Annual Report • Mar 31, 2013
Annual Report
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Mountview Estates P.L.C. was established in 1937 as a small family business based in North London by two brothers, Frank and Irving Sinclair.
Mountview Estates P.L.C. is a Property Trading Company. The Company owns and acquires tenanted residential property throughout the UK and sells such property when it becomes vacant.
The figures below are calculated as a percentage of the total value of Inventories of Trading properties.
Derbyshire, Leicestershire and Nottinghamshire
Portfolio percentage
Bedfordshire, Berkshire, Essex, Buckinghamshire, Cambridgeshire, Hertfordshire, Oxfordshire, Norfolk, Suffolk, Middlesex, Northamptonshire
Portfolio percentage
18.49%
London (North) Portfolio percentage
22.95%
Remainder of England and Wales
Portfolio percentage
13.97%
Kent, Surrey, Sussex, Dorset, Hampshire, Isle of Wight
Portfolio percentage
London (South)
Portfolio percentage
D. M. Sinclair FCA
I am pleased to report strongly increased profits for the year ended 31 March 2013; profit before tax was £28.9 million (2012: £22.8 million) an increase of £6.1 million.
In my statement last year I reported that Mountview continued to record good financial performance against the backdrop of a very challenging economic climate. The economic climate continues to be far from easy and so an increase in profits in excess of 25% must be considered a substantial achievement.
Your Board is able to recommend an increased final dividend of 125p per share in respect of the year ended 31 March 2013 which is payable on 19 August 2013 to shareholders on the Register of Members as at 19 July 2013. This will make a total dividend for the year ended 31 March 2013 of 175p per share (2012: 165p per share) which is more than three times covered by the earnings per share.
During the year under review we have continued to make good purchases and have enjoyed strong growth in sales. Our financial resources are well managed which keeps us in good position to take advantage of suitable opportunities when they come along. Recently recruited personnel are developing well and I am confident that the future of the Company is in the hands of a good team.
In our second interim management statement we reported the sudden death of Keith Langrish-Smith. Keith had joined the Company in 1974 and was married to Elizabeth (one of the twin daughters of Frank Sinclair, co-founder of the Company). He had planned to retire at the end of the Company's financial year, but died unexpectedly on 17 December 2012. Keith's easy going and affable demeanour is missed by everyone. Indeed he may prove to have been one of the last members of the family to have served in the management of the Company.
Keith's loyalty and dedication to the Company is perhaps uncommon in this day and age and it may be that it could only be expected from a family member. Nevertheless I have a fine team around me and I thank them all for their efforts throughout the year which have produced results of which they can be proud.
We cannot defy all the difficulties of the economic climate but the Company is well placed to do more than just survive and can expect to enjoy good progress when conditions are less difficult.
One final note relates to me personally; after more than 23 years I have decided to step down as Chairman with effect from the Annual General Meeting. John Fulton, who has been one of our Non-Executive Directors since 2007, will assume the role of Non-Executive Chairman and I shall remain as Chief Executive of the Company. I believe that the time is right for me to hand over the role of Chairman and concentrate on the day-to-day running and development of the business, which continues to go from strength to strength in difficult markets. Good Corporate Governance also dictates the splitting of the two roles and we believe that now is the right time to take this step.
D.M. Sinclair Chairman
The Group's business model is simple. We are a property trading company that buys tenanted properties at a discount to notional vacant possession value and then sells them when they become vacant.
The Group trades in the following categories:
A unit is a property, however large or small, whether freehold or leasehold, which is held subject to one tenancy.
| No. of units |
Cost £m |
|
|---|---|---|
| Regulated, Assured Shorthold tenancies, and other | 2,420 | 266.62 |
| Assured tenancies | 235 | 23.08 |
| Ground rents | 1,115 | 1.82 |
| Life tenancies | 340 | 25.10 |
Analysis of the Group Trading portfolio at the lower of cost and estimated net realisable value by geographical location as at 31 March 2013
| Regulated, Assured Shorthold tenancies, Assured tenancies and other £m |
Ground rents £m |
Life tenancies £m |
Portfolio % |
|
|---|---|---|---|---|
| London (North) | 71.81 | 0.69 | 0.20 | 22.95 |
| London (South) | 78.75 | 0.86 | 2.96 | 26.08 |
| Kent, Surrey, Sussex, Dorset Hampshire, Isle of Wight |
37.26 | 0.05 | 5.64 | 13.57 |
| Bedfordshire, Berkshire, Essex, Buckinghamshire, Cambridgeshire, Hertfordshire, Oxfordshire, Norfolk, Suffolk, Middlesex, Northamptonshire |
52.03 | 0.12 | 6.38 | 18.49 |
| Derbyshire, Leicestershire and Nottinghamshire |
14.74 | 0.10 | 0.80 | 4.94 |
| Remainder of England and Wales | 35.11 | – | 9.12 | 13.97 |
£56.6m
£33.7m
continued
Revenue
(2012: £42.9m)
Gross profit
(2012: £27.2m)
At Mountview, we have a relatively straightforward yet proven way of working: we buy tenanted residential properties and sell them when they become vacant. We buy both regulated tenancy and life tenancy property. The former, which are characterised by rental returns below market value balanced by earlier settlement are becoming increasingly short in supply. Due to the Housing Act 1988 no new such tenancies have been created for over 20 years.
Life tenancy stock has nominal rental income, is bought at a greater discount to vacant possession value and has a higher margin on sale. A key attraction of this sector to Mountview is the fact that property maintenance is usually the responsibility of the life tenant and this leads to lower ongoing costs to ourselves. We carry out regular checks to ensure that all properties are maintained in good condition.
During the financial year the Group has sold the following number of units:
| No. of | ||
|---|---|---|
| Sales Price (£) | units | Location |
| 500,000 –1 million | 13 | London |
| below 500,000 | 164 | London and other |
| 177 |
We achieved sales of £39.96 million (2012: £27.8 million) demonstrating the liquidity of the Portfolio. The average sales price achieved was £225,000 (2012: £203,000). Based on sales achieved during the financial year, the Directors considered it justified to reverse the remaining provision for the Magdalen Portfolio of £1.02 million. The Portfolio is located in London SW18 and was purchased in January 2008.
Left: Landsdown Crescent, Bath Above: Saltwood, Hythe, Kent
The majority of our residential properties that are subject to a regulated tenancy are concentrated in London and the South East. Returns from the regulated portfolios are derived from a combination of below market rental income and trading profits on the sale of property, when the property falls vacant and the reversionary gain is crystallised.
ancial business Purchases Most properties acquired are unimproved and therefore of low average value. One of the core Mountview capabilities is to actively manage these properties: we identify opportunities to add value by carrying out refurbishments prior to their sale. The greatest gains are available at the upper end of the market and this is where we concentrate our refurbishment activities. These properties are sold by private treaty.
| Analysis of Acquisitions | ||||
|---|---|---|---|---|
| No. of units |
Year ended 31 March 2013 Cost £m |
|||
| Regulated tenancies | 200 | 27.10 | ||
| Life tenancies | 2 | 0.22 | ||
| Ground rents (or created) |
23 | 0.03 | ||
| Assured tenancies (or created) |
11 | 1.46 | ||
| 236 | 28.81 |
The above analysis does not include legal and commission expenses directly related to the acquisition of properties or any repairs of a capital nature.
The Group residential trading properties are carried in the balance sheet at the lower of cost and net realisable value. Net realisable value is the estimated net proceeds of sale if the property were to be vacant at the date of the balance sheet.
During the year to 31 March 2013, the Company benefited from good market conditions in certain areas. The last 12 months have seen us achieve premium prices for a number of properties, especially in sought-after areas such as Belsize Park and the West End of London.
The Company's rental income is derived from five different sources:
Where possible we still target those properties where the rent is capped and where our team has identified opportunities to make key improvements. For example, a relatively modest investment can ensure that a property benefits from services and amenities that have been lacking in the past. In many cases, this leads directly to a substantial increase in rental income.
The operating contribution from the core business (comprising profits on sale of trading properties and rental income) is analysed in Note 4 on page 34.
informati
continued
The professional knowledge and skills of our compact team overcame difficult market conditions during the year, ensuring that we were able to purchase properties for a total of £28.8 million.
Looking ahead, we believe that we will identify similar opportunities in the coming months. Our strength is based on a tight focus on our core business of regulated tenancies together with a prudent approach. We have kept gearing low and borrowing under control.
Since the end of the financial year we have continued to sell and purchase properties and we are pleased with the results achieved. Given our financial strength we believe that we are in a strong position to take advantage of any prime purchasing opportunities which may arise in the near future.
The analysis of the investment portfolio as at 31 March 2013 is as follows:
| 2013 | 2012 | |
|---|---|---|
| Louise Goodwin Limited 37 units 38 units | ||
| A.L.G. Properties Limited | 4 units | 5 units |
All the properties are located in Belsize Park, London NW3, one of the capital's most prestigious addresses.
The only significant departures from the Company's normal activities, these investment companies were purchased in 1999 when we seized the opportunity to build a presence in one of the best locations in London. Although rental returns have proven to be less significant than we anticipated, the investment portfolio has nevertheless generated consistently strong cash flow.
When the properties become vacant, we refurbish and sell them. During the financial year, we disposed of 1 unit for £1.880 million in Louise Goodwin Limited and 1 Freehold for £59,000 in A.L.G. Properties Limited (2012: disposed of 7 units for a total of £4.8 million in Louise Goodwin Limited and 5 units for £4.09 million in A.L.G. Properties Limited).
We will continue to maintain our strategy for the investment portfolio, deriving rental income in the short to medium-term and capital through sales when units become vacant. We are prepared to refurbish the properties and sell them by private treaty to discerning purchasers who actively seek new homes in this area.
As Belsize Park is an extremely desirable area with high levels of demand the outlook remains positive.
Valuations increased during the year by £2.6 million. The properties comprised within the investment portfolio have been revalued externally for the purpose of these accounts. The value attributed to each individual property reflects the change in its condition where appropriate and any adjustment resulting from changes in market circumstances.
Details of the valuation of the investment portfolio are disclosed in Note 13 to the Consolidated Financial Statement on pages 38 to 39.
37 units (2012: 38)
4 units (2012: 5)
continued
Louise Goodwin Limited A.L.G. Properties Limited
Top: Belsize Park Gardens, NW3 Left: Belsize Grove, NW3
G
Joined the Company as Company Secretary in 1977, became a Director on 1 January 1982 and succeeded his late father as Chairman on 5 June 1990. Fellow of the Institute of Chartered Accountants in England and Wales.
Mr K. Langrish-Smith was a Director of the Company for part of the financial year ended 31 March 2013 but sadly passed away on 17 December 2012.
Joined the Company in 1996 and became Company Secretary. Became a Director on 1 April 2004. Fellow of the Association of Chartered Certified Accountants.
Joined the Company as a Non-Executive Director on 1 January 2007. Fellow of the Institute of Chartered Accountants in England and Wales. He has held senior financial roles in multinational companies.
*J.B. Fulton is considered to be independent for the purposes of the UK Corporate Governance Code 2010.
Joined the Company as a Non-Executive Director on 1 November 2010. Fellow of Institute of Chartered Accountants in England and Wales. Son of the late Frank Sinclair co-founder of the Company. Retired as Head of Correspondent Banking for National Bank of Canada but remains as an Adviser on International Banking.
Mountview House, 151 High Street, Southgate, London N14 6EW
HSBC Bank Plc, 60 Queen Victoria Street, London EC4N 4TR
Barclays Bank Plc, One Churchill Place, London E14 5HP
BSG Valentine Lynton House, 7–12 Tavistock Square, London WC1H 9BQ
Norton Rose Fulbright LLP 3 More London Riverside, London SE1 2AQ
Capita Registrars The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU
Brewin Dolphin Securities Ltd 12 Smithfield Street, London EC1A 9BD
SPARK Advisory Partners Limited 33 Glasshouse Street London W1B 5DG
The Directors have pleasure in presenting to the Members their 76th Annual Report together with the Financial Statements for the year ended 31 March 2013.
The results for the year are set out in the Income Statement on page 23.
The Directors recommend the payment of a final dividend of 125p per share. The dividend will be paid on 19 August 2013, subject to approval at the Annual General Meeting on 14 August 2013, to Shareholders on the register at the close of business on 19 July 2013.
The principal activities of the Company and its subsidiary undertakings are as follows:
| Parent Company Mountview Estates P.L.C. |
Property Trading |
|---|---|
| Subsidiary undertakings (wholly-owned) | |
| Hurstway Investment Company Limited | Property Trading |
| Louise Goodwin Limited | Property Investment |
| A.L.G. Properties Limited | Property Investment |
Details of the Group's performance during the year and expected future developments are contained in the Chairman's Statement and the Review of Operations on pages 3 to 9. In addition the Group has established the following Financial Key Performance Indicators:
The Directors consider that there are no significant non-financial indicators in existence.
continued
The Group's business is subject to a number of different risk factors but management considers the key risks to the Group's business are:
Our residential portfolio consists mainly of low value units spread over high demand areas of London and the South East. The majority of our properties are of relatively low value, which are still affordable even during a market slowdown. Our investment portfolio is located in the highly desirable area of Belsize Park.
The shrinking of the UK economy combined with the worsening economic outlook and higher unemployment may affect the prices obtained from the sale of properties. Please see Note 3 to the Consolidated Financial Statements on pages 33 and 34.
The Company had entered into an Interest Rate Swap Agreement from 2008, for a period of 5 years on £40 million of its loan with the intention to reduce its exposure to interest rate fluctuations. The Interest Rate Swap Agreement expired in March 2013.
The Company has negotiated its long-term loan facilities with Barclays Bank until November 2014 and HSBC Bank until January 2015. The Company also demonstrated in the past that it is able to generate strong cash flows even in difficult market conditions.
The Directors consider that the following are potentially material non-financial risks.
| Risks | Impact | Action taken to mitigate |
|---|---|---|
| Reputation | Destabilisation of the Company, adverse effect on share price |
Act honourably, communicate |
| People related issues | Loss of key employees/ low morale/inadequate skills |
Maintain market level remuneration packages, training. Succession planning and recruitment |
| Computer failure | Loss of data | External IT consultants, backup, off-site copies |
| Acquisitions | Low returns and liquidity | Draw on wealth of experience to ensure continued selective geographical spread of desirable properties |
In accordance with the Company's Articles of Association, Mr. D.M. Sinclair retires from the Board by rotation and being eligible, offers himself for reappointment. A resolution for his reappointment will be proposed at the Annual General Meeting.
The authorised share capital of the Company as at 31 March 2013 was £250,000 divided into 5,000,000 Ordinary Shares of 5p of which 3,899,014 were in issue (2012: 3,899,014).
The rights and obligations attaching to the Company's shares, as well as the powers of the Company's Directors, are set out in the Company's Articles of Association, a copy of which can be viewed on the Company's website at www.mountviewplc.co.uk
The Company's Articles of Association can only be amended by special resolution of the Shareholders.
continued
| The number of Ordinary Shares in the Company in which the Directors and their families were interested is as follows: | ||||
|---|---|---|---|---|
| 31 March 2013 |
1 April 2012 |
|||
| 538,383 | 535,883 | |||
| 12,302 | 12,302 | |||
| 132,484 | 119,724 | |||
All the above interests are beneficial.
There have been no changes in the interest of the Directors in the share capital of the Company between 31 March 2013 and 15 July 2013.
As at 15 July 2013, the following disclosures of major holdings of voting rights have been made (and have not been amended or withdrawn) to the Company pursuant to the requirements of Disclosure and Transparency Rule 5:
| of 5p each | Share Capital |
|---|---|
| 10.08 | |
| 4.60 | |
| 3.03 | |
| 15.31 | |
| 7.87 | |
| 3.73 | |
| 3.80 | |
| 393,193 179,400 118,100 596,745 307,000 145,650 148,220 |
* denotes indirect holding
** denotes combined direct and indirect holding
Given the size of the Company and the nature of its business as a property trading company, the Company does not currently have any policies in place in relation to environmental, social or community issues.
The Company provides regular training relating to the use of computer software and the general professional development of the staff concerned. A great number of our employees have worked for the Company for many years and there is very little turnover of staff.
continued
Certain banking agreements to which the Company is a party (described in Note 18 to the Consolidated Financial Statements) alter or terminate upon a change of control of the Company following a takeover bid.
There are no other significant agreements to which the Company is a party that take effect, alter or terminate upon a change of control of the Company following a takeover bid.
There are no contractual or other agreements or arrangements in place between the Company and third parties which, in the opinion of the Directors, are essential to the business of the Company.
There was no contract in existence during or at the end of the financial year in which a Director of the Company is, or was, materially interested, and which is or was significant in relation to the Company's business.
The Company purchases liability insurance covering the Directors and Officers of the Company and its Subsidiary undertakings.
The Company's Articles of Association at Article 163 permit the provision of indemnities to the Directors (at the discretion of the Board), which constitute qualifying third party indemnity and qualifying pension scheme indemnity provisions under the Companies Act 2006.
The Company's policy in respect of all its suppliers is to settle the terms of payment when agreeing the terms of each transaction. The Company also ensures that the suppliers are made aware of the terms of payment and abide by them.
Trade creditors existing at 31 March 2013 relating to purchases of property stock generally complete 28 days after exchange of contracts. Other trade creditors were settled, on average, 21 days after incurring the liability (2012: 21 days).
Financial risk management objectives and policies are set out in Note 3 to the Consolidated Financial Statements on pages 33 to 34. Details regarding the Company's use of financial instruments are set out in Note 20 to the Consolidated Financial Statements on pages 42 and 43.
The Company's Shareholders will be asked to approve the Remuneration Report contained in the Annual Report and Accounts at the Annual General Meeting to be held on 14 August 2013 and accordingly, a resolution will be proposed at the Annual General Meeting.
The Directors' statement on Corporate Governance is set out on pages 17 to 19.
The Group is committed to achieving a high standard of health and safety. The Group regularly reviews its health and safety policies and practices to ensure that appropriate standards are maintained. The gas supply and appliances within all of the Group's relevant residential properties are independently inspected under the Gas Safety (Installation and Use) Amended Regulations 1996 and certificates of compliance obtained.
continued
During the year the Group made charitable donations of £46,160 (2012: £48,350).
The main beneficiaries of such charitable donations are: Willow Foundation, Cancer Research UK and Cystic Fibrosis.
There were no political donations made during the year (2012: £nil).
The Directors continue to adopt the going concern basis in preparing the accounts.
The financial position of the Group including key financial ratios is set out in the Review of Business and Prospects.
The Group is historically profitable, has considerable liquidity and recently reviewed its long-term borrowing facilities with the banks. As a result, the Directors believe the Group is very well placed to manage its business risks successfully and have a good expectation that both the Company and the Group have adequate resources to continue their operations. Further detailed information is set out on page 32.
There are no material events that have occurred subsequent to the end of the financial year that require disclosure.
Messrs. BSG Valentine have indicated their willingness to continue in office and a resolution for the reappointment of BSG Valentine as auditors for the ensuing year will be proposed at the Annual General Meeting.
By Order of the Board
M.M. BRAY Company Secretary
18 July 2013
The Directors are responsible for preparing the Annual Report, the Directors' Remuneration Report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union, and the Parent Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period. In preparing these financial statements, the Directors are required to:
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements and the Directors' remuneration report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Each of the Directors, whose names and functions are listed on page 10 confirm that, to the best of their knowledge:
The maintenance and integrity of the Mountview Estates P.L.C. website is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.
By Order of the Board
M.M. BRAY Company Secretary 18 July 2013
Mountview Estates P.L.C. is a family controlled company. There is a concert party in existence, whose net aggregate shareholdings amount to approximately 53% of the issued share capital of the Company.
The Company has applied the principles and provisions set out in the UK Corporate Governance Code, including both the main principles and the supporting principles throughout the accounting period except as detailed in this section.
The UK Corporate Governance Code requires that there should be a clear division of responsibilities at the head of the Company between the running of the Board and the executives' responsibility for running the Company's business. In addition, the UK Corporate Governance Code requires (for smaller Companies) there to be at least two independent Non-Executive Directors and that the Company should have at least three Non-Executive Directors. In this regard the Board has carefully considered the division of the responsibilities of the Chairman and Chief Executive (this dual role is not compliant with the UK Corporate Governance Code), together with the number of independent Non-Executive Directors and has concluded, given the size of the Company and Group, that these arrangements have to date been appropriate. While the Chairman has not had unfettered powers of decision, the Board has kept this situation under review and has concluded, however, that the role of Chairman will be split. Mr. J.B. Fulton, the current independent Non-Executive Director will assume the role of Non-Executive Chairman with effect from the Annual General Meeting 2013. The Board does not consider that Mr. Fulton has any other significant commitment for disclosure which would impact on his ability to perform the function of Non-Executive Chairman. Furthermore a search is underway to appoint another independent Non-Executive Director.
Each Board member has responsibility to ensure that the Group's strategies lead to increased shareholder value.
As at the year ended 31 March 2013 the Board comprised the Chairman, Mr. D.M. Sinclair, one Executive Director and two Non-Executive Directors (of which one is considered to be independent for the purpose of the UK Corporate Governance Code). All Directors have access to independent professional advice at the expense of the Company and to the services of the Company Secretary who is responsible to the Board for ensuring the correct procedures are followed.
In addition to ad-hoc meetings arranged to discuss particular transactions and events, the full Board meets at least four times a year and retains full and effective control over the Group's activities. The following table sets out details of the number of meetings of the Board (excluding ad hoc meetings) and of the Audit and Remuneration Committees during the year and the attendance at these meetings by the Directors who were in office during the period.
| Meetings | Mr. D.M. Sinclair |
Mr. K. Langrish -Smith* |
Mrs. M.M. Bray |
Mr. A.J. Sinclair |
Mr. J.B. Fulton |
|---|---|---|---|---|---|
| Full Board | 5 | 4 | 5 | 5 | 4 |
| Audit Committee | 1 | – | 1 | 2 | 2 |
| Remuneration Committee | 1 | – | – | 3 | 3 |
| Nomination Committee | 2 | 1 | 4 | 2 | 4 |
*deceased 17 December 2012
Day-to-day management is delegated to the Executive Board which focuses on major transactions, business growth, strategy, cash management and control.
There is regular communication with the Non-Executive Directors in order to keep them informed on the Company's operations.
All members of the Board are subject to the re-election provisions of the Articles of Association which require that one third of their number offer themselves for re-election each year and, on appointment, at the first Annual General Meeting (AGM) after appointment. Details of those Directors offering themselves for reappointment are set out in the Directors' Report on page 12.
The Articles of Association of the Company contain the following provisions relating to the appointment and replacement of Directors:
continued
After making diligent enquiries, including the review of future anticipated cash flows and compliance with banking covenants, the Directors have a reasonable expectation that the Group and Company have adequate resources to continue in existence for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the accounts.
The Directors consider that the small size of the Group and Board does not warrant a formal evaluation process. However, performance of the Directors is evaluated on an ongoing basis by the Board. Based on the close working relationships of Board and the Committees, the Directors are satisfied with both the performance of the Board and its Committees. In making decisions throughout the year, the Board is strongly aware of its responsibilities to the Company's Shareholders.
Any areas of concern are addressed during regular management or Board meetings.
The Remuneration Committee comprises Mr. J.B. Fulton (Non-Executive Director) and Mr. A.J. Sinclair (Non-Executive Director). The Committee, which is chaired by Mr. J.B. Fulton, monitors, reviews and makes recommendations to the Board on all elements of the remuneration of the Executive Directors. The Committee meets twice a year and the aim of the Committee is to provide total remuneration packages which attract, retain and motivate Executive Directors of the appropriate calibre.
Mr. D.M. Sinclair, the Chairman of the Company, is invited by the Remuneration Committee members to attend one meeting or part of any meeting as and when appropriate.
No Director is involved in deciding his/her own remuneration and the remuneration of the Non-Executive Directors is determined by the full Board.
The report of Directors' Remuneration is set out on pages 20 to 22.
The Nomination Committee is responsible for the selection and approval of appointments to the Board. Given the small size of the Company the Chairman of the Nomination Committee is Mr. D.M. Sinclair and all the Directors of the Company are members. There were four meetings during this year and key matters considered were:
The Nomination Committee keeps the composition of the Board and possible directors appointments under regular review and when the Board and Nomination Committee determine that it may be appropriate to appoint further directors it would engage an independent external search consultant to assist in the process.
The Audit Committee comprises Mr. J.B. Fulton (Non-Executive Director) and Mr. A.J. Sinclair (Non-Executive Director). The Committee, which is chaired by Mr. J.B. Fulton, has clear terms of reference agreed by the Board and is responsible for ensuring that the Group's system of financial control is adequate. It also keeps under review the cost effectiveness of the audit and the independence and objectivity of the auditors.
This includes the approval of any non-audit service fees above a relatively normal level.
The Committee is satisfied that the taxation services provided by BSG Valentine are overseen by partners and staff who are excluded from the audit procedure.
continued
Mr. D.M. Sinclair and Mrs M.M. Bray attended one of the meetings held by the Audit Committee.
The Committee meets twice a year and one of these meetings is with the external auditors without an Executive Director in attendance. The Chairman of the Audit Committee reports to the Board on matters discussed with external auditors. The Audit Committee monitors the integrity of the financial statements and reviews the interim and annual financial statements before submission to the Board. Further the Committee seeks to ensure that the external auditors are independent.
Mr. J.B. Fulton is a Fellow of the Institute of Chartered Accountants in England and Wales.
The Audit Committee has satisfied itself that the Company complies with the principles set out in the Smith Report.
The Board as a whole acknowledges its responsibility for ensuring satisfactory dialogue with Shareholders and the Chairman is available to meet Shareholders on request to discuss specific concerns they may have. The Company principally communicates with and updates its Shareholders as to its progress by way of the Annual Report and Accounts and half yearly interim reports which are posted on the Company's website www.mountviewplc.co.uk. Investors may use the Company's Annual General Meeting to communicate with the Board. The entire Board will be available at the Annual General Meeting for Shareholders to ask questions. The Board including the Non-Executive Directors, is available throughout the year to listen to the views of Shareholders.
Details of the Company's risk management profile are included in paragraph 14 in the Report of the Directors on page 14 and in Note 3 to the Consolidated Financial Statements on pages 33 to 34.
An ongoing process for identifying, evaluating and managing the significant risks faced by the Group was in place throughout the period from 1 April 2012 to the date of approval of the Annual Report and Accounts. The effectiveness of this process is reviewed annually by the Board.
The Directors are responsible for establishing and maintaining the Group's system of internal financial control. Internal control systems in any group are designed to identify, evaluate and manage risks faced by that group and meet the particular needs of that group and the risks to which it is exposed. By their nature such system can provide reasonable but not absolute protection against material misstatement or loss. Due to its size, the Group does not have a dedicated internal audit function. The key procedures which the Directors have established with a view to providing effective internal financial control are as follows:
Identification of business risks – The Board is responsible for identifying the major business risks faced by the Group, such as fluctuations in interest rates, inflation rates, fluctuations in consumer spending, employment levels and for determining the appropriate course of action to manage those risks.
Management structure – The Board has overall responsibility for the Group and there is a formal schedule of matters specifically reserved for decision by the Board.
Corporate accounting – Responsibility levels are communicated throughout the Group as part of the corporate accounting procedures. These procedures set out authorisation levels, segregation of duties and other control procedures.
Quality and integrity of personnel – The integrity and competence of personnel is ensured through high recruitment standards and close Board supervision.
Monitoring – Internal financial control procedures are reviewed by the Board as a whole. These reviews embrace the provision of regular information to management, and monitoring of performance and key performance indicators.
By Order of the Board
M.M. BRAY Company Secretary
18 July 2013
Governance
The Remuneration Committee, as constituted by the Board is responsible for the determination of the remuneration of the Executive Directors of Mountview Estates P.L.C. The Board as a whole considers the remuneration of the Non-Executive Directors. External advisers were not used in the financial year under review.
The Group operates in a competitive environment. In forming its policy on remuneration the Group aims to set reward packages which enable the Group to attract, retain and motivate executives with the appropriate skills and experience.
The Remuneration Committee has reviewed the remuneration policy for the financial year and for the financial year ahead, and has developed the following specific remuneration package consisting of two elements.
Basic salaries and benefits in kind for each Executive Director are reviewed on an annual basis by the Remuneration Committee, which takes into account individual responsibilities, experience and performance as well as competitive market practice. Benefits include the provision of a car, private medical health insurance and life insurance.
Directors have the choice of the use of a company car or a cash alternative. All members of staff benefit from health and life insurances. The Group does not operate any share option scheme.
Bonuses are recommended by the Committee and approved by the Board having regard to the performance of the Group and the Executive Directors during the year. In assessing corporate performance the Remuneration Committee takes into account the Group's corporate performance within the property sector and other similar sized companies.
Each Non-Executive Director receives fees of £36,000 p.a.. The Non-Executive Directors are not entitled to bonuses, benefits or pension contributions.
The Company contributes 10% of the total of the Executive Directors' gross annual salaries and bonuses to a Stakeholder Pension Scheme. This scheme is available to all employees of the Company.
continued
The graph below is prepared in accordance with the Directors' Remuneration Report Regulations 2002 and illustrates the Company's performance compared to a broad equity market index over the past five years. As the Company is a constituent of the FTSE All-Share Real Estate Index, that index is considered the most appropriate form of broad equity market index against which the Company's performance should be plotted. Performance is measured by Total Shareholder Return as represented by share price performance and dividend.
The graph looks at the value of £100 invested in Mountview Estates P.L.C. on 31 March each year compared to the value of £100 invested in the FTSE All-Share Real Estate Index.
Details of the Directors' service contracts and letters of appointment with the Company, and the unexpired terms there under are as follows:
| Contract date | Unexpired term | Notice period | |
|---|---|---|---|
| D.M. Sinclair | 8 August 2002 | No fixed term | 12 months |
| M.M. Bray | 1 April 2004 | No fixed term | 12 months |
| J.B. Fulton | 1 January 2013 | 29 months | none |
| A.J. Sinclair | 1 November 2010 | 4 months | none |
The Executive Directors are entitled to a compensation payment after a change in control of the Company. Such compensation payment (subject to deduction of income tax as required by law and any other sums owed by the Executive Director to the Company) is equal to the Executive Director's gross remuneration as reported in the Company's last audited accounts as announced to the London Stock Exchange.
Non-Executive Directors are entitled to accrued fees only due to them as at the date of termination of their appointment.
continued
| Benefits | Pensions | ||||
|---|---|---|---|---|---|
| Salary | Bonus | in kind | contributions | Total | |
| 2013 | £000 | £000 | £000 | £000 | £000 |
| Executive | |||||
| D.M. Sinclair | 300 | 240 | 68 | 54 | 662 |
| K. Langrish-Smith (deceased 17 December 2012) | 112 | 45 | 12 | 15 | 184 |
| Mrs M.M. Bray | 250 | 180 | – | 43 | 473 |
| Non-Executive | |||||
| J.B. Fulton | 36 | – | – | – | 36 |
| A.J. Sinclair | 36 | – | – | – | 36 |
| 734 | 465 | 80 | 112 | 1,391 | |
| Benefits | Pensions | ||||
| Salary | Bonus | in kind | contributions | Total | |
| 2012 | £000 | £000 | £000 | £000 | £000 |
| Executive | |||||
| D.M. Sinclair | 275 | 160 | 63 | 22 | 520 |
| K. Langrish-Smith | 150 | 40 | 24 | 10 | 224 |
| Mrs M.M. Bray | 235 | 120 | – | 18 | 373 |
| Non-Executive | |||||
| J.B. Fulton | 24 | – | – | – | 24 |
| J.A.N. Laing (resigned 31 March 2012) | 24 | – | – | – | 24 |
| A.J. Sinclair | 24 | – | – | – | 24 |
| 732 | 320 | 87 | 50 | 1,189 |
Individual performance of Executive Directors is also evaluated against a set of pre-determined criteria. Furthermore in conducting its Executive Compensation Review, the Committee has consulted a variety of relevant external benchmarks and published data.
Each of the Executive Directors who served during the year has a service agreement, which can be terminated on one year's notice by either party.
An Ordinary Resolution to approve this report will be proposed at the Annual General Meeting of the Company.
This report was approved by the Board on 18 July 2013.
J.B. FULTON Chairman of the Remuneration Committee
for the year ended 31 March 2013
| Year ended | Year ended | ||
|---|---|---|---|
| Notes | 31.03.2013 £000 |
31.03.2012 £000 |
|
| Revenue | 4 | 56,646 | 42,931 |
| Cost of sales | 4 | (22,906) | (15,741) |
| Gross profit | 33,740 | 27,190 | |
| Administrative expenses | (3,759) | (3,773) | |
| Gain on sale of investment properties | 13 | 84 | 484 |
| Operating profit before changes in fair value of investment properties | 30,065 | 23,901 | |
| Increase in fair value of investment properties | 13 | 2,602 | 3,208 |
| Profit from operations | 32,667 | 27,109 | |
| Change in fair value of derivatives | 20 | 563 | (271) |
| Net finance costs | 8 | (4,302) | (4,033) |
| Profit before taxation | 28,928 | 22,805 | |
| Taxation – current | (6,511) | (6,648) | |
| Taxation – deferred | 19 | (272) | 1,298 |
| Taxation | 9 | (6,783) | (5,350) |
| Profit attributable to equity Shareholders | 22,145 | 17,455 | |
| Basic and diluted earnings per share (pence) | 11 | 568.0p | 447.7p |
for the year ended 31 March 2013
| Notes | As at March 2013 £000 |
As at March 2012 £000 |
|
|---|---|---|---|
| Assets | |||
| Non-current assets | |||
| Property, plant and equipment | 12 | 2,337 | 2,441 |
| Investment properties | 13 | 27,852 | 26,537 |
| 30,189 | 28,978 | ||
| Current assets | |||
| Inventories of trading properties | 15 | 316,626 | 301,072 |
| Trade and other receivables | 16 | 1,198 | 1,371 |
| Cash at bank | 900 | 987 | |
| 318,724 | 303,430 | ||
| Total assets | 348,913 | 332,408 | |
| Equity and liabilities | |||
| Capital and reserves attributable to equity holders of the Company | |||
| Share capital | 21 | 195 | 195 |
| Capital redemption reserve | 22 | 55 | 55 |
| Capital reserve | 22 | 25 | 25 |
| Other reserves | 22 | 56 | 56 |
| Cash flow hedge reserve | 20 | – | (1,040) |
| Retained earnings | 23 | 243,641 | 227,928 |
| 243,972 | 227,219 | ||
| Non-current liabilities | |||
| Long-term borrowings | 18 | 84,950 | 90,000 |
| Deferred tax | 19 | 6,294 | 6,023 |
| 91,244 | 96,023 | ||
| Current liabilities | |||
| Bank overdrafts and loans | 18 | 8,427 | 3,364 |
| Trade and other payables | 17 | 1,631 | 1,385 |
| Current tax payable | 3,639 | 2,814 | |
| Derivative financial instruments | 20 | – | 1,603 |
| 13,697 | 9,166 | ||
| Total liabilities | 104,941 | 105,189 | |
| Total equity and liabilities | 348,913 | 332,408 |
Approved by the Board on 18 July 2013.
D.M. Sinclair M.M. Bray Chairman Director
The notes on pages 27 to 45 are an integral part of these consolidated financial statements.
| Notes | Share capital £000 |
Capital reserve £000 |
Capital redemption reserve £000 |
Cash flow hedge reserve £000 |
Other reserves £000 |
Retained earnings £000 |
Total £000 |
|
|---|---|---|---|---|---|---|---|---|
| Changes in equity for year ended 31 March 2012 |
||||||||
| Balance as at 1 April 2011 | 195 | 25 | 55 | (2,340) | 56 | 216,905 | 214,896 | |
| Reduction in reserve | 20 | 1,300 | 1,300 | |||||
| Profit for the year | 17,455 | 17,455 | ||||||
| Dividends | 10 | (6,432) | (6,432) | |||||
| Balance at 31 March 2012 | 22 | 195 | 25 | 55 | (1,040) | 56 | 227,928 | 227,219 |
| Changes in equity for year ended 31 March 2013 |
||||||||
| Balance as at 1 April 2012 | 195 | 25 | 55 | (1,040) | 56 | 227,928 | 227,219 | |
| Reduction in reserve | 20 | 1,040 | 1,040 | |||||
| Profit for the year | 22,145 | 22,145 | ||||||
| Dividends | 10 | (6,432) | (6,432) | |||||
| Balance at 31 March 2013 | 23 | 195 | 25 | 55 | – | 56 | 243,641 | 243,972 |
for the year ended 31 March 2013
| Year ended | Year ended | ||
|---|---|---|---|
| Notes | 31 March 2013 £000 |
31 March 2012 £000 |
|
| Cash flows from operating activities | |||
| Profit from operations | 32,667 | 27,109 | |
| Adjustment for: | |||
| Depreciation | 163 | 166 | |
| Loss on disposal of property, plant and equipment | 3 | 10 | |
| Gain on disposal of investment properties | (84) | (484) | |
| (Increase) in fair value of investment properties | (2,602) | (3,208) | |
| Operating cash flows before movement in working capital | 30,147 | 23,593 | |
| (Increase) in inventories | (15,554) | (41,610) | |
| Decrease (Increase) in receivables | 173 | (179) | |
| Increase/(Decrease) in payables | 246 | (100) | |
| Cash generated from operations | 15,012 | (18,296) | |
| Interest paid | (4,302) | (4,033) | |
| Income taxes paid | (5,675) | (7,106) | |
| Net cash inflow/(outflow) from operating activities | 5,035 | (29,435) | |
| Investing activities | |||
| Proceeds from disposal of investment properties | 13 | 1,939 | 8,895 |
| Capital expenditure on investment properties | 13 | (567) | (1,426) |
| Purchase of property, plant and equipment | 12 | (74) | (160) |
| Proceeds from disposal of property, plant and equipment | – | 4 | |
| Net cash inflow from investing activities | 1,298 | 7,313 | |
| Cash flows from financing activities | |||
| Increase in borrowings | 687 | 40,000 | |
| Repayment of borrowings | (5,050) | (200) | |
| Equity dividend paid | (6,432) | (6,432) | |
| Net cash (outflow)/inflow from financing activities | (10,795) | 33,368 | |
| Net/(decrease)/increase in cash and cash equivalents | (4,462) | 11,246 | |
| Opening cash and cash equivalents | (2,103) | (13,349) | |
| Cash and cash equivalents at end of year | 18(a) | (6,565) | (2,103) |
for the year ended 31 March 2013
Mountview Estates P.L.C. (the Company) and its subsidiaries (the Group) is a property trading company with a portfolio in England and Wales.
The Company is a public limited liability company incorporated, domiciled and registered in England.
The address of its registered office is: 151 High Street, Southgate, London N14 6EW. The Company website is: www.mountviewplc.co.uk
The Company has its premium listing on the London Stock Exchange.
These consolidated financial statements have been approved for issue by the Board of Directors on 18 July 2013.
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
The Group's financial statements have been prepared under the historical cost convention, as modified by the revaluation of investment properties, and in accordance with applicable International Financial Reporting Standards, (IFRS) as adopted by the EU.
The Company has elected to prepare its Parent Company financial statements in accordance with UK GAAP. These are presented on pages 48 to 55.
The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies.
The areas involving a higher degree of judgement or complexity or areas where assumptions and estimates are significant to the Consolidated Financial Statements are disclosed in Note 2(s) "Estimates and Judgements".
The Group's financial statements incorporate the results of Mountview Estates P.L.C. and all of its subsidiary undertakings made up to 31 March each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee enterprise so as to obtain benefits from its activities.
The Group exercises control through voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group.
On acquisition, the identifiable assets, liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. The purchase method has been used in consolidating the subsidiary financial statements.
All significant inter company transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation within the consolidated accounts.
Consistent accounting policies have been used across the Group.
for the year ended 31 March 2013
A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments.
The Group has identified two such segments as follows:
Above segments are UK based. More details are given in Note 5.
The charge for current tax is based on the results for the year as adjusted for items which are non-assessable or disallowed. It is calculated using rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax base used in the computation of taxable profit. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction, which affects neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax is calculated at the rates that are expected to apply when the asset or liability is settled. Deferred tax is charged or credited in the income statement, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
Revenue includes proceeds of sales of properties, rents from properties, which are held as trading stock, investment and other sundry items of revenue before charging expenses.
Rental income is recognised over the rental period.
Sales of properties are recognised on legal completion as in the Directors' opinion this is the point at which the substantial risks and rewards of ownership have been transferred.
Dividend distribution to the Company's Shareholders is recognised as an expense in the Group's financial statements in the period in which the dividends are approved.
Interest expense for borrowings is recognised within "finance costs" in the income statement using the effective interest rate method. The effective interest method is a method of calculating the financial liability and of allocating the interest expense over the relevant period.
for the year ended 31 March 2013
Property, plant and equipment are stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the item. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.
Depreciation is calculated so as to write off the cost of an asset, less its estimated residual value, over the useful economic life of that asset using the straight-line method as follows:
| Freehold property | – | 2% |
|---|---|---|
| Fixtures and fittings and office equipment | – | 20% |
| Computer equipment | – | 25% |
| Motor vehicles – reducing balance method | – | 20% |
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each financial year. An asset's carrying amount is written down immediately to its recoverable amount if its carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the Income Statement.
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation or depreciation are reviewed for impairment whenever events or changes in circumstances indicate that carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Any impairment is recognised in the Income Statement in the year in which it occurs.
Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the companies in the consolidated group, is classified as investment property.
Investment property is measured initially at its cost including related transaction costs.
After initial recognition, investment property is carried at fair value. Fair value is based on active market prices adjusted, if necessary, for any difference in the nature, location or condition of the specified asset. If this information is not available the Group uses alternative valuation methods such as recent prices or less active markets or discounted cash flow projections.
Subsequent expenditure is included in the carrying amount of the property when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are charged to the income statement during the financial period in which they are incurred.
Gains or losses arising from changes in the fair value of the Group's investment properties are included in the income statement of the period in which they arise.
for the year ended 31 March 2013
These comprise residential properties all of which are held for resale, and are shown in the financial statements at the lower of cost and estimated net realisable value. Cost includes legal fees and commission charges incurred during acquisition together with improvement costs. Net realisable value is the net sale proceeds which the Group expects on sale of a property in its current condition with vacant possession. Where residential properties are sold tenanted, net realised value is the current market value net of associated selling costs. There were no such sales during the financial year. The analysis of the Group revenue as at 31 March 2013 is on page 34.
The Group operates a stakeholder contribution pension scheme for employees. The annual contributions payable are charged to the Income Statement. The Group has no further payment obligations once the contributions have been paid.
Financial assets and financial liabilities are recognised in the Group's balance sheet when the Group has become a party to the contractual provisions of the instrument. Trade and other receivables and trade and other payables and cash and cash equivalents are measured at their net realisable value.
Loans are recorded at fair value at initial recognition and thereafter at amortised costs under the effective interest method.
Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts.
Assets held under hire purchase agreements are capitalised and disclosed under tangible fixed assets at their fair value. The capital element of the future payments is treated as a liability and the interest is charged to the profit and loss account on a straight-line basis.
Rentals payable under operating leases are charged to profit and loss on a straight-line basis over the term of the relevant lease.
The Group uses derivative instruments to help manage its interest rate risk. In accordance with its treasury policy, the Group does not hold or issue derivatives for trading purposes.
The derivatives are recognised initially at fair value. Subsequently, the gain or loss on remeasurement to fair value is recognised immediately in the Income Statement, unless the derivatives qualify for cash flow hedge accounting in which case any gain or loss is taken to equity in a cash flow hedge reserve.
The Group has not hedge accounted during the year.
for the year ended 31 March 2013
None of the new standards, interpretations and amendments, effective for the first time from 1 January 2012, have had a material effect on the financial statements of the Group or the Company.
At the date of authorisation of these financial statements there are a number of standards, amendments and interpretations to existing standards that have been published but which are not yet effective and which have not been early adopted by the Group. These are as follows:
All the above IFRSs interpretations and amendments to existing standards are yet to be endorsed by the European Union ("EU") at the date of approval of these financial statements with the exception of IFRS 7.
The Directors are currently considering the potential impact arising from the future adoption of these standards and interpretations listed above.
Governance
for the year ended 31 March 2013
The Directors are required to make an assessment of the Group's ability to continue to trade as a going concern. Because of the difficult market conditions prevailing this assessment has been subject to more uncertainties than are usual.
The two main considerations were as follows:
The Group has a £20 million revolving loan facility with HSBC Bank. The termination date of this facility is January 2015.
The Group has a £75 million revolving loan facility with Barclays Bank. The termination date of this facility is November 2014.
The core facility has two covenants, both unchanged by the new facilities, covering loan to value ("LTV") ratio and interest cover. The Group has remained well within both of these covenants during the year.
On the basis of the above, the Directors have a reasonable expectation that the Group and the Company have adequate resources to continue in operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in preparing the financial statements.
The Group considers the intention at the outset when each property is acquired in order to classify the property as either an investment or a trading property. Where the intention is to either trade the property or where the property is held for immediate sale upon receiving vacant possession within the ordinary course of business, the property is classified as trading property. Where the intention is to hold the property for its long-term rental yield and/or capital appreciation, the property is classified as an investment property.
In considering the values attributable to the investment portfolio, the following factors are taken into consideration:
The valuation of the portfolios was made in accordance with the requirements of the RICS Valuation Standards Manual, Sixth Edition and International Valuation Standard 40.
The Group's residential trading stock is carried in the balance sheet at the lower of cost and net realisable value.
As the Group's business model is to sell trading stock on vacancy, net realisable value is the net sales proceeds which the Group expects on sale of a property with vacant possession.
The Board estimate that inventory of £12.8 million will be settled within the next 12 months, with the remaining inventory value expected to be settled in more than 12 months. This estimation is based on the average cost of sales of inventory over the last three year period. Mountview's business, historic and current has involved the purchase for sale of residential properties subject to regulated tenancies, such properties being sold when vacant possession is obtained.
Regulated tenancies by their nature are not for any specific period of time and in most cases they do not become vacant until the death of the tenant.
It is difficult to predict with any certainty the time at which Mountview's inventory properties might become vacant.
for the year ended 31 March 2013
The Group's activities expose it to a variety of financial risks: market risk (including price risk and cash flow risk) credit risk and liquidity risk. The Group's policies on financial risk management are to minimise the risk of adverse effect on performance and to ensure the ability of the Group to continue as a going concern.
The financial risks relate to the following financial instruments: trade receivables, cash and cash equivalents, trade and other payables and borrowings.
The Group is exposed to market risk through interest rates and availability of credit.
– the Group is exposed to property price and property rental risk.
– as the Group has no significant interest bearing assets, its income and operating cash flows are substantially independent of changes in market interest rates.
– borrowings issued at variable rates expose the Group to cash flow interest rate risk. The Group's cash flow and fair value interest rate risk is constantly monitored by the Group's management. The Group uses derivative instruments to help manage its interest rate risk.
The Board is confident that based on the historical performance of the Group, the finance costs are sufficiently covered by profits from operations.
The Group has two covenants covering loan to value ratio and interest cover. These covenants were complied with during the financial year and we are confident to meet them at the interim stage.
Exposure to credit risk and interest risk arises in normal course of the Group's business.
The Group has no significant concentration of credit risk. Credit risk arises from cash and cash equivalents as well as credit exposures with respect to rental customers, including outstanding receivables. The Directors are of the opinion that credit risk is minimal due to the low level of trade receivables relative to the Balance Sheet totals. Regulated tenants are incentivised through the benefit of their tenancy agreement to avoid default on their rent.
Lifetime tenancies are generally at low or zero rent and hence suffer minimal credit risk.
The Group's liquidity position is monitored daily by management and is reviewed quarterly by the Board of Directors. The Group ensures that it maintains sufficient cash for operational requirements at all times. The nature of its business is very cash generative from its gross rents and sales of trading properties.
In adverse trading conditions, new acquisitions can be minimised, and as a consequence reduce the gearing level and improve the liquidity. A summary table with majority of financial liabilities is presented in Note 18.
Governance
for the year ended 31 March 2013
The Group's objective when managing capital is to safeguard the Group's ability to continue as a going concern. The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total debt and equity.
| 2013 | 2012 | |
|---|---|---|
| £000 | £000 | |
| Total borrowings | 93,377 | 93,364 |
| Less cash | (900) | (987) |
| Net borrowings | 92,477 | 92,377 |
| Total equity | 243,972 | 227,219 |
| Total borrowings plus equity | 336,449 | 319,596 |
| Gearing ratio | 27.5% | 28.9% |
All revenue arises in the United Kingdom.
Rental income from tenancies of occupied properties. The income is recognised on an accruals basis.
Sale of stock properties. This is recognised on the date of legal completion.
| 2013 | 2012 | |
|---|---|---|
| £000 | £000 | |
| Revenue | ||
| Gross sales of properties | 39,968 | 27,800 |
| Gross rental income | 16,678 | 15,131 |
| 56,646 | 42,931 | |
| Cost of sales | ||
| Cost of properties sold | 16,156 | 9,251 |
| Property expenses | 6,750 | 6,490 |
| 22,906 | 15,741 | |
| Gross profit | ||
| Sales of properties | 23,812 | 18,549 |
| Net rental income | 9,928 | 8,641 |
| 33,740 | 27,190 |
Cost of properties sold includes £1.02 million credit in respect of the reversed provision for the Magdalen Portfolio.
for the year ended 31 March 2013
A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. The Group monitors its operations in the following segments:
| 2013 | 2012 | |||||
|---|---|---|---|---|---|---|
| Property trading £000 |
Property investment £000 |
Group £000 |
Property trading £000 |
Property investment £000 |
Group £000 |
|
| Revenue | 56,198 | 448 | 56,646 | 42,488 | 443 | 42,931 |
| Operating profit before changes in fair value of investment properties |
30,066 | (1) | 30,065 | 23,666 | 235 | 23,901 |
| Finance costs | (4,302) | (4,302) | (4,033) | (4,033) | ||
| Profit after tax | 22,145 | 17,455 | ||||
| Assets | 316,552 | 32,361 | 348,913 | 303,321 | 29,087 | 332,408 |
| Liabilities | 104,684 | 257 | 104,941 | 104,779 | 410 | 105,189 |
| Fixed assets | ||||||
| Capital expenditure | 74 | 567 | 641 | 160 | 1,426 | 1,586 |
| Depreciation | 117 | 46 | 163 | 125 | 41 | 166 |
Head office costs have been allocated and included within the Group's two operating segments. The Group's two main business segments operate within the United Kingdom.
| 2013 £000 |
2012 £000 |
|
|---|---|---|
| The operating profit is stated after charging: | ||
| Depreciation of tangible fixed assets | 163 | 166 |
| Loss on disposal of fixed assets | 3 | 10 |
| Auditors' remuneration | ||
| – the audit of the Parent Company and Consolidated Financial Statements | 40 | 38 |
| – the audit of the Company's subsidiaries pursuant to legislation | 12 | 12 |
| – tax compliance work | 9 | 9 |
| Operating expenses for investment properties | 236 | 454 |
| And after crediting: | ||
| – net rental income | 9,928 | 8,641 |
| – administrative charges to related companies (Note 25) | 38 | 37 |
The details of Directors' remuneration are shown in the audited section of the Remuneration Report on page 22.
The Company contributes 3% of the total annual gross salaries and bonuses of each employee to a Stakeholder Pension Scheme. The average monthly number of employees during the year was as follows:
| 2013 | 2012 | |
|---|---|---|
| Office and management | 24 | 24 |
for the year ended 31 March 2013
| 2013 £000 |
2012 £000 |
|
|---|---|---|
| Wages and salaries | 2,113 | 1,865 |
| Social security costs | 254 | 234 |
| Pension costs | 112 | 85 |
| 2,479 | 2,184 | |
| Directors' remuneration | ||
| Total Directors' remuneration including salary, bonuses, benefits in kind and pensions contributions amounted to: |
1,391 | 1,189 |
| 8. Finance costs | ||
| 2013 | 2012 | |
| Interest on bank overdrafts, and loans | £000 4,302 |
£000 4,033 |
| 9. Income tax expense | ||
| 2013 | 2012 | |
| £000 | £000 | |
| (a) Analysis of charge in the year | ||
| Current tax: UK Corporation Tax 24% (2012: 26%) |
6,511 | 6,648 |
| Deferred tax: Current year 24% (2012: 26%) |
272 | (1,298) |
| Taxation attributable to the Company and its subsidiaries | 6,783 | 5,350 |
| (b) Factors affecting income tax expense | ||
| The charge for the year can be reconciled to the profit per the income statement as follows: | ||
| Profit on ordinary activities before taxation | 28,928 | 22,805 |
| Profit on ordinary activities multiplied by rate of tax 24% (2012: 26%) | 6,942 | 5,930 |
| Expenses not deductible for tax | 25 | 110 |
| Income not taxable | – | (126) |
| Depreciation in excess of capital allowances | 18 | (10) |
| Taxation on capital gains | 316 | 1,574 |
| Profit on sale of assets | (19) | – |
| Marginal relief | (3) | – |
| Revaluation surplus in subsidiaries not taxed | (624) | (830) |
| Deferred tax | 272 | (1,298) |
| Cash flow hedge adjustment | (135) | – |
| Sundry adjusting items | (9) | – |
| Taxation attributable to the Company and its subsidiaries | 6,783 | 5,350 |
The deferred tax adjustment relates to the change in fair value of investment properties.
for the year ended 31 March 2013
On 20 August 2012, a dividend of 115p per share (2011: 115p per share) was paid to the Shareholders. On 25 March 2013 a dividend of 50p per share (2012: 50p per share) was paid to the Shareholders. This resulted in total dividends paid in the year of £6.43 million (2012: £6.43 million).
In respect of the current year, the Directors propose that a final dividend of 125p per share will be paid to the Shareholders on 19 August. This dividend is subject to approval by the Shareholders at the Annual General Meeting and has not been included as a liability in these financial statements.
The proposed final dividend for 2013 is payable to all Shareholders on the Register of Members on 19 July 2013. The total estimated final dividend to be paid is £4.87 million.
| 2013 £000 |
2012 £000 |
|
|---|---|---|
| The calculations of earnings per share are based on the following profits and number of shares. | ||
| Net profit for financial year (basic and fully diluted) | 22,145 | 17,455 |
| Weighted average number of Ordinary Shares for basic and fully diluted earnings per share | 3,899,014 | 3,899,014 |
| Basic and diluted earnings per share | 568.0p | 447.7p |
The Company has no dilutive potential Ordinary Shares.
| Freehold property £000 |
Fixtures and fittings £000 |
Motor vehicles £000 |
Computer equipment £000 |
Total £000 |
|
|---|---|---|---|---|---|
| Cost | |||||
| At 1 April 2012 | 2,671 | 333 | 271 | 21 | 3,296 |
| Additions | – | 67 | – | 7 | 74 |
| Disposals | – | – | (47) | – | (47) |
| At 31 March 2013 | 2,671 | 400 | 224 | 28 | 3,323 |
| Depreciation | |||||
| At 1 April 2012 | 595 | 122 | 128 | 10 | 855 |
| Charge for the year | 53 | 80 | 23 | 7 | 163 |
| On disposals | – | – | (32) | – | (32) |
| At 31 March 2013 | 648 | 202 | 119 | 17 | 986 |
| Net book value | |||||
| At 31 March 2012 | 2,076 | 211 | 143 | 11 | 2,441 |
| At 31 March 2013 | 2,023 | 198 | 105 | 11 | 2,337 |
Property, plant and equipment are located within the UK.
Included within the net book value of £2,337,000 is £23,000 relating to assets held under hire purchase agreement. The depreciation charged to the financial statements in the year in respect of such assets amounted to £6,030 (2012: £7,540). Governance
for the year ended 31 March 2013
| Freehold property £000 |
Fixtures and fittings £000 |
Motor vehicles £000 |
Computer equipment £000 |
Total £000 |
|
|---|---|---|---|---|---|
| Cost | |||||
| At 1 April 2011 | 2,671 | 208 | 315 | 152 | 3,346 |
| Additions | – | 160 | – | – | 160 |
| Disposals | – | (35) | (44) | (131) | (210) |
| At 31 March 2012 | 2671 | 333 | 271 | 21 | 3,296 |
| Depreciation | |||||
| At 1 April 2011 | 542 | 84 | 123 | 136 | 885 |
| Charge for the year | 53 | 73 | 35 | 5 | 166 |
| On disposals | – | (35) | (30) | (131) | (196) |
| At 31 March 2012 | 595 | 122 | 128 | 10 | 855 |
| Net book value | |||||
| At 31 March 2011 | 2,129 | 124 | 192 | 16 | 2,461 |
| At 31 March 2012 | 2,076 | 211 | 143 | 11 | 2,441 |
Property, plant and equipment are located within the UK.
| At 31 March 2013/(2012) | 27,852 | 26,537 |
|---|---|---|
| Increase in Fair Value during the year | 2,602 | 3,208 |
| Disposals | (1,855) | (8,411) |
| Subsequent expenditure | 568 | 1,426 |
| Fair value at 1 April 2013/(2012) | 26,537 | 30,314 |
| £000 | £000 | |
| 2013 | 2012 |
The sales of investments properties are not included in the Group Revenue.
During the financial year we disposed of 2 units for a total of £1.939 million.
The difference between the sales price £1.939 million (2012: £8.89 million) and the market fair value £1.855 million (2012: £8.41 million) of £84,000 (2012: £484,000) is shown in the Consolidated Income Statement as a separate item.
The realised gains on sales are transferred to Reserves in the Group accounts.
The Companies' freehold and long leasehold properties were valued on 31 March 2013 by an external valuer Martin Angel, FRICS of Allsop LLP. The valuations are in accordance with the requirements of the RICS Valuation – Professional Standards – Global and UK Edition, 2012. The properties are all held for investment and Market Values are on the basis that the properties would be sold subject to any existing leases and tenancies. The valuer's opinion of Market Value was primarily derived using comparable recent market transactions on arm's-length terms.
Allsop LLP has undertaken work for Mountview Estates P.L.C. for in excess of 20 years including acquisitions, disposals and valuations.
In relation to Allsop LLP's preceding financial year, the proportion of the total fees payable by Mountview Estates P.L.C. to the total fee income of Allsop LLP was less than 5% which is regarded by the RICS as negligible.
for the year ended 31 March 2013
The aggregate Fair Value of the Company's interests in its investment portfolios was:
£24,989,000 (Twenty-four million, nine hundred and eighty-nine thousand pounds), split as follows:
£2,863,000 (Two million, eight hundred and sixty-three thousand pounds).
Information relating to the basis of valuation of investment properties and the judgements and assumption adopted by management is set out in Note 2(u) "Estimates and Judgements".
A revaluation surplus of £2.602 million has arisen on valuation of investment properties to Market Value as at 31 March 2013 (2012: surplus of £3.208 million) and this has been taken to the income statement.
The Directors are of the opinion that the fair value equates to the Market Value.
These represent the cost of shares in the following wholly-owned subsidiary undertakings, which are incorporated and operate in England and Wales. Their results are consolidated in the accounts of the Group, for the period during which they are subsidiary undertakings.
| Cost | ||
|---|---|---|
| 2012 | ||
| 2013 | ||
| Principal activity | £000 | |
| Hurstway Investment Company Limited | Property trading | 1 |
| Louise Goodwin Limited | Property investment | 15,351 |
| A.L.G. Properties Limited | Property investment | 2,924 |
| 18,276 |
| 2013 | 2012 | |
|---|---|---|
| £000 | £000 | |
| Residential properties | 316,626 | 301,072 |
| 2013 | 2012 | |
|---|---|---|
| £000 | £000 | |
| Trade receivables | 339 | 378 |
| Prepayments and accrued income | 859 | 993 |
| 1,198 | 1,371 |
The Directors consider that the carrying amount of trade and other receivables approximates their fair value.
There are no bad or doubtful debts at the year end. There are no material debts past due, and there are no financial assets that are impaired.
for the year ended 31 March 2013
| 1,631 | 1,385 | |
|---|---|---|
| Other creditors | 891 | 859 |
| Other taxes and social security costs | 151 | 143 |
| Trade creditors | 589 | 383 |
| £000 | £000 | |
| 2013 | 2012 |
The Directors consider that the carrying amount of trade and other payables approximates their fair value.
Future commitments under hire purchase agreements are as follows:
| 2013 | 2012 | |
|---|---|---|
| £000 | £000 | |
| Amounts payable within 1 year | 22 | 28 |
| 2013 | 2012 | |
|---|---|---|
| £000 | £000 | |
| Bank overdrafts | 7,465 | 3,089 |
| Bank loans | 84,950 | 90,000 |
| Other loans | 962 | 275 |
| 93,377 | 93,364 |
| 2013 | 2012 | |
|---|---|---|
| £000 | £000 | |
| Bank overdrafts (7,465) |
(3,089) | |
| Cash | 900 | 986 |
| (6,565) Cash and cash equivalents as at 31 March |
(2,103) |
Maturity profile of financial liabilities at 31 March 2013 was as follows:
| 2013 | 2012 | |
|---|---|---|
| £000 | £000 | |
| Amounts repayable: | ||
| In one year or less | 8,427 | 3,364 |
| Between one and two years | 84,950 | – |
| Between two and five years | – | 90,000 |
| 93,377 | 93,364 | |
| Less: amount due for settlement within 12 months (shown under current liabilities) | (8,427) | (3,364) |
| Amount due for settlement after 12 months | 84,950 | 90,000 |
| The average interest rates paid were as follows: | ||
| 2013 | 2012 | |
| Bank overdrafts and money market loan | 2.48% | 2.51% |
| Bank loans | 4.31% | 4.40% |
| Other loans | 1.0% | 1.0.% |
for the year ended 31 March 2013
The Directors consider that the carrying amount of bank overdrafts and loans approximates their fair value.
The other principal features of the Group's borrowings are as follows.
| 2013 | 2012 | |
|---|---|---|
| £000 | £000 | |
| Deferred tax liabilities | 6,294 | 6,023 |
| Net position at 31 March | 6,294 | 6,023 |
| 2013 | 2012 | |
|---|---|---|
| £000 | £000 | |
| At 1 April | 6,023 | 7,321 |
| Debit/(Credit) to income for the year | 271 | (1,298) |
| At 31 March | 6,294 | 6,023 |
The following are in deferred tax liabilities recognised by the Group and movements thereon during the period:
| 2013 | 2012 | |
|---|---|---|
| £000 | £000 | |
| At 1 April | 6,023 | 7,321 |
| Debit/(Credit) to income for the year | 271 | (1,298) |
| At 31 March | 6,294 | 6,023 |
for the year ended 31 March 2013
The Group's financial assets at the year end consist of trade receivables and cash at bank and in hand of £900,000 (2012: £1.5 million).
The Directors consider that the carrying amount of cash at bank and in hand approximates their fair value.
The trade receivables amounted to £1.2 million (2012: £1.3 million).
The Directors consider that the carrying amount of trade receivables approximates their fair value.
| 2013 | 2012 | |
|---|---|---|
| £000 | £000 | |
| Bank overdrafts | 7,465 | 3,089 |
| Secured bank loans | 84,950 | 90,000 |
| Unsecured loans | 962 | 275 |
| 93,377 | 93,364 |
Interest charged in the Income Statement for the above borrowings amounted to £4.32 million (2012: £4.03 million).
The Directors consider that the carrying amount of borrowings approximates their fair value. The details of the terms of the borrowings together with the average interest rates can be seen in Note 19.
As at 31 March 2013 it is estimated that general increase of 1 point in interest rates would decrease the Group's profit before tax by approximately £450,000 (2012: £500,000).
The Group entered into an Interest Rate Swap Agreement in January 2008 in order to help manage its interest rate risk.
The swap was based on £40 million non-amortising notional amount, and its fixed interest rate was 4.98% (31 March 2012: 4.98%).
In the Income Statement there is a credit of £563,000 relating to "change in fair value of derivatives."
The figure is the net effect of:
The above entries are due to the cessation of the interest rate swap agreement which matured in March 2013.
for the year ended 31 March 2013
The following table analyses the Group's financial liabilities and derivative financial liabilities at the balance sheet date into relevant maturity groupings based on the remaining period to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. As the amounts included in the table are the contractual undiscounted cash flows, these amounts will not always equal the amounts disclosed on the balance sheet for borrowings, derivative financial instruments, and trade and other payables.
Trade and other payables due within 12 months equal their carrying balances as the impact of discounting is not significant.
| Less than | Between | ||
|---|---|---|---|
| 1 year | 1 and 5 years | Total | |
| At 31 March 2013 | £000 | £000 | £000 |
| Interest bearing loans and borrowings | 8,705 | 92,542 | 101,247 |
| Cash flow hedge | – | – | – |
| Trade and other payables | 1,051 | – | 1,051 |
| Less than | Between | ||
| 1 year | 1 and 5 years | Total | |
| At 31 March 2012 | £000 | £000 | £000 |
| Interest bearing loans and borrowings | 3,559 | 102,121 | 105,680 |
| Cash flow hedges | 1,603 | – | 1,603 |
| Trade and other payables | 1,385 | – | 1,385 |
| Less than | Between | ||
|---|---|---|---|
| 1 year | 1 and 5 years | Total | |
| At 31 March 2013 | £000 | £000 | £000 |
| Interest bearing loans and borrowings per accounts | 8,427 | 84,950 | 93,377 |
| Interest | 278 | 7,592 | 7,870 |
| Financial liability cash flows as above | 8,705 | 92,542 | 101,247 |
| Less than | Between | ||
| 1 year | 1 and 5 years | Total | |
| At 31 March 2012 | £000 | £000 | £000 |
| Interest bearing loans and borrowings per accounts | 3,364 | 90,000 | 93,364 |
| Interest | 195 | 12,121 | 12,316 |
| Financial liability cash flows as above | 3,559 | 102,121 | 105,680 |
for the year ended 31 March 2013
| 2013 £000 |
2012 £000 |
|
|---|---|---|
| Authorised: | ||
| 5,000,000 Ordinary Shares of 5p each | 250 | 250 |
| Allotted, issued and fully paid: | ||
| 3,899,014 Ordinary Shares of 5p each | 195 | 195 |
| 2013 £000 |
2012 £000 |
|
|---|---|---|
| Capital redemption reserve | 55 | 55 |
| Capital reserve | 25 | 25 |
| Other reserves | 56 | 56 |
| 136 | 136 |
Capital redemption reserve relates to buy-back of the Company's own shares.
The Group does not maintain insurance cover against other risks except where several properties are located in close physical vicinity. A reserve is maintained to deal with such non-insured risks and at 31 March 2013 stood at £56,000 (2012: £56,000).
| £000 | |
|---|---|
| Balance at 1 April 2012 | 227,928 |
| Net profit for the year | 22,145 |
| Dividends paid | (6,432) |
| Balance at 31 March 2013 | 243,641 |
for the year ended 31 March 2013
During the financial year there were no key management personnel emoluments, other than remuneration.
2.(a) Mountview Estates P.L.C. provides general management and administration services to Ossian Investors Limited and Sinclair Estates Limited, companies of which Mr. D.M. Sinclair is a Director. Fees of £38,179 (2012: £37,325) were charged for these services.
The future aggregate minimum lease payments payable by the Group under non-cancellable operating leases are as follows:
| 2013 £000 |
2012 £000 |
|
|---|---|---|
| Operating lease payments due: | ||
| Not later than one year | – | – |
| Later than one year and not later than five years | 10 | 10 |
| Later than five years | – | – |
| 10 | 10 |
to the Members of Mountview Estates P.L.C.
We have audited the Group Financial Statements of Mountview Estates P.L.C. for the year ended 31 March 2013, which comprise the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Statement of Consolidated Cash Flows and the related Notes 1 to 25. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRS) as adopted by the European Union.
As explained more fully in the Statement of Directors' Responsibilities set out in the Director's Report, the Directors are responsible for the preparation of the Group Financial Statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the Group financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for the Company's members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies with the audited financial statements we consider the implications for our report.
In our opinion the Group Financial Statements:
In our opinion:
to the Members of Mountview Estates P.L.C.
We have nothing to report in respect of the following. Under the Companies Act 2006 we are required to report to you if, in our opinion:
Under the Listing Rules we are required to review:
We have reported separately on the Parent Company financial statements of Mountview Estates P.L.C. for the year ended 31 March 2013 and on the information in the Report of the Remuneration Committee and Directors' Remuneration Report that is described as having been audited.
Athanasios Athanasiou (Senior Statutory Auditor) for and on behalf of BSG Valentine
Chartered Accountants and Statutory Auditors London, United Kingdom
18 July 2013
as at 31 March 2013
| Notes | As at 31.03.2013 £000 |
As at 31.03.2012 £000 |
|
|---|---|---|---|
| Fixed assets | |||
| Tangible assets | 3 | 2,225 | 2,346 |
| Investments | 4 | 18,276 | 18,276 |
| 20,501 | 20,622 | ||
| Current assets | |||
| Stocks | 5 | 301,501 | 285,868 |
| Debtors | 6 | 1,138 | 1,278 |
| Cash at bank and in hand | 866 | 899 | |
| 303,505 | 288,045 | ||
| Creditors: amounts falling due within one year | 7 | (13,138) | (8,651) |
| Net current assets | 290,367 | 279,394 | |
| Total assets less current liabilities | 310,868 | 300,016 | |
| Creditors: amounts falling due after more than one year | 8 | (91,130) | (93,461) |
| 219,738 | 206,555 | ||
| Capital and reserves | |||
| Called up share capital | 9 | 195 | 195 |
| Capital redemption reserve | 10 | 55 | 55 |
| Capital reserve | 10 | 25 | 25 |
| Other reserves | 10 | 39 | 39 |
| Cash flow hedge reserve | 11 | – | (1,040) |
| Profit and loss account | 12 | 219,424 | 207,281 |
| 219,738 | 206,555 |
Approved by the Board on 18 July 2013.
D.M. Sinclair M.M. BRAY Chairman Director
for the year ended 31 March 2013
The Accounts have been prepared under the historical cost convention, and in accordance with applicable Accounting Standards.
Fixed assets investments in subsidiary undertakings are stated at cost less any provision for impairment.
Corporation tax payable is provided on taxable profits at the current rate.
Turnover includes proceeds of sales of properties, rents from properties which are held as trading stock, or investment and any other sundry items of revenue before charging expenses. Sales of properties are recognised on completion.
Depreciation is calculated so as to write off the cost of an asset, less its estimated residual value, over the useful economic life of that asset using the straight-line method as follows:
| Freehold property | – | 2% |
|---|---|---|
| Fixtures and fittings and office equipment | – | 20% |
| Computer equipment | – | 25% |
| Motor Vehicles – reducing balance method | – | 20% |
Fixed assets are subject to review for impairment in accordance with FRS11 "Impairment of Fixed Assets and Goodwill". Any impairment is recognised in the Profit and Loss Account in the year in which it occurs.
These comprise residential properties all of which are held for resale, and are valued at the lower of cost and estimated net realisable value. Cost to the Group includes legal fees and commission charges incurred during acquisition together with improvement costs. Net realisable value is the net sale proceeds which the Group expects on sale of a property with vacant possession in its current condition. The analysis of the Group revenue as at 31 March 2013 is on page 34.
Assets held under hire purchase agreements are capitalised and disclosed under tangible fixed assets at their fair value. The capital element of the future payments is treated as a liability and the interest is charged to the profit and loss account on a straight-line basis.
Rentals payable under operating leases are charged to profit and loss on a straight-line basis over the term of the relevant lease.
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 right to pay less or to receive more, tax, with the following exceptions:
for the year ended 31 March 2013
| 2013 £000 |
2012 £000 |
|
|---|---|---|
| Wages and salaries | 2,113 | 1,865 |
| Social security costs | 254 | 234 |
| Pension costs | 112 | 85 |
| 2,479 | 2,184 | |
| Directors' remuneration | ||
| 2013 £000 |
2012 £000 |
|
| Total Directors' remuneration including salary, bonuses, benefits in kind and pensions contributions amounted to: |
1,391 | 1,189 |
The details of Directors' remuneration are shown in the audited section of the Remuneration Report on page 22.
The Company contributes 3% of the total annual gross salaries and bonuses of each employee to a Stakeholder Pension Scheme.
The average monthly number of employees during the year was as follows:
| 2013 £000 |
2012 £000 |
|
|---|---|---|
| Office and management | 24 | 24 |
| Freehold property £000 |
Fixtures and fittings £000 |
Motor vehicles £000 |
Computer equipment £000 |
Total £000 |
|
|---|---|---|---|---|---|
| Cost | |||||
| At 1 April 2012 | 2,671 | 163 | 271 | 21 | 3,126 |
| Additions | – | 8 | – | 7 | 15 |
| Disposals | – | – | (47) | – | (47) |
| At 31 March 2013 | 2,671 | 171 | 224 | 28 | 3,094 |
| Depreciation | |||||
| At 1 April 2012 | 595 | 47 | 128 | 10 | 780 |
| Charge for the year | 53 | 38 | 23 | 7 | 121 |
| On disposals | – | – | (32) | – | (32) |
| At 31 March 2013 | 648 | 85 | 119 | 17 | 869 |
| Net book value | |||||
| At 31 March 2012 | 2,076 | 116 | 143 | 11 | 2,346 |
| At 31 March 2013 | 2,023 | 86 | 105 | 11 | 2,225 |
Included within the net book value of £2,225,000 is £23,010 relating to assets held under hire purchase agreement. The depreciation charged to the financial statements in the year in respect of such assets amounted to £6,030 (2012: £7,540).
All tangible assets of the Company are located within the UK.
for the year ended 31 March 2013
These represent the cost of shares in the following wholly-owned subsidiary undertakings, which are incorporated and operate in England and Wales. Their results are consolidated in the accounts of the Group, for the period during which they are Subsidiary undertakings.
| 2013 | 2012 |
|---|---|
| £000 | £000 |
| 1 | 1 |
| 15,351 | 15,351 |
| 2,924 | 2,924 |
| 18,276 | 18,276 |
The Company owns 100% of the Ordinary Share capital of the following companies:
| Subsidiary undertaking | Country of incorporation | Principal activity |
|---|---|---|
| Hurstway Investment Company Limited | UK | Property trading |
| Louise Goodwin Limited | UK | Property investment |
| A.L.G. Properties Limited | UK | Property investment |
| 2013 | 2012 | |
|---|---|---|
| £000 | £000 | |
| Residential properties | 301,501 | 285,868 |
| 2013 | 2012 | |
|---|---|---|
| £000 | £000 | |
| Trade debtors | 324 | 362 |
| Prepayments and accrued income | 814 | 916 |
| 1,138 | 1,278 |
| 2013 £000 |
2012 £000 |
|
|---|---|---|
| Bank loans and overdrafts | 7,465 | 3,089 |
| Trade creditors | 578 | 339 |
| Corporation Tax | 3,128 | 2,342 |
| Other taxes and social security costs | 152 | 154 |
| Other creditors | 853 | 849 |
| Other loans | 962 | 275 |
| Derivative financial instruments | – | 1,603 |
| 13,138 | 8,651 |
Other loans consist of loans from connected persons. Interest payable on these loans was at 0.5% above Barclays Bank Plc base rate.
for the year ended 31 March 2013
| 7.(a) Commitments under hire purchase agreement | ||
|---|---|---|
| Future commitments under hire purchase agreements are as follows: | ||
| 2013 | 2012 | |
| £000 | £000 | |
| Amounts payable within one year | 22 | 28 |
| 8. Creditors: Amounts falling due after more than one year | ||
| 2013 £000 |
2012 £000 |
|
| Bank loans | 84,950 | 90,000 |
| Amounts owed to subsidiary undertakings | 6,180 | 3,461 |
| Other loans | – | – |
| 91,130 | 93,461 | |
| Maturity profile of financial liabilities at 31 March 2013 was as follows: | ||
| 2013 £000 |
2012 £000 |
|
| Amounts repayable: | ||
| In one year or less | 8,427 | 3,364 |
| Between one and two years | 84,950 | – |
| Between two and five years | – | 90,000 |
| More than five years | – | 3,461 |
| 93,377 | 96,825 | |
| Less: amount due for settlement within 12 months (shown under current liabilities) | (8,427) | (3,364) |
| Amount due for settlement after 12 months | 84,950 | 93,461 |
The Directors consider that the carrying amount of bank overdrafts and loans approximates their fair value.
for the year ended 31 March 2013
The other principal features of the Group's borrowings are as follows.
Headroom of this facility at 31 March 2013 amounted to £7.5 million (2012: £11.9 million).
| 2013 £000 |
2012 £000 |
|
|---|---|---|
| Authorised: | ||
| 5,000,000 Ordinary Shares of 5p each | 250 | 250 |
| Allotted, issued and fully paid: | ||
| 3,899,014 Ordinary Shares of 5p each | 195 | 195 |
| 2013 £000 |
2012 £000 |
|
|---|---|---|
| Capital redemption reserve | 55 | 55 |
| Capital reserve | 25 | 25 |
| Other reserves | 39 | 39 |
| Balance at 31 March | 119 | 119 |
Capital redemption reserve relates to buy-back of the Company's own shares.
The Group does not maintain insurance cover against other risks except where several properties are located in close physical vicinity. A reserve is maintained to deal with such non-insured risks and at 31 March 2013 stood at £39,000 (2012: £39,000).
for the year ended 31 March 2013
The Company entered into an Interest Rate Swap Agreement in January 2008 in order to help manage its interest rate risk.
The interest rate swap matured in March 2013. The swap was based on £40 million non-amortising notional amount. Up to expiry date of 21 March 2013 the fixed interest rate was 4.98% (March 2012: 4.98%).
| 2013 £000 |
2012 £000 |
|
|---|---|---|
| Balance at 1 April | 207,281 | 169,650 |
| Net profit for the year (including dividends received year end – 2012) | 18,575 | 44,063 |
| Dividends paid | (6,432) | (6,432) |
| Balance at 31 March | 219,424 | 207,281 |
for the year ended 31 March 2013
| The future aggregate minimum lease payments payable by the Group under non-cancellable operating leases are as follows: | ||||
|---|---|---|---|---|
| 2013 | 2012 | |||
| £000 | £000 | |||
| Operating lease payments due: | ||||
| Not later than one year | – | – | ||
| Later than one year and not later than five years | 10 | 10 | ||
| Later than five years | – | – | ||
| 10 | 10 |
to the Members of Mountview Estates P.L.C. on the Parent Company Financial Statements
We have audited the Parent Company Financial Statements of Mountview Estates P.L.C. for the year ended 31 March 2013 which comprise the Parent Company Balance Sheet and the related Notes 1 to 14 The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
As explained more fully in the Statement of Directors' Responsibilities, the Directors are responsible for the preparation of the Parent Company Financial Statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the Parent Company Financial Statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for the Company's members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Parent Company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements.
In addition we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies with the audited financial statements we consider the implications for our report.
In our opinion the Parent Company Financial Statements:
In our opinion:
to the Members of Mountview Estates P.L.C. on the Parent Company Financial Statements
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
We have reported separately on the Group Financial Statements of Mountview Estates P.L.C. for the year ended 31 March 2013.
Athanasios Athanasiou (Senior Statutory Auditor) for and on behalf of BSG Valentine
Chartered Accountants and Statutory Auditors London
18 July 2013
| as at 31 March 2013 |
|||||||
|---|---|---|---|---|---|---|---|
| IFRS 2007 £000 |
IFRS 2008 £000 |
IFRS 2009 £000 |
IFRS 2010 £000 |
IFRS 2011 £000 |
IFRS 2012 £000 |
IFRS 2013 £000 |
|
| Revenue | 68,168 | 54,338 | 53,599 | 56,697 | 47,655 | 42,931 | 56,646 |
| Profit before taxation | 50,227 | 29,529 | 13,062 | 29,255 | 23,560 | 22,805 | 28,928 |
| Taxation | 15,167 | 8,861 | 3,673 | 7,620 | 6,589 | 5,350 | 6,783 |
| Profit after taxation | 35,060 | 20,668 | 9,389 | 21,635 | 16,971 | 17,455 | 22,145 |
| Earnings per share | 899.2p | 530.1p | 241.0p | 554.8p | 435.3p | 447.7p | 568.0p |
| Rate of dividend | 150p | 155p | 155p | 165p | 165p | 165p | 175p |
| Cover | 5.99 | 3.42 | 1.55 | 3.36 | 2.64 | 2.71 | 3.25 |
| Cost of dividend | 5,848 | 6,042 | 6,042 | 6,432 | 6,432 | 6,432 | 6,823* |
| Total remuneration (including Directors) | 3,377 | 2,846 | 2,528 | 2,759 | 2,390 | 2,184 | 2,479 |
| Executive Directors' remuneration | 2,021 | 1,498 | 1,436 | 1,569 | 1,233 | 1,117 | 1,319 |
| Total remuneration (including Directors) as percentage of dividend |
57.75 | 47.10 | 41.84 | 42.89 | 37.15 | 33.95 | 36.33 |
| Cost of Executive Directors remuneration as percentage of total remuneration |
59.85 | 52.64 | 56.80 | 56.87 | 51.59 | 51.14 | 53.2 |
| Cost of Executive Directors' remuneration as percentage of dividend |
34.5 | 24.7 | 23.7 | 24.3 | 19.1 | 17.3 | 19.3 |
*The £6.82 million dividend in relation to 2013 is made up of the interim dividend of £1.95 million and the final dividend of £4.87 million, which will be paid on 19 August 2013, subject to approval at the AGM on 14 August 2013.
Notice is hereby given that the 76th Annual General Meeting of the Members of Mountview Estates P.L.C. (incorporated in England and Wales with registered number 00328020) will be held at the offices of Norton Rose Fulbright LLP, 3 More London Riverside, London SE1 2AQ on 14 August 2013 at 11.30 a.m. for the following purposes:
By Order of the Board
Company Secretary Mountview House 151 High Street Southgate London N14 6EW
18 July 2013
Nominated persons should also remember that their main point of contact in terms of their investment in the Company remains the Member who nominated the Nominated Person to enjoy information rights (or, perhaps the custodian or broker who administers the investment on their behalf). Nominated Persons should continue to contact that Member, custodian or broker (and not the Company) regarding any changes or queries relating to the Nominated Person's personal details and interest in the Company (including any administrative matter). The only exception to this is where the Company expressly requests a response from a Nominated Person.
The Company may not require the members requesting any such website publication to pay its expenses in complying with Sections 527 or 528 Companies Act 2006. Where the Company is required to place a statement on a website under Section 527 Companies Act 2006, it must forward the statement to the Company's auditor not later than the time when it makes the statement available on the website. The business which may be dealt with at the meeting includes any statement that the Company has been required under Section 527 Companies Act 2006 to publish on a website.
| Final dividend record date | 19 July |
|---|---|
| Annual Report posted to Shareholders | 19 July |
| Annual General Meeting | 14 August |
| Final dividend payment | 19 August |
| Interim results | 28 November |
Copies of this statement are being sent to shareholders. Copies may be obtained from the Company's registered office:
Mountview House 151 High Street Southgate London N14 6EW
All administrative enquiries relating to shareholdings should be addressed to the Company's Registrars:
Capita Registrars The Registry 34 Beckenham Road Beckenham Kent BR3 4TU
Mountview House, 151 High Street, Southgate, London N14 6EW
Tel: +44 (0) 20 8920 5777 Fax: +44 (0) 20 8882 9981
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