Interactive Investor

Baker Tilly fires London & Associated Properties warning

24th April 2014 16:14

Ceri Jones from interactive investor

London & Associated Properties, the UK shopping centre and Central London retail property specialist, announced a 6.7% rise in its net asset value in its final results for the year ended 31 December 2013, but its auditor highlighted concerns about the company's continued operation.

In the midst of a 32,280-word statement of largely unbroken text is wedged a warning from Baker Tilly on the company's status as a going concern, highlighting that the group's £44.2 million revolving credit facility was repayable in September 2012 and an agreement has not yet been reached with the group's finance providers to extend or replace this facility. "These conditions, along with the other matters explained in the group accounting policies of the financial statements, indicate the existence of a material uncertainty which may cast significant doubt about the group and company's ability to continue as a going concern," the auditor said.

Baker Tilly also highlighted a change of accounting practice used to value the group and company's financial instruments. "The resultant financial instrument liability at 31 December 2013 is £9.57 million for continuing operations and £14.6 million for discontinued operations (2012: £33.94 million).

"If the directors had continued to adopt the previous valuation methodology the liability in the balance sheet would have been £7.92 million for continuing operations and £11.47 million for discontinued operations. In relation to continuing operations this change in accounting estimation has reduced the profit by £1.65 million in the current year."

The firm, which is chaired by Sir Michael Heller and managed by his chief executive son John, posted pre-tax losses of £1.1 million for 2013, down from £7.6 million the previous year. However, the statement pointed out that if the impact of discontinued operations is excluded, it would have posted a £1.6 million profit compared with a £5.9 million loss a year earlier.

Property income was £8.2 million (£8.1 million on a like-for-like basis) and net assets rose to £49.7 million (£46.5 million).

During the period the company sold King Edward Court, Windsor, for an aggregate of £108 million, and other strategic property disposals of £17 million. A new venture was formed with Oaktree Capital Management around a £120 million shopping portfolio, and planning permission has been granted for the redevelopment of Langney shopping centre in Eastbourne.

Following the property sales, the management said the company is in a stronger financial position for the future, and therefore took the opportunity to reintroduce a dividend at 0.12p.

"These transactions have strengthened our balance sheet and have enabled us to negotiate better terms with the Royal Bank of Scotland, but we shall only renew this line of credit for a short period," said Heller, who is also deputy chairman of the Centre for Policy Studies and was a former CEO of KP, and main board director of United Biscuits. "Your board is in detailed negotiations with different lenders to totally replace the RBS facilities. We have a number of offers of finance which we are considering. All the offers received are on significantly better terms than those previously on offer from RBS."

The shares fell 4.83% to 49.01p, still perplexingly over twice the value of their 52-week low of 22.3p.

Related Categories