TIDMALPH
RNS Number : 1914H
Alpha Pyrenees Trust Limited
09 March 2018
9 March 2018
ALPHA PYRENEES TRUST LIMITED
("ALPHA PYRENEES TRUST" or the "COMPANY")
ALPHA PYRENEES TRUST POSTS RESULTS FOR THE YEARED 31 DECEMBER
2017
Alpha Pyrenees Trust Limited, the property company invested
primarily in commercial real estate in France, today posts its
results for the period from 1 January to 31 December 2017.
For further information:
Serena Tremlett, Chairman, Alpha Pyrenees Trust Limited 01481 231100
Paul Cable, Fund Manager, Alpha Real Capital LLP 020 7391 4700
For more information on the Company, please visit
www.alphapyreneestrust.com.
FORWARD-LOOKING STATEMENTS
This trading update contains forward-looking statements which
are inherently subject to risks and uncertainties because they
relate to events and depend upon circumstances that will occur in
the future. There are a number of factors that could cause actual
results to differ materially from those expressed or implied by
such forward-looking statements. Forward-looking statements are
based on the Board's current view and information known to them at
the date of this update. The Board does not make any undertaking to
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. Nothing in
this trading update should be construed as a profit forecast.
About the Trust
Alpha Pyrenees Trust Limited ("the Trust" or "the Group" or "the
Company") primarily invested in properties in France, particularly
in the Ile-de-France region around Paris, focusing on commercial
property in the office, industrial, logistics and retail sectors
let to tenants with strong covenants. The Trust is pursuing an
orderly realisation of its investment property and has the support
of its lender in this process.
Dividends
The Trust does not pay dividends.
Listing
The Trust is a closed-ended Guernsey registered investment
company which has been declared under the relevant legislation to
be an Authorised Closed-Ended Collective Investment Scheme. Its
shares are listed on the Official List of the UK Listing Authority
and traded on the London Stock Exchange.
Management
The Trust's Investment Manager is Alpha Real Capital LLP ("the
Investment Manager"). Control of the Trust rests with the
non-executive Guernsey-based Board of Directors.
ISA/SIPP status
The Trust's shares are eligible for Individual Savings Accounts
(ISAs) and Self Invested Personal Pensions (SIPPs).
Website
www.alphapyreneestrust.com
Chairman's Statement
The Investment Manager has been focused on achieving asset sales
to support the settlement of the bank borrowings which mature on 31
October 2018. The Board notes the progress achieved on this front
during the year with the sale of a further two properties in France
at prices totalling GBP4.9 million (EUR5.5 million) and the
remaining two properties in Spain at prices totalling GBP1.0
million (EUR1.2 million) with the net proceeds being used to
partially repay bank borrowings. The Investment Manager is focused
on selling the Trust's remaining property asset, St Cyr L'Ecole,
located in France, in a consensual manner in accordance with a
formal agreement with Barclays Bank PLC ("Barclays"). To further
this process the Investment Manager continues to undertake active
asset management for St. Cyr, with particular emphasis on the
letting of vacant space to enhance property income and the
marketability of the property (see property review section). The
Board is aware of the risks and uncertainties that the Company and
Group are facing whilst pursuing this final property sale and
provide further detail on these in notes 19 and 20 to the financial
statements.
Going concern
During the year, the Board has made further progress in the
planned orderly realisation of its investment properties and
subsequent partial repayment of the bank borrowings. The maturity
date of the remaining bank borrowings is 31 October 2018. The Trust
has the support of its lender for the sale of its remaining
property with a view to winding up the Trust's group in due course.
The accounts are therefore not prepared on a going concern
basis.
Results
Results for the year to 31 December 2017 show a consolidated
loss of GBP12.4 million (loss of 10.5 pence per share). The loss
primarily reflects the losses on disposal of investment properties
during the year and the finance costs.
Revaluation and Net Asset Value
The remaining investment property held for sale is included in
the consolidated balance sheet at a valuation of GBP5.9 million
(EUR6.7 million) as assessed by the independent valuers (note 10).
As at 31 December 2017, the net asset value per ordinary share is
negative 63.5p (31 December 2016: negative 50.2p): the movement in
the year primarily reflecting the loss in the year, losses on
revaluation and sale of properties and adverse foreign exchange
movement.
Brexit
In June 2016, the "Brexit" Referendum was held, in which the
United Kingdom voted to leave the European Union. The Board
considers that this event will not have any material adverse impact
on the realisation of the Trust's remaining property.
Finance Commentary
Following net repayments in the period of GBP5.8 million (EUR6.6
million), as at 31 December 2017 the Trust had principal borrowings
of GBP77.0 million (EUR86.8 million) under its facilities with
Barclays.
The current interest rates will continue to apply to the
facilities until maturity and the 2% extension fees (per annum
pro-rated), charged on the initial and all extensions up to 15
April 2016, are deferred to the maturity date and will be payable
to the extent that the Trust has sufficient cash funds at that time
(note 14). No additional fee was charged on the latest extension to
31 October 2018.
There is a cash-pooling arrangement in place which provides the
Trust with working capital for its operations.
Formal marketing of the Trust's remaining property is ongoing
and the results of the marketing process to date indicate that,
although there is no certainty that a transaction will take place,
if it does, the price achieved is most likely to be lower than the
valuation at 31 December 2017. The Trust will provide further
updates on progress in due course.
As the Board has previously stated, the sale process will not
result in any return to ordinary shareholders after repayment of
the Trust's bank borrowings, to the extent that this is possible,
has taken place.
Serena Tremlett
Chairman
8 March 2018
Property review
Portfolio overview
The Trust owns one property in France (St Cyr L'Ecole) of
approximately 6,340 square metres of commercial real estate. This
is a vacant property, which, although well located and offering
good value accommodation to occupiers, suffers from weak tenant
demand at the present time.
The valuation of St Cyr L'Ecole as at 31 December 2017 was
GBP5.9 million (EUR6.7 million).
Property Sales
On 30 March 2017 and 23 May 2017 respectively, the Trust sold
its properties located at Champs sur Marne and Ivry-sur-Seine in
France totalling approximately 13,350 square metres for a total of
GBP4.9 million (EUR5.5 million).
On 12 and 21 December 2017 respectively, the Trust sold its
properties located at Alcalá de Guadaíra and Écija in Spain
totalling approximately 11,650 square metres for a total of GBP1.0
million (EUR1.2 million).
These sales form part of the orderly realisation process
supported by the Trust's lender, Barclays, and the net proceeds
from these sales have been used in the reduction of the Trust's
bank borrowings.
The remaining property held by the Trust is being actively
marketed and the Trust will provide further updates on the result
of the marketing process in due course.
Paul Cable
For and on behalf of the Investment Manager
8 March 2018
Directors
David Jeffreys (aged 58)
Director
David Jeffreys qualified as a Chartered Accountant with Deloitte
Haskins and Sells in 1985. He works as an independent non-executive
director to a number of Guernsey based investment fund companies
and managers and is a Guernsey resident.
From 2007 until 2009 David was the Managing Director of EQT
Funds Management Limited, the Guernsey management office of the EQT
group of private equity funds. He was previously the Managing
Director of Abacus Fund Managers (Guernsey) Limited between 1993
and 2004, a third party administration service provider to
primarily corporate and fund clients.
In addition to the Company, David is a director of two listed
entities, Alpha Real Trust Limited and Tetragon Financial Group
Limited, and a number of other unlisted entities.
Serena Tremlett (aged 53)
Director
Serena has over 25 years' experience in financial services,
specialising in closed-ended property and private equity funds and
fund administration over the last 19 years.
She is a non-executive director on the listed company board of
Alpha Real Trust Limited in addition to various unlisted property
and private funds and general partners. Serena was previously
company secretary (and a director) of Assura Group, at that time a
FTSE 250 company listed on the London Stock Exchange, investing in
primary healthcare property and ran Assura's Guernsey head
office.
Prior to working for Assura, Serena was head of Guernsey
property funds at Mourant International Finance Administration (now
State Street) for two years and worked for Guernsey International
Fund Managers (now Northern Trust) for seven years where she sat on
a number of listed and unlisted fund boards. In 2008, Serena
co-founded Morgan Sharpe Administration Limited, a specialist
closed-ended fund administrator which was sold to Estera, a leading
provider of fiduciary and administration services in April 2017 and
is now known as Estera Administration (Guernsey) Limited. Serena
remains its managing director.
Directors' and corporate governance report
The Directors present their report and financial statements of
the Company and the Group for the year ended 31 December 2017.
Principal activities and status
Since its incorporation on 16 November 2005, the Company, an
authorised closed-ended Guernsey registered investment company, has
carried on the business of a property investment company, investing
in commercial property in France and Spain. The Trust is pursuing
an orderly realisation of its investment property and has the
support of its lender in this process.
Its shares are listed on the Official List of the UK Listing
Authority and have been traded on the London Stock Exchange since
29 November 2005.
Business review, results and dividends
The Chairman's statement above contains a review of the Group's
business for the year.
The results for the year are set out in the financial statements
below.
The Trust does not pay dividends.
Corporate governance
The Company is authorised by the Guernsey Financial Services
Commission ('GFSC') and for this reason is required to follow the
principles and guidance set out in the Finance Sector Code of
Corporate Governance issued by the GFSC and effective from 1
January 2012 (re-issued in 2016 effective from 1 April 2016 year
ends onwards) ('Guernsey Code').
As a company with a standard listing on the London Stock
Exchange, the Company is not required to comply with the UK
Corporate Governance Code ('UK Code'). However, the Board does take
into consideration the UK Code in determining its governance
procedures whilst also taking into account the size of the Company,
the nature of its business and its entirely non-executive
board.
The Board
Biographies of the current Directors are set out above.
The Directors' interests in shares of the Company as at 31
December 2017 are set out below and there have been no changes in
such interests up to the current date:
Number of Number of
ordinary shares ordinary shares
2017 2016
------------------ ----------------- -----------------
Dick Kingston* 710,616 710,616
------------------ ----------------- -----------------
David Jeffreys 250,000 250,000
------------------ ----------------- -----------------
Phillip Rose* 1,290,079 1,290,079
------------------ ----------------- -----------------
David Rowlinson* - -
------------------ ----------------- -----------------
Serena Tremlett 121,472 121,472
* resigned on 3 June 2016
Non-executive Directors are not appointed for specified terms.
However, appointments of Board members can be terminated at any
time without penalty and the Company's Articles of Association
("Articles") require each Director to retire and submit
himself/herself to re-election by the shareholders at every third
year. In addition, the Board believes that continuity and
experience adds to its strength.
The Annual General Meeting of the Company will take place on 27
April 2018.
Individual Directors may seek independent legal advice in
relation to their duties on behalf of the Company.
Senior Independent Director
The Board has appointed David Jeffreys as its Senior Independent
Director and has agreed that he will be available for discussions
with shareholders independently of his peers, to the extent
appropriate.
Operations of the Board
The Board's primary role is to review matters which are of
strategic importance to the Company, including the following:
1) Setting, and continuing to review, the objectives and
strategy of the Company, taking into account market conditions.
2) Reviewing the capital structure of the Company including gearing.
3) Appointing the Investment Manager, administrator and other
appropriately skilled service providers; monitoring their
effectiveness and performance through regular reports and
meetings.
4) Reviewing the Company's performance including net asset value and earnings per share.
The Board considers these matters at its quarterly meetings.
The Board meets at least four times per annum and on an ad-hoc
basis to consider specific issues reserved for decision by the
Board including all potential disposals, significant capital
expenditure and leasing matters and decisions relating to the
Company's financial gearing.
Certain matters relating to the implementation of strategy are
delegated either to the Investment Manager or the administrator but
the performance of such delegation by these agents is regularly
monitored by the Board.
At the Board's quarterly meetings it considers papers circulated
in advance including reports provided by the Investment Manager and
the administrator in its capacity as Company Secretary. The
Investment Manager's report comments on:
-- The French and Spanish property markets including
recommendations for any changes in strategy that the Investment
Manager considers may be appropriate.
-- Performance of the Group's portfolio and key asset management initiatives.
-- Transactional activity undertaken over the previous quarter
and being contemplated for the future.
-- The Group's financial position including relationships with bankers and lenders.
The administrator provides a quarterly compliance, company
secretarial and regulatory report.
Together, these reports enable the Board to assess the success
with which the Group's strategy is being implemented, consider any
relevant risks (such as the general economic climate) and to
consider how they should be properly managed.
Board and Director appraisals
The Board is aware of the ongoing requirement to evaluate its
performance, composition (and whether it has an appropriate mix of
knowledge, skills and experience) and the ongoing relationships
between with the Investment Manager and Administrator, together
with the information provided to and communication between Board
members.
A decision has been taken by the remaining members of the Board
that a formal process is not required at this stage of the
Company's life, however the Board will continue to self assess on
an ongoing basis keeping in mind that evaluation of the Board's
performance and relationships is central to good corporate
governance.
At the June 2016 Board meeting, the Board considered its
composition in terms of size and cost to manage the completion of
the sales process described above. As a result of these
considerations, David Rowlinson, Phillip Rose and Dick Kingston
resigned from the Board, effective 3 June 2016. David Jeffreys and
Serena Tremlett, who have been with the Company since inception,
continue as Directors and the Board will take responsibility going
forward for matters previously dealt with by its
sub-committees.
Board meeting attendance
The table below shows the attendance at Board meetings during
the year to 31 December 2017:
Director No. of No. of
meetings meetings
attended eligible
to attend
----------------- ---------- -----------
David Jeffreys 10 10
----------------- ---------- -----------
Serena Tremlett 10* 10
* two meetings were attended by Serena Tremlett's alternate
Director: Mel Torode.
Directors' and officers' insurance
An appropriate level of Directors' and Officers' insurance is
maintained whereby Directors are indemnified against liabilities to
third parties to the extent permitted by Guernsey company law.
Board Committees
The Board had established three standing committees, all of
which operated under detailed terms of reference, copies of which
are available on request from the Company Secretary. Following the
decisions taken at the June 2016 Board meeting, the Board
Committees were dissolved. Responsibilities of the Board Committees
have been taken over by the two remaining non-executive
Directors.
Audit Committee
The Audit Committee had consisted of David Jeffreys (Chairman),
Dick Kingston, David Rowlinson and Serena Tremlett.
Role of the Committee
The role of the Audit Committee, which met at least twice a
year, included:
-- The engagement, review of the work carried out by and the
performance of the Company's external auditor.
-- To monitor and review the independence, objectivity and
effectiveness of the external auditor.
-- To develop and apply a policy for the engagement of the
external audit firm to provide non-audit services.
-- To assist the Board in discharging its duty to ensure that
financial statements comply with all legal requirements.
-- To review the Company's financial reporting and internal
control policies and to ensure that the procedures for the
identification, assessment and reporting of risks are adequate.
-- To review regularly the need for an internal audit function.
-- To monitor the integrity of the Company's financial
statements, including its annual and half year reports and
announcements relating to its financial performance, reviewing the
significant financial reporting issues and judgements which they
contain.
-- To review the consistency of accounting policies and practices.
-- To review and challenge where necessary the financial results
of the Company before submission to the Board.
The Audit Committee made recommendations to the Board which were
within its terms of reference and considered any other matters as
the Board might have referred to it.
Policy for non audit services
The Board has adopted a policy for the provision of non-audit
services by its external auditor, BDO Limited and reviews and
approves all material non-audit related services in accordance with
the need to ensure the independence and objectivity of the external
auditor. No services, other than audit-related ones, were carried
out by BDO Limited during 2017.
Internal audit
The Board relies upon the systems and procedures employed by the
Investment Manager and the administrator which are regularly
reviewed and are considered to be sufficient to provide it with the
required degree of comfort. Resulting from this and the fact that
the Group only has one employee, the Board continues to believe
that there is no need for an internal audit function.
Nomination Committee
The Nomination Committee had consisted of Serena Tremlett
(Chairman), David Jeffreys, Dick Kingston, Phillip Rose and David
Rowlinson.
The Committee's principal task was to review the structure, size
and composition of the Board in relation to its size and position
in the market and to make recommendations to fill Board vacancies
as they arose and it met at least annually.
Remuneration Committee and attendance
The Remuneration Committee had consisted of the independent
non-executive Directors being David Jeffreys (Chairman), Dick
Kingston, David Rowlinson and Serena Tremlett.
The Board approved formal terms of reference for the Committee
and a copy of these is available on request from the Company
Secretary.
As the Company comprises only non-executive directors, the
Committee's main role was to determine their remuneration within
the cap set out in the Company's Articles.
Remuneration report
The fees payable to the Directors were limited to GBP200,000 per
annum in aggregate under the Company's Articles and the annual fees
payable to each Director had not changed since the Company's shares
were listed in 2005 to the June 2016 Board meeting. At that
meeting, the Board was reduced to two non-executive Directors with
their fees being reduced to GBP40,000 per annum in aggregate. The
fees payable to the Directors are expected to reflect their
expertise, responsibilities and time spent on the business of the
Company, taking into account market equivalents, the activities and
the size of the Company and market conditions. Under their
respective appointment letters, each director is entitled to an
annual fee together with a provision for reimbursement for any
reasonable out of pocket expenses.
During the year the Directors received the following emoluments
in the form of fees from the Company:
Year ended Year ended
31 December 31 December
2017 2016
GBP GBP
------------------ ------------- -------------
Dick Kingston* - 15,000
------------------ ------------- -------------
David Jeffreys 20,000 21,500
------------------ ------------- -------------
Phillip Rose* - 10,000
------------------ ------------- -------------
David Rowlinson* - 10,000
------------------ ------------- -------------
Serena Tremlett 20,000 20,000
------------------ ------------- -------------
Total 40,000 76,500
* resigned on 3 June 2016
Internal control and risk management
The Board understands its responsibility for ensuring that there
are sufficient, appropriate and effective systems, procedures,
policies and processes for internal control of financial,
operational, compliance and risk management matters in place in
order to manage the risks which are an inherent part of business.
Such risks are managed rather than eliminated in order to permit
the Company to meet its financial and other objectives.
As the Company has only one employee, the Board reviews the
internal procedures of both its Investment Manager and its
administrator upon which it is reliant. The Investment Manager has
a schedule of matters which have been delegated to it by the Board
and upon which it reports to the Board on a quarterly basis. These
matters include quarterly management accounts and reporting against
key financial performance indicators. Further, a compliance report
is produced by the administrator for the Board on a quarterly
basis.
The Company maintains a risk management framework which
considers the non-financial as well as financial risks and this is
reviewed by the Board.
Investment management agreement
The Company has an agreement with the Investment Manager. This
sets out the Investment Manager's key responsibilities, which
include proposing a property investment strategy to the Board,
identifying property investments to recommend for sale and managing
appropriate lending facilities. The Investment Manager is also
responsible to the Board for all issues relating to property asset
management.
Substantial shareholding
Shareholders with holdings of more than three per cent of the
issued ordinary shares of the Company as at 9 February 2018 were as
follows:
Name of investor No. % held
of ordinary
shares
---------------------------- ------------- -------
Antler Investment
Holdings Limited 21,437,393 18.22
---------------------------- ------------- -------
Alpha Global Property
Securities Fund Pte.
Ltd 9,390,800 7.98
---------------------------- ------------- -------
Peel Hunt 9,002,977 7.65
---------------------------- ------------- -------
Mr K. Dhana 7,095,960 6.03
---------------------------- ------------- -------
Interactive Investor 6,741,973 5.73
---------------------------- ------------- -------
Mr Richard M. Peskin 6,000,000 5.10
---------------------------- ------------- -------
Mrs Rosemary J. Skelley 5,857,607 4.98
---------------------------- ------------- -------
Halifax Share Dealing
Clients 5,499,273 4.68
---------------------------- ------------- -------
Hargreaves Lansdown
Asset Management 4,628,425 3.93
---------------------------- ------------- -------
Barclays Wealth Management
(UK) 4,355,336 3.70
Shareholder relations
The Board places high importance on its relationship with its
shareholders, with members of the Investment Manager's Investment
Committee making themselves available for meetings with key
shareholders and sector analysts. Reporting of these meetings and
market commentary is received by the Board on a quarterly basis to
ensure that shareholder communication fulfils the needs of being
useful, timely and effective. One or more members of the Board and
the Investment Manager will be available at the Annual General
Meeting to answer any questions that shareholders attending may
wish to raise.
Directors' Responsibilities Statement
Company law requires the Directors to prepare financial
statements for each financial year, which give a true and fair view
of the state of affairs of the Company and of the Group at the end
of the year and of the profit or loss of the Company and the Group
for that year.
In preparing those financial statements, the Directors are
required to:
(1) select suitable accounting policies and then apply them consistently;
(2) make judgements and estimates that are reasonable and prudent;
(3) state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements;
(4) prepare the financial statements on the going concern basis
unless it is appropriate to assume that the Company and Group will
not continue in business (as detailed in the going concern
paragraph below and in note 2 of the financial statements, these
financial statements have not been prepared on a going concern
basis).
The Directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time the
financial position of the Company and of the Group and to enable
them to ensure that the financial statements comply with the
Companies (Guernsey) Law, 2008. They are also responsible for
safeguarding the assets of the Company and Group and hence for
taking reasonable steps for the prevention and detection of fraud
and other irregularities.
The Directors confirm that they have complied with the above
requirements in preparing the financial statements.
So far as each of the Directors is aware, there is no relevant
information of which the Company's auditor is unaware, and they
have taken all the steps they ought to have taken as Directors to
make themselves aware of any relevant information and to establish
that the Company's auditor is aware of that information.
Going concern
During the year, the Board has made further progress in the
planned orderly realisation of its investment properties and
subsequent partial repayment of the bank borrowings. The maturity
date of the remaining bank borrowings is 31 October 2018. The Trust
has the support of its lender for the sale of its remaining
property with a view to winding up the Trust's group in due course.
The accounts are therefore not prepared on a going concern
basis.
Annual General Meeting
The AGM will be held in Guernsey at 9 a.m. on 27 April 2018 at
Old Bank Chambers, La Grande Rue, St Martin's, Guernsey. The
meeting will be held to receive the Annual Report and Financial
Statements, re-elect Directors and propose the reappointment of the
auditor and that the Directors be authorised to determine the
auditor's remuneration.
Independent auditor
BDO Limited has expressed its willingness to continue in office
as auditor of the Company.
By order of the Board,
David Jeffreys
Director
Directors' statement pursuant to the Disclosure and Transparency
Rules
Each of the Directors, whose names and functions are listed in
the Directors' and corporate governance report, confirm that, to
the best of each person's knowledge and belief:
-- the financial statements, prepared in accordance with
International Financial Reporting Standards as adopted by the EU
('IFRS') in accordance with the requirements of the London Stock
Exchange, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Group and Company,
and
-- the Chairman's statement and the property review include a
fair review of the development and performance of the business and
the position of the Company and Group and notes 19 and 20 to the
financial statements provide a description of the principal risks
and uncertainties that they face.
By order of the Board,
David Jeffreys
Director
Corporate responsibility - benefits, risks and controls
The Board has reviewed the Company's Corporate Responsibility
Policy and considers this to be appropriate for the Company. The
Company's policy is as follows:
Alpha Pyrenees Trust Limited is committed to managing its
property in a way that delivers positive environmental, social and
economic benefits. The Company recognises that the way in which
buildings are designed, built, managed and occupied, significantly
influences their impact on the environment and affected communities
and it seeks to manage these issues.
The Company believes that, through the implementation of
socially responsible policies, the Company can manage effectively
our sustainability related risks, associated with, for example,
climate change (more severe and regular floods, increasing storm
damage costs and rising energy prices), site contamination and
remediation, use of hazardous materials, waste management (rising
landfill and disposal costs) and local community relations.
The Company's standard business process ensured that appropriate
environmental reports were obtained as part of the due diligence
process for property acquisitions and the Company assessed the
accessibility of each property to public transportation.
The Company's managers and appointed agents are required to
comply with all relevant laws and regulations affecting the
Company's business, and managers are expected to be aware of the
environmental issues associated with property investment including
environmental health and safety legislation, energy use, pollution
and waste management.
Independent auditors' report
To the members of Alpha Pyrenees Trust Limited
Opinion
We have audited the financial statements of Alpha Pyrenees Trust
Limited (the 'parent company') and its subsidiaries ('the group)
for the year ended 31 December 2017 which comprise the Consolidated
and Company Statements of Comprehensive Income, the Consolidated
and Company Statements of Financial Position, the Consolidated and
Company Statements of Cash Flows, the Consolidated and Company
Statements of Changes in Equity and notes to the financial
statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union.
In our opinion, the financial statements:
-- give a true and fair view of the state of the group's and of
the parent company's affairs as at 31 December 2017 and of the
group's loss and parent company's profit for the year then
ended;
-- have been properly prepared in accordance with International
Financial Reporting Standards as adopted by the EU; and
-- have been properly prepared in accordance with the
requirements of the Companies (Guernsey) Law, 2008.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We are independent of the group
and the parent company in accordance with the ethical requirements
that are relevant to our audit of the financial statements in the
UK, including the FRC's Ethical Standard as applied to listed
entities, and we have fulfilled our other ethical responsibilities
in accordance with these requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Use of our report
This report is made solely to the company's members, as a body,
in accordance with Section 262 of the Companies (Guernsey) Law,
2008. 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 auditor's 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.
Emphasis of Matter - financial statements prepared on a basis
other than that of a going concern
We draw attention to the disclosures made in note 2 to the
financial statements which explains that it is the intention of the
Board to sell the group's remaining investment property with a view
to winding up the group in due course. As a consequence, the
financial statements have therefore been prepared on a basis other
than that of a going concern. Our opinion is not modified in this
respect of this matter.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect
on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Key Audit Matter Audit Response
-------------------------------- ------------------------------------
Property Valuation We evaluated the competence
(note 10) of the external valuer,
Knight Frank, which included
Property valuations consideration of their
are a highly subjective qualifications and expertise.
area as the valuer We read the terms of engagement
will make judgements with the group to determine
as to property yields, whether there were any
quality of tenants matters that might have
and other variables affected their objectivity
to arrive at the current or may have imposed scope
open market value limitations upon their
of the remaining property. work. We found no evidence
to suggest that the objectivity
Any input inaccuracies of the valuer in their
or unreasonable bases performance of the valuations
used in the valuation was compromised.
judgements (such as
in respect of estimated We have read the valuation
rental value and yield report for the remaining
profile applied) could property, discussed the
result in a material basis of the property
misstatement of the valuation with valuer
group statement of to understand the process
comprehensive income undertaken by them and
and the group statement we confirmed that valuation
of financial position. had been prepared in accordance
with professional valuation
standards and IFRS.
We have considered the
reasonableness of the
inputs used by Knight
Frank in the valuation,
such as the terms of void
periods, rent free periods
and other assumptions
that impact the value.
-------------------------------- ------------------------------------
Disposal of subsidiary
entities (note 9) We agreed the calculation
of the reclassification
Two subsidiaries, of foreign exchange gains
Alpha Pyrenees Spain on translation of foreign
SLU and Alpha Pyrenees operations on disposal
Athis Mons SCI, were to audited figures going
liquidated during back to the date of incorporation
the year. For such of the two subsidiaries.
disposals, IFRS requires
any foreign currency We also reviewed the disclosure
translation reserve made in the financial
to be recycled through statements in respect
the statement of comprehensive of the disposals to ensure
income. This is a compliance with the requirements
material figure to of IFRS.
the financial statements
and requires analysis
of the results of
the subsidiaries disposed
of from the date of
their incorporation.
-------------------------------- ------------------------------------
Our application of materiality
We apply the concept of materiality both in planning and
performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the magnitude by which
misstatements, including omissions, could influence the economic
decisions of reasonable users that are taken on the basis of the
financial statements. Importantly, misstatements below these levels
will not necessarily be evaluated as immaterial as we also take
account of the nature of identified misstatements, and the
particular circumstances of their occurrence, when evaluating their
effect on the financial statements as a whole.
For planning, we considered materiality to be the level by which
misstatements individually or in aggregate, including omissions,
could influence the economic decisions of the relevant users. Based
on our professional judgment, we determined materiality for the
group financial statements as a whole to be GBP102,600 (2016:
GBP222,000), which is based on a level of 1% of total assets held
for the majority of the year, and we determined materiality for the
parent company financial statements as a whole to be GBP5,130
(2016: GBP11,000). We considered total assets to be the most
appropriate benchmark due to the nature of the group being an
investment property fund.
Performance materiality for the group has been set at GBP71,820
(2016: GBP155,400) which is 70% of materiality. This has been set
based upon the control environment in place, the directors
assessment of risk and our past experience of adjustments.
International Standards on Auditing (UK) also allow the auditor
to set a lower materiality for particular classes of transaction,
balances or disclosures for which misstatements of lesser amounts
than materiality for the financial statements as a whole could
reasonably be expected to influence the economic decisions of users
taken on the basis of the financial statements. In this context, we
set a lower level of materiality to apply to rental income and
sensitive fees including investment management fees, directors'
fees, property operating expenses, administration fees, audit fees
and legal fees. We determined materiality for these areas to be
GBP10,530.
Component materiality has been set for the components which are
significant to the group financial statements. Materiality for
these components has been set at GBP67,000 (2016: GBP165,000).
We agreed with the Board of Directors that we would report all
audit differences in excess of GBP5,130 (2016: GBP11,000).
An overview of the scope of our audit
We tailored the scope of our audit taking into account the
nature of the group's and parent company's investments, involvement
of the Investment Manager and the company's Administrator, the
accounting and reporting environment and the industry in which the
group and parent company operates.
This assessment took into account the likelihood, nature and
potential magnitude of any misstatement. As part of this risk
assessment we considered the group's and parent company's
interaction with the Investment Manager and the company's
Administrator. We assessed the control environment in place at the
Investment Manager and the company's Administrator to the extent
that it was relevant to our audit. Following this assessment, we
applied professional judgement to determine the extent of testing
required over each balance in the financial statements.
The parent company and each subsidiary form separate components
of the group. The parent company and the significant component,
Alpha Pyrenees Offices SCI have both been subject to a full scope
audits. Alpha Pyrenees Athis Mons SCI, Alpha Pyrenees Alcala SLU
and Alpha Pyrenees Ecija SLU have had specific procedures performed
on them. We have performed desktop reviews on all the remaining
subsidiaries, as they are not significant to the group.
The audit work on Alpha Pyrenees Offices SCI and the specific
procedures on Alpha Pyrenees Athis Mons SCI, Alpha Pyrenees Alcala
SLU and Alpha Pyrenees Ecija SLU were completed by the component
auditors and reviewed by us. In addition to the work performed by
the component auditors, we have performed audit procedures on all
key risk areas.
Other information
The Directors are responsible for the other information. The
other information comprises the information included in the annual
report, other than the financial statements and our auditor's
report thereon. Our opinion on the financial statements does not
cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit, or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a
material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact.
We have nothing to report in this regard.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
where the Companies (Guernsey) Law, 2008 requires us to report to
you if, in our opinion:
-- proper accounting records have not been kept by the parent company; or
-- the financial statements are not in agreement with the accounting records; or
-- we have failed to obtain all the information and explanations
which, to the best of our knowledge and belief, are necessary for
the purposes of our audit.
Responsibilities of Directors
As explained more fully in the Directors' responsibilities
statement within the Directors' Report, the Directors are
responsible for the preparation of the financial statements and for
being satisfied that they give a true and fair view and for such
internal control as the Directors determines is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are
responsible for assessing the group's and parent company's ability
to continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the Directors either intend to liquidate the
group or to cease operations, or have no realistic alternative but
to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of
the financial statements is located at the Financial Reporting
Council's ("FRC's") website at:
https://www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor's report.
We were appointed by the board of directors on 22 November 2006
to audit the financial statements for the year ending 31 December
2006 and subsequent financial periods. The period of total
uninterrupted engagement is 12 years, covering the years ended 31
December 2006 to 31 December 2017.
The non-audit services prohibited by the FRC's Ethical Standard
were not provided to the group or the parent company and we remain
independent of the group and the parent company in conducting our
audit.
Our audit opinion is consistent with the additional report to
the board of directors.
The engagement director on the audit resulting in this
independent auditor's report is Richard Searle.
.......................................................
Richard Michael Searle FCA
For and on behalf of BDO Limited, Chartered Accountants and
Recognised Auditor
Place du Pré, Rue du Pré, St Peter Port, Guernsey
Date: 8 March 2018
Consolidated statement of comprehensive income
For the year ended For the year ended
31 December 2017 31 December 2016
--------------------------------- ------------------------------- -------------------------------
Revenue Capital Total Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ ------- --------- --------- --------- --------- --------- ---------
Income
------------------------ ------- --------- --------- --------- --------- --------- ---------
Revenue 3 413 - 413 1,033 - 1,033
------------------------ ------- --------- --------- --------- --------- --------- ---------
Property operating
expenses 3 (827) - (827) (1,241) - (1,241)
------------------------ ------- --------- --------- --------- --------- --------- ---------
Net rental expense (414) - (414) (208) - (208)
------------------------ ------- --------- --------- --------- --------- --------- ---------
Losses on disposal
of investment
properties held
for sale 10 - (5,398) (5,398) - (1,461) (1,461)
------------------------ ------- --------- --------- --------- --------- --------- ---------
Gains on disposal
of subsidiaries - 1,531 1,531 - 676 676
------------------------ ------- --------- --------- --------- --------- --------- ---------
Losses on revaluation
of investment
properties held
for sale 10 - (966) (966) - (7,268) (7,268)
------------------------ ------- --------- --------- --------- --------- --------- ---------
Expenses
------------------------ ------- --------- --------- --------- --------- --------- ---------
Investment Manager's
fee 18 (747) - (747) (867) - (867)
------------------------ ------- --------- --------- --------- --------- --------- ---------
Other administration
costs 4 (395) - (395) (948) - (948)
------------------------ ------- --------- --------- --------- --------- --------- ---------
Operating loss (1,556) (4,833) (6,389) (2,023) (8,053) (10,076)
------------------------ ------- --------- --------- --------- --------- --------- ---------
Finance costs 5 (5,324) (672) (5,996) (5,462) (17) (5,479)
------------------------ ------- --------- --------- --------- --------- --------- ---------
Loss before
taxation (6,880) (5,505) (12,385) (7,485) (8,070) (15,555)
------------------------ ------- --------- --------- --------- --------- --------- ---------
Taxation 6 - - - - - -
------------------------ ------- --------- --------- --------- --------- --------- ---------
Loss for the
year (6,880) (5,505) (12,385) (7,485) (8,070) (15,555)
------------------------ ------- --------- --------- --------- --------- --------- ---------
Other comprehensive
income/(loss)
------------------------ ------- --------- --------- --------- --------- --------- ---------
Items that may
be reclassified
to profit or
loss in subsequent
periods:
------------------------ ------- --------- --------- --------- --------- --------- ---------
Foreign exchange
losses on translation
of foreign operations
(translation
reserve) - (1,691) (1,691) - (6,498) (6,498)
------------------------ ------- --------- --------- --------- --------- --------- ---------
Reclassification
of foreign exchange
gains on translation
of foreign operations
following disposals - (1,531) (1,531) - (676) (676)
------------------------ ------- --------- --------- --------- --------- --------- ---------
Other comprehensive
loss for the
year - (3,222) (3,222) - (7,174) (7,174)
------------------------ ------- --------- --------- --------- --------- --------- ---------
Total comprehensive
loss for the
year (6,880) (8,727) (15,607) (7,485) (15,244) (22,729)
------------------------ ------- --------- --------- --------- --------- --------- ---------
Loss per share
- basic & diluted 8 (10.5)p (13.2)p
The total column of this statement represents the Group's
statement of comprehensive income, prepared in accordance with IFRS
as adopted by the European Union. The revenue and capital columns
are supplied as supplementary information permitted under IFRS. All
items in the above statement derive from continuing operations. All
income is attributable to the equity holders of the parent company.
There are no non-controlling interests.
The accompanying notes are an integral part of the financial
statements.
Consolidated balance sheet
Notes 2017 2016
As at 31 December 2017 GBP'000 GBP'000
--------------------------------- ------ ---------- ----------
Current assets
--------------------------------- ------ ---------- ----------
Investment properties held
for sale 10 5,945 16,824
--------------------------------- ------ ---------- ----------
Trade and other receivables 11 228 685
--------------------------------- ------ ---------- ----------
Restricted cash 12 2,313 3,897
--------------------------------- ------ ---------- ----------
Cash and cash equivalents 12 788 1,213
--------------------------------- ------ ---------- ----------
9,274 22,619
--------------------------------- ------ ---------- ----------
Current liabilities
--------------------------------- ------ ---------- ----------
Trade and other payables 13 (1,165) (1,294)
--------------------------------- ------ ---------- ----------
Bank borrowings 14 (82,629) (2,889)
--------------------------------- ------ ---------- ----------
Liabilities directly associated
with investment properties (190) (257)
--------------------------------- ------ ---------- ----------
(83,984) (4,440)
--------------------------------- ------ ---------- ----------
Non-current liabilities
--------------------------------- ------ ---------- ----------
Bank borrowings 14 - (77,282)
--------------------------------- ------ ---------- ----------
Net liabilities (74,710) (59,103)
--------------------------------- ------ ---------- ----------
Equity
--------------------------------- ------ ---------- ----------
Share capital 15 - -
--------------------------------- ------ ---------- ----------
Special reserve 16 113,131 113,131
--------------------------------- ------ ---------- ----------
Translation reserve 16 13,838 17,060
--------------------------------- ------ ---------- ----------
Capital reserve 16 (179,748) (174,243)
--------------------------------- ------ ---------- ----------
Revenue reserve 16 (21,931) (15,051)
--------------------------------- ------ ---------- ----------
Total equity (74,710) (59,103)
--------------------------------- ------ ---------- ----------
Net asset value per share (63.5)p (50.2)p
The financial statements were approved by the Board of Directors
and authorised for issue on 8 March 2018. They were signed on its
behalf by:
David Jeffreys
Director
The accompanying notes are an integral part of the financial
statements.
Consolidated cash flow statement
Notes For the For the
year ended year ended
31 December 31 December
2017 2016
GBP'000 GBP'000
-------------------------------------- ------ ------------- -------------
Operating activities
-------------------------------------- ------ ------------- -------------
Loss for the year (12,385) (15,555)
-------------------------------------- ------ ------------- -------------
Adjustments for :
-------------------------------------- ------ ------------- -------------
Losses on disposal of investment
properties held for sale 5,398 1,461
-------------------------------------- ------ ------------- -------------
Gains on disposal of subsidiaries (1,531) (676)
-------------------------------------- ------ ------------- -------------
Losses on revaluation of
investment properties held
for sale 966 7,268
-------------------------------------- ------ ------------- -------------
Finance costs 5,996 5,479
-------------------------------------- ------ ------------- -------------
Operating cash flows before
movements in working capital (1,556) (2,023)
-------------------------------------- ------ ------------- -------------
Movements in working capital:
-------------------------------------- ------ ------------- -------------
Movement in trade and other
receivables 707 1,013
-------------------------------------- ------ ------------- -------------
Movement in trade and other
payables (250) (1,454)
-------------------------------------- ------ ------------- -------------
Cash flows used in operating
activities (1,099) (2,464)
-------------------------------------- ------ ------------- -------------
Investing activities
-------------------------------------- ------ ------------- -------------
Proceeds from disposal
of investment properties 5,120 25,319
-------------------------------------- ------ ------------- -------------
Cash flows from investing
activities 5,120 25,319
-------------------------------------- ------ ------------- -------------
Financing activities
-------------------------------------- ------ ------------- -------------
Repayment of borrowings (5,781) (28,702)
-------------------------------------- ------ ------------- -------------
Bank loan interest paid
and costs (65) (1,385)
-------------------------------------- ------ ------------- -------------
Restricted cash movement 12 1,706 7,412
-------------------------------------- ------ ------------- -------------
Cash flows used in financing
activities (4,140) (22,675)
-------------------------------------- ------ ------------- -------------
Net (decrease)/increase
in cash and cash equivalents (119) 180
-------------------------------------- ------ ------------- -------------
Cash and cash equivalents
at beginning of year 1,213 1,309
-------------------------------------- ------ ------------- -------------
Exchange translation movement (306) (276)
-------------------------------------- ------ ------------- -------------
Cash and cash equivalents
at end of year (note 12) 788 1,213
The accompanying notes are an integral part of the financial
statements.
Consolidated statement of changes in equity
For the year Share Special Translation Capital Revenue Total
ended 31 December capital reserve reserve reserve reserve equity
2016 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ---------- --------- ------------ ---------- --------- ---------
At 1 January
2016 - 113,131 24,234 (166,173) (7,566) (36,374)
--------------------- ---------- --------- ------------ ---------- --------- ---------
Total comprehensive
loss for the
year
--------------------- ---------- --------- ------------ ---------- --------- ---------
Loss for the
year - - - (8,070) (7,485) (15,555)
--------------------- ---------- --------- ------------ ---------- --------- ---------
Other comprehensive
loss - - (7,174) - - (7,174)
--------------------- ---------- --------- ------------ ---------- --------- ---------
Total comprehensive
loss for the
year - - (7,174) (8,070) (7,485) (22,729)
--------------------- ---------- --------- ------------ ---------- --------- ---------
At 31 December
2016 - 113,131 17,060 (174,243) (15,051) (59,103)
--------------------- ---------- --------- ------------ ---------- --------- ---------
Note 15, 16
For the year Share Special Translation Capital Revenue Total
ended 31 December capital reserve reserve reserve reserve equity
2017 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ---------- --------- ------------ ---------- --------- ---------
At 1 January
2017 - 113,131 17,060 (174,243) (15,051) (59,103)
--------------------- ---------- --------- ------------ ---------- --------- ---------
Total comprehensive
loss for the
year
--------------------- ---------- --------- ------------ ---------- --------- ---------
Loss for the
year - - - (5,505) (6,880) (12,385)
--------------------- ---------- --------- ------------ ---------- --------- ---------
Other comprehensive
loss - - (3,222) - - (3,222)
--------------------- ---------- --------- ------------ ---------- --------- ---------
Total comprehensive
loss for the
year - - (3,222) (5,505) (6,880) (15,607)
--------------------- ---------- --------- ------------ ---------- --------- ---------
At 31 December
2017 - 113,131 13,838 (179,748) (21,931) (74,710)
--------------------- ---------- --------- ------------ ---------- --------- ---------
Note 15, 16
The accompanying notes are an integral part of the financial
statements.
Company statement of comprehensive income
For the year For the year
ended ended
31 December 31 December
2017 2016
------------------------ ------- ------------------------------- -------------------------------
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Notes
------------------------ ------- --------- --------- --------- --------- --------- ---------
Expenses
------------------------ ------- --------- --------- --------- --------- --------- ---------
Investment Manager's
fee 18 (747) - (747) (867) - (867)
------------------------ ------- --------- --------- --------- --------- --------- ---------
Other administration
costs 4 (203) - (203) (458) - (458)
------------------------ ------- --------- --------- --------- --------- --------- ---------
Total expenses (950) - (950) (1,325) - (1,325)
------------------------ ------- --------- --------- --------- --------- --------- ---------
Operating loss (950) - (950) (1,325) - (1,325)
------------------------ ------- --------- --------- --------- --------- --------- ---------
Finance costs 5 - (1) (1) (1) (18) (19)
------------------------ ------- --------- --------- --------- --------- --------- ---------
Movement in impairment
of amounts receivable
from and investments
in subsidiary 9,
undertakings 19 - 1,095 1,095 - 1,208 1,208
------------------------ ------- --------- --------- --------- --------- --------- ---------
(Loss)/profit
before taxation (950) 1,094 144 (1,326) 1,190 (136)
------------------------ ------- --------- --------- --------- --------- --------- ---------
Taxation 6 - - - - - -
------------------------ ------- --------- --------- --------- --------- --------- ---------
(Loss)/profit
for the year (950) 1,094 144 (1,326) 1,190 (136)
------------------------ ------- --------- --------- --------- --------- --------- ---------
Total comprehensive
(loss)/income
for the year (950) 1,094 144 (1,326) 1,190 (136)
The total column of this statement represents the Company's
statement of comprehensive income, prepared in accordance with IFRS
as adopted by the European Union. The revenue and capital columns
are supplied as supplementary information permitted under IFRS. All
items in the above statement derive from continuing operations.
The accompanying notes are an integral part of the financial
statements.
Company balance sheet
Notes 2017 2016
As at 31 December 2017 GBP'000 GBP'000
----------------------------- ------ ---------- ----------
Current assets
----------------------------- ------ ---------- ----------
Trade and other receivables 11 13 15
----------------------------- ------ ---------- ----------
Cash and cash equivalents 12 3 1
----------------------------- ------ ---------- ----------
16 16
----------------------------- ------ ---------- ----------
Total assets 16 16
----------------------------- ------ ---------- ----------
Current liabilities
----------------------------- ------ ---------- ----------
Trade and other payables 13 (643) (787)
----------------------------- ------ ---------- ----------
Total liabilities (643) (787)
----------------------------- ------ ---------- ----------
Net liabilities (627) (771)
----------------------------- ------ ---------- ----------
Equity
----------------------------- ------ ---------- ----------
Share capital 15 - -
----------------------------- ------ ---------- ----------
Special reserve 16 113,131 113,131
----------------------------- ------ ---------- ----------
Capital reserve 16 (137,035) (138,129)
----------------------------- ------ ---------- ----------
Revenue reserve 16 23,277 24,227
----------------------------- ------ ---------- ----------
Total equity (627) (771)
The financial statements were approved by the Board of Directors
and authorised for issue on 8 March 2018. They were signed on its
behalf by:
David Jeffreys
Director
The accompanying notes are an integral part of the financial
statements.
Company cash flow statement
Note For the For the
year ended year ended
31 December 31 December
2017 2016
GBP'000 GBP'000
--------------------------------- ----- ------------- -------------
Operating activities
--------------------------------- ----- ------------- -------------
Profit/(loss) for the
year 144 (136)
--------------------------------- ----- ------------- -------------
Adjustments for :
--------------------------------- ----- ------------- -------------
Finance costs 1 19
--------------------------------- ----- ------------- -------------
Movement in impairment
of amounts receivable
from subsidiary undertakings (1,095) (1,208)
--------------------------------- ----- ------------- -------------
Operating cash flows before
movements in working capital (950) (1,325)
--------------------------------- ----- ------------- -------------
Movement in operating
trade and other receivables 3 (3)
--------------------------------- ----- ------------- -------------
Movement in operating
trade and other payables (144) 104
--------------------------------- ----- ------------- -------------
Cash flows used in operations (1,091) (1,224)
--------------------------------- ----- ------------- -------------
Interest paid - (1)
--------------------------------- ----- ------------- -------------
Cash flows used in operating
activities (1,091) (1,225)
--------------------------------- ----- ------------- -------------
Investing activities
--------------------------------- ----- ------------- -------------
Current account loans
repaid 9 1,093 1,194
--------------------------------- ----- ------------- -------------
Cash flows from investing
activities 1,093 1,194
--------------------------------- ----- ------------- -------------
Net increase/(decrease)
in cash and cash equivalents 2 (31)
--------------------------------- ----- ------------- -------------
Cash and cash equivalents
at beginning of year 1 36
--------------------------------- ----- ------------- -------------
Exchange translation movement - (4)
--------------------------------- ----- ------------- -------------
Cash and cash equivalents
at end of year 3 1
The accompanying notes are an integral part of the financial
statements.
Company statement of changes in equity
For the year ended Share Special Capital Revenue Total
31 December 2016 capital reserve reserve reserve equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ---------- --------- ---------- --------- ---------
At 1 January 2016 - 113,131 (139,319) 25,553 (635)
--------------------- ---------- --------- ---------- --------- ---------
Total comprehensive
income/(loss) for
the year
--------------------- ---------- --------- ---------- --------- ---------
Income/(loss) for
the year - - 1,190 (1,326) (136)
--------------------- ---------- --------- ---------- --------- ---------
Total comprehensive
income/(loss) for
the year - - 1,190 (1,326) (136)
--------------------- ---------- --------- ---------- --------- ---------
At 31 December 2016 - 113,131 (138,129) 24,227 (771)
--------------------- ---------- --------- ---------- --------- ---------
Note 15, 16
For the year ended Share Special Capital Revenue Total
31 December 2017 capital reserve reserve reserve equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ---------- --------- ---------- --------- ---------
At 1 January 2017 - 113,131 (138,129) 24,227 (771)
--------------------- ---------- --------- ---------- --------- ---------
Total comprehensive
income/(loss) for
the year
--------------------- ---------- --------- ---------- --------- ---------
Income/(loss) for
the year - - 1,094 (950) 144
--------------------- ---------- --------- ---------- --------- ---------
Total comprehensive
income/(loss) for
the year - - 1,094 (950) 144
--------------------- ---------- --------- ---------- --------- ---------
At 31 December 2017 - 113,131 (137,035) 23,277 (627)
--------------------- ---------- --------- ---------- --------- ---------
Note 15, 16
The accompanying notes are an integral part of the financial
statements.
Notes to the financial statements
1. General information
The Company is a limited liability, closed-ended investment
company incorporated in Guernsey. The address of the registered
office is given below. The nature of the Group's operations and its
principal activities are set out in the Chairman's statement above.
The financial statements were approved and authorised for issue on
8 March 2018 and signed by David Jeffreys on behalf of the
Board.
2. Significant accounting policies
A summary of the principal accounting policies is set out below.
The policies have been consistently applied to all years
presented.
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of
applying the accounting policies. The areas involving a high degree
of judgement or complexity or areas where the assumptions and
estimates are significant to the financial statements are disclosed
in this note.
Basis of preparation
These financial statements have been prepared in accordance with
IFRS, which comprise standards and interpretations approved by the
International Accounting Standards Board ("IASB"), and
International Accounting Standards and Standards Interpretations
Committee's interpretations approved by the International
Accounting Standards Committee ("IASC") that remain in effect, and
to the extent that they have been adopted by the European
Union.
Going concern
During the year, the Board has made further progress in the
planned orderly realisation of its investment properties and
subsequent partial repayment of the bank borrowings. The maturity
date of the remaining bank borrowings is 31 October 2018. The Trust
has the support of its lender for the sale of its remaining
property with a view to winding up the Trust's group in due course.
The accounts are therefore not prepared on a going concern
basis.
a) Adoption of new and revised Standards
A number of new standards and interpretations issued by the IASB
and the International Financial Reporting Interpretations Committee
are effective for the current year. The adoption of these standards
has not led to any changes in the Group's accounting policies; an
exception is represented by the Disclosure Initiative Amendments to
IAS7: this amendment requires disclosure of changes in liabilities
arising from financing activities (see note 14).
b) Standards and Interpretations in issue and not yet
effective
At the date of authorisation of these financial statements,
there were a number of standards and interpretations, which have
not been applied in these financial statements that were in issue
but not yet effective. These are either not relevant to the Company
and Group or, given the orderly disposal of its remaining
investment property and intended winding up of the Company and
Group, are not expected to have a significant impact.
Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and the subsidiary undertakings
controlled by the Company, made up to 31 December each year.
Control is achieved where the Company has power over the investee,
exposure or rights, to variable returns from its involvement with
the investee and the ability to use its power to affect the amount
of the investor's returns.
The results of subsidiary undertakings acquired or disposed of
during the year are included in the consolidated statement of
comprehensive income from the effective date of acquisition or up
to the effective date of disposal as appropriate.
When necessary, adjustments are made to the financial statements
of subsidiary undertakings to bring their accounting policies used
into line with those used by the Group.
All intra-group transactions, balances, income and expenses are
eliminated on consolidation.
Presentation of statement of comprehensive income
In order to better reflect the activities of an investment
company and in accordance with guidance issued by the Association
of Investment Companies ("AIC"), supplementary information, which
analyses the statement of comprehensive income between items of a
revenue and capital nature, has been presented alongside the
Company and Group's statements of comprehensive income.
Revenue recognition
Rental income from investment property leased out under an
operating lease is recognised in the statement of comprehensive
income on a straight line basis over the term of the lease. Lease
incentives granted are recognised as an integral part of the net
consideration for the use of the property and are therefore also
recognised on the same straight line basis. Rental revenues are
accounted for on an accruals basis. Therefore, deferred revenue
generally represents advance payments from tenants. Revenue is
recognised when it is probable that the economic benefits
associated with the transaction will flow to the Group and the
amount of revenue can be measured reliably. Upon early termination
of a lease by the lessee, the receipt of a surrender premium is
immediately recognised as revenue.
The Company's interest income is accrued on a time basis, by
reference to the principal outstanding and the effective interest
rate applicable. Provisions against recoverability of interest
income are recognised as an expense within the movement in
impairment of amounts receivable from subsidiary undertakings.
Leasing
Leases are classified as finance leases whenever the terms of
the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as
operating leases.
Foreign currencies
a) Functional and presentation currency
Items included in the financial statements of each of the Group
entities are measured in the currency of the primary economic
environment in which the entity operates (the "functional
currency"). The consolidated financial statements are presented in
Sterling, which is the Company's functional and presentation
currency.
b) Transactions and balances
Transactions in currencies other than the functional currency of
the Group's entity involved are recorded at the rates of exchange
prevailing on the dates of the transactions. At each balance sheet
date, monetary assets and liabilities that are denominated in
foreign currencies are retranslated at the rates prevailing on the
balance sheet date. Gains and losses arising on retranslation are
included in net profit or loss for the year.
c) Group companies
The results and financial position of all the Group entities
that have a functional currency which differs from the presentation
currency are translated into the presentation currency as
follows:
(i) assets and liabilities for each balance sheet presented are
translated at the closing rate at the date of the balance
sheet;
(ii) income and expenses for each statement of comprehensive
income are translated at the average exchange rate prevailing in
the period; and
(iii) all resulting exchange differences are recognised as a
separate component of equity.
On consolidation, the exchange differences arising from the
translation of the Company's net investment in foreign entities are
taken to other comprehensive income. When a foreign operation is
sold, such exchange differences are recognised in the statement of
comprehensive income as part of the gain or loss on sale.
The year-end exchange rate used is GBP1:EUR1.127 (2016:
GBP1:EUR1.169) and the average rate for the year used is
GBP1:EUR1.142 (2016: GBP1:EUR1.226).
Operating profit
a) Company
Operating profit includes interest income from subsidiary
entities, as reduced by Investment Manager's fees and
administrative expenses and excludes the movement on impairment of
loans from and investments in subsidiaries, finance costs and
finance income.
b) Group
Operating profit includes net gains or losses on revaluation of
investment properties and net gains or losses on disposal of
investment properties and subsidiaries, as reduced by
administrative expenses and property operating costs and excludes
finance costs and finance income.
Expenses
All expenses are accounted for on an accruals basis and include
fees and other expenses paid to the administrator, the Investment
Manager and the Directors.
In respect of the analysis between revenue and capital items
presented within the statement of comprehensive income, all
expenses have been presented as revenue items except:
(i) realised gains or losses from disposal of investment
properties and subsidiaries and unrealised gains or losses on
revaluation of investment properties;
(ii) foreign exchange losses.
Taxation
The Company is exempt from Guernsey taxation on income derived
outside of Guernsey and bank interest earned in Guernsey. A fixed
annual fee of GBP1,200 (2016: GBP1,200) is payable to the States of
Guernsey in respect of this exemption. No charge to Guernsey
taxation arises on capital gains. The Group is liable to foreign
tax arising on activities of the overseas subsidiaries. The Company
has subsidiary operations in Luxembourg, Belgium, France and
Spain.
The tax expense represents the sum of the tax currently payable
and deferred tax.
Fair value measurement
The Group measures certain non-financial assets such as
investment property held for sale, at fair value at the end of each
reporting period, using recognised valuation techniques and
following the principles of IFRS 13. In addition, fair values of
financial instruments measured at amortised cost are disclosed in
the financial statements.
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The fair value
measurement is based on the presumption that the transaction to
sell the asset or transfer the liability takes place either:
-- in the principal market for the asset or liability, or
-- in the absence of a principal market, in the most
advantageous market for the asset or liability.
The Group must be able to access the principal or the most
advantageous market at the measurement date. The fair value of an
asset or a liability is measured using the assumptions that market
participants would use when pricing the asset or liability,
assuming that market participants act in their economic best
interest.
A fair value measurement of a non-financial asset takes into
account a market participant's ability to generate economic
benefits by using the asset in its highest and best use or by
selling it to another market participant that would use the asset
in its highest and best use.
The Group uses valuation techniques that are appropriate in the
circumstances and for which sufficient data are available to
measure fair value, maximising the use of relevant observable
inputs and minimising the use of unobservable inputs significant to
the fair value measurement as a whole:
-- Level 1 - Quoted (unadjusted) market prices in active markets
for identical assets or liabilities.
-- Level 2 - Valuation techniques for which the lowest level
input that is significant to the fair value measurement is directly
or indirectly observable.
-- Level 3 - Valuation techniques for which the lowest level
input that is significant to the fair value measurement is
unobservable.
For assets and liabilities that are recognised in the financial
statements on a recurring basis, the Group determines whether
transfers have occurred between levels in the hierarchy by
re-assessing categorisation (based on the lowest level input that
is significant to the fair value measurement as a whole) at the end
of each reporting period.
Investment property held for sale
Investment property, which was property held to earn rentals
and/or for capital appreciation, was initially recognised at cost
being the fair value of consideration given including related
transaction costs. As from prior year, the Group investment
properties are all classified as held for sale. Investment
properties are classified as held for sale if their carrying amount
will be recovered by sale rather than by continuing use in the
business. For this to be the case, the property must be available
for immediate sale in its present condition, management must be
committed to and have initiated a plan to sell the property which,
when initiated, was expected to result in a completed sale within
twelve months. Property assets that are classified as held for sale
are measured at fair value based on half yearly professional
valuations made by Knight Frank LLP, in accordance with IAS 40
Investment Property. The valuations are in accordance with
standards complying with the Royal Institution of Chartered
Surveyors Appraisal and Valuation manual and the International
Valuation Standards Committee.
Gains or losses arising from changes in the fair value of
investment property held for sale are included in the statement of
comprehensive income in the period in which they arise. Properties
were treated as acquired when the Group assumed the significant
risks and returns of ownership and are treated as disposed of when
these are transferred to the buyer.
Segmental reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, which is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the Board of Directors of the
Company.
For management purposes, the Group is organised into one main
operating segment, which invests in commercial property located in
Europe. Accordingly, all significant operating decisions are based
upon analysis of the Group as one segment. The financial results
from this segment are equivalent to the financial statements of the
Group as a whole.
All of the Group's revenue is from entities that are
incorporated in Europe.
The Group does not have non-current assets at the balance sheet
date (2016: none).
With the exception of cash and cash equivalents and restricted
cash, which are located in Europe and Guernsey, all of the Group's
current assets are located in Europe only.
Investment in subsidiaries
Investments in subsidiaries are initially recognised and
subsequently carried at cost in the Company's financial statements
less, where appropriate, provisions for impairment.
Financial instruments
Financial assets and financial liabilities are recognised on the
Company and Group's balance sheet when the Company and Group become
a party to the contractual provisions of the instrument. The
Company and Group shall offset financial assets and financial
liabilities if the Company and Group has a legally enforceable
right to set off the recognised amounts and interests and intends
to settle on a net basis.
(a) Financial assets
The Company and Group's financial assets fall into the
categories discussed below, with the allocation depending to an
extent on the purpose for which the asset was acquired. The Company
and Group have not classified any of its financial assets as held
to maturity or as available for sale.
Unless otherwise indicated, the carrying amounts of the Company
and Group's financial assets are a reasonable approximation of
their fair values.
(i) Loans and receivables
These assets are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They
arise principally through rental leases with tenants (e.g. trade
receivables and cash and cash equivalents) but also incorporate
other types of contractual monetary assets. They are initially
recognised at fair value plus transaction costs that are directly
attributable to the acquisition or issue and subsequently carried
at amortised cost using the effective interest rate method, less
provision for impairment.
The effect of discounting on these financial instruments is not
considered to be material.
Impairment provisions are recognised when there is objective
evidence (such as significant financial difficulties on the part of
the counterparty or default or significant delay in payment) that
the Company and Group will be unable to collect all of the amounts
due under the terms of the receivable, the amount of such a
provision being the difference between the net carrying amount and
the present value of the future expected cash flows associated with
the impaired receivable. For trade receivables, such impairments
directly reduce the carrying amount of the impaired asset and are
recognised against the relevant income category in the statement of
comprehensive income.
Cash and cash equivalents are carried at cost and consist
primarily of short term deposits in banks with an original maturity
of three months or less.
Restricted cash is carried at cost and relates to trapped cash
held on the cash pooling account controlled by Barclays.
(ii) Derecognition of financial assets
A financial asset (in whole or in part) is derecognised
either:
-- when the Company and Group has transferred substantially all
the risks and rewards of ownership; or
-- when it has neither transferred nor retained substantially
all the risks and rewards and when it no longer has control over
the asset or a portion of the asset; or
-- when the contractual right to receive cash flow has expired.
(b) Financial liabilities
The Company and Group classifies its financial liabilities into
one of two categories, depending on the purpose for which the
liability was issued and its characteristics.
Unless otherwise indicated, the carrying amounts of the Company
and Group's financial liabilities are a reasonable approximation of
their fair values.
(i) Financial liabilities measured at amortised cost
Other financial liabilities include the following items:
-- Trade payables and other short-term monetary liabilities,
which are initially recognised at fair value and subsequently
carried at amortised cost using the effective interest rate
method.
-- Bank borrowings are initially recognised at fair value net of
attributable transaction costs incurred. Such interest bearing
liabilities are subsequently measured at amortised cost using the
effective interest rate method.
(ii) Derecognition of financial liabilities
A financial liability (in whole or in part) is derecognised when
the Company and Group has extinguished its contractual obligations,
it expires or is cancelled. Any gain or loss on derecognition is
taken to the statement of comprehensive income.
(c) Share capital
Financial instruments issued by the Company are treated as
equity only to the extent that they do not meet the definition of a
financial liability. The Company's ordinary shares are classified
as equity instruments. For the purposes of the disclosures given in
note 19 the Company considers all its share capital, share premium
and all other reserves as equity. The Company is not subject to any
externally imposed capital requirements.
(d) Effective interest rate method
The effective interest rate method is a method of calculating
the amortised cost of a financial asset or liability and of
allocating interest income or expense over the relevant period. The
effective interest rate is the rate that exactly discounts
estimated future cash receipts or payments (including all fees or
amounts paid or received that form an integral part of the
effective interest rate, transaction costs and other premiums or
discounts) through the expected life of the financial asset or
liability, or, where appropriate, a shorter period.
Significant accounting estimates and judgements
The Directors make estimates and assumptions concerning the
future. The resulting accounting estimates will, by definition,
seldom equal the related actual results. The estimates and
assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within
the next financial year are discussed below.
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances.
Investment property
The gross property value is the price that would be received to
sell an asset in an orderly transaction between market participants
at the measurement date. Transaction costs normally borne by the
seller are not deducted in arriving at gross property value, in
accordance with IFRS 13. The fair value is calculated by deducting
the costs normally borne by the purchaser from the gross property
value. Fair value is not intended to represent the liquidation
value of the property, which would be dependent upon the price
negotiated at the time of sale less any associated selling costs.
The fair value is largely based on estimates using property
appraisal techniques and other valuation methods. Such estimates
are inherently subjective and actual values can only be determined
in a sales transaction.
Investment properties held for sale are measured at fair value.
The Board determines that a property is available for sale where it
is intended and expected to sell within one year from the date of
classification as held for sale.
The fair value of the Group's investment properties held for
sale as at 31 December 2017 was GBP5.9 million (2016: GBP16.8
million). Refer to note 10 for further details.
3. Revenue
Group Company Group Company
2017 2017 2016 2016
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- --------- --------- --------- ---------
Rental income 280 - 375 -
-------------------------------- --------- --------- --------- ---------
Other income - - 357 -
-------------------------------- --------- --------- --------- ---------
Service and management charges 133 - 301 -
-------------------------------- --------- --------- --------- ---------
Total 413 - 1,033 -
At 31 December 2017, the Group recognised non recoverable
property operating expenditure as follows:
2017 2016
GBP'000 GBP'000
------------------------------------ --------- ---------
Service charge income 133 301
------------------------------------ --------- ---------
Property operating expenditure (827) (1,241)
------------------------------------ --------- ---------
Non recoverable property operating
expenditure (694) (940)
Property operating expenses relating to investment properties
that did not generate any rental income were GBP0.3 million (2016:
GBP0.5 million).
Revenue from one tenant in Spain, Fitness 4 All, amounted to
GBP0.1 million (2016: Fitness 4 All for GBP0.1 million). Total
revenue from tenants located in France amounted to GBP0.2 million
(2016: GBP0.5 million) and total revenue from tenants located in
Spain amounted to GBP0.2 million (2016: GBP0.2 million).
The Group leased out its investment property solely under
operating leases. Leases were typically for terms of standard
institutional 3/6/9 years in France and 5 + 5 years in Spain. At
the balance sheet date, the Group owns only one vacant property,
St. Cyr l'Ecole, located in France, so it has no contracted rent
with tenants and hence no future minimum lease payments are
expected for the foreseeable future:
2017 2016
GBP'000 GBP'000
---------------------------------------- ---------- ---------
Within one year - 256
---------------------------------------- ---------- ---------
In the second to fifth years inclusive - 1,053
---------------------------------------- ---------- ---------
After five years - 1,968
---------------------------------------- ---------- ---------
Total - 3,277
4. Other administration costs
Group Company Group Company
2017 2017 2016 2016
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- --------- --------- ---------
Accounts and administrative
fees 187 74 265 126
----------------------------- --------- --------- --------- ---------
Non-executive Directors'
fees 40 40 77 77
----------------------------- --------- --------- --------- ---------
Auditors' remuneration
for audit services 57 35 70 37
----------------------------- --------- --------- --------- ---------
Other professional
fees 107 54 532 218
----------------------------- --------- --------- --------- ---------
Staff costs 4 - 4 -
Total 395 203 948 458
----------------------------- --------- --------- --------- ---------
The Group has one employee. The Directors are the only key
management personnel of the Group.
5. Finance costs
Group Company Group Company
2017 2017 2016 2016
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- --------- --------- ---------
Interest on bank borrowings 5,236 - 5,134 -
----------------------------- --------- --------- --------- ---------
Loan fee amortisation 60 - 276 -
----------------------------- --------- --------- --------- ---------
Foreign exchange loss 672 1 17 18
----------------------------- --------- --------- --------- ---------
Other charges 28 - 52 1
----------------------------- --------- --------- --------- ---------
Total 5,996 1 5,479 19
Other than net losses on financial liabilities held at fair
value through profit or loss, finance costs arise on financial
liabilities measured at amortised cost using the effective interest
rate method.
6. Taxation
(a) Taxation on profit on ordinary activities
Group
The Group's tax position for the year comprises:
Group Group
2017 2016
GBP'000 GBP'000
------------------------------------- --------- ---------
Deferred taxation
------------------------------------- --------- ---------
France - -
------------------------------------- --------- ---------
Spain - -
------------------------------------- --------- ---------
Total - -
------------------------------------- --------- ---------
Tax expense reconciliation
------------------------------------- --------- ---------
Loss for the year (12,385) (15,555)
------------------------------------- --------- ---------
Loss for the year at the tax rate
of 33.33% (4,128) (5,184)
------------------------------------- --------- ---------
Less: income not taxable (591) (359)
------------------------------------- --------- ---------
Add: expenditure not taxable 1,431 2,957
------------------------------------- --------- ---------
Add: un-provided deferred tax asset
movement 3,288 2,586
------------------------------------- --------- ---------
Tax charge - -
Tax at domestic rates applicable to profits in the country
concerned
Group Group
2017 2016
GBP'000 GBP'000
-------------------------- --------- ---------
French taxation at 33.33% - -
-------------------------- --------- ---------
Spanish taxation at 25% - -
(b) Deferred taxation
The following are the major deferred tax liabilities and assets
recognised by the Group and movements thereon.
Revaluation of Accelerated tax Tax losses Interest rate swap Total
investment properties depreciation GBP'000 GBP'000 GBP'000
GBP'000
GBP'000
----------------------- ----------------------- ----------------------- ----------- ------------------- ---------
At 31 December 2015 (13,775) 13,833 (58) - -
----------------------- ----------------------- ----------------------- ----------- ------------------- ---------
Charged/(credited) to
profit or loss 7,415 (7,479) 64 - -
----------------------- ----------------------- ----------------------- ----------- ------------------- ---------
Charged/(credited) to
other comprehensive
income (1,854) 1,860 (6) - -
----------------------- ----------------------- ----------------------- ----------- ------------------- ---------
At 31 December 2016 (8,214) 8,214 - - -
----------------------- ----------------------- ----------------------- ----------- ------------------- ---------
Charged/(credited) to
profit or loss 2,591 (2,591) - - -
----------------------- ----------------------- ----------------------- ----------- ------------------- ---------
Charged/(credited) to
other comprehensive
income (1,642) 1,642 - - -
----------------------- ----------------------- ----------------------- ----------- ------------------- ---------
At 31 December 2017 (7,265) 7,265 - - -
At the balance sheet date the Group has unused tax losses of
GBP211.0 million (2016: GBP170.6 million). Due to the
unpredictability of future taxable profits, the Directors believe
it is not prudent to recognise deferred tax assets in respect of
the losses.
The French unused tax losses of GBP101.6 million (2016: GBP89.7
million), Belgian unused tax losses of GBP0.2 million (2016: GBP0.9
million), Spanish unused tax losses of GBP12.5 million (2016:
GBP29.9 million) and unused tax losses in Luxembourg of GBP96.7
million (2016: GBP50.1 million) can be carried forward
indefinitely.
7. Dividends
The Company does not pay dividends.
8. Earnings per share
The calculation of the basic and diluted earnings per share is
based on the following data:
1 January 1 January
to to
31 December 31 December
2017 2016
-------------------------------- ------------- -------------
Losses after tax per statement
of comprehensive income
(GBP'000) (12,385) (15,555)
-------------------------------- ------------- -------------
Basic and diluted losses
per share (10.5)p (13.2)p
-------------------------------- ------------- -------------
Weighted average number
of ordinary shares (000's) 117,627 117,627
9. Investment in subsidiary undertakings
A list of the significant investments in subsidiaries, including
the name, country of incorporation and the proportion of ownership
interest is given below.
Name of subsidiary Class % of class Country Principal
undertaking of share held with of activity
voting incorporation
rights
--------------------------- ---------- ----------- --------------- ------------
Alpha Pyrenees Luxembourg Ordinary 100% Luxembourg Holding
SARL company
--------------------------- ---------- ----------- --------------- ------------
Alpha Pyrenees Belgium Ordinary 100% Belgium Holding
SA company
--------------------------- ---------- ----------- --------------- ------------
Alpha Pyrenees Athis Ordinary 100% France Holding
Mons SARL company
--------------------------- ---------- ----------- --------------- ------------
Alpha Pyrenees Offices Ordinary 100% France Holding
SARL company
--------------------------- ---------- ----------- --------------- ------------
Alpha Pyrenees Offices Ordinary 100% France Property
SCI investment
--------------------------- ---------- ----------- --------------- ------------
Alpha Pyrenees Alcalá Ordinary 100% Spain Property
SLU investment
--------------------------- ---------- ----------- --------------- ------------
Alpha Pyrenees Ècija Ordinary 100% Spain Property
SLU investment
The Group's investment properties are held by its subsidiary
undertakings.
During the year, Alpha Pyrenees Spain SLU and Alpha Pyrenees
Athis Mons SCI, both property investment companies, were
dissolved.
The Company has made the following loans to its subsidiary
undertakings as at 31 December 2017:
2017 2017 2017 2016 2016 2016
Interest Non-interest Total Interest Non-interest Total
bearing bearing bearing bearing
GBP'000 GBP'000 GBP'000 GBP'000
GBP'000 GBP'000
------------
Loans 110,528 76,071 186,599 106,557 68,590 175,147
------------ ---------- -------------- ---------- ---------- -------------- ----------
Impairment (110,528) (76,071) (186,599) (106,557) (68,590) (175,147)
------------ ---------- -------------- ---------- ---------- -------------- ----------
Total - - - - - -
The loans are denominated in Euros, unsecured and are subject to
a range of interest rates, fixed for the term of the relevant loan.
At 31 December 2017 the weighted average interest rate was 5.17%
(2016: 4.81%).
A total impairment of GBP186.6 million (2016: GBP175.1 million)
has been made against amounts receivable from subsidiary
undertakings to reflect the current mark to market impact of the
property valuations which have arisen within the Group subsidiaries
and that Barclays has first charge over all investment properties
held for sale.
During the year, the Company received GBP1,093,000 (2016:
GBP1,194,000) as loan repayment from subsidiaries, as shown in the
cash flow statement under investing activities: this is due to the
cash release mechanism of the cash pooling account controlled by
Barclays (see note 12) and impacts the Company's statement of
comprehensive income through the movement in impairment of amounts
receivable from and investments in subsidiary undertakings.
The Company's investment in subsidiaries is also fully
impaired.
10. Investment properties held for sale
2017 2016
GBP'000 GBP'000
------------------------------------- --------- ---------
Investment properties held
for sale at 1 January 16,824 39,283
------------------------------------- --------- ---------
Subsequent capital expenditure - -
after acquisition
------------------------------------- --------- ---------
Disposals (10,159) (19,891)
------------------------------------- --------- ---------
Movement in rent incentives/initial
costs (230) (280)
------------------------------------- --------- ---------
Fair value adjustment in
the year (966) (7,268)
------------------------------------- --------- ---------
Effect of foreign exchange 476 4,980
------------------------------------- --------- ---------
Investment properties held
for sale at 31 December 5,945 16,824
Investment properties held for sale represent the fair value of
properties that have been actively marketed for disposal at the
balance sheet date.
The fair value of the Group's investment properties held for
sale at 31 December 2017 and 31 December 2016 (with the exception
of Ivry in France, which was valued by the Directors at its selling
price), has been arrived at on the basis of valuations carried out
at that date by Knight Frank LLP, independent valuers not connected
to the Group. The portfolio has been valued on a fair value basis
as defined by the Royal Institution of Chartered Surveyors
Appraisal and Valuation Standards ("RICS").
The approved RICS definition of fair value is "the price that
would be received to sell an asset, or paid to transfer a
liability, in an orderly transaction between market participants at
the measurement date."
During the year, the Group sold two properties in France and two
properties in Spain: Ivry for GBP2.6 million (EUR2.9 million) and
Champs sur Marne for GBP2.3 million (EUR2.6 million) in France and
Alcalá de Guadaíra for GBP0.6 million (EUR0.7 million) and Écija
for GBP0.4 million (EUR0.5 million) in Spain.
At 31 December 2017, the Group has pledged one investment
property held for sale valued at GBP5.9 million (EUR6.7 million)
(2016: GBP16.8 million (EUR19.7 million)) to secure borrowings
(note 14).
No provision is made for potential disposal costs as these will
be contingent upon ultimate realisation values and specific
arrangements that may be agreed.
Formal marketing of the Trust's remaining property is ongoing
and the results of the marketing process to date indicate that,
although there is no certainty that a transaction will take place,
if it does, the price achieved is most likely to be lower than the
valuation at 31 December 2017. The Trust will provide further
updates on progress in due course.
11. Trade and other receivables
Group Company Group Company
2017 2017 2016 2016
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- --------- --------- --------- ---------
Trade receivables 14 - 53 -
--------------------------- --------- --------- --------- ---------
Amounts receivable from
Property Managing Agents 59 - 34 -
--------------------------- --------- --------- --------- ---------
Prepayments 39 13 41 11
--------------------------- --------- --------- --------- ---------
Other receivables 22 - 438 4
--------------------------- --------- --------- --------- ---------
VAT receivable 94 - 119 -
--------------------------- --------- --------- --------- ---------
Total 228 13 685 15
The Directors consider that the carrying amount of trade and
other receivables approximates to their fair value. Note 19
provides an ageing of trade receivables.
12. Cash and cash equivalents
Cash and cash equivalents included in the cash flow statement
comprise the following balance sheet amounts:
Group Company Group Company
2017 2017 2016 2016
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- --------- --------- ---------
Cash at bank in the balance
sheet 3,101 3 5,110 1
----------------------------- --------- --------- --------- ---------
Cash balance held on the
cash pooling account (2,313) - (3,897) -
----------------------------- --------- --------- --------- ---------
Cash and cash equivalents 788 3 1,213 1
The cash balance held on the cash pooling account is subject to
certain restrictions; accordingly this balance has not been
classified as cash and cash equivalents for the purposes of the
cash flow statement.
In November 2013, the Group entered into a cash pooling
arrangement with Barclays over the Group's cash-flows from the
whole property portfolio in order to provide further security to
Barclays but which provides the Group and the Company with working
capital for its operations. The resulting cash pooling account is
controlled by Barclays and a cash release mechanism is in place
whereby cash is released by Barclays following review of the
Group's working capital budget, which is updated quarterly.
13. Trade and other payables
Group Company Group Company
2017 2017 2016 2016
GBP'000 GBP'000 GBP'000 GBP'000
---------------------- --------- --------- --------- ---------
Trade payables 90 19 277 128
---------------------- --------- --------- --------- ---------
Deferred income 4 - 241 -
---------------------- --------- --------- --------- ---------
Investment Manager's
fee payable 596 596 627 627
---------------------- --------- --------- --------- ---------
VAT payable 8 - 3 -
---------------------- --------- --------- --------- ---------
Accruals 467 28 146 32
---------------------- --------- --------- --------- ---------
Total 1,165 643 1,294 787
Trade payables and accruals primarily comprise amounts
outstanding for trade purchases and ongoing costs. The Group has
financial risk management policies in place to ensure that all
payables are paid within the credit time frame.
The Directors consider that the carrying amount of trade and
other payables approximates to their fair value.
14. Bank borrowings
Group Company Group Company
2017 2017 2016 2016
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ --------- --------- --------- ---------
Current liabilities:
interest payable and
bank borrowings 82,629 - 2,889 -
------------------------------ --------- --------- --------- ---------
Non-current liabilities: - - 77,282 -
bank borrowings
------------------------------ --------- --------- --------- ---------
Total liabilities 82,629 - 80,171 -
------------------------------ --------- --------- --------- ---------
The borrowings are repayable
as follows:
------------------------------ --------- --------- --------- ---------
Interest payable 5,645 - 2,889 -
------------------------------ --------- --------- --------- ---------
On demand or within one 76,984 - - -
year
------------------------------ --------- --------- --------- ---------
In the second to fifth - - 77,282 -
years inclusive
------------------------------ --------- --------- --------- ---------
After five years - - - -
------------------------------ --------- --------- --------- ---------
82,629 - 80,171 -
During the year, the Group sold four investment properties at
prices totalling GBP5.9 million (EUR6.7 million) with the net
proceeds from these sales contributing to bank borrowings
repayments of GBP5.8 million (EUR6.6 million).
At 31 December 2017, GBP77.0 million (EUR86.8 million) (2016:
GBP77.3 million (EUR90.3 million)) was outstanding on all
borrowings. Borrowings are secured over the shares in the Company's
operating subsidiaries and mortgages over properties with a total
value of GBP5.9 million (EUR6.7 million) (2016: GBP16.8 million
(EUR19.7 million)).
The weighted average rate of interest at 31 December 2017 on all
fixed rate loans is 5.17% (2016: 5.19%) and 9.62% (2016: 9.59%) on
floating rate loans.
The repayment date of all borrowings is 31 October 2018.
Extension fees of 2% (per annum pro-rated) are charged on all
borrowings from 10 February 2015: these are deferred to the new
maturity date and will be payable to the extent that the Group has
sufficient cash funds at that time. No additional fee was charged
on the latest extensions to 31 October 2016 and to 31 October 2018.
As at 31 December 2017, the Board considers it probable, based on
cash flow forecasts, that there will be insufficient cash funds to
settle this amount and hence this represents a contingent liability
of EUR6.3 million (GBP5.6 million), which has not been recognised
in these financial statements.
The table below sets out an analysis of net debt and the
movements in net debt for the year ended 31 December 2017.
Other assets Liabilities from
financing activities
------------------------- --------------------------- --------------------------------------------------- ---------
Restricted cash Cash Borrowings due within 1 Borrowings due after 1 Total
GBP'000 GBP'000 year year GBP'000
GBP'000 GBP'000
------------------------- ---------------- --------- ------------------------ ------------------------- ---------
Net debt as at 1 January
2016 10,054 1,309 (91,311) - (79,948)
------------------------- ---------------- --------- ------------------------ ------------------------- ---------
Cash flows (7,412) 180 30,343 - 23,111
------------------------- ---------------- --------- ------------------------ ------------------------- ---------
Non cash movements
------------------------- ---------------- --------- ------------------------ ------------------------- ---------
Foreign exchange
adjustments 1,255 (276) (13,793) - (12,814)
------------------------- ---------------- --------- ------------------------ ------------------------- ---------
Loan fee amortisation
and other costs - - (276) - (276)
------------------------- ---------------- --------- ------------------------ ------------------------- ---------
Interest charge - - (5,134) - (5,134)
------------------------- ---------------- --------- ------------------------ ------------------------- ---------
Transfer to borrowings
after 1 year - - 77,282 (77,282) -
------------------------- ---------------- --------- ------------------------ ------------------------- ---------
Net debt as at 31
December 2016 3,897 1,213 (2,889) (77,282) (75,061)
------------------------- ---------------- --------- ------------------------ ------------------------- ---------
Cash flows (1,706) (119) 65 5,781 4,021
------------------------- ---------------- --------- ------------------------ ------------------------- ---------
Non cash movements
------------------------- ---------------- --------- ------------------------ ------------------------- ---------
Foreign exchange
adjustments 122 (306) (170) (2,838) (3,192)
------------------------- ---------------- --------- ------------------------ ------------------------- ---------
Loan fee amortisation
and other costs - - - (60) (60)
------------------------- ---------------- --------- ------------------------ ------------------------- ---------
Interest charge - - (5,236) - (5,236)
------------------------- ---------------- --------- ------------------------ ------------------------- ---------
Capitalised interest - - 2,585 (2,585) -
------------------------- ---------------- --------- ------------------------ ------------------------- ---------
Transfer to borrowings
after 1 year - - (76,984) 76,984 -
------------------------- ---------------- --------- ------------------------ ------------------------- ---------
Net debt as at 31
December 2017 2,313 788 (82,629) - (79,528)
------------------------- ---------------- --------- ------------------------ ------------------------- ---------
15. Share capital
Authorised share capital
The Company's authorised share capital is unlimited.
Issued and fully paid
Number of
shares
----------------------------------------- ------------
At 31 December 2015 117,627,056
----------------------------------------- ------------
Shares cancelled/issued during the year -
----------------------------------------- ------------
At 31 December 2016 117,627,056
----------------------------------------- ------------
Shares cancelled/issued during the year -
----------------------------------------- ------------
At 31 December 2017 117,627,056
The Company has one class of shares which carry no right to
fixed income. All ordinary shares have nil par value.
16. Reserves
The movements in the reserves for the Group and the Company are
shown above.
Special reserve
On 9 December 2005, the Royal Court of Guernsey confirmed the
reduction of the Company's capital by way of cancellation of the
amount standing to the credit of its share premium account on that
date. The amount was transferred to the special reserve. The
special reserve is a distributable reserve to be used for all
purposes permitted under Guernsey company law, including the
buyback of shares and payment of dividends.
Translation reserve
The translation reserve contains exchange differences arising on
consolidation of the Group's overseas operations. These amounts may
subsequently be reclassified to profit or loss.
Capital reserve
The capital reserve contains gains and losses on the disposal of
investment properties, and increases and decreases in the fair
value of the Group's investment properties and currency swap
derivative financial instruments, together with expenses allocated
to capital.
Revenue reserve
Any surplus arising from net profit after tax is taken to this
reserve, which may be utilised for the buyback of shares and
payment of dividends.
17. Events after the balance sheet date
Part of the sale's proceeds of the Ecija property in Spain were
used to repay borrowings in January 2018 for GBP0.3 million (EUR0.3
million).
18. Related party transactions
Parties are considered to be related if one party has the
ability to control the other party or exercise significant
influence over the other party in making financial or operational
decisions. Alpha Real Capital LLP is the Investment Manager to the
Company under the terms of the Investment Manager Agreement and is
thus considered a related party of the Company.
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note.
Following the disposal of the majority of the property
portfolio, the Board has agreed, in line with the consensual sales
programme established with Barclays, a monthly fee reflecting the
need for the Investment Manager to maintain adequate resources to
complete the disposal of the remaining properties and winding up of
the Group. This fee is separately disclosed on the face of the
statement of comprehensive income. The consensual sales programme
requires 30% of fees earned by the Investment Manager to be
deferred and only released when sales milestones have been
achieved. The outstanding balance for Investment Manager's fees as
at 31 December 2017 is GBP596,000 (31 December 2016:
GBP627,000).
The Directors of the Company received fees for their services as
detailed below.
Directors 2017 2016
fees GBP'000 GBP'000
------------------ --------- ---------
Dick Kingston** - 15
------------------ --------- ---------
David Jeffreys 20 22
------------------ --------- ---------
Phillip Rose** - 10
------------------ --------- ---------
David Rowlinson* - 10
------------------ --------- ---------
Serena Tremlett
(Chairman) 20 20
------------------ --------- ---------
Total 40 77
*David Rowlinson is a director of Antler Investment Holdings
Limited ("Antler") and the managing director of Liberation
Management Limited, which is a trustee of the Rockmount Purpose
Trust that indirectly is a partner of Alpha Real Capital LLP. As
such he was considered to be in a position in which he was able to
exercise significant influence over the Investment Manager. David
Rowlinson resigned as Director of the Company with effective date 3
June 2016.
** Resigned with effective date 3 June 2016
Serena Tremlett is the Managing Director of Estera
Administration (Guernsey) Limited ('EAGL'), the Company's
administrator and secretary. EAGL was formerly Morgan Sharpe
Administration Limited, which was purchased by Estera on 28 April
2017. Serena is a minority shareholder of EAGL's parent company.
During the period the Company paid Estera fees of GBP48,000 (31
December 2016: GBP81,000).
During the year, in addition to the Directors' fees above, David
Jeffreys and Serena Tremlett received GBP1,000 (2016: GBP1,750) and
GBP6,500 (2016: GBP3,750) respectively for their position as
Directors of Company's subsidiaries.
Directors' shareholdings in the Company are detailed in the
Directors' and corporate governance report.
The following, being partners of the Investment Manager, hold or
have an interest in the following shares in the Company at 31
December 2017:
2017 2016
Number of Number of
shares held shares held
------------------- ------------- -------------
Rockmount
Ventures Limited
and ARRCO
Limited** 21,437,393 21,437,393
------------------- ------------- -------------
P. Rose*** 1,290,079 1,290,079
------------------- ------------- -------------
B. Bauman 544,809 544,809
------------------- ------------- -------------
B. Frith 229,078 229,078
------------------- ------------- -------------
K. Devon-Lowe 108,650 24,650
**Rockmount Ventures Limited is the parent company of ARRCO
Limited. The interest attributed to the two corporate partners
represents 21,437,393 shares held by a related party, Antler. As
such these companies are considered to be in a position in which
they are able to exercise significant influence over the Investment
Manager.
***Phillip Rose is the CEO and a partner of the Investment
Manager.
Alpha Global Property Securities Fund Pte. Ltd, a wholly owned
subsidiary of ARC registered in Singapore, holds 9,390,800 (31
December 2016: 9,390,800) shares in Alpha Pyrenees Trust
Limited.
Paul Cable, being the Investment Manager's Fund Manager
responsible for the Company's investments, holds 84,918 (2016:
84,918) shares in the Company.
19. Financial instruments risk exposure and management
In common with all other businesses, the Group is exposed to
risks that arise from its use of financial instruments. This note
describes the Group's objectives, policies and processes for
managing those risks and the methods used to measure them. Further
quantitative information in respect of these risks is presented
throughout these financial statements.
There have been no substantive changes in the Group's exposure
to financial instrument risks, its objectives, policies and
processes for managing those risks or the methods used to measure
them from previous periods unless otherwise stated in this
note.
Principal financial instruments
The principal financial instruments used by the Group and
Company, from which financial instrument risk arises, are as
follows:
Financial assets and liabilities
carrying value
----------------------------- ------------------------------------------
Group Company Group Company
2017 2017 2016 2016
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- --------- --------- ---------
Current financial
assets
----------------------------- --------- --------- --------- ---------
Trade and other receivables
(excluding prepayments
and VAT) 95 - 525 4
----------------------------- --------- --------- --------- ---------
Restricted cash 2,313 - 3,897 -
----------------------------- --------- --------- --------- ---------
Cash and cash equivalents 788 3 1,213 1
----------------------------- --------- --------- --------- ---------
Total current financial
assets 3,196 3 5,635 5
----------------------------- --------- --------- --------- ---------
Current financial
liabilities
----------------------------- --------- --------- --------- ---------
Trade and other payables
(excluding deferred
income) 1,161 643 1,053 787
----------------------------- --------- --------- --------- ---------
Bank borrowings 82,629 - 2,889 -
----------------------------- --------- --------- --------- ---------
Liabilities directly
associated with investment
properties held for
sale 190 - 257 -
----------------------------- --------- --------- --------- ---------
Total current financial
liabilities 83,980 643 4,199 787
----------------------------- --------- --------- --------- ---------
Non-current financial
liabilities
----------------------------- --------- --------- --------- ---------
Bank borrowings - - 77,282 -
----------------------------- --------- --------- --------- ---------
Total non-current - - 77,282 -
financial liabilities
----------------------------- --------- --------- --------- ---------
Total financial liabilities 83,980 643 81,481 787
----------------------------- --------- --------- --------- ---------
Net changes in realised and unrealised gains or losses on
financial instruments can be summarised as follows:
Group Company Group Company
2017 2017 2016 2016
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ---------- --------- --------- ---------
Net change in realised
gains or losses on
loans and receivables
----------------------------- ---------- --------- --------- ---------
Movement in impairment
of amounts receivable
from and investments
in subsidiary undertakings - 1,095 - 1,208
----------------------------- ---------- --------- --------- ---------
Total - 1,095 - 1,208
Group Company Group Company
2017 2017 2016 2016
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- --------- --------- ---------
Bank interest income - - - -
----------------------------- --------- --------- --------- ---------
Interest on bank borrowings (5,235) - (5,134) -
----------------------------- --------- --------- --------- ---------
Loan fee amortisation (60) - (276) -
----------------------------- --------- --------- --------- ---------
Total interest expense (5,295) - (5,410) -
----------------------------- --------- --------- --------- ---------
General objectives, policies and processes
The Board has overall responsibility for the determination of
the Group's risk management objectives and policies and, whilst
retaining ultimate responsibility for them, it has delegated the
authority for designing and operating processes that ensure the
effective implementation of the objectives and policies to the
Group's finance function.
The overall objective of the Board is to set polices that seek
to reduce risk as far as possible without unduly affecting the
Group's competitiveness and flexibility. The above financial risk
management policies apply equally to the Group and the Company.
Further details regarding these policies are set out below.
Credit risk
Credit risk arises when a failure by counterparties to discharge
their obligations could reduce the amount of future cash inflows
from financial assets on hand at the balance sheet date.
a) Group
The Group's credit risk principally arises from cash and cash
equivalents as well as credit exposures with respect to tenants
including other receivables. In the event of a default by an
occupational tenant, the Group will suffer a rental shortfall and
incur additional costs in maintaining, insuring and re-letting the
property until it is re-let. General economic conditions may affect
the financial stability of tenants and prospective tenants and/or
demand for and value of real estate assets. A property advisor
monitors the tenants in order to anticipate and minimise the impact
of default by occupational tenants. Where possible, tenants' risk
is mitigated through rental guarantees.
At year end, the Group only owns one vacant property so there
are no tenants left in the portfolio (in 2016 Fitness 4 All was the
largest tenant within the portfolio representing 27.0% of the
annual contracted rent).
At 31 December 2017, trade and other receivables past due but
not impaired amounted to nil (2016: GBP0.1 million).
The carrying amount of financial assets recorded in the
financial statements, which is net of impairment losses, represents
the Group's maximum exposure to credit risk without taking into
account the value of rent deposits obtained. Details of the Group's
receivables are summarised in note 11 of the financial
statements.
The Group policy is to maintain its cash and cash equivalent
balances with a reasonable diversity of banks. The Board monitors
the placement of cash balances on an ongoing basis and has policies
to limit the amount of credit exposure to any financial
institution. As at 31 December 2017, the Group had spread its cash
across four financial institutions and had placed circa 75% in one
bank, this mainly representing cash held on the cash pooling
account (note 12).
b) Company
The Company's credit risk principally arises from cash and cash
equivalents and amounts receivable from subsidiaries. The Company
follows the same Group policy with regards to diversification of
banking arrangements. Amounts receivable from subsidiaries are of
mainly a long term nature and the loans are monitored on a regular
basis.
An impairment of GBP186.6 million (2016: GBP175.1 million) has
been made against amounts receivable from subsidiary undertakings
to reflect the current mark to market impact of the investment
properties valuations, loss realised on investment properties
disposals, which have arisen within the Group's subsidiaries (note
9) and the fact that Barclays has first charge over all investment
properties held for sale.
2017 2016
Total Total
GBP'000 GBP'000
-------------------
Impairment at
1 January 175,147 146,923
------------------- --------- ---------
Movement (1,095) (1,208)
------------------- --------- ---------
Effect of foreign
exchange 12,547 29,432
------------------- --------- ---------
Impairment at
31 December 186,599 175,147
------------------- --------- ---------
The carrying amount of financial assets recorded in the
financial statements, which is net of impairment losses, represents
the Company's maximum exposure to credit risk. Details of the
Company's loans and receivables are summarised in notes 9 and 11 of
the financial statements.
Liquidity risk
Liquidity risk is the risk that arises when the maturity of
assets and liabilities does not match. An unmatched position
potentially enhances profitability, but can also increase the risk
of losses. The Group and Company have developed procedures with the
object of minimising such losses such as maintaining sufficient
cash and other highly liquid current assets and by having in place
an adequate amount of committed credit facilities. Cash and cash
equivalents are placed with financial institutions on a short term
basis reflecting the Group's and Company's desire to maintain a
level of liquidity in order to enable timely payments to
creditors.
The cash balance held on the cash pooling account is subject to
certain restrictions; accordingly this balance has not been
classified as cash and cash equivalents for the purposes of the
cash flow statement (note 12).
The cash pooling account is controlled by Barclays and a cash
release mechanism is in place whereby cash is released by Barclays
following review of the Group's working capital budget, which is
updated quarterly. This allows the Group to settle its liabilities
for working capital requirements in a timely manner.
a) Group
The following table illustrates the contractual maturity
analysis of the Group's financial liabilities based, where
relevant, on interest rates and exchange rates prevailing at the
balance sheet date.
2017 Within 1 year 1-2 years Total Carrying value
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------------------- -------------- ---------- --------- ---------------
Trade and other payables (excluding deferred income) 1,161 - 1,161 1,161
-------------------------------------------------------------- -------------- ---------- --------- ---------------
Liabilities directly associated with investment properties
held for sale 190 - 190 190
-------------------------------------------------------------- -------------- ---------- --------- ---------------
Bank borrowings 87,623 - 87,623 82,629
-------------------------------------------------------------- -------------- ---------- --------- ---------------
88,974 - 88,974 83,980
-------------------------------------------------------------- -------------- ---------- --------- ---------------
2016 Within 1 year 1-2 years Total Carrying value
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------------------- -------------- ---------- --------- ---------------
Trade and other payables (excluding deferred income) 1,053 - 1,053 1,053
-------------------------------------------------------------- -------------- ---------- --------- ---------------
Liabilities directly associated with investment properties
held for sale 257 - 257 257
-------------------------------------------------------------- -------------- ---------- --------- ---------------
Bank borrowings 2,889 87,181 90,070 80,171
-------------------------------------------------------------- -------------- ---------- --------- ---------------
4,199 87,181 91,380 81,481
-------------------------------------------------------------- -------------- ---------- --------- ---------------
Given the current economic environment and the maturity of the
Group's bank borrowings on 31 October 2018 the Board will continue
to seek the support of its lender for the sale of its remaining
investment property with a view to winding up the Group in due
course. The financial statements are therefore not prepared on a
going concern basis.
b) Company
The Company only has trade payables and other payables which are
payable within one year.
Market risk
a) Foreign exchange risk
The Group operates in Europe and is exposed to foreign exchange
risk arising from various currency exposures, primarily with
respect to Euros. Foreign exchange risk arises from future
commercial transactions, recognised monetary assets and liabilities
and net investments in foreign operations.
The Group's policy is, where possible, to allow Group entities
to settle liabilities denominated in their functional currency
(primarily Euros or Sterling) with the cash generated from their
own operations in that currency.
As the property portfolio was acquired and mortgaged in Euros
the Board considers it appropriate from a risk perspective to
review currency exposure on a net assets basis. For illustrative
purposes, therefore, the effect of a strengthening of the Euro by 5
cents would decrease Group net liabilities by GBP0.3 million (2016:
decrease by GBP0.8 million). A weakening of the Euro by 5 cents
would increase net liabilities by GBP0.3 million (2016: increase by
GBP0.7 million).
As the Company impairs its large intercompany loan book to
reflect the underlying net asset value of its Group companies, the
overall net asset sensitivity of the Company to foreign currency
movements is the same as the Group's above.
b) Cash flow and fair value interest rate risk
The Group's principal interest rate risk arises from
borrowings.
The Group's cash flow is regularly monitored by the Group's
management.
For the Group, an increase of 100 basis points in interest rates
would result in an increased post-tax loss of GBP0.3 million (2016:
GBP0.3 million). A decrease in 100 basis points in interest rates
would result in a reduced post-tax loss for the period of GBP0.3
million (2016: GBP0.3 million).
For the Company, in line with prior year, an increase or
decrease of 100 basis points in interest rates would not result in
a significant change of post-tax loss.
The sensitivity analyses above are based on a change in an
assumption while holding all other assumptions constant. In
practice, this is unlikely to occur, and changes in some of the
assumptions may be correlated - for example, change in interest
rate and change in market values.
c) Capital risk management
The Group's objectives when managing capital had been to
safeguard the Group's ability to continue as a going concern in
order to provide returns for shareholders and benefits for other
stakeholders and to maintain an optimal capital structure to reduce
the cost of capital.
As stated in note 2, the Group is not a going concern and the
Board will continue to seek the support of its lender in an orderly
realisation of its remaining one investment property in order to
repay borrowings and with a view to winding up the Group in due
course.
Consistent with others in the industry, the Board monitors
capital on the basis of the gearing ratio in the currency in which
properties and associated borrowings are held and takes action
where appropriate.
The Company has no borrowings; all borrowings are by
subsidiaries within the Group.
d) Fair values
The following methods and assumptions are used to estimate fair
values:
-- Cash and short-term deposits, trade receivables, trade
payables and other current liabilities approximate their carrying
amounts due to the short-term maturities of these instruments.
-- The fair value of floating rate borrowings is calculated by
discounting future cash flows using rates currently available for
debt of similar terms and remaining maturities. The carrying value
does not approximate fair value.
-- The fair value of fixed rate borrowings is estimated based on
the present value of future principal and interest cash flows,
discounted at the market rate of interest at the reporting date.
The carrying value does not approximate fair value.
-- The fair value of the floating rate and fixed rate borrowings
approximates GBP7.9 million (note 20).
20. Fair value measurement
IFRS 13 requires disclosure of the fair value measurement of the
Group's assets and liabilities, the related valuation techniques,
the valuations' recurrence and the inputs used to assess and
develop those measurements.
The Group discloses fair value measurements by level of the
following fair value measurement hierarchy:
-- Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
-- Inputs other than quoted prices included within level 1 that
are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) (level
2).
-- Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (level
3).
The level in the fair value hierarchy within which the asset or
liability is categorised is determined on the basis of the lowest
input that is significant to the fair value measurement. Assets and
liabilities are classified in their entirety into one of the three
levels.
Investment properties held for sale are valued on a recurring
basis: half yearly.
The Group's valuers derive the fair value by applying the
methodology and valuation guidelines as set out by the Royal
Institution of Chartered Surveyors in the United Kingdom in
accordance with IAS 40. This approach is based on discounting the
future net income receivable from properties to arrive at the net
present value of that future income stream. Future net income
comprises the rent secured under existing leases, less any known or
expected non-recoverable costs and the current market rent
attributable to vacant units. The consideration basis for this
calculation excludes the effects of any taxes on the net income.
The discount factors used to calculate fair value are consistent
with those used to value similar properties with comparable leases
in each of the respective markets. A decrease in the net rental
income or an increase in the discount rate will decrease the fair
value of the investment property.
In December 2016, the Ivry property had been valued by the
Directors at its selling price, this being the best approximation
to its fair value at year end.
The following table shows an analysis of the fair values of
assets and liabilities recognised in the balance sheet by level of
the fair value hierarchy described above:
Assets and liabilities measured
at fair value
---------------------------------------------------------------------
Level Level Level Total
1 2 3
--------- --------- -------- --------
31 December 2017 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- --------- --------- -------- --------
Assets measured at
fair value
---------------------------- --------- --------- -------- --------
Investment properties
held for sale - - 5,945 5,945
---------------------------- --------- --------- -------- --------
Liabilities for which
fair values are disclosed
---------------------------- --------- --------- -------- --------
Current
---------------------------- --------- --------- -------- --------
Bank borrowings (note
19 d)) - - (7,919) (7,919)
---------------------------- --------- --------- -------- --------
Total - - (1,974) (1,974)
---------------------------- --------- --------- -------- --------
Assets and liabilities measured
at fair value
-----------------------------------------------------------------------
Level Level Level Total
1 2 3
--------- --------- --------- ---------
31 December 2016 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- --------- --------- --------- ---------
Assets measured at
fair value
---------------------------- --------- --------- --------- ---------
Investment properties
held for sale - - 16,824 16,824
---------------------------- --------- --------- --------- ---------
Liabilities for which
fair values are disclosed
---------------------------- --------- --------- --------- ---------
Current
---------------------------- --------- --------- --------- ---------
Bank borrowings (note
19 d)) - - (2,889) (2,889)
---------------------------- --------- --------- --------- ---------
Non current
---------------------------- --------- --------- --------- ---------
Bank borrowings (note
19 d)) - - (18,179) (18,179)
---------------------------- --------- --------- --------- ---------
Total - - (4,244) (4,244)
---------------------------- --------- --------- --------- ---------
The Group determines whether transfers have occurred between
levels in the hierarchy by re-assessing categorisation (based on
the lowest level input that is significant to the fair value
measurement as a whole) at the end of each reporting period.
There were no transfers between level 1 and level 2 fair value
measurements.
Movements in level 3 of the fair value measurements, during the
year ended 31 December 2017 can be summarised as follows:
2017 2016
--------------------------------
GBP'000 GBP'000
-------------------------------- -------- --------
At 1 January 16,824 39,283
-------------------------------- -------- --------
Subsequent capital expenditure
after acquisition - -
-------------------------------- -------- --------
Disposals (4,892) (18,496)
-------------------------------- -------- --------
Loss recognised in profit or
loss (5,267) (1,395)
-------------------------------- -------- --------
Rent incentives movement (230) (280)
-------------------------------- -------- --------
Fair value adjustment (966) (7,268)
-------------------------------- -------- --------
Effect of foreign exchange 476 4,980
-------------------------------- -------- --------
At 31 December 5,945 16,824
-------------------------------- -------- --------
The fair value of investment properties is based on unobservable
inputs and it is therefore disclosed as level 3. The following
methods, assumptions and inputs were used to estimate fair values
of investment properties:
31 December 2017
--------------------------------------------------------------------------------------------------------------------------
Class of Carrying Area Valuation technique Significant Range/value Weighted
investment amount / (square meters) unobservable inputs average
properties fair value
'000
-------------- ------------- ---------------- ---------------------- --------------------- --------------- ---------
Gross ERV per sqm p.
Europe GBP5,945 6,340 Income capitalisation a. EUR50 / EUR150 n/a*
(EUR6,700)
---------------------------- ---------------- ---------------------- --------------------- --------------- ---------
Net initial yield (1.7)% n/a
---------------------------- ---------------- ---------------------- --------------------- --------------- ---------
Reversionary yield 13.6% n/a
---------------------------- ---------------- ---------------------- --------------------- --------------- ---------
Gross equivalent 10.0% n/a
yield
* not applicable since only one property in portfolio
31 December 2016
--------------------------------------------------------------------------------------------------------------------------
Class of Carrying Area Valuation technique Significant Range Weighted
investment amount / (square meters) unobservable inputs average
properties fair value
'000
-------------- ------------- ---------------- ---------------------- --------------------- --------------- ---------
Gross ERV per sqm p.
Europe GBP14,363 23,920 Income capitalisation a. EUR36 / EUR150 EUR105.7
(EUR16,790)
-------------- ------------- ---------------- ---------------------- --------------------- --------------- ---------
Net initial yield (8.1)% / 0.1% (3.0)%
-------------- ------------- ---------------- ---------------------- --------------------- --------------- ---------
Reversionary yield 12.2% / 14.8% 13.1%
-------------- ------------- ---------------- ---------------------- --------------------- --------------- ---------
Gross equivalent
yield 10.0% / 11.5% 10.6%
-------------- ------------- ---------------- ---------------------- --------------------- --------------- ---------
Europe GBP2,461 7,420 Selling price - - -
(EUR2,877)
The Directors assessed at the balance sheet date whether the
Group's investment properties are being exploited according to
their highest and best use and they are satisfied that this is the
case.
Property risk
The majority of properties have been valued by an independent
third party (see note 10) and the fair value has been arrived at on
the basis of a sale between a willing buyer and willing seller.
Should the Group be required to dispose of its investment
properties not as a willing seller the sale proceeds could
vary.
In 2016, one investment property was valued based upon the
agreed selling price.
Liabilities for which fair value is disclosed
The fair value of the Group's borrowings has been determined by
reference to what will be realised in an orderly wind up of the
Group and hence the amount that will be repaid.
Company
The Company did not have any financial assets or financial
liabilities at fair value through profit or loss.
Directors and Trust information
Directors Independent valuers Legal advisors
Serena Tremlett Knight Frank LLP in Guernsey
(Chairman) 55 Baker Street Carey Olsen
David Jeffreys London W1U 8AN PO Box 98
Carey House
Les Banques
St Peter Port
Guernsey GY1 4BZ
Registered office Independent auditor Legal advisors
Old Bank Chambers BDO Limited in the UK
La Grande Rue Place du Pré, Norton Rose
St Martin's Rue du Pré 3 More London Riverside
Guernsey GY4 6RT St Peter Port London SE1 2AQ
Guernsey GY1 3LL
Investment Manager Tax advisors Registrar
Alpha Real Capital BDO LLP Computershare Investor
LLP 55 Baker Street Services (Jersey)
Level 6, 338 Euston London W1U 7EU Limited
Road Deloitte LLP Queensway House
London NW1 3BG Hill House Hilgrove Street
1 Little New Street St Helier
London EC4A 3TR Jersey JE1 1ES
Administrator and
secretary
Estera Administration
(Guernsey) Limited
(formerly Morgan
Sharpe
Administration
Limited)
Old Bank Chambers
La Grande Rue
St Martin's
Guernsey GY4 6RT
Shareholder information
Share price
The Company's Ordinary Shares are listed on the London Stock
Exchange.
Change of address
Communications with shareholders are mailed to the addresses
held on the share register. In the event of a change of address or
other amendment, please notify the Company's Registrar under the
signature of the registered holder.
Investment Manager
The Company is advised by Alpha Real Capital LLP which is
authorised and regulated by the Financial Conduct Authority in the
United Kingdom.
Financial Calendar
Financial reporting Reporting/Meeting dates
---------------------------------------- ------------------------
Annual results announcement 9 March 2018
---------------------------------------- ------------------------
Annual report published 29 March 2018
---------------------------------------- ------------------------
Annual General Meeting 27 April 2018
---------------------------------------- ------------------------
First trading update statement (Qtr 1) 8 June 2018
---------------------------------------- ------------------------
Half year report 10 Aug 2018
---------------------------------------- ------------------------
Second trading update statement (Qtr 3) 9 Nov 2018
This information is provided by RNS
The company news service from the London Stock Exchange
END
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