- Part 2: For the preceeding part double click ID
disclosed. In addition, a
Group Statement of Comprehensive Income has been produced for the first time.
IFRS 7 introduced additional disclosures on financial instruments.
Also in the current year, the Group has adopted the following standards and
guidance for the first time, none of which has had a material effect on the
results for the year:
- Amendments to IAS 20 - Accounting for Government Grants and Disclosure of
Government Assistance
- Amendments to IAS 32 and IAS 1 - Puttable Financial Instruments and
Obligations Arising on Liquidation
- Amendments to IAS 38 - Intangible assets
- Amendments to IAS 39 and IFRS 7 - Reclassification of Financial Assets
- Amendments to IAS 39 and IFRS 7 - Reclassification of Financial Assets -
Effective Date and Transition
- Amendments to IAS 40 - Investment Property
- Amendments to IFRS 1 and IAS 27 - Cost of an Investment in a Subsidiary,
Jointly Controlled Entity or Associate
- Amendments to IFRS 2 - Vesting Conditions and Cancellations
- Amendments to IFRIC 9 and IAS 39 - Embedded Derivatives
- IFRIC 12 - Service Concession Arrangements
- IFRIC 13 - Customer Loyalty Programmes
- IFRIC 15 - Agreements for the Construction of Real Estate
- IFRIC 16 - Hedges of a Net Investment in a Foreign Operation
At the date of authorisation of these financial statements, the following
Standards and Interpretations, which have not been applied in these financial
statements, were in issue but not yet effective. In some cases these standards
and guidance have not been endorsed by the European Union:
- IAS 24 (revised) - Related Party Disclosures; effective for accounting
periods starting on or after 1 January 2011
- Amendments to IAS 27 - Consolidated and Separate Financial Statements;
effective for accounting periods starting on or after 1 July 2009
- Amendment to IAS 32 (October 2009) - Classification of Rights Issues;
effective for accounting periods starting on or after 1 February 2010
- Amendments to IAS 39 - Eligible Hedged Items; effective for accounting
periods starting on or after 1 July 2009
- FRS 1 (revised) - First-time Adoption of International Financial Reporting
Standards; effective for accounting periods starting on or after 1 July 2009
- Amendments to IFRS 1 - Additional Exemptions for First-time Adopters;
effective for accounting periods starting on or after 1 January 2010
- Amendment to IFRS 1 - Limited Exemption from Comparative IFRS 7 Disclosures
for First-time Adopters; effective for accounting periods starting on or after
1 July 2010
- Amendments to IFRS 2 - Group Cash-settled Share-based Payment Transactions;
effective for accounting periods starting on or after 1 January 2010
- IFRS 9 - Financial Instruments; effective for accounting periods starting on
or after 1 January 2013
- IFRS 3 (revised) - Business Combinations; effective for accounting periods
starting on or after 1 July 2009
- Amendments to IFRIC 14 - Prepayments of a Minimum Funding Requirement;
effective for accounting periods starting on or after 1 January 2011
- IFRIC 17 - Distributions of Non-cash Assets to Owners; effective for
accounting periods starting on or after 1 July 2009
- IFRIC 18 - Transfers of Assets from Customers; effective for transfers on or
after 1 July 2009
- IFRIC 19 - Extinguishing Financial Liabilities with Equity Instruments;
effective for accounting periods starting on or after 1 July 2010
These pronouncements, when applied, will either result in changes to
presentation and disclosure, or are not expected to have a material impact on
the financial statements.
2.2 Business Combinations
(i) Subsidiary undertakings
Subsidiary undertakings are those entities controlled by the Group. Control is
assumed when the Group has the power to govern the financial and operating
policies of an entity or business to benefit from its activities. Subsidiaries
are fully consolidated from the date on which control is transferred to the
Group until the date control ceases. All intra-group transactions, balances,
income and expenses are eliminated on consolidation.
(ii) Joint ventures
Joint ventures are those entities over whose activities the Group has joint
control, established by contractual agreement. The group financial statements
include the Group's proportionate share of income, expenses, assets,
liabilities and cash flows of joint ventures.
(iii) Associates
Associates are those entities over which the Group has significant influence
but which are not subsidiary undertakings or joint ventures. The results and
assets and liabilities of associates are incorporated in these financial
statements using the equity method of accounting. Investments in associates
are carried in the Balance Sheet at cost as adjusted by post-acquisition
changes in the Group's share of the net assets of the associate, less any
impairment in the value of individual investments. When the Group's share of
losses in an associate equals or exceeds its interest in the associate the
Group does not recognise further losses, unless it has incurred obligations or
made payments on behalf of the associate. Unrealised gains on transactions
between the Group and its associates are eliminated to the extent of the
Group's interest in the associates. Unrealised losses are also eliminated
unless the transaction provides evidence of an impairment of the asset
transferred.
(iv) Goodwill
Goodwill arising on consolidation represents the excess of the cost of
acquisition over the Group's interest in the fair value of identifiable assets
and liabilities of a subsidiary, joint venture or associate at the date of
acquisition. It is initially recognised as an asset at cost and is
subsequently measured at cost less any accumulated impairment losses. Goodwill
which is recognised as an asset is reviewed for impairment at least annually.
2.3 Foreign currency
(i) Foreign currency transactions
Transactions in foreign currencies are translated into sterling using the
exchange rate prevailing at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies at the balance sheet date are
translated into sterling at the exchange rate ruling at that date, and
differences arising on translation are recognised in profit before tax, unless
they relate to qualifying cash flow hedges or qualifying net investment
hedges.
Changes in the fair value of monetary securities classified as
available-for-sale and denominated in foreign currencies are recognised in
profit before tax where the translation difference results from changes in the
amortised cost of the security, and are recognised in equity where it results
from other changes in the carrying amount of the security.
(ii) Consolidation of foreign entities
The results and financial position of all the Group entities that have a
functional currency different from sterling are translated into sterling as
follows:
(a) assets and liabilities are translated at the closing rate at the date of
the balance sheet;
(b) income and expenses for each income statement are translated at the
average exchange rates (unless this average is not a reasonable approximation
of the cumulative effect of the rates prevailing on the transaction dates, in
which case income and expenses are translated at the dates of the
transactions); and
(c) all resulting exchange differences are recognised directly in equity in
the cumulative translation reserve.
On consolidation, exchange differences arising from the translation of the net
investment in foreign entities, and of borrowings and other currency
instruments designated as hedges of such investments, are taken to the
cumulative translation reserve. When a foreign operation is sold, such
exchange differences are recognised as part of the gain or loss on sale in
profit before tax.
2.4 Investment properties
Investment properties are those properties held for long-term rental yields or
for capital appreciation or both. Land held under an operating lease is
classified and accounted for as an investment property when the definition of
investment property is met and the operating lease is accounted for as if it
were a finance lease. Investment properties are measured initially at cost,
including related transaction costs.
After initial recognition at cost, investment properties are carried at fair
value, based on market value as determined by professional external valuers at
the balance sheet date. Investment properties being redeveloped for continuing
use as investment properties, or for which the market has become less active,
continue to be classified as investment properties and measured at fair value.
Changes in fair values are recognised in profit before tax. If an investment
property becomes owner-occupied, it is reclassified as property, plant and
equipment, and its fair value at the date of reclassification becomes its cost
for accounting purposes. Subsequently the owner-occupied property is
depreciated over its useful economic life and revalued at the balance sheet
date.
2.5 Property, plant and equipment
Property, plant and equipment is stated at historical cost less accumulated
depreciation and any recognised impairment loss.
Land is not depreciated. Depreciation on property, plant and equipment is
calculated using the straight-line method to allocate cost less estimated
residual values over the estimated useful lives, as follows:
Plant and equipment 4 - 5 years
Freehold property 6 years
The gain or loss arising on the disposal or retirement of an asset is
determined as the difference between the sale proceeds and the carrying amount
of the asset and is recognised in profit before tax. Freehold property is
depreciated until December 2014 after which it is anticipated that it will be
redeveloped.
2.6 Intangible assets
Intangible assets acquired separately are capitalised at cost, and in respect
of business combinations are capitalised at fair value at the date of
acquisition. Intangible assets are amortised over their estimated useful lives
on a straight line basis as follows:
Trade names 11 years
Customer relationships 10 - 11 years
Technology 4 years
Capitalised development and other costs not amortised
2.7 Financial instruments
(i) Derivative financial instruments
The Group uses derivative financial instruments, including swaps and interest
rate caps, to help manage its interest rate and foreign exchange rate risk.
Derivative financial instruments are recorded, and subsequently revalued, at
fair value. Revaluation gains and losses are recognised in profit before tax,
except for derivatives which qualify as effective cash flow hedges, the gains
and losses relating to which are recognised directly in equity.
(ii) Available-for-sale investments
Available-for-sale investments are initially measured at cost, and are
subsequently revalued to fair value. Revaluation gains and losses are
recognised directly in equity, except for impairment losses and foreign
exchange gains and losses on monetary assets. On disposal, the cumulative gain
or loss previously recognised in equity is recycled through profit before tax.
(iii) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, demand deposits and other
short-term highly liquid investments which are readily convertible to a known
amount of cash and are subject to an insignificant risk of changes in value.
(iv) Trade and other receivables and payables
Trade and other receivables are recognised initially at fair value. An
impairment provision is created where there is objective evidence that the
Group will not be able to collect the receivable in full. Trade and other
payables are stated at cost, which equates to fair value.
(v) Borrowings
Borrowings are recognised initially at fair value less attributable
transaction costs. Subsequently, borrowings are stated at amortised cost with
any difference between the amount initially recognised and the redemption
value being recognised in profit before tax over the period of the borrowings,
using the effective interest rate method.
2.8 Revenue
(i) Rental income
Rental revenue from operating leases is recognised on a straight-line basis
over the lease term. When the Group provides incentives to its customers, the
cost of incentives are recognised over the lease term, on a straight-line
basis, as a reduction of rental revenue.
(ii) Service charge income
Service and management charge revenue is recognised on a gross basis in the
accounting period in which the services are rendered. Where the Group is
acting as an agent, the commission rather than gross revenue is recorded as
revenue.
(iii) Other property-related income
Revenue from the sale of goods and services is booked when the revenue can be
calculated reliably, and the risks and benefits have been transferred to the
buyer. Revenues are booked net of deductions for VAT and discounts.
2.9 Profit on sale of investment properties
Profits on sale of investment properties are recognised when the risks and
rewards of ownership have been transferred to the buyer, typically on
unconditional exchange of contracts or when legal title passes.
2.10 Income tax
Current tax is based on taxable profit for the year and is calculated using
tax rates that have been enacted or substantively enacted by the balance sheet
date.
Deferred tax is provided using the balance sheet liability method on temporary
differences between the carrying value of assets and liabilities for financial
reporting purposes and the values used for tax purposes. Temporary differences
are not provided for when they arise from initial recognition of goodwill or
from the initial recognition of assets and liabilities in a transaction that
does not affect accounting or taxable profit.
The amount of deferred tax provided is based on the expected manner of
realisation or settlement of the carrying amount of assets and liabilities,
and is calculated using rates that are expected to apply in the period when
the liability is settled or the asset is realised, in the tax jurisdiction in
which the temporary differences arise. Deferred tax is charged or credited in
arriving at profit after tax, except when it relates to items recognised
directly in equity, in which case the deferred tax is also recognised in
equity.
Deferred tax assets are recognised only to the extent that it is probable that
future taxable profits will be available against which the assets can be used.
The deferred tax assets and liabilities are only offset if they relate to
income taxes levied by the same taxation authority, there is a legally
enforceable right of set-off and the Group intends to settle its current tax
assets and liabilities on a net basis.
2.11 Leases
Leases are classified as finance leases whenever the terms of the lease
transfer substantially all the risks and benefits of ownership to the lessee.
All other leases are classified as operating leases. Certain operating leases
for land that is classified and accounted for as investment property pursuant
to IAS 40 - Investment Properties are accounted for as if they were finance
leases.
(i) A Group company is the lessee
(a) Rentals payable under operating leases are charged to the Statement of
Comprehensive Income on a straight-line basis over the term of the lease.
Benefits received and receivable as an incentive to enter into an operating
lease are also spread on a straight-line basis over the term of the lease.
(b) Assets held under finance leases are recognised as assets at the lease
commencement date at the lower of the fair value of the leased asset and the
present value of the minimum lease payments. The corresponding liability to
the lessor is included in the Balance Sheet as a finance lease obligation.
Each lease payment is allocated between finance charges and reduction of the
lease obligation so as to achieve a constant rate of interest on the remaining
balance of the liability. Finance charges are charged directly against income.
(ii) A Group company is the lessor
(a) Rental income from operating leases is recognised on a straight-line basis
over the term of the lease. Initial direct costs incurred in negotiating and
arranging an operating lease are added to the carrying amount of the leased
asset and recognised on a straight-line basis over the lease term.
(b) Amounts due from lessees under finance leases are recorded as receivables
at the amount of the Group's net investment in the leases. Finance lease
income is allocated to accounting periods so as to reflect a constant periodic
return on the Group's net investment outstanding in respect of the leases.
2.12 Employee benefits
Pension obligations
The Group operates various defined contribution plans. The Group pays
contributions to publicly or privately administered pension insurance plans on
a mandatory, contractual or voluntary basis. The Group has no further payment
obligations once the contributions have been paid. A contribution is
recognised as an employee benefit expense when it is due. A prepaid
contribution is recognised as an asset to the extent that a cash refund or a
reduction in future payments is available.
3 Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group's accounting policies, which are described in
note 2, the Directors are required to make judgements, estimates and
assumptions about the carrying amounts of assets and liabilities that are not
readily apparent from other sources. The estimates and associated assumptions
are based on historical experience and other factors that are considered to be
relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Changes to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current and
future periods.
The following are the critical estimates and judgements that the Directors
have made in the process of applying the Group's accounting policies and that
have the most significant effect on the amounts recognised in the financial
statements.
(i) Fair value of investment properties
The best evidence of fair value is current prices in an active market for
similar lease and other contracts. In the absence of such information, the
Group determines the amount within a range of reasonable fair value estimates.
In making its judgement, the Group considers information from a variety of
sources including:
(a) current prices in an active market for properties of a different nature,
condition or location (or subject to different lease or other contracts),
adjusted to reflect those differences;
(b) recent prices of similar properties in less active markets, with
adjustments to reflect any changes in economic conditions since the date of
the transactions that occurred at those prices; and
(c) discounted cash flow projections based on reliable estimates of future
cash flows, derived from the terms of any existing lease and other contracts,
and (where possible) from external evidence such as current market rents for
similar properties in the same location and condition, and using discount
rates that reflect current market assessments of the uncertainty in the amount
and timing of the cash flows.
(ii) Income Taxes
The Group is subject to income taxes in different jurisdictions and estimation
is required to determine the worldwide provision for income taxes. There are
some transactions and calculations for which the ultimate tax determination is
uncertain. Where the final tax outcome of these matters is different from the
amounts that were initially recorded, such differences will impact the income
tax and deferred tax provisions in the period in which determination is made.
(iii) Impairment of goodwill and other intangible assets
When assessing possible impairment of goodwill and other intangible assets the
Group is required to make an assessment of recoverable amounts. Recoverable
amount is calculated as the higher of fair value less costs to sell and value
in use. In making these assessments, assumptions are required to be made based
upon information available at the time.
(iv) Deferred tax
The method of calculation of deferred tax in relation to UK properties assumes
that indexation allowance will be available as it is assumed that the Group
will recover the carrying amount of its investment properties through use
followed by an eventual sale.
4 Segment information
The Group has two operating divisions - Investment Property and Other
Investments. Other Investments comprise corporate bonds, shares in Catena AB,
Bulgarian Land Development Plc and Wyatt Media Group AB, and other small
corporate investments. The Group manages the Investment Property division on a
geographical basis due to its size and geographical diversity. Consequently,
the Group's principal operating segments are:
Investment Property - United Kingdom
France
Germany
Sweden
Other Investments
There are no transactions between the operating segments.
The Group's results for the year ended 31 December 2009 by operating segment
were as follows:
Investment
property
United Other
Kingdom France Germany Sweden Investments Total
£m £m £m £m £m £m
Rental income 25.0 15.9 14.8 4.9 - 60.6
Service charge
income 4.7 4.2 1.7 0.3 - 10.9
Other property-
related income 0.4 0.3 0.3 - - 1.0
Income from
non-property
activities - - - - 3.8 3.8
Group revenue 30.1 20.4 16.8 5.2 3.8 76.3
Service charges
and similar
expenses (6.3) (4.5) (2.8) (1.2) - (14.8)
Administration
expenses (2.6) (1.5) (1.1) (0.5) (3.7) (9.4)
Other expenses (1.0) (0.7) (1.2) (0.2) (0.2) (3.3)
Costs (9.9) (6.7) (5.1) (1.9) (3.9) (27.5)
Group revenue
less costs 20.2 13.7 11.7 3.3 (0.1) 48.8
Net movements
on revaluation
of investment
properties 24.1 (15.9) (13.5) (1.4) - (6.7)
Profit on sale
of
investment
properties 0.3 - - - - 0.3
Profit on sale
of
corporate bonds - - - - 1.9 1.9
Segment
operating
profit/(loss) 44.6 (2.2) (1.8) 1.9 1.8 44.3
Net finance
costs (6.1) (7.0) (7.4) (1.6) (3.4) (25.5)
Share of profit
of
associates
after
tax - - - - 2.5 2.5
Segment
profit/(loss)
before tax 38.5 (9.2) (9.2) 0.3 0.9 21.3
Taxation (4.0) 1.6 0.2 0.6 0.5 (1.1)
Segment
profit/(loss)
after tax 34.5 (7.6) (9.0) 0.9 1.4 20.2
Central
administration
costs (2.8)
Profit for the
year 17.4
On the adoption of IFRS 8 - Operating Segments in 2009, certain items in 2008
and 2007 have been reclassified. Previously, other investments were shown
within their respective geographical segment, central administration costs and
non-recurring costs were included within the UK segment and the deferred tax
charge was not allocated by segment. In 2008, results from associates (loss of
£7.5 million) were shown within the Sweden segment and are now shown within
the Other Investments segment. Available-for-sale investments of £11.0 million
were shown in the assets of the UK segment and investments in associates of
£39.3 million were shown in the Sweden segment; both are now shown within
other investments.
The Group's results for the year ended 31 December 2008 by operating segment,
restated as explained above and in note 2, were as follows:
Investment
property
United Other
Kingdom France Germany Sweden Investments Total
£m £m £m £m £m £m
Rental income 26.2 19.6 12.3 5.0 - 63.1
Service charge
income 5.4 3.4 2.2 0.3 - 11.3
Other property-
related income 0.9 1.1 - 1.3 - 3.3
Income from
non-property
activities - - - - 3.9 3.9
Group revenue 32.5 24.1 14.5 6.6 3.9 81.6
Service charges
and similar
expenses (5.7) (3.7) (2.3) (1.4) - (13.1)
Administration
expenses (1.6) (2.0) (1.8) (1.3) (6.5) (13.2)
Other expenses (1.6) (0.8) (1.2) - (4.6) (8.2)
Costs (8.9) (6.5) (5.3) (2.7) (11.1) (34.5)
Group revenue
less costs 23.6 17.6 9.2 3.9 (7.2) 47.1
Net movements
on revaluation
of investment
properties (59.4) (17.8) (19.9) (6.2) - (103.3)
Profit/(loss)
on
sale of
investment
properties 6.6 (0.2) 0.6 - - 7.0
Impairment of
intangible
fixed
assets and
goodwill - - - - (22.0) (22.0)
Loss on
disposal of
subsidiaries - (15.9) - (0.3) - (16.2)
Segment
operating loss (29.2) (16.3) (10.1) (2.6) (29.2) (87.4)
Net finance
costs (25.7) (9.0) (8.8) (1.4) 1.9 (43.0)
Share of loss
of
associates
after
tax - - - - (7.5) (7.5)
Segment loss
before tax (54.9) (25.3) (18.9) (4.0) (34.8) (137.9)
Taxation 25.5 34.4 1.6 2.1 0.5 64.1
Segment
(loss)/profit
after tax (29.4) 9.1 (17.3) (1.9) (34.3) (73.8)
Central
administration
costs (2.9)
Non-recurring
costs (1.3)
Loss for the
year (78.0)
Other segment information:
Capital
Assets Liabilities expenditure
2008 2007 2008 2007 2008 2007
2009 restated restated 2009 restated restated 2009 restated restated
£m £m £m £m £m £m £m £m £m
Investment
Property
United Kingdom 370.2 428.9 625.5 282.0 311.5 482.3 1.3 2.7 20.8
France 246.1 307.5 376.5 187.6 193.5 295.2 31.4 1.2 5.5
Germany 200.0 210.1 177.5 158.8 152.4 123.0 17.8 11.1 26.2
Sweden 58.6 70.1 71.5 30.7 52.8 44.6 2.2 2.4 0.5
Other investments 150.0 58.4 132.9 56.8 26.2 35.7 - - -
1,024.9 1,075.0 1,383.9 715.9 736.4 980.8 52.7 17.4 53.0
Included within the assets of other investments are investments in associates
of £40.9 million (2008: £39.3 million; 2007: £42.3 million).
5 Profit/(loss) for the year
Profit/(loss) for the year has been arrived at after charging:
2009 2008
£m £m
Auditors' remuneration
Fees payable to the Company's auditors for
the audit of the parent Company and group
accounts 0.2 0.1
Fees payable to the Company's auditors for
other services to the Group
The audit of the Company's subsidiaries
pursuant to legislation 0.1 0.1
Corporate finance services* - 0.2
Depreciation and amortisation 0.5 1.4
Loss on disposal of property, plant and
equipment - 0.2
Permanent diminution in value of
available-
for-sale equity investments - 3.0
Employee benefits expense (note 6) 6.7 7.9
Professional fees and other non-recurring
costs of investigating a potential
restructuring
of the Group* - 1.3
* In 2008 fees payable to the Company's auditors for corporate finance
services of £0.2 million are also included within non-recurring costs of £1.3
million.
6 Employee benefits expense
2009 2008
£m £m
Wages and salaries 5.3 5.5
Social security costs 0.8 1.2
Pension costs - defined contribution
plans 0.2 0.4
Other employee-related expenses 0.4 0.8
6.7 7.9
The Directors are considered to be key management of the Group.
No amounts were charged to the Statement of Comprehensive Income in relation
to share-based payments (2008: £nil).
The monthly average number of employees of the Group in continuing operations,
including Executive Directors, was as follows:
2009 2008
Other Other
Property operations Total Property operations Total
number number number number number number
Male 20 20 40 22 39 61
Female 29 8 37 30 15 45
49 28 77 52 54 106
7 Net Finance costs
2009 2008
£m £m
Interest expense
Bank loans 22.7 33.3
Debenture loans 4.7 4.7
Other interest 0.3 0.9
Amortisation of issue costs of loans 0.8 3.7
Foreign exchange variances 9.7 (11.9)
Movement in fair value of derivative
financial instruments
Interest rate swaps: transactions not
qualifying as hedges (6.7) 19.9
Interest rate caps, collars and floors:
transactions not qualifying as hedges 0.4 1.1
Interest income (6.4) (8.7)
25.5 43.0
8 Taxation
2009 2008
£m £m
Current tax 2.1 3.6
Deferred tax (note 20) (1.0) (67.7)
1.1 (64.1)
A deferred tax charge of £3.2 million (2008: £nil) was recognised directly in
equity (note 20).
The charge for the year differs from the theoretical amount which would arise
using the weighted average tax rate applicable to profits of Group companies
as follows:
2009 2008
£m £m
Profit/(loss) before tax 18.5 (142.1)
Tax calculated at domestic tax rates
applicable to profits in the respective
countries 4.9 (40.8)
Expenses not deductible for tax purposes 0.5 10.3
Tax effect of unrecognised losses in
associates and joint ventures (0.7) 2.0
Previously unrecognised tax losses
and other deferred tax adjustments (3.6) (3.0)
Different taxation treatment of disposals (0.1) (32.2)
Deferred tax assets not recognised 2.9 0.4
Adjustment in respect of prior periods (2.8) (0.8)
Tax expense/(credit) for the year 1.1 (64.1)
The weighted average applicable tax rate of 26.3 per cent (2008: 28.7 per
cent) was derived by applying to their relevant profits and losses the rates
in the jurisdictions in which the Group operated.
9 Earnings per share
Management has chosen to disclose adjusted earnings per share from continuing
operations in order to provide an indication of the Group's underlying
business performance. Adjusted earnings per share excludes the effect of
revaluations of investment properties and deferred tax.
2009 2008
£m £m
Profit/(loss) for the year attributable
to the owners of the Company 17.5 (78.1)
Deferred tax (1.0) (67.7)
Net movement on revaluation of
investment properties 6.7 103.3
Adjusted profit/(loss) for the year
attributable to the owners of the
Company 23.2 (42.5)
2009 2008
number number
Weighted average number of
ordinary shares 48,249,810 64,783,048
2009 2008
pence pence
Basic and diluted earnings/(loss) per
share from continuing operations 36.4 (120.6)
Adjusted earnings/(loss) per share
from continuing operations 48.2 (65.6)
In 2009 there were no instruments in issue which could have changed the
weighted average number of shares. In 2008 there were share options in issue
for part of the year, the effect of which had they been issued from the start
of the year would have been accretive to earnings per share. Had these been
issued from the start of 2008, the weighted average number of shares that year
would have increased by 110,877 shares.
10 Investment properties
2009 2008 2007
£m £m £m
At 1 January 798.8 1,175.3 1,143.4
Acquisitions 29.2 - 29.0
Capital expenditure 23.4 17.2 23.2
Transfer to property, plant
and equipment (note 11) - (2.3) -
Disposals - property sales (1.9) (120.5) -
Disposals - corporate sales
(note 30) - (285.3) -
Net movements on
revaluation of investment
properties (6.7) (103.3) (68.1)
Rent-free period debtor
adjustments 1.5 (1.0) 0.8
Exchange rate variances (31.3) 118.7 47.0
At 31 December 813.0 798.8 1,175.3
The investment properties (and the owner-occupied property detailed in note
11) were revalued at 31 December 2009 to their fair value. Valuations were
based on current prices in an active market for all properties. The property
valuations were carried out by external, professionally qualified valuers as
follows:
UK 2009: Lambert Smith Hampton
UK 2007 and 2008: Allsop & Co.
France: DTZ Debenham Tie Leung
Germany: DTZ Debenham Tie Leung
Sweden: CB Richard Ellis
Investment properties included leasehold buildings of which the carrying
amount was £18.1 million (2008: £20.8 million; 2007: £113.3 million).
Where the Group leases out its investment property under operating leases the
duration is typically 3 years or more. No contingent rents have been
recognised in the current or comparative years.
Substantially all investment properties (and the owner-occupied property
detailed in note 11) are secured against debt.
In the latter half of 2008 the economic climate and lower transactional
volumes in the real estate markets in which the Group was active meant that
the valuers had to refer to greater use of professional judgement in arriving
at the year end valuations at 31 December 2008. The Directors are satisfied
that market conditions, while still remaining challenging, had returned to a
more normal level of transactional activity by 31 December 2009. The Directors
are satisfied that the external valuations supplied are appropriate to adopt
for the 2009 financial statements without adjustment.
11 Property, plant and equipment
2009 2008 2007
£m £m £m
Cost or valuation
At 1 January 6.6 6.7 6.5
Transfer from investment
property (note 10) - 2.3 -
Additions 0.1 0.2 0.8
Disposals - (2.6) (0.6)
Revaluation
increase/(decrease) 0.1 (0.3) -
Exchange rate variances - 0.3 -
At 31 December 6.8 6.6 6.7
Accumulated depreciation
and impairment
At 1 January (3.8) (4.9) (4.5)
Depreciation charge (0.5) (0.9) (1.0)
Disposals - 2.2 0.6
Exchange rate variances - (0.2) -
At 31 December (4.3) (3.8) (4.9)
Net book value
At 31 December 2.5 2.8 1.8
Owner-occupied property was revalued at 31 December 2009 based on the external
valuation performed by Lambert Smith Hampton (in prior years Allsop & Co.) as
detailed in note 10.
12 Intangible assets
Other
Goodwill intangibles Total
£m £m £m
Cost
At 1 January 2009 and at
31 December 2009 18.6 7.2 25.8
Amortisation
At 1 January 2009 and at
31 December 2009 (17.5) (7.2) (24.7)
Net book value
At 31 December 2009 1.1 - 1.1
Other
Goodwill intangibles Total
£m £m £m
Cost
At 1 January 2008 15.2 6.5 21.7
Additions 3.6 0.2 3.8
Disposals (1.6) - (1.6)
Exchange rate variations 1.4 0.5 1.9
At 31 December 2008 18.6 7.2 25.8
Amortisation
At 1 January 2008 - (2.2) (2.2)
Amortisation - (0.5) (0.5)
Impairment (17.5) (4.5) (22.0)
At 31 December 2008 (17.5) (7.2) (24.7)
Net book value
At 31 December 2008 1.1 - 1.1
Other
Goodwill intangibles Total
£m £m £m
Cost
At 1 January 2007 12.9 6.3 19.2
Additions 1.8 - 1.8
Exchange rate variations 0.5 0.2 0.7
At 31 December 2007 15.2 6.5 21.7
Amortisation
At 1 January 2007 - (0.4) (0.4)
Amortisation - (1.8) (1.8)
At 31 December 2007 - (2.2) (2.2)
Net book value
At 31 December 2007 15.2 4.3 19.5
Goodwill
Goodwill comprised £0.8 million (2008: £0.8 million; 2007: £2.4 million) on
the acquisition of a French property portfolio in 2004 and £0.3 million (2008:
£0.3 million; 2007: £0.3 million) on a German property acquisition in 2005.
All other goodwill and intangible assets related to Wyatt Media Group AB and
were fully written down in 2008.
In October 2007, the Group purchased a call option for the remaining 60%
shareholding in Bilddagboken AB for £1.2 million. The option was exercised on
22 January 2008 for £2.2 million. When exercised, goodwill of £3.3 million was
recognised.
In February and April 2008, the Group acquired a further 25.1% of the share
capital of Internetami AB (Tyda) taking the Group's total shareholding to
82.3%. On acquisition, goodwill of £0.2 million was recognised.
In October 2008, the Group acquired the remaining 47% of the share capital of
Xtraworks AB. On acquisition, goodwill of £0.1 million was recognised.
Other intangibles
Other intangibles (relating to trade names, technology, customer
relationships, capitalised development and other costs) relate to Wyatt Media
Group AB and were fully written down during 2008 as described above.
2009 Impairment review
Goodwill was reviewed for impairment at 31 December 2009 using the key
assumptions set out below. No impairment was required.
Key assumptions:
Unamortised goodwill at 31 December 2009 related to contingent deferred tax
arising on acquisitions of corporate entities for which an equal deferred tax
liability was recognised in the Balance Sheet.
2008 impairment review
The impairment losses recognised in the Statement of Comprehensive Income in
2008 in respect of goodwill and intangible assets related exclusively to Wyatt
Media Group AB. During the year ended 31 December 2008, the goodwill and
intangible assets in respect of the Group's online media operations were
impaired by £17.5 million and £4.5 million, respectively. This was due to
market competition, primarily in the social networking environment, and
increased obsolescence of existing coding and software causing a significant
pre-tax risk adjustment. At 31 December 2008 the net book value of goodwill
and intangible assets relating to Wyatt Media Group AB was £nil.
Key assumptions:
The key assumptions used in reviewing for impairment at 31 December 2008 the
goodwill and intangibles of Wyatt Media Group AB were as follows:
- Budgeted earnings before interest, tax, depreciation and amortisation
(EBITDA) - budgeted EBITDA was based on an "income per user" measure derived
from existing income streams and new product launches. Projected user volumes
using web services were derived from past experience of the business.
- Long-term growth rates - growth rates of between 2-3 per cent were used
which approximated to the nominal GDP rates in the countries in which the
business operated.
- Pre-tax adjusted discount rate - the discount rate was derived from a
risk-free rate adjusted to reflect specific risk premiums in relation to the
systemic risk of 33 per cent and a risk adjustment (`beta') applied to reflect
the risk of the operating entity.
13 Joint ventures
At 31 December 2009 the Group had a one-third interest (2008: one-third; 2007:
one-third ) in the issued ordinary share capital of Fielden House Investments
Limited, a company incorporated in England and Wales.
The principal activity of Fielden House Investments Limited is investment in,
and management and development of, commercial property.
The following amounts represent the Group's share of the assets and
liabilities, and income and expenditure of Fielden House Investments Limited
which are included in the Balance Sheet and Statement of Comprehensive Income
of the Group:
2009 2008 2007
£m £m £m
Assets
Non-current assets 1.8 2.3 2.9
Current assets 0.2 - 0.1
2.0 2.3 3.0
Liabilities
Non-current liabilities (2.5) (2.5) (2.5)
Current liabilities (0.2) - (0.1)
(2.7) (2.5) (2.6)
Net (liabilities)/assets (0.7) (0.2) 0.4
Income 0.2 0.2 0.2
Expenses (0.2) (0.8) (0.2)
Loss after income tax - (0.6) -
In 2007 the Group had interests in two other joint ventures, Teighmore Limited
and New London Bridge House Limited, of which the Group also owned one-third
of the issued ordinary share capital.
New London
Teighmore Bridge House Total
2007 £m £m £m
Assets
Non-current assets 80.4 29.8 110.2
Current assets 2.2 0.3 2.5
82.6 30.1 112.7
Liabilities
Current liabilities (69.1) (13.6) (82.7)
Net assets 13.5 16.5 30.0
Income 0.7 1.1 1.8
Expenses (6.0) (1.4) (7.4)
Loss after income tax (5.3) (0.3) (5.6)
The Group's interests in New London Bridge House Limited and Teighmore Limited
were disposed of during 2008 as described in note 30. There were no contingent
liabilities on sale.
14 Investments in associates
Net assets Goodwill Total
£m £m £m
At 1 January 2009 34.6 4.7 39.3
Additions 1.7 0.1 1.8
Share of profit of
associates after tax# 2.5 - 2.5
Other equity movements* 0.4 - 0.4
Dividends received (1.5) - (1.5)
Exchange rate differences (1.6) - (1.6)
At 31 December 2009 36.1 4.8 40.9
Net assets Goodwill Total
£m £m £m
At 1 January 2008 31.9 10.4 42.3
Additions 0.8 0.1 0.9
Reclassification 1.3 (1.3) -
Share of loss of associates
after tax# (2.2) (5.3) (7.5)
Other equity movements* 4.3 - 4.3
Dividends received (1.5) - (1.5)
Exchange rate differences - 0.8 0.8
At 31 December 2008 34.6 4.7 39.3
Net assets Goodwill Total
£m £m £m
At 1 January 2007 - - -
Transfer from other
investments 4.2 - 4.2
Additions 24.8 10.4 35.2
Share of profit of
associates
after tax# 0.5 - 0.5
Other equity movements* 0.3 - 0.3
Exchange rate differences 2.1 - 2.1
At 31 December 2007 31.9 10.4 42.3
# Consists of share of associates' loss of £0.3 million (2008: loss of £4.3
million; 2007: profit of £0.5 million) and the realisation of £2.8 million
(2008: £2.1 million; 2007: £nil) of negative goodwill on acquisition. The
write down of goodwill of £5.3 million in 2008 is explained in note 14.
* Primarily foreign exchange movements of the associate undertakings.
£1.3 million was reclassified to net assets from goodwill in 2008 to reflect a
revision to the original acquisition calculation in 2007, which had been based
on preliminary results and was updated in 2008 to reflect published data.
During 2008 Bulgarian Land Development Plc restated its 2007 accounts. The
share of loss in 2008 disclosed above includes £0.5 million relating to 2007,
and other equity movements in 2008 include a further £0.5 million also
relating to 2007.
The Group's interests in its principal associates were as follows:
Interest held
Profit / in ordinary
Country of Assets Liabilities Revenues (loss) share capital
At 31 December incorporation
2009 £m £m £m £m %
Catena AB Sweden 66.4 (43.8) 5.1 3.0 29.8
Bulgarian Land
Development Plc Isle of Man 27.4 (13.9) 2.1 (3.3) 47.7
Flavour of the
Month AB Sweden - - - - 40.0
93.8 (57.7) 7.2 (0.3)
Interest held
Profit / in ordinary
Country of Assets Liabilities Revenues (loss) share capital
At 31 December incorporation
2008 £m £m £m £m %
Catena AB Sweden 61.4 (40.9) 4.6 (3.2) 29.1
Bulgarian Land
Development Plc Isle of Man 23.8 (9.7) 2.3 (1.1) 35.8
Flavour of the
Month AB Sweden - - - - 40.0
85.2 (50.6) 6.9 (4.3)
Interest held
Profit / in ordinary
Country of Assets Liabilities Revenues (loss) share capital
At 31 December incorporation
2007 £m £m £m £m %
Catena AB Sweden 57.8 (34.9) 0.7 0.6 29.1
Bulgarian Land
Development Plc Isle of Man 17.2 (8.2) - (0.1) 28.7
75.0 (43.1) 0.7 0.5
Catena AB
In May 2007 the Group acquired a 27.6 per cent stake in Catena AB, a listed
Swedish property company, increasing this to 29.1 per cent on 3 July 2007, for
an aggregate sum of £28.0 million. A further 0.7 per cent was acquired during
2009 at a cost of £0.6 million. Henry Klotz, Chief Executive Officer of the
Company, was appointed Chairman of Catena in 2007.
The quoted market value of the Group's investment in the shares of Catena AB
at year end was £26.1 million (2008: £17.6 million; 2007: £28.0 million).
Bulgarian Land Development Plc
During 2006, the Group acquired 4,250,000 shares (10.6 per cent) of Bulgarian
Land Development Plc (BLD), a company listed on the Alternative Investment
Market of the London Stock Exchange, at a cost of £4.2 million. BLD develops
residential and commercial properties in Bulgaria.
In 2007 a further 7,211,787 shares were acquired by the Group at a cost of
£7.2 million taking the total shareholding to 28.7 per cent.
In 2008 a further 2,859,500 shares were acquired by the Group at a cost of
£0.8 million to take the total shareholding to 35.8 per cent. This created
negative goodwill of £2.1 million which was included in the Group's profit
before tax in 2008.
In 2009 the Group increased its holding by 4,763,491 shares at a cost of £1.2
million, taking the total shareholding to 47.7 per cent. This created negative
goodwill of £2.8 million which was included in the Group's profit before tax
in 2009.
The market value of the Group's investment in the shares of BLD at the year
end was £3.8 million (2008: £4.6 million; 2007: £9.1 million).
Flavour of the Month AB
In 2008 the Group acquired a 40 per cent interest in a blog resourcing website
provider, Flavour of the Month AB, for £0.1 million.
Impairment
2009
In assessing the carrying value of Catena AB, the Group considered that the
balance sheet of Catena AB at 31 December 2009 was stated at fair value except
for certain deferred tax liabilities. It was management's assessment that the
realisation of Catena's property assets would occur through corporate
disposals and therefore latent deferred tax liabilities were unlikely to
crystallise. As the Group's share of the net assets of Catena AB, excluding
deferred tax liabilities, exceeded the carrying value of the Group's interest
there was no further impairment of the Group's interest in Catena AB at 31
December 2009.
BLD is carried in the Balance Sheet at a value equal to the Group's share of
its net assets. BLD's net assets were reviewed and found not to be impaired at
31 December 2009. Accordingly there was no further provision against the
carrying value of the Group's interest in BLD at 31 December 2009.
2008
Given the economic instability in late 2008 and the likelihood of a slowdown
in global growth, the Group considered that this represented a potential
indication of impairment in relation to its associate investments.
Consequently, the Group tested the recoverability of its associate investments
by comparing the carrying amount of the associate investment at the balance
sheet date to its recoverable amount. This resulted in a write down of £5.3
million of goodwill.
In assessing the carrying value of Catena AB, the Group considered that the
balance sheet of Catena AB at 31 December 2008 was stated at fair value except
for certain deferred tax liabilities. It was management's assessment that the
realisation of Catena's property assets would occur through corporate
disposals and therefore latent deferred tax liabilities were unlikely to
crystallise. Taking this into account the write down in relation to Catena was
£3.9 million in 2008, representing the excess of carrying value over fair
value.
In assessing the carrying value of BLD there was significant uncertainty over
the timing and level of future cash flows which crystallised a write down of
goodwill of £1.4 million in 2008. A review of BLD's underlying assets was
undertaken and found not to be impaired at 31 December 2008. On this basis the
Directors considered the Group's share of net assets approximated to
recoverable value.
15 Other investments
2009 2008 2007
£m £m £m
Available-for-sale
financial
investments carried at
fair
value
Listed corporate bonds UK 17.1 1.2 -
Eurozone 40.0 8.3 -
Other 12.9 1.2 -
Listed equity securities UK 0.6 0.3 1.7
Sweden 2.5 2.3 5.0
Other 0.1 0.1 -
Unlisted investments UK - 0.1 -
Sweden 0.6 0.6 -
Government securities UK 0.1 0.2 0.1
73.9 14.3 6.8
Investments designated
as
at fair value through
the
profit or loss
Listed equity securities UK - - 0.8
Other - - 0.3
Unlisted investments Sweden - - 0.5
- - 1.6
73.9 14.3 8.4
When investments are managed and their performance is evaluated on a fair
value basis they are designated upon initial recognition as "at fair value
through the profit or loss". All other equity investments are designated as
"available-for-sale".
The movement of other investments is analysed below:
2009 2008 2007
£m £m £m
At 1 January 14.3 8.4 16.2
Additions 70.7 10.6 7.2
Disposals (23.4) (0.3) (13.5)
Fair value movements
recognised in reserves on
available-for-sale assets 13.5 (3.4) 1.7
Fair value movements
recognised in profit before
tax on available-for-sale
assets - (3.0) (0.3)
Transfers to investments in
associates - - (4.2)
Exchange rate variations (1.2) 2.0 1.3
At 31 December 73.9 14.3 8.4
The table below gives an analysis of the valuation methods used to measure the
fair value of the other investments, grouped into Levels 1 to 3 based on the
degree to which the fair value is observable.
2009 2008 2007
£m £m £m
Level 1 - quoted unadjusted
market prices 3.3 2.9 7.9
Level 2 - valuation from
observable market data# 70.0 10.7 -
Level 3 - other valuation
methods* 0.6 0.7 0.5
73.9 14.3 8.4
# Includes £5.1 million (2008: £4.9 million; 2007: £nil) of corporate bonds
priced directly from market makers in those bonds.
* Unlisted equity shares valued using multiples from comparable listed
organisations.
16 Derivative financial instruments
2009 2009 2008 2008 2007 2007
Assets Liabilities Assets Liabilities Assets Liabilities
£m £m £m £m £m £m
Non-current
Interest
rate swaps - - - - 0.1 -
Interest
rate caps
and floors 0.1 - 0.4 - 1.2 -
0.1 - 0.4 - 1.3 -
Current
Interest
rate swaps - (15.7) - (22.4) - (2.3)
Forward
foreign
exchange
contracts - - - (0.2) - -
Call option
on
subsidiary
undertaking - - - - 1.3 -
- (15.7) - (22.6) 1.3 (2.3)
0.1 (15.7) 0.4 (22.6) 2.6 (2.3)
The valuation methods used to measure the fair value of all derivative
financial instruments were grouped into Level 2, being derived from inputs
which were either observable as prices or derived from prices.
There were no derivative financial instruments accounted for as hedging
instruments.
Interest rate swaps
The aggregate notional principal of the outstanding interest rate swap
contracts at 31 December 2009 was £136.7 million (2008: £296.8 million; 2007:
£195.7 million). The average period to maturity of the interest rate swaps was
3.9 years
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