GLE Group. Report and Financial Statements

Transcription

1 GLE Group Report and Financial Statements

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3 Contents Strategic Report 1 Directors Report 5 Corporate Governance Framework 10 Report on Directors Remuneration 14 Independent Auditor s Report 17 Group Income Statement 18 Group Statement of Comprehensive Income 19 Group Balance Sheet 20 Group Statement of Changes in Equity 21 Group Cash Flow Statement 22 Notes to the Consolidated Financial Statements 23 Company Balance Sheet 51 Notes to the Parent Company Financial Statements 52 Country of incorporation of parent Company: Great Britain Directors P G Collis CB M G Large P Thackwray OBE J Crook Cllr M A Loveday S Tye M Dobney A K Manning-Jones M B Walsh M I Edmond Cllr G Nicholson (Chair) A M Watts CBE P A Hendrick Sir E Peacock Secretary and registered office: M B Walsh, 5th Floor, Valiant Building, 14 South Parade, Leeds, West Yorkshire, LS15QS Company number Auditors BDO LLP, 55 Baker Street, London, W1U 7EU GLE Group ( the Group ) comprises Greater London Enterprise Limited, the holding company and its subsidiaries. The Group brings innovative and commercial approaches to economic growth, successfully unlocking the potential of people and growing businesses. As a leading provider of business finance, accommodation, consulting services and enterprise development, the Group continues to build on its commercial success and track record in lending, borrowing, investing and managing the funds and assets that underpin physical, economic and social regeneration. GLE Group Report and Financial Statements I Contents

4 Strategic Report The Directors present their strategic report on the Group for the year ended 31 March Introduction The Greater London Enterprise (GLE) Group is a leading Small to Medium Enterprise (SME) specialist with over thirty years experience of: delivering finance, expertise and innovation; growing businesses, encouraging enterprise and generating growth; creating places for businesses and people. 2. Business Review The year to March 2014 has been another very good year for the GLE Group with all business areas performing in line with, or ahead of, target and contributing to an Operating Profit of 5.4m. This compares with 1.2m in 2013 and 0.7m in The financial results were considerably ahead of expectations. In the year to March 2014 GLE s businesses: helped over 8,000 companies to grow their exports; saw almost 4,000 new jobs created by the entrepreneurs assisted; were instrumental in the birth of 3,000 new businesses; lent around 4m to nearly 3,000 businesses; delivered sales ledger management for nearly 200 SME clients; provided small businesses with cash flow funding of almost 300m; and managed, improved or developed serviced office, studio and industrial space for 270 small businesses. The Group s Net Worth increased by 1.7m (2013: increase of 0.4m), reflecting the combined impact of the increase in profitability and in the value of the Group s assets. Regrettably the revaluation of the Group s share of its defined benefit pension scheme operated by the London Pensions Fund Authority resulted in an increase in the estimated deficit of 1.1m which compared with a minimal movement last year (a decrease of 0.1m). The scheme is closed to new members. Group Net Worth was also adversely impacted by the loss on disposal of 1.0m on the Group s investment in YFM Equity Partners, following the Group decision, as reported in last year s Report and Financial Statements, to sell this business to its management team. The Group s Operating Profit benefitted from strong performances across all Group businesses and, in particular, significantly increased profitability in the Properties business (profits of 5.3m; 2013: 2.2m). The Cash Flow Finance business - Independent Growth Finance (IGF) - continued to report strong levels of profitability of 0.9m (2013: 0.6m). Overall this is a very pleasing result, which reflects the hard work of all involved and the growing confidence emerging in the markets in which the Group operates. The Group is committed to the SME finance, enterprise development and property and regeneration sectors, and to the medium term aim of increasing both the scale and the impact of its work in these activities. As the results show all of the Group s business areas now have the potential to generate profits, but GLE aims to ensure that profit generation is not the only driver and that it can identify, target and achieve other non-financial measures too. This may be expressed as the social return on the Group s activities whether in businesses or jobs created, people supported or space regenerated. The Group continues to deliver its services at a national, regional and local level from offices across London and the south-east. In all its activities GLE strives to deliver high quality innovative services and investment aimed at meeting the needs of those starting or growing businesses. This is done by: Delivering International Trade services. Managing start-up and early stage Loan Finance. Encouraging Enterprise Support through self-employment. Providing Cash-flow Finance. Offering IT and Web Services for SMEs. Investing in property and creating Places for Businesses and People. Making Equity Finance investments. The combined activities of International Trade, Loan Finance and Enterprise Support are run though GLE s Enterprise Development business and account for nearly 200 staff and a turnover of more than 14.8m in 2013/14 (2012/13: 10.9m). Together they made their most significant contribution to Group profits to date and in the coming year the Group will invest further in the systems and people to build further on this record performance. International Trade GLE s international trade teams working on behalf of UKTI assisted more than 8,000 companies to develop new export markets, producing nearly 400m of additional sales. This was the major area of growth, with GLE s delivery for UKTI expanding to include a new focus on mid-sized 1 GLE Group Report and Financial Statements I Strategic Report

5 businesses, a doubling of the support for UK companies to improve their export communications, a widening of the export market research service offer to include a new market selection tool, and a near-doubling of the number of companies supported through the intensive Passport to Export programme to more than 750. At the end of the year, clients had reported 383m of new export contracts which they attributed to the help they had received from GLE s international trade teams. Loan Finance 4m was lent to nearly 3,000 new and established businesses. A record lending year of 3,000 loans was further enhanced by the longawaited launch of two new funds aimed at established businesses, as the year closed. Thanks to the backing of Lloyds Banking Group, Co-operative and Unity Banks, the Regional Growth Fund and the European Investment Fund, 10m of new funds under management were added, allowing the business to set to triple its target for the value of loans to be made in the coming year to 12m. The highest volume of loans made was on behalf of the Government under the New Enterprise Allowance Scheme (NEA), helping unemployed people to become self-employed and start businesses. An excellent lending record was acknowledged by a request for the team to expand its delivery from 3 to 4 of the 7 NEA regions. The business now delivers this service in Wales, Scotland, London, the Home Counties and Central England. The team s work for the Start- Up Loans Company also grew, culminating in a further contract extension into the new financial year. Enterprise Support Over 4,000 new and established entrepreneurs were helped to start and expand. The early stage advisory team continued to support new businesses to start and grow on behalf of several London boroughs with more than 2,000 people receiving counselling, mentoring and training. Under a major contract for the Department of Work and Pensions, the enterprise support team has now helped nearly 1,000 unemployed people create work of their own by starting a business. More widely, London s SMEs have been supported to increase and commercialise innovation in their businesses, become supplier-ready, prepare a case for finance and adapt to major threats to businesses survival. Cash Flow Finance During the year the Group, through its subsidiary Independent Growth Finance (IGF), delivered cash flow finance and sales ledger management to around 200 SME clients. The majority of the 300m advanced to this sector was delivered through IGF s invoice discounting and factoring operations although ancillary services including direct debit, payroll and commercial loans also enhanced the financial packages provided to clients. Once again the financial performance of the business exceeded budget despite substantial investment in IT enhancement and marketing initiatives, considered necessary for the future growth of the business. Recognising how technology is impacting the invoice finance market, the Company is investing in technological projects to enhance and simplify the clients experience. After several years of static overall client numbers it is pleasing to report that client numbers showed an encouraging increase during the year. Client numbers across the industry as a whole only grew 1% during the year, as reported by the Asset Based Finance Association (ABFA), predominantly in ABL Finance, Export, Import and Stock financing, which are not products that IGF offers. Despite this IGF has managed to increase numbers from the more traditional Invoice Finance products demonstrating that there is a sustained need within the SME market for these facilities. The rate of client attrition was encouraging at 28% with the noticeable change being that IGF reduced the number of clients lost to competitors or who became selffunding to 11 which was down from 21 in the previous year. This reflects IGF s commitment to continually striving to improve customer service. During the year, IGF undertook a survey of its clients. Feedback showed that 97% felt that their expectations had been met and 96% would recommend IGF s services to a third party. IGF acknowledges that a key strength of the business is its staff and the engagement of its workforce to drive service quality is reflected in the feedback received. IGF has continued to outperform its original 3 year plan and the strategy to continue to focus on traditional invoice finance has proved sound. In a benign market it has been pleasing to see growth and sustainable levels of profitability, which will further strengthen the business as a significant independent provider of vital cash flow finance to SMEs. GLE Group Report and Financial Statements I Strategic Report 2

6 IT and Web Services A further demonstration of the Group s commitment to backing an entrepreneurial approach in the SME service sector was the creation of GLE Connect. GLE has backed its own inhouse IT team in making their high quality IT and Web Services available externally. From a standing start, the newly created business has secured two significant external contracts and is currently in discussion with several other prospective clients. This is a very encouraging start for this new business. Places for Businesses and People The Group s property and regeneration business, GLE Properties (GLEP) helps create places for businesses and people through property investment and development focused mainly in the London area. This year GLEP, before property revaluations, produced an operating profit of 2.9m (2013: 2.2m), whilst the value of its investment portfolio increased by approximately 7.9m through a combination of acquisitions of 5.5m (2013: 0.4m) and valuation improvements of 2.4m (2013: 0.2m). Profits overall were approximately 5.3m (2013: 2.6m). The results benefitted from the construction of the Company s first key worker housing development, a conversion and extension of a redundant former BBC office building in Shepherds Bush. The project which has been developed in partnership with specialist intermediate housing provider Pocket Living has created 30 residential units, 24 of which are designated as affordable housing. Purchaser interest was stronger than originally anticipated reflecting the strength of demand for this type of housing and the London residential market generally. Both lettings and sales at the Company s 34,000sf Dagenham Business Centre development have progressed well as the economy has recovered and demand for new business space has increased. The development was completed in 2011/2012 and initial take up was slow reflecting the economic environment but by this year the development was 85% occupied. The year also saw the sale of the last two units at the 57,000sf, 28 unit Horizon Business Centre in Erith bringing that development to a successful conclusion. The market index for industrial property capital values (IPD) showed an increase of approximately 9% over the year having been negative or more recently static for several years so the increase is particularly welcome. The independent valuation of the Company s investment portfolio shows an increase in value of approximately 7%, slightly behind the IPD index. This reflects a combination of the shorter term more flexible tenure offered to the Company s SME tenants, the focus on smaller units and that the portfolio includes some ageing offices where the potential for alternative uses are being considered. During the year the Company completed its first investment acquisition for several years with the purchase of the Romford Seedbed Centre. A second investment acquisition was progressing at the year-end and has since completed. The Company s portfolio of investments now provides accommodation for around 270 mainly small businesses in a mixture of serviced office, studio and industrial units. The hands-on approach of the in-house property team meant that occupancy increased further to reach 84% by the year-end producing a better than target rental return from the portfolio. The business continues to focus on creating opportunities to enhance value and promote regeneration by investing finance and expertise in site assembly, capital improvements and exploring alternative and complementary uses. Whilst no new development site acquisitions were made in the year, the business expects to make progress in this regard early in 2014/2015. Identifying investment opportunities with the potential to enhance value over the medium term continues to be challenging, with limited product coming to the market and considerable demand from investors. However, as reported the business has made progress with two new investment acquisitions and remains well placed for further acquisitions in the year ahead. Equity Finance During the year the Group made two strategic investment transactions. As planned, it completed the sale of YFM Equity Partners (YFM), a business it had acquired in 2008, and which it had over the five years of ownership restructured from one focused substantially on public sector supported venture funds (a product of former government policy initiatives in the sector) to a successful Venture Capital Trust (VCT) and institutional private equity fund manager. It had long been recognised that to realise its full potential and complete its transition YFM needed to be able to grow the level of institutional funds under management in the same way that it had grown its VCT activity. For the business to be able to attract substantial institutional investment, a move to a management owned/ management risk-taking model was required and this was completed successfully in late At the same time the Group made a strategic investment in Pocket Living Limited (Pocket), the award-winning private developer of intermediate housing in London. GLE acquired a 5% stake in the company with an option to acquire a further 5%. 3 GLE Group Report and Financial Statements I Strategic Report

7 Pocket had successfully bid for and was awarded a loan of 21.7m for 10 years from the Mayor of London to build for owner occupation around 4,000 affordable homes across London. Pocket s model is unique and their homes are targeted specifically at the intermediate market those who earn too much to qualify for social housing, but are priced out of the open market. The investment from GLE and the agreement with the Mayor s office will help develop Pocket as a key provider of affordable housing for London s intermediate market and support the expansion of the Pocket model into a greater number of London local authorities. GLE will continue to invest directly and will also take stakes in a range of SME relevant equity funds. It currently retains investments in the Seraphim Capital Fund (an Enterprise Capital Fund launched by GLE), the Chandos Fund (a YFM managed institutional fund), and the British Smaller Companies VCTs. The Group has total investment holdings under these combined headings of 1.6m (2013: 1.5m). Other activities GLE has continued to service the London boroughs and London Councils European funding, information and lobbying contracts which are run centrally from within the Chief Executive s team. The specialist consulting team provide support to help organisations access European funding, policy information and advice to strengthen funding bids and to evaluate the effectiveness of existing programmes and projects. The team works for a range of public and private sector providers. In order to ensure the future of this vital service GLE has secured the support of London Councils, the Greater London Authority and the City of London in a partnership to create a new Community Interest Company to be known as Access Europe Network CIC to deliver these services from mid-2014 onwards. GLE will continue its involvement as a sponsor and supporter of this new vehicle. 3. Principal Risks and Uncertainties The Board and the management of the Group pay careful attention to the identification and control of risks associated with the Group s activities. At Board level, regular reports are given addressing all risk areas. These are supplemented by reviews by the Audit Review Committee. As with other aspects of the Group, all identified areas of risk are allocated to an Executive Director for monitoring and management. The Group is exposed to a number of risks which can be summarised as follows: Property market: The Group is exposed to fluctuation in the commercial property market. This risk is mitigated by management regularly reviewing market conditions and taking appropriate action. Interest rate risk: The Group s borrowings are principally at a margin over LIBOR thus exposing the Group to cash flow interest rate risk. The Group s policy is to ensure the margin is competitive when compared to other banks and to give consideration to hedging to reduce exposure to this risk. Credit risk: At IGF Invoice Finance significant sums of monies are advanced to clients thereby exposing the Group to the risk that these amounts may not be recoverable. This risk is mitigated by controls over client take-on procedures, securing advanced funds against client assets and ongoing review of client accounts to ensure the amounts remain recoverable. Liquidity risk: The Group is exposed to liquidity risk as sufficient funds are required to support trading, investing and financing activities. The Group regularly monitors the liquidity position to ensure that sufficient funds are available to meet both current and future requirements. Liquidity management includes managing the Group s working capital and borrowings. The Group s borrowings are the subject of a number of financial covenants which the Directors regularly monitor to ensure both current and future compliance. 4. Conclusion The results this year demonstrate the substantial progress GLE s businesses have made over recent years and the real benefit of the longer term view the Group takes when investing its finance and expertise in developing new activities. The challenge remains to maintain the flexibility to respond quickly to the constantly changing needs and circumstances of the markets and the economy in which the Group competes. The small business finance and enterprise agenda remains vital if the recovery in the economy is to be sustained. This is where GLE operates and where GLE can continue to play its part in delivering effective high quality SME focussed services, investment and innovation. Finally and most importantly the success reported this year would not have been possible without one essential ingredient, the people. GLE is fortunate in that it is able to attract and retain a rich resource of hardworking, innovative and creative people throughout the organisation. My sincere thanks to everyone and to all of my board colleagues too for the immense contribution they have made over the past year. I look forward to this continuing as we explore the opportunities and indeed the challenges that lie ahead. Martin Large Group Chief Executive GLE Group Report and Financial Statements I Strategic Report 4

8 Directors Report 1. Results The Group s profit for the year, after taxation and minority interests, amounted to 3,158,000 (2013: 519,000) and has been added to reserves. In accordance with the articles of association, no dividend is payable to members. 2. Directors Those persons who acted as Directors during the year and subsequently are given below: Non-Executive Directors P G Collis CB J Crook M Dobney M I Edmond P A Hendrick Cllr M A Loveday (resigned Chair 4 April 2013) A K Manning-Jones Cllr G Nicholson (appointed Chair 4 April 2013) Sir E Peacock (appointed 22 July 2014) S Tye (appointed 22 July 2014) A M Watts CBE Executive Directors M G Large P Thackwray OBE M B Walsh (Group Chief Executive) (Managing Director, GLE Enterprise Development) (Group Finance Director) 3. Directors Interests in Shares The Company is limited by guarantee without share capital. Certain Non-Executive Directors are appointed from time to time to act as Private Members of the Company. These Private Members have no rights to participate in the income and assets of the Company. P A Hendrick, J Crook, M Dobney, M I Edmond, A K Manning-Jones and A M Watts CBE acted as Private Members throughout the year. P G Collis CB, following his appointment to the Board in September 2012, became a Private Member effective from the last Annual General Meeting held on 28 November None of these Directors has or had at any time during the year any interest in the shares of any other Group undertakings. 4. Auditors BDO LLP have expressed their willingness to continue in office. In accordance with Section 485 of the Companies Act 2006, a resolution to reappoint BDO LLP as auditors of the Company will be proposed at the next Annual General Meeting. 5 GLE Group Report and Financial Statements I Directors Report

9 5. Directors responsibilities for the financial statements The Directors are responsible for preparing the annual 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 elected to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and the 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 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 they have been prepared in accordance with IFRSs as adopted by the European Union, subject to any material departures disclosed and explained in the financial statements; 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 enable them to ensure that the financial statements comply with the requirements of the Companies Act 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. All of the current Directors have taken all the steps that they ought to have taken to make themselves aware of any information needed by the Company s auditors for the purpose of their audit and to establish that the auditors are aware of that information. The Directors are not aware of any relevant audit information of which the auditors are unaware. ON BEHALF OF THE BOARD M G Large Director 5th Floor, Valiant Building, 14 South Parade, Leeds, West Yorkshire, LSI 5QS 22 July 2014 GLE Group Report and Financial Statements I Directors Report 6

10 Left & below: Computer generated images of the Apex Court, Shepherds Bush office-to-residential conversion project. A principally key worker flat development comprising a total of 30 units developed with our project partners Pocket Living Limited. 7 GLE Group Report and Financial Statements

11 Above: Supply Nine Elms on the South Bank is a free programme of supply chain development workshops, presentations by Nine Elms developers, one-to-one support, networking and Meet the Buyer events. The programme is designed to help Lambeth and Wandsworth businesses providing building and construction related services, grow, engage with new buyers and be fit to compete for new contracts. Over 10 billion worth of construction spending in Nine Elms on the South Bank will create numerous opportunities for local businesses. This programme is delivered by GLE on behalf of the London Boroughs of Wandsworth and Lambeth. GLE Group Report and Financial Statements

12 Above: The launch of the GLE onelondon 5m London Loan Fund which, with backing from Lloyds Bank and European Investment Fund, will finance over 270 London businesses. From left to right: Sir Michael Snyder, Senior Partner, Kingston Smith LLP and chairman of the fund; Peter Thackwray, Managing Director, GLE Enterprise Development; Tim Hinton, Managing Director, SME & Mid Markets Banking, Commercial Banking, Lloyds Banking Group; and George Passaris, Head of Securitisation, European Investment Fund. Right: Ilias Manolopoulos brings real Greek frozen yoghurt to Coventry, with finance and mentoring from GLE s Start Up Loans team. 9 GLE Group Report and Financial Statements

13 Corporate Governance Framework The Group is committed to high standards of Corporate Governance and the Board of Directors believes this is a key element in continuing to preserve value and deliver growth in the Group. This commitment reflects the importance the Board attaches to strong, open and visible governance and clear and transparent reporting. GLE is a company limited by guarantee with a combination of private and public sector members, the public sector members being the London local authorities. Thirteen of these local authorities have the opportunity to nominate a proportion (less than 20%) of the board of Directors. The Board monitors its corporate governance practices with an annual review undertaken by the Audit Review Committee with the aim of ensuring that governance policies and performance are maintained and continue to comply with the appropriate legal, regulatory and reporting requirements. Board of Directors The Board of Directors met three times during the financial year and has overall responsibility for leading and controlling the Company and is accountable to the Ordinary and New Members (the London Boroughs) for financial and operational performance. The Board has adopted a formal schedule of matters detailing key aspects of the Company s affairs presented to it for decision. Responsibility for the development and recommendation of strategic plans for consideration by the Board, for implementation of strategies and policies approved by the Board and for operational management is delegated to the Boards of GLE Investments Limited (GLEI) and GLE Contracts Limited (GLEC) of which a number of Executive and Non-Executive Directors are members. At 31 March 2014, the Board comprised a Non-Executive Chair, three Executive Directors and eight Non-Executive Directors. The Directors are as shown on page 5. With the exception of Cllr G Nicholson and Cllr M A Loveday (who are nominated by the original London Borough Ordinary Members) the Non-Executive Directors are the Private Members of the Company. Biographical details of members of the Board are included on the Group s external website at: and The Board is aware that six Non- Executive Directors, Paul Hendrick, Jeremy Crook, Megan Dobney, Anne Watts, Andrew Manning-Jones and Mary Edmond have all served in excess of 10 years. However, the Board considers they remain independent given their wide range of external appointments to other Boards and other interests outside of the Group. Their continued engagement and contribution is much valued. Following an open recruitment process, the gradual refreshing of the Board is continuing with the appointment in July 2014 of two new non-executive directors: Sir Eric Peacock and Ms Sheryl Tye. The roles of the Chair and Group Chief Executive are distinct and separate, with a clear division of responsibilities. The Board appointed Paul Hendrick as Senior Independent Director. The Senior Independent Director chairs the boards of the principal operating subsidiaries GLEI and GLEC. The Board considers that the Non-Executive Chair and the Senior Independent Director are independent of the Group Chief Executive and this, together with the majority of independent Non- Executive Directors and use of Board Committees, facilitates a forum for clear, independent and unfettered communication both internally and externally. The Non-Executive Directors combine broad business and commercial experience with independent and objective judgement. This balance enables the Board to provide clear and effective leadership and maintain the highest standards of integrity across the Group s business activities. The Board has reviewed the independence of the Non-Executive Directors and has concluded that, with the exception of Cllr G Nicholson and Cllr M A Loveday who are nominated by the original London Borough Ordinary Members, the Non-Executive Directors are independent. The Board is supplied with comprehensive Board papers in advance of each Board meeting, including financial and business reports covering each of the Group s principal business activities. The Board accepts its responsibility for ensuring there is an effective system of internal control. In this respect the Audit Review Committee regularly reports and advises the Board on these issues. The Board undertakes an annual self-assessment process, the results of which are reviewed by the Board and the Nominations Committee and help inform future priorities for Board performance development generally. GLE Group Report and Financial Statements I Corporate Governance Framework 10

14 The Board also carries out an annual review of the following: Conflicts of interest and related policy. Whistleblowing policy which provides a mechanism for staff to raise issues of concern if required on a confidential basis. Board and Committee terms of reference. Relevant legal and compliance developments. Relevant health and safety matters. Regular attendance of Board and Committee meetings is an important commitment on the part of Executive and Non-Executive Directors to ensure that governance arrangements remain robust and effective. Set out in the following tables are the attendance records of Directors at meetings of the Board and the Board s Committees: Board Meetings: Director s Name To May 2014 To May 2013 To May 2012 P G Collis (appointed 6 September 2012) 3/3 3/3 N/A J Crook 3/3 2/3 3/3 M Dobney 2/3 2/3 2/3 M I Edmond 3/3 3/3 3/3 P A Hendrick 3/3 2/3 3/3 M G Large 3/3 3/3 3/3 M A Loveday 2/3 2/3 3/3 A K Manning-Jones 3/3 3/3 3/3 G Nicholson 3/3 3/3 3/3 P R E Pledger (resigned 13 January 2013) N/A 1/3 3/3 L Soden (resigned 29 November 2012) N/A 1/3 3/3 P Thackwray 3/3 3/3 3/3 M B Walsh 3/3 3/3 3/3 A M Watts 3/3 3/3 3/3 M Williams (resigned 27 June 2012) N/A N/A 3/3 11 GLE Group Report and Financial Statements I Corporate Governance Framework

15 Audit Review Committee Meetings: Director s Name To May 2014 To May 2013 To May 2012 P G Collis (appointed 6 September 2012) 3/3 1/3 N/A P A Hendrick 3/3 3/3 3/3 L Soden (resigned 29 November 2012) N/A 2/3 3/3 A M Watts 3/3 3/3 3/3 Remuneration & Personnel Committee Meetings: Director s Name To May 2014 To May 2013 To May 2012 L Soden (resigned 29 November 2012) N/A 1/3 2/2 P A Hendrick 2/2 1/3 N/A P R E Pledger (resigned 13 January 2013) N/A 1/3 2/2 A M Watts 2/2 3/3 2/2 P G Collis (appointed 6 September 2012) 2/2 1/3 N/A Nominations Committee: Director s Name To May 2014 To May 2013 To May 2012 P A Hendrick 2/2 1/1 1/1 M G Large 2/2 1/1 1/1 P R E Pledger (resigned 13 January 2013) N/A N/A 1/1 A M Watts 2/2 1/1 1/1 P G Collis (appointed 6 September 2012) 2/2 1/1 N/A All Directors have access to the advice and services of the Group Company Secretary, who is responsible to the Board for ensuring that Board procedures are followed and that applicable rules and regulations are complied with. In addition, all Directors are able, if necessary, to obtain relevant independent professional advice at the Company s expense. Board Committees In order to ensure effective control and oversight, the Board has a number of committees with specific responsibilities defined by written terms of reference which are reviewed annually by the Board, the Audit Review Committee and the relevant Committee and are available on request from the Group Company Secretary. The principal committees are as follows: The Audit Review Committee The Audit Review Committee met three times in the year. It consists of three independent Non-Executive Directors. The three members are P A Hendrick (Chair), P G Collis CB and A M Watts CBE. In addition, the Group Chief Executive, the Group Finance Director, external auditors and internal auditors attend by invitation at the discretion of the Chair. The Committee is responsible for assisting the Board in discharging its responsibilities for the selection of accounting policies and financial reporting, internal controls and its risk management framework. Group management have established a system of internal control, which includes the accounting systems needed to manage and record the transactions undertaken by the business. However, it must be recognised that any system cannot provide absolute assurance against material misstatement or loss. The Group s internal audit function is externally provided by a third party firm of accountants and reports directly to the Audit Review Committee. During the year the Audit Review Committee reviewed the results of a number of internal audit reports covering various issues of internal controls and risk management. This programme of work will continue in the forthcoming year and is part of a planned three year rolling schedule across the Group. The Audit Review Committee carries out a formal regular review of the Group s risk register and makes appropriate recommendations to the Board. The Audit Review Committee also reviews the independence of GLE Group Report and Financial Statements I Corporate Governance Framework 12

16 the external auditors, including the relationship between audit and nonaudit work performed by the external auditors. The Audit Review Committee reviews the nature and scope of the audit with the external auditors prior to commencement and continues to monitor the scope and results of the annual audit, its cost effectiveness and objectivity. The Committee also formally evaluates the performance of the external and internal auditors on an annual basis. The internal and external auditors have direct access, if required, to the Chair of the Committee. The Committee monitors and reviews corporate governance practices and performance on an annual basis on behalf of the Board. The Remuneration and Personnel Committee The Remuneration and Personnel Committee met twice in the year and consists of three independent Non-Executive Directors. Executive Directors may attend at the invitation of the Chair to report on specific matters. The current Non-Executive members are A M Watts CBE (Chair), P A Hendrick and P G Collis CB. The Committee assists the Board in discharging its responsibilities for executive remuneration policy, remuneration arrangements of Directors and remuneration, employment and personnel policy generally across the Group. The Committee also monitors and reports on employment, gender and diversity statistics and recruitment, retention and staff development policies within the Group. The Nominations Committee The Nominations Committee met in November 2013 and May It consists of three Non-Executive Directors and one Executive Director. The current Non-Executive members are A M Watts CBE, P A Hendrick (Chair) and P G Collis CB. The Committee is responsible for assisting the Board in the formal selection and appointment of Directors. The Committee considers potential candidates and recommends the appointment of new Directors to the Board. The Committee also takes responsibility on behalf of the Board for the recruitment, induction and training of new Directors and the assessment of Board and individual Director s performance. It also takes responsibility for the evaluation of Board members performance which includes review of attendance records and contributions to meetings. The Committee also reviews and reports on performance in relation to Board and Sub-Committee administration including the content and timeliness of papers and minutes. Greater London Enterprise Investments Limited (GLEI) and Greater London Enterprise Contracts Limited (GLEC) The Boards of GLEI and GLEC meet together. There were four meetings in the financial year. The Boards of GLEI and GLEC consist of three independent Non-Executive Directors and two Executive Directors. The Non- Executive members of each Board are P A Hendrick (Chair), A M Watts CBE and P G Collis CB. The Executive Directors of these Boards are Martin Large (Group Chief Executive) and Michael Walsh (Group Finance Director). In addition, the senior management for each of the Group s businesses attend by invitation. These Boards perform a regular financial and operational review of the activities of the Group. They have delegated authority from the Board for the detailed review of specific financial and operational matters as directed from time to time and making recommendations as appropriate to the Board. Their responsibilities include the review and development of the annual budget and the medium term plans, strategy for each business and subsequently making appropriate recommendations to the Board for approval and implementation. Relations with the Members Each year, the Company provides Members with a report and a review of the Group s activities. Members are invited to attend the Annual General Meeting, where they have the opportunity to ask questions and raise any concerns to the Board of Directors. Two of the Non-Executive Directors are appointed by the original London Borough Ordinary Members and ensure the rest of the Board maintain an understanding of the views of those Members on an ongoing basis. The Company s website ( provides information on the Group s current activities. 13 GLE Group Report and Financial Statements I Corporate Governance Framework

17 Report on Directors Remuneration 1. Introduction The Remuneration and Personnel Sub-Committee ( the Committee ) is responsible for: The determination of Group policy for executive remuneration and the terms and conditions of employment of the Executive Directors. The determination of appropriate performance conditions for incentive arrangements and bonus payments across the Group. Review and determination of Group personnel policies as required. The Committee consists wholly of independent Non-Executive Directors and the current members are A M Watts CBE (Chair), P A Hendrick and P G Collis CB. Executive Directors attend by invitation at Committee meetings as required for relevant items, but are always excluded when their own performance and remuneration are under review. In the last financial year the Committee met twice. The Committee continued to carefully review and monitor GLE s remuneration and incentive policies. Previously implemented improvements to both the process and structure of annual bonus schemes in recent years resulted in no significant changes to incentive schemes in 2013/2014. The Committee will continue to monitor these schemes and will review in the light of prevailing market conditions. In addition, the Committee is currently reviewing the Group s medium term incentive arrangements with the possibility of a revised scheme being introduced to replace the scheme established in April 2003 but discontinued for the purposes of new awards with effect from April This is described below in more detail. The objective of GLE s employment policies is to ensure that the Group is able to attract and retain the best calibre of employee from all sections of the communities in which it operates, encouraging diversity and equal opportunities. With regard to remuneration of senior executives, remuneration levels need to be sufficient to attract and retain Directors of the quality required to manage the Group successfully. A component part of the remuneration package is therefore structured to link rewards to corporate and individual performance. In this respect wherever possible, comparisons have been made with other companies in similar sectors to ensure that packages offered are consistent and fair in relation to that offered elsewhere. Accordingly in this respect, the remuneration package of senior executives may include (in addition to an annual salary), both an annual performance incentive together with a potential element of medium term incentive. Annual Performance Bonus A bonus is paid to management and staff for financial performance in respect of their business, provided certain annual targets are exceeded and this is, in addition, linked to an individual s performance appraisal. Payment of annual bonuses is capped at varying levels up to a maximum of 100% of salary for staff and for Executive Directors with the exception of the Development Properties bonus scheme which is linked to the medium-term performance of individual development projects and which may, under certain circumstances, and dependent upon the timing of scheme completions, pay in excess of 100% of salary in a particular year. Bonuses paid to management and staff are not pensionable. Medium Term Incentive Scheme The future structure of the Group s medium term incentive arrangements are currently under review by the Committee with the possibility of introducing a replacement medium term incentive structure. As a result, no new awards have been granted and all existing awards have now either been exercised or have expired under the existing scheme. The existing Medium Term Incentive Scheme was established with effect from 1 April 2003 with Executive Directors being able to participate in the Scheme. This scheme was a phantom share scheme and was designed to encourage and reward medium-term performance by providing incentives linked to the increase in the Net Asset Value of the Group. Full details of the remaining awards that expired during the year and participants in the scheme are provided in the Directors schedule of emoluments that follows this report. The intention is that no future awards will be made under the existing scheme. Employment Contracts All Executive Directors have contracts providing for periods of up to one year s notice. A Redundancy Compensation agreement exists for one Executive Director, which in addition to the period of notice provided in his contract of employment, offers protection in the event of redundancy equivalent to one year s remuneration. The Committee, having taken independent specialist advice, are of the opinion that this is reasonable and is not out of step with current best practice. GLE Group Report and Financial Statements I Report on Directors Remuneration 14

18 2. Policy on Remuneration of Executive Directors The main components of executive remuneration for the year ended 31 March 2014 were: Basic Salary With one exception, Executive Directors benefited from an increase in base salaries during the year to 31 March Annual Performance Bonus The Group operates annual performance bonus schemes which are approved by the Committee. Payments under annual performance bonus schemes are non-pensionable. Pensions The Group makes contributions to a defined benefit scheme operated by the London Pensions Fund Authority, on behalf of two Executive Directors and to a defined contribution scheme in respect of one Executive Director. The contributions are based on basic salary only. Other Benefits Executive Directors are entitled to receive a company car or the cash equivalent. The Executive Directors are entitled to the provision of insurance against critical illness and private health care although not all Directors elect to take up these benefits. 3. Emoluments Total emoluments of the Directors for the year are shown below. Basic Salary Fees Annual Bonus * Other Benefit ** Total 2013 Total 2012 Executive Directors M G Large P Thackwray OBE M B Walsh M Williams (resigned 27 June 2012) Non-Executive Directors L M Soden (resigned 29 November 2012) J Crook M Dobney P A Hendrick P G Collis CB (appointed 6 September 2012) P R E Pledger (resigned 13 January 2013) A M Watts CBE M I Edmond Cllr M A Loveday Cllr G Nicholson A K Manning-Jones GLE Group Report and Financial Statements I Report on Directors Remuneration

19 3. Emoluments (continued) Two Executive Directors were members of a defined benefit scheme. The annual pension accruing to the highest paid Director at the year-end was 31,307 (2013: 30,281) and the accrued lump sum was nil (2013: nil). One Executive Director was a member of a defined contribution scheme. *Annual bonuses were paid during the year to 31 March 2014 in relation to performance in the year to 31 March ** Other benefits comprise mainly employer contributions to Executive Director s pension schemes and Company car benefits. Allocation value granted to Directors under the Medium Term Incentive Scheme At 31 March 2013 Exercised / Expired during the year At 31 March 2014 Exercise price* Normal exercise date from Normal exercise date to M G Large 84,431 (84,431) P Thackwray 26,854 (26,854) M Williams 26,912 (26,912) Total 138,197 (138,197) - The future structure of the Group s medium term incentive arrangements are currently under review by the Committee with the possibility of introducing a replacement medium term incentive structure. As a result, no new awards have been granted and all existing awards have now either been exercised or have expired under the existing scheme. * The notional gross value attributable to each Unit at the time of Exercise is equal to the net asset value of the Group under IFRS (after excluding the net pension deficit see note 11) as disclosed in the audited consolidated financial statements of the Group at the financial year-end immediately preceding the grant date, divided by 10,000, Group Personnel Policies The Committee has focused on seeking to improve and enhance best practice with regard to personnel policy and procedures. It regularly monitors the effectiveness of the Group s diversity and inclusiveness policy through the review of employee statistics including the ratio of staff by gender, age and the numbers from ethnic minorities. During the year the Committee has kept personnel activities and training and development under regular review. GLE is a diversity and inclusiveness employer and actively encourages applications from all sectors of the community. Disabled people who meet all of the essential criteria will be invited to interview. It continues to encourage and support the Group s commitment to the development and training of any of its employees which is reflected in both its commitment and continued accreditation to Investors in People (IIP), ISO 9001 and Customer First for certain areas of the Group during the year. GLE Group Report and Financial Statements I Report on Directors Remuneration 16

20 Independent Auditor s Report to the Members of Greater London Enterprise Limited We have audited the financial statements of Greater London Enterprise Limited for the year ended 31 March 2014 which comprise the group income statement, the group statement of comprehensive income, the group statement of financial position and company balance sheet, the group statement of changes in equity, the group statement of cash flows and the related notes. The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting framework that has been applied in preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). 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 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. 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 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 financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Financial Reporting Council s (FRC s) Ethical Standards for Auditors. Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the FRC s website at auditscopeukprivate. Opinion on financial statements In our opinion: the financial statements give a true and fair view of the state of the group s and the parent company s affairs as at 31 March 2014 and of the group s profit for the year then ended; the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; the parent company s financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and the financial statements have been prepared in accordance with the requirements of the Companies Act Opinion on other matters prescribed by the Companies Act 2006 In our opinion the information given in the strategic report and directors report for the financial year for which the financial statements are prepared is consistent with the financial statements. 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 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. Tim Neathercoat (senior statutory auditor) For and on behalf of BDO LLP, statutory auditor London United Kingdom 22 July 2014 BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127). 17 GLE Group Report and Financial Statements I Independent Auditor s Report to the Members of Greater London Enterprise Limited

21 Group Income Statement For the year ended 31 March 2014 Restated Note Revenue 3,4 29,666 23,958 Cost of sales (6,172) (7,856) Gross profit 23,494 16,102 Other operating expense 5 (4) (39) Increase/(decrease) in value of available for sale investments Loss on disposal/impairment of owned assets (8) (6) Share of profit/(loss) of associate 16 5 (25) Administrative expenses: Amortisation of intangibles - (620) Other administrative expenses (20,653) (14,378) Total administrative expenses (20,653) (14,998) Increase in value of investment properties 13,14 2, Operating profit 6 5,370 1,246 Finance income Finance expense 10 (859) (526) Profit before taxation 4, Taxation 12 (655) (201) Profit from continuing operations 3, Loss on discontinued operations, net of tax 7 (757) (154) Profit for the year 3, Attributable to: - Equity holders of the parent 3, Minority interest , The notes on pages 23 to 50 form part of these Group financial statements. GLE Group Report and Financial Statements I Group Income Statement 18

22 Group Statement of Comprehensive Income For the year ended 31 March 2014 Profit for the year 3, Other comprehensive income Actuarial losses on defined benefit pension plans (net of deferred taxation) (1,029) (91) Deferred tax effect of gains in property revaluations (474) (32) Total comprehensive income for the year 1, Attributable to: - Equity holders of the parent 1, Minority interest , The notes on pages 23 to 50 form part of these Group financial statements. 19 GLE Group Report and Financial Statements I Group Statement of Comprehensive Income

23 Group Balance Sheet At 31 March 2014 Company Number Note Non Current Assets Property, plant & equipment 13 1,238 1,218 Investment property 14 33,261 25,399 Investments in equity accounted associates Available for sale investments 17 3,896 3,838 Other investments 18 1,075 - Other receivables Deferred tax asset ,133 30,886 Current Assets Development properties 20 3,908 5,464 Trade and other receivables 21 28,285 21,691 Cash & cash equivalents 22 9,368 4,045 41,561 31,200 Total Assets 81,694 62,086 Current Liabilities Trade and other payables 23 14,433 12,729 Provisions Loans and borrowings 25a 11,280 10,157 25,730 22,934 Non Current Liabilities Other payables 25b 3,877 3,373 Loans and borrowings 25a 19,000 5,500 Employee benefits 11 2,294 1,155 25,171 10,028 Total Liabilities 50,901 32,962 Net Assets 30,793 29,124 Capital and reserves Members contribution 29 1,300 1,300 Other reserve Retained earnings 29,338 27,683 Equity attributable to Equity holders of Company 30,759 29,104 Minority interest ,793 29,124 The financial statements on pages 18 to 50 were approved and authorised for issue by the Board of Directors on 22 July 2014 and were signed on its behalf by: P A Hendrick, Director The notes on pages 23 to 50 form part of these Group financial statements. GLE Group Report and Financial Statements I Group Balance Sheet 20

24 Group Statement of Changes in Equity For the year ended 31 March 2014 Note Members Contribution Other Reserves Retained Earnings Total Minority Interest Total Equity Balance at 31 March , ,287 28,708-28,708 Changes in equity in 2013 Actuarial losses on defined (118) (118) - (118) benefit plans Tax effect of losses recognised directly in equity (91) (91) - (91) Tax effect of gain in property (32) (32) - (32) revaluations Net expense recognised - - (123) (123) - (123) directly in equity Profit for the year Total profit recognised Balance at 31 March , ,683 29, ,124 Changes in equity in 2014 Actuarial losses on defined (1,181) (1,181) - (1,181) benefit plans Tax effect of losses recognised directly in equity - - (1,029) (1,029) - (1,029) Tax effect of gain in property (474) (474) - (474) revaluations Net expense recognised - - (1,503) (1,503) - (1,503) directly in equity Profit for the year - - 3,158 3, ,172 Total profit recognised - - 1,655 1, ,669 Balance at 31 March , ,338 30, ,793 The Other Reserve relates to amounts recognised in equity in respect of available for sale investments. The notes on pages 23 to 50 form part of these Group financial statements. 21 GLE Group Report and Financial Statements I Group Statement of Changes in Equity

25 Group Cash Flow Statement For the year ended 31 March 2014 Restated Cash flows from operating activities Profit for the year 3, Adjustments for non-cash movements: Depreciation Amortisation of intangible assets Increase in value of investment property (2,343) (590) (Increase)/impairment in value of owned property (25) 56 Increase in value of available for sale investments (168) (6) Finance income (73) (174) Finance cost Share of (profit)/loss in associate (5) 25 Loss on sale of discontinued operations, net of tax Gain on sale of fixed assets - 24 Income tax expense Movement in working capital: (Increase)/decrease in trade and other receivables (6,814) 1,359 Decrease in development property values 1,556 2,447 Increase/(decrease) in trade and other payables 3,225 (1,961) Decrease in provisions and employee benefits (118) (95) Cash generated from operations 1,111 3,420 Net interest paid (740) (474) Corporation tax received Net cash flows from operating activities 371 3,262 Cash flows from investing activities Purchases of property, plant and equipment (288) (233) Disposals of property, plant and equipment 50 - Disposal of discontinued operations, net of cash disposed of (1,240) - Purchase of investment properties (5,519) - Purchases of available-for-sale financial assets - (46) Disposals of available-for-sale financial assets Purchase of other investments (1,075) - Investment loans repayments Net cash from investing activities (7,956) (48) Cash flows from financing activities Increase in/(repayments of) bank borrowings 13,500 (3,400) Net cash used in financing activities 13,500 (3,400) Net increase/(decrease) in cash and cash equivalents 5,915 (186) Cash and cash equivalents (including overdrafts) at 1 April 3,148 3,334 Cash and cash equivalents (including overdrafts) at 31 March 9,063 3,148 The notes on pages 23 to 50 form part of these Group financial statements. GLE Group Report and Financial Statements I Group Cash Flow Statement 22

26 Notes to the Consolidated Financial Statements For the year ended 31 March Incorporation and operations Greater London Enterprise Limited is incorporated and domiciled in Great Britain as a private limited company. The principal activity of the Company is that of a holding company for its subsidiaries. The activities of the Company and its subsidiaries ( the Group ) are described in note Summary of significant 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. Basis of preparation The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards and Interpretations issued by the International Accounting Standards Board as adopted by the EU (IFRS). The Group has applied all accounting standards and interpretations issued by the International Accounting Standards Board and International Financial Reporting Interpretations Committee relevant to its operations and effective for accounting periods beginning 1 April The Group s Revolving Credit Facility ( the bank loan ) is secured on the investment properties and is a revolving loan facility of 30,000,000 which was renewed on 27 February 2013 and runs until 26 February Interest is charged at LIBOR plus 2.25%. The Directors are therefore confident that the Group will have adequate resources to continue in operational existence for the foreseeable future. Accordingly they continue to adopt the going concern basis in preparing the consolidated financial statements for the year ended 31 March Restatement of comparative figures The prior year comparative figures have been restated to reflect the sale of the Equity Finance business on 30 September 2013 which has been disclosed in the Income Statement as discontinued operations. New pronouncements The Group has applied all accounting standards and interpretations issued by the International Accounting Standards Board and International Financial Reporting Interpretations Committee (IFRIC), as adopted by the EU, relevant to its operations and effective for accounting periods beginning 1 April In assessing the going concern basis of preparation of the consolidated financial statements for the year ended 31 March 2014, the Directors have taken into consideration detailed forecasts for each of the business areas and the availability of funding. The finance facility represents the amount due under the Group s variable rate back to back invoice discounting agreement and is secured by way of a debenture. The finance facility is the subject of an ongoing commercial finance facility with no fixed termination date. There is no indication that this facility will be terminated. 23 GLE Group Report and Financial Statements I Notes to the Consolidated Financial Statements

27 2. Summary of significant accounting policies (continued) The new or revised standards or interpretations that are effective for accounting periods commencing on or after 1 April 2013 and that are applicable to the Group are as follows. The adoption of these standards does not lead to any changes in the Group s accounting policies and have no material impact on the financial statements. Standard Effective date IFRS 10 Consolidated financial statements 1 January 2014 IFRS 11 Joint arrangements 1 January 2014 IFRS 12 Disclosure of interest in other entities 1 January 2014 IAS 27 Separate financial statements 1 January 2014 IAS 28 Investments in associates and joint ventures 1 January 2014 IAS 32 (amendment) Offsetting financial assets and financial liabilities 1 January 2014 IFRS 10, 12, 27 (amendment) Investment Entities 1 January 2014 The following new or revised standards or interpretations that are applicable to the Group but which have not been adopted early are as follows: Effective for accounting periods commencing on or after 1 April 2014: Standard Effective date IAS 19 Defined Benefit Plans: Employee contributions 1 July 2014 IFRS 15* Revenue from Contracts with Customers 1 January 2017 IFRS 9* Financial instruments - * Not yet endorsed by the EU. The directors do not expect these standards and interpretations to have a material impact on the financial statements. Basis of consolidation The Group financial statements include the financial statements of Greater London Enterprise Limited and its subsidiary undertakings. Intercompany transactions and balances between Group companies are eliminated in full. The profit attributable to members of the Company is stated after deducting the proportion attributable to minority interests. Minority interests in the net assets of consolidated subsidiaries are identified separately from the Group s equity therein. Minority interests consist of the amount of those interests at the date of the original business combination and the minority s share of the changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority s interest in the subsidiary s equity are allocated against the interest of the Group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group. Discontinued operations A discontinued operation is a component of the Group s business that represents a separate major line of business or geographical area of operations or is a subsidiary acquired exclusively with a view to resale, that has been disposed of, has been abandoned or that meets the criteria to be classified as held for sale. Discontinued operations are presented in the group income statement as a single line which comprises the post-tax profit or loss of the discontinued operation along with the post-tax gain or loss recognised on the re-measurement to fair value less costs to sell or on disposal of the assets or disposal groups constituting discontinued operations. GLE Group Report and Financial Statements I Notes to the Consolidated Financial Statements 24

28 2. Summary of significant accounting policies (continued) Impairment of non-financial assets Non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to sell) the asset is written down accordingly. Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the asset s cash-generating unit (i.e. the lowest group of assets in which the asset belongs for which there are separately identifiable cash flows). Goodwill is allocated on initial recognition to each of the Group s cash-generating units that is expected to benefit from the synergies of the combination giving rise to the goodwill. Impairment charges are included in the administrative expenses line item in the Income Statement, except to the extent they reverse gains previously recognised in equity. Revenue recognition Revenue is stated exclusive of intra- Group transactions, trade discounts, VAT and other taxes. It comprises rental income, interest receivable on loans, fees receivable from investment management and advisory services, factoring commission and discount charges, dividends on unlisted investments (which are recognised as received) and income from sales of development properties. Fees receivable on advisory contracts are included in turnover on the basis of the sales value of work completed during the year. Commissions, discount charges and other fees are recognised as they are earned. Rental income and interest receivable are recognised in the period to which they relate. Lease incentives, such as rent-free periods, are spread over the life of the lease on a straight line basis. Revenue recognition policies in respect of the sale of both investment and development properties are given below under the appropriate caption. Foreign currency Transactions entered into by Group entities in a currency other than the currency of the primary economic environment in which it operates (the functional currency ) are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the Balance Sheet date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are similarly recognised immediately in the Income Statement. Financial assets The Group classifies its financial assets into one of the following categories, depending on the purpose for which the asset was acquired. The Group s accounting policy for each category is as follows: Loans and receivables: These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of goods and services to customers (trade debtors), but also incorporate other types of contractual monetary asset. They are carried at cost less any provision for impairment. Impairment losses are recognised in the Income Statement where the recoverable amount falls below carrying value. Available-for-sale: Non-derivative financial assets not included in the above category are classified as available-for-sale and comprise the Group s strategic investments in entities not qualifying as subsidiaries, associates or jointly controlled entities. They are carried at fair value with changes in fair value recognised directly in equity. Where a decline in the fair value of an availablefor-sale financial asset constitutes objective evidence of impairment, the amount of the loss is removed from equity and recognised in the Income Statement. Financial liabilities The Group only has financial liabilities that are recognised at amortised cost, these include: Trade payables and other monetary liabilities, which are recognised at amortised cost. Bank borrowings are initially recognised at the amount advanced net of any transaction costs directly attributable to the issue of the instrument. Such interest bearing liabilities are subsequently measured at amortised cost using the effective interest rate method, which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the Balance Sheet. Interest expense in this context includes initial transaction costs and premium payable on redemption, as well as any interest or coupon payable while the liability is outstanding. Borrowing costs Interest incurred on the bank loan used to fund the construction of the Group s development properties is capitalised from the start of the development work until the date of practical completion. The capitalisation is suspended if there are prolonged periods when development activity is interrupted. 25 GLE Group Report and Financial Statements I Notes to the Consolidated Financial Statements

29 2. Summary of significant accounting policies (continued) Capitalised interest is calculated with reference to the actual rate payable on borrowings for development purposes or for that part of the development cost financed out of general funds. Other financing costs incurred in respect of development properties are charged to the income and expenditure account in the year that they arise, except that financing costs relating to pre-sold and pre-let development properties are capitalised up to the point when a development is either sold or acquires investment status. The Group does not incur any other interest costs that qualify for capitalisation under IAS 23 Borrowing costs. Grants receivable Revenue grants are recognised in the Income Statement in the period to which they relate. Grants receivable in respect of development properties are included in the Income Statement account when the related property is sold. Capital grants are treated as follows: (a) grants receivable to finance loans advanced under the London Social Inclusion Growth Fund are included as deferred income and are released to the Income Statement to offset any bad debts arising from those loans; (b) grants receivable to finance the purchase of fixed asset investments are included as deferred income and are released to the Income Statement to offset any impairment provisions against such investments, either in full or in part depending on the terms of the scheme; (c) grants receivable to finance the expenditure on depreciable tangible fixed assets are included in deferred income and are released to the Income Statement in line with the depreciation charges on those assets; (d) grants receivable in respect of investment properties are deducted in arriving at the carrying amount of the asset purchased. Provisions The Group has recognised provisions for liabilities of uncertain timing or amount including those for legal disputes. Provisions are measured at the best estimate of the expenditure required to settle the obligation at the reporting date. Investment properties Investment properties are those properties owned by the Group that are held either to earn rental income or for capital appreciation or both. Investment properties are initially recognised at cost plus transactions costs. Subsequently, the Group s investment properties are revalued annually to open market value, with changes in the carrying value recognised in the Income Statement. Investment properties are not depreciated. Where revenue is obtained from the sale of the investment properties it is recognised when the significant risks and returns have been transferred to the buyer. This is generally when an irrevocable and unconditional contract has been entered into by the Balance Sheet date except where payment or completion is expected to occur significantly after exchange. Development properties Development properties are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost includes materials, labour, directly attributable fees and expenses, finance costs (see accounting policy for borrowing costs), and relevant overheads incurred in bringing the development property to its present location and condition. Provisions for all known or expected losses to completion are deducted in arriving at the valuation of development properties. Where revenue is obtained from the sale of the development properties it is recognised when the significant risks and returns have been transferred to the buyer. This is generally when an irrevocable and unconditional contract has been entered into by the Balance Sheet date except where payment or completion is expected to occur significantly after exchange. Property, plant and equipment Items of plant and equipment are initially recognised at cost. Costs comprise purchase cost and any directly attributable costs of bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Depreciation is provided on all items of property, plant and equipment and the cost is written off over their expected useful economic lives. It is applied at the following rates: Fixtures and fittings % per annum straight line Computer equipment % per annum straight line Amounts recoverable on contracts Work in progress on advisory contracts is valued at the cost of materials, labour and relevant overheads less progress payments and, where necessary, provisions to reduce cost to estimated realisable value. Where a loss is anticipated, the expected loss is recognised immediately. GLE Group Report and Financial Statements I Notes to the Consolidated Financial Statements 26

30 2. Summary of significant accounting policies (continued) Deferred taxation Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the Balance Sheet differs to its tax base, except for differences arising on: the initial recognition of goodwill; the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit; and investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future. Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised. The amount of the asset or liability is determined using tax rates that have been enacted or substantially enacted by the Balance Sheet date and are expected to apply when the deferred tax liabilities/(assets) are settled/ (recovered). Deferred tax balances are not discounted. Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either: the same taxable Group Company; or different Group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered. Retirement benefits: Defined contribution schemes Contributions to defined contribution pension schemes are charged to the Income Statement in the year to which they relate. Retirement benefits: Defined benefit schemes Defined benefit scheme surpluses and deficits are measured at: the fair value of scheme assets at the Balance Sheet date; less scheme liabilities calculated using the projected unit credit method discounted to its present value using yields available on high quality corporate bonds that have maturity dates approximating to the terms of the liabilities; plus unrecognised past service costs; less the effect of minimum funding requirements agreed with scheme trustees. Re-measurements of the net defined obligation are recognised directly within equity. The re-measurements include: actuarial gains and losses return on plan assets (interest exclusive) any asset ceiling effects (interest exclusive) Service costs are recognised in profit or loss, and include current and past service costs as well as gains and losses on curtailments. Net interest expense (income) is recognised in profit or loss, and is calculated by applying the discount rate used to measure the defined benefit obligation (asset) at the beginning of the annual period to the balance of the net defined benefit obligation (asset), considering the effects of contributions and benefit payments during the period. Gains or losses arising from changes to scheme benefits or scheme curtailment are recognised immediately in profit or loss. Settlements of defined benefit schemes are recognised in the period in which the settlement occurs. Debt factoring and invoice discounting Under the Group s debt factoring and invoice discounting arrangements, the underlying receivables remain assets of the Group s clients. The Group is not party to the contractual provisions in respect of these receivables. Accordingly, the Group does not recognise these receivables in the Group Balance Sheet. Amounts advanced to the Group s debt factoring and invoice discounting clients are recognised as receivables in the Group s Balance Sheet. 27 GLE Group Report and Financial Statements I Notes to the Consolidated Financial Statements

31 2. Summary of significant accounting policies (continued) Critical accounting estimates and judgements The Group makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historic experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. (a) Valuation of investment property and freehold land and buildings Information in relation to the valuation of investment property is disclosed in note 14. The valuation is based upon assumptions including future rental income, anticipated occupation rates, future development costs and the appropriate discount rate. The valuers and Directors also make reference to market evidence of transaction prices for similar properties. (b) Pension assumptions The costs, assets and liabilities of the defined benefit scheme operated by the Group are determined using methods relying on actuarial estimates and assumptions. Details of the key assumptions are set out in note 11. The Group takes advice from independent actuaries relating to the appropriateness of the assumptions. Changes in the assumptions used may have a significant effect on the consolidated Income Statement and the Balance Sheet. (c) Impairment of accounts receivable The Group regularly assesses the recoverability of its factored debts for evidence of impairment. This assessment involves judgement in respect of the credit quality of counterparties and the quality of security provided to the Group. 3. Revenue The Group s revenue can be analysed as follows: Restated Sale of development properties 7,073 5,281 Investment management and advisory fees 15,310 11,995 Factoring commission and discount charges 4,450 4,295 Rental income 2,833 2,387 29,666 23,958 GLE Group Report and Financial Statements I Notes to the Consolidated Financial Statements 28

32 4. Segmental analysis The Group reports all financial results between the following five segments. These comprise: Equity Finance Cash Flow Finance Enterprise Development Property and Regeneration Central Services Details on the activities of each segment, except Central Services, are included in the Strategic Report on pages 1 4. In the case of Central Services, this segment exists to provide core services to Group companies, including the provision of financial management, IT, marketing and communications, HR, company secretarial and compliance services and office facilities. Equity Finance Cash Flow Finance Enterprise Development Property & Regeneration Central Services Revenue - 4,450 14,858 10, ,666 Operating (loss) / profit ,280 (779) 5,370 Net finance costs (786) Profit before tax 4,584 Total Balance Sheet Assets - 20,231 4,879 45,602 1,614 72,326 Liabilities - (4,623) (5,883) (6,684) (3,431) (20,621) Net cash / (debt) - (11,151) 3,081 (13,889) 1,047 (20,912) - 4,457 2,077 25,029 (770) 30,793 Other information Capital expenditure Depreciation GLE Group Report and Financial Statements I Notes to the Consolidated Financial Statements

33 4. Segmental analysis (continued) Restated Equity Finance Cash Flow Finance Enterprise Development Property & Regeneration Central Services Total Revenue - 4,309 10,899 8, ,958 Operating (loss) / profit ,171 (1,695) 1,246 Net finance costs (352) Profit before tax 894 Balance Sheet Assets 99 18,494 4,489 33,894 1,065 58,041 Liabilities 4,263 (4,462) (4,869) (4,303) (7,934) (17,305) Net cash / (debt) 1,162 (10,073) 1,747 (5,344) 896 (11,612) 5,524 3,959 1,367 24,247 (5,973) 29,124 Other information Capital expenditure Depreciation The Group s secondary reporting segment is geographic. The Group s activities are conducted principally in the United Kingdom. 5. Other operating expense This comprises: Restated Loss on sale of investments (4) (39) (4) (39) 6. Operating profit This is stated after charging: Staff costs (see note 8) 14,483 15,244 Depreciation (see note 13) Amortisation of intangible assets Operating lease charges Auditors remuneration for the audit of the Company 4 38 Auditors remuneration for the audit of subsidiaries Auditors remuneration for non-audit services GLE Group Report and Financial Statements I Notes to the Consolidated Financial Statements 30

34 7. (Loss) on discontinued operations, net of tax On 18 April 2013, GLE entered into a sales and purchase agreement with the senior management of its Equity Finance business, via a Limited Liability Partnership created for that purpose, to sell the majority of the Equity Finance business ( the business ), by the sale of YFM Private Equity Limited and the assignment of the management agreements, comprising the operating business of YFM Venture Finance Limited, to senior management. The sale was subject to a number of conditions precedent mainly relating to obtaining investor consents and change of control consent from the Financial Conduct Authority which were achieved during the summer and early autumn of The sales process completed on 30 September The operating results of the business for the period to 30 September 2013 together with the loss on disposal of the business, in total a net loss of 757,000, have therefore been reclassified and included separately in the Group income statement and are analysed in the table below. In accordance with accounting standards, the prior year comparative has also been adjusted to show separately, in discontinued operations, the losses of the business in 2013 of 154,000. For further background details on the decision to sell the business, please see page 3 of the Strategic Report. a) Loss on disposal of subsidiary undertaking Cash consideration received 210 Cash disposed of (1,450) Net cash outflow on disposal of discontinued operations (1,240) Net assets disposed (other than cash) Property plant and equipment (2) Other investments (40) Trade and other receivables (343) Trade and other payables Disposal costs (223) Loss on disposal of discontinued operations (note 7b) (950) b) Discontinued operations Revenue 3,046 6,592 Expenses other than finance costs (2,801) (6,806) Investment income Tax expense (55) (43) Loss on disposal of discontinued operations (note 7a) (950) - Loss for the year (757) (154) 31 GLE Group Report and Financial Statements I Notes to the Consolidated Financial Statements

35 7. (Loss) on discontinued operations, net of tax (continued) The Group Cash Flow statement includes the following amounts relating to discontinued operations: Operating activities 193 (154) Investing activities (1,240) - Financing activities - - Net cash from discontinued operations (1,047) (154) 8. Staff costs Wages and salaries 11,793 12,497 Social security costs 1,550 1,465 Pension costs - defined contribution schemes 926 1,059 - defined benefit scheme (note 11) Total staff costs 14,483 15,244 Average numbers of staff during the year were as follows: Number Number Equity Finance Cash Flow Finance Enterprise Development Business Accommodation 7 7 Consulting 3 10 Central Services Directors remuneration Remuneration in respect of Directors was as follows: Salary and bonuses Defined benefit pension cost As at 31 March 2014, there were 2 directors in the Group s defined benefit scheme (2013 2). There is 1 director in the Group s defined contribution scheme (2013 1). GLE Group Report and Financial Statements I Notes to the Consolidated Financial Statements 32

36 10. Net finance cost Finance income Interest received on bank deposits 15 5 Interest received on loans made Finance income from defined benefit scheme (note 11) Finance costs Interest payable on borrowings and similar costs Net interest expense from defined benefit scheme (note 11) Net finance costs During the current and prior year, no finance costs were capitalised into development properties. Finance income relates to financial assets classified as loans and receivables. Finance costs relate to financial liabilities classified as financial liabilities measured at amortised cost. 11. Pension costs defined benefit scheme Certain employees of the Group are members of a defined benefit scheme operated by the London Pensions Fund Authority which covers the Group s obligation to provide pensions to retired employees and currently eligible members of staff, based on final pensionable salary. The assets of the scheme are held independently from the Group s finances and are administered by trustee companies. Pension costs are assessed on the advice of Barnett Waddingham, an independent qualified actuary following triennial valuations using the projected unit method. The latest valuation of the scheme was carried out at 31 March The valuation assumed that investment returns would be 4.4% per annum (equal to the discount rate), that salary increases would average 1.0% per annum and that present and future pensions would increase at the rate of 2.8% per annum. The contribution paid by employees in the scheme ranges from 5.5% to 7.5% of pensionable salaries and the Company s regular cash contribution is 17.8% p.a. of pensionable salaries. The main financial assumptions used to value the assets and liabilities of the scheme as at 31 March 2014, 2013 and 2012 in accordance with the requirements of IAS 19 are shown in the following table: 2012 RPI increase 3.6% 3.4% 2.8% CPI increases 2.8% 2.6% 2.0% Salary increases 1.0% 1.0% 2.0% Pension increases 2.8% 2.6% 2.0% Discount rate for scheme liabilities 4.4% 4.4% 4.6% 33 GLE Group Report and Financial Statements I Notes to the Consolidated Financial Statements

37 11. Pension costs defined benefit scheme (continued) Mortality assumptions As part of the formal valuations the actuaries carried out detailed analysis of the experience of the membership of the scheme. The analysis indicated that the rates of improvement in mortality are currently running at a similar level to those assumed by the 92 series standard tables. The resulting average expectation of life for a male pensioner member currently aged 65 is 22.9 years (2.5 more years for females) whereas for a male active member currently aged 45 the life expectancy as at the valuation date is assumed to be 45.2 years (2.4 more years for females). The fair value of the assets held by the pension scheme, the long-term expected rate of return on each class of assets and the value of the scheme s liabilities assessed on the assumptions described above are shown in the following tables. In accordance with IAS 19, the following liability has been recognised in the Balance Sheet: Group s share of pension fund assets 9,260 8,746 Present value of scheme liabilities (11,551) (9,900) Present value of unfunded liabilities (3) (1) Deficit in the scheme (2,294) (1,155) Related deferred tax asset Net pension liability (1,837) (850) Assets (Employer) Long term return % p.a Fund value at 31 March 2014 Long term return % p.a Fund value at 31 March 2013 Equities - 4, % 6,384 LDI/Cashflow matching Infrastructure Commodities Target Return Portfolio - 2, % 875 Alternative Assets % 1,312 Cash % 175 Property Total value of market assets 4.4% 9, % 8,746 For accounting periods beginning on or after 1 January 2013, the expected return and the interest cost have been replaced with a single net interest cost which effectively sets the expected return on assets equal to the discount rate of 4.4%. GLE Group Report and Financial Statements I Notes to the Consolidated Financial Statements 34

38 11. Pension costs defined benefit scheme (continued) Reconciliation of plan assets At beginning of year 8,746 7,760 Expected return Interest on assets Return on assets less interest (73) - Contributions by participants Contribution by employers Benefits paid (189) (407) Other actuarial gains/(losses) Administration expenses (13) - Actuarial gain/(loss) At end of year 9,260 8,746 Composition of plan assets Equities 4,908 6,384 LDI/Cashflow matching Target Return Portfolio 2, Alternative Assets - 1,312 Infrastructure Commodities 92 - Property Cash Closing fair value of plan assets 9,260 8,746 Reconciliation of plan liabilities At beginning of year 9,900 9,013 Interest cost Current service cost Contribution by plan participants Change in financial assumptions Change in demographic assumptions Experience loss/(gain) on defined benefit obligation Estimated benefits paid net of transfers in (189) - Benefits paid - (407) Actuarial gain/(loss) At end of year 11,551 9, GLE Group Report and Financial Statements I Notes to the Consolidated Financial Statements

39 11. Pension costs defined benefit scheme (continued) The following disclosures show the amounts that have been included in the income statement and the statement of changes in equity under IAS 19: Analysis of the amount (credited)/charged to operating profit/(loss): Service cost Net interest on the defined liability/(asset) 46 - Administration expenses Analysis of the amount charged to finance income Expected return on pension scheme assets Interest on pension scheme liabilities - (407) Net gain Less deferred taxation Analysis of amount recognised in equity Cumulative actuarial losses recognised directly in equity Return on plan assets in excess of interest (73) - Other actuarial gains/(losses) on assets Change in financial assumptions (375) - Change in demographic assumptions (323) - Experience (loss)/gain on defined benefit obligation (526) - Actuarial gains/(losses) on plan assets Actuarial (losses)/gains on obligations - (687) Net loss (1,181) (118) Less deferred tax credit (1,029) (91) GLE Group Report and Financial Statements I Notes to the Consolidated Financial Statements 36

40 11. Pension costs defined benefit scheme (continued) Movement in deficit during the year At 1 April (1,155) (1,255) Movement in year: Current service cost (113) (128) Contributions Net (losses)/gains (59) 122 Net actuarial losses (1,181) (118) At 31 March (2,294) (1,155) It has been agreed with the trustees that the contribution rate for the next year will be 15.4% per annum. In order to reduce the deficit, the Group has agreed with the London Pensions Fund Authority to make additional payments of 88,000 per annum for the year ended 31 March For the year ended 31 March 2014 the Group made additional contributions of 69,000 (2013: 69,000). History of experience gains and losses Experience gains/(losses) on scheme assets (445) Value of assets 9,260 8,746 7,760 Percentage of scheme assets 5.7% 6.5% (5.7%) Experience gains on scheme liabilities Present value of liabilities 11,551 9,900 9,013 Percentage of the present value of the scheme liabilities 0.0% 0.0% 0.0% Defined contribution schemes The pension charge in respect of this scheme is the actual contributions paid. These amounted to 926,000 (2013: 1,059,000). 37 GLE Group Report and Financial Statements I Notes to the Consolidated Financial Statements

41 12 Taxation Analysis of taxation expense / (credit) in the year: Restated Current tax expense / (credit) UK corporation tax at 23% on profits for the year (2013: 24%) Adjustments in respect of prior years (13) (129) Total current taxation expense / (credit) 531 (69) Deferred tax expense / (credit) Origination and reversal of temporary differences (17) 252 Effect of tax rate changes Adjustments in respect of previous periods 84 - Total deferred tax expense Total taxation expense The reasons for the difference between the actual tax credit for the year and the standard rate of corporation tax in the UK applied to profits for the year are as follows: Profit on ordinary activities before taxation Restated 4, Expected tax charge based on the standard rate of corporation tax in the UK of 23% (2013: 1, %) Income / expenses not deductible for tax purposes (512) 269 Unprovided deferred tax movement (63) (44) Adjustment in respect of prior years 71 (129) Unrelieved tax losses and other deductions on the period (50) - Other timing differences 98 (128) Effect of tax rate changes Total taxation expense GLE Group Report and Financial Statements I Notes to the Consolidated Financial Statements 38

42 13. Property, plant and equipment Property Fixtures and fittings Computer equipment Total Cost or valuation At 1 April ,197 1,053 2,900 Additions Revaluations (85) - - (85) At 31 March ,295 1,189 3,084 Additions Disposals - (177) (151) (328) Revaluations Reclassification At 31 March ,518 1,673 3,816 Accumulated depreciation At 1 April ,453 Charge for the year Impairment At 31 March ,866 Charge for the year Disposals - (136) (139) (275) Reclassification At 31 March ,094 1,484 2,578 Net book value At 31 March ,238 At 31 March , GLE Group Report and Financial Statements I Notes to the Consolidated Financial Statements

43 14. Investment property Freehold property Leasehold property Total 000 At 1 April ,108 15,701 24,809 Additions Revaluations (55) At 31 March ,053 16,346 25,399 Additions 4, ,519 Transfers 2,090 (2,090) - Revaluations 592 1,751 2,343 At 31 March ,448 16,813 33,261 Bank borrowings are secured on the Group s freehold and leasehold property. The Group s investment properties were valued by Jones Lang La Salle, chartered surveyors, as at 31 March The valuations were performed in accordance with the Appraisal and Valuation Manual of the Royal Institute of Chartered Surveyors. The Directors consider that their valuation is an accurate reflection of fair value at the Balance Sheet date. There are no current obligations to purchase, construct or develop the investment properties. During the year 2,818,000 (2013: 2,292,000) was recognised in the Income Statement in relation to rental income from investment properties. Direct operating expenses, including repairs and maintenance, arising from investment property that generated rental income amounted to 436,000 (2013: 347,000). Direct operating expenses, including repairs and maintenance, arising from investment property that did not generate rental income during the year amounted to 892,000 (2013: 580,000). At 31 March 2014, there was no restriction on the potential future realisation of investment property or the remittance of income and proceeds of disposal (2013: nil). At 31 March 2014, there were no contractual obligations to purchase investment property (2013: nil). GLE Group Report and Financial Statements I Notes to the Consolidated Financial Statements 40

44 15 Subsidiaries The main subsidiaries of Greater London Enterprise Limited, all of which are incorporated and registered in Great Britain, and have been included in these consolidated financial statements, are as follows: Name of Company Nature of business Percentage of ownership interest at 31 March GLE Investments Limited Investment company GLE Properties Limited Investment property company GLE Property Developments Limited Development property company One London Limited Enterprise agency London Seed Capital Limited Investment company Waterfront Studios Limited Investment property company One London Trade and Investment Limited Administrative company South East Trade and Investment Limited Administrative company GLE Private Equity Limited Investment company SMH Group (Holdings) Limited Investment company SMH Equity Partners Limited Investment company YFM Venture Finance Limited Management company YFM Private Finance Limited Management company IGF Invoice Finance Limited Invoice discounting company Investments in associates The following entity, incorporated and regitered in Great Britain, meets the definition of an associate and has been equity accounted in the consolidated financial statements: Name of Company Country of incorporation Ownership interest at 31 March London Business Loans (Wholesale) Limited Great Britain 49% 49% Aggregated amounts relating to associates are as follows: Total assets 1,363 2,304 Total liabilities 1,326 2,277 Revenues Profit / (loss) for the year 11 (50) 41 GLE Group Report and Financial Statements I Notes to the Consolidated Financial Statements

45 17. Available for sale investments 000 At 1 April ,110 Additions 46 Disposals (231) Revaluation (14) Legacy fund (49) Profit & loss (24) At 31 March ,838 Additions - Disposals - Revaluation 6 Legacy fund (116) Profit & loss 168 At 31 March ,896 Available-for-sale investments consist entirely of unquoted UK equity securities. The fair values of the unquoted securities are valued in accordance with market valuations where available. Where market valuations are not available a valuation methodology is used. For example in accordance with the British Venture Capital Association Guidelines. Where the range of fair values derived by applying a valuation model is significant and the probabilities of the various estimates cannot be reasonably assessed, the investment is carried at cost. 18. Other investments 000 At 1 April Additions 1,075 At 31 March ,075 During the year the GLE Group acquired a 5% equity stake in Pocket Living Limited, an award-winning private developer of intermediate housing in London, at a cost of 500,000. It also provided a loan to Pocket Living Limited for 500,000 which has an option to convert to equity. The investment made during the year includes costs of 75,000. GLE Group Report and Financial Statements I Notes to the Consolidated Financial Statements 42

46 19. Financial instruments and financial risk Interest rate risk: The Group s borrowings are principally at a margin over LIBOR thus exposing the Group to cash flow interest rate risk. The Group s policy is to ensure the margin is competitive when compared to other banks and to give consideration to hedging to reduce exposure to this risk. Credit risk: At IGF Invoice Finance significant sums of monies are advanced to clients thereby exposing the Group to the risk that these amounts may not be recoverable. This risk is mitigated by controls over client take on procedures, securing advanced funds against client assets and on-going review of client accounts to ensure the amounts remain recoverable. Liquidity risk: The Group is exposed to liquidity risk as sufficient funds are required to support trading, investing and financing activities. The Group regularly monitors the liquidity position to ensure that sufficient funds are available to meet both current and future requirements. Liquidity management includes managing the Group s working capital and borrowings. The Group s borrowings are the subject of a number of financial covenants which the Directors regularly monitor to ensure both current and future compliance. The Group s revolving loan facility runs until February As such, the Directors are confident the Group will have sufficient funds to meet its continuing obligations as they fall due. Fair value risk: The Group has a number of holdings in available-for-sale investments which exposes the Group to fair value risk. This risk is mitigated both by the Group s due diligence procedures that it undertakes prior to entering into an investment and its ongoing monitoring procedures. In accordance with IFRS 7, the following table shows the principal and interest repayments of the Group: Due in 2015 Due in 2016 Due in 2017 Total Bank loans - 15,250 3,750 19,000 Overdraft Finance facility 10, ,975 At 31 March ,280 15,250 3,750 30,280 Due in 2014 Due in 2015 Due in 2016 Total Bank loans - - 5,500 5,500 Overdraft Finance facility 9, ,260 At 31 March ,157-5,500 15,657 The Group has used a sensitivity analysis technique that measures the estimated change in fair value of the Group s financial instruments to both the Income Statement and equity of an instantaneous increase or decrease of 1% in market interest rates. This exercise has been performed purely for illustrative purposes as in practice, these changes rarely occur in isolation. In preparing this analysis, it has been assumed that changes in market interest rates affect the interest payable or receivable on floating rate financial instruments. 43 GLE Group Report and Financial Statements I Notes to the Consolidated Financial Statements

47 19. Financial instruments and financial risk (continued) 1% decrease in market interest rate 1% increase in market interest rate At 31 March 2014 Impact on Income Statement 157 (157) The amounts generated from the sensitivity analysis are estimates of the impact of market risk assuming that the specified changes occur. Clearly, developments in global markets may cause the actual changes to differ significantly from the changes specified above. Therefore, this analysis should not be considered a projection of likely future events and losses. The sensitivities above exclude any potential impact on the Group s retirement benefit obligations. Capital structure The Group manages its bank loans and equity as capital. The Group s principal objective is to ensure that the Group has sufficient capital to fund its operations. In developing business plans, management consider the likely capital requirements and how to fund these requirements. Additional capital is funded by using the least cost source at the time of fund raising. At 31 March 2014, the Group s capital can be summarised as follows: 19,000 5,500 Bank loans 10,975 9,260 Finance facility IGF 1,300 1,300 Members contribution 31,275 16,060 The Group is not subject to any externally imposed capital requirements. The maximum amount of credit risk that the Group is exposed to is in respect of its total trade and other receivables. GLE Group Report and Financial Statements I Notes to the Consolidated Financial Statements 44

48 20. Development properties Development properties 3,908 5,464 Included within the carrying value of development properties is capitalised interest of nil ( nil). As at 31 March 2014 the Group made a provision of nil (2013: nil) against the carrying value of development properties. 21. Trade and other receivables Current Net amount recoverable in respect of factored debts 16,555 14,864 Other trade receivables 6,488 1,477 Total trade receivables 23,043 16,341 Other receivables Deferred taxation (note 26) Prepayments and accrued income 4,374 4,291 28,285 21,691 The gross value of the trade receivables factored by IGF Invoice Finance Limited is 37,146,150 (2013: 36,079,129). 22. Cash and cash equivalents Short term bank deposits Cash at bank 8,666 3,162 9,368 4, Trade and other payables Current Trade payables Other taxes 688 1,027 Corporation tax Accruals and deferred income 4,534 4,571 Other payables 7,656 6,090 14,433 12, GLE Group Report and Financial Statements I Notes to the Consolidated Financial Statements

49 24. Provisions The following amounts should be provided for in relation to on-going and potential litigation, the outcome and timing of which are both uncertain. The movement is as shown below: At 1 April Amounts released in the year (31) (70) At 31 March a Loans and borrowings Current Non-current Current Non-current Overdrafts Finance facility 10,975-9,260 - Bank loans - 19,000-5,500 11,280 19,000 10,157 5,500 Bank loans comprise one agreement for 14,000,000 which is in place until 26 February The borrowing is interest bearing at 2.25% above LIBOR on all balances. Another bank loan for 5,000,000 commenced during the year and is in place until 13 March This borrowing is interest bearing at 7.85% above LIBOR on all balances. The finance facility represents the amount due under the Group s variable rate back-to-back invoice discounting agreement and is secured by a debenture. Due to the confidential nature of this agreement, the discount rate has not been disclosed. The finance facility is the subject of an ongoing commercial finance facility with no fixed termination date. Borrowings mature as follows: Less than one year 11,280 10,157 Two to five years 19,000 5,500 30,280 15,657 GLE Group Report and Financial Statements I Notes to the Consolidated Financial Statements 46

50 25.b Other payables - non current Deferred income and other payables 3,311 3,373 Deferred taxation (note 26) 566-3,877 3,373 Deferred income comprises monies received and held within two separate funds known as the Endowment Fund and the Legacy Fund, part of the SMH Group (Holdings) Limited (formerly YFM Group (Holdings) Limited) acquisition. These grant aided co-investment funds provide risk capital to small and medium sized companies. Funding assistance is provided to the Group by way of a grant. The grant received is credited to either the Endowment Fund or the Legacy Fund and the eligible investment is included within available for sale investments. Capital losses arising on these investments are deducted from the relevant Fund. The income arising from these investments is credited to the Group Income Statement. 26 Deferred taxation Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 20% (2013: 23%). The movement on the deferred tax account is as shown below: At 1 April (220) (456) Profit and loss expense Profit and loss expense on discontinued operations 52 - Charge to equity Transfer on disposal of discontinued operations Transfer from other payables non current liabilities - (109) At 31 March 566 (220) Deferred tax assets have been recognised in respect of all such tax losses and other temporary differences giving rise to deferred tax assets where the Directors believe it is probable that these assets will be recovered. 47 GLE Group Report and Financial Statements I Notes to the Consolidated Financial Statements

51 26 Deferred taxation (continued) Details of the deferred tax liability, amounts charged/(credited) to the Group Income Statement and amounts charged/ (credited) to Reserves are as follows: Liability/ (Asset) Discontinued Operations Charged/ (credited) to Income Charged/ (credited) to Reserves Accelerated capital allowances Unprovided deferred tax (97) - Other temporary and deductible differences (51) Capital gains/(losses) Available losses (9) Amount in respect of pension liability (457) - - (152) Unprovided deferred taxation (101) Total deferred taxation Liability/ (Asset Charged/ (credited) to Income Charged/ (credited) to Reserves Accelerated capital allowances (144) (4) 32 Unprovided deferred tax 197 (36) - Other temporary and deductible differences (66) (47) - Available losses (207) (220) Amount in respect of pension liability (305) 62 (27) (525) 313 (27) Unprovided deferred taxation (197) 36 - Total deferred taxation (722) There are net unused tax losses carried forward of 101,000 (2013: 197,000). The deductible temporary differences can be carried forward indefinitely. The amounts shown in respect of the pension liability are included within non-current assets on the Group Balance Sheet. GLE Group Report and Financial Statements I Notes to the Consolidated Financial Statements 48

52 27. Leases The Group as lessee: In addition, the Group and the Company have financial commitments for the forthcoming year in respect of rentals due under operating leases. The total commitments to make these payments fall due as follows: Restated Less than one year Two to five years 1,407 1,426 Greater than five years 8,086 8,366 10,006 10,504 The Group as lessor: The Group leases out all of its investment properties under operating leases for average terms of 3-5 years to expiry. The future aggregate minimum rental recoverable under non-cancellable operating leases is as follows: Less than one year 2,056 2,105 Two to five years 2,413 2,552 Greater than five years ,877 5, Contingent liabilities From time to time and in the normal course of business, claims against the Company and/or Group may be received. On the basis of its own estimates and both internal and external professional advice, management is of the opinion that no material losses will be incurred in respect of claims and accordingly no provision has been made in these financial statements. 29. Members contributions The Company is limited by guarantee and has no share capital. Members contributions represent amounts received from London borough councils. These contributions are repayable only out of the assets of the Company available on a winding-up. In the event of a winding-up, the first 13,000,000 (plus 5% compound interest thereon from 13 November 1997, being the date of adoption of the new Memorandum and Articles of Association) is to be shared equally amongst the original ordinary members. Any surplus above this amount is to be shared equally amongst the original ordinary members and the new ordinary members. Private members have no right to participate in the income and assets of the Company. 49 GLE Group Report and Financial Statements I Notes to the Consolidated Financial Statements

53 30. Related party transactions During the year the GLE Group made a strategic investment in Pocket Living Limited ( Pocket ), the award-winning private developer of intermediate housing in London, which resulted in the acquisition of a 5% stake in Pocket with an option to acquire a further 5%; Martin Large, GLE Group s CEO, was appointed to the board of Pocket to represent the Group s interest. During the year the GLE Group entered into the following related party transactions with Pocket: Other investments (note 18) 1,000 Fee income for Director s services Post balance sheet events As part of the continuing planned expansion of the investment property portfolio, the Property business, in June 2014, completed the acquisition of an investment property in Thurrock, Essex at a cost of approximately 2,100,000. In addition the Development Property business recently, in early June 2014, exchanged contracts for the acquisition of a development site in Edmonton, North London. The transaction is due to complete in July 2014 at a cost of 3,300,000. Also in July 2014, the Investment Property business completed the sale of its office site in South Ruislip, Middlesex, with consideration received of 3,000,000 and an estimated profit on disposal of approximately 2,200,000. GLE Group Report and Financial Statements I Notes to the Consolidated Financial Statements 50

54 Company Balance Sheet At March Company Number Note Non current assets Investments in equity accounted associates Investments 34 9,038 8,902 9,056 8,915 Current assets Debtors Amounts falling due within one year Amounts falling due after more than one year Cash at bank Creditors: amounts falling due within one year 36 (2,661) (3,703) Net current liabilities (2,559) (3,602) Net assets less current liabilities excluding pension liability 6,497 5,313 Net pension liability (1,837) (850) Net Assets 4,660 4,463 Capital and reserves Members contributions 37 1,300 1,300 Revaluation reserve 2 2 Accumulated funds 3,358 3,161 Members funds: equity interests 38 4,660 4,463 The financial statements on pages 51 to 54 were approved and authorised for issue by the Board of Directors on 22 July 2014 and were signed on its behalf by: P A Hendrick Director The notes on pages 52 to 54 form part of these financial statements. 51 GLE Group Report and Financial Statements I Company Balance Sheet

55 Notes to the Parent Company Financial Statements for the year ended 31 March Accounting policies Basis of preparation The financial statements have been prepared under the historical cost convention and in accordance with applicable United Kingdom Accounting Standards. The principal accounting policies, which have been applied consistently, are set out below. The financial statements of Greater London Enterprise Limited as a standalone entity have been prepared on the going concern basis following receipt of confirmation from the entity s subsidiary undertaking to whom it owes money that they will not seek repayment until the company is in a financial position to repay such amounts. Investment in subsidiary undertakings Investments by the Company in the shares of subsidiary undertakings are stated at cost less any provisions where, in the opinion of the Directors, there has been impairment in the value of any such investment. Deferred taxation Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the Balance Sheet differs to its tax base, except for differences arising on: the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit; and investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future. Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised. The amount of the asset or liability is determined using tax rates that have been enacted or substantially enacted by the Balance Sheet date and are expected to apply when the deferred tax liabilities/(assets) are settled/ (recovered). Deferred tax balances are not discounted. Cash flow statement The Company has taken advantage of the exemption conferred by FRS 1 not to prepare a cash flow statement on the basis that the Company s results are included in its own published consolidated financial statements. Related party transactions The Company has taken advantage of the exemption conferred by FRS 8 (Related Party Disclosures) not to disclose any transactions with members of the Group on the grounds that these financial statements are presented together with the consolidated financial statements. Defined benefit scheme The amounts charged to the income and expenditure account are the current service charge costs and gains and losses on settlements and curtailments. They are included as part of staff costs. Past service costs are recognised in the income and expenditure account if the benefits are vested. If the benefits have not vested immediately the costs are recognised over the period until vesting occurs. The interest cost and the expected return on assets are shown as a net amount within either interest payable or receivable. Actuarial gains and losses are recognised immediately in the statement of total recognised gains and losses. Defined benefit schemes are funded, with the assets of the scheme held separately from those of the Group, in separate trustee administered funds. Pension scheme assets are measured at a fair value and liabilities are measured on an actuarial basis using the projected unit method and discounted at a rate equivalent to the current rate of return of a high quality corporate bond and term to the scheme liabilities. The actuarial valuations are obtained triennially and are updated at each Balance Sheet date. The resulting defined asset or liability, net of the related deferred tax, is presented separately after other net assets on the face of the Balance Sheet. The assumptions in relation to the pension scheme are included in the Consolidated Financial Statements (see note 11). GLE Group Report and Financial Statements I Notes to the Parent Company Financial Statements 52

56 33. Investments in equity accounted associates Net Book Value at 1 April Movement on provision 5 (25) Net Book Value at 31 March Investments Investment in subsidiary undertakings Cost and Net Book Value at 31 March 8,250 8,250 Other investments Net Book Value at 1 April Additions - 46 Revaluation 12 (4) Movement on provision 124 (69) Net Book Value at 31 March Total investments 9,038 8,902 The Company s principal subsidiaries are listed in note 16 of the Consolidated Financial Statements. 35. Debtors Current Other debtors Non-current Other debtors GLE Group Report and Financial Statements I Notes to the Parent Company Financial Statements

57 36. Creditors: amounts falling due within one year Corporation tax Deferred taxation - 64 Amounts owed to subsidiary undertakings 2,599 3,540 Accruals ,661 3, Members contributions The Company is limited by guarantee and has no share capital. Members contributions represent amounts received from London borough councils. These contributions are repayable only out of the assets of the Company available on a windingup. In the event of a winding-up, the first 13,000,000 (plus 5% compound interest thereon from 13 November 1997, being the date of adoption of the new Memorandum and Articles of Association) is to be shared equally amongst the original ordinary members. Any surplus above this amount is to be shared equally amongst the original ordinary members and the new ordinary members. Private members have no right to participate in the income and assets of the Company. 38. Reconciliation of movements in members funds At 1 April 4,463 4,532 Profit / (loss) for the year 197 (69) At 31 March 4,660 4,463 The Company is not publishing a separate statement of financial performance as permitted by section 408 of the Companies Act The profit for the financial year dealt with in the Group financial statements was 197,542 (2013: loss of 69,823). GLE Group Report and Financial Statements I Notes to the Parent Company Financial Statements 54

58 Above & right: 65 Commercial Officers helped over 100 businesses to explore export opportunities in 61 markets worldwide, all in a single day, at a GLE-organised event at the Kia Oval for UKTI. 55 GLE Group Report and Financial Statements

59 Above: GLE s Anu Vask leading 13 companies to one of the leading economies in Central Asia, Kazakhstan, on a Trade Mission delivered for UKTI. All but one identified new business opportunities. Left: 10 London companies showcased their wares at Blueprint 2014, Asia s Fashion Gateway as part of GLE s delivery of UKTI s London region trade services. The fair attracted over 14,000 visitors from around the world. GLE Group Report and Financial Statements

60

61 GLE Group Registered office: 5th Floor Valiant Building 14 South Parade Leeds West Yorkshire LS1 5QS Head office: Queen Elizabeth Street London SE1 2JN Tel Fax