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Registered number: 06433018
LS HARBOUR EXCHANGE LIMITED
(PREVIOUSLY KNOWN AS LS HARBOUR EXCHANGE OPTION LIMITED)
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2021
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LS HARBOUR EXCHANGE LIMITED
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DIRECTORS' REPORT
FOR THE YEAR ENDED 31 MARCH 2021
The directors of LS Harbour Exchange Limited (the 'Company') present their report and the audited financial statements for the year ended 31 March 2021.
Directors' responsibilities statement
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The directors are responsible for preparing the Directors' Report and the audited financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare audited financial statements for each financial year. Under that law the directors have elected to prepare the audited financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 101 ‘Reduced Disclosure Framework’. Under company law the directors must not approve the audited financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these audited 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 applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
∙prepare the audited 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 to enable them to ensure that the audited financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
On 26 August 2020, the Company changed its name from LS Harbour Exchange Option Limited to LS Harbour Exchange Limited.
Principal activity, review of the business and future developments
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The Company has continued its business of property investment in the United Kingdom. No changes in the Company's principal activity are anticipated in the foreseeable future.
The Directors have determined that preparing the financial statements on the going concern basis is appropriate due to the continued financial support of the ultimate parent company, Land Securities Group PLC. The Directors’ going concern assessment covers the period to 31 August 2022 and confirmation has been received that Land Securities Group PLC will support the Company until at least this date. It is understood that this support will remain in place until revoked and there is no expectation this will occur in the foreseeable future. The Company’s ability to meet its future liabilities is therefore dependent on the financial performance, position and liquidity of the Group as a whole. At a Group level, considerations included potential risks and uncertainties in the business, credit, market, property valuation and liquidity risks, including the availability and repayment profile of bank facilities, as well as forecast covenant compliance. Following the deterioration in cash collections over the year ended 31 March 2021 as a result of Covid-19, further stress testing has been carried out to ensure the Group has sufficient cash resources to continue in operation for the period to 31 August 2022. This stress testing modelled a scenario with materially reduced levels of cash receipts over the next 12 months. Based on these considerations, together with available market information and the Directors’ knowledge and experience of the Company, the Directors continue to adopt the going concern basis in preparing the financial statements for the year ended 31 March 2021.
Results for the year and dividend
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The results are set out in the Statement of Comprehensive Income on page 6.
The directors do not recommend the payment of a dividend for the year ended 31 March 2021 (2020: £Nil).
The directors who held office during the year and up to the date of this report were:
Land Securities Management Services Limited
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The Company has made qualifying third party indemnity provisions for the benefit of the respective directors which were in place throughout the year and which remain in place at the date of this report.
Page 1
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LS HARBOUR EXCHANGE LIMITED
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DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2021
Small companies exemption
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The Directors' Report has been prepared in accordance with the special provisions relating to small companies within Part 15 of the Companies Act 2006.
The Company has taken advantage of the exemption under s414B of the Companies Act 2006 not to prepare a Strategic Report.
Statement of disclosure of information to auditor
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Each of the persons who are directors at the time when this Directors' Report is approved has confirmed that:
∙so far as the director is aware, there is no relevant audit information of which the Company's auditor is unaware, and
∙the director has taken all the steps that ought to have been taken as a director in order to be aware of any relevant audit information and to establish that the Company's auditor is aware of that information.
This report was approved by the Board and signed on its behalf.
E Miles, for and on behalf of LS Company Secretaries Limited
Company Secretary
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Registered and domiciled in England and Wales
Registered number: 06433018
Page 2
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INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF
LS HARBOUR EXCHANGE OPTION LIMITED
Opinion
We have audited the financial statements of LS Harbour Exchange Limited (the 'Company') for the year ended 31 March 2021 which comprise the Statement of Comprehensive Income, the Balance Sheet, the Statement of Changes in Equity and the related notes 1 to 15, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure Framework (United Kingdom Generally Accepted Accounting Practice)
In our opinion, the financial statements:
∙give a true and fair view of the state of the Company's affairs as at 31 March 2021 and of its profit for the year then 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.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report below. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company’s ability to continue as a going concern through the period to 31 August 2022.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Company’s ability to continue as a going concern.
Other information
The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information contained within the annual report.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
∙the information given in the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
∙the directors' report has been prepared in accordance with applicable legal requirements.
Page 3
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INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF LS HARBOUR EXCHANGE OPTION LIMITED (CONTINUED)
Matters on which we are required to report by exception
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In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the directors' report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
∙adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
∙the financial statements 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; or
∙the directors were not entitled to take advantage of the small companies exemptions in preparing the directors’ report and from the requirement to prepare a strategic report.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 1, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity and management.
Our approach was as follows:
•We obtained an understanding of the legal and regulatory frameworks that are applicable to the Company and determined that the most significant which are directly relevant to specific assertions in the financial statements are those that relate to the reporting framework (FRS 101 and the Companies Act 2006) and the relevant tax regulations in the United Kingdom, including the UK REIT regulations .
•We understood how the Company is complying with those frameworks through enquiry with the Company and by identifying the Company’s policies and procedures regarding compliance with laws and regulations. We also identified those members of the Company who have the primary responsibility for ensuring compliance with laws and regulations, and for reporting any known instances of non-compliance to those charged with governance.
•We assessed the susceptibility of the Company’s financial statements to material misstatement, including how fraud might occur by reviewing the Land Securities Group risk register and through enquiry with the Company’s Management during the planning and execution phases of the audit. Where the risk was considered to be higher we performed audit procedures to address each identified fraud risk, specifically the risk over valuation of investment properties and revenue recognition, including the timing of the revenue recognition and treatment of lease incentives.
•Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Our procedures involved:
oEnquiry of Management, and when appropriate, those charged with governance of the Company regarding their knowledge of any non-compliance or potential non-compliance with laws and regulations that could affect the financial statements;
oReading minutes of meetings of those charged with governance;
oObtaining and reading correspondence from legal and regulatory bodies, including HMRC; and
oJournal entry testing, with a focus on manual journals and journals indicating large or unusual transactions based on our understanding the business.
•In addition, we completed procedures to conclude on the compliance of the disclosures in the financial statements with all applicable reporting requirements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Page 4
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INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF LS HARBOUR EXCHANGE OPTION LIMITED (CONTINUED)
Use of our report
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Claire Johnson (Senior statutory auditor)
For and on behalf of
Ernst & Young LLP, Statutory Auditor
London
N.B. The date of signing should be entered in 'ACCOUNTS COMPLETION' section
Date: 19 August 2021
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LS HARBOUR EXCHANGE LIMITED
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STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2021
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Property management and administrative expenses
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Net deficit on revaluation of investment properties
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Profit and total comprehensive income for the financial year
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There were no recognised gains or losses for 2021 or 2020 other than those included in the Statement of Comprehensive Income.
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All amounts are derived from continuing activities.
Page 6
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LS HARBOUR EXCHANGE LIMITED
REGISTERED NUMBER:06433018
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BALANCE SHEET
AS AT 31 MARCH 2021
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Net investment in finance leases
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Trade and other receivables
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Amounts owed to Group undertakings
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The financial statements on pages 6 to 17 were approved by the Board of Directors and were signed on its behalf by:
J Gillard, for and on behalf of LS Director Limited
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Page 7
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LS HARBOUR EXCHANGE LIMITED
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STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2021
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Total comprehensive income for the financial year
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Total comprehensive income for the financial year
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Page 8
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LS HARBOUR EXCHANGE LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2021
1.Accounting policies
The financial statements have been prepared on a going concern basis and in accordance with Financial Reporting Standard 101 'Reduced Disclosure Framework' ('FRS 101') and the Companies Act 2006. The financial statements are prepared under the historical cost convention modified to include the revaluation of investment properties.
LS Harbour Exchange Limited (the ‘Company’) is a private company limited by shares and is incorporated, domiciled and registered in England and Wales (Registered number: 06433018). The nature of the Company’s operations is set out in the Directors' Report on page 1. The results of the Company are included with the results of Land Securities Group PLC and its subsidiaries (the 'Group') in the consolidated financial statements of Land Securities Group PLC which are available from the Company's registered office at 100 Victoria Street, London, SW1E 5JL.
The accounting policies which follow set out those policies which apply in preparing the financial statements for the year ended 31 March 2021. The financial statements are prepared in Pounds Sterling and are rounded to the nearest thousand pounds (£000).
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Financial reporting standard 101 - reduced disclosure exemptions
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The Company has taken advantage of the following disclosure exemptions under FRS 101:
∙the requirements of IFRS 7 Financial Instruments: Disclosures
∙the requirements of paragraphs 91-99 of IFRS 13 Fair Value Measurement
∙the requirement in paragraph 38 of IAS 1 'Presentation of Financial Statements' to present comparative information in respect of:
- paragraph 79(a)(iv) of IAS 1;
- paragraph 73(e) of IAS 16 Property, Plant and Equipment;
- paragraph 118(e) of IAS 38 Intangible Assets;
- paragraphs 76 and 79(d) of IAS 40 Investment Property; and
∙the requirements of paragraphs 10(d), 10(f), 16, 38A, 38B, 38C, 38D, 40A, 40B, 40C, 40D, 111 and 134-136 of IAS 1 Presentation of Financial Statements
∙the requirements of IAS 7 Statement of Cash Flows
∙the requirements of paragraphs 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
∙the requirements in IAS 24 Related Party Disclosures to disclose related party transactions entered into between two or more members of a group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member
∙the requirements of paragraphs 134(d)-134(f) and 135(c)-135(e) of IAS 36 Impairment of Assets.
The equivalent disclosures relating to IFRS 7, IFRS 13 & IAS 36 are included in the consolidated financial statements of Land Securities Group PLC, in which the entity is consolidated.
Investment properties are properties, either owned or leased by the Company, that are held either to earn rental income or for capital appreciation, or both. Investment properties are measured initially at cost including related transaction costs, and subsequently at fair value. Fair value is based on market value, as determined by a professional external valuer at each reporting date. The difference between the fair value of an investment property at the reporting date and its carrying amount prior to re-measurement is included in the Statement of Comprehensive Income as a valuation surplus or deficit. Investment properties are presented on the Balance Sheet within non-current assets.
Properties are treated as acquired when the Company assumes control of the property. Capital expenditure on properties consists of costs of a capital nature, including costs associated with developments and refurbishments. Where a property is being developed or undergoing major refurbishment, interest costs associated with direct expenditure on the property are capitalised. The interest capitalised is calculated using the Company’s weighted average cost of borrowings. Interest is capitalised from the commencement of the development work until the date of practical completion. Certain internal staff and associated costs directly attributable to the management of major schemes are also capitalised. The total staff and associated costs are capitalised based on the proportion of time spent on the relevant scheme. Internal staff costs are capitalised from the date it is determined to be probable that the development will progress until the date of practical completion.
When the Company begins to redevelop an existing investment property for continued future use as an investment property, the property continues to be held as an investment property. When the Company begins to redevelop an existing investment property with a view to sell, the property is transferred to trading properties and held as a current asset. The property is re-measured to fair value as at the date of the transfer with any gain or loss being taken to the Statement of Comprehensive Income. The re-measured amount becomes the deemed cost at which the property is then carried in trading properties
Properties are treated as disposed when control of the property is transferred to the buyer. Typically, this will either occur on unconditional exchange or on completion. Where completion is expected to occur significantly after exchange, or where the Company continues to have significant outstanding obligations after exchange, the control will not usually transfer to the buyer until completion.
The profit on disposal is determined as the difference between the sales proceeds and the carrying amount of the asset at the beginning of the accounting period plus capital expenditure to the date of disposal. The profit on disposal of investment properties is presented separately on the face of the Statement of Comprehensive Income.
Page 9
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LS HARBOUR EXCHANGE LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2021
1.Accounting policies (continued)
Other investments are financial assets held at fair value. Changes to fair value are recorded within Other Comprehensive Income.
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Trade and other receivables
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Trade and other receivables are recognised initially at fair value, subsequently at amortised cost and, where relevant, adjusted for the time value of money, and are presented in the balance sheet net of allowances for doubtful receivables. The Company assesses on a forward-looking basis, the expected credit losses associated with its trade receivables. A provision for impairment is made for the lifetime expected credit losses on initial recognition of the receivable. If collection is expected in more than one year, the balance is presented within non-current assets.
In determining the expected credit losses, the Company takes into account any recent payment behaviours and future expectations of likely default events (i.e. not making payment on the due date) based on individual customer credit ratings, actual or expected insolvency filings or company voluntary arrangements, likely deferrals of payments due, rent concessions and market expectations and trends in the wider macro-economic environment in which our customers operate. These assessments are made on a customer by customer basis.
Trade and other receivables are written off once all avenues to recover the balances are exhausted and the lease has ended. Receivables written off are no longer subject to any enforcement activity.
A provision is recognised in the Balance Sheet when the Company has a constructive or legal obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation. Where relevant, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.
The Directors have determined that preparing the financial statements on the going concern basis is appropriate due to the continued financial support of the ultimate parent company, Land Securities Group PLC. The Directors’ going concern assessment covers the period to 31 August 2022 and confirmation has been received that Land Securities Group PLC will support the Company until at least this date. It is understood that this support will remain in place until revoked and there is no expectation this will occur in the foreseeable future. The Company’s ability to meet its future liabilities is therefore dependent on the financial performance, position and liquidity of the Group as a whole. At a Group level, considerations included potential risks and uncertainties in the business, credit, market, property valuation and liquidity risks, including the availability and repayment profile of bank facilities, as well as forecast covenant compliance. Following the deterioration in cash collections over the year ended 31 March 2021 as a result of Covid-19, further stress testing has been carried out to ensure the Group has sufficient cash resources to continue in operation for the period to 31 August 2022. This stress testing modelled a scenario with materially reduced levels of cash receipts over the next 12 months. Based on these considerations, together with available market information and the Directors’ knowledge and experience of the Company, the Directors continue to adopt the going concern basis in preparing the financial statements for the year ended 31 March 2021.
Rental income, including fixed rental uplifts, is recognised in the Statement of Comprehensive Income on a straight-line basis over the term of the lease. Lease incentives being offered to occupiers to enter into a lease, such as an initial rent-free period or a cash contribution to fit out or similar costs, are an integral part of the net consideration for the use of the property and are therefore recognised on the same straight-line basis. Contingent rents, being lease payments that are not fixed at the inception of a lease, for example turnover rents, are variable consideration and are recorded as income in the year in which they are earned. Where a single payment is received from a tenant to cover both rent and service charge, the service charge component is separated and reported as service charge income.
The Company’s revenue from contracts with customers, as defined in IFRS 15 includes service charge income and other property related income.
Service charge income and management fees are recorded as income over time in the year in which the services are rendered. Revenue is recognised over time because the tenants benefit from the services as soon as they are rendered by the Company. The actual service provided during each reporting period is determined using cost incurred as the input method.
When property is let under a finance lease, the Company recognises a receivable equal to the net investment in the lease at inception of the lease. Rentals received are accounted for as repayments of principal and finance income as appropriate. Finance income is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining net investment in the finance lease and is recognised within revenue.
Property and contract expenditure is expensed as incurred.
Page 10
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LS HARBOUR EXCHANGE LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2021
1.Accounting policies (continued)
Income tax on the profit or loss for the year comprises current and deferred tax. Current tax is the tax payable on the taxable income for the year and any adjustment in respect of previous years. Deferred tax is provided in full using the Balance Sheet liability method on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is determined using tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply when the asset is realised or the liability is settled.
No provision is made for temporary differences (i) arising on the initial recognition of assets or liabilities, other than on a business combination, that affect neither accounting nor taxable profit and (ii) relating to investments in subsidiaries to the extent that they will not reverse in the foreseeable future.
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception date. The arrangement is assessed for whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
Company is lessor
i) Operating lease – properties leased out to tenants under operating leases are included in investment properties in the Balance Sheet.
ii) Finance lease – where the Company’s leases transfer the significant risks and rewards incidental to ownership of the underlying asset to the tenant, the lease is accounted for as a finance lease. At the outset of the lease the fair value of the asset is de-recognised from investment property and recognised as a finance lease receivable. Lease income is recognised over the period of the lease, reflecting a constant rate of return. The difference between the gross receivable and the present value of the receivable is recognised as finance income within Revenue over the lease term.
Lease income is recognised over the period of the lease reflecting a constant rate of return. Where only the buildings element of a property lease is classified as a finance lease, the land element is shown within operating leases.
Final dividend distributions to the Company’s shareholders are recognised as a liability in the Company’s financial statements in the period in which the dividends are approved by the Company’s shareholders. Interim dividends are recognised when paid.
Amounts owed to Group undertakings
Amounts owed to Group undertakings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, amounts owed to Group undertakings are stated at amortised cost with any difference between the amount initially recognised and redemption value being recognised in the Statement of Comprehensive Income over the period of the loan, using the effective interest method.
Trade and other payables with no stated interest rate and payable within one year are recorded at transaction price. Trade and other payables after one year are discounted based on the amortised cost method using the effective interest rate.
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Changes in accounting policies and standards
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The accounting policies used in these financial statements are consistent with those applied in the last annual financial statements, as amended where relevant to reflect the adoption of new standards, amendments and interpretations which became effective in the year. There have been no new accounting standards, amendments or interpretations during the year that have a material impact on the financial statements of the Company.
Amendments to accounting standards
A number of new standards, amendments to standards and interpretations have been issued but are not yet effective for the Company, none of which are expected to have a material impact on the financial statements of the Company.
Page 11
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LS HARBOUR EXCHANGE LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2021
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Significant accounting judgements and estimates
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The Company’s significant accounting policies are stated in note 1 above. Not all of these significant accounting policies require management to make difficult, subjective or complex judgements or estimates. The following is intended to provide an understanding of the policies that management consider critical because of the level of complexity, judgement or estimation involved in their application and their impact on the financial statements. These judgements involve assumptions or estimates in respect of future events. Actual results may differ from these estimates.
Judgements
Finance lease calculations
In apportioning rentals on finance lease properties, the Company is required to estimate the split of the fair values of the properties concerned between land and buildings. The inception of many of the Company’s leases took place many years ago and therefore reliable estimates are very difficult to obtain. Accordingly, the Company has had to apply its judgement in estimating the split at inception of certain finance lease properties.
Estimates
(a) Investment property valuation
The Company uses the valuation performed by its external valuer, CBRE Limited, as the fair value of its investment properties.
The valuation of investment properties is inherently subjective due to, among other factors, the individual nature of each property, its location and the expected future rental revenues from that particular property. As a result, the valuations the Company places on its property portfolio are subject to a degree of uncertainty and are made on the basis of assumptions which may not prove to be accurate, particularly in periods of volatility or low transaction flow in the property market. The assumptions upon which CBRE Limited has based its valuation of the Company’s properties as at 31 March 2021 include, but are not limited to, matters such as the tenure and tenancy details for the properties, ground conditions at the properties, the structural condition of the properties, prevailing market yields and comparable market transactions. These assumptions are market standard and accord with the Royal Institution of Chartered Surveyors (RICS) Valuation – Professional Standards UK 2014 (revised April 2015). However, if any assumptions made by the external valuer prove to be inaccurate, this may mean that the value of the Company’s properties differs from their valuation, which could have a material effect on the Company’s financial condition.
The Valuer’s report for the year ended 31 March 2020 contained a ‘material uncertainty’ clause due to the disruption to the market at that date caused by Covid-19. The inclusion of this clause indicated that there was substantially more uncertainty than normal and therefore a higher likelihood that the assumptions upon which the external valuer had based its valuations prove to be inaccurate. There was no material uncertainty clause included in the Valuer’s report for the year ended 31 March 2021. Refer to note 8 for further details on the valuation as at year end.
(b) Trade and other receivables
The Company is required to judge when there is sufficient objective evidence to require the impairment of individual trade receivables. It does this by assessing on a forward-looking basis, the expected credit losses associated with its trade receivables. A provision for impairment is made for the lifetime expected credit losses on initial recognition of the receivable. In determining the expected credit losses, the Company takes into account any recent payment behaviours and future expectations of likely default events (i.e. not making payment on the due date) based on individual customer credit ratings, actual or expected insolvency filings or company voluntary arrangements, likely deferrals of payments due, rent concessions and market expectations and trends in the wider macro-economic environment in which our customers operate. These assessments are made on a customer by customer basis.
The Company’s assessment of expected credit losses is inherently subjective due to the forward-looking nature of the assessments, in particular, the assessment of expected insolvency filings or company voluntary arrangements, likely deferrals of payments due and rent concessions. As a result, the value of the provisions for impairment of the Company’s trade receivables are subject to a degree of uncertainty and are made on the basis of assumptions which may not prove to be accurate.
Page 12
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LS HARBOUR EXCHANGE LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2021
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Rental income (excluding lease incentives)
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Adjustment for lease incentives
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Other property related income
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Other direct property or contract expenditure
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Other direct property or contract expenditure are costs incurred in the direct maintenance and upkeep of investment properties. Void costs, which include costs relating to empty properties pending redevelopment and refurbishment, costs of investigating potential development schemes which do not proceed, and costs in respect of housekeepers and outside staff directly responsible for property services, are also included.
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Property management and administrative expenses
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Property management and administrative expenses consist of all costs of managing the property, together with the costs of rent reviews and renewals, re-lettings of the property and management services as explained in note (a) below. No staff costs or overheads are capitalised.
(a) Management services
The Company had no employees during the year (2020: None). Management services were provided to the Company throughout the year by Land Securities Properties Limited, a fellow subsidiary undertaking, charges for which amount to £708,000 (2020: £708,000).
(b) Directors’ remuneration
The Group's directors' emoluments are borne by Land Securities Properties Limited. The directors of the Company, who are key management personnel of the Company, received no emoluments from Land Securities Properties Limited for their services to the Company (2020: £Nil).
(c) Auditor remuneration
The Group auditor’s remuneration is borne by Land Securities Properties Limited. The proportion of the remuneration which relates to the Company amounts to £2,630 (2020: £1,700). No non-audit services were provided to the Company during the year (2020: None).
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Interest on amounts owed to Group undertakings
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Page 13
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LS HARBOUR EXCHANGE LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2021
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Income tax on profit for the year
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Total income tax on profit in the Statement of Comprehensive Income
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Factors affecting tax charge for the year
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The tax assessed for the year is lower than (2020 - lower than) the standard rate of corporation tax in the UK of 19% (2020 - 19%). The differences are explained below:
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Profit before tax multiplied by UK corporation tax rate
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Exempt property rental profits in the year
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Exempt property revaluation deficits in the year
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Total tax charge in the Statement of Comprehensive Income (as above)
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Land Securities Group PLC is a Real Estate Investment Trust (REIT). As a result the Company does not pay UK corporation tax on the profits and gains from qualifying rental business in the UK provided it meets certain conditions. Non-qualifying profits and gains of the Company continue to be subject to corporation tax as normal.
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Net book value at the beginning of the year
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Deficit on revaluation of investment properties
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Net book value at 31 March
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The historical cost of the investment properties is £18,300,000 (2020: £18,300,000). The difference between the carrying amount and historical cost is £7,801,000 deficit (2020: £7,481,000). The market value has been adjusted for properties treated as finance leases amounting to £141,576,000 (2020: £148,336,000) and by deducting tenant lease incentives amounting to £2,601,000 (2020: £2,283,000). The valuations are prepared by CBRE Limited, external valuers, in accordance with RICS valuation standards.
The above investment properties act as security against listed debt recognised within a fellow Land Securities Group PLC subsidiary.
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Page 14
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LS HARBOUR EXCHANGE LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2021
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Net investment in finance leases
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Unguaranteed residual value
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Net investment in finance leases
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Gross receivables from finance leases
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Later than one year but not more than five years
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Unearned future finance income
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Unguaranteed residual value
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Net investment in finance leases
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The Company has leased out a number of investment properties under finance leases, which range from 25 to 100 years in duration from the inception of the lease. These are accounted for as finance lease receivables rather than investment properties.
The fair value of the Company’s finance lease receivables, using a discount rate of 6.25% (2020: 6.25%), is £141,576,000 (2020: £148,336,000).
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Trade and other receivables
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Total trade and other receivables
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Page 15
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LS HARBOUR EXCHANGE LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2021
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Social security and other taxes
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Total trade and other payables
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Deferred income principally relates to rents received in advance.
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Amounts owed to Group undertakings
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Amounts owed to Group undertakings - fellow subsidiary
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Total amounts owed to Group undertakings
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The unsecured amounts owed to Group undertakings are repayable on demand with no fixed repayment date. Interest is charged at 3.6% per annum (2020: 4.1%).
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Ordinary shares of £1.00 each
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At the beginning of the year
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The Company holds a 25.73% share in Harbour Exchange Management Company Limited.
The Company is not deemed to control Harbour Exchange Management Company Limited as its powers of control are limited.
The directors believe that the carrying value of the investments are supported by their underlying net assets.
Page 16
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LS HARBOUR EXCHANGE LIMITED
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2021
The immediate parent company is LS London Holdings One Limited.
The ultimate parent company and controlling party at 31 March 2021 was Land Securities Group PLC, which is registered in England and Wales. This is the largest parent company of the Group to consolidate these financial statements.
Consolidated financial statements for the year ended 31 March 2021 for Land Securities Group PLC can be obtained from the Company Secretary at the registered address of the ultimate parent company, 100 Victoria Street, London, SW1E 5JL, and from the Group’s website at www.landsec.com. This is the largest and smallest Group to include these accounts in its consolidated financial statements.
Page 17
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