Corbo affected by downturn

Corbo is a specialist property company owned and registered in Ballymena in Northern Ireland. A considerable part of the property portfolio is located in Great Britain.

The nature of the property business and the way in which it registers accounts has the effect of showing operating profits as a large proportion of turnover. The turnover figures reflect the rental income from the property owned by the company. Operating profit is shown before the deduction of net interest payments on borrowed funds and before allowance is made for losses made on the disposal of properties.

Pre-tax profits are shown after interest is deducted which in 2009-10 amounted to £26.6m. In the latest period, to January 2011, interest payments cost £24.9m and a further loss of £39.9m was attributed to a loss on three properties disposed of at less than their book value.

In addition to the £39.9m loss accounted for in calculating pre-tax profits, in a revaluation of the assets of the company, a balance sheet reduction of £38.2m was taken from the revaluation reserves accumulated as part of the value of shareholders' funds.

As a result, shareholders' funds, at the balance sheet date, fell from £294m in February 2010 to £211m in January 2011, a fall of £83m, or 28%.

The latest registered accounts show how Corbo was affected by the rise in property values until 2010 and then by the fall in values in the most recent year. The fixed assets of the company on the balance sheet were valued at £772m at the end of February 2010. In January 2011 the value was £163m lower.

Of particular interest in a large property company is the way in which bank borrowing has related to the balance sheet value of assets.

Bank borrowing in February 2006, at £282m, represented 40% of the balance sheet values. In February 2009, this ratio had risen to over 64% and reciprocally, shareholders' funds had declined as a proportion of assets. Now, in January 2011, bank borrowing, at £401m, has risen further to 67% of the book value of fixed assets.

Corbo owns a controlling part of the share capital of three other companies: Murray House, Lemon Quay group and ASM (NI) Developments.