Focusing on stability
Wichford P.L.C. Annual Report 2008 2008 review Governance Company financials How we performed A responsible business 2008 in numbers
Introduction 1 Report of the Directors 22 Report of the Independent Auditors 54 At a glance 2 Statement of Directors’ responsibilities 25 Company balance sheet 56 Investing securely 4 Corporate governance statement 26 Notes to the accounts 57 Minimising risk 6 Directors’ Remuneration Report 29 Highlights 8 Report of the Independent Auditors 30 Chairman’s statement 9 Business review 10 Directors 20 Consolidated financials Investors 2008 in numbers Additional information
Consolidated income statement 32 List of properties 64 Consolidated statement of recognised Four year review 67 income and expense 32 Company information 68 Consolidated balance sheet 33 Glossary of terms 69 Consolidated cash flow statement 34 Notes to the financial statements 35 Wichford P.L.C. is a property investment company, registered in the Isle of Man, with a portfolio of 79 properties occupied principally by Central and State Government bodies in both the UK and Continental Europe. Our portfolio totals over 341,000 sq m (3.47 million sq ft) and is independently valued at £598 million.
Number of properties 79 2007: 78
Rental income now index-linked 61.1% 2007: 45%
Average unexpired lease length 9.21 years 2007: 12.13 years
Opposite page: Centenary Court, Bradford
2008 review Governance Consolidated financials Company financials Investors How we performed A responsible business 2008 in numbers 2008 in numbers Additional information At a glance Wichford has 79 properties with a wide geographical spread across the UK and other major European countries. During the year under review, the Company disposed of one property in the UK and acquired one property in the Netherlands and one in the UK.
Long-term stability The Company’s tenants are Government bodies and the overall vacancy rate continues to be less the one per cent.
CENTRAL STATE GOVERNMENT LONG-TERM STABILITY GOVERNMENT
St Anne House, Croydon This 73,000 sq ft office building was acquired during the year from an institutional vendor and is let primarily to the Home Office until 2017 at an annual rent of £1.1 million.
Wichford P.L.C. Annual Report 2008 Core Portfolio Number and value of properties Active Portfolio in UK Portfolio Continental Europe
72 UK £446.4m
Annualised rental income of properties in UK Portfolio £33.0m
Net initial yield of properties in UK Portfolio 7.4%
Number and value of properties in Continental European Portfolio
7 europe £151.3m
Annualised rental income of properties in Continental European Portfolio £9.8m
Net initial yield on valuation of properties in Continental European Portfolio 6.2%
Portfolio value (£m)
Year UK Core uK Active european Total 2005 206 61 – 267 2006 344 112 – 456 2007 367 159 147 673 2008 312 135 151 598
Geographical split of index-linked properties
A A South 33.14% E D B Midlands 21.85% C North 30.58% D Wales 5.09% E Scotland 9.34%
B C
2008 review Governance Consolidated financials Company financials Investors How we performed A responsible business 2008 in numbers 2008 in numbers Additional information The Company believes that its approach of acquiring properties primarily occupied by Central and State Government departments continues to provide the most secure income available in the marketplace.
Vacancy rates continue to run at less than one per cent of the Company’s total floor space of 341,000 sq m.
Investing
THIS PAGE: Dale street, liverpool
Wichford P.L.C. Annual Report 2008 Centenary Court, Bradford Theatre Street, Norwich Regional Inland Revenue headquarters 9,000 sq ft building let to the Department with lease expiry in 2027 at an annual of Work and Pensions until 2030 at an rent of £1.8 million and RPI indexation annual rent of £164,000. throughout the lease. securely
2008 review Governance Consolidated financials Company financials Investors How we performed A responsible business 2008 in numbers 2008 in numbers Additional information The Company’s properties are occupied by a range of governmental departments including the Police, various justice departments, the DVLA, the Passport Office, and more recently, The International Criminal Court. (For a full list of tenants/occupiers, see page 64).
Minimising
Lease re-negotiations during the year 17
Uxbridge County Court, Hayes Freehold modern office building fitted out as courts occupied by Uxbridge County Court. Let until 2018 at an annual rent of £180,000.
Wichford P.L.C. Annual Report 2008 This page: The Hague, Netherlands During the year, the Company completed the acquisition of Haagse Veste1 in The Hague, Netherlands. The building is occupied by the Royal Dutch Government for use by the International Criminal Court. It is let for a term of six years with the tenants’ option to extend for a further four years. The initial rent is €2.1 million and is indexed to 100 per cent of the Dutch CPI on a yearly basis. risk
2008 review Governance Consolidated financials Company financials Investors How we performed A responsible business 2008 in numbers 2008 in numbers Additional information Highlights
Trading Operations Profit after tax 04 (£3.0m) 05 06 £7.8m £10.3m 07 £11.4m 2007: £11.4m 08 £10.3m
Total loss after tax ( £130.4m) 2007: (£9.8m)
Trading Operations earnings per share 04 (6.51p) 05 06 8.06p 7.77p 07 9.70p 2007: 9.70p 08 7.77p
Total earnings per share ( 98.23p) 2007: (£8.40p)
Net asset value per share
05 168.6p 06 217.2p 88.9p 07 208.5p 2007: 208.5p 08 88.9p
Recommended final dividend Total dividend for Number of new Continental Europe by value per share the year properties acquired of total portfolio 3.15p 7.25p 2 25% 2007: 6.2p 2007: 10.20p 2007: 13 2007: 22%
Wichford P.L.C. Annual Report 2008 Chairman’s statement 2007-08 was a challenging period for everyone with the most difficult economic conditions in years. Inevitably, the downturn had a negative impact on the value of our property portfolio. However, our income remains secure and we continue to make profits on a trading performance that proved relatively strong in Philippe de Nicolay the context of the commercial property sector. Chairman
I believe that Wichford has the strength to weather the Corporate reporting current turbulence without compromising its proven strategy: This year’s Annual Report looks very different from its to generate robust income streams by renting quality real predecessors. It reflects our commitment to achieving the estate to quality tenants. highest standards of governance and transparency for our investors and other Stakeholders. Giving them the information Financial results they need to assess our strategy and performance accurately The profit from Trading Operations for the year to 30 September is an important way of reciprocating their loyalty. 2008 was £10.3 million, down 9.6 per cent on the prior year. The value of the Group’s portfolio fell by £141.3 million. Dividend In light of the uncertainty regarding the Company’s interest Following this valuation reduction, the overall result for the year rate hedges and of prevailing economic conditions we took is a loss of £130.4 million. Net assets at 30 September 2008 a decision to reduce our total dividend for the year to were £118.0 million against £276.7 million the previous year. between 7 pence and 8 pence per share. The Directors are recommending a final dividend of 3.15 pence per share, The earnings per share (eps) from trading operations under which, with the interim dividend of 4.1 pence per share, IFRS were 7.77 pence (2007 eps: 9.70 pence). The total basic will make a total dividend of 7.25 pence per share for the eps for the year ended 30 September 2008 is a loss of year. The final dividend, if approved by Shareholders, will 98.23 pence per share compared to a loss of 8.40 pence be paid on 20 February 2009 to Shareholders on the register per share the previous year. of members at the close of business on 30 January 2009. In future years, we intend to split the dividend for the year Key events into two equal payments. On 28 December 2007, we listed on the London Stock Exchange’s Main Market, having joined the AIM in August 2004. Outlook In July 2008, we completed the acquisition of Haagse Veste1 in Our rental income remains secure despite the current The Hague, Netherlands, for a consideration of €35.0 million. economic instability. Because our tenants are all Central In August 2008, we signed an agreement with Land Securities and State Government bodies, there is a very low risk of Trillium that extended our leases on 16 properties occupied by them defaulting on rent and as our tenant turnover is so UK Central Government tenants until 2023, linking their rents to low, we have the advantage of long-term stability. the UK consumer price index (CPI). For further details of these transactions, see pages 10-11. With the likelihood of more turbulence ahead during 2009, we will be aiming to maintain this stability rather Funding than expanding our portfolio. However, I am cautiously Amongst the casualties of the credit crunch was Lehman optimistic that we will see signs of recovery the following Bros, who structured the funding vehicles that provided the year. In preparation, we are conducting a comprehensive majority of our borrowings. The principal funding through review of our financial arrangements, our portfolio and our these vehicles is unaffected by Lehman’s demise, although strategy to ensure our business is in a good position to there have been some issues with interest rate hedges, as take advantage of the recovery when it arrives. explained on page 18. Philippe de Nicolay People Chairman This is my first year as Chairman of Wichford P.L.C., 16 December 2008 having succeeded Michael Sheehan upon his retirement on 8 November 2007. Once again, I would like to thank Continental Europe by value Michael for laying such solid foundations during his term. of total portfolio I would also like to welcome three new Board members: Richard Melhuish and Mark Taylor, who were both appointed on 8 November 2007; and Wolf Cesman, who was appointed on 22 May 2008. I am certain that their 25% expertise and experience will be an invaluable asset as 2007: 22% we build on Michael’s legacy.
2008 review Governance Consolidated financials Company financials Investors How we performed A responsible business 2008 in numbers 2008 in numbers Additional information Business review Wichford’s solid trading performance in a turbulent year underlines the resilience of its business model.
Profit on Trading Operations operating review Our objective is to create sustainable Shareholder value by buying properties let to Central and State Government tenants, £10.3m to extend unexpired lease terms and re-gear the rentals to 2007: £11.4m secure reliable, index-linked rental income streams.
In the year ended 30 September 2008, amid the toughest Total value of our portfolio trading climate for years, we delivered a pre-tax profit from Trading Operations of £10.3 million on a revenue that rose £598m 26.9 per cent from £33 million in the previous 12 months to £42 million. This rise is primarily due to a full year’s contribution 2007: £679m of our European properties, which were mainly acquired towards the end of the last financial year. Total rent generated by our properties Inevitably, the unfavourable market conditions impacted on the value of Wichford’s assets despite the secure income stream £42m of our portfolio. The UK market, in particular, was affected with 2007: £33m values falling throughout the year. At 30 September 2008, the 72 properties in our UK portfolio were independently valued at £447 million compared to £526 million the previous year. Total number of properties in our portfolio Our portfolio of seven properties in Continental Europe was valued at £151 million by the end of the year. Overall, the value of our properties fell 11.1 per cent from £673 million 79 at 30 September 2007. 2007: 78 The limited number of UK disposals and acquisitions Wichford Total floor space of property in our portfolio made during the year reflects the uncertain state of the market and the scarcity of banking finance for commercial property. 341,014 sq m In total, we completed just one disposal and two acquisitions. 2007: 286,898 sq m A review of Wichford’s portfolio is on page 13 and our major investments are listed on pages 16 and 17.
Share price Overall, our portfolio performance was in line with the IPD All Property Index. However, the economic downturn had a negative impact on share prices across the commercial property sector and Wichford shares were not immune to this downward trend.
Key events Despite the economic slowdown, Wichford’s year was notable for a number of important events.
Main Market Listing On 28 December 2007, Wichford listed on the London Stock Exchange’s Main Market, having joined the AIM in August 2004. While the AIM provided our business with a strong base during our early years as a publicly quoted company, stepping up to the Main Market demonstrates Wichford’s growing maturity and confidence.
Wichford P.L.C. Annual Report 2008 10 1
Lease re-negotiations During the year, we reached agreement to extend the leases on 17 properties occupied by UK Central Government tenants until 2023, linking their rents to the UK consumer price index (CPI). Such deals are attractive to both parties with the tenants obtaining security of tenure and Wichford security of income.
Hague acquisition In July 2008, Wichford completed the acquisition of Haagse Veste1 in The Hague, Netherlands, for a consideration of €35.0 million. The building is leased to the Royal Dutch Government for use by the International Criminal Court. It provides a total net lettable space of approximately 12,350 sq m plus 155 car parking spaces. It is let for a term of six years from July 2008 with a tenant’s option to extend 2 for a further four years. The initial rent is €2.1 million and is indexed to the Dutch CPI on a yearly basis. The tenant 1. Derby road, grays undertook a substantial fit-out programme prior to taking Freehold property occupied by Job Centre occupancy of the building. Plus. Let until 2003 with a break in 2018. Annual rent of £145,000. Lloyds TSB loan In May 2008, Wichford signed a new three-year loan deal with 2. Foliot HOUSE, Plymouth Lloyds TSB Bank plc for £58.5 million. Given the shortage of Freehold office buildings occupied by the Learning Schools Council, Lloyds bank bank finance for the commercial property sector, this deal and the Devon and Cornwall Police represents a strong vote of confidence in the Company. Authority. Let until 2015 at an annual rent of £244,500. Corovest In May 2008, Corovest Fund Managers (UK) Limited, a fund management group with a strong property background, acquired 50 per cent of Wichford’s Property Adviser, Wichford Property Management Limited (WPML), formerly held by Laird Capital Limited. J O Hambro Capital Management Limited, one of the founders of Wichford, retains its 50 per cent interest in WPML. The breadth and depth of Corovest’s experience in the property market will further reinforce the strength of WPML’s management capability.
3
3. Great Western House, Birkenhead Part freehold, part leasehold property occupied by the Child Support Agency. Let until 2023 with a break in 2018. Annual rent of £780,000.
2008 review Governance Consolidated financials Company financials Investors 11 How we performed A responsible business 2008 in numbers 2008 in numbers Additional information Business review continued
Market commentary Overview Thanks to the quality of its tenants, Wichford is strongly positioned to weather the current economic turmoil in the UK and abroad. Focusing on Central and State Government occupiers means our business faces a very low risk of its 1 tenants defaulting on rent. At the same time, we enjoy the long-term stability that comes with low tenant turnover.
With the UK Government taking active steps to mitigate the impact of the economic downturn, Wichford’s rental income is strongly protected. Public use of many buildings in our portfolio is likely to remain stable as the economy continues to slow down. Public use of some properties, such as Government job centres, will probably increase if forecasts of rising unemployment prove accurate.
UK property market Since it began trading in the UK, our business had enjoyed highly favourable market conditions, with strong investment demand, low interest rates and easily accessible bank finance. 2 In Autumn 2007, these conditions changed dramatically and 1. Clifton House, Peterborough have continued to deteriorate ever since. The downturn began Freehold building occupied by Job Centre with the collapse of the US sub-prime market, which triggered Plus. Let until 2023 with a break in 2018. a global banking crisis that has severely restricted the Annual rent of £810,800. availability of bank finance for commercial property and virtually closed the securitisation market. This, in turn, has 2. CYppa court, chippenham seen a significant rise in the yields that investors demand for Freehold property. Occupied by Job commercial real estate and a consequent fall in values. Centre Plus. Let until 2023 with a break in 2018. Annual rent of £187,000. Due to concern over property values and shortage of credit, banks are still reluctant to lend money to finance commercial property transactions which in turn has slowed transaction volumes in the market. Furthermore, banks are charging increased margins on loans, reducing the impact of interest rate cuts.
Despite the quality of our tenants and the reliability of our rental streams, the downturn has inevitably impacted on our growth plans. For example, the squeeze on liquidity makes it difficult to take advantage of a buyers’ market by acquiring new properties at competitive prices.
Wichford P.L.C. Annual Report 2008 12 Nevertheless, we remain optimistic that market conditions will improve in time and we are working hard to ensure that 3 we are positioned to take full advantage of the upturn when it comes. 3. Trentside, Nottingham Freehold property. Let until 2018 to The European property market Environment Agency at an annual rent of £452,500. Market trends across Continental Europe are between three and six months behind the UK. Here, the downward correction in property values began at the end of 2007 and continued through 2008. By the middle of the year, Continental Europe was still attracting capital, but from a falling number of investors. However, the situation has deteriorated further within the last two months with little market activity now.
Portfolio overview Indexation Index-linking as many of its tenancies as possible is core to Wichford’s business model. By the end of the year, 61 per cent of our rents were either fixed or subject to indexation compared to 45 per cent at the end of the previous year. 17 properties owned by the Group benefited from lease extensions or Split of index-linked properties renewals over the last 12 months and were transferred from the Active Portfolio to the Core Portfolio. This continued the A A Open market rent review 39.0% Company’s successful Active Portfolio strategy. Across the E B UK cpi 15.1% portfolio, there are 19 principal tenants: 14 in the UK, two C european cpi 24.0% in France, two in Germany and one in the Netherlands. All D D uk rpi 11.0% tenants are Central or State Government bodies. A list of the E uk fixed increases 10.9% Company’s properties and its tenants is given on page 64.
At 30 September 2008, Wichford’s portfolio comprised B 79 properties, with 72 UK properties independently valued C at £447 million; and seven European properties independently valued at £151 million.
Of these, one is in France, five are in Germany and one is in The Netherlands. Rental income now index-linked 61.1% 2007: 45%
2008 review Governance Consolidated financials Company financials Investors 13 How we performed A responsible business 2008 in numbers 2008 in numbers Additional information Business review continued
Disposals In October 2007, we completed the sale of Archway Tower in Islington, London, for £11.0 million, reflecting a satisfactory profit over a book cost of £10.2 million and over the September 2007 valuation of £9.5 million. Significantly, this transaction was completed just as the market was beginning to weaken.
Acquisitions During the year, we acquired two properties for a total of £42 million. The first acquisition, completed on 30 May 2008, involved St Anne House, Croydon, for a total cost of £15.25 million. The second acquisition, completed in July 2008, was Haagse Veste1 in The Hague, Netherlands for a consideration 1 of €35.0 million.
1. The Hague, Netherlands The Key Events section (pages 10-11) includes more details For description, See page 7. about the acquisition of this flagship building, which was fitted out by the Dutch Government to a significantly higher specification than comparable office buildings in The Hague.
UK Core Portfolio Wichford’s Core Portfolio includes most of our assets and generates most of its income. It is made up of properties with lease terms of more than seven years until expiry or a possible lease break date at the tenant’s option.
Key facts (at 30 September 2008) Properties 49 Total area (1,885,307 sq ft) 175,151 sq m Gross asset value £322.0 million Annualised rental income £22.6 million Average rental yield by area (£12.19 per sq ft) £131.18 per sq m Net initial yield on valuation 6.65 per cent Average term of unexpired leases 10.16 years Property rentals index-linked 63.2 per cent
Weighted average unexpired lease term in our Core Portfolio 10.16 years 2007: 10.6 years
Wichford P.L.C. Annual Report 2008 14 2
UK Active Portfolio Wichford’s Active Portfolio is made up of properties with lease terms of less than seven years to expiry or a possible lease break date at the tenant’s option. Here, our focus is on individual properties where we can enhance value through active asset management, including lease renewals.
Key facts (at 30 September 2008) Properties 23 Total area (765,918 sq ft) 71,156 sq m Gross asset value £124.6 million Annualised rental income £10.4 million Average rental yield by area (£13.61 per sq ft) £146.45 per sq m 3 Net initial yield on valuation 7.86 per cent Average term of unexpired leases 3.77 years 2. Waterside Court, Leeds Property rentals index-linked 14.4 per cent Freehold property. Occupied by The Home Office Immigration and Nationality Continental European Portfolio Directorate. Let until 2015 with a break in 2010. Annual rent of £527,000. By the end of the year, our Continental European Portfolio made up 25 per cent of our total assets. Covering France, 3. Castle House, Leeds Germany and The Netherlands, this portfolio comprises Property with a long leasehold expiry in seven properties, all of them occupied by Central and 2109. Occupied by Her Majesty’s Revenue State Government bodies. Its most recent addition is the and Customs. Let until 2023 at an annual Haagse Veste1 building in The Hague. Let to the Royal Dutch rent of £1.25 million. Government, this flagship property is home to the International Criminal Court. Property Portfolio that is in Key facts (at 30 September 2008) Continental Europe Properties 7 Total area (1,024,551 sq ft) 95,181 sq m Gross asset value £151.3 million 25% Annualised rental income £9.8 million 2007: 22% Average rental yield by area (£9.57 per sq ft) £102.96 per sq m Net initial yield on valuation 6.2 per cent Average term of unexpired leases 12.59 years Property rentals index-linked 100 per cent
2008 review Governance Consolidated financials Company financials Investors 15 How we performed A responsible business 2008 in numbers 2008 in numbers Additional information Business review continued 10 largest investments
Valuation 1. Justizzentrum, Halle, Germany The UK property portfolio has been valued for the Group Freehold Courts and offices built in 1997 and totalling 34,689 sq m by Atisreal Limited and the entire Continental Europe Let to Land Sachsen – Anhalt until June 2020. property portfolio by DTZ Eurexi, acting as independent Current rent £2.6 million per annum. CPI indexation. property valuers. Valuation: £35.8m
2. Weiner Platz, Dresden, Germany Freehold 2004 built office of 17,449 sq m Let to VBG Verwaltungs – Berufsgenossenschaft until April 2024. Current rent £2.2 million per annum. CPI indexation. Valuation: £32.8m
3. Martin Luther Strasse, Stuttgart, Germany Freehold 2005 built office of 12,455 sq m Let to VBG Verwaltungs – Berufsgenossenschaft until January 2025. Current rent £1.7 million per annum. CPI indexation. Valuation: £26.7m
4. Centenary Court, Bradford Freehold 1990s built office of 9,743.2 sq ft Occupied by Inland Revenue until April 2027 at £1.4 million per annum. Break 2021. RPI indexation. Valuation: £25.5m
5. Haagse Veste1, The Hague, The Netherlands Freehold 2008 built office building of 12,878 sq m Occupied by the Royal Dutch Government for use by the International Criminal Court. Let for a term of six years with the tenant’s option to extend for a further four years. Initial rent of £1.7 million. CPI Indexation. Valuation: £23.3m
THIS PAGE: Unicorn house, bromley, UK
Wichford P.L.C. Annual Report 2008 16 6. Castle House, Leeds Strength and stability Leasehold 1980s built office of 7,270.8 sq m Let to Secretary of State for the Environment until 2023. With the global economic downturn Current rent £1.25 million. RPI indexation. likely to get worse before improving, our Valuation: strongest defence is that all our tenants/ occupiers in the UK and Continental £19.5m Europe are Government departments.
7. Woodlands, Bedford Freehold 1985 built office of 10,415.7 sq m Majority occupied by Highways Agency until August 2020 Current rent £1.4 million. Fixed uplift at rent review. Valuation: £16.6m
8. Unicorn House, Bromley Freehold 1980s built office of 5,365.2 sq m Let to Secretary of State for the Environment until 2010 and then to Trillium until March 2022 with a break in 2018. Current rent £1 million. RPI indexation. Originally part of the Active Portfolio. Valuation: £16.2m
9. Pilsworth Road, Rochdale Freehold 2006 built office and warehouse complex of 9,172.8 sq m Let to the UK Government until 2021 with a break at 2016. Current rent £1.1 million per annum. Valuation: £15.4m
10. St Anne House, Croydon Freehold 1960s built office building of 6,758 sq m Let to the Home Office until 2017 with a break in 2012. Current rent of £1.1 million. Valuation: £15.2m
2008 review Governance Consolidated financials Company financials Investors 17 How we performed A responsible business 2008 in numbers 2008 in numbers Additional information Business review continued
financial review Debt Credit market conditions became increasingly challenging over the second half of the financial year and new lending for investment into property has contracted sharply. Where credit is available, market terms now reflect both higher margins and lower loan-to-value ratios. In light of current market conditions the Company has taken the opportunity to engage independent advisers to review all its financial arrangements.
Lehman Brothers Lehman Brothers had originally provided the business with loans totalling £344 million which were subsequently 1 securitised into three CMBS vehicles known as Windermere VIII, Windermere XI and Windermere XIV (“Windermere”). On 1. Sidlaw House, Dundee completion of the securitisation, Lehman Brothers ceased to Feuhold property. Occupied by Her be the lender and the securitisation conduits took over this Majesty’s Revenue and Customs. Let until role. However, Lehman Brothers Special Finance, Inc. (LBSF) 2017 at an annual rent of £788,000. remained counter-party to the interest rate swaps with the CMBS vehicles from which the Group benefits and treats as hedging arrangements, and these arrangements were guaranteed by Lehman Brothers International (Europe) (“LBI”). LBI remained as the agent and security agent to the CMBS vehicles, although in practice these responsibilities were discharged by Hatfield Philips.
Following Lehman Brothers Holdings Inc. being placed into Chapter 11 protection and LBI into administration, the Loan Facilities at 30 September 2008 Company made an announcement on the 7th of October 2008 effective which emphasised that these events did not constitute an Interest Rate Key Facility Lender £m Maturity Sept 2008 Covenants event of default on the loans. This announcement highlighted Delta Windermere XI October also the absence of loan-to-value covenants. Notwithstanding CMBS Ltd. 114.6 2012* 5.72% ICR the fact that it was not itself in administration, the potential Gamma Windermere VIII October inability of LBSF to perform as counterparty to these hedging CMBS Ltd. 199.7 2012* 5.56% ICR arrangements was also identified. As previously stated, this Hague SNS Property July may have implications for the interest rate setting mechanism Finance 17.5 2014 6.09% ICR and the interest rate hedges that have been put in place by the Halle Windermere XIV April Windermere vehicles. CMBS Ltd. 29.5 2014 5.05% ICR January ICR, The Company has been notified, and it is expected that, VBG1 talisman 3 55.9 2010 4.27% LTV until such time as the future hedging arrangements for the Windermere vehicles are resolved, the Company will continue April ICR, to pay interest at the pre-existing fixed rate profiles. The VBG2 talisman 4 44.6 2011 5.03% LTV Company has appointed NM Rothschild & Sons’ specialist Zeta** Lloyds TSB 31.0 May 2011 6.62% LTV debt team to advise on this matter. Total 492.8
* Subject to a WAULT of 7.5 years from October 2012, but calculated as at October 2010. ** Zeta swap rate applies to £26m, the remainder forms part of a short term VAT facility which is un-hedged.
Wichford P.L.C. Annual Report 2008 18 Re-basing our dividend shown in Note 11. The principle reason for this decline is due In the same statement, we announced that we intended to to the values assigned to the Group’s properties by the external lower our annual dividend to between 7 pence and 8 pence valuers as described in the Operating Review. per share. This year, the Directors are recommending a final dividend of 3.15 pence per share, which, with the interim Trade and other receivables dividend of 4.1 pence, will make a total dividend of 7.25 pence The total at 30 September 2008 was £31.3 million for the year. When we listed on the AIM, we pledged to pay (2007: £18.9 million) with further detail shown in Note 12. an annual dividend. Although the business has consistently The major increase is due to the accrued rental incentives fulfilled this pledge, limited rental growth meant we effectively associated with the 17 lease re-negotiations during the year; financed our dividend increases by profits realised from selling these balances will be amortised over the life of the new properties. With 61 per cent of our rentals now indexed-linked, lease terms. we are now in a position to cover our dividend from recurring, secure rental income. As a result, the dividend level now has a Borrowings more sustainable base. During the year the Group took out two new facilities, referred to as the Zeta and Hague facilities. These have been the Rental Growth main contributions to the increase in borrowings to a total Open market rents are likely to remain static for some time. of £490.5 million (2007: £424.6 million). In response, we are taking steps to index-link rents and re-gear our leases wherever possible. MANAGING RISK For a review of the principal risks and uncertainties facing Administrative Expenses the Company, please see page 22. These totalled £7.4 million (2007: £3.8 million). The cost of the Company moving from AIM to a full listing was £0.7 million LOOKING AHEAD and this has been shown in the ‘Other Items’ column of the While the current economic turbulence continues, we will trading statement. continue to play to the strengths that underpin the portfolio growth we have achieved to date. At the same time, we The change in the level of charge between 2007 and the current realise that standing still in the current climate is not an option. year is partially due to the 2007 charge benefiting from a credit Given the profound and permanent changes that our sector of £1.5 million following the reversal of a provision for accrued is undergoing, it is clear that we must evolve further to ensure performance fees, made in earlier years, whilst the current that we are in a position to capitalise on emerging opportunities year charge includes the full year expenses of the French once the global economy begins to recover. and German investments, the first of which was acquired at the end of June 2007. With the immediate focus on stability and security rather than growth, this means working with our tenants, partners and Further details of the Group’s administrative expenses are other stakeholders to sustain Shareholder value by refining shown in Note 5 to the accounts. the proven business model that we first brought to the market.
Finance Cost Achieving stability, preparing to grow The total finance cost for the year was £25.8 million We derive two important strengths from this business model: (2007: £19.7 million). The majority of the increase results from high quality Central and State Government tenants paying the inclusion in this financial year of a full year’s finance cost reliable rental revenue, most of it index-linked. With the focus associated with the investments in Continental Europe made on achieving stability, we will continue to derive Shareholder during the last four months of the previous financial year, value from these strengths, which present a strong defence together with the finance cost of the new Zeta and Hague against economic turbulence. facilities taken out from May onwards. In parallel, we plan to undertake a comprehensive review of Investment Properties our financing structure while tailoring our strategy to map a The carrying cost of the investment properties at 30 September clear path towards renewed growth once recovery begins. 2008 was £587.0 million (2007: £663.6 million) with further detail
2008 review Governance Consolidated financials Company financials Investors 19 How we performed A responsible business 2008 in numbers 2008 in numbers Additional information Directors
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05
06 07
Wichford P.L.C. Annual Report 2008 20 01. Philippe de Nicolay (53) 05. Mark Taylor (57) Non-Executive Director Non-Executive Director Wichford remains a (Chairman) (Chairman of the Audit Committee) dynamic, progressive and Philippe de Nicolay is a General Partner of Rothschild Mark Taylor is a chartered accountant with almost 30 et Cie Banque and was a director of Rothschild Asset years financial and general management experience in growing business, lead Management (London) (1997-2000). He was a director of the construction, property development and investment Insight Investment Management (Global) (1997-2000) and sectors. He was finance director and company secretary by a team that is solid, Chief Operating Officer of Rothschild Asset Management of Workspace Group plc for 12 years. Prior to this, he spent International Holdings BV (1997-2000). 17 years with John Laing, where he was both joint managing dependable, experienced, director of John Laing Developments Limited and group 02. Ita McArdle (44) investment director. Following this, Mark joined the Ministry Non-Executive Director of Defence for a short period to assist in the privatisation of specialist, focused and risk (Senior Independent Director) its married quarters’ estate. He qualified as an accountant in 1972, being admitted as a Fellow of the ICAEW in 1975. averse. Above all, it has the Ita McArdle qualified as a Manx Advocate in 1995 and became a partner of Simcocks Advocates in 1996. She 06. Richard Melhuish (61) strength and the strategy practised in corporate commercial law including financial Non-Executive Director services for both private and corporate clients before retiring (Member of the Audit Committee) to weather the current on 30 April 2008 to set up her own consultancy. She sits on the boards of a number of public companies, collective Richard Melhuish is a chartered surveyor with over 35 years economic downturn. investment schemes together with some private companies experience in property investment and asset management. in conjunction with clients. Her directorships include He was previously managing director and co-founder of Bulgarian Land Development PLC, National Grid Insurance Chancerygate Asset Management Limited. Since 2006 he Company (Isle of Man) Limited and the Premier Options has been a director of Chancerygate (IOM) Limited where he Fund PLC. Ms McArdle is a member of the Isle of Man Law is responsible for strategy, portfolio performance, acquiring Society, the Law Society of England and Wales and the and selling property. Prior to this Richard worked from 1978 International Bar Association. Ms McArdle resides in the at Liverpool Victoria Friendly Society Limited where, as head Isle of Man. of property from 1993, he was responsible for the property element of both the Life Fund and the Staff Pension Fund. 03. Hugh Ward (55) He was elected a Fellow of the RICS in 1989. Non-Executive Director (Member of the Audit Committee) 07. Wolf Cesman (66) Non-Executive Director Hugh Ward has worked in the investment services industry since 1973 during which time he has held senior executive Wolf Cesman is a Chartered Accountant with over 40 positions with Schroders, Capital House and more recently years experience in property asset management and INVESCO. During his time at INVESCO, he was Chief development. Executive Officer of INVESCO Group’s UK and offshore business and was a member of the AMVESCAP Group He is a director and major shareholder of Madison executive board. He is currently a non-executive director of Property Fund Managers, listed on the JSE, which is the a number of companies within the financial services sector. asset manager of three JSE listed property funds. Wolf is Member of the Audit Committee. a director of CIREF Limited, listed on AIM.
04. David Harrel (60) Prior to the establishment of Madison, Wolf was an Non-ExeCutive Director executive of Liberty Life for 24 years the last 17 as CEO of its property business. David Harrel was a founding Partner of SJ Berwin LLP in 1982 and was the Senior Partner of the firm from 1992 to 2006. He specialised in corporate dispute resolution and employment and financial services related matters. He is now a consultant to SJ Berwin LLP and his directorships include, Non-Executive Director of Rathbones Plc and Chairman of The Kyte Group Limited.
2008 review Governance Consolidated financials Company financials Investors 21 How we performed A responsible business 2008 in numbers 2008 in numbers Additional information Report of the Directors
The Directors present their report and the audited financial statements for the year ended 30 September 2008.
Results and dividends The Group loss for the year after taxation amounted to £130.4 million (2007: loss of £9.8 million). The Directors recommend the declaration of a final dividend of 3.15 pence per share and accordingly a resolution will be put to the Annual General Meeting on 29 January 2009 to declare a final dividend in respect of the year ended 30 September 2008 payable on 20 February 2009 to those Shareholders on the register at the close of business on 30 January 2009.
Principal activity The principal activity of the Company and its subsidiaries is the generation of rental income and capital growth through investment in properties across the UK and Continental Europe, which are occupied by Central or State Government bodies.
Review of the business and future activities The Chairman’s Statement on page 9, and the Business Review on pages 10 to 19, contain a review of the business and an indication of future developments.
Principal risks and uncertainties facing the Company The following identifies what the Company believes to be its principal risks and the ways in which it manages and controls these risks:
(i) The inability to identify additional return enhancing properties – the Group manages this process by thoroughly evaluating each acquisition introduced to it by the Property Manager or others;
(ii) The risk of tenants exercising their break options or leases not being renewed at the end of their term, both resulting in properties lying vacant – this risk is managed by the Group aiming to keep the Active Portfolio at around 20 per cent of the whole portfolio;
(iii) The risk of a general downturn in the property market negatively impacting on the valuation of individual properties – whilst the Group cannot influence the property market, it has negotiated with its lenders that, on most of its facilities, there is no continuing loan to value covenant and therefore there will be no requirement to repay any part of the UK loans as a result of any such downturn;
(iv) The risk of operating in a complex regulatory and legislative environment – the Group manages these risks by appointing managers, administrators and advisers, who are familiar with regulatory requirements, to ensure that the activities of the Group are compliant with all applicable regulations.
The financial risks and the ways in which the Group manages them are listed below.
(i) Interest Rate Risk The Group finances its operations through equity, retained profits and bank borrowings. The Group then uses interest rate derivatives to manage its exposure to interest rate fluctuations. At the year end all of the Group’s borrowings were at fixed rates after taking account of interest rate swaps (see note 17 of the financial statements).
(ii) Debt Financing The bank borrowings are secured by fixed and floating charges over the assets and income streams of the Company and the Group. The principal covenants relating to these borrowings are an interest cover ratio and a weighted average unexpired lease term but there is no loan to value covenant on most of its facilities.
(iii) Exchange Rate Risk As the Group acquires properties in Continental Europe, there is now the additional risk of movements in exchange rates – the Group minimises the initial exposure to foreign currency exchange rate movements by matching, as much as possible, the revenue streams (net of interest) and acquisition costs in the same currency.
Company’s objectives, policies and strategies in respect of financial instruments The Group’s treasury operations are co-ordinated and managed in accordance with policies and procedures approved by the Board. They are designed to mitigate the financial risks faced by the Group, which primarily relate to funding and interest rate exposure.
The Group’s financial instruments comprise bank borrowings, interest rate swaps, interest rate collars, and other items such as trade debtors and creditors that arise directly from its operations.
Wichford P.L.C. Annual Report 2008 22 Further details of financial instruments are given in note 17 to the financial statements. The Board reviews and agrees policies for managing financial risks, which are summarised above.
Share capital As at 30 September 2008, the Company had 132,761,948 Ordinary Shares of 10 pence each in issue.
On 30 September 2008, the middle market quotation per Ordinary Share was 70 pence. The comparable figure at 28 September 2007 was 152.25 pence.
Notified shareholdings As at the date of this report, the following interests in the Ordinary Shares of the Company of 3 per cent and above of the issued share capital had been notified to the Company:
% of Issued No. of shares Share Capital The REAL Co. (Jersey) Holdings Limited 13,300,000 10.02 Jupiter Asset Management Limited 12,427,800 9.37 CIREF Limited and entities associated with its investment manager, Corovest Fund Managers Limited 12,205,308 9.19 AXA S.A. 10,385,688 7.82 Rathbone Brothers Plc 7,807,680 5.88 New Star Asset Management Limited 7,572,441 5.70 Rensburg Fund Management Limited 6,368,300 4.80 F&C Asset Management Plc 6,234,973 4.70 Blackrock, Inc. 6,046,295 4.55 J O Hambro Capital Management Limited 5,991,430 4.51 Legal & General Group Plc 5,409,627 4.07 J O Hambro Investment Management Limited 5,192,406 3.91
Directors Biographical details for all of the Company’s Directors can be found on page 21.
Michael Sheehan retired as Chairman and a Director of the Company on 8 November 2007. Philippe de Nicolay has replaced him as Chairman.
Wolf Cesman was appointed a Director of the Company on 22 May 2008.
According to Article 95 of the Articles of Association of the Company at each Annual General Meeting, one third of the Directors shall retire from office by rotation. The Directors to retire by rotation at the forthcoming Annual General Meeting are H R Ward and I M McArdle. The Director to retire in accordance with Article 90 of the Articles of Association and seeking re-election, having been appointed during the year, is W E Cesman.
Directors’ interests The interests of the Directors in the share capital of the Company (all of which are beneficial unless otherwise stated) as at 30 September 2008 are set out below:
Number of Shares Number of Shares Director as at 30 Sept 2008 as at 30 Sept 2007 P E J F de Nicolay 30,000 – I M McArdle 15,000 5,000 H R Ward 10,000 10,000 D T D Harrel 43,174 – R M Melhuish 10,000 – R M Taylor – – W E Cesman – –
2008 review Governance Consolidated financials Company financials Investors 23 How we performed A responsible business 2008 in numbers 2008 in numbers Additional information Report of the Directors continued
These interests remain unchanged as at the date of this report.
Disclosure of information to the Independent Auditor So far as the Directors are aware, there is no relevant audit information of which the Company’s Independent Auditor, in connection with the preparation of its report is unaware and each Director has taken all reasonable steps to make himself aware of any relevant audit information and to establish that the Company’s Independent Auditor is aware of that information.
Annual General Meeting The Annual General Meeting of the Company will be held on 29 January 2009 at midday at the offices of Simcocks Trust Limited.
The Ordinary Business comprises receipt of the Directors’ Report and audited financial statements for the year ended 30 September 2008; approval of the Directors’ Remuneration Report; the declaration of a final dividend; the re-appointment of three Directors; the re-appointment of Grant Thornton as Independent Auditor and authorisation of the Directors to determine the Independent Auditor’s remuneration. Resolutions 1 to 7 deal with these matters.
The Special Business comprises the authorisation of the Directors to allot Ordinary Shares up to a maximum nominal amount of £4,425,398 during the period to expire on the date of the Annual General Meeting to be held in 2010. The Special Business also comprises the authorisation of the Directors to make market purchases (within the meaning of Section 13 of the Isle of Man Companies Act 1992) of Ordinary Shares, provided that:
(a) the maximum number of Ordinary Shares authorised to be acquired is 10.00 per cent of the issued Ordinary Shares at the date of this report;
(b) the minimum price which may be paid for any such Ordinary Share is 10 pence;
(c) the maximum price which may be paid for any such Ordinary Share is the amount equivalent to 105 per cent of the arithmetical average of the middle market quotations (as derived from the Daily Official List of the London Stock Exchange plc) for the five business days immediately preceding the day on which the Ordinary Share is purchased; and
(d) the authority shall expire on the date of the Annual General Meeting of the Company to be held in 2010.
The current authorities for the Directors to allot shares and to make market purchases expire on the date of the 2009 Annual General Meeting, to be held on 29 January 2009. Resolutions 8 and 9 deal with these matters.
The next item of Special Business will renew the Directors’ authority to disapply pre-emption rights. The current authority will expire on the date of the 2009 Annual General Meeting, to be held on 29 January 2009. Resolution 10 will deal with this matter.
Resolution 11, a Special Resolution, will authorise the Directors to cancel £50 million of the Company’s Share Premium account, subject to the confirmation of the court, in order to provide further flexibility for the Company’s financial structure.
Resolution 12, also a Special Resolution, will be put to the meeting recommending that the Company’s Articles of Association are amended in relation to the borrowing powers of the Company.
The Notice of the Annual General Meeting and the resolutions to be put to the meeting are included as a separate document which you should have received with the Annual Report and financial statements.
Creditor payment policy It is the Group policy to settle suppliers’ accounts in accordance with their individual terms of business. As at 30 September 2008, the Company had £0.1 million of trade creditors representing 15 creditor days (2007: £1.4 million of trade creditors representing 25 creditor days).
By order of the Board Anne Couper Woods Company Secretary 16 December 2008
Wichford P.L.C. Annual Report 2008 24 Statement of Directors’ responsibilities
Isle of Man 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 the Group and of the profit or loss of the Group for that year. In preparing these financial statements, the Directors have:
• selected suitable accounting policies and applied them consistently;
• made judgements and estimates that are reasonable and prudent;
• followed applicable International Financial Reporting Standards (“IFRS”); and
• prepared the financial statements 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 Group and to enable them to ensure that the financial statements comply with the Isle of Man Companies Acts 1931 to 2004 (as amended). They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
2008 review Governance Consolidated financials Company financials Investors 25 How we performed A responsible business 2008 in numbers 2008 in numbers Additional information Corporate governance statement
Combined code The Board supports the principles of good governance as set out in the Combined Code 2006. The Board considers that it has complied with all of the provisions of the Combined Code, save as identified and explained below.
The Board The Board currently comprises the Chairman and six Non-Executive Directors, all of whom are independent from the management team of WPML. The Board is chaired by Philippe de Nicolay, who was appointed as Chairman on 8 November 2007 upon the retirement of Michael Sheehan. Philippe de Nicolay, Ita McArdle and Hugh Ward were all appointed as Directors of the Company on 28 June 2004. David Harrel was appointed on 11 July 2007; Mark Taylor and Richard Melhuish were appointed on 8 November 2007 and Wolf Cesman was appointed on 22 May 2008.
Mr Cesman is a director of CIREF Limited, the AIM listed property investment company managed by Corovest Fund Managers, which together with other members of the Corovest Group currently has a shareholding in Wichford P.L.C. of 9.19%.
Corovest Fund Managers (UK) Limited, a UK based property fund management company, holds a 50% interest in the Company’s Property Adviser, Wichford Property Management Limited.
The Board appointed Ita McArdle to be the Senior Independent Director during the year. As recommended by the Combined Code, Ita McArdle is available to Shareholders where contact with the Chairman regarding a Company matter is inappropriate.
The Board is responsible for setting the overall Group strategy and investment policy, monitoring Group performance and authorising all property acquisitions and disposals. To assist it in discharging these responsibilities, it receives regular financial and portfolio reports from WPML (“the Property Adviser”). It also receives updates on regulatory issues and corporate governance rules and guidelines on a regular basis from the Company Secretary.
The Board meets at least four times per year and has adopted a schedule of matters reserved for its decision.
The table below lists the number of Board and Committee meetings attended by each Director. During the year ended 30 September 2008, there were in total 14 Board Meetings and 4 Audit Committee Meetings as well as many meetings of a Committee of the Board to deal with interim decisions between Board Meetings.
Board meetings Audit Committee Director attended meetings attended P E J F de Nicolay 8 n/a I M McArdle 11 n/a H R Ward 5 4 D T D Harrel 4 n/a R M Melhuish 8 3 R M Taylor 6 4 W E Cesman 1 n/a
The Board does not consider it necessary to establish a separate Remuneration Committee as it has no Executive Directors. The Board, as a whole, being Non-Executive, will constitute a Nomination Committee.
The Chairman and other members of the Board recommend that the Directors retiring be re-elected at the forthcoming Annual General Meeting. All Directors are subject to an annual performance evaluation, which is an ongoing exercise. As part of this evaluation, the Chairman confirms that the retiring Directors continue to demonstrate commitment to their role and responsibly fulfil their functions.
The Audit Committee Mark Taylor chairs the Audit Committee (“the Committee”) which also comprises Hugh Ward and Richard Melhuish. The Board is satisfied that Mark Taylor has recent and relevant financial experience for the purposes of paragraph C.3.1 of the Combined Code.
The Committee met four times during the year.
The principal duties of the Committee are to review the half-yearly and annual financial statements before their submission to the Board and to consider any matters raised by the Company’s Independent Auditor. The Committee also reviews the independence and objectivity of the Independent Auditor, accounting policies, internal controls, the management contract and the appointment and remuneration of the Independent Auditor.
Wichford P.L.C. Annual Report 2008 26 The Committee plays an important role in the appraisal and supervision of key aspects of the Group’s business, including financial reporting and internal controls. The Committee meets representatives of the Property Adviser who report as to the proper conduct of business in accordance with the regulatory environment in which both the Group and the Property Adviser operate. The Group’s external Independent Auditor also attends the Committee at its request, at least once a year, and reports on its work procedures, the quality of the Group’s accounting procedures and its findings in relation to the Group’s statutory accounts.
During the period, the Committee reviewed the effectiveness and independence of the Group’s Independent Auditor and the outcome of the review was satisfactory. The Committee has in place a policy on non-audit services. Services that are of a compliance nature or that are closely related to the audit are pre-approved. All other services shall be considered on a case-by-case basis by the Committee.
Remuneration Details of Directors’ Remuneration can be found in the Directors’ Remuneration Report on page 29.
Property Adviser During the period, WPML acted as Property Adviser to the Group under a Property Adviser’s Agreement and received from the Group an annual fee of 0.6 per cent of the gross asset value of the Group (excluding cash) and 0.3 per cent of the Group’s cash balances. The fee is payable quarterly in arrears. Under a revised Property Adviser’s Agreement dated 19 December 2007, the agreement between the Company and WPML can be terminated by either party giving the other not less than three years’ written notice.
WPML is also entitled to receive a performance fee calculated as 20 per cent of the amount by which the total shareholder return (share price movement plus dividends) exceeds 10 per cent for the immediately preceding financial year. This fee will be settled by the issue of further shares in the Company only if the annualised shareholder return in the succeeding two year period has exceeded 10 per cent and the Company’s net asset value per share is greater than that pertaining at the time of the Company’s original flotation.
The Board keeps under review the performance of WPML as Property Adviser to the Group. In the opinion of the Directors the continuing appointment of WPML on the agreed terms is in the best interests of the Shareholders as a whole. The Directors believe that WPML is well resourced to act as Property Adviser to the Group and well equipped to identify attractive investment opportunities.
Property Manager During the period under review, BCM, as the Property Manager, provided investment advisory and management services to the Group under the Property Manager’s Agreement. In consideration of BCM providing these services, it receives a fee equivalent to 1 per cent plus VAT of the contract price or sale proceeds arising on the acquisition or disposal of properties, plus expenses. However, if BCM is not the introducer of the property in question, the fee reduces to 0.5 per cent plus VAT. It also receives an annual fee equivalent to 0.8 per cent plus VAT of the annual occupational rents received. The agreement between the Group and BCM can be terminated by either party giving the other 12 months’ notice of termination.
Shareholder relations The Group issues the half-yearly and annual financial statements to each of its shareholders. In addition, all stock exchange announcements can be found on the Company’s website, www.wichford.com, on the “Regulatory News” page within the Investors section.
The Property Adviser and the Property Manager have regular meetings with institutional shareholders. The Board supports the principle that the Annual General Meeting be used to communicate with Shareholders and encourages them to attend and participate.
Independent professional advice There is an agreed procedure for the Directors, in the furtherance of their duties, to take independent professional advice at the Company’s expense, having first notified the Chairman.
2008 review Governance Consolidated financials Company financials Investors 27 How we performed A responsible business 2008 in numbers 2008 in numbers Additional information Corporate governance statement continued
Accountability and audit The Board’s responsibilities with regard to the financial statements are set out on page 25. The Independent Auditor’s Report is given on pages 30 and 31.
Internal control The Board recognises its ultimate responsibility for the Group’s system of internal control and has established procedures for identifying, evaluating and managing risks that the Group is exposed to and has identified risk management controls in the key areas of business objectives, accounting, compliance, operations and secretarial as areas for the extended review. These procedures have operated throughout the year and up to the date of approval of the Annual Report and audited financial statements. It has, however, to be understood that systems of internal control, however carefully designed, operated and supervised, can provide only reasonable and not absolute assurance against material misstatement or loss.
A description of the Group’s operations and the strategy which it employs to maximise returns whilst minimising risks can be found on page 22.
The Group does not have its own internal audit function but places reliance on compliance and other control functions of its service providers.
Going concern After making enquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue in operation for the foreseeable future. They have, therefore, adopted the going concern basis in preparing these financial statements.
Non-compliance with the Combined Code Throughout the year ended 30 September 2008, the Company has complied with the Combined Code 2008, except that it did not comply with the following provisions at any time during the year:
A.4 – The Board as a whole, being entirely Non-Executive, will constitute a Nomination Committee;
A.7.2 – This provision is complied with save that all of the Directors are not appointed for a specific term but their appointment is terminable on three months’ notice.
D.1.2 – This provision is not strictly complied with as it is the management team of WPML and BCM who have regular contact with major institutional shareholders. All comments received from those Shareholders are fed back to the Board. When practicable, all Directors do attend the Annual General Meeting and are available to communicate with Shareholders.
Wichford P.L.C. Annual Report 2008 28 Directors’ Remuneration Report
As the Board consists entirely of Non-Executive Directors, the Board as a whole acts as a Remuneration Committee and agrees Directors’ remuneration. The Board periodically reviews the level of Directors’ fees relative to other comparable companies and in light of the Directors’ responsibilities.
The table below shows the annual fees payable and the actual fees paid to each of the Directors during the year:
Annual Actual fees payable fees paid Director Role £ £ P E J F de Nicolay Non-Executive Director and Chairman 40,000 38,000 I M McArdle Non-Executive Director 20,000 20,000 H R Ward Non-Executive Director – sits on Audit Committee 22,000 22,000 D T D Harrel Non-Executive Director 20,000 20,000 R M Melhuish Non-Executive Director – sits on Audit Committee 20,000 17,974 R M Taylor Non-Executive Director and Chairman of Audit Committee 30,000 26,961 W E Cesman Non-Executive Director 20,000 7,205
R M Taylor and R M Melhuish were appointed on 8 November 2007 and W E Cesman was appointed on 22 May 2008. As these Directors were appointed during the year, the fees paid to them reflect the time that they have been on the Board.
Michael Sheehan, who retired as Chairman and a Director of the Company on 8 November 2007 received £3,405 in fees from 1 October 2007 up until the date of his retirement.
Each of the Directors entered into an engagement letter on their appointment with the Company which records the terms of their appointment as a Non-Executive Director.
This Report was approved by the Board on 16 December 2008 and signed on its behalf by the Chairman.
2008 review Governance Consolidated financials Company financials Investors 29 How we performed A responsible business 2008 in numbers 2008 in numbers Additional information Report of the Independent Auditors, Grant Thornton, to the members of Wichford P.L.C.
We have audited the consolidated financial statements of Wichford P.L.C. for the year ended 30 September 2008 which comprise the consolidated income statement, consolidated statement of recognised income and expense, consolidated balance sheet, consolidated cash flow statement and the related notes. These financial statements have been prepared under the accounting policies set out therein.
This report is made solely to the Group and Company’s members, as a body, in accordance with Section 15 of the Companies Act 1982. Our audit work has been undertaken so that we might state to the Group and Company’s members those matters we are required to state to them in an auditors’ 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 Group and Company and the Group’s and Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. We have reported separately on the Parent company financial statements of Wichford P.L.C. for the year ended 30 September 2008.
Respective responsibilities of Directors and Auditors The Directors’ responsibilities for preparing the financial statements in accordance with applicable Isle of Man Company law and International Financial Reporting Standards (“IFRS”) are set out in the Statement of Directors’ Responsibilities on page 25.
Our responsibility is to audit the Group financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Isle of Man Companies Acts 1931 to 2004. We also report to you whether, in our opinion, the information given in the Report of the Directors includes that specific information presented in the Chairman’s Statement, Debt Finance Report and Property Adviser’s Report that is cross-referred from the Review of the business and future activities section of the Report of the Directors.
We read other information contained in the Annual Report and consider whether it is consistent with the audited Group financial statements. The other information comprises only the Report of the Directors, the Chairman’s Statement, the Property Adviser’s Report, the Debt Finance Report and the Corporate Governance Statement. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the Group financial statements. Our responsibilities do not extend to any other information.
Wichford P.L.C. Annual Report 2008 30 Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the United Kingdom Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the Directors in the preparation of the financial statements and of whether the accounting policies are appropriate to the Group’s and Company’s circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations, which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion, we also evaluated the overall adequacy of the presentation of information in the financial statements.
Opinion In our opinion: • the Group financial statements give a true and fair view, in accordance with International Financial Reporting Standards, of the state of the Group’s affairs as at 30 September 2008 and of the Group’s result for the year then ended; • the Group financial statements have been properly prepared in accordance with the Isle of Man Companies Acts 1931 to 2004; and • the information given in the Directors’ Report is consistent with the financial statements.
Grant Thornton Chartered Accountants Exchange House 54/58 Athol Street Douglas Isle of Man IM1 1JD 16 December 2008
2008 review Governance Consolidated financials Company financials Investors 31 How we performed A responsible business 2008 in numbers 2008 in numbers Additional information Consolidated income statement for the year ended 30 September 2008
Year ended 30 September 2008 Year ended 30 September 2007 Trading Other Trading Other Operations* Items** Total Operations* Items** Total Notes £m £m £m £m £m £m Revenue 4 42.0 – 42.0 33.1 – 33.1 Deficit on revaluation of investment properties 11 – (140.8) (140.8) – (22.6) (22.6) Profit on disposal of investment properties – 0.8 0.8 – 1.4 1.4 Administrative expenses (6.7) (0.7) (7.4) (3.8) – (3.8)
OPERATING PROFIT/(LOSS) 5 35.3 (140.7) (105.4) 29.3 (21.2) 8.1
Finance income 7 1.2 – 1.2 2.0 – 2.0 Finance cost 7 (25.8) – (25.8) (19.7) – (19.7)
PROFIT/(LOSS) BEFORE TAX 10.7 (140.7) (130.0) 11.6 (21.2) (9.6)
Income tax expense 8 (0.4) – (0.4) (0.2) – (0.2)
PROFIT/(LOSS) FOR THE YEAR 20 10.3 (140.7) (130.4) 11.4 (21.2) (9.8)
Earnings per share from continuing operations Basic/Diluted – pence 9 7.77 (106.00) (98.23) 9.70 (18.10) (8.40)
Consolidated statement of recognised income and expense for the year ended 30 September 2008
Year ended 30 September 2008 Year ended 30 September 2007 Trading Other Trading Other Operations* Items** Total Operations* Items** Total Notes £m £m £m £m £m £m Income and expense recognised directly in equity (Loss)/gains on cash flow hedges 20 – (13.8) (13.8) – 12.9 12.9 (Loss)/gain foreign currency translation 20 – 1.2 1.2 – 0.6 0.6
NET INCOME RECOGNISED IN EQUITY – (12.6) (12.6) – 13.5 13.5
PROFIT/(LOSS) FOR THE YEAR 20 10.3 (140.7) (130.4) 11.4 (21.2) (9.8)
TOTAL RECOGNISED INCOME AND EXPENSE FOR THE YEAR 20 10.3 (153.3) (143.0) 11.4 (7.7) 3.7
All activities are continuing.
* Trading Operations: This excludes the Other Items and reflects the trading activities of the Group. ** Other Items: Includes the profits and losses on the sales of investment properties and items of a non-trading nature such as valuation adjustments arising from the fair value of investment properties and derivative financial instruments.
Wichford P.L.C. Annual Report 2008 32 Consolidated balance sheet As at 30 September 2008
30 September 30 September 2008 2007 Notes £m £m NON-CURRENT ASSETS Investment properties 11 587.0 663.6 Derivative financial assets 17 1.3 15.1 588.3 678.7
CURRENT ASSETS Trade and other receivables 12 31.3 18.9 Cash at bank 13 15.1 20.3 46.4 39.2 ASSETS HELD FOR SALE 14 – 10.9 TOTAL ASSETS 634.7 728.8
CURRENT LIABILITIES Trade and other payables 15 (25.5) (25.8) (25.5) (25.8)
NON-CURRENT LIABILITIES Borrowings 16 (490.5) (424.6) Deferred tax liabilities 8 (0.7) (0.4) (491.2) (425.0)
LIABILITIES ASSOCIATED WITH ASSETS HELD FOR SALE 14 – (1.3) TOTAL LIABILITIES (516.7) (452.2) NET ASSETS 118.0 276.7
EQUITY Share capital 19 13.3 13.3 Share premium 20 168.7 168.7 Retained earnings 20 (65.2) 81.2 Cash flow hedges reserve 20 (0.6) 12.9 Currency translation reserve 20 1.8 0.6
TOTAL EQUITY ATTRIBUTABLE TO THE ORDINARY EQUITY HOLDERS OF THE PARENT COMPANY 118.0 276.7
NET ASSET VALUE Basic/Diluted – pence per share 10 88.9 208.5
These financial statements were approved by the Board of Directors on 16 December 2008 and signed on its behalf by:
Ita McArdle Director
Richard Melhuish Director
2008 review Governance Consolidated financials Company financials Investors 33 How we performed A responsible business 2008 in numbers 2008 in numbers Additional information Consolidated cash flow statement for the year ended 30 September 2008
Year ended Year ended 30 September 30 September 2008 2007 £m £m OPERATING PROFIT FOR THE YEAR (105.4) 8.1 Adjust non-cash items: Decrease in fair value of investment properties 140.8 22.6 Profit on sale of investment properties (0.8) (1.2) Performance fee adjustment – (1.5) Accrued rental income (0.3) (0.4) Rent incentives (11.8) 0.2 Foreign exchange loss (5.7) –
Working capital adjustments: Decrease/(Increase) in trade and other receivables 0.1 (5.7) (Decrease)/Increase in trade and other payables (0.6) 12.2 Finance costs paid (26.0) (19.2) Finance costs received 1.3 2.0 Finance lease interest (0.2) (0.2)
CASH FLOWS FROM OPERATING ACTIVITIES (8.6) 16.9
INVESTING ACTIVITIES Purchase of investment properties (42.4) (251.3) Sale of investment properties 11.0 13.3
CASH FLOW USED IN INVESTING ACTIVITIES (31.4) (238.0)
FINANCING ACTIVITIES Ordinary Shares issued (net of expenses) – 73.3 Increase in bank debt 48.5 161.0 Equity dividends paid (13.7) (10.2)
CASH FLOWS FROM FINANCING ACTIVITIES 34.8 224.1
(DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (5.2) 3.0 Cash and cash equivalents at beginning of period 20.3 17.3
CASH AND CASH EQUIVALENTS AT YEAR END 15.1 20.3
Wichford P.L.C. Annual Report 2008 34 Notes to the financial statements
1. Basis of preparation The financial statements are prepared in accordance with the principal accounting policies adopted by the Group as set out in note 2 and International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board.
These accounting policies have been consistently applied to all the periods presented.
The financial statements are prepared on the historical cost basis, except for investment property and derivative financial instruments that are measured at fair value. The financial statements are presented in millions of pounds sterling (£m) except where otherwise indicated.
2. Significant accounting policies A summary of the principle accounting policies is set out below and the most significant ones areitalicised :
Basis of consolidation The financial statements comprise the historical financial information of Wichford P.L.C. and its subsidiaries (“the Group”) for the period ended 30 September 2008. Wichford P.L.C. is a public listed company incorporated in the Isle of Man. Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred from the Group. Control comprises the power to govern the financial and operating policies of the investee so as to obtain benefit from its activities and is achieved through direct or indirect ownership of voting rights; currently exercisable or convertible potential voting rights; or by way of contractual agreement.
The financial statements of the subsidiaries are prepared for the same reporting year as the parent company, using consistent accounting policies. All intra-group transactions are eliminated as part of the consolidation process.
Revenue Revenue recognised in the income statement represents property rental income and interest income, net of VAT and other sales-related taxes, as follows:
Rental income receivable under operating leases Rental income receivable under operating leases is recognised on a straight-line basis over the term of the lease, except for contingent rental income which is recognised when it arises.
Incentives for lessees to enter into lease agreements are spread evenly over the non-cancellable period of the lease, even if the payments are not made on such a basis.
Premiums received to terminate leases are recognised in the income statement when they arise.
The lease term is the non-cancellable period of the lease together with any further term for which the tenant has the option to continue the lease, where, at the inception of the lease, the Directors are reasonably certain that the tenant will not exercise that option.
Service charges Where the Group invoices service charges, these amounts are not recognised as income as the risks in relation to the provision of these goods and services are primarily borne by the Group’s customers. Any servicing expenses suffered by the Group are included within direct costs.
Interest income Interest income is recognised as it accrues using the effective interest rate basis.
Insurance premiums Insurance premiums recharged to tenants are not reflected in either income or expense.
2008 review Governance Consolidated financials Company financials Investors 35 How we performed A responsible business 2008 in numbers 2008 in numbers Additional information Notes to the financial statementscontinued
2. Significant accounting policiescontinued Property acquisitions Where properties are acquired through the acquisition of corporate interests the Directors have regard to the substance of the assets and activities of the acquired entity in determining whether the acquisition represents the acquisition of a business.
Where such acquisitions are not judged to be an acquisition of a business the transactions are accounted for as if the Group had acquired the underlying property directly. Accordingly, no goodwill arises, rather the cost of the corporate entity is allocated between the identifiable assets and liabilities of the entity based on their relative fair values at the acquisition date.
Otherwise corporate acquisitions are accounted for as business combinations.
Business combinations and goodwill Business combinations are accounted for under IFRS 3 using the purchase method of accounting. The cost of acquisition is the consideration given in exchange for the identifiable net assets. This consideration includes any cash paid plus the fair value at the date of exchange of assets given, liabilities incurred or assumed and equity instruments issued by the Group. The cost of acquisition also includes directly attributable costs.
The acquired net assets are initially recognised at fair value. Where the Group does not acquire 100 per cent ownership of the acquired company, a minority interest is recorded as the minority’s proportion of the fair value of the acquired net assets. Any adjustment to the fair values is recognised within twelve months of the acquisition date.
Goodwill on acquisitions comprises the excess of the fair value of the consideration plus any associated costs for investments in subsidiaries over the fair value of the identifiable net assets acquired. Any goodwill and fair value adjustments are recorded as assets and liabilities of the acquired company for the purposes of consolidation and are recorded in the local currency of that company. The costs of integrating and reorganising acquired businesses are charged to the post-acquisition income statement.
Goodwill is carried at cost less accumulated impairment losses.
The Group’s goodwill is reviewed at each balance sheet date on an annual basis, or more frequently if there is an indication that the goodwill is impaired, to determine whether events or changes in circumstances exist that indicate that their carrying amount may not be recoverable. If such an indication exists, the asset’s recoverable amount is estimated. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. An impairment loss is recognised in the income statement for the amount by which the asset’s carrying amount exceeds its recoverable amount.
Investment property Property held to earn rent or for capital appreciation, or both, is classified as investment property and recognised initially at cost, including directly attributable transaction costs.
Property held under leases for the same purpose is also classified as investment property, accounted for as held under a finance lease and initially recognised at the sum of any premium paid on acquisition and the present value of any further minimum lease payments. The corresponding liability to the superior leaseholder is included in the balance sheet as a finance lease obligation.
Thereafter investment property is measured at fair value, which reflects market conditions at the balance sheet date. For the purposes of the historical financial information, the assessed fair value is:
• reduced by the carrying amount of any accrued income resulting from the spreading of lease incentives and/or minimum lease payments; and
• increased by the carrying amount of any liability to the superior leaseholder included in the balance sheet as a finance lease obligation.
The annual valuations of investment property are based upon estimates and subjective judgements that may vary from the actual values and sales prices that may be realised by the Group upon ultimate disposal. The critical assumptions made relating to valuations have been disclosed in note 11 to the financial statements.
Wichford P.L.C. Annual Report 2008 36 2. Significant accounting policiescontinued Gains or losses arising from changes in the fair value of investment property are included in the income statement in the year in which they arise. Profits or losses on the disposal of investment property are recognised at contract completion for the disposal.
Non-current assets held for sale Investment property is transferred to non-current assets held for sale when it is expected that the carrying amount will be recovered principally through sale rather than from continuing use due to advanced sale discussions. On re-classification, investment property continues to be measured at fair value.
Finance leases Finance leases are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and the reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to the income statement as they arise.
Cash and short-term deposits Cash and short-term deposits in the balance sheet comprise cash at bank, short-term deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less.
For the purpose of presenting the “Consolidated cash flow statement”, cash and cash equivalents consist of cash and short-term deposits as defined above, net of outstanding bank overdrafts.
Trade and other receivables Trade and other receivables are recognised and carried at the lower of their original invoiced value and recoverable amount. A provision for impairment of trade receivables is established where there is objective evidence that the Group will not be able to collect all amounts due according to original terms of the receivables concerned. Balances are written off when the probability of recovery is assessed as being remote.
Trade and other payables Trade and other payables are recognised at fair value and subsequently measured at amortised cost.
Loans and borrowings Loans and borrowings are initially recognised at fair value less directly attributable transaction costs.
After initial recognition, interest and non-interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Amortised cost is calculated by taking into account any issue costs and any discount or premium on settlement.
Borrowing costs are recognised in the income statement using the effective interest rate method.
Gains and losses arising on the repurchase, settlement or otherwise cancellation of liabilities are recognised in finance income and finance expense respectively.
Derecognition of financial liabilities A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires.
Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and recognition of new liability, and the difference in the respective carrying amounts is recognised in the income statement.
2008 review Governance Consolidated financials Company financials Investors 37 How we performed A responsible business 2008 in numbers 2008 in numbers Additional information Notes to the financial statementscontinued
2. Significant accounting policiescontinued Derivative financial instruments The Group uses derivative financial instruments, such as interest rate swaps, to hedge its risks associated with interest rate fluctuations. The Group does not hold or issue derivatives for trading purposes. Such derivative financial instruments are initially recognised at fair value on the date at which a derivative contract is entered into and are subsequently remeasured at fair value at each reporting date.
For derivatives that do not qualify for hedge accounting, any gains or losses arising from changes in fair value are taken directly to the income statement for the year. For derivatives that qualify for hedge accounting, the effective portions of the gains or losses arising from changes in fair value are recognised in equity as net unrealised gains or losses, while any ineffective portion is recognised immediately in profit or loss.
For the purpose of hedge accounting, interest rate swaps are designated as cash flow hedges where they hedge exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a forecast transaction.
Hedge accounting is discontinued when the hedging instrument expires, is sold, terminated, exercised or no longer qualifies for hedge accounting. At that point in time, any cumulative gain or loss on the hedging instrument recognised in equity is kept in equity until the forecast transaction occurs. At the time of the forecast transaction, the net cumulative gain or loss recognised in equity is transferred to the income statement for the year.
Fair values of financial instruments The fair value of quoted instruments is determined by reference to bid prices at the close of business on the balance sheet date. Where there is no active market, fair value is determined using valuation techniques. These include using recent arms-length market transactions; reference to the current market value of another instrument which is substantially the same; discounted cash flow analysis and pricing models.
Share-based payments A performance fee is payable as part of the contract with the Property Adviser, and this is to be satisfied by the issuance of new shares in the parent company. This performance fee is related to the total return to Shareholders, based on the share price and dividends paid. The resulting performance fee for a particular performance period will be settled by the issuance of shares to the Property Adviser, subject to certain vesting conditions, at the end of the subsequent two years.
The performance fee is charged to the income statement over the vesting period in accordance with IFRS 2 Share-based payment. Until the issuance of any shares under this contract, and in accordance with IFRS 2 guidance, the charge to the income statement is added back to distributable reserves, as it does not result in cash leaving the Group.
On the issuance of any shares under this contract, the full market value of the shares issued will be charged to the parent company’s distributable reserves.
Current taxation Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the tax authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantially enacted by the balance sheet date.
Wichford P.L.C. Annual Report 2008 38 2. Significant accounting policiescontinued Deferred taxation Deferred income tax is provided using the liability method on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes with the following exceptions:
• where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss;
• in respect of taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and
• deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which deductible temporary differences, carried forward tax credits or tax losses can be utilised.
The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted, or substantively enacted, at the balance sheet date.
In determining the expected manner of realisation of an asset, the Directors consider that the Group will recover the residual value of an asset through sale and the depreciable amount through use. Whilst investment property is measured at fair value, it is intrinsically depreciable. Consequently deferred tax relating to that portion of the carrying amount of the investment property that would be considered depreciable under IAS 16 is measured on an “in use”, not an “on sale” basis. The element of the total carrying amount of the investment property represented by the land is considered non-depreciable and the Directors estimate the depreciable amount and residual value of the building element on a case-by-case basis.
Foreign currency translation Transactions in foreign currencies are initially recorded in the functional currency by applying the spot exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the balance sheet date. All differences are taken to the income statement. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.
Exchange differences arising on a monetary item that forms part of a reporting entity’s net investment in a foreign operation shall be recognised in profit or loss in the separate financial statements of the reporting entity or the individual financial statements as appropriate. In the financial statements that include the foreign operations and the reporting entity (the Group accounts), such exchange differences shall be recognised initially in a separate component of equity and recognised in profit or loss on disposal of the foreign operation.
The assets and liabilities of foreign operations are translated into sterling at the rate of exchange ruling at the balance sheet date. Income and expenses of foreign operations are translated at weighted average exchange rates for the accounting period. The resulting exchange differences are taken directly to a separate component of equity.
Operating profit Operating profit is profit stated after profit/loss on disposal of investment properties and the revaluation of the property portfolio but before finance income and costs.
2008 review Governance Consolidated financials Company financials Investors 39 How we performed A responsible business 2008 in numbers 2008 in numbers Additional information Notes to the financial statementscontinued
2. Significant accounting policiescontinued Exceptional items The Group presents as exceptional items on the face of the income statement, those material items of income and expense which, because of the nature and expected infrequency of the events giving rise to them, merit separate presentation to allow Shareholders to understand better the elements of financial performance in the year, so as to facilitate comparison with prior periods and to assess better trends in financial performance.
Equity Equity comprises the following: • “Share Capital” represents the nominal value of equity shares. • “Share Premium” represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of share issues. • “Retained earnings” represents retained profits. • “Cash flow hedges reserve” represents the changes in the carrying amount of cash flow hedges. • “Currency translation reserve” represents the differences arising from translation of investments in overseas subsidiaries.
New standards and interpretations not applied The International Accounting Standards Board (“IASB”) and International Financial Reporting Interpretations Committee (“IFRIC”) have issued the following standards and interpretations with effective dates after the date of these financial statements that have not yet been adopted by the Group.
IASB Amendment to IAS 32 Financial Instruments: Presentation and IAS 1 Presentation of Financial Statements - Puttable Financial Instruments and Obligations Arising on Liquidation (effective 1 January 2009).
IAS 27 Consolidated and Separate Financial Statements (Revised 2008) (effective 1 July 2009).
Amendment to IFRS 2 Share-based Payment - Vesting Conditions and Cancellations (effective 1 January 2009).
Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards and IAS 27 Consolidated and Separate Financial Statements - Costs of Investment in a Subsidiary, Jointly Controlled Entity or Associate (effective 1 January 2009).
Amendment to IAS 39 Financial Instruments: Recognition and Measurement - Eligible Hedged Items (effective 1 July 2009).
Improvements to IFRSs (effective 1 January 2009 other than certain amendments effective 1 July 2009).
IFRS 3 Business Combinations (Revised 2008) (effective 1 July 2009).
IFRS 8 Operating Segments (effective 1 January 2009).
IFRIC IFRIC 15 Agreements for the Construction of Real Estate (effective 1 January 2009).
IFRIC 16 Hedges of a Net Investment in a Foreign Operation (effective 1 October 2008).
None of the above Standards or Interpretations is expected to have a material impact.
The Company has adopted IFRS 7 “Financial Instruments: Disclosures” for these financial statements.
Critical judgements and estimates The preparation of financial statements in conformity with IFRS requires the use of judgements and estimates that affect the reported amounts of assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the period reported. Although these estimates are based on the Directors best knowledge of the amount, event or actions, actual results may differ from those estimates.
The principal areas where such judgements and estimates have been made are:
Wichford P.L.C. Annual Report 2008 40 2. Significant accounting policiescontinued Investment property valuation The Group uses the valuation performed by its independent valuers as a fair value of its investment properties. The valuation is based upon assumptions including estimated rental values, future rental income, anticipated maintenance costs, future development costs and appropriate discount rates. The valuers also make reference to market evidence of transaction prices for similar properties.
Deferred taxation The Group considers that the value of the property portfolio is likely to be realised by sale rather than use over time. Therefore, no provision has been made for deferred taxation on valuation uplift.
The Group bases its deferred taxation provision on the assumption that the residual value of the investment properties is not less than the present value as provided by its external valuers.
Derivative financial instruments The Group uses the valuation provided by its bankers as the fair value of its cash flow hedges. The valuation is based upon assumption including market prices and estimated cash flows.
3. Segment information The primary reporting segment of the Group is the entire business. The business activity of the Group is property investment in the UK and Continental Europe which the Board considers to be the only business segment. Therefore information provided elsewhere in the historical financial information relates to that segment.
Secondary reporting format – Geographic segments The following table presents revenue, expenditure and certain asset information regarding the Group’s geographical segments:
Rest of Year ended 30 September 2008 UK Europe Total £m £m £m Segment revenue 33.0 9.0 42.0 Carrying amount of Segment assets Segment assets 441.4 194.0 635.4 Segment capital expenditure Acquisition of investment properties 15.2 28.6 43.8
Rest of Year ended 30 September 2007 UK Europe Total £m £m £m Segment revenue 31.3 1.8 33.1 Carrying amount of Segment assets Segment assets 572.7 156.1 728.8 Segment capital expenditure Acquisition of investment properties 110.4 149.6 260.0
4. Revenue Year ended Year ended 30 September 30 September 2008 2007 £m £m Rental income 42.0 33.0 Other income – 0.1 42.0 33.1 Finance income (note 7) 1.2 2.0 43.2 35.1
2008 review Governance Consolidated financials Company financials Investors 41 How we performed A responsible business 2008 in numbers 2008 in numbers Additional information Notes to the financial statementscontinued
5. Operating profit The following items have been charged in arriving at operating profit: Year ended Year ended 30 September 30 September 2008 2007 £m £m Property Advisor’s fees – for advisory services 3.9 3.4 – for accrued performance fees – (1.5) Property Manager’s fees 0.1 0.2 Independent Auditor’s remuneration – for audit 0.2 0.1 – for review of tax provision – – – for tax compliance work 0.2 0.2 – for other advisory services 0.1 – Legal fees 1.4 0.4
In addition to the fees shown above as the Independent Auditor’s remuneration, the Independent Auditor also charged nil (2007: £0.1 million) for due diligence and advisory services. These fees have been either capitalised as part of the cost of acquiring properties or charged to the Share Premium account as an expense of raising additional share capital. The total fees payable to the auditor in the year were £0.5 million (2006: £0.4 million).
The performance fee is payable by Wichford P.L.C. to Wichford Property Management Limited (WPML) and takes the form of a share incentive scheme, under which WPML will acquire Ordinary Shares in Wichford P.L.C. at no cost, by way of an annual profit-sharing participation.
The amount of the annual award is calculated as 20 per cent of the amount by which the total return on the Ordinary Shares in Wichford P.L.C. exceeds 10 per cent for the preceding financial year. A separate calculation of the amount of the annual award is made in relation to each separate tranche of Ordinary Shares in Wichford P.L.C. issued during the relevant financial year.
The award of these shares will only vest if the annualised return over the three-year period from the beginning of the relevant financial year to the end of the period two years later, is not less than 10 per cent per annum and will only be issued if Wichford P.L.C.’s net asset per share value is greater than, or equal to, its net asset per share value as at 5 August 2004.
Wichford P.L.C. estimates the accrual for the performance fee for each half-yearly and year-end financial report.
The amounts accrued in the past two years and the resultant charges to the consolidated income statement are nil and £0.9 million respectively.
In the previous year, the share price fell and therefore the amount in the financial statements had been adjusted accordingly to reflect the fact that the annualised return had not been achieved over the past three years. As a result, there had been a reduction in the performance fee accruals and a resultant credit to the consolidated income statement of £1.5 million.
Included in the administrative expenses in the consolidated income statement of £7.4 million are the costs of the move from AIM to the Main Market of the London Stock Exchange plc, which amounted to £0.7 million and are shown in the Other Items column.
6. Directors’ emoluments There were no employees other than the Directors of the parent company. Directors’ emoluments paid in the year were £152,470 (2007: £175,250) and all relate to fees; there being no other benefits or payments.
Wichford P.L.C. Annual Report 2008 42 7. Finance revenue and costs Year ended Year ended 30 September 30 September 2008 2007 £m £m Finance revenue Interest receivable 1.2 2.0 Fair value adjustment of interest rate swap – – Total finance revenue 1.2 2.0
Finance costs Bank interest 25.1 19.0 Amortisation of loan agreement fees 0.5 0.4 Finance lease interest 0.2 0.2 Other – 0.1 Total finance expense 25.8 19.7
8. Income tax (a) Tax on profit from ordinary activities Year ended Year ended 30 September 30 September 2008 2007 £m £m Profit for the period not subject to UK income tax (123.4) (9.6) Profit before tax (123.4) (9.6)
Current income tax Adjustments in respect of previous period – – Income tax on interest receivable – – Total current income tax – –
Deferred tax Origination and reversal of temporary differences 0.4 0.2 Income tax expense reported in the income statement 0.4 0.2
2008 review Governance Consolidated financials Company financials Investors 43 How we performed A responsible business 2008 in numbers 2008 in numbers Additional information Notes to the financial statementscontinued
8. Income tax continued (b) Deferred tax Deferred tax included in the balance sheet is as follows: 30 September 30 September 2008 2007 £m £m Deferred tax liability Lease accounting temporary differences 0.7 0.4 Deferred tax liability 0.7 0.4
The deferred tax included in the income statement is as follows: Year ended Year ended 30 September 30 September 2008 2007 £m £m Lease accounting temporary differences 0.4 0.2 Deferred income tax expense 0.4 0.2
9. Earnings per share Basic earnings per share for the year ended 30 September 2008 is based on the loss attributable to equity shareholders of £130.4 million (2007: loss of £9.8 million) and a weighted average number of Ordinary Shares outstanding during the year ended 30 September 2008 of 132,726,728 (2007: 116,904,399).
Diluted earnings per share are the same as basic earnings per share. Year ended Year ended 30 September 30 September 2008 2007 £m £m Loss attributable to equity shareholders (130.4) (9.8) Weighted average number of Ordinary Shares (000s) 132,727 116,904 Earnings per share – pence Basic loss per share (98.23) (8.40)
10. Net assets per share Net assets per share is calculated by dividing the net assets at 30 September 2008 attributable to the equity holders of the parent of £118.0 million (2007: £276.7 million) by the number of Ordinary Shares as at 30 September 2008 of 132,761,948 (2007: 132,703,055)
30 September 30 September 2008 2007 Net assets attributable to equity holders of the parent (£m) 118.0 276.7 Number of Ordinary Shares (000s) 132,762 132,703 Net assets per share (pence) 88.9 208.5
11. Investment properties Freehold Freehold/ and long Long Feuhold leasehold leasehold Total 2008 £m £m £m £m At 30 September 2007 515.0 37.1 111.5 663.6 Foreign exchange differences 20.5 – – 20.5 Purchases during the year 43.5 – – 43.5 Disposals during the year – – (10.2) (10.2) Valuation gains/(losses) (113.6) (5.0) (22.7) (141.3) Transferred from assets held for sale – – 10.9 10.9 Reclassifications 3.1 (9.7) 6.6 – At 30 September 2008 468.5 22.4 96.1 587.0
Wichford P.L.C. Annual Report 2008 44 11. Investment properties continued During the year to 30 September 2008 the Group acquired two properties for a total consideration of £42.4 million. In addition, the Group disposed of one property for £11.0 million, producing a profit in excess of £0.8 million. As a result of these transactions, at 30 September 2008, the Group owned 79 properties throughout the UK, France, Germany and the Netherlands.
Freehold Freehold/ and long Long Feuhold leasehold leasehold Total 2007 £m £m £m £m At 30 September 2006 308.1 29.7 113.6 451.4 Purchases during the year 245.9 14.2 – 260.1 Disposals during the year (16.9) – – (16.9) Valuation gains/(losses) (24.5) (6.8) 8.8 (22.5) Transferred to assets held for sale (Note 14) – – (10.9) (10.9) Payment on account for asset in course of construction 2.4 – – 2.4 At 30 September 2007 515.0 37.1 111.5 663.6
All the Group’s investment properties were externally valued as at 30 September 2008 and 30 September 2007 on the basis of open market value by professionally qualified valuers in accordance with the Appraisal and Valuation Standards of the Royal Institution of Chartered Surveyors. The Group’s valuer is Atisreal Limited in the UK and DTZ for Continental Europe for the valuations as at 30 September 2008. For the previous year’s valuation the Continental Europe properties were valued by DTZ in France together with Savills and JLL in Germany.
The value of each of the properties has been assessed in accordance with the relevant parts of the Red Book. In particular, the Market Value has been assessed in accordance with PS 3.2. Under these provisions, the term “Market Value” means “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arms-length transaction after proper marketing wherein the parties have each acted knowledgeably, prudently and without compulsion”.
In undertaking the valuations on the basis of Market Value, the valuers have applied the interpretative commentary which has been settled by the International Valuation Standards Committee and which is included in PS 3.2. The RICS considers that the application of the Market Value definition provides the same result as Open Market Value, a basis of value supported by previous editions of the Red Book.
The valuation does not include any adjustments to reflect any liability to taxation that may arise on disposal, nor for any costs associated with disposals incurred by the owner. No allowance has been made to reflect any liability to repay any government or other grants, or taxation allowance that may arise on disposals. Deductions have been made to reflect purchasers’ acquisition costs. These have been applied according to value on a sliding scale, representative of the typical costs that would be incurred in the market.
A reconciliation of investment and development property valuations to the balance sheet carrying value of property is shown below:
30 September 30 September 2008 2007 £m £m Investment property at Market Value as determined by external valuers 597.9 673.5 Add minimum payment under head leases separately included as a payable in the balance sheet 2.0 3.5 Less accrued incentives separately included as a receivable in the balance sheet (11.8) (4.2) Less accrued rental income separately included as a receivable in the balance sheet (1.2) (0.8) Add accrued rental income separately included as a payable in the balance sheet 0.1 0.1 587.0 672.1
Add payment on account for asset in the course of construction – 2.4 Less property transferred to assets held for sale – (10.9) Balance sheet carrying value of investment property 587.0 663.6
2008 review Governance Consolidated financials Company financials Investors 45 How we performed A responsible business 2008 in numbers 2008 in numbers Additional information Notes to the financial statementscontinued
12. Trade and other receivables 30 September 30 September 2008 2007 £m £m Trade receivables 6.9 7.2 VAT recoverable 5.5 0.1 Accrued rental incentives 11.8 4.2 Accrued rental income 0.5 0.8 Other prepayments 5.3 6.2 Service charge 1.3 0.4 31.3 18.9
Trade receivables are non-interest bearing and generally have a 14-day term. Due to their short maturities, the fair value of trade and other receivables approximates to their book value.
As at 30 September 2008 nil trade receivables were impaired (2007: nil). As at 30 September 2008, nil trade receivables were overdue but not impaired (2007: nil).
13. Cash and cash equivalents 30 September 30 September 2008 2007 £m £m Cash at bank 15.1 20.3
Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods dependent on the immediate cash requirements of the Group. The book value of cash and cash equivalents approximates their fair value.
14. Assets held for sale As at 30 September 2008 the Group was not holding any assets for sale.
As at 30 September 2007 the long leasehold property at Archway, Islington, in London with an external valuation of £9.5 million, was classified as held for sale. The carrying value of the property (£10.9 million) and the present value of the Archway finance lease (£1.3 million) were presented separately on the balance sheet. The disposal of this property was completed on 11 October 2007.
15. Trade and other payables 30 September 30 September 2008 2007 £m £m Rents received in advance 9.7 8.3 VAT payable 1.1 0.5 Other payables and accruals 13.4 16.5 Accrued rental income – 0.1 Service charge 1.3 0.4 25.5 25.8
Trade and other payables are non-interest bearing and it is the Group’s policy to pay within the stated terms which typically vary from 30-45 days. Due to their short maturities, the fair value of trade payables approximates to their book value.
Wichford P.L.C. Annual Report 2008 46 16. Borrowings 30 September 30 September 2008 2007 £m £m Non-current Bank loans 492.8 425.3 Less: deferred finance costs (4.3) (2.7) Finance leases 2.0 3.4 Less: finance lease classified as held for sale – (1.4) 490.5 424.6 a) Bank Loans At 30 September 2008, the bank borrowings of £492.8 million (2007: £425.3 million) are secured by fixed and floating charges over the assets and income streams of the Group. It comprised of seven separate borrowing facilities each secured on a number of discrete assets with no common assets.
These facilities are summarised as below: 30 September 30 September 2008 2007 Facility Lender £m £m Delta Windermere XI CMBS Ltd 114.6 114.6 Gamma Windermere VIII CMBS Ltd 199.7 199.7 Hague SNS Property Finance 17.5 – Halle Windermere XIV CMBS Ltd 29.5 22.2 VBG1 Talisman 3 55.9 49.5 VBG2 Talisman 4 44.6 39.3 Zeta Lloyds TSB 31.0 – 492.8 425.3
The Gamma and Delta facilities are non-amortising and have final repayment dates in October 2012 and both have been put into securitisation conduits by the lender.
The Hague facility is non-amortising and has a final repayment date in July 2014.
The Halle facility is non-amortising and has a final repayment date in April 2014.
The VBG facilities are amortising dependent upon expected rent rises with final repayment dates in January 2010 for VBG1 and April 2011 for VBG2. However, on acquisition, part of the purchase price was paid into escrow accounts such that all expected amortisation of these bank loans will be funded by the escrow accounts. These facilities have been put into securitisation conduits by the lender.
The Zeta facility is non-amortising and has a final repayment date in May 2011.
All of the facilities are subject to the interest rate swaps detailed in note 17. The only exception is £5.0 million of the Zeta facility that is not subject to an interest rate swaps as it is expected that this amount will be repaid in the near future.
The book value of borrowings is not materially different to the fair value.
2008 review Governance Consolidated financials Company financials Investors 47 How we performed A responsible business 2008 in numbers 2008 in numbers Additional information Notes to the financial statementscontinued
16. Borrowings continued b) Finance Leases Obligations under finance leases at the balance sheet dates are analysed as follows: 30 September 30 September 2008 2007 £m £m Gross finance lease liabilities repayable: In one year or less 0.1 0.2 In more than one year, but not more than five years 0.5 0.8 In more than five years 18.3 18.6 18.9 19.6 Less: finance charges allocated to future periods (16.9) (16.2) Present value of minimum lease payments 2.0 3.4
30 September 30 September 2008 2007 £m £m Present value of finance lease liabilities repayable: In one year or less – – In more than one year, but not more than five years 0.1 – In more than five years 1.9 3.4 Present value of minimum lease payments 2.0 3.4
The present values of minimum lease payments have been calculated by using the market cost of external borrowings available to the Group at the inception of the lease. The Directors consider that the carrying amount of these finance lease obligations approximate their fair value.
Wichford P.L.C. Annual Report 2008 48 17. Derivative financial instruments The Group enters into interest rate swaps and forward currency contracts. The purpose is to manage the interest rate and currency risks arising from the Group’s operations and its sources of finance.
It is the Group’s policy that no trading in derivatives shall be undertaken. a) Interest rate swap agreements In accordance with the terms of the borrowing arrangements, the Group has entered into interest swap agreements.
The interest rate swaps are used to manage the interest rate profile of financial liabilities. The Group has employed interest rate swaps to eliminate future exposure to interest rate fluctuations. As a result of the use of interest rate swaps, the fixed rate profile of the Group was:
The total amount of notional value of these interest rate swaps at 30 September 2008 was £487.8 million (2007: £425.3 million) and the blended fixed rate achieved by these interest rate swaps was 4.58% (2007: 4.55%).
The interest rate swaps which were originally taken out by the Group as interest rate hedges on the Delta, Gamma and Halle facilities were novated to or were taken out with a Lehman Brothers company. From then a fixed rate interest became payable, equivalent to that under the swaps. Since, by this means the Group has the economic interest in the swaps, it has recognised them in its accounts.
However the interest rate swaps held by the securitisation vehicles have a Lehman Brothers company as counter-party. As the status of this counter-party’s ability to fulfill its obligations under these interest rate swaps is uncertain the Company has decided to assign a zero fair value to them.
The Group is still receiving the benefit of these interest rate swaps as the agent for the securitisation vehicles is continuing to charge interest according to the profiles of these interest rate swaps while the trustees of the securitisation vehicles consider how best to replace them.
The interest rate hedges from which the Group benefits have not been terminated at the time of this report.
2008 review Governance Consolidated financials Company financials Investors 49 How we performed A responsible business 2008 in numbers 2008 in numbers Additional information Notes to the financial statementscontinued
17. Derivative financial instrumentscontinued The Group also has entered into the following additional interest rate swap contract that commences after the year end as follows:
30 September 30 September 2008 2007 Effective Date Maturity Date Swap Rate £m £m 01/11/2011 15/10/2012 4.90% * 113.7 113.7
The overall effect of the derivatives in the above tables is to maintain a constant total nominal value of the amount hedged. This is achieved by the nominal value of a number of the above derivatives reducing over time, offset by the nominal value of another increasing over the total period of the borrowings.
30 September 30 September 2008 2007 £m £m Fair value of the Group’s derivative arrangements 1.3 15.1
Hedge accounting The loss of £13.8 million on the fair value of the interest rate swaps (2007: gain of £12.9 million) in the 12 months to 30 September 2008 is reported in the reserves as the Group has applied hedge accounting to their swap agreements. The cash flow hedges have been assessed as highly effective. The swap agreements are designated a cash flow hedge against interest rate fluctuations.
The hedge arrangements have resulted in a benefit to cash flow of the Group of £0.9 million. b) Forward Exchange Agreements The Group has entered into short-term foreign exchange sale and purchase contracts for the purpose of mitigating the Group’s exposure to foreign exchange rate movements on its equity investment in foreign property acquisitions. The Group chooses not to designate these contracts as hedging instruments.
Due to the short-term nature of these contracts, the fair value approximates to their book value. c) Financial assets The financial assets of the Group comprise cash deposits and hedging instruments held at fair value. The fair value of the cash deposits equates to the amount in the various Group bank accounts. d) Financial liabilities The financial liabilities of the Group comprise the Group’s bank loans. These are held at amortised cost.
18. Financial risk management objectives and policies The Group’s principal financial instruments, other than derivatives (note 17), comprise bank loans, finance lease liabilities and cash. The main purpose of these financial instruments is to finance the Group’s operations. The Group has various other financial assets and liabilities such as trade receivables and trade payables that arise directly from its operations.
The main risks arising from the Group’s financial instruments are interest rate risk, exchange rate risk, credit risk and liquidity risk. The Board of Directors reviews and agrees policies for managing each of these risks which are summarised below.
The financial risks and the ways in which the Group manages them are listed as follows:
(a) Interest rate risk The Group finances its operations through equity, retained profits and bank borrowings. All of the Group’s bank borrowings are charged at variable interest rates.
Wichford P.L.C. Annual Report 2008 50 18. Financial risk management objectives and policies continued The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s long-term debt obligations with floating interest rates. The Group uses interest rate derivatives to fully mitigate its exposure to interest rate fluctuations. At the year end, as a result of the use of interest rate swaps, the majority of the Group’s borrowings were at fixed interest rates.
30 September 30 September 2008 2007 Fixed rate bank borrowings weighted average interest rate 5.44% 5.36% Weighted average period for which rate is fixed in years 4 years 7 years
The Group’s profit before tax therefore has no exposure to interest rate fluctuations.
(b) Exchange rate risk As the Group acquires properties in Continental Europe, there is now the additional risk of movements in €/£ exchange rates – the Group minimises the exposure to foreign currency exchange rate movements by matching, as much as possible, the investment properties and associated loans in the same currency.
The following table demonstrates the sensitivity to a reasonably possible change in the €/£ exchange rate, with all variables held constant, of the Group’s profit before tax (due to changes in value of revenue and interest streams) and the Group’s equity (due to changes in the value of investment properties and associated loans).
Effect on profit Effect on Increase/decrease before tax equity in €/£ exchange rate £m £m 2008 +5% (2.1) (2.4) -5% 2.1 2.4 2007 +5% – (0.1) -5% – 0.1
The €/£ exchange rate as at 30 September 2008 was 1.2582 (2007: 1.4359). The average rate for the year was 1.31738 (2007: 1.4359).
(c) Credit risk The Group trades only with recognised, creditworthy third parties. It is the Group’s policy that all tenants who wish to trade on credit terms are subject to credit verification procedures. In addition, the Group further manages the credit risks by employing specialist property managers to monitor the properties. The result is that the Group’s exposure to bad debt is not significant. The maximum exposure is the carrying amount as disclosed in Note 12.
With respect to credit risk arising from the other financial assets of the Group, which comprise cash and cash equivalents and certain derivative instruments, the Group’s exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments.
(d) Liquidity risk The Group monitors its risk to a shortage of funds through the use of both short-term and long-term cash flow forecasts. The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts and bank loans.
The table below summarise the maturity profile of the Group’s borrowings at 30 September 2008 based on contractual undiscounted payments. Finance lease Bank loans liabilities At 30 September 2008 £m £m In one year or less 1.6 0.1 In more than one year, but not more than two years 56.1 0.1 In more than two years, but not more than three years 73.8 0.1 In more than three years, but not more than four years – 0.1 In more than four years, but not more than five years 314.3 0.1 In more than five years 47.0 18.4 492.8 18.9
2008 review Governance Consolidated financials Company financials Investors 51 How we performed A responsible business 2008 in numbers 2008 in numbers Additional information Notes to the financial statementscontinued
18. Financial risk management objectives and policies continued
Finance lease Bank loans liabilities At 30 September 2007 £m £m In one year or less 0.4 0.2 In more than one year, but not more than two years 1.1 0.2 In more than two years, but not more than three years 49.0 0.2 In more than three years, but not more than four years 38.3 0.2 In more than four years, but not more than five years – 0.2 In more than five years 336.5 18.6 425.3 19.6
(e) Capital Management The Company’s Articles of Association set out the borrowing powers of the Company. This defines a maximum amount that could be borrowed to be five times the issued share capital of the Company and the capital and revenue reserves of the Company. This gives a maximum borrowing power at 30 September 2008 of £656 million (2007: £1,383 million). The Company expects to remain within this maximum for the foreseeable future. The borrowings at 30 September 2008 are shown in note 16.
In addition, the Group is principally managed by reference to the loan to value ratios and expects to maintain this ratio between 60 per cent and a maximum of 85 per cent.
As a mechanism for managing the exposure to foreign currency exchange rate movements, the Group expects to borrow additional funds in the functional currency relevant to the acquisition it funds.
19. Authorised and issued share capital 30 September 30 September 2008 2007 AUTHORISED Ordinary Shares of 10 pence each – number 180,000,000 180,000,000 – £m 18.0 18.0
ISSUED, CALLED UP AND FULLY PAID – number 132,761,948 132,703,055 – £m 13.3 13.3
Holders of the Ordinary Shares are entitled to receive dividends and other distributions and to attend and vote at any general meeting.
Ordinary Shares of 10 pence each 30 September 30 September Number 2008 2007 – ranking for dividends for the current year 132,761,948 97,325,697 – not ranking for interim dividend for the previous year – 35,377,358 132,761,948 132,703,055
Ordinary Shares of 10 pence each 30 September 30 September £m 2008 2007 – ranking for dividends for the current year 13.3 9.7 – not ranking for interim dividend for the current period – 3.6 13.3 13.3
Wichford P.L.C. Annual Report 2008 52 20. Equity Cash flow Currency Share Share Retained hedges translation capital premium earnings reserve reserve Total 2008 £000 £000 £000 £000 £000 £000 At 30 September 2007 13.3 168.7 81.2 12.9 0.6 276.7 Foreign exchange differences – – (2.3) 0.3 – (2.0) Total recognised income for the period – – (130.4) (13.8) 1.2 (143.0) Dividends paid – – (13.7) – – (13.7) At 30 September 2008 13.3 168.7 (65.2) (0.6) 1.8 118.0
Cash flow Currency Share Share Retained hedges translation capital premium earnings reserve reserve Total 2007 £000 £000 £000 £000 £000 £000 At 30 September 2006 9.7 149.0 52.7 – – 211.4 Shares issued 3.6 71.4 – – – 75.0 Share issue costs – (1.7) – – – (1.7) Transfer to distributable reserves (50.0) 50.0 – – – Total recognised income for the year – – (9.8) 12.9 0.6 3.7 Credit relating to performance fee of Property Advisor – – (1.5) – – (1.5) Dividends paid – – (10.2) – – (10.2) At 30 September 2007 13.3 168.7 81.2 12.9 0.6 276.7
21. Dividends 30 September 30 September Ordinary dividends paid 2008 2007 £m £m Final dividend for 2006 – 6.5 pence per share – 6.3 Interim dividend for 2007 – 4 pence per share – 3.9 Final dividend for 2007 – 6.2 pence per share 8.2 – Interim dividend for 2008 – 4.1 pence per share 5.5 – 13.7 10.2
The Directors are proposing a final dividend for the year of 3.15 pence per share (amounting to £4.2 million). Shareholders will be asked to approve this dividend at the forthcoming Annual General Meeting and, if approved, the dividend will be paid on 20 February 2009 to all those Shareholders on the register as the close of business on 30 January 2009.
A final dividend for 2007 of 6.2 pence per share (amounting to £8.2 million) was approved by the Shareholders at the Annual General Meeting and was paid on 18 February 2008 to all those Shareholders on the register at the close of business on 8 February 2008.
22. Capital commitments As at 30 September 2008, the Group had no capital commitments (2007: £21 million).
As at 30 September 2007, the Group had commitments of £21 million in relation to one property in The Hague, The Netherlands, on which purchase contracts had been exchanged but the purchase had not been completed. This purchase was subsequently completed on 21 July 2008.
23. Events after the balance sheet date Following the financial year ended 30 September 2008, the Group has been in discussions with the administrators to the CMBS vehicles over the situation of the interest rate swaps put in place to fix the effective interest rate to the Group. These discussions are ongoing and relate to loans of £314 million and €37 million.
2008 review Governance Consolidated financials Company financials Investors 53 How we performed A responsible business 2008 in numbers 2008 in numbers Additional information Report of the Independent Auditors, Grant Thornton, to the members of Wichford P.L.C.
We have audited the financial statements of Wichford P.L.C. for the year ended 30 September 2008 which comprise the balance sheet and the related notes. These financial statements have been prepared under the accounting policies set out therein.
This report is made solely to the Company’s members, as a body, in accordance with Section 15 of the Companies Act 1982. 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 auditors’ 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.
Respective responsibilities of Directors and Auditors The Directors’ responsibilities for preparing the financial statements in accordance with applicable Isle of Man company law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) are set out in the Statement of Directors’ Responsibilities on page 25.
Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Isle of Man Companies Acts 1931 to 2004. We also report to you whether, in our opinion, the information given in the Directors’ Report is consistent with the financial statements. In addition we report to you if, in our opinion, the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding Directors’ transactions with the Company is not disclosed.
We read the Directors’ Report and any other information accompanying the financial statements and consider the implications for our report, if we become aware of any apparent misstatements or inconsistencies within it.
Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the United Kingdom Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the Directors in the preparation of the financial statements and of whether the accounting policies are appropriate to the Company’s circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations, which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion, we also evaluated the overall adequacy of the presentation of information in the financial statements.
Wichford P.L.C. Annual Report 2008 54 Opinion In our opinion: • the financial statements give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, of the state of the Company’s affairs as at 30 September 2008 and of its result for the year then ended; • the financial statements have been properly prepared in accordance with the Isle of Man Companies Acts 1931 to 2004; and • the information given in the Directors’ Report is consistent with the financial statements.
Grant Thornton Chartered Accountants Exchange House 54/58 Athol Street Douglas ISLE OF MAN IM1 1JD 16 December 2008
2008 review Governance Consolidated financials Company financials Investors 55 How we performed A responsible business 2008 in numbers 2008 in numbers Additional information Company balance sheet As at 30 September 2008
30 September 30 September 2008 2007 Notes £m £m Fixed assets Investments 2 – – – – Current assets Debtors 3 264.7 248.7 Cash at bank 1.3 6.6 266.0 255.3
Creditors – amounts falling due within one year 4 (1.2) (1.4) Net current assets 264.8 253.9 Total assets less current liabilities 264.8 253.9 Net assets 264.8 253.9 Capital & Reserves Called up share capital 5 13.3 13.3 Share premium account 6 168.7 168.7 Profit & loss account 7 82.8 71.9 Equity shareholders’ funds 264.8 253.9
These financial statements were approved by the Board of Directors on 16 December 2008 and signed on its behalf by:
Ita McArdle Director
Richard Melhuish Director
Wichford P.L.C. Annual Report 2008 56 Notes to the accounts
1. Accounting policies A summary of the significant accounting policies is set out below. They have all been applied consistently throughout the year.
Basis of consolidation The financial information has been prepared under historical cost convention, and in accordance with applicable Isle of Man law and United Kingdom accounting standards.
Cash flow statement The Company has taken advantage of the exemption under FRS 1 not to produce a cash flow statement as one is prepared for the consolidated financial statements.
Profit for the year As permitted under Section 3 of the Companies Act 1982 (Isle of Man), the Company has not prepared its own income statement.
Expenses Expenses are incurred by the Group in relation to the establishment, constitution, administration and business of the Group. Costs incurred on the purchase of investment properties are capitalised as part of the cost of investment. Costs relating to acquisitions in progress are retained in the balance sheet and included in the cost of acquisition on completion. Costs incurred on aborted acquisitions are written off to the profit and loss accounts.
Loan issue expenses In accordance with FRS 4 “Capital Instruments”, loans are included initially at the amount of the net proceeds relating to the borrowing. After initial recognition, the loans are measured at amortised cost using the effective interest method. The amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement.
Derivative instruments The Company uses interest rate derivatives to hedge interest rate exposures on the Group’s borrowings.
The Company’s criteria for adopting hedge accounting for interest rate swaps are:
(i) the derivative instrument must be related to a liability at inception; and
(ii) it must reduce the interest rate risk on the related liability by converting a variable rate to a fixed rate.
The Company’s criteria for adopting hedge accounting for interest rate caps are:
(i) the derivative must be related to expected interest rate exposures based on current and anticipated borrowing capabilities; and
(ii) it must reduce interest rate risk on such future borrowings as to limit the exposure to increases in interest rates.
Interest differentials are recognised by accruing the net interest payable. The cost of interest rate hedges is recorded in the balance sheet against the associated borrowing and is taken to the profit and loss account over the life of the hedging relationship. If the hedge is terminated early, the gain/loss is recognised on a basis which matches the timing and accounting treatment of the hedged item.
2008 review Governance Consolidated financials Company financials Investors 57 How we performed A responsible business 2008 in numbers 2008 in numbers Additional information Notes to the accounts continued
1. Accounting policies continued Taxation Current tax, including UK corporation tax, UK income tax and foreign tax, is provided at amounts expected to be paid or recovered using the tax rates and laws that have been enacted, or substantially enacted, by the balance sheet date.
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date. Where transactions or events have occurred at that date, that will result in an obligation to pay more, or a right to pay less or receive more, tax, with the following exception:
• Deferred tax assets are recognised only to the extent that the Directors consider that it is more likely than not that there will be suitable taxable profits from which the underlying timing differences can be deducted.
Where required deferred tax is provided, without discounting, under the liability method at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws enacted, or substantively enacted, at the balance sheet date.
Share-based payments As part of the contract with the Property Adviser, a performance fee is payable and this is to be satisfied by the issuance of new shares in the Company. This performance fee is related to the total return to Shareholders, based on the share price and dividends paid. The resulting performance fee for a particular performance period will be settled by the issuance of shares to the Property Adviser, subject to certain vesting conditions, at the end of the subsequent two years.
The performance fee is charged to the profit and loss account over the vesting period in accordance with FRS 20. Until the issuance of any shares under this contract, and in accordance with guidance issued by the Institute of Chartered Accountants in England and Wales, the charge to the profit and loss account is added back to distributable reserves, as it does not result in cash leaving the Company.
On the issuance of any shares under this contract, the full market value of the shares will be charged to the Company’s distributable reserves.
2. Investments
Year ended 30 September 2008 Shares Loans Total £m £m £m As at 30 September 2007 – 210.5 210.5 Foreign exchange differences – 6.9 6.9 Additions – 32.4 32.4 As at 30 September 2008 – 249.8 249.8
Year ended 30 September 2007 Shares Loans Total £m £m £m As at 30 September 2006 – 136.5 136.5 Additions – 74.0 74.0 As at 30 September 2007 – 210.5 210.5
The loans to subsidiary undertakings shown above are included in Debtors on the Company’s balance sheet; an analysis of which is shown in note 3.
Wichford P.L.C. Annual Report 2008 58 2. Investments continued The principal subsidiaries, whose results are included in these financial statements are:
Principal subsidiary % Equity owned by: Principal activity Company Subsidiary
Incorporated in British Virgin ISLANDS Wichford Centenary Court Limited Property Investment 100.00
Incorporated in France Wichford St Cloud SCI Property Investment 100.00
Incorporated in Germany B. Holding II GmbH Holding Company 94.80 B. Holding III GmbH Holding Company 94.80 Dandelion KG Property Investment 96.36 Dandelion Verwaltungsgesellschaft mb H General Partner* 96.36 Ebony KG Property Investment 96.36 Ebony Verwaltungsgesellschaft mbH General Partner** 96.36 Justizzentrum Halle Parkplatz Verwaltungs-GmbH & Co. KG Property Investment 100.00 Justizzentrum in Halle Wichford & Co. KG Property Investment 93.87 Justizzentrum in Halle Wichford Verwaltungsgesellschaft mbH General Partner*** 100.00 Ludwigsburg Property GmbH & Co. KG Property Investment 96.36 Ludwigsburg Property Management GmbH General Partner**** 100.00 Ludwigsburg Real Estate Management GmbH Holding Company 96.30 Ticino Property GmbH & Co. KG Property Investment 96.36 Ticino Property Management GmbH General Partner***** 100.00 Ticino Real Estate Management GmbH Holding Company 96.30 Wichford Parkplatz GmbH Property Investment 100.00
Incorporated in Gibraltar Wichford Edgbaston Limited Property Investment 100.00
Incorporated in Great Britain Wichford Carlisle Limited Property Investment 100.00 Wichford Ladywell Limited Property Investment 100.00 Wichford Property General Partner Limited General Partner****** 100.00 Wichford Property Limited Partnership Property Investment 100.00
Incorporated in Guernsey Wichford Worthing Limited Property Investment 100.00
Incorporated in the Isle of Man Wichford Property (LP) Limited Limited Partner******* 100.00 Wichford Alpha Limited Holding Company 100.00 Wichford Glidewell Limited Property Investment 100.00 Wichford Liverpool Limited Property Investment 100.00 Wichford Sheffield Limited Property Investment 100.00 Wichford St Helens Limited Property Investment 100.00 Wichford Swindon Limited Property Investment 100.00 Wichford Wellesley Road Limited Property Investment 100.00 Wichford Beta Limited Holding Company 100.00 Wichford Bedford Limited Property Investment 100.00 Wichford Bromley Limited Property Investment 100.00 Wichford Hartlepool Limited Property Investment 100.00
2008 review Governance Consolidated financials Company financials Investors 59 How we performed A responsible business 2008 in numbers 2008 in numbers Additional information Notes to the accounts continued
2. Investments continued
Principal subsidiary % Equity owned by: Principal activity Company Subsidiary Wichford Manchester Limited Property Investment 100.00 Wichford Northampton Limited Property Investment 100.00 Wichford Redcar Limited Property Investment 100.00 Wichford Rotherham Limited Property Investment 100.00 Wichford Washington Limited Property Investment 100.00 Wichford Wigan Limited Property Investment 100.00 Wichford Gamma Limited Holding Company 100.00 Wichford Aberdeen (Atholl House) Limited Property Investment 100.00 Wichford Aberdeen (Cullen House) Limited Property Investment 100.00 Wichford Acton Limited Property Investment 100.00 Wichford Barnsley Limited Property Investment 100.00 Wichford Basildon No 1 Limited Property Investment 100.00 Wichford Billingham Limited Property Investment 100.00 Wichford Birkenhead Limited Property Investment 100.00 Wichford Birmingham Limited Property Investment 100.00 Wichford Bradford Limited Property Investment 100.00 Wichford Bridgewater Limited Property Investment 100.00 Wichford Chester Limited Property Investment 100.00 Wichford Chippenham Limited Property Investment 100.00 Wichford Dalkeith Limited Property Investment 100.00 Wichford Dundee Limited Property Investment 100.00 Wichford G3 Limited Property Investment 100.00 Wichford Grays Limited Property Investment 100.00 Wichford Leeds Limited Property Investment 100.00 Wichford Lindsay Limited Property Investment 100.00 Wichford Llandarcy Park Limited Property Investment 100.00 Wichford Newport Road Limited Property Investment 100.00 Wichford Paisley Limited Property Investment 100.00 Wichford Peterborough Limited Property Investment 100.00 Wichford Plymouth Limited Property Investment 100.00 Wichford Property Holdings No 3 Limited Property Investment 100.00 Wichford Redditch Limited Property Investment 100.00 Wichford Riverside Exchange Limited Property Investment 100.00 Wichford Salford Quays Limited Property Investment 100.00 Wichford Smethwick Limited Property Investment 100.00 Wichford Sparkhill Limited Property Investment 100.00 Wichford St Asaph Limited Property Investment 100.00 Wichford St Mellons Limited Property Investment 100.00 Wichford Swansea Limited Property Investment 100.00 Wichford Telford Limited Property Investment 100.00 Wichford Wakefield Limited Property Investment 100.00 Wichford Waterside Leeds Limited Property Investment 100.00 Wichford Wolverhampton Limited Property Investment 100.00 Wichford Delta Limited Holding Company 100.00 Wichford Bristol Limited Property Investment 100.00
Wichford P.L.C. Annual Report 2008 60 2. Investments continued
Principal subsidiary % Equity owned by: Principal activity Company Subsidiary Wichford Chatham Limited Property Investment 100.00 Wichford Chelmsford Limited Property Investment 100.00 Wichford Durley Limited Property Investment 100.00 Wichford Molineux Wolverhampton Limited Property Investment 100.00 Wichford Newcastle Limited Property Investment 100.00 Wichford Newington Causeway Limited Property Investment 100.00 Wichford North Street Limited Property Investment 100.00 Wichford Norwich Limited Property Investment 100.00 Wichford Tamar Limited Property Investment 100.00 Wichford Trentside Limited Property Investment 100.00 Wichford West Point Limited Property Investment 100.00 Wichford Woodlands Limited Property Investment 100.00 Wichford Europe Limited Holding Company 100.00 Wichford Halle Limited Property Investment 100.00 Wichford Halle II Limited Property Investment 100.00 Wichford Halle III Limited Property Investment 100.00 Wichford Halle IV Limited Property Investment 100.00 Wichford Europe 2 Limited Holding Company 100.00
Incorporated in Jersey Exchange House Unit Trust Property Investment 100.00 Wichford Harrow Limited Property Investment 100.00 Wichford Ipswich Limited Property Investment 100.00 Wichford Oldham Limited Property Investment 100.00 Wichford Southampton Limited Property Investment 100.00
Incorporated in Luxembourg Concertine SA Holding Company 100.00 Mirano SA Holding Company 100.00 Wichford Dandelion Holding sarl Holding Company 100.00 Wichford Ebony Holding sarl Holding Company 100.00 Wichford Ludwigsburg Holding sarl Holding Company 100.00 Wichford Ticino Holding sarl Holding Company 100.00 Wichford VGB Holding sarl Holding Company 100.00
* General Partner of Dandelion KG ** General Partner of Ebony KG ** General Partner of Justizzentrum in Halle Wichford GmbH & Co. KG **** General Partner of Ludwigsburg Property GmbH & Co. KG ***** General Partner of Ticino Property & Co. KG ****** General Partner of the Wichford Property Limited Partnership ******* Limited Partner of the Wichford Property Limited Partnership
2008 review Governance Consolidated financials Company financials Investors 61 How we performed A responsible business 2008 in numbers 2008 in numbers Additional information Notes to the accounts continued
3. Debtors 30 September 30 September 2008 2007 £m £m Trade debtors – – VAT recoverable 0.1 0.1 Prepayments 2.4 7.5 Amounts due from subsidiary undertakings 262.2 241.1 Total debtors 264.7 248.7
4. Creditors: amounts falling due within one year 30 September 30 September 2008 2007 £m £m Other creditors and accruals 1.2 1.4 Total creditors falling due within one year 1.2 1.4
5. Share capital 30 September 30 September 2008 2007 AUTHORISED Ordinary Shares of 10 pence each – number 180,000,000 180,000,000 – £m 18.0 18.0
ISSUED, CALLED UP AND FULLY PAID Ordinary Shares of 10 pence each – number 132,761,948 132,703,055 – £m 13.3 13.3
Holders of the Ordinary Shares are entitled to receive dividends and other distributions and to attend and vote at any general meeting.
The Company made share placings of Ordinary Shares on 13 March 2007 whereby the shares issued at that time did not rank for any interim dividend related to the financial period ended 31 March 2007 but arepari passu with the remaining Ordinary Shares for dividends for the financial periods beginning on or after 1 April 2007.
Ordinary Shares of 10 pence each 30 September 30 September Number 2008 2007 – ranking for dividends for the current year 132,761,948 97,325,697 – not ranking for interim dividend for the previous year – 35,377,358 132,761,948 132,703,055
Ordinary Shares of 10 pence each 30 September 30 September £m 2008 2007 – ranking for dividends for the current year 13.3 9.7 – not ranking for interim dividend for the previous year – 3.6 13.3 13.3
Wichford P.L.C. Annual Report 2008 62 6. Share premium account 30 September 30 September 2008 2007 £m £m As at 1 October 168.7 148.9 Premium on shares issued in period (net of expenses) – 69.8 Transfer to distributable reserves – (50.0) As at 30 September 168.7 168.7
7. Profit and loss account 30 September 30 September 2008 2007 £m £m As at 1 October 71.9 15.9 Profit for the year 24.6 17.7 (Debit)/credit relating to Performance Fee of Property Adviser – (1.5) Dividends paid (13.7) (10.2) Transfer to distributable reserves – 50.0 As at 30 September 82.8 71.9
8. Reconciliation of Shareholders’ funds 30 September 30 September 2008 2007 £m £m As at 1 October 253.9 174.6 Profit for the year 24.6 17.7 Dividends paid (13.7) (10.2) (Debit)/credit relating to Performance Fee of Property Adviser – (1.5) Gross proceeds from issue of Ordinary Shares – 75.0 Share issue costs – (1.7) As at 30 September 264.8 253.9
2008 review Governance Consolidated financials Company financials Investors 63 How we performed A responsible business 2008 in numbers 2008 in numbers Additional information List of properties
Value bands † £0-5 million * £5-10 million • £10-20 million + >£20 million Area Address Value band (sq m) Tenant/occupier UNITED KINGDOM Atholl House Guild Street Aberdeen AB11 6AR * 5,110 First Secretary of State Lord Cullen House Fraser Place Aberdeen AB25 3TP * 3,046 Health and Safety Executive Cooper House 59 Peel Street Barnsley S70 2RL * 2,016 Secretary of State for Environment Great Oaks House Great Oaks Basildon SS14 1JE * 5,077 Secretary of State for Environment Woodlands Manton Industrial Estate Manton Lane Bedford Bedfordshire MK41 7LW • 10,398 Highways Agency Chailey House Secretary of State for Transport, 30 Cardington Road Bedford Bedfordshire MK42 0EX † 1,546 Local Government and the Regions Theatre Buildings Kingsway Billingham TS23 2NA † 648 Secretary of State for Environment Great Western House Chester Street Woodside Birkenhead CH41 6DA • 7,752 Secretary of State for Environment Aqueous 2 Aqueous Business Village Birmingham B6 5RQ * 3,408 Secretary of State for Health Sheldon Secretary of State for Transport, 2308 Coventry Road Sheldon Birmingham B26 3JZ * 2,693 Local Government and the Regions Hanover House Northgate Street Bridgwater Somerset TA6 3HG † 1,944 Secretary of State for Environment Centenary Court St Blaise Way Bradford BD1 4DB + 9,769 Secretary of State for Environment Phoenix House Rushton Avenue Thornbury Bradford BD3 7BH * 3,637 First Secretary of State Bristol 31-49 Newfoundland Street & 1 Newfoundland Court Bristol BS2 9AP * 2,947 Secretary of State for Health Unicorn House 28 Elmfield Road Bromley BR1 1NX • 5,365 Secretary of State for Environment Rivers House Fortran Way St Mellons Cardiff CF3 0EY † 2,010 Environment Agency Ty Cambrian House 29 Newport Road Cardiff CF24 0TP * 3,201 Environment Agency Rufus House Castle Street Carlisle CA3 8RX † 2,545 Secretary of State for Environment The Observatory Secretary of State for Transport, Brunel Chatham Maritime Kent ME4 4NT † 1,993 Local Government and the Regions Wren House Hedgerows Business Park Chelmsford Essex CM2 5FP † 1,287 First Secretary of State Chantry House 55 57 and 59 City Road and 28 Crewe Street Chester CH1 3AQ † 3,219 Secretary of State for Environment Cyppa Court Avenue La Fleche Chippenham Wiltshire SN15 3ER † 1,167 Secretary of State for Environment St Anne House Secretary of State for Transport, 20-26 Wellesley Road Croydon • 6,808 Local Government and the Regions Dalkeith 7/15 Buccleuch Street Dalkeith EH22 1HB † 661 First Secretary of State Lindsay House 18/30 Ward Road Dundee DD1 1QB * 3,672 Secretary of State for Environment Sidlaw House Secretary of State for Transport, 4 Explorer Road Dundee DD2 1DX * 5,502 Local Government and the Regions
Wichford P.L.C. Annual Report 2008 64 Area Address Value band (sq m) Tenant/occupier Edgbaston 2 Duchess Place Secretary of State for Transport, Edgbaston B16 8NS * 4,309 Local Government and the Regions Ladywell House Ladywell Road Edinburgh EH12 7TB * 4,728 Secretary of State for Environment Grays 2 Derby Street Grays RM16 8QQ † 1,112 Secretary of State for Environment Lyon House Lyon Road Harrow HA1 2DG • 9,246 Secretary of State for Environment Ward Jackson House Raby Road Hartlepool TS24 8AA † 1,935 Secretary of State for Environment St Clare House Princes Street Ipswich IP1 1PH • 7,667 Secretary of State for Environment Castle House Lisbon Street Leeds LS1 4LX • 7,271 Secretary of State for Environment Jefferson House 27 Park Place Leeds LS1 2SZ * 2,959 Secretary of State for Environment Waterside Court Kirkstall Road Leeds LS4 2DD * 3,344 Secretary of State for Environment Prudential Buildings 36 Dale Street Liverpool L2 5UZ † 2,309 Her Majesty’s Court Services Maes Newydd Britannic Way Llandarcy Neath SA10 6JQ † 1,352 Environment Agency Southwark 63/67 Newington Causeway London SE1 6LS * 2,211 Secretary of State for Environment Acton Armstrong Road London W3 7JL • 3,790 Secretary of State for Environment Manchester 1009 Oldham Road Newton Heath Manchester M40 2EP † 1,433 Secretary of State for Environment Centralofts Secretary of State for Communities 1 Waterloo Square Newcastle Upon Tyne NE1 4DR † 521 and Local Government St Katherine’s House 50 Gold Street Northampton NN1 2LG † 2,703 Secretary of State for Environment Norwich 1 Theatre Street Norwich NR2 1RG † 816 Department for Works and Pensions Trentside Scarrington Road West Bridgeford Nottingham NG2 5F * 3,368 Environment Agency Tweedale House 75 Union Street Oldham OL1 1LH † 1,916 Environment Agency Paisley 47/51 High Street Paisley PA1 2AN † 1,293 Secretary of State for Environment Clifton House Broadway & 126/128 Park Road Peterborough PE1 1QZ • 5,503 Secretary of State for Environment Bretonside Exeter Street Plymouth • 5,700 Department for Work & Pensions West Street and Centre Point Plymouth † 2,590 Secretary of State Brooklands Office Campus Plymouth PL6 5XR † 1,813 Secretary of State for Environment Portland House West Dyke Road Redcar TS10 1DH † 883 Secretary of State for Environment Osprey House Albert Street Redditch B97 4DE † 2,759 Secretary of State for Health
2008 review Governance Consolidated financials Company financials Investors 65 How we performed A responsible business 2008 in numbers 2008 in numbers Additional information List of properties continued
Value bands † £0-5 million * £5-10 million • £10-20 million + >£20 million Area Address Value band (sq m) Tenant/occupier Pilsworth Road Heywood Rochdale • 9,173 Secretary of State Bradmarsh Business Park Bow Bridge Close Rotherham S60 1BY † 1,340 Environment Agency Units 1 & 2 Dallas Court South Langworthy Road Salford Quays M50 2GF † 1,536 Secretary of State for Environment Kings Court Hanover Way Sheffield S3 7UF • 5,037 Secretary of State for Environment Trinity House High Street Smethwick B66 3AD † 1,151 Secretary of State for Environment St Cross House 18 Bernard Street Southampton SO14 3PJ * 3,993 Secretary of State for Environment Heynesfield House Stoney Lane Sparkhill B12 8AF † 1,088 Secretary of State for Environment Netcom House St Asaph LL17 0JG * 2,381 North Wales Police Authority Gregson House 2 Central Street St Helens WA10 1UF † 2,828 Secretary of State for Environment Unit 5 Secretary of State for Transport, Sandringham Park Swansea Vale Swansea SA7 0AA † 2,795 Local Government and the Regions Delta 900 Delta Business Park Great Western Way Swindon SN5 7XQ † 2,833 Secretary of State for Environment Sapphire House Stafford Park 10 Telford TF3 3AB • 8,327 Secretary of State for Environment The Grange Uxbridge County Court Uxbridge UB4 8HL † 1,066 First Secretary of State Cheviot House Washington NE37 1HE † 2,750 First Secretary of State Exchange House 60 Exchange Road Watford WD18 0GG • 5,846 Secretary of State for Environment Brocol House King Street Wigan WN1 1EA † 4,127 Secretary of State for Environment Temple House Temple Street Wolverhampton WV2 4AU † 2,551 Secretary of State for Environment Molineux House Temple Street Wolverhampton WV2 4AN † 3,013 Secretary of State for Environment Saxon House Little High Street Worthing Sussex † 1,464 Environment Agency York Kettlestring Lane Clifton Moor York YO30 4XF † 2,155 First Secretary of State
CONTINENTAL EUROPE Margrafenstrasse 17/18 10969 Berlin Germany • 7,173 VBG Wiener Platz 01069 Dresden Germany + 17,449 VBG Kolner Strasse 20 51429 Berisch-Gladbach Cologne Germany • 8,240 VBG Martin-Luther-Strasse 79 71636 Ludwigsburg Stuttgart + 12,455 VBG Thuringer Strasse Halle an der Saale Germany + 34,689 State of Saxony-Anhalt Haagse Veste 1 The Hague The Netherlands + 12,878 Royal Dutch Government Le Riverside 22-23 Quai Carnot Saint Cloud 92210 France * 2,297 ACE Wichford P.L.C. Annual Report 2008 66 Four year review
30 September 30 September 30 September 30 September 2008 2007 2006 2005* Financial Revenue £m 42.0 33.1 24.2 16.0 Profit Before Tax Trading Operations £m 10.7 11.6 8.0 (5.3) Total £m (130.0) (9.6) 53.0 4.8 Earnings per Share Trading Operations Pence 7.8 9.7 8.1 (11.6) Total Pence (98.2) (8.4) 54.2 10.4 Net Assets £m 118.0 276.7 211.4 164.1 Gearing Percentage 403 146 117 58 Net Assets per Share Pence 88.9 208.5 217.2 168.6
UK Portfolio Number of properties 72 72 61 46 Total area Square metres 246,307 244,776 208,734 138,037 Annualised total rent £m 33.0 32.5 27.3 17.6 Valuation £m 446.6 526.3 455.8 267.1 Average rent £ per sq metre 135.39 132.80 130.80 136.40 Occupancy Percentage 99 98 99 99
Continental European Portfolio Number of properties 7 6 – – Total area Square metres 95,181 77,314 – – Annualised total rent £m 9.8 7.8 – – Valuation £m 151.3 147.1 – – Average rent £ per sq metre 102.96 100.73 – – Occupancy Percentage 100 100 – –
* This is a 15 month period
2008 review Governance Consolidated financials Company financials Investors 67 How we performed A responsible business 2008 in numbers 2008 in numbers Additional information Company information
Directors (All Non-Executive) Isle of Man administrator UK bankers Philippe de Nicolay (Chairman) Simcocks Trust Limited Bank of Scotland Plc David Harrel Top Floor 38 Threadneedle Street Ita McArdle (Senior Independent 14 Athol Street London EC2P 2HL Director) Douglas Richard Melhuish Isle of Man IM1 1JA German bankers Mark Taylor (Chairman of the Audit ABN AMRO Bank N.V. Committee) Isle of Man advocates Niederlassung Deutschland Hugh Ward Simcocks Advocates Limited Theodor-Heuss-Allee 80, Wolf Cesman Ridgeway House 60486 Frankfurt am Main Ridgeway Street Germany Company Secretary Douglas Anne Couper Woods Isle of Man IM99 1PY Deutsche Bank Wilhelmstrasse 20-22, Assistant Company Secretary UK solicitors 65185 Wiesbaden Sarah Marshall S J Berwin LLP Germany 10 Queen Street Place Property Adviser London EC4R 1BE Luxembourg bankers Wichford Property Management Limited Fortis Banque Luxembourg S.A. Ground Floor Independent Auditor 27 avenue Monterey Ryder Court Grant Thornton L-2951 14 Ryder Street Exchange House Luxembourg London SW1Y 6QB 54/58 Athol Street Douglas French bankers Property Manager Isle of Man IM1 1JD ING Belgium S.A. Succursale en France Brown Cooper Marples Limited 24/26 blvd Carnot 20 Upper Grosvenor Street UK valuers 59042 Lille London W1K 7PB Atisreal Limited France Norfolk House Registrars 31 St James’ Square Registered Office Capita Registrars (Isle of Man) Limited London SW1Y 4JR Top Floor 3rd Floor 14 Athol Street Exchange House Continental European valuers Douglas 54-62 Athol Street DTZ Eurexi Isle of Man IM1 1JA Douglas 8 rue de l’Hotel de Ville Isle of Man 92522 Neuilly-sur-Seine Incorporated and registered IM1 1JD France in Isle of Man No. 111198C Joint broker Isle of Man bankers KBC Peel Hunt Ltd Royal Bank of Scotland International 111 Old Broad Street Limited London EC2N 1PH Royal Bank House Victoria Street Joint broker Douglas Evolution Securities Limited Isle of Man IM99 1NJ 100 Wood Street London EC2V 7AN
Wichford P.L.C. Annual Report 2008 68 Glossary of terms
Active Portfolio Gearing Other Items Portfolio of UK properties which have The Group’s net debt as a percentage Includes the profit and losses on the lease terms of less than seven years to of net assets. sales of the investment properties and expiry or a possible lease break date at items of a non-trading, non-cash nature the tenant’s option. ICR such as valuation adjustments arising Interest Cover Ratio. from the fair valuing of investments AIM properties and derivative financial The London Stock Exchange’s Index linked statements. international market for smaller, Where a government published index growing companies. is used as the mechanism to determine Property Adviser increases in rent from the tenant. An WPML BCM example of such an index is the United Brown Cooper Marples Limited. Kingdom Consumer Price Index. Property Manager BCM CMBS IPD Commercial Mortgage-backed Investment Property Databank, an Trading Operations securitisation. independent organisation that issues This excludes the Other Items and real estate performance indices. reflects the trading activities of Combined Code the Group. The Combined Code on Corporate JOHCM Governance issued by the Financial J O Hambro Capital Management WAULT Reporting Council in June 2006. Limited. Weighted Average Unexpired Lease Term. Continental European Portfolio LTV Portfolio of properties in Europe but Loan to Value. WPML not in the UK. Wichford Property Management Main Market Limited, jointly owned by JOHCM Corovest Main Market of the London Stock and Corovest. Corovest Fund Managers (UK) Limited. Exchange PLC.
Core Portfolio Management Company Portfolio of UK properties which have WPML. lease terms in excess of seven years to expiry or a possible lease break date at Net Initial Yield the tenant’s option. The percentage of the current annual rents to the valuation of the properties after including a potential purchaser’s estimated acquisition costs.
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2008 review Governance Consolidated financials Company financials Investors 69 How we performed A responsible business 2008 in numbers 2008 in numbers Additional information