Mountview Estates P.L.C. Annual Report and Accounts 2013 M o u n t v i e w E s t a t e s P. L . C . A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 3 About Us 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. Contents Business Review 01 Our Performance 02 Where we Operate 03 Chairman’s Statement 04 Review of Operations Governance 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. 10 Directors and Advisers 11 Directors’ Report 16 Statement of Directors’ Responsibilities 17 Corporate Governance 20 Remuneration Report Financial Statements 23 Consolidated Statement of Comprehensive Income 24 Consolidated Statement of Financial Position 25 Consolidated Statement of Changes in Equity 26 Consolidated Cash Flow Statement 27 Notes to the Consolidated Financial Statements 46 Independent Auditors’ Report to the Members of Mountview Estates P.L.C. 48 Company Balance Sheet under UK GAAP 49 Notes to the Financial Statements under UK GAAP 56 Independent Auditors’ Report to the Members of Mountview Estates P.L.C. on the Parent Company Financial Statements 58 Table of Comparative Figures Other Information 59 Notice of Meeting 62 Shareholders’ Information 63 Shareholders’ Notes Mountview Estates P.L.C. Annual Report and Accounts 2013 01 Mountview Estates P.L.C. advises its shareholders that, following the issue of the final results, the relevant dates in respect of the proposed final dividend payment of 125p per share are as follows: Ex-dividend date 17 July 2013 Record date 19 July 2013 Payment date 19 August 2013 Our Performance £56.6m £33.7m Turnover +31.9% (2012: £42.9m) Gross profit +23.9% (2012: £27.2m) £28.9m £26.3m Profit before tax +26.8% (2012: £22.8m) Profit before tax excluding investment properties revaluation +34.2% (2012: £19.6m) £244.0m 568p Equity holders’ funds (£m) +7.4% (2012: £227.2m) Earnings per share (pence) +26.9% (2012: 447.7p) £62.6 Net assets per share +7.4% (2012: £58.3) 175p Dividend per share (pence) +6.1% (2012: 165p) Mountview Estates P.L.C. Annual Report and Accounts 2013Governanceother informationfinancial statementsbusiness review Where we Operate The figures below are calculated as a percentage of the total value of Inventories of Trading properties. Derbyshire, Leicestershire and Nottinghamshire Portfolio percentage 4.94% Remainder of England and Wales Portfolio percentage 13.97% Kent, Surrey, Sussex, Dorset, Hampshire, Isle of Wight Portfolio percentage 13.57% 02 Bedfordshire, Berkshire, Essex, Buckinghamshire, Cambridgeshire, Hertfordshire, Oxfordshire, Norfolk, Suffolk, Middlesex, Northamptonshire Portfolio percentage 18.49% London (North) Portfolio percentage 22.95% London (South) Portfolio percentage 26.08% Mountview Estates P.L.C. Annual Report and Accounts 2013 Chairman’s Statement D. M. Sinclair FCA 03 Profit before tax (£m) +26.8% 28.9 22.8 2012 2013 Equity holder funds (£m) +7.4% 227.2 244 2012 2013 Dividend per share (pence) +6.1% 165 175 2012 2013 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 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. Mountview Estates P.L.C. Annual Report and Accounts 2013Governanceother informationfinancial statementsbusiness review Review of Operations 04 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. Our portfolio Categories of property held as trading stock The Group trades in the following categories: • Regulated tenanted (residential) units • Ground rent units • Life tenancy units • Assured tenancies A unit is a property, however large or small, whether freehold or leasehold, which is held subject to one tenancy. Analysis of the Group Trading portfolio by type as at 31 March 2013 Regulated, Assured Shorthold tenancies, and other Assured tenancies Ground rents Life tenancies No. of units Cost £m 2,420 266.62 235 1,115 340 23.08 1.82 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 71.81 78.75 Ground rents £m Life tenancies £m 0.69 0.86 0.20 2.96 Portfolio % 22.95 26.08 37.26 0.05 5.64 13.57 52.03 0.12 6.38 18.49 14.74 35.11 0.10 – 0.80 9.12 4.94 13.97 London (North) London (South) Kent, Surrey, Sussex, Dorset Hampshire, Isle of Wight Bedfordshire, Berkshire, Essex, Buckinghamshire, Cambridgeshire, Hertfordshire, Oxfordshire, Norfolk, Suffolk, Middlesex, Northamptonshire Derbyshire, Leicestershire and Nottinghamshire Remainder of England and Wales Mountview Estates P.L.C. Annual Report and Accounts 2013 05 Review of Operations continued 2,420regulated tenancies Revenue £56.6m (2012: £42.9m) Gross profit £33.7m (2012: £27.2m) Sales 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: Sales Price (£) No. of units 500,000 –1 million below 500,000 13 164 Location London 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 Mountview Estates P.L.C. Annual Report and Accounts 2013Governanceother informationfinancial statementsbusiness review 06 Review of Operations continued 1,115 ground rents Mountview Estates P.L.C. Annual Report and Accounts 2013 1,115 Review of Operations continued 4 1 3 2 £28.8m Purchases 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. 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 Regulated tenancies 200 Life tenancies 2 Ground rents (or created) Assured tenancies (or created) 23 11 236 Year ended 31 March 2013 Cost £m 27.10 0.22 0.03 1.46 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. Left: Cardiff, South Glamorgan 07 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. Rental income The Company’s rental income is derived from five different sources: • Regulated tenancies • Assured tenancies • Assured shorthold tenancies • Life tenancies • Ground rents 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. i b u S n E S S R E v E w i G O v E R n A n C E i i F n A n C A L S t A t E M E n t S O t h E R i n F O R M A t O n i Mountview Estates P.L.C. Annual Report and Accounts 2013Governanceother informationfinancial statementsbusiness reviewAnalysis of acquisition1. Regulated tenancies (200)2. Life tenancies (2)3. Ground rents (23)4. Assured tenancies (11) 08 Louise Goodwin Limited 37 units (2012: 38) A.L.G. Properties Limited 4 units (2012: 5) Review of Operations continued Summary prospects for the Group 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. investment Companies 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). Outlook 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. Valuation(s) 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. Mountview Estates P.L.C. Annual Report and Accounts 2013 Review of Operations continued 09 £1.9m total disposals Louise Goodwin Limited A.L.G. Properties Limited Top: Belsize Park Gardens, NW3 Left: Belsize Grove, NW3 i b u S n E S S R E v E w i G O v E R n A n C E i i F n A n C A L S t A t E M E n t S O t h E R i n F O R M A t O n i Mountview Estates P.L.C. Annual Report and Accounts 2013Governanceother informationfinancial statementsbusiness review 10 Directors and Advisers Secretary and Registered Office Mrs. M.M. Bray FCCA Mountview House, 151 High Street, Southgate, London N14 6EW Bankers HSBC Bank Plc, 60 Queen Victoria Street, London EC4N 4TR Barclays Bank Plc, One Churchill Place, London E14 5HP Auditors BSG Valentine Lynton House, 7–12 Tavistock Square, London WC1H 9BQ Solicitors Norton Rose Fulbright LLP 3 More London Riverside, London SE1 2AQ Registrars and Transfer Office Capita Registrars The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU Brokers Brewin Dolphin Securities Ltd 12 Smithfield Street, London EC1A 9BD Financial Advisers SPARK Advisory Partners Limited 33 Glasshouse Street London W1B 5DG D. M. Sinclair FCA (Chairman) 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. K. Langrish-Smith 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. Mrs. M.M. Bray FCCA Joined the Company in 1996 and became Company Secretary. Became a Director on 1 April 2004. Fellow of the Association of Chartered Certified Accountants. Non-Executive Directors J.B. Fulton FCA* 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. A.J. Sinclair FCA 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 Estates P.L.C. Annual Report and Accounts 2013 Directors’ Report 11 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. 1. Results and dividends 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. 2. Activities The principal activities of the Company and its subsidiary undertakings are as follows: Parent Company Mountview Estates P.L.C. Subsidiary undertakings (wholly-owned) Hurstway Investment Company Limited Louise Goodwin Limited A.L.G. Properties Limited 3. Review of business and principal risks Property Trading Property Trading Property Investment 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: Financial Key Performance indicators Turnover (£m) +31.9% 56.6 42.9 Profit before tax excluding investment properties revaluations (£m) Interest cover in relation to profit before interest and taxation 6.7 7.5 26.3 +34.2% 19.6 2012 2013 2012 2013 2012 2013 Earnings per share (p) Net assets per share (£) Gearing ratio (%) 568 447.7 +26.9% 58.3 62.6 +7.4% 28.9 27.5 2012 2013 2012 2013 2012 2013 Non-financial The Directors consider that there are no significant non-financial indicators in existence. Governanceother informationfinancial statementsbusiness reviewMountview Estates P.L.C. Annual Report and Accounts 2013 Directors’ Report continued 12 3. Review of business and principal risks continued Risk review 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: Market and Strategic Risk • Long-term downturn in the UK housing market 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. • Long-term worldwide recession 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. Financial Risk • Significant fluctuations in interest rates 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. • A lack of availability of finance 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. Other non-financial risks The Directors consider that the following are potentially material non-financial risks. Risks Impact Reputation People related issues Destabilisation of the Company, adverse effect on share price Loss of key employees/ low morale/inadequate skills Computer failure Loss of data Acquisitions Low returns and liquidity Action taken to mitigate Act honourably, communicate Maintain market level remuneration packages, training. Succession planning and recruitment External IT consultants, backup, off-site copies Draw on wealth of experience to ensure continued selective geographical spread of desirable properties 4. Rotation of Directors 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. 5. Share capital 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. Mountview Estates P.L.C. Annual Report and Accounts 2013 Directors’ Report continued 13 6. Directors’ interests in share capital The number of Ordinary Shares in the Company in which the Directors and their families were interested is as follows: Ordinary Shares of 5p each Mr. D.M. Sinclair including the following holding of Sinclair Estates Limited – 54,165 Mr. D.M. Sinclair is a Director of the above company Mrs. M.M. Bray Mr. A.J. Sinclair, including the following holding of Viewthorpe (old) Limited – 28,208. The Company is wholly-owned by Mr. A.J. Sinclair All the above interests are beneficial. 31 March 2013 1 April 2012 538,383 12,302 535,883 12,302 132,484 119,724 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. 7. Notifiable interests in share capital 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: Mr. Phillip Wheater, Mr. David Wright and Mr. Alistair Sinclair, Trustees of the Frank and Daphne Sinclair Grandchildren Settlement * Mr. Geoffrey Wilfred Bew Todd and Ms. Helen Clark Trustees of W.D.I. Sinclair Grandchildren Settlement * Doris Sinclair Will Trust * Mrs. M.A. Murphy ** Mrs. E. Langrish-Smith Mrs. A. Williams ** Mrs. S. Simkins ** * denotes indirect holding ** denotes combined direct and indirect holding 8. Environmental matters and social/community issues Ordinary Shares of 5p each % of Issued Share Capital 393,193 179,400 118,100 596,745 307,000 145,650 148,220 10.08 4.60 3.03 15.31 7.87 3.73 3.80 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. 9. Employees 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. Governanceother informationfinancial statementsbusiness reviewMountview Estates P.L.C. Annual Report and Accounts 2013 Directors’ Report continued 14 10. Significant agreements 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. 11. Directors’ interests in contracts 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. 12. Directors’ and officers’ liability insurance 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. 13. Policy on the payment of creditors 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). 14. Financial risk management objectives and policies 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. 15. Remuneration policy 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. 16. Corporate Governance The Directors’ statement on Corporate Governance is set out on pages 17 to 19. 17. Health and safety 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. Mountview Estates P.L.C. Annual Report and Accounts 2013 Directors’ Report continued 15 18. Donations 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). 19. Going concern basis 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. 20. Post balance sheet events There are no material events that have occurred subsequent to the end of the financial year that require disclosure. 21. Auditors 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 Governanceother informationfinancial statementsbusiness reviewMountview Estates P.L.C. Annual Report and Accounts 2013 16 Statement of Directors’ Responsibilities 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: • select suitable accounting policies and then apply them consistently; • make judgements and accounting estimates that are reasonable and prudent; • state whether IFRSs as adopted by the European Union and applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the Group and Parent Company financial statements respectively; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. 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 Group financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group; • the Business Review on pages 1 to 9 includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces; • so far as the Directors are aware, there is no relevant audit information of which the Company’s auditors are unaware; and • the Directors have taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Company’s auditors are aware of that information. 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. Annual Report and Accounts 2013 Corporate Governance 17 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. The Board 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 Full Board Audit Committee Remuneration Committee Nomination Committee *deceased 17 December 2012 Mr. D.M. Sinclair Mr. K. Langrish -Smith* Mrs. M.M. Bray Mr. A.J. Sinclair Mr. J.B. Fulton 5 1 1 2 4 – – 1 5 1 – 4 5 2 3 2 4 2 3 4 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: • The Company may, by ordinary resolution, appoint a person who is willing to act to be a Director, either to fill a vacancy or as an addition to the existing Board. • The Board has the power to appoint any person who is willing to act as a Director, either to fill a vacancy or as an addition to the existing Board. Any Director appointed by the Board is required to retire at the first AGM of the Company following his or her appointment. Governanceother informationfinancial statementsbusiness reviewMountview Estates P.L.C. Annual Report and Accounts 2013 Corporate Governance continued 18 • The total number of Directors (other than any alternate Directors) must not be more than 12 or less than two. • In addition to any power to remove a Director conferred by Section 168 of the Companies Act 2006, the Company may, by ordinary resolution remove any Director before the expiration of his or her period of office, but without prejudice to any claim for damages which he or she may have for breach of any contract of service between him or her and the Company. The Company may then appoint another person who is willing to act, to be a Director in his or her place in accordance with the Articles of Association. Going concern 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. Directors – performance evaluation 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. Remuneration Committee 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. Nomination Committee 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: • Appointment of an independent external search consultant • Reviewing and interviewing potential Non-Executive Directors 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. Audit Committee 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. Mountview Estates P.L.C. Annual Report and Accounts 2013 Corporate Governance continued 19 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. Communications with Shareholders 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. Risk management 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. Internal financial control 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 Governanceother informationfinancial statementsbusiness reviewMountview Estates P.L.C. Annual Report and Accounts 2013 Remuneration Report 20 UNAUDITED INFORMATION Remuneration Committee 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. Remuneration policy 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 salary and benefits – the fixed part of the package • Annual discretionary bonuses 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. Non-Executive Directors Each Non-Executive Director receives fees of £36,000 p.a.. The Non-Executive Directors are not entitled to bonuses, benefits or pension contributions. Pensions 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. Mountview Estates P.L.C. Annual Report and Accounts 2013 Remuneration Report continued 21 Performance graph 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. Mountview Estates – Total Return Index FTSE All Share R/E IVST SVS £ – Total Return Index 160 140 120 100 80 60 40 20 0 2008 2009 2010 2011 2012 2013 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: D.M. Sinclair M.M. Bray J.B. Fulton A.J. Sinclair Contract date 8 August 2002 1 April 2004 1 January 2013 1 November 2010 Unexpired term No fixed term No fixed term 29 months 4 months Notice period 12 months 12 months none 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. Governanceother informationfinancial statementsbusiness reviewMountview Estates P.L.C. Annual Report and Accounts 2013 Remuneration Report continued AUDITED INFORMATION 2013 Executive D.M. Sinclair K. Langrish-Smith (deceased 17 December 2012) Mrs M.M. Bray Non-Executive J.B. Fulton A.J. Sinclair 2012 Executive D.M. Sinclair K. Langrish-Smith Mrs M.M. Bray Non-Executive J.B. Fulton J.A.N. Laing (resigned 31 March 2012) A.J. Sinclair 22 Total £000 662 184 473 36 36 Salary £000 Bonus £000 Benefits in kind £000 Pensions contributions £000 300 112 250 36 36 734 240 45 180 – – 465 68 12 – – – 80 54 15 43 – – 112 1,391 Salary £000 Bonus £000 Benefits in kind £000 Pensions contributions £000 275 150 235 24 24 24 732 160 40 120 – – – 320 63 24 – – – – 87 22 10 18 – – – 50 Total £000 520 224 373 24 24 24 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. Service contracts 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. Approval 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 Mountview Estates P.L.C. Annual Report and Accounts 2013 Consolidated Statement of Comprehensive Income for the year ended 31 March 2013 Revenue Cost of sales Gross profit Administrative expenses Gain on sale of investment properties Operating profit before changes in fair value of investment properties Increase in fair value of investment properties Profit from operations Change in fair value of derivatives Net finance costs Profit before taxation Taxation – current Taxation – deferred Taxation Profit attributable to equity Shareholders Basic and diluted earnings per share (pence) 23 Year ended 31.03.2013 £000 56,646 (22,906) 33,740 (3,759) 84 30,065 2,602 32,667 563 (4,302) 28,928 (6,511) (272) (6,783) 22,145 568.0p Year ended 31.03.2012 £000 42,931 (15,741) 27,190 (3,773) 484 23,901 3,208 27,109 (271) (4,033) 22,805 (6,648) 1,298 (5,350) 17,455 447.7p Notes 4 4 13 13 20 8 19 9 11 The notes on pages 27 to 45 are an integral part of these consolidated financial statements. Mountview Estates P.L.C. Annual Report and Accounts 2013Governanceother informationfinancial statementsbusiness review 24 As at March 2013 £000 As at March 2012 £000 Notes 12 13 15 16 21 22 22 22 20 23 18 19 18 17 20 2,337 27,852 30,189 2,441 26,537 28,978 316,626 301,072 1,198 900 318,724 348,913 195 55 25 56 – 243,641 243,972 84,950 6,294 91,244 8,427 1,631 3,639 – 13,697 104,941 348,913 1,371 987 303,430 332,408 195 55 25 56 (1,040) 227,928 227,219 90,000 6,023 96,023 3,364 1,385 2,814 1,603 9,166 105,189 332,408 Consolidated Statement of Financial Position for the year ended 31 March 2013 Assets Non-current assets Property, plant and equipment Investment properties Current assets Inventories of trading properties Trade and other receivables Cash at bank Total assets Equity and liabilities Capital and reserves attributable to equity holders of the Company Share capital Capital redemption reserve Capital reserve Other reserves Cash flow hedge reserve Retained earnings Non-current liabilities Long-term borrowings Deferred tax Current liabilities Bank overdrafts and loans Trade and other payables Current tax payable Derivative financial instruments Total liabilities Total equity and liabilities Approved by the Board on 18 July 2013. D.M. SinCLAiR Chairman M.M. bRAY Director The notes on pages 27 to 45 are an integral part of these consolidated financial statements. Mountview Estates P.L.C. Annual Report and Accounts 2013 25 Consolidated Statement of Changes in Equity for the year ended 31 March 2013 Changes in equity for year ended 31 March 2012 Balance as at 1 April 2011 Reduction in reserve Profit for the year Dividends Balance at 31 March 2012 Changes in equity for year ended 31 March 2013 Balance as at 1 April 2012 Reduction in reserve Profit for the year Dividends Balance at 31 March 2013 Share capital £000 Capital reserve £000 Capital redemption reserve £000 Cash flow hedge reserve £000 Notes Other reserves £000 Retained earnings £000 Total £000 195 25 55 (2,340) 1,300 56 216,905 214,896 1,300 17,455 17,455 (6,432) (6,432) 195 25 55 (1,040) 56 227,928 227,219 195 25 55 (1,040) 1,040 56 227,928 227,219 1,040 195 25 55 – 56 243,641 243,972 22,145 22,145 (6,432) (6,432) 20 10 22 20 10 23 The notes on pages 27 to 45 are an integral part of these consolidated financial statements. Mountview Estates P.L.C. Annual Report and Accounts 2013Governanceother informationfinancial statementsbusiness review Consolidated Cash Flow Statement for the year ended 31 March 2013 26 Cash flows from operating activities Profit from operations Adjustment for: Depreciation Loss on disposal of property, plant and equipment Gain on disposal of investment properties (Increase) in fair value of investment properties Operating cash flows before movement in working capital (Increase) in inventories Decrease (Increase) in receivables Increase/(Decrease) in payables Cash generated from operations Interest paid Income taxes paid Net cash inflow/(outflow) from operating activities Investing activities Proceeds from disposal of investment properties Capital expenditure on investment properties Purchase of property, plant and equipment Proceeds from disposal of property, plant and equipment Net cash inflow from investing activities Cash flows from financing activities Increase in borrowings Repayment of borrowings Equity dividend paid Net cash (outflow)/inflow from financing activities Net/(decrease)/increase in cash and cash equivalents Opening cash and cash equivalents Cash and cash equivalents at end of year Year ended 31 March 2013 £000 Year ended 31 March 2012 £000 Notes 32,667 27,109 163 3 (84) (2,602) 30,147 (15,554) 173 246 15,012 (4,302) (5,675) 5,035 1,939 (567) (74) – 1,298 687 (5,050) (6,432) (10,795) (4,462) (2,103) (6,565) 166 10 (484) (3,208) 23,593 (41,610) (179) (100) (18,296) (4,033) (7,106) (29,435) 8,895 (1,426) (160) 4 7,313 40,000 (200) (6,432) 33,368 11,246 (13,349) (2,103) 13 13 12 18(a) The notes on pages 27 to 45 are an integral part of these consolidated financial statements. Mountview Estates P.L.C. Annual Report and Accounts 2013 27 Notes to the Consolidated Financial Statements for the year ended 31 March 2013 1. General information 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. 2. Accounting policies 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. (a) basis of preparation 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”. (b) basis of consolidation 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. Mountview Estates P.L.C. Annual Report and Accounts 2013Governanceother informationfinancial statementsbusiness review Notes to the Consolidated Financial Statements continued for the year ended 31 March 2013 28 2. Accounting policies (continued) (c) Segment reporting 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: • core portfolio • residential investments. Above segments are UK based. More details are given in Note 5. (d) income tax 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. (e) Revenue 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. (f) Dividend distribution 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. (g) interest expense 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. Mountview Estates P.L.C. Annual Report and Accounts 2013 Notes to the Consolidated Financial Statements continued for the year ended 31 March 2013 29 2. Accounting policies (continued) (h) Property, plant and equipment 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 Fixtures and fittings and office equipment Computer equipment Motor vehicles – reducing balance method – 2% – 20% – 25% – 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. (i) impairment of assets 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. (j) investment property 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. Mountview Estates P.L.C. Annual Report and Accounts 2013Governanceother informationfinancial statementsbusiness review Notes to the Consolidated Financial Statements continued for the year ended 31 March 2013 30 2. Accounting policies (continued) (k) inventories – trading properties 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. (l) Pension costs 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. (m) Financial instruments 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. (n) bank borrowings Loans are recorded at fair value at initial recognition and thereafter at amortised costs under the effective interest method. (o) Cash and cash equivalents 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. (p) hire purchase agreements 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. (q) Leasing Rentals payable under operating leases are charged to profit and loss on a straight-line basis over the term of the relevant lease. (r) Derivatives 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. Mountview Estates P.L.C. Annual Report and Accounts 2013 Notes to the Consolidated Financial Statements continued for the year ended 31 March 2013 31 2. Accounting policies (continued) (s) new and revised international financial reporting standards New and amended standards adopted by the Group 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. Standards and interpretations in issue but not yet effective 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: international Financial Reporting Standards (“iFRS”) • Amendment to IAS 1 “Financial statement presentation” introduces a requirement for entities to group items presented in other comprehensive income on the basis of whether they are potentially reclassifiable to profit or loss subsequently. • Amendment to IAS 12 (revised) “Income taxes” introduces an exception to the existing principle for the measurement of deferred tax assets or liabilities arising on investment property measured at fair value. • Amendment to IAS 19 “Employee benefits” eliminates the corridor approach and calculates finance costs on a net funding basis and also introduces a requirement to group items presented in Other Comprehensive Income on the basis of whether they are potentially recycled to income statement. • IAS 27 (revised) “Separate Financial Statements” and IAS 28 (revised 2011) “Associates and joint ventures” include the provisions on separate financial statements which are not included in IFRS 10. • Amendment to IAS 32 “Financial instruments: Presentation” clarifies the offsetting requirements for amounts presented in the statement of financial position. • Amendment to IFRS 1 “First time adoption” addresses how a first time adopter would account for a government loan with a below-market rate of interest when transitioning to IFRS. • IFRS 9 “Financial instruments: classification and measurement” which has two measurement categories: amortised cost and fair value. All equity instruments are measured at fair value. A debt instrument is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. • IFRS 10 “Consolidated financial statements” which identifies the concept of control as the determining factor of whether an entity should be included within the consolidated financial statements. • IFRS 11 “Joint arrangements” includes revised definitions of joint arrangements which focus on the rights and obligations over the legal form. The standard removes the option of proportional consolidation. • IFRS 12 “Disclosure of interests in other entities” requires disclosure of all interests in other entities. • IFRS 13 “Fair value measurement” provides a precise definition of fair value and a single source of fair value measurement and disclosure requirements. 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. Mountview Estates P.L.C. Annual Report and Accounts 2013Governanceother informationfinancial statementsbusiness review Notes to the Consolidated Financial Statements continued for the year ended 31 March 2013 32 2. Accounting policies (continued) (t) Critical accounting judgements and key areas of estimation uncertainty Going concern 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: 1. Refinancing of banking facilities 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. 2. Covenant compliance 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. Distinction between investment and trading property 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. Investment properties In considering the values attributable to the investment portfolio, the following factors are taken into consideration: • sales of properties within the Group’s portfolio during the preceding 12 months • sales of properties in the same district whenever the information is available • published market research concerning the performance of the property market in this region and district • factors affecting individual properties and units in relation to value, and factors in the district which might affect the values of individual properties and units. 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. Carrying value of trading stock 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. Inventory expected to be settled in more than 12 months 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. Mountview Estates P.L.C. Annual Report and Accounts 2013 Notes to the Consolidated Financial Statements continued for the year ended 31 March 2013 33 3. Financial risk management objectives and policies 1. Financial risk factors 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. (a) Market risk The Group is exposed to market risk through interest rates and availability of credit. Price risk – the Group is exposed to property price and property rental risk. Cash flow and fair value interest rate 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. Long-term borrowings – 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. (b) Credit risk 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. (c) Liquidity 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. Mountview Estates P.L.C. Annual Report and Accounts 2013Governanceother informationfinancial statementsbusiness review Notes to the Consolidated Financial Statements continued for the year ended 31 March 2013 34 3. Financial risk management objectives and policies (continued) (d) Capital risk management 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. Total borrowings Less cash Net borrowings Total equity Total borrowings plus equity Gearing ratio 4. Analysis of revenue and cost of sales All revenue arises in the United Kingdom. 1. Rental income from tenancies of occupied properties. The income is recognised on an accruals basis. 2. Sale of stock properties. This is recognised on the date of legal completion. Revenue Gross sales of properties Gross rental income Cost of sales Cost of properties sold Property expenses Gross profit Sales of properties Net rental income 2013 £000 93,377 (900) 92,477 243,972 336,449 27.5% 2012 £000 93,364 (987) 92,377 227,219 319,596 28.9% 2013 £000 2012 £000 39,968 16,678 56,646 16,156 6,750 22,906 23,812 9,928 33,740 27,800 15,131 42,931 9,251 6,490 15,741 18,549 8,641 27,190 Cost of properties sold includes £1.02 million credit in respect of the reversed provision for the Magdalen Portfolio. Mountview Estates P.L.C. Annual Report and Accounts 2013 Notes to the Consolidated Financial Statements continued for the year ended 31 March 2013 35 5. Segmental information 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: Revenue Operating profit before changes in fair value of investment properties Finance costs Profit after tax Assets Liabilities Fixed assets Capital expenditure Depreciation Property trading £000 56,198 30,066 (4,302) Property investment £000 2013 Group £000 448 56,646 (1) 30,065 (4,302) 22,145 348,913 104,941 316,552 104,684 32,361 257 74 117 567 46 641 163 Property trading £000 42,488 23,666 (4,033) 303,321 104,779 160 125 Property investment £000 443 235 29,087 410 1,426 41 2012 Group £000 42,931 23,901 (4,033) 17,455 332,408 105,189 1,586 166 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. 6. Profit from operations The operating profit is stated after charging: Depreciation of tangible fixed assets Loss on disposal of fixed assets Auditors’ remuneration – the audit of the Parent Company and Consolidated Financial Statements – the audit of the Company’s subsidiaries pursuant to legislation – tax compliance work Operating expenses for investment properties And after crediting: – net rental income – administrative charges to related companies (Note 25) 2013 £000 2012 £000 163 3 40 12 9 236 166 10 38 12 9 454 9,928 38 8,641 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: Office and management 2013 24 2012 24 Mountview Estates P.L.C. Annual Report and Accounts 2013Governanceother informationfinancial statementsbusiness review Notes to the Consolidated Financial Statements continued for the year ended 31 March 2013 7. Staff costs (including Directors) Wages and salaries Social security costs Pension costs Directors’ remuneration 36 2013 £000 2,113 254 112 2,479 2012 £000 1,865 234 85 2,184 Total Directors’ remuneration including salary, bonuses, benefits in kind and pensions contributions amounted to: 1,391 1,189 8. Finance costs Interest on bank overdrafts, and loans 9. Income tax expense (a) Analysis of charge in the year Current tax: UK Corporation Tax 24% (2012: 26%) Deferred tax: Current year 24% (2012: 26%) Taxation attributable to the Company and its subsidiaries (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 Profit on ordinary activities multiplied by rate of tax 24% (2012: 26%) Expenses not deductible for tax Income not taxable Depreciation in excess of capital allowances Taxation on capital gains Profit on sale of assets Marginal relief Revaluation surplus in subsidiaries not taxed Deferred tax Cash flow hedge adjustment Sundry adjusting items 2013 £000 4,302 2012 £000 4,033 2013 £000 2012 £000 6,511 6,648 272 6,783 (1,298) 5,350 28,928 6,942 25 – 18 316 (19) (3) (624) 272 (135) (9) 22,805 5,930 110 (126) (10) 1,574 – – (830) (1,298) – – 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. Mountview Estates P.L.C. Annual Report and Accounts 2013 Notes to the Consolidated Financial Statements continued for the year ended 31 March 2013 37 10. Dividends 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. 11. Earnings per share 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) Weighted average number of Ordinary Shares for basic and fully diluted earnings per share Basic and diluted earnings per share The Company has no dilutive potential Ordinary Shares. 12. Property, plant and equipment 2013 £000 2012 £000 22,145 17,455 3,899,014 3,899,014 568.0p 447.7p Cost At 1 April 2012 Additions Disposals At 31 March 2013 Depreciation At 1 April 2012 Charge for the year On disposals At 31 March 2013 Net book value At 31 March 2012 At 31 March 2013 Freehold property £000 Fixtures and fittings £000 Motor vehicles £000 Computer equipment £000 2,671 – – 2,671 595 53 – 648 2,076 2,023 333 67 – 400 122 80 – 202 211 198 271 – (47) 224 128 23 (32) 119 143 105 21 7 – 28 10 7 – 17 11 11 Total £000 3,296 74 (47) 3,323 855 163 (32) 986 2,441 2,337 Property, plant and equipment are located within the UK. hire purchase agreement 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). Mountview Estates P.L.C. Annual Report and Accounts 2013Governanceother informationfinancial statementsbusiness review Notes to the Consolidated Financial Statements continued for the year ended 31 March 2013 12. Property, plant and equipment (continued) Freehold property £000 Fixtures and fittings £000 Motor vehicles £000 Computer equipment £000 Cost At 1 April 2011 Additions Disposals At 31 March 2012 Depreciation At 1 April 2011 Charge for the year On disposals At 31 March 2012 Net book value At 31 March 2011 At 31 March 2012 Property, plant and equipment are located within the UK. 13. Investment properties Fair value at 1 April 2013/(2012) Subsequent expenditure Disposals Increase in Fair Value during the year At 31 March 2013/(2012) 2,671 – – 2671 542 53 – 595 2,129 2,076 208 160 (35) 333 84 73 (35) 122 124 211 315 – (44) 271 123 35 (30) 128 192 143 152 – (131) 21 136 5 (131) 10 16 11 2013 £000 26,537 568 (1,855) 2,602 27,852 38 Total £000 3,346 160 (210) 3,296 885 166 (196) 855 2,461 2,441 2012 £000 30,314 1,426 (8,411) 3,208 26,537 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. Louise Goodwin Limited and A.L.G. Properties Limited 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. Mountview Estates P.L.C. Annual Report and Accounts 2013 Notes to the Consolidated Financial Statements continued for the year ended 31 March 2013 39 13. Investment properties (continued) The aggregate Fair Value of the Company’s interests in its investment portfolios was: Louise Goodwin Limited £24,989,000 (Twenty-four million, nine hundred and eighty-nine thousand pounds), split as follows: • Freehold: £24,584,000 (Twenty-four million, five hundred and eighty-four thousand pounds). • Long Leasehold: £405,000 (Four hundred and five thousand pounds). A.L.G. Properties Limited £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. 14. Investments Fixed asset investments 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. Hurstway Investment Company Limited Property trading Louise Goodwin Limited A.L.G. Properties Limited Property investment Property investment Principal activity 15. Inventories Residential properties 16. Trade and other receivables Trade receivables Prepayments and accrued income Cost 2012 2013 £000 1 15,351 2,924 18,276 2013 £000 2012 £000 316,626 301,072 2013 £000 339 859 2012 £000 378 993 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. Mountview Estates P.L.C. Annual Report and Accounts 2013Governanceother informationfinancial statementsbusiness review Notes to the Consolidated Financial Statements continued for the year ended 31 March 2013 17. Trade and other payables Trade creditors Other taxes and social security costs Other creditors The Directors consider that the carrying amount of trade and other payables approximates their fair value. 17(a) Commitments under hire purchase agreement Future commitments under hire purchase agreements are as follows: Amounts payable within 1 year 18. Bank overdrafts and loans Bank overdrafts Bank loans Other loans 18.(a) Cash and cash equivalents Bank overdrafts Cash Cash and cash equivalents as at 31 March Maturity profile of financial liabilities at 31 March 2013 was as follows: Amounts repayable: In one year or less Between one and two years Between two and five years Less: amount due for settlement within 12 months (shown under current liabilities) Amount due for settlement after 12 months The average interest rates paid were as follows: Bank overdrafts and money market loan Bank loans Other loans 40 2013 £000 589 151 891 1,631 2012 £000 383 143 859 1,385 2013 £000 22 2012 £000 28 2013 £000 7,465 84,950 962 93,377 2013 £000 (7,465) 900 (6,565) 2012 £000 3,089 90,000 275 93,364 2012 £000 (3,089) 986 (2,103) 2013 £000 2012 £000 8,427 84,950 – 93,377 (8,427) 84,950 2013 2.48% 4.31% 1.0% 3,364 – 90,000 93,364 (3,364) 90,000 2012 2.51% 4.40% 1.0.% Mountview Estates P.L.C. Annual Report and Accounts 2013 Notes to the Consolidated Financial Statements continued for the year ended 31 March 2013 41 18.(a) Cash and cash equivalents (continued) 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. 1. The Group has short-term borrowing facilities of £15 million with Barclays Bank. This facility expires at November 2013 and the rate of interest payable is: • 1.75% over LIBOR on £7 million • 1.9% over Base rate on £8 million. Headroom of this facility at 31 March 2013 amounted to £7.5 million (2012: £11.9 million). 2. The Group has a £75 million long-term borrowing facility with Barclays Bank. This is a five year revolving loan and the termination date of this facility is November 2014. The rate of interest payable on the loan is 1.8% above LIBOR. The loan is secured by a cross guarantee between Mountview Estates P.L.C. and its subsidiaries. The loan is not repayable by instalments. Headroom of this facility at 31 March 2013 amounted to £18.5 million (2012: £15 million). 3. The Group has a £10 million short-term borrowing facilities with HSBC Bank. This is a three year revolving loan facility and the termination date of this facility is December 2014. The rate of interest payable is 2.5% above LIBOR. Headroom of this facility at 31 March 2012 amounted to £1.55 million (2012: 0.8 million). The loan is secured by letter of Negative Pledge. The loan is not repayable by instalments. 4. The Group has a £20 million long-term borrowing facility with HSBC Bank. This is a five year revolving loan and the termination date of this facility is January 2015. The rate of interest payable on the loan is 2.5% above LIBOR. The loan is secured by Letter of Negative Pledge. The loan is not repayable by instalments. Headroom of this facility at 31 March 2013 amounted to £nil (2012: £nil). 5. Other loans consist of loans from connected persons, and companies of which Mr. D.M. Sinclair is a Director. Loans of £962,800 (2012: £275,000) are repayable within one year. Interest payable on these loans is at 0.5% above Barclays Bank Plc base rate. 19. Deferred Tax Analysis for financial reporting purposes Deferred tax liabilities Net position at 31 March The movement for the year in the Group’s net deferred tax position was as follows: At 1 April Debit/(Credit) to income for the year At 31 March 2013 £000 6,294 6,294 2013 £000 6,023 271 6,294 The following are in deferred tax liabilities recognised by the Group and movements thereon during the period: Revaluation of properties At 1 April Debit/(Credit) to income for the year At 31 March 2013 £000 6,023 271 6,294 2012 £000 6,023 6,023 2012 £000 7,321 (1,298) 6,023 2012 £000 7,321 (1,298) 6,023 Mountview Estates P.L.C. Annual Report and Accounts 2013Governanceother informationfinancial statementsbusiness review Notes to the Consolidated Financial Statements continued for the year ended 31 March 2013 42 20. Financial instruments Fair value of financial assets 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. Fair value of borrowings Bank overdrafts Secured bank loans Unsecured loans 2013 £000 7,465 84,950 962 93,377 2012 £000 3,089 90,000 275 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). Derivative financial instruments 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: - A reduction in the fair value of a financial instrument creditor by £1.603 million - A reduction of the cash flow hedge reserve of £1.040 million The above entries are due to the cessation of the interest rate swap agreement which matured in March 2013. Mountview Estates P.L.C. Annual Report and Accounts 2013 Notes to the Consolidated Financial Statements continued for the year ended 31 March 2013 43 20. Financial instruments (continued) undiscounted maturity profile of financial liabilities 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. At 31 March 2013 Interest bearing loans and borrowings Cash flow hedge Trade and other payables At 31 March 2012 Interest bearing loans and borrowings Cash flow hedges Trade and other payables Reconciliation of maturity analysis At 31 March 2013 Interest bearing loans and borrowings per accounts Interest Financial liability cash flows as above At 31 March 2012 Interest bearing loans and borrowings per accounts Interest Financial liability cash flows as above Less than 1 year £000 8,705 – 1,051 Between 1 and 5 years £000 Total £000 92,542 101,247 – – – 1,051 Total £000 Less than 1 year £000 Between 1 and 5 years £000 3,559 1,603 1,385 102,121 105,680 – – 1,603 1,385 Less than 1 year £000 Between 1 and 5 years £000 8,427 278 8,705 84,950 7,592 92,542 Less than 1 year £000 Between 1 and 5 years £000 3,364 195 3,559 90,000 12,121 Total £000 93,377 7,870 101,247 Total £000 93,364 12,316 102,121 105,680 Mountview Estates P.L.C. Annual Report and Accounts 2013Governanceother informationfinancial statementsbusiness review Notes to the Consolidated Financial Statements continued for the year ended 31 March 2013 21. Called up share capital Authorised: 5,000,000 Ordinary Shares of 5p each Allotted, issued and fully paid: 3,899,014 Ordinary Shares of 5p each 22. Other reserves Capital redemption reserve Capital reserve Other reserves 44 2013 £000 250 195 2013 £000 55 25 56 136 2012 £000 250 195 2012 £000 55 25 56 136 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). 23. Retained earnings Balance at 1 April 2012 Net profit for the year Dividends paid Balance at 31 March 2013 £000 227,928 22,145 (6,432) 243,641 Mountview Estates P.L.C. Annual Report and Accounts 2013 Notes to the Consolidated Financial Statements continued for the year ended 31 March 2013 45 24. Related party transactions 1. 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. (b) Included within other loans repayable in less than one year and on demand is a loan from Sinclair Estates Limited. The balance outstanding at the balance sheet date was £637,800 (2012: £100,000). Interest was payable on the loan at a rate of 0.5% above Barclays Bank Plc base rate. Interest paid in the year on this loan amounted to £3,152 (2012: £780). (c) Included within other loans repayable in less than one year and on demand is a loan from Ossian Investors Limited. The balance outstanding at the balance sheet date was £150,000 (2012: £nil). Interest was payable on the loan at a rate of 0.5% above Barclays Bank Plc base rate. Interest paid in the year on this loan amounted to £767 (2012: £744). (d) Included within other loans, repayable in less than one year and on demand is a loan from Mrs. D. Sinclair, a shareholder of the Company. The balance outstanding at the balance sheet date was £175,000 (2012: £175,000). Interest was payable on the loan at a rate of 0.5% above Barclays Bank Plc base rate. Interest paid in the year on this loan amounted to £1,750 (2012: £1,750). (e) All of the above loans are unsecured. (f) Transactions between the Group and its subsidiaries, which are related parties, have been eliminated on consolidation and have not been disclosed in this note. 25. Operating lease commitments The future aggregate minimum lease payments payable by the Group under non-cancellable operating leases are as follows: Operating lease payments due: Not later than one year Later than one year and not later than five years Later than five years 2013 £000 2012 £000 – 10 – 10 – 10 – 10 Mountview Estates P.L.C. Annual Report and Accounts 2013Governanceother informationfinancial statementsbusiness review Independent Auditors’ Report to the Members of Mountview Estates P.L.C. 46 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. Respective responsibilities of Directors and auditors 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. Scope of the audit of the Financial Statements 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. Opinion on Financial Statements In our opinion the Group Financial Statements: • give a true and fair view of the state of the Group’s affairs as at 31 March 2013 and of its profit for the year then ended; • have been properly prepared in accordance with IFRS as adopted by the European Union; and • have been prepared in accordance with the requirements of the Companies Act 2006 and Article 4 of the IAS Regulation. Opinion on other matter prescribed by the Companies Act 2006 In our opinion: • the information given in the Directors’ Report for the financial year for which the Group financial statements are prepared is consistent with the Group financial statements. • the information given in the Corporate Governance statement on pages 17 to 19 with respect to internal control and risk management systems and about share capital structures is consistent with the financial statements. Mountview Estates P.L.C. Annual Report and Accounts 2013 Independent Auditors’ Report continued to the Members of Mountview Estates P.L.C. 47 Matters on which we are required to report by exception 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: • certain disclosures of Directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit; or • a corporate governance statement has not been prepared by the Parent Company. Under the Listing Rules we are required to review: • the Directors’ statement in relation to going concern; and • the part of the Corporate Governance Statement relating to the Company’s compliance with the nine provisions of the UK Corporate Governance Code specified for our review; and • certain elements of the Report to the shareholders by the Board on Directors’ Remuneration. Other matters 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 Mountview Estates P.L.C. Annual Report and Accounts 2013Governanceother informationfinancial statementsbusiness review 48 As at 31.03.2013 £000 As at 31.03.2012 £000 Notes 3 4 5 6 7 8 9 10 10 10 11 12 2,225 18,276 20,501 2,346 18,276 20,622 301,501 285,868 1,138 866 303,505 (13,138) 290,367 310,868 (91,130) 219,738 195 55 25 39 – 219,424 219,738 1,278 899 288,045 (8,651) 279,394 300,016 (93,461) 206,555 195 55 25 39 (1,040) 207,281 206,555 Company Balance Sheet under UK GAAP as at 31 March 2013 Fixed assets Tangible assets Investments Current assets Stocks Debtors Cash at bank and in hand Creditors: amounts falling due within one year Net current assets Total assets less current liabilities Creditors: amounts falling due after more than one year Capital and reserves Called up share capital Capital redemption reserve Capital reserve Other reserves Cash flow hedge reserve Profit and loss account Approved by the Board on 18 July 2013. D.M. SinCLAiR Chairman M.M. bRAY Director Mountview Estates P.L.C. Annual Report and Accounts 2013 49 Notes to the Financial Statements under UK GAAP for the year ended 31 March 2013 1. Accounting policies (a) basis of accounting The Accounts have been prepared under the historical cost convention, and in accordance with applicable Accounting Standards. (b) investments Fixed assets investments in subsidiary undertakings are stated at cost less any provision for impairment. (c) taxation Corporation tax payable is provided on taxable profits at the current rate. (d) turnover 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. (e) Depreciation 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 Fixtures and fittings and office equipment Computer equipment Motor Vehicles – reducing balance method – 2% – 20% – 25% – 20% (f) impairment of fixed assets 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. (g) Stocks 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. (h) hire purchase agreements 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. (i) Leasing Rentals payable under operating leases are charged to profit and loss on a straight-line basis over the term of the relevant lease. (j) Deferred tax 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: • provision is made for tax on gains arising from the revaluations (and similar fair value adjustments) of fixed assets, and gains on disposal of fixed assets that have been rolled over into replacement assets, only to the extent that, at balance sheet date, there is binding agreement to dispose of these assets concerned. However, no provision is made where, on the basis of all available evidence at the balance sheet date, it is more likely than not that the taxable gain will be rolled over into replacement assets and charged to tax only where the replacement assets are sold; • deferred tax assets are recognised only to the extent that the Directors consider that it is more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted. Mountview Estates P.L.C. Annual Report and Accounts 2013Governanceother informationfinancial statementsbusiness review Notes to the Financial Statements under UK GAAP continued for the year ended 31 March 2013 2. Staff costs (including Directors) Wages and salaries Social security costs Pension costs Directors’ remuneration Total Directors’ remuneration including salary, bonuses, benefits in kind and pensions contributions amounted to: 50 2013 £000 2,113 254 112 2,479 2012 £000 1,865 234 85 2,184 2013 £000 2012 £000 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: Office and management 3. Tangible assets Cost At 1 April 2012 Additions Disposals At 31 March 2013 Depreciation At 1 April 2012 Charge for the year On disposals At 31 March 2013 Net book value At 31 March 2012 At 31 March 2013 2013 £000 24 2012 £000 24 Freehold property £000 Fixtures and fittings £000 Motor vehicles £000 Computer equipment £000 2,671 – – 2,671 595 53 – 648 2,076 2,023 163 8 – 171 47 38 – 85 116 86 271 – (47) 224 128 23 (32) 119 143 105 21 7 – 28 10 7 – 17 11 11 Total £000 3,126 15 (47) 3,094 780 121 (32) 869 2,346 2,225 hire Purchase Agreement 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. Mountview Estates P.L.C. Annual Report and Accounts 2013 Notes to the Financial Statements under UK GAAP continued for the year ended 31 March 2013 51 4. Investments Fixed asset investments 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. Hurstway Investment Company Limited Louise Goodwin Limited A.L.G. Properties Limited The Company owns 100% of the Ordinary Share capital of the following companies: Subsidiary undertaking Country of incorporation Hurstway Investment Company Limited Louise Goodwin Limited A.L.G. Properties Limited UK UK UK 5. Stocks Residential properties 6. Debtors: due within one year Trade debtors Prepayments and accrued income 7. Creditors: amounts falling due within one year Bank loans and overdrafts Trade creditors Corporation Tax Other taxes and social security costs Other creditors Other loans Derivative financial instruments 2013 £000 1 15,351 2,924 18,276 2012 £000 1 15,351 2,924 18,276 Principal activity Property trading Property investment Property investment 2013 £000 2012 £000 301,501 285,868 2013 £000 324 814 2012 £000 362 916 1,138 1,278 2013 £000 7,465 578 3,128 152 853 962 – 13,138 2012 £000 3,089 339 2,342 154 849 275 1,603 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. Mountview Estates P.L.C. Annual Report and Accounts 2013Governanceother informationfinancial statementsbusiness review Notes to the Financial Statements under UK GAAP continued for the year ended 31 March 2013 7.(a) Commitments under hire purchase agreement Future commitments under hire purchase agreements are as follows: Amounts payable within one year 8. Creditors: Amounts falling due after more than one year Bank loans Amounts owed to subsidiary undertakings Other loans Maturity profile of financial liabilities at 31 March 2013 was as follows: Amounts repayable: In one year or less Between one and two years Between two and five years More than five years Less: amount due for settlement within 12 months (shown under current liabilities) Amount due for settlement after 12 months The Directors consider that the carrying amount of bank overdrafts and loans approximates their fair value. 52 2013 £000 22 2012 £000 28 2013 £000 84,950 6,180 – 2012 £000 90,000 3,461 – 91,130 93,461 2013 £000 2012 £000 8,427 84,950 – – 93,377 (8,427) 84,950 3,364 – 90,000 3,461 96,825 (3,364) 93,461 Mountview Estates P.L.C. Annual Report and Accounts 2013 Notes to the Financial Statements under UK GAAP continued for the year ended 31 March 2013 53 8. Creditors: Amounts falling due after more than one year (continued) The other principal features of the Group’s borrowings are as follows. 1. The Group has short-term borrowing facilities of £15 million with Barclays Bank. This facility expires at November 2013 and the rate of interest payable is: • 1.75% over LIBOR on £7 million • 1.9% over Base rate on £8 million. Headroom of this facility at 31 March 2013 amounted to £7.5 million (2012: £11.9 million). 2. The Group has a £75 million long-term borrowing facility with Barclays Bank. This is a five year revolving loan and the termination date of this facility is November 2014. The rate of interest payable on the loan is 1.8% above LIBOR. The loan is secured by a cross guarantee between Mountview Estates P.L.C. and its subsidiaries. The loan is not repayable by instalments. Headroom of this facility at 31 March 2013 amounted to £18.5 million (2012: £15 million). 3. The Group has a £10 million short-term borrowing facilities with HSBC Bank. This is a three year revolving loan facility and the termination date of this facility is December 2014. The rate of interest payable on the loan is 2.5% above LIBOR. The loan is secured by Letter of Negative Pledge. The loan is not repayable by instalments. Headroom of this facility at 31 March 2013 amounted to £1.55 million (2012: £0.8 million). 4. The Group has a £20 million long-term borrowing facility with HSBC Bank. This is a five year revolving loan and the termination date of this facility is January 2015. The rate of interest payable on the loan is 2.5% above LIBOR. The loan is secured by Letter of Negative Pledge. The loan is not repayable by instalments. Headroom of this facility at 31 March 2013 amounted to £nil (2012: £nil). 5. Other loans consist of loans from connected persons, and companies of which Mr. D.M. Sinclair is a Director. Loans of £962,800 (2012: £275,000) are repayable within one year. Interest payable on these loans is at 0.5% above Barclays Bank Plc base rate. 9. Called up share capital Authorised: 5,000,000 Ordinary Shares of 5p each Allotted, issued and fully paid: 3,899,014 Ordinary Shares of 5p each 10. Other reserves Capital redemption reserve Capital reserve Other reserves Balance at 31 March 2013 £000 250 195 2013 £000 55 25 39 119 2012 £000 250 195 2012 £000 55 25 39 119 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). Mountview Estates P.L.C. Annual Report and Accounts 2013Governanceother informationfinancial statementsbusiness review Notes to the Financial Statements under UK GAAP continued for the year ended 31 March 2013 54 11. Derivative financial instruments 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%). 12. Profit and loss account Balance at 1 April Net profit for the year (including dividends received year end – 2012) Dividends paid Balance at 31 March 13. Related party transactions 2013 £000 2012 £000 207,281 169,650 18,575 (6,432) 44,063 (6,432) 219,424 207,281 1. 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. (b) Included within other loans repayable in less than one year and on demand is a loan from Sinclair Estates Limited. The balance outstanding at the balance sheet date was £637,800 (2012: £100,000). Interest was payable on the loan at a rate of 0.5% above Barclays Bank Plc base rate. Interest paid in the year on this loan amounted to £3,152 (2012: £780). (c) Included within other loans repayable in less than one year and on demand is a loan from Ossian Investors Limited. The balance outstanding at the balance sheet date was £150,000 (2012: £nil). Interest was payable on the loan at a rate of 0.5% above Barclays Bank Plc base rate. Interest paid in the year on this loan amounted to £767 (2012: £744). (d) Included within other loans, repayable in less than one year and on demand is a loan from Mrs. D. Sinclair, a shareholder of the Company. The balance outstanding at the balance sheet date was £175,000 (2012: £175,000). Interest was payable on the loan at a rate of 0.5% above Barclays Bank Plc base rate. Interest paid in the year on this loan amounted to £1,750 (2011: £1,750). (e) All of the above loans are unsecured. (f) Transactions between the Group and its Subsidiaries, which are related parties, have been eliminated on consolidation and have not been disclosed in this note. Mountview Estates P.L.C. Annual Report and Accounts 2013 Notes to the Financial Statements under UK GAAP continued for the year ended 31 March 2013 55 14. Operating lease commitments The future aggregate minimum lease payments payable by the Group under non-cancellable operating leases are as follows: Operating lease payments due: Not later than one year Later than one year and not later than five years Later than five years 2013 £000 2012 £000 – 10 – 10 – 10 – 10 Mountview Estates P.L.C. Annual Report and Accounts 2013Governanceother informationfinancial statementsbusiness review Independent Auditors’ Report to the Members of Mountview Estates P.L.C. on the Parent Company Financial Statements 56 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). Respective responsibilities of Directors and auditors 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. Scope of the audit of the Financial Statements 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. Opinion on Financial Statements In our opinion the Parent Company Financial Statements: • give a true and fair view of the state of the Company’s affairs as at 31 March 2013 and of its profit for the year when ended; • have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and • have been prepared in accordance with the requirements of the Companies Act 2006. Opinion on other matters prescribed by the Companies Act 2006 In our opinion: • the part of the report of the Remuneration Committee and Directors’ Remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006; and • the information given in the Directors’ Report for the financial year for which the Parent Company Financial Statements are prepared is consistent with the Parent Company Financial Statements. Mountview Estates P.L.C. Annual Report and Accounts 2013 Independent Auditors’ Report continued to the Members of Mountview Estates P.L.C. on the Parent Company Financial Statements 57 Matters on which we are required to report by exception 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: • adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or • the Parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns; or • certain disclosures of Directors’ Remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. Other matter 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 Mountview Estates P.L.C. Annual Report and Accounts 2013Governanceother informationfinancial statementsbusiness review Table of Comparative Figures 58 Revenue Profit before taxation Taxation Profit after taxation Earnings per share Rate of dividend Cover Cost of dividend Total remuneration (including Directors) Executive Directors’ remuneration Total remuneration (including Directors) as percentage of dividend Cost of Executive Directors remuneration as percentage of total remuneration Cost of Executive Directors’ remuneration as percentage of dividend IFRS 2007 £000 68,168 50,227 15,167 35,060 899.2p 150p 5.99 5,848 3,377 2,021 IFRS 2008 £000 54,338 29,529 8,861 20,668 530.1p 155p 3.42 6,042 2,846 1,498 IFRS 2009 £000 53,599 13,062 3,673 9,389 241.0p 155p 1.55 6,042 2,528 1,436 IFRS 2010 £000 56,697 29,255 7,620 21,635 554.8p 165p 3.36 6,432 2,759 1,569 IFRS 2011 £000 47,655 23,560 6,589 16,971 435.3p 165p 2.64 6,432 2,390 1,233 as at 31 March 2013 IFRS 2013 £000 56,646 28,928 6,783 22,145 568.0p 175p 3.25 6,823* 2,479 1,319 IFRS 2012 £000 42,931 22,805 5,350 17,455 447.7p 165p 2.71 6,432 2,184 1,117 57.75 47.10 41.84 42.89 37.15 33.95 36.33 59.85 52.64 56.80 56.87 51.59 51.14 34.5 24.7 23.7 24.3 19.1 17.3 53.2 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. Mountview Estates P.L.C. Annual Report and Accounts 2013 Notice of Meeting 59 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: As ordinary business: 1. To receive and consider the Reports of the Directors and the Auditors and the audited Statements of Accounts of the Company for the year ended 31 March 2013. 2. To declare a final dividend of 125p per share payable on 19 August 2013 to Shareholders on the register at 19 July 2013. 3. To re-appoint Mr. D.M. Sinclair as a Director of the Company. 4. To approve the Directors’ Remuneration Report set out in the Annual Report and Accounts for the year ended 31 March 2013. 5. To re-appoint Messrs BSG Valentine as Auditors of the Company to hold office from the conclusion of the Meeting to the conclusion of the next meeting at which the accounts are laid before the meeting. 6. To authorise the Directors to determine the Auditors’ remuneration for the ensuing year. By Order of the Board M.M. bRAY Company Secretary Mountview House 151 High Street Southgate London N14 6EW 18 July 2013 Mountview Estates P.L.C. Annual Report and Accounts 2013Governanceother informationfinancial statementsbusiness review Notice of Meeting continued 60 Notes: 1. A Member who is entitled to attend and vote at the Meeting is entitled to appoint one or more proxies to attend, speak and vote instead of him/her. A proxy need not also be a Member of the Company. If a Member appoints more than one proxy to attend the Meeting, each proxy must be appointed to exercise the rights attached to a different share or shares held by the Member. If a Member wishes to appoint more than one proxy and so requires additional Forms of Proxy, the Member should contact Capita Registrars (PXS), The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU. 2. A Form of Proxy is enclosed with this Report and Accounts and should be completed in accordance with the instructions contained therein. Completion and return of the Form of Proxy will not prevent a Member from attending the Meeting and voting in person. To be effective, the Form of Proxy and any power of attorney or other authority under which it is signed (or a notarially certified copy of such authority) must be deposited at the office of the Company’s Registrars, Capita Registrars (PXS), The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU, not later than 48 hours before the time of the Meeting or any adjournment thereof. Amended instructions must also be received by the Company’s Registrars by the deadline for receipt of Forms of Proxy. 3. To appoint a proxy or to give or amend an instruction to a previously appointed proxy via the CREST system, the CREST message must be received by the issuer’s agent RA10 by no later than 48 hours before the time of the Meeting or any adjournment thereof. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host) from which the issuer’s agent is able to retrieve the message. After this time any change of instructions to a proxy appointed through CREST should be communicated to the proxy by other means. CREST Personal Members or other CREST sponsored members, and those CREST Members who have appointed voting service provider(s) should contact their CREST sponsor or voting service provider(s) for assistance with appointing proxies via CREST. For further information on CREST procedures, limitations and system timings please refer to the CREST Manual. We may treat as invalid a proxy appointment sent by CREST in the circumstances set out in Regulation 35(5) (a) of the Uncertificated Securities Regulations 2001. In any case your proxy instruction must be received by the Company’s registrars no later than 48 hours before the time of the Meeting or any adjournment thereof. 4. Any person receiving a copy of this Notice as a person nominated by a Member to enjoy information rights under Section 146 of the Companies Act 2006 (a “Nominated Person”) should note that the provisions in Notes 1 and 2 above concerning the appointment of a proxy or proxies to attend the Meeting in place of a Member, do not apply to a Nominated Person as only Shareholders have the right to appoint a proxy. However, a Nominated Person may have a right under an agreement between the Nominated Person and the Member by whom he or she was nominated to be appointed, or to have someone else appointed, as a proxy for the Meeting. If a Nominated Person has no such proxy appointment right or does not wish to exercise it, he/she may have a right under such an agreement to give instructions to the Member as to the exercise of voting rights at the Meeting. 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. 5. Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001 (as amended) and for the purposes of Section 360B of the Companies Act 2006, entitlement to attend and vote at the Meeting and the number of votes which may be cast thereat will be determined by reference to the register of members of the Company as at 6.00 pm on 12 August 2013 (the ”Specified Time”) or 48 hours (excluding any day or part of any day that is not a working day) before the date of any adjourned Meeting. If the Meeting is adjourned to a time not more than 48 hours after the Specified Time, that time will also apply for the purpose of determining the entitlement of Members to attend and vote and for the purpose of determining the number of votes they may cast at the adjourned Meeting. Changes to entries on the register of members after the relevant deadline shall be disregarded in determining the rights of any person to attend and vote at the Meeting. Mountview Estates P.L.C. Annual Report and Accounts 2013 Notice of Meeting continued 61 6. Any corporation which is a Member can appoint one or more corporate representatives who may exercise on its behalf all of its powers as a Member, provided that, if it is appointing more than one corporate representative, it does not do so in relation to the same shares. It is therefore no longer necessary to nominate a designated corporate representative. 7. If the Chairman, as a result of any proxy appointments, is given discretion as to how the votes the subject of those proxies are cast and the voting rights in respect of those discretionary proxies, when added to the interests in the Company’s securities already held by the Chairman, result in the Chairman holding such number of voting rights that he has a notifiable obligation under the Disclosure and Transparency Rules, the Chairman will make the necessary notifications to the Company and the Financial Services Authority. As a result, any Member holding 3% or more of the voting rights in the Company who grants the Chairman a discretionary proxy in respect of some or all of those voting rights and so would otherwise have a notification obligation under the Disclosure and Transparency Rules, need not make a separate notification to the Company and the Financial Services Authority. 8. Under Section 527 of the Companies Act 2006, Members meeting the threshold requirements set out in that section have the right to require the Company to publish on a website a statement setting out any matter relating to: (a) the audit of the Company’s accounts (including the auditor’s report and the conduct of the audit) that are to be laid before the meeting; or (b) any circumstance connected with an auditor of the Company ceasing to hold office since the previous meeting at which annual accounts and reports were laid in accordance with Section 437 of the Companies Act 2006. 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. 9. Any Member attending the Meeting has the right to ask questions. The Company must cause to be answered any question relating to the business being dealt with at the Meeting put by a Member attending the Meeting. However, Members should note that no answer need be given in the following circumstances: (a) if to do so would interfere unduly with the preparation of the Meeting or would involve a disclosure of confidential information; (b) if the answer has already been given on a website in the form of an answer to a question; or (c) if it is undesirable in the interests in the Company or the good order of the meeting that the question be answered. 10. This Notice, together with information about the total numbers of shares in the Company in respect of which Members are entitled to exercise voting rights at the Meeting as at 18 July 2013 being the last business day prior to the printing of this Notice and, if applicable, any members’ statements, members’ resolutions or members’ matters of business received by the Company after the date of this Notice, will be available on the Company’s website www.mountviewplc.co.uk. 11. Any electronic address provided either in this Notice or in any related documents (including the Form of Proxy) may not be used to communicate with the Company for any purposes other than those expressly stated. 12. As at 18 July 2013, being the last business day prior to the printing of this Notice, the Company’s issued capital consisted of 3,899,014 Ordinary Shares carrying one vote each. Therefore, the total voting rights in the Company as at 18 July 2013 are 3,899,014. 13. Copies of the Directors’ service contracts and letters of appointment with the Company are available for inspection at the registered office at Mountview House, 151 High Street, Southgate, London N14 6EW during normal business hours on weekdays (Saturdays, Sundays and English public holidays excepted) from the date of this notice until the conclusion of the Meeting and will also be available for inspection on the date and at the place of the Meeting from 15 minutes prior to the commencement of the Meeting until the conclusion of the Meeting. Mountview Estates P.L.C. Annual Report and Accounts 2013Governanceother informationfinancial statementsbusiness review Shareholders’ Information Financial calendar 2013 Final dividend record date Annual Report posted to Shareholders Annual General Meeting Final dividend payment Interim results 62 19 July 19 July 14 August 19 August 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 Estates P.L.C. Annual Report and Accounts 2013 Shareholders’ Notes 63 Mountview Estates P.L.C. Annual Report and Accounts 2013Governanceother informationfinancial statementsbusiness review Shareholders’ Notes continued 64 Mountview Estates P.L.C. Annual Report and Accounts 2013 M o u n t v i e w E s t a t e s P. L . C . A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 3 Mountview Estates P.L.C. Mountview House, 151 High Street, Southgate, London N14 6EW Tel: +44 (0) 20 8920 5777 Fax: +44 (0) 20 8882 9981 www.mountviewplc.co.uk