<pre>http://pdf.reuters.com/Regnews/regnews.asp?i=43059c3bf0e37541&u=urn:newsml:reuters.com:20090916:RnsP1524Z . RNS Number : 1524Z Westcity PLC 16 September 2009 Company Number 0164213 WESTCITY PLC HALF YEAR REPORT 2009 unaudited HALF YEAR results foR the six months to 30 June 2009 WESTCITY PLC CHAIRMAN'S STATEMENT UNAUDITED RESULTS FOR THE HALF YEAR ENDED 30 June 2009 Westcity Plc's ("Group") major asset is its investment of 34.3% in the Stonehage Westcity Property Fund("Fund") of £14,355,000 which is carried at fair value based upon the proportionate share of the net asset value of the Fund of E49.2m. The Group incurred a loss after tax for the six months under review of £2,970,000 (2008: loss £4,843,000) principally due to the loss on the proportionate share of the Group's investment in the Fund of £2,271,000 (2008: loss £2,297,000). This loss comprises two components, a reduction in the net asset value of the Fund for the six months of £168,000, and, the impact of foreign currency translation loss of £2,103,000 as a result of the strengthening of the pound since 31 December 2008 from 1.02 to 1.17 to the Euro. Excluding the Fund related losses, the Company recorded an operating loss of £699,000 (2008: loss £2,546,000 including loss on forward exchange contract of £1,441,000),as revenues failed to cover the Company's operating expenses due to the reduced level of investment activity by the Fund. REVIEW OF OPERATIONS We have continued to adopt a defensive strategy through this turbulent period, a strategy which comprises three key elements: * no further investment until value is clearly understood and funding markets return to sensible levels * continue to maintain and improve current levels of income on all our assets * monitor all levels on debt finance with a view of maintaining or renegotiating principal terms where applicable The Fund continued to liquidate investments where opportunities presented themselves with a view to preserving cash, as a result of which 90% of the total net asset value of the Fund was represented in cash (E44.3 million) as at 30 June 2009. As a consequence of the asset divestments and freeze on new investments by the Fund, minimal revenue has been generated for our Group from fee income. Against this lack of income the group continued to further reduce its fixed cost base. The assets in the Fund are being constantly monitored and closely managed to ensure that wherever possible improved rental income and reduced cost bases are achieved. The majority of the Fund's remaining investment portfolio is situated in Germany, where transactional activity remained extremely low during the first six months of 2009. Vacancy rates and rental rates remained under pressure and capitalisation yields continued to expand with the consequential reduction in property values. Although the portfolio was not formally valued at 30 June 2009, further impairment provisions totalling E3.4 million were made against three of the Fund's German investments. These impairments were made with the benefit of indicative values and guidance received from professional advisors in Germany. However, the overall net asset value of the Fund only reduced by E0.5 million during the 6 months to 30th June 2009. OUTLOOK Whilst the company has reduced its fixed cost base over the past twelve months there is no visibility on revenues recovering. Active management of the remaining portfolio remains a priority with strong emphasis on further reducing the cost base and improving rental income at the property level. Tenant retention remains a key focus. While yields continue to come under pressure and transactional activity remains low, maximising and realising the value from the existing portfolio will require time. Once some level of confidence returns to world markets and financing flows are restored to more normal levels, the longer term is expected to provide stronger exit opportunities for these investments. In the meantime the Fund will continue to manage these assets with a focus on preserving value. PRINCIPAL RISKS AND UNCERTAINTIES There have been no changes to the risk factors in the Group since the year end. Interest rate risk - Our interest rate risk primarily arises from borrowings issued at floating interest rates which exposes the group to cashflow interest rate risk. The group is exposed to interest rate risk as a result of its loan from Chapman International Investment LTD. At 30 June 2009 the group had debt of £1,175,000. Credit risk - The group's principal financial assets are cash balances and deposits. To reduce the risk of counterparty default the group deposits its surplus funds in approved high quality banks. Credit risk is limited due to the group's close working relationship with the Fund. Foreign currency risk - The group is exposed to foreign currency risk as a result of its investment into the Stonehage Westcity Property Fund. Market risk - The year under review has been one of unparalleled turbulence with severe volatilities within the real estate and financial markets which has led to a re-evaluation of property as an asset class. The past twelve months have proved to be a particularly testing time with most property companies and funds experiencing a sharp fall in capital values. Liquidity risk - The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation. The financial obligation in the Group is principally restricted to trade and other payables and the loan from Chapman International Investment LTD. A detailed explanation of the principal risks and uncertainties can be found in the 2008 Annual Report (Pages 35-38 / Note 14) which is available in "read only" format for viewing or downloading, free of charge, on the company website at www.westcityplc.com/reports.php. DIVIDEND No dividend will be paid on the ordinary shares in respect of the period under review (2008: NIL). RECOMMENDED CASH OFFER AND SHARE ALTERNATIVE (the "Offer") Westcity has separately announced today that the Board has reached agreement on the terms of a recommended cash offer and share alternative to be made from a newly formed company Berkshire Bidco Limited incorporated by Westcity's largest shareholder, Chapman International Investments Ltd. Shareholders are entitled to receive 13 pence in cash for each Westcity share or elect to receive, in respect of all (but not some) of their Westcity shares, 1 Berkshire share for each Westcity share in lieu of the cash consideration. The cash offer represents a premium of approximately 48.5% to the price of 8.75 pence per Westcity share (being closing price on 29th June 2009, the last trading day before the announcement on 24th August 2009 by Westcity that it was in discussions regarding a possible offer). The Offer is to be implemented by means of a scheme of arrangement between Westcity and the Scheme Shareholders under part 26 of the 2006 Act. Ira RappExecutive Chairman16 September 2009 WESTCITY PLC RESPONSIBILITY STATEMENT UNAUDITED RESULTS FOR THE HALF YEAR ENDED 30 June 2009 We confirm that to the best of our knowledge: (a) The condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting'; (b) the chairman's statement includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and (c) the chairman's statement includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein). On behalf of the Board Ira Rapp Michael Tannenbaum Executive Chairman Finance Director 16 September 2009 16 September 2009 WESTCITY PLC CONDENSED CONSOLIDATED INCOME STATEMENT UNAUDITED RESULTS FOR THE HALF YEAR ENDED 30 June 2009 Unaudited Unaudited Audited results for the results for the results for 6 months to 6 months to the year ended 30 June 30 June 31 December 2009 2008 2008 £'000 £'000 £'000 REVENUE 106 432 694 Finance revenue - 90 91 Employee benefits expense (496) (1,250) (2,013) Depreciation and amortisation expense (13) (19) (36) Other expenses (404) (407) (1,144) Loss on Investment held at fair value through profit (2,271) (2,297) (4,512) and loss Finance Costs - - (27) Share of profits of equity accounted investments 108 49 218 Loss on forward exchange contract - (1,441) (1,441) (LOSS) BEFORE TAX (2,970) (4,843) (8,170) Income taxes - - - (LOSS) FOR THE PERIOD ATTRIBUTABLE TO EQUITY HOLDERS (2,970) (4,843) (8,170) OF THE PARENT Basic (loss) per share (4.00)p (6.50)p (11.00)p Diluted (loss) per share (4.00)p (6.50)p (11.00)p WESTCITY PLC CONDENSED CONSOLIDATED Balance Sheet AS AT 30 June 2009 Unaudited Unaudited Audited 30 June 30 June 31 December 2009 2008 2008 Notes £'000 £'000 £'000 NON-CURRENT ASSETS Property, plant and equipment 20 50 34 Equity accounted investments 299 171 191 Other financial assets 14,355 18,840 16,626 14,674 19,061 16,851 CURRENT ASSETS Trade and other receivables 68 526 342 Prepayments 41 58 22 Cash and cash equivalents 51 512 42 160 1,096 406 TOTAL ASSETS 14,834 20,157 17,257 CURRENT LIABILITIES Trade and other payables 182 350 255 Loans and borrowings 1,175 - - Provisions 6 131 55 323 1,488 405 578 NON-CURRENT LIABILITIES Loans and borrowings - - 400 Provisions 6 164 374 167 164 374 567 TOTAL LIABILITIES 1,652 779 1,145 NET ASSETS 13,182 19,378 16,112 SHAREHOLDERS' EQUITY Called up share capital 7 743 743 743 Share based payments reserve 8 491 390 451 Other capital reserves 8 25,571 25,589 25,571 Retained earnings 8 (13,623) (7,344) (10,653) 13,182 19,378 16,112 WESTCITY PLC condensed CONSOLIDATED Cash Flow Statement FOR THE half YEAR ENDED 30 June 2009 Unaudited Unaudited Audited 6 months to 6 months to year to 30 June 30 June 31 December 2009 2008 2008 Notes £'000 £'000 £'000 Net cash flows from operating activities 9 9 (4,365) (4,809) Investing activities Interest received - 90 91 Net cash flows used in investing activities - 90 91 Financing activities Interest paid - - (27) Net cash flows used in financing activities - - (27) Net increase/(decrease) in cash and cash equivalents 9 (4,275) (4,745) Cash and cash equivalents at 1 January 42 4,787 4,787 Cash and cash equivalents at 30 June/ 31 December 51 512 42 WESTCITY PLC CONdensed conSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE HALF YEAR ENDED 30 June 2009 Share based payment reserve £'000 Other capital reserves Issued Capital £'000 Retained earnings Total Equity £'000 £'000 £'000 743 321 25,589 (2,501) 24,152 At 1st January 2008 Total income and expense for the period - - - (4,843) (4,843) Share based payment - 69 - - 69 743 390 25,589 (7,344) 19,378 At 30 June 2008 / 1 July 2008 Total income and expense for the period - - - (3,327) (3,327) Share based payment - 61 - - 61 Increase in provision - - (18) 18 - At 31 December 2008 743 451 25,571 (10,653) 16,112 Total income and expense for the period - - - (2,970) (2,970) Share based payment - 40 - - 40 At 30 June 2009 743 491 25,571 (13,623) 13,182 WESTCITY PLC NOTES TO the CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 30 June 2009 1. BASIS OF PREPARATION The condensed financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards and in accordance with International Accounting Standards (IAS) 34 Interim Financial Reporting and have not been audited for the period under review. The financial information contained in this document does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. The financial information for the year ended 31st December 2008 is extracted from the audited financial statements for that year on which the auditors gave an unqualified report and which did not give a statement under Section 237 (2) or 237 (3) of the Companies Act 1985. A copy of these 2008 financial statements has been filed with the Registrar of Companies. A copy of these 2008 financial statements has been filed with the Registrar of Companies. The Group prepares its consolidated financial statements in accordance with IFRS, and the statements have been prepared using the accounting policies set out in the Group's 2008 statutory accounts. The Directors have carefully considered the Group's budget and cashflow to ensure that the Group has adequate working capital, taking into account the two year loan facility from Chapman International Investment Limited as outlined in Note 11 and current negotiations in place with Chapman International Investment Limited regarding the subsequent working capital requirements on expiry of the facility with them in June 2010. Overall, the directors have a reasonable expectation that the Group will have adequate resources and facilities to continue in the foreseeable future on the basis of securing new working capital requirements on expiry of the existing facility given the strength of the underlying investments held by the Group. For this reason, the Directors continue to adopt the going concern basis in preparing the Half Year Report. 2. SIGNIFICANT ACCOUNTING POLICIES The condensed financial statements have been prepared on a historical cost basis or fair value basis as appropriate. The same accounting policies, presentation and methods of computation are followed in these condensed financial statements as were applied in the preparation of the Group's financial statements for the year ended 31 December 2008. 3. SEGMENT INFORMATION The Group income derives principally from its operations in the UK and Channel Islands being that of property related investment, development and management. The directors consider there is no segmental information to be provided on the basis that the Group is based and operated from the UK with an investment in the Channel Islands. 4. DIVIDENDS No dividends were paid or declared in the period (June 2008: Nil, December 2008: Nil). 5. (LOSS)/EARNINGS PER ORDINARY SHARE Basic earnings per ordinary share has been calculated on the Group's loss attributable to shareholders of £2,970,000 (June 2008 loss: £4,843,000, December 2008 loss: £8,170,000) and on the weighted average number of ordinary shares in issue during the period which was 74,299,301 (June 2008: 74,299,301, December 2008: 74,299,301). There are no potentially dilutive or anti-dilutive share options in the period. 6. PROVISIONS Pension Scheme deficit Onerous property leases Total £'000 £'000 £'000 Provision at 1 January 2009 268 222 490 Provision Increased - 50 50 Provision settled (193) - (193) Provision utilised - (52) (52) Provision at 30 June 2009 75 220 295 Current 75 56 131 Non-current - 164 164 75 220 295 Provisions for liabilities Provision is made in these financial statements for all material liabilities including any legal claims which are expected to materialise and a lease liability which has materialised on premises formerly occupied by a Group company. The Directors have considered the adequacy of provisions for product liability, property lease liabilities which have materialised, trade disputes and environmental issues relating to disposed businesses and consider that adequate provision has been made, or sufficient funds held in escrow, to meet any contingent costs. The Group pension scheme deficit will be repaid by November 2009 at which time the scheme will effectively cease. The provision for the Group onerous property leases is still a current obligation and will be valid until the lease is re-assigned. 7. SHARE CAPITAL There were no changes to the issued share capital of the Company during the period. 8. RESERVES Share based payments reserve Other capital reserves Retained earnings Group £'000 £'000 £'000 At 1 January 2009 451 25,571 (10,653) Share based payment 40 - - Retained (loss) for the period - - (2,970) At 30 June 2009 491 25,571 (13,623) Nature and purpose of other reserves Share based payments reserve The share based payments reserve is used to recognise the fair value of options expensed but not exercised. Other capital reserves The other capital reserves arose following the cancellation of amounts included in the capital redemption reserve and share premium account. The other capital reserves are not to be treated as representing realised profits of the Company and will be treated as an undistributable reserve for the purposes of section 264 of the Companies Act 1985, as it may apply to the Company, for so long as any debts of or claims against the Company as at 11 October 2006 shall remain outstanding. 9. NET CASH OUTFLOW FROM OPERATING ACTIVITIES Unaudited Unaudited Audited 6 months to 30 June 6 months Year to 31 December 2009 to 30 June 2008 2008 £'000 £'000 £'000 Operating (loss) before tax (2,970) (4,843) (8,170) Loss on sale of property, plant and equipment - - - Depreciation 13 20 36 Share based payments expense 40 - 130 Share of profits of equity accounted investment (108) (49) (68) Dividend from equity accounted investment - 69 - Decrease in the fair value of investments 2,271 2,297 4,512 Finance income - (90) (91) Finance expense - - 27 Decrease/(increase) in receivables 273 (111) 71 Decrease/(increase) in prepayments (19) (24) 12 Increase/(decrease) in payables 685 (1,602) (1,297) (Decrease)/increase in provisions (176) (32) 29 9 (4,365) (4,809) 10. GROUP FINANCIAL COMMITMENTS The Group had no commitments under non-cancellable operating leases at the period end. 11. CONTINGENT LIABILITIES Indemnities and warranties The Group continues to have contingent liabilities in connection with indemnities and warranties given to the purchasers of its former businesses. As no claims have been made under these indemnities and warranties, the Directors are unable to quantify these potential liabilities. Property lease liabilities The Group continues to have contingent liabilities in connection with the property leases of its former businesses, for which it is exposed to lease obligations in the event of an assignee's default. The remaining lengths of these leases range from 3 to 5 years. Whilst all assignees continue to meet their obligations under these leases, the current annual rent obligations (which may be subject to periodic reviews), before allowing for any mitigating activities, for all such leases are approximately £352,000 per annum. No provision has been made in respect of these contingent matters. Loan facility The Company secured a two year loan facility from Chapman International Investment Ltd, the Company's largest shareholder on 4th June 2008. The Company has granted Chapman a charge over 5 million units in the Fund, as security for the loan. The loan is repayable at the end of the 2 year period. The facility will only be drawn down to the extent that the Company's remaining cash resources for working capital are insufficient. 12. RELATED PARTY TRANSACTIONS Material transactions in the half year period to 30th June 2009 and as at 30th June 2009 were as follows: Unaudited Unaudited Audited 6 months to 30 June 6 months Year to 31 December 2009 to 30 June 2008 2008 £'000 £'000 £'000 Loan balance of a two year facility of £2 million has - 400 been taken out with Chapman International LTD, the company's largest shareholder. 1,175 This information is provided by RNS The company news service from the London Stock Exchange END IR LFMMTMMMBBPL </pre>