Company Snapshot: Killultagh Estates Ltd.
Downward trend in property values remains a major factor
Killultagh Estates is a large Northern Ireland-owned company engaged in managing property for rental and investment.
It is one of a number of closely related property companies controlled by different shareholders.
As a property investor, until 2008, the notable features of the profit and loss account, and the balance sheet, were the increases in the value of its fixed assets and investments and their impact on borrowing and interest charges also linked to unrealised capital gains in the value of the assets. More recently, particularly in the year to March 2011, the accounts reflect the large reduction in property values although interest on borrowed funds remained a large cost.
Before taking account of the exceptional allocation to costs for the impairment of the value of assets, operating profits would have remained healthy. Rental incomes and income from unit trusts, based on investments in property, fell by 7% in 2011.
The group trading revenue has, in each year, exceeded the annual interest costs on borrowed funds.
In the year to March 2011, trading revenue of £13.7m was needed to cover net interest payments of £10.9m.
Whilst this group of companies continued to trade satisfactorily in terms of rental incomes, the critical feature of the recent accounts has been the write-down or provision for falls in the value of property investments. In the most recent year, the balance sheet value of shareholders' funds fell by over £80m to register with a negative value of £78m at the end of March 2011. The balance sheet valuation of tangible assets and investments fell by £87m from March 2010 to March 2011.
In the same period, the value of borrowing outstanding fell by nearly £6m but was still £241m at the end of the financial year.
Capital spending, after large commitments in 2005 to 2008, has fallen sharply in recent years.
The registered accounts draw readers' attention to the reliance of the group on the continuing support of its lending institutions.
Shareholders' funds were over £74m in March 2007. Then in March 2008 the stated value was £68m and fell further to £53, by March 2009. More recently, shareholders' funds fell to only £2m in March 2010 and then to a negative value of £78m in March 2011.
The downward revaluation of property in the accounts of development companies is, unhappily, a phenomenon occurring in many companies.