to the half-yearly financial statements
for the six months ended 31 March 2013
1 Accounting policies
Basis of preparation
The financial information in this half-yearly report does not
constitute the full statutory annual accounts within the meaning of
Section 434(3) of the Companies Act 2006 and is unaudited.
The statutory annual accounts of Terrace Hill Group plc for the
year ended 30 September 2012 have been reported on by the company's
auditors and have been delivered to the Registrar of Companies. The
independent auditors' report on the annual accounts for 2012 was
unqualified, did not draw attention to any matters by way of
emphasis and did not contain a statement under Section 498(2) or
498(3) of the Companies Act 2006.
The half-yearly report has been prepared in accordance with the
recognition and measurement principles of International Financial
Reporting Standards (IFRS) as endorsed by the European Union.
The same accounting policies, presentation and method of
computation are followed in these financial statements as were
applied in the group's latest annual audited financial statements
and using accounting policies that are expected to be applied for
the financial year ending 30 September 2013. Although there are a
number of IFRS and IFRIC amendments or interpretations issued since
the 2012 annual accounts were published, none are expected to have
a material impact on the group's reporting.
Going concern
The directors are required to make an assessment of the group's
ability to continue to trade as a going concern. The directors have
given this matter due consideration and have concluded that it is
appropriate to prepare the interim financial information on a going
concern basis.
The group maintains a rolling 24-month cash forecast that takes
account of all known inflows and outflows. The cash flow includes
estimates of a number of key variables including the assumed dates
and amounts relating to property disposals and amounts that may be
required to reduce indebtedness as a consequence of falling
property values and re-financing. The cash flow is regularly stress
tested to ensure that the group can withstand reasonable changes in
circumstances that could adversely affect its cash flow. The key
potential changes that the group has considered include: (i) the
possible falls in value of the portfolio which could result in
margin calls; (ii) increased funding costs if future loan to value
covenants were breached; (iii) reduced debt facility levels on
renewed facilities; and (iv) possible delays in the timing and
reductions in proceeds from sales. The group has GBP22.5 million of
outstanding loan re-financings to complete in 2013, of which
GBP4.7m is credit approved for extension from 12 to 18 months and
is awaiting documentation. We have opened discussions with the
other relevant lenders and are confident that we shall negotiate
new, extended maturities in the same way that we have done
successfully in the past. After considering the potential cash flow
sensitivities the directors believe that the group has sufficient
resources to continue trading for the foreseeable future.
2 Earnings per ordinary share
The calculation of basic earnings per ordinary share is based on
a profit of GBP8,831,000 (30 September 2012: GBP1,742,000 and 31
March 2012: loss of GBP9,232,000) and on 210,951,299 ordinary
shares, being the weighted average number of shares in issue during
the period (30 September 2012 and 31 March 2012: 210,951,299).
The calculation of diluted earnings per share for 31 March 2013
is based on a profit of GBP8,831,000 (30 September 2012:
GBP1,742,000) and on 211,426,546 (30 September 2012: 211,426,546)
ordinary shares, being the weighted average number of shares in
issue during the period adjusted to allow for the issue of ordinary
shares in connection with a share award. For 31 March 2012 the
calculation of diluted earnings per ordinary share is the same as
that for basic earnings per share because of the loss in both
periods.
3 Analysis of divisions
The group operates in two principal divisions, being commercial
property development and residential property investment. The group
does not operate outside the UK.
Unallocated Unallocated
Residential Commercial items Total Residential Commercial items Total
March March March March September September September September
2013 2013 2013 2013 2012 2012 2012 2012
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- ----------- ---------- ----------- -------- ----------- ---------- ----------- ----------
Balance sheet
Investment
properties 420 - - 420 12,928 2,250 - 15,178
Property, plant and
equipment - - 112 112 - 17 128 145
Investments -
associates
and joint ventures - 1,000 - 1,000 - 1,000 - 1,000
Other investments - 4,279 - 4,279 - 4,279 - 4,279
Intangible assets - 2,365 - 2,365 823 2,365 - 3,188
Deferred tax assets - - 5,407 5,407 - - 6,467 6,467
-------------------- ----------- ---------- ----------- -------- ----------- ---------- ----------- ----------
420 7,644 5,519 13,583 13,751 9,911 6,595 30,257
-------------------- ----------- ---------- ----------- -------- ----------- ---------- ----------- ----------
Development
properties - 57,389 - 57,389 - 70,284 - 70,284
Trade and other
receivables 61 19,847 - 19,908 231 17,020 - 17,251
Cash 482 18,012 - 18,494 493 5,506 - 5,999
-------------------- ----------- ---------- ----------- -------- ----------- ---------- ----------- ----------
543 95,248 - 95,791 724 92,810 - 93,534
-------------------- ----------- ---------- ----------- -------- ----------- ---------- ----------- ----------
Borrowings - (28,893) - (28,893) (9,987) (43,178) - (53,165)
Trade and other
payables (4,432) (12,749) - (17,181) (6,515) (10,033) - (16,548)
Current tax - - (3,016) (3,016) - - (3,014) (3,014)
Deferred tax
liabilities - - (1,151) (1,151) - - (851) (851)
-------------------- ----------- ---------- ----------- -------- ----------- ---------- ----------- ----------
(4,432) (41,642) (4,167) (50,241) (16,502) (53,211) (3,865) (73,578)
-------------------- ----------- ---------- ----------- -------- ----------- ---------- ----------- ----------
Net assets (3,469) 61,250 1,352 59,133 (2,027) 49,510 2,730 50,213
-------------------- ----------- ---------- ----------- -------- ----------- ---------- ----------- ----------
4 Investment properties
GBP'000
--------------------- --------
Valuation
At 1 October 2011 21,393
Disposals (5,685)
Loss on revaluation (530)
--------------------- --------
At 30 September 2012 15,178
Disposals (14,747)
Loss on revaluation (11)
--------------------- --------
At 31 March 2013 420
--------------------- --------
The group's residential investment properties including the
residential investment properties held in Terrace Hill Residential
PLC were valued on the basis of Market Value by Allsop LLP
("Allsop"), external valuers, as at 31 March 2013 in accordance
with the Appraisal and Valuation Standards of the Royal Institution
of Chartered Surveyors and have been primarily derived using
comparable recent market transactions on arm's-length terms. The
total fees, including the fees for this assignment, earned by
Allsop from the group are less than 5.0% of the total UK revenues
of Allsop. The principal signatories of the Allsop valuation
reports have continuously been the signatories of valuations for
the same addressee and valuation purpose as this report since 2010.
Allsop have continuously been carrying out valuation instructions
for the group for the same period. Allsop have carried out
Valuation, Agency and Professional services on behalf of the group
for in excess of three years.
5 Investments
Associates and joint ventures
Joint
Associates venture Total
GBP'000 GBP'000 GBP'000
------------------------------------------------------ ---------- -------- --------
Cost or valuation
At 1 October 2011 1,000 419 1,419
Share of results - (200) (200)
Impairment - (219) (219)
At 30 September 2012 1,000 - 1,000
Share of results - 43 43
Losses for period applied against receivables forming
part of net investment - (43) (43)
At 31 March 2013 1,000 - 1,000
------------------------------------------------------ ---------- -------- --------
Other investments
31 March 30 September 31 March
2013 2012 2012
GBP'000 GBP'000 GBP'000
------------------ --------- ------------ --------
Other investments 4,279 4,279 4,279
------------------ --------- ------------ --------
Included in other investments is a balance due from Howick Place
JV S.a.r.l. totalling GBP4,273,000 (30 September 2012 and 31 March
2012: GBP4,273,000) that has a final maturity date of 31 December
2014.
6 Development properties
GBP'000
------------------------------------------------------------ --------
At 1 October 2011 72,961
Additions 28,807
Disposals (30,919)
Amounts written back on the value of development properties 4,410
Amounts written off the value of development properties (4,975)
------------------------------------------------------------ --------
At 30 September 2012 70,284
Additions 25,880
Disposals (38,591)
Amounts written back on the value of development properties -
Amounts written off the value of development properties (184)
------------------------------------------------------------ --------
At 31 March 2013 57,389
------------------------------------------------------------ --------
No amounts are held in development properties in respect of
construction contracts and retentions on such contracts are
GBPNil.
7 Trade and other receivables
31 March 30 September 31 March
2013 2012 2012
GBP'000 GBP'000 GBP'000
------------------------------------------------- --------- ------------ --------
Trade receivables 2,738 2,507 5,192
Other receivables 2,268 2,216 1,750
------------------------------------------------- --------- ------------ --------
Trade and other receivables 5,006 4,723 6,942
Amounts recoverable under construction contracts 9,558 7,558 -
Prepayments and accrued income 5,344 4,970 11,389
Amounts due from associates and joint ventures 28,717 28,605 28,423
Provision for amounts due from associates and
joint ventures (28,717) (28,605) (28,423)
------------------------------------------------- --------- ------------ --------
19,908 17,251 18,331
------------------------------------------------- --------- ------------ --------
The movement in the allowance for impairment in respect of
amounts due from associates and joint ventures during the period
was as follows:
2013
GBP'000
--------------------------------------------------------- --------
At 1 October 2012 28,605
Increase in allowance on amounts due from associates and
joint ventures 112
--------------------------------------------------------- --------
At 31 March 2013 28,717
--------------------------------------------------------- --------
The allowance is based on the directors' assessment of
recoverability of amounts due from associates and joint
ventures.
Amounts recoverable under construction contracts
31 March 30 September 31 March
2013 2012 2012
GBP'000 GBP'000 GBP'000
------------------------------------------------ --------- ------------ --------
Contract costs incurred plus recognised profits
less recognised losses to date 32,178 44,979 -
Less: Progress billings (22,620) (34,421) -
------------------------------------------------ --------- ------------ --------
Contracts in progress at balance sheet date 9,558 7,558 -
------------------------------------------------ --------- ------------ --------
8 Bank overdrafts and loans
31 March 30 September 31 March
2013 2012 2012
GBP'000 GBP'000 GBP'000
----------------------------- -------- ------------ --------
Bank loans 29,021 53,624 54,720
Bank overdrafts 1 1 1,800
----------------------------- -------- ------------ --------
29,022 53,625 56,520
Unamortised loan issue costs (130) (460) (226)
----------------------------- -------- ------------ --------
28,893 53,165 56,294
Amounts due:
Within one year 25,752 40,699 14,963
After more than one year 3,141 12,466 41,331
----------------------------- -------- ------------ --------
28,893 53,165 56,294
----------------------------- -------- ------------ --------
9 Post balance sheet events
On 22 May 2013, the group acquired 47 units at an open market
value of GBP5.3 million from its associate Terrace Hill Residential
PLC. The purchase was funded by a bank loan of GBP4.6 million and
cash from the Groups own resources.
The group had previously given a guarantee of GBP15.0 million as
part of the security arrangements for the bank facilities of
Terrace Hill Residential PLC, one of its associated undertakings.
In the March 2013 results the group has included within payables an
amount of GBP4,200,000 (30 September 2012: GBP6,011,000), being its
share of the agreed liability to the bank.
Half-yearly report
The half-yearly report is available, free of charge, from the
company secretary, Terrace Hill Group PLC, 1 Portland Place, London
W1B 1PN.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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