Annual Report 2012 - Cadogan

CADOGAN GROUP LIMITED 

Annual Report 2012

Contents 

Chairman’s Statement 

Directors and Secretary 

Financial Highlights 

Chief Executive’s Review 

Directors’ Report 

Independent Auditor’s Report 

Consolidated Profit and Loss Account 

Consolidated Balance Sheet 

Other Principal Statements 

Company Balance Sheet 

Consolidated Cash Flow Statement 

Notes on the Financial Statements 

Five Year Summary 

1 

2 

3 

4-18 

19-20 

21 

22 

23 

24 

25 

26 

27-44 

45

CHAIRMAN’S STATEMENT 31 DECEMBER 2012 

VisCount Chelsea 

I took over as chairman of Cadogan Group Limited from my father in March 2012. Since then I am delighted that the 

group has continued to prosper and 2012 has proved to be a successful year in which to have taken over the reins of 

our business. 

The eyes of the world were focused on London in 2012. The Queen's Diamond Jubilee celebrations, the Olympics and 

the Paralympics were all successful and greatly acclaimed. The great sense of history and tradition, for which London 

has always been known, married perfectly with London's modern cosmopolitan culture and ethnic diversity to produce 

truly memorable events again and again. 

While the sporting and cultural events of 2012 took centre stage, the economic backdrop provided continuing strong 

support to activity levels and market sentiment. London’s broad international investment appeal has proved a great 

strength, enhanced by its status as an international ‘safe haven’, and by the continuing weakness and wobbles of the 

Eurozone. Each renewed bout of economic fragility in Europe or political instability in the Middle East has only added 

to the perceived attractions of London. 

These factors have contributed to the desirability of London as a place in which to work, to live and to operate a business. 

They help to generate continuing healthy levels of occupational demand for both residential and commercial properties. 

Thus the property market in central London has flourished with yields remaining firm and with high levels of investment 

and occupational activity. Again the strength of the property market in London has been in marked contrast to much of 

the rest of the UK, where the lack of any consistent growth in the economy and a depressed property market have 

produced poor returns and minimal activity levels. 

With all our property interests focused in central London and specifically in Chelsea and Knightsbridge, I am therefore 

able to present another successful set of results for 2012. The total value of our properties reached £3.88 billion, gross 

rental income £104.7 million and profit before taxation was £57.3 million. This is less than the profit before taxation 

figure we reported last year of £71.6 million, but the reduction largely reflects a lower write back of £3.9 million (2011 

- £16 million) from the release of provisions made previously against the value of our investment properties. 

In spite of the gloomy prognosis for the broader UK economy, the outlook for London remains positive. There will come 

a time when the property market in the UK regions starts to recover, but there is no reason to expect that that will of 

itself damage London's prospects. We believe that our attractive locations and clear strategic priorities will enable our 

business to continue to prosper in the years ahead. 

I was delighted to announce at the end of 2012 that Francis Salway had agreed to join the board as a non-executive 

director. As former Chief Executive of Land Securities and a non-executive director of Next plc, Francis brings immense 

experience and judgement which we are already benefitting from greatly and which augment the considerable talents 

provided by the rest of the board. 

I have very much enjoyed my first year as chairman of Cadogan, and I am extremely grateful to my fellow directors and 

all our staff, led by Hugh Seaborn, for the guidance and assistance which they have given me over this time. 

Viscount Chelsea 

25 April 2013 

VisCount Chelsea 

1

DIRECTORS AND SECRETARY & FINANCIAL HIGHLIGHTS 31 DECEMBER 2012 

Directors 

Viscount Chelsea* 

Chairman 

the hon. James Bruce* 

Deputy Chairman 

hugh seaborn 

Chief Executive 

Richard Grant 

Finance Director 

Charles ellingworth* 

John Gordon* 

John de havilland* 

Francis salway* 

secretary 

Paul Loutit 

Registered office 

18 Cadogan Gardens 

London SW3 2RP 

Company number 

2997357 

life President 

The Earl Cadogan D.L. 

auditor 

Ernst & Young LLP 

1 More London Place 

London SE1 2AF 

*Non-executive 

2

Financial Highlights 

GROSS RENTS AND INTEREST 2008 - 2012 

£ Million 

120 

Gross rents 

Interest payable 

2011 2012 

£ million £ million 

100 

80 

Property income 100.2 107.3 

60 

40 

Profit on sale of 

investment Properties 17.2 17.3 

20 

0 

Profit on ordinary activities 

Before taxation 71.6 57.3 

2008 2009 2010 


PRINCIPAL BALANCE SHEET ITEMS 2008 - 2012 

£ Million 

Properties 

Shareholders’ funds 

Net borrowings 

4500 

4000 

3500 

3000 


£ million £ million 

2500 

2000 

1500 

Properties at Valuation 3,455 3,875 

1000 

500 

0 

net Borrowings 419 504 

shareholders’ Funds 2,988 3,317 

2008 2009 2010 


NET ASSETS PER SHARE 2008 - 2012 

£ per share 

Net assets per share 

30 

25 

20 


15 

net assets Per share £24.90 £27.64 

10 

earnings Per share 50.7p 40.9p 

2008 2009 2010 


3

CHIEF ExECUTIVE’S REVIEW 31 DECEMBER 2012 

huGh seaBoRn 

Overview 

This has been a successful year across all property sectors. 

The value of the portfolio rose to £3.88bn (up 9%) and 

gross rental income increased to £104.7m (up 5.6%), both 

all-time highs. The business produced a profit before tax 

of £57.3m. 

The growth in values of 9%, after adjusting for acquisitions 

and disposals, was led by our retail properties, up a shade 

over 13%, while residential showed an increase of 7.6%. 

We have been successful in acquiring a number of 

properties within our traditional estate boundaries, with a 

total value in excess of £160 million. All these acquisitions 

enable us to further progress our estate management 

strategies. The property market in central London and 

particularly in Chelsea and Knightsbridge, has been strong 

throughout the year. Demand from occupiers for both our 

commercial and residential properties has remained healthy 

and vacancy levels have stayed low. 

We continue to adopt a long term approach to the way in 

which we do business. This demands however that careful 

attention is paid to the short term to ensure we are on the 

right course and delivering competitive performance, 

balanced with maintaining a long view of our interests 

and the health and prosperity of the area in which we do 

business. 

We concentrate on the tight geographical area of Chelsea 

and Knightsbridge. This focus means we know our markets 

intimately. We have a high quality portfolio concentrated 

on luxury retail and high end residential. We have an 

innovative leasing approach which, on the one hand, 

reflects our customers’ businesses and on the other, our 

need to manage carefully each property for the benefit of 

the whole. Our close relationship with our customers 

allows us to understand their business needs and to 

respond dynamically. Low levels of gearing and long term 

financing mean we are able to, and do, respond rapidly 

to opportunities to invest in new properties while 

maintaining our refurbishment and redevelopment 

programme. 

We have a highly professional and proficient in-house 

team managing the Estate and these people have 

demonstrated their commitment and good work over the 

past year for which I am immensely grateful. It is vital to 

the business to continue to attract, retain, develop and 

motivate talented people. This team is supported by bestin-class 

external advisers to whom I also owe a great debt 

of gratitude. 

We have a genuine long term vested interest in the 

area which underpins all that we do. We consider our role 

to be one of stewardship, that is to improve the assets 

for present and future generations. As such, we have a 

responsibility to actively manage the environmental impact 

of our activities. We also have a responsibility to the 

communities we affect and to the occupiers of our 

buildings. We are working hard to integrate our community, 

customer and environmental principles into the heart of 

the business and aim to be an organisation recognised as 

both a good neighbour and one with which it is good to 

do business. This makes Cadogan a more resilient business. 

What does this mean in practice? One example is our 

commitment to provide voluntarily 45 flats with a value 

in excess of £20 million, which will be provided to key 

workers at reduced rents. London as a world class city 

needs to function and to do so it must be able to house 

people of all incomes. There must come a time when 

housing costs become a drag on the competitiveness of 

the capital and this will require long term measures to be 

taken now to avert future problems. 

Another example is that Cadogan also owns and operates 

Cadogan Hall, one of London’s leading concert halls and 

home to the Royal Philharmonic Orchestra. As well as 

contributing to a diverse mix of attractions for Chelsea’s 

residents and visitors, the Hall does much more locally. It 

plays a role in the local community, running a number of 

events throughout the year specifically targeted at 

supporting aspiring musicians, inspiring young people and 

supporting other community groups. 

There are many other examples of our environmental, 

community and customer activities, a selection of which 

have been posted to our website. 

4


Property Portfolio 

investment Performance highlights 

• total property portfolio value grew to £3.88 billion 

Increase of 9.0% adjusting for purchases and sales 

• Residential portfolio increased in value by 7.6% 

• Commercial portfolio gained 10.1% 

Retail portfolio increased by 13.4% 

Office portfolio increased by 4.6% 

The outstanding performer in terms of capital value growth 

was our retail portfolio, while the residential portfolio, which 

performed so strongly in 2011, showed a slowdown from 

the rapid growth of the previous year. Rental growth at the 

north end of Sloane Street was the prime factor in improving 

our retail values and demand for our best retail locations 

remained strong throughout the year. Prime central London 

residential property continued to benefit from international 

demand and limited supply availability, but the increases 

and changes to Stamp Duty Land Tax, announced in the 

2012 budget, which created considerable uncertainty in the 

marketplace, undoubtedly had a dampening effect on 

activity levels and sentiment in the market. 

acquisitions a nd Disposals 

We were active in the retail, office and hotel sectors 

acquiring a number of interests at a total cost of £139 

million. Included within this total was a head leasehold 

retail interest in Sloane Street, an office building off the 

Kings Road and the head lease and business of the boutique 

hotel at No. 11 Cadogan Gardens. All these acquisitions fit 

well with our strategic priorities and will enable us to 

enhance our returns over the medium and long term. We 

were able to utilise the substantial cash balances which 

had built up during the course of the year to fund the 

major part of these acquisitions. The balance was financed 

through a drawdown from one of our standby facilities. 

In a quieter residential market, we acquired fewer long 

lease residential units than we have in recent years. We 

purchased one house and 13 flats at a total cost of just 

over £22 million. We acquire residential properties to 

enable us to consolidate our ownership, particularly in 

key mixed-use buildings and to expand our portfolio of 

market let residential units. 

Sales of residential properties through the Leasehold 

Reform Act process continued at a steady pace and 

totalled just over £90 million (2011 - £83 million). We 

completed on the sale of 108 units (2011 – 104 units). The 

profit achieved over the previous year’s valuation was 

£16.3 million, slightly less than the figure of £17.1 million 

achieved in 2011. 

We have continued to receive a steady level of 

enfranchisement claims since the beginning of 2013. 

6


Developments 

Development expenditure rose in 2012, as compared to 

a relatively quiet year in 2011. Total development 

expenditure in 2012 was a shade under £20 million and 

covered a wide variety of small and medium-size projects. 

There was significant activity also in planning and 

preparatory work on a number of future schemes, most 

notable of which is the redevelopment of Liscartan and 

Granville Houses at 127 – 135 Sloane Street. 

Major completed projects include the reconfiguration of 

the three large retail units at 201 – 206 Sloane Street. Our 

work on these units was completed in the autumn and all 

three were handed over to their new tenants before the 

year end. We completed the major refurbishment of 18 

serviced apartments units at 13 – 19 Sloane Gardens 

which are subject to a management contract. We also 

completed the refurbishment of a number of houses in 

Oakley Gardens and the conversion into three flats of a 

house in Tedworth Square. 

We are also nearing completion of two residential 

schemes at 107/109 Cadogan Gardens and 21/22 Hans 

Place. Completion of the 13 residential units will provide 

a substantial boost to the quality of our residential letting 

portfolio. 

As noted above we have been working hard preparing for 

the redevelopment of 127 – 135 Sloane Street. We have 

met our original timetable for the commencement of this 

development and the site was handed over to the 

contractor, Mace, in February of this year. The 

development programme envisages completion in the first 

half of 2015. Once complete, this scheme will provide 

45,000 ft.² of Grade A office space over five floors, and 

approximately 50,000 ft.² of retail space, including six 

large retail units fronting onto Sloane Street, and a new 

restaurant unit on Pavilion Road. 

This high quality development will further enhance the 

attraction of the Sloane Square area, which has seen the 

opening of Café Colbert and Rag and Bone in 2012, and 

where we have a number of other attractive retail lettings 

in the pipeline. 

8


lettings 

We experienced good demand for residential, retail and 

office units throughout 2012. As a result vacancy levels 

across all our sectors remained low throughout the year and 

we anticipate this continuing into 2013. 

We have experienced some fluctuations in demand for 

residential lettings over the course of 2012, but we monitor 

the market closely and are able to respond quickly to 

changes to maintain our occupancy levels. We have 

devoted much effort to improving the speed with which we 

refresh units between lettings, while at the same time 

improving the quality of both the accommodation we 

provide and the quality of service we offer to our customers. 

Our most significant new retail lettings in the year were of 

the three reconfigured units at the north end of Sloane Street 

which were let to Tom Ford, Ermenegildo Zegna and 

Alberto Ferretti. The first two are new to Sloane Street and 

will further enhance the breadth and quality of brands 

represented on the street. We have continued to attract 

other new and interesting retailers including Browns, 

Bimba & Lola and Stefanel. In response to their changing 

needs we were also able to provide additional space to 

some of our most successful existing retailers, including 

Hackett, Loro Piana and Smythsons. 

Demand from international brands looking to enter or 

extend their presence into London has remained strong 

throughout the year. We have a number of lease expiries 

arising in 2013, particularly in Duke of York Square and 

we have discussions with a number of high-quality 

international retailers who are keen to come to Chelsea. 

10


Financial Review 

trading highlights 

• Rental income rose to £104.7 million 

Increase of 5.6 % 

• Residential enfranchisement sales increased to £90.1 

million Increase of 8.9% 

• Profit on ordinary activities before taxation reduced 

to £57.3 million Reduction of 19.9% 

• earnings per share reduced to 40.9 pence per share 

Reduction of 19.3% 

All sectors of the business contributed to the growth in 

rental income. 

During the course of 2012 the annual rental income 

derived from our residential market let portfolio increased 

from just under £17 million at the beginning of the year 

to nearly £20.3 million at the year end. The number of 

active tenancies increased from 468 to 529 over the same 

period. These increases principally reflected acquisitions 

made during 2010 and 2011 which, after refurbishment 

works, were added to our letting portfolio during 2012. 

We also benefited from an overall increase of circa 6% in 

rental values during the year and from reducing the time 

taken between vacation and re-letting. 

Within the commercial portfolio the principal driver in our 

rental growth was from index linked rents. The rents on 

the majority of our retail units are linked to increases in 

retail prices and these averaged around 3.5% over 2012. 

Rental income in 2012 also benefited from the new leases 

signed towards the end of 2011 with Massimo Dutti, Rag 

and Bone and Café Colbert. 

The artistic success of Cadogan Hall continues. We take 

great care to attract a high quality and varied artistic 

programme to the hall, while carefully managing the 

significant cost of this enterprise. In 2014 the hall will be 

celebrating its 10th anniversary and is planning an eclectic 

programme of events throughout the year to celebrate this 

milestone. 

Last year's financial results benefited to the extent of 

£16.0 million from the write back to the profit and loss 

account of provisions made in previous years to reflect 

impairments in the value of our investment properties. The 

equivalent and much reduced figure in 2012 is £3.9 million, 

and this is the most significant factor in explaining the 

overall reduction in the reported profit before taxation, 

down from £71.6 million in 2011 to £57.3 million in 2012. 

With the rise in property values over the last three years 

virtually all of the provisions made previously to reflect 

impairment in the value of investment properties have 

now been reversed. 

Net interest payable increased marginally from £28.8 million 

to £28.9 million; the level of borrowings outstanding 

during the course of the year remained fairly steady, and 

with rates of interest fixed on virtually all our borrowings, 

the charge for the year remained stable. 

12


Balance sheet and Borrowings 

The rise in the year end value of our investment properties 

was the major factor contributing to the rise in group 

shareholders’ funds, which rose from £2.99 billion to 

£3.32 billion. Net assets per share increased from £24.90 

to £27.64. Balance sheet gearing increased from 14.0% 

to 15.2%. Our financial ratios remain healthy and we 

continue to maintain significant headroom against the 

various covenants and prudential limits required of us by 

our bankers and the board. 

Year-end net borrowings were £504.3 million, a 

substantial increase from the previous year-end figure of 

£419.3 million. Most of this increase however arose 

shortly before the year end as a result of expenditure on 

acquisitions and the payment of dividends. 

During the year we renewed our revolving credit facility. 

The previous facility amounting to £75 million had been 

provided on a sole basis by the Royal Bank of Scotland. 

In April 2012 we negotiated a new five year facility with 

a consortium comprising the Royal Bank of Scotland and 

Lloyds Banking Group and reduced the amount of the 

facility to £50 million. 

In addition to this committed revolving credit facility we 

have also arranged an uncommitted standby facility 

amounting to approximately £100 million which is 

provided by one of our long-standing private placement 

investors. Although the facility is not provided on a 

committed basis it gives us cost effective access to funding 

which can be drawn at short notice, subject to agreeing 

interest rates and margins based on prevailing market rates. 

Towards the end of the year we drew £30 million from this 

facility, split into two equal tranches of £15 million, one 

with a ten year maturity, the other with a fifteen year 

maturity. The overall effective interest rate, which was fixed 

through to the maturity of the loans, was 3.67%. 

14

At the year end the group had substantial funds available 

for future acquisitions. These comprise approximately £70 

million of committed facilities and a further £70 million 

from the uncommitted facility referred to above. 

We have a balanced profile of future debt maturities 

extending out to 2056. As at 31 December 2012 our 

borrowing facilities had an average maturity of 17.8 years 

and 48% of our total borrowings facilities do not mature 

for more than 15 years. All of our currently drawn 

borrowings are at fixed rates of interest, either through 

direct agreement with the lender or through the use of 

swaps; the average rate across all our loans is 5.90%. 

We are proud of and value the relationships we have 

developed with our long-term lenders. The borrowing 

strategy which we have developed, which is based on 

fixed rates of interest and long-term maturities, provides 

certainty in our financing profile and supports our overall 

strategy for the business. 

15


approach to Risk Management 

Cadogan is a long term property investor with a clearly 

defined focus on high quality property assets located in 

central London. The group has appropriate policies and 

methodologies in place to identify, assess and manage the 

risks faced by the business. Because of its private ownership 

and long-term outlook the group aims for, and is able to 

achieve, a high level of resilience in all areas of its business. 

The group maintains a Risk Register which identifies the 

principal risks impacting on the group's operations and 

financial position. The Register provides an assessment of 

the likelihood of the identified risks materialising and 

includes an estimate of the potential impact of each area 

of risk on the group's business. The Register also lists the 

key actions which have been put in place to avoid, 

eliminate or mitigate the identified risks. The group also 

make use of appropriate external specialists to advise on 

compliance with the established policies and regulations. 

The principal risks and uncertainties faced by the group 

and a brief summary of how it deals with each of these 

areas of risk are set out below: 

Property market risks – the risks arising from property cycles 

and from shorter term unexpected changes in the market 

for property investment, development and occupation. 

As a long-term investor the group is less reliant than others 

upon predicting property market cycles and aims to 

manage the impact of the property cycle and any other 

short-term fluctuations in values or activity levels by 

ensuring that the group has a relatively high proportion of 

committed long term loan finance and high levels of 

available liquidity. These factors also assist the group in 

managing cash flow and liquidity risks. 

Although the group’s properties are concentrated in a 

relatively small geographic area there are a large number of 

properties in many different uses. The largest individual 

property represents 4.6% of the total portfolio value and the 

highest individual rent 4.2% of total annual rental income. 

Finance and cash flow risks – the risks associated with 

unexpected changes in interest rates and availability of 

debt finance. 

The majority of the group's long-term borrowings are at 

fixed rates of interest, achieved either by agreement with 

the lender, or through the interest rate derivatives market. 

The group board requires at least 75% of long-term debt 

to be subject to fixed rates of interest. The group does not 

undertake financial instrument transactions that are 

speculative or unrelated to the group's trading activities. 

Board approval is required for the use of any new financial 

instrument. 

The group seeks to manage refinancing risk through the 

use of a spread of loan maturities. In normal circumstances 

loan terms are for an initial period of 10 years or more. The 

incidence of maturities is spread so as to ensure that major 

re-financings do not coincide in a single year. 

The various private placings of debt which the group has 

undertaken in recent years have included a significant 

proportion of US dollar borrowings. All exposure to US 

dollars in relation to both interest and capital repayments 

was swapped into sterling on the date on which the loans 

were committed, and as a result there is no residual foreign 

exchange risk exposure to the group. Operationally the 

group has no foreign currency exposure. 

Property operational risks – the risks associated with the 

management and ownership of property. 

The group accords a high priority to health and safety 

issues. The group has well established compliance and 

reporting procedures to ensure that health and safety risks 

are reduced and eliminated as far as is practicable. During 

the course of 2012 the group sought an external audit of 

its health and safety policies and procedures, the results of 

which confirmed the quality and integrity of the group's 

health and safety practices. 

16


21 

Prospects 

There is no doubt that the success of London as a world 

city contributes to our performance. On a range of 

measures London has done well. Economic forecasts are 

generally positive, suggesting that, subject to further 

significant deterioration in the economy, it will continue 

to do so, supported by continued growth in the TMT and 

professional services sectors, and further ahead we can 

also expect a gradual recovery in financial services. 

The UK economy faces many challenges and growth rates 

are unlikely to be as strong as prior to the financial crisis. 

However, we have a high quality portfolio concentrated 

on luxury retail and high end residential, which is very 

attractive to occupiers, the advantage of being able to 

manage the parts for the benefit of the whole Estate, a high 

calibre team and a very strong financial structure that 

supports our business objectives. 

We remain committed to our long term strategy of 

developing and enhancing the Estate and I firmly believe 

that our focus on our existing assets, delivery of quality 

accommodation and service to meet the needs of our 

customers, remain the right approach for long term success. 

Hugh Seaborn 

25 April 2013 

18

20 

DIRECTORS’ REPORT 31 DECEMBER 2012 

The directors present their report and the financial statements for the year ended 31 December 2012. 

Principal activity and Review of the Business 

The principal activity of the group during the year continued to be property investment. The group’s other activities 

include the operation of hotels and a concert hall. A review of the group’s business during 2012 and its future prospects 

is contained in the Chief Executive’s review on pages 4 to 18. 

Results and Dividends 

The consolidated profit and loss account set out on page 22 shows a profit attributable to the shareholders for the year 

of £49,118,000 (2011 – £60,885,000). Interim dividends of £34,000,000 (2011 – £30,000,000) equivalent to 28.3p 

per ordinary share (2011 – 25p per ordinary share) were declared and paid during the year. 

Risk Management 

A summary of the principal risks and uncertainties has been included in the Chief Executive’s review on page 16. 

Directors 

Earl Cadogan stepped down as a director on 26 March 2012 on the occasion of his retirement as Chairman of the 

company and Lord Churston retired as a director on 4 April 2012. 

F W Salway was appointed a director on 6 December 2012. All the other directors holding office during the financial 

year and up to the date of this report are listed on page 2. 

The ultimate holding company maintains liability insurance for its directors and officers and for those of its subsidiaries 

in respect of proceedings brought by third parties, subject to the conditions set out in section 234 of the Companies Act 

2006. Such qualifying third party indemnity provision remains in force as at the date of approving the directors’ report. 

Directors’ interests 

The directors’ interests in the shares of the company at 31 December 2012 were as follows: 

Non-beneficial 

31 December 2012 31 December 2011 

The Earl Cadogan Ordinary shares of £1 each 10,275,547 10,275,547 

Viscount Chelsea Ordinary shares of £1 each 4,982,083 4,982,083 

Viscount Chelsea also held a beneficial interest in 5,000,000 (2011 – 5,000,000) ordinary shares of £1 each in the 

ultimate holding company. In addition, the children of Viscount Chelsea are amongst the beneficiaries of trust funds 

which held 28,435,000 (2011 – 28,435,000) ordinary shares of £1 each in the ultimate holding company and 7,710,367 

(2011 – 7,710,367) ordinary shares of £1 each in Cadogan Group Limited. 

The interests of the Hon. J H M Bruce, C V Ellingworth, J D Gordon and J A de Havilland are disclosed in the financial 

statements of the ultimate holding company. 

Charitable Contributions 

The group’s charitable contributions for the year were £151,000 (2011 – £45,000). In addition, the Cadogan Charity, a 

shareholder in the company, makes donations to a variety of local and national charities. 

19

21 

DIRECTORS’ REPORT 31 DECEMBER 2012 

Going Concern 

The group’s business activities, together with the factors likely to affect its future development, its financial position, 

financial risk management objectives, details of its financial instruments and derivative activities, and its exposures to 

price, credit, liquidity and cash flow risk are set out in the Chief Executive’s review. 

The group has considerable financial resources derived from an established investment property portfolio in prime central 

London. The group has substantial long-term committed financing arrangements and also has access to overdraft and 

revolving credit facilities from its bankers. Taking these factors into account the directors believe that the group is well 

placed to manage its business risks successfully. 

After making enquiries, the directors have a reasonable expectation that the group has adequate resources to continue 

in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in 

preparing the annual report and financial statements. 

statement of Directors’ Responsibilities 

The directors are responsible for preparing the report and 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 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 

the company and of the profit or loss of the group for that period. In preparing those financial statements, the directors 

are required to: 

• select suitable accounting policies and then apply them consistently; 

• make judgements and estimates that are reasonable and prudent; 

• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed 

and explained in the financial statements; and 

• 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 proper accounting records that disclose with reasonable accuracy at any time 

the financial position of the company and to enable them to ensure that the financial statements comply with the 

Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking 

reasonable steps for the prevention and detection of fraud and other irregularities. 

The directors are responsible for the maintenance and integrity of the corporate and financial information included on 

the company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial 

statements may differ from legislation in other jurisdictions. 

Disclosure of information to the auditors 

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit 

information, being information needed by the auditor in connection with preparing its report, of which the auditor is 

unaware. Having made enquiries of fellow directors and the group’s auditor, each director has taken all the steps that he 

is obliged to take as a director in order to make himself aware of any relevant audit information and to establish that the 

auditor is aware of that information. 

auditor 

A resolution concerning the re-appointment of Ernst & Young LLP as auditor will be proposed at the forthcoming annual general 

meeting. 

By order of the board 

Paul loutit Secretary 

25 April 2013 Registered Number: 2997357 

20

INDEPENDENT AUDITOR’S REPORT 31 DECEMBER 2012 

We have audited the financial statements of Cadogan Group Limited for the year ended 31 December 2012 which 

comprise the Consolidated Profit and Loss Account, the Consolidated and Company Balance Sheets, the Consolidated 

Statement of Total Recognised Gains and Losses, The Note of Historical Cost Profit and Losses, The Reconciliation of 

Movement in Consolidated Shareholders’ Funds, the Consolidated Cash Flow Statement and the related notes 1 to 25. 

The financial reporting framework that has been applied in their preparation 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 2006. Our audit work has been undertaken so that we might state to the company's members those 

matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted 

by law, we do not accept or assume responsibility to anyone other than the company and the company's members as 

a body, for our audit work, for this report, or for the opinions we have formed. 

Respective Responsibilities of Directors and auditor 

As explained more fully in the Statement of Directors’ Responsibilities set out on page 20, 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 Auditing Practices Board’s Ethical 

standards for Auditors. 

scope of the audit of the Financial statements 

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give 

reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or 

error. This includes an assessment of: whether the accounting policies are appropriate to the group’s and the parent 

company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant 

accounting estimates made by the directors; and the overall presentation of the financial statements. 

In addition, we read all the financial and non-financial information in the annual report and financial statements to 

identify material inconsistencies with the audited financial statements. If we become aware of any apparent material 

misstatements or inconsistencies we consider the implications for our report. 

opinion on the Financial statements 

In our opinion the financial statements: 

• give a true and fair view of the state of the group’s and parent company’s affairs as at 31 December 2012 and of the 

group’s profit for the year then ended; 

• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and 

• have been prepared in accordance with the requirements of the Companies Act 2006. 

opinion on other Matters Prescribed By the Companies act 2006 

In our opinion the information given in the Chairman’s Statement, the Chief Executive’s Review and the 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 director’ remuneration specified by law are not made; or 

• we have not received all the information and explanations we require for our audit. 

eamonn McGrath (Senior statutory auditor) 

for and on behalf of Ernst & Young LLP, Statutory Auditor 

London 

25 April 2013 

21

CONSOLIDATED PROFIT AND LOSS ACCOUNT 31 DECEMBER 2012 

Note 2012 2011 

£000 £000 

turnover 

Continuing operations 

Acquisitions 

Group turnover 

Cost of sales 

Gross Profit 

Administrative expenses 

Movements in provision for diminution of value 

operating Profit 


Acquisitions 

Profit on sale of investment properties 

113,845 102,074 

2,604 3,850 

2 116,449 105,924 

(34,086) (27,865) 

82,363 78,059 

(17,295) (10,786) 

3 3,919 15,960 

6 

68,795 82,073 

192 1,160 

68,987 83,233 

4 17,293 17,155 

Profit on ordinary activities before interest 

Interest receivable 

Interest payable 

Profit on ordinary activities before taxation 

Tax on profit on ordinary activities 

Profit on ordinary activities after taxation attributable to shareholders 

Dividends 

Retained Profit for the Year 

earnings Per share 

86,280 100,388 

733 857 

5 (29,677) (29,664) 

57,336 71,581 

8 (8,218) (10,696) 

49,118 60,885 

9 (34,000) (30,000) 

10 15,118 30,885 

11 40.9p 50.7p 

Notes 1 to 25 form an integral part of these financial statements. 

22

CONSOLIDATED BALANCE SHEET 31 DECEMBER 2012 

Fixed assets 

Tangible fixed assets 


£000 £000 

12 3,878,514 3,458,108 

Current assets 

Stock 

Debtors 

Cash at bank and in hand 

Creditors amounts falling due within one year 

Bank loans and other borrowings 

Trade and other creditors 

Corporation tax 

net Current assets/(liabilities) 

59 40 

14 13,299 11,113 

22 4,364 63,328 

17,722 74,481 

16 4,000 4,000 

15 50,784 41,511 

4,696 5,007 

59,480 50,518 

(41,758) 23,963 

total assets less Current liabilities 

3,836,756 3,482,071 

Creditors amounts falling due after more than one year 

Bank loans and other long term borrowings 

16 504,672 478,672 

Provisions For liabilities and Charges 

Deferred taxation 

Long term pension (asset)/liability 

17 11,240 11,698 

23 4,310 3,587 

3,316,534 2,988,114 

Capital and Reserves 

Share capital 

Revaluation reserve 

Profit and loss account 

shareholders’ Funds 

18 120,000 120,000 

19 2,408,979 2,166,771 

19 787,555 701,343 

3,316,534 2,988,114 


- Director 

Hugh Seaborn 

25 April 2013 

- Director 


23

OTHER PRINCIPAL STATEMENTS 31 DECEMBER 2012 

Consolidated statement of Recognised Gains and losses 

2012 2011 

£000 £000 

Profit for the year attributable to shareholders 

Unrealised actuarial loss on pension commitments 

Deferred taxation on the actuarial loss on pension commitments 

Unrealised surplus on revaluation of investment properties 

Unrealised surplus on revaluation of land and buildings 

Attributable taxation on realised revaluation surplus 

total Recognised Gains and losses in the Year 

49,118 60,885 

(1,240) (5,845) 

285 1,461 

313,693 384,421 

564 5,770 

- (72) 

362,420 446,620 

note of historical Cost Profits and losses 


£000 £000 

Reported profit on ordinary activities before taxation 

Realisation of property revaluation gains of previous years 

historical cost profit on ordinary activities before taxation 

historical Cost Profit For the Year Retained after taxation, and Dividends 

57,336 71,581 

72,049 63,838 

129,385 135,419 

87,167 94,651 

Reconcilliation of Movement in Consolidated shareholders’ Funds 


£000 £000 

Total recognised gains and losses in the year 

Dividends 

Net addition to shareholders’ funds 

Opening shareholders’ funds 

Closing shareholders’ Funds 

362,420 446,620 

(34,000) (30,000) 

328,420 416,620 

2,988,114 2,571,494 

3,316,534 2,988,114 


24

COMPANY BALANCE SHEET 31 DECEMBER 2012 

Fixed assets 

Investments 


£000 £000 

13 117,317 117,317 

Current assets 

Amounts due from subsidiary undertakings 

814,098 682,776 

Creditors amounts falling due within one year 

Other creditors 

Taxation 

net Current assets 

15 82 75 

9 9 

91 84 

814,007 682,692 

total assets less Current liabilities 

931,324 800,009 

Creditors amounts falling due after more than one year 

Long term borrowings 

16 3,080 3,080 

928,244 796,929 

Capital and Reserves 

Share capital 


shareholders’ Funds 

18 120,000 120,000 

19 808,244 676,929 

928,244 796,929 


- Director 

Hugh Seaborn 

25 April 2013 

- Director 


25

CONSOLIDATED CASH FLOW STATEMENT 31 DECEMBER 2012 


£000 £000 

net Cash inflow From operating activities 

20 60,072 68,281 

Returns on investments and servicing of Finance 

Interest received 

Interest paid 

net Cash outflow From Returns on investments and servicing of Finance 

1,279 311 

(29,728) (26,844) 

(28,449) (26,533) 

taxation 

Corporation tax paid 

(8,793) (10,709) 

Capital expenditure and Financial investment 

Purchase of tangible fixed assets 

Proceeds from sales of fixed assets 

net Cash inflow/(outflow) From Capital expenditure and Financial investment 

(141,066) (64,587) 

91,485 82,725 

(49,581) 18,138 

acquisitions and Disposals 

Purchase of subsidiary undertaking 

Net cash acquired with subsidiary undertaking 

net Cash outflow From acquisitions and Disposals 

13 (4,855) (548) 

13 18 416 

(4,837) (132) 

equity Dividends Paid 

(34,000) (30,000) 

net Cash inflow/(outflow) Before Financing 

(65,588) 19,045 

Financing 

Increase in long term borrowings 

Repayment of long term borrowings 

net Cash inflow From Financing 

30,000 150,047 

(23,376) (117,033) 

21 6,624 33,014 

increase/(Decrease) in Cash For the Year 

22 (58,964) 52,059 


26

NOTES ON THE FINANCIAL STATEMENTS 31 DECEMBER 2012 

1 accounting Policies 

(a) accounting convention 

The financial statements have been prepared under the historical cost convention modified by the revaluation of investment properties and 

properties under development and in accordance with UK applicable accounting standards. Compliance with SSAP 19 “Accounting for 

Investment Properties” requires a departure from the requirements of the Companies Act 2006 relating to depreciation and an explanation 

of this departure is given in (g) below. 

(b) Basis of consolidation 

The group financial statements consolidate the financial statements of Cadogan Group Limited and its subsidiary undertakings for the 

yearended 31 December 2012. No profit and loss account is presented for Cadogan Group Limited as permitted by section 408 of the 

Companies Act 2006. 

(c) turnover 

Turnover in the property investment business is stated net of VAT, and comprises gross rents, including reverse premiums received on early 

lease terminations, commissions and other fees receivable. The cost of all lease incentives (such as rent-free periods) is offset against the total 

rent due and the net rental income is then spread evenly over the period from the start of the lease to the date of the next rent review or the 

lease end date. Increases in rents arising from rent reviews are recognised when the review has been completed and agreed with the tenant. 

Turnover in the hotel and concert hall operations represents amounts derived from the provision of goods and services, stated net of VAT. 

(d) investments 

Investments in subsidiaries are included at cost, less a provision for diminution in value where applicable. 

(e) land and buildings, investment properties and properties under development 

Land and buildings, investment properties and properties under development are included in the financial statements at market valuation at 

the year end. Any surplus arising on revaluation is taken through the statement of total recognised gains and losses to the revaluation reserve. 

Any resulting deficit, if temporary, is taken through the statement of total recognised gains and losses to the revaluation reserve. If a deficit below 

original cost arises and is deemed to be permanent it is taken through the profit and loss account. Additions to properties include costs of a 

capital nature only; interest and other costs in respect of developments and refurbishments are charged to the profit and loss account as incurred. 

(f) Profit on sale of properties 

Profits or losses on the sale of investment properties are calculated by reference to the book value at the end of the previous year, adjusted 

for any subsequent capital expenditure, and are treated as exceptional items. Such transactions are recognised on the exchange of contracts, 

providing no material conditions remain outstanding. 

(g) Depreciation 

In accordance with SSAP 19 no depreciation is provided on freehold investment properties. Although the Companies Act 2006 requires all 

properties to be depreciated the directors believe that departure from this requirement is necessary in order for the financial statements to give 

a true and fair view. Depreciation is reflected in the open market value of the investment properties and land and buildings included in the 

financial statements and cannot be quantified separately. 

Plant and equipment is depreciated on a straight line basis at annual rates varying between 10% and 33%. 

27


1 accounting Policies (continued) 

(h) stocks 

Stocks are stated at the lower of cost and net realisable value. 

(i) taxation 

Provision is made for deferred taxation on all material timing differences. No deferred taxation is provided on the revaluation of investment 

properties, unless a binding agreement for the sale of the asset exists at the year end. 

(j) Foreign currencies 

Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction or at the contracted rate if the transaction is covered by 

a forward foreign currency contract. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling 

at the balance sheet date or if appropriate at the forward contract rate. 

(k) Derivative instruments 

The group uses forward foreign currency contracts to reduce exposure to foreign exchange rates. The group also uses interest rate swaps to adjust 

interest rate exposures. The group considers its derivative instruments qualify for hedge accounting when certain criteria are met. Details of the 

relevant criteria are set out below. 

Forward foreign currency contracts 

The criteria for forward foreign currency contracts are: 

• the instrument must be related to a firm foreign currency commitment; 

• it must involve the same currency as the hedged item; and 

• it must reduce the risk of foreign currency exchange movements on the group’s operations. 

The rates under such contracts are used to record the hedged item. As a result, gains and losses are offset against the foreign exchange gains and 

losses on the related financial assets and liabilities, or where the instrument is used to hedge a committed future transaction, are not recognised 

until the transaction occurs. 

Interest rate swaps 

The group’s criteria for interest rate swaps are: 

• the instrument must be related to an asset or a liability; and 

• it must change the character of the interest rate by converting a variable rate to a fixed rate or vice versa. 

Interest differentials are recognised by accruing within net interest payable. Interest rate swaps are not revalued to fair value or shown on the 

group balance sheet at the year end. If they are terminated early, the gain/ loss is spread over the remaining maturity of the original instrument. 

(l) Pension benefits 

The pension costs relating to the group’s defined benefit scheme are accounted for in accordance with Financial Reporting Standard 17 – 

‘Retirement Benefits’ (FRS17). Current service costs and net financial returns are included in the profit and loss account in the year to which 

they relate. Actuarial gain and losses and movements on the deferred asset relating to the pension liability are recognised in the statement of 

recognised gains and losses. 

The annual contributions for defined contribution schemes are charged to the profit and loss account in the year to which 

they relate. 

28


2 turnover and segmental analysis 

Turnover, group profit on ordinary activities before tax and net assets are analysed as follows: 

Property investment Hotels and Concert Hall Total 

2012 2011 2012 2011 2012 2011 

£000 £000 £000 £000 £000 £000 

turnover 

Gross rental income 

and other sales 

Other income 

Total turnover 

Turnover of No.11 

Cadogan Gardens 

included above 

104,714 99,174 9,160 5,676 113,874 104,850 

2,575 1,074 – – 2,575 1,074 

107,289 100,248 9,160 5,676 116,449 105,924 

– – 2,604 3,850 2,604 3,850 

Profit 


68,655 82,783 332 450 68,987 83,233 

Profit on disposal of 

fixed assets 

Net interest 

Profit on ordinary activities 

before taxation 

Operating profit of 

No.11 Cadogan Gardens 


17,293 17,155 

(28,944) (28,807) 

57,336 71,581 

– – 192 1,160 192 1,160 

net assets 


Net assets of 

No.11 Cadogan Gardens 


3,267,303 2,971,734 49,231 16,380 3,316,534 2,988,114 

– – 33,510 16,556 33,510 16,556 

All operations take place within the United Kingdom. The group operates in two principal areas of activity, property investment and hotels and 

concert hall activities. On 25 January 2012 the group acquired Couture Holdings Limited, a holding company which owned indirectly the 

business, assets and liabilities of No.11 Cadogan Gardens, a luxury boutique hotel in Chelsea. The activities of this business are included within 

the Hotels and Concert Hall sector shown above together with those of Cadogan Hotel Partners Limited, which was acquired in 2011. 

29


3 Movements in Provision For Diminution in Value 


£000 £000 

Write back of impairment losses on investment properties 

3,919 15,960 

The figures for 2012 include no amounts relating to the acquisition of 

No.11 Cadogan Gardens. 

4 Profit on sale of investment Properties 


£000 £000 

Profits on sales of freeholds and receipt of long lease premiums, 

less directly related costs and expenses 

17,293 17,155 

The figures for 2012 include no amounts relating to the acquisition of 

No.11 Cadogan Gardens. 

5 interest Payable 


£000 £000 

Interest on bank loans and other borrowings not wholly repayable within five years 

Interest on bank loans, overdrafts and other borrowings repayable within five years 

Other interest 

29,199 27,388 

340 2,514 

138 (238) 

29,677 29,664 

6 operating Profit 


£000 £000 

Operating profit is stated after charging: 

Depreciation 

Auditors’ remuneration: 

Audit of the financial statements – includes £50,000 in respect of 

the company (2011 – £48,000) 

Other fees to auditors – tax services 

– other services 

Hire of plant and equipment 

2,050 826 

195 179 

338 242 

242 102 

18 5 

30


7 Directors and employees 


£000 £000 

Aggregate directors’ emoluments in respect of qualifying services 

1,690 1,977 

Included within directors’ emoluments above are contributions to money 

purchase pension schemes for three directors amounting to £128,000 

(2011 3 directors – £126,000). 

The emoluments, excluding pension contributions, of the highest paid director 

were £645,000 (2011 – £648,000). 


£000 £000 

Employee costs: 

Wages and salaries 

Social security costs 

Pension costs – defined contribution scheme 

Pension costs – net cost of defined benefit scheme 

6,833 5,029 

754 585 

468 434 

159 248 

8,214 6,296 

The average number of persons employed by the group, including executive 

directors, during the year was 185 (2011 – 110). 

8 taxation 

(a) analysis of charge in the year 

Current tax: 

UK corporation tax 

Adjustments in respect of previous years 

Total current tax 


£000 £000 

9,355 10,280 

(679) (383) 

8,676 9,897 

Deferred tax: 

Origination and reversal of timing differences 

Total deferred tax 

(458) 799 

(458) 799 

Tax on profit on ordinary activities 

8,218 10,696 

31


8 taxation (continued) 

(b) Factors affecting tax charge for the year 

The tax charge for the current year is lower than the current standard rate of 

corporation tax in the UK of 24.5% (2011 – 26.5%). The difference is explained 

as follows: 

Standard tax rate 

Actual current tax rate 

Difference 


% % 

25 27 

15 14 

(10) (13) 

Explained by: 

Effect of rollover relief and indexation allowance on taxable profits 

on property disposals. 

Capital allowances in excess of depreciation 

Non-taxable write back of provision for diminution in value of 

investment properties 

Sundry permanent differences 

Adjustment to tax in respect of prior periods 

(7) (6) 

(1) (2) 

(2) (6) 

1 2 

(1) (1) 

(10) (13) 

(c) Factors that may affect future tax charges 

The UK corporation tax rate reduced to 24% from April 2012 and will 

reduce to 23% from April 2013. A further 2% reduction was proposed in the 

December 2012 Autumn Statement, taking the rate to 21% by April 2014. 

In addition, a further 1% reduction was proposed in the March 2013 Budget, 

taking the rate to 20% by April 2015. 

As at the balance sheet date, only the first 1% tax reduction from April 2013 

had been “substantively enacted” and hence in accordance with accounting 

standards, it is only the impact of this 1% reduction that has been reflected in 

the group’s financial statements as at 31 December 2012. 

The effect on the group of the further proposed reductions in the UK corporation 

tax rate will be reflected in the group's financial statements in future years, 

as appropriate, once the proposals have been substantively enacted. 

The effect of the reduction in the tax rate to 20% on the group's deferred tax 

liability would be to reduce the deferred tax liability (set out in note 17) by 

£1,466,000. The rate changes will also impact the amount of future tax 

payments to be made by the group. 

No provision has been made for deferred tax which would arise in the event 

that the group disposed of its investment properties at their current market 

values included in these financial statements. Tax would be payable on these 

disposals to the extent that rollover relief is not available. The total potential 

deferred tax liability on the sale of all the group’s investment properties is 

£741 million (2011 – £699 million). 

32


9 Dividends 


£000 £000 

15.83p per share paid on 11 June 2012 

12.5p per share paid on 28 December 2012 

12.5p per share paid on 4 October 2011 

12.5p per share paid on 14 December 2011 

19,000 – 

15,000 – 

– 15,000 

– 15,000 

34,000 30,000 

10 Retained Profit For the Year 

The profit for the year has been retained by: 

The company 

Subsidiaries 


£000 £000 

131,315 110,870 

(116,197) (79,985) 

15,118 30,885 

The parent company’s profit before dividends for the financial year was 

£165,315,000 (2011 – £140,870,000). 

11 earnings Per share 

The calculation of earnings per ordinary share for 2012 is based on earnings 

attributable to ordinary shareholders of £49,118,000 (2011 – £60,885,000) 

and on 120,000,000 ordinary shares (2011 – 120,000,000 ordinary shares) 

being the effective number of such shares in issue during the year. 

33


12 tangible Fixed assets 

Group 

Cost or valuation 

At 1 January 2012 

Transfers 

Revaluation 

Additions 

Acquired with subsidiary 

Disposals 

Write back of impairment losses 

at 31 December 2012 

Freehold Freehold 

investment land and total Plant and 

properties buildings properties equipment total 

£000 £000 £000 £000 £000 

3,405,653 49,425 3,455,078 9,402 3,464,480 

(1,600) 1,600 – – – 

313,693 564 314,257 – 314,257 

143,890 – 143,890 1,297 145,187 

– 31,901 31,901 1,044 32,945 

(73,852) – (73,852) – (73,852) 

3,919 – 3,919 – 3,919 

3,791,703 83,490 3,875,193 11,743 3,886,936 

Depreciation 


Charge for the year 

Disposals 


– – – 6,372 6,372 

– – – 2,050 2,050 

– – – – – 

– – – 8,422 8,422 

net Book Value 


At 31 December 2011 

3,791,703 83,490 3,875,193 3,321 3,878,514 

3,405,653 49,425 3,455,078 3,030 3,458,108 

The valuation of the group’s freehold 

properties at 31 December 2012 was 

carried out by Chapman Petrie (commercial 

properties) and Cluttons (residential 

properties), both firms of chartered 

surveyors, on the basis of market value, 

in accordance with the Appraisal and 

Valuation Manual of the Royal Institution 

of Chartered Surveyors. 

The historical cost of freehold properties 

at 31 December 2012 was £1,464,950,000 

(2011 –£1,287,043,000). These amounts 

are stated after the deduction of 

accumulated impairment losses of 

£2,611,000 (2011 –£6,530,000). 

34


13 Fixed asset investments 

Investment in subsidiary companies at cost 

at 31 December 2012 and 31 December 2011 

Company 

£000 

117,317 

The principal subsidiary companies at 31 December 2012 were: 

Company 

Held directly 

Cadogan Estates Limited 

Chelsea Land Limited 

nature of business 

Proportion 

of shares 

held 

% 

Property investment 100 

Intermediate holding company 100 

Held indirectly 

Cadogan Estates Property Investments Limited 

Cadogan Developments Limited 

Cadogan Hall Limited 

Cadogan Holdings Limited 

Chelsea Land Developments Limited 

Cadogan Hotel Partners Limited 

Leda Hotels Limited 



Venue management 100 



Hotel operator 100 

Hotel operator 100 

On 25 January 2012 the group acquired Couture Holdings Limited, 

a holding company which owned indirectly the business, assets and 

a liabilities of No.11 Cadogan Gardens, a luxury boutique hotel in Chelsea. 

Consideration for the acquisition was £4,855,000 satisfied by cash. In 

a subsequent internal reorganisation the business, the assets and liabilities 

of the hotel were transferred to Leda Hotels Limited, an existing 

wholly-owned subsidiary of the group. Subsequent to this transfer 

Couture Holdings Limited and its subsidiaries were disposed of for £1. 

Analysis of the acquisition of Couture Holdings Limited: 

Revaluation Fair value 

Book value adjustments to group 

£000 £000 £000 

Tangible fixed assets 

Stock 

Debtors 

Cash 

Creditors due within one year 

Bank loan and long term borrowings 

Net assets 

Goodwill 

The business of No.11 Cadogan Gardens contributed £254,000 to 

the group’s net operating cash flows and utilised £381,000 for capital 

expenditure and financial investment. 

30,297 2,648 32,945 

20 - 20 

45 - 45 

18 - 18 

(8,797) - (8,797) 

(19,376) - (19,376) 

2,207 2,648 4,855 

– 

4,855 

35


13 Fixed asset investments (continued) 

The acquired hotel, 11 Cadogan Gardens, earned 

a profit after tax of £72,000 in the year ended 31 

December 2012, of which a loss of £120,000 arose 

in the period 1 January 2012 to 25 January 2012. 

The summarised profit and loss account for the period 

from 1 January 2011 to the effective date of 

acquisition is as follows: 

2012 

£000 

Turnover 

82 

Operating loss 

(61) 

Loss before taxation 

Taxation 

Loss for the period to 25 January 

(120) 

– 

(120) 

There were no recognised gains or losses in the period 

from 1 January 2012 to 25 January 2012 other than the 

loss of £120,000 above. 

14 Debtors 

Group 


£000 £000 

Trade debtors 

Other debtors 

Accrued income 

1,991 328 

4,509 5,585 

6,799 5,200 

13,299 11,113 

15 trade and other Creditors 

Group 

Company 

2012 2011 2012 2011 

£000 £000 £000 £000 

Trade creditors 

Other creditors and accruals 

Social security and other taxation 

Deferred income 

5,147 3,409 – – 

18,878 14,057 53 49 

543 345 29 26 

26,216 23,700 – – 

50,784 41,511 82 75 

36


16 Borrowings 

(a) Bank loans and overdrafts 

Repayable other than by instalments: 

Group 


£000 £000 

Bank loans and overdrafts 

– – 

At 31 December 2012 the group had committed but 

undrawn credit facilities of £50.0 million (2011 - 

£75.0 million) under a revolving credit facility 

arrangement. 

(b) other long term Borrowings 

Amounts falling within one year: 

6.941% commercial mortgage loan 2025 

Amounts falling due in two to five years: 

5.75% unsecured loan notes 2016 


Amounts falling due in more than five years: 

5.75% unsecured loan notes 2016 

6.45% $40m unsecured loan notes 2018 

7.33% £4m unsecured loan notes 2018 










6.01% £30m unsecured loan noted 2041 






Group 

Company 

2012 2011 2012 2011 

£000 £000 £000 £000 

4,000 4,000 – – 

3,080 – 3,080 – 

16,000 16,000 – – 

19,080 16,000 3,080 – 

– 3,080 – 3,080 

20,141 20,141 – – 

4,000 4,000 – – 

22,659 22,659 – – 

45,000 45,000 – – 

15,000 – – – 

11,581 11,581 – – 

72,000 76,000 – – 

15,000 – – – 

37,523 37,523 – – 

37,524 37,524 – – 

45,720 45,720 – – 

30,000 30,000 – – 

20,000 20,000 – – 

15,240 15,240 – – 

25,000 25,000 – – 

29,204 29,204 – – 

40,000 40,000 – – 

485,592 462,672 – 3,080 

Total other long term borrowings 

508,672 482,672 3,080 3,080 

37


16 Borrowings (continued) 

(b) other long term Borrowings (continued) 

£508,672,000 (2011 – £482,672,000) of the total borrowings and overdrafts 

is subject to fixed rates of interest to maturity, which average 5.90% (2011 – 

6.04%). 

The 6.941% commercial mortgage loan 2025 is secured by fixed charges 

over specific assets of subsidiary companies. 

All the interest payments and principal repayments relating to the loan notes 

issued in US dollars were swapped into sterling at fixed exchange rates. 

This currency swap has the effect of reducing the effective interest rate on 

the US dollar loans from the rates shown above to an average effective rate 

of 5.90% (2011 – 6.04%). This, combined with the fixed interest rates payable 

on the sterling loans gives an overall effective interest rate across all the series 

of notes, fixed until maturity, of 5.66% (2011 – 5.82%). 

The market value of the group’s swap contracts at 31 December 2012 was 

£54,707,000 (2011 –£79,001,000) less than their book value. 

17 Deferred taxation 

Group 


£000 £000 

At 1 January 

11,698 10,899 

Deferred tax charge for the year: 


at 31 December 

(458) 799 

11,240 11,698 

The liability for deferred taxation comprises the following: 

Accelerated capital allowances 

Other timing differences 

11,725 12,240 

(485) (542) 

11,240 11,698 

Deferred tax has not been provided on the chargeable gains that have 

been rolled over. The unprovided deferred tax on rolled over gains is 

£145,560,000 (2011 – £138,724,000). 

38


18 share Capital 


authorised, allotted, Authorised, allotted, 

issued and fully paid issued and fully paid 

number of 

Number of 

shares £000 shares £000 

Ordinary shares of £1 each 

120,000,000 120,000 120,000,000 120,000 

19 Reserves 

Group 

Revaluation reserve 

arising on arising on Profit 

land and investment and loss 

buildings properties total account 

£000 £000 £000 £000 


9,495 2,157,276 2,166,771 701,343 

Profit for the year 

Dividend declared and paid 

Surplus on revaluation of land and 

buildings and investment properties 

Revaluation surplus realised on premiums 

and sales of freeholds 

Attributable taxation on disposal of 

investment properties 

Actuarial loss on pension commitments 

Attributable taxation on actuarial loss on 

pension commitments 


– – – 49,118 

– – – (34,000) 

564 313,693 314,257 – 

– (72,049) (72,049) 72,049 

– – – – 

– – – (1,240) 

– – – 285 

10,059 2,398,920 2,408,979 787,555 

Company 

Profit 

and loss 

account 

£000 


676,929 

Profit for the year 

Dividend declared and paid 


165,315 

(34,000) 

808,244 

39


20 Reconciliation of operating Profit to net 

Cash inflow From operating activities 

Group 


£000 £000 £000 £000 

Operating profit 

Depreciation 

Provisions for diminution in value 

Difference between current service cost and 

pension contributions 

(Increase)/decrease in stock 

(Increase)/decrease in debtors 

(Decrease) in creditors 

Movement in working capital 

68,987 83,233 

2,050 826 

(3,919) (15,960) 

(564) (289) 

1 (15) 

(3,027) 659 

(3,456) (173) 

(6,482) 471 

net cash inflow from operating activities 

60,072 68,281 

21 Reconciliation of net Cash Flow to 

Movement in net Debt 

Group 


£000 £000 

Increase/(decrease) in cash for the year 

Increase in debt 

Loans acquired with subsidiary undertaking 

Movement in net debt for the year 

Net debt at 31 December 2011 

net debt at 31 December 2012 

(58,964) 52,059 

(6,624) (33,014) 

(19,376) (13,033) 

(84,964) 6,012 

(419,344) (425,356) 

(504,308) (419,344) 

22 analysis of net Debt 

Group 

At 31 at 31 

December 

December 

2011 Cash flow Acquisitions 2012 

£000 £000 £000 £000 

Cash at bank and in hand 

63,328 (58,964) – 4,364 

Debt due within one year 

Debt due after one year 

(4,000) 19,376 (19,376) (4,000) 

(478,672) (26,000) – (504,672) 

(419,344) (65,588) (19,376) (504,308) 

40


23 Pension arrangements 

The group operates both defined benefit and defined contribution funded pension schemes for its employees. The assets of these schemes are 

held separately from those of the group in independently administered funds. 

Defined benefit scheme 

The group’s defined benefit pension scheme, which is closed to new members, is called the Cadogan Pension & Assurance Scheme 

(“the Scheme”). The Scheme provides benefits based on final pensionable earnings, and contributions are based on valuations carried out 

every three years by an independent actuary using the “attained age method”. The following disclosures exclude any allowance for defined 

contribution schemes operated by the group. The FRS 17 liability value does not include allowance for any discretionary benefits. 

The group expects to contribute around £664,000 to the Scheme during the year to 31 December 2013. 

Assumptions 

The principal assumptions used to calculate Scheme liabilities include: 

Discount rate 

Inflation assumption (RPI) 

Pension increases in payment 

Revaluation in deferment 

Salary Increases 


4.40% pa 4.70% pa 

2.50% pa 2.50% pa 

5.00% pa 5.00% pa 

5.00% pa 5.00% pa 

4.00% pa 4.00% pa 

Retirements 

Withdrawals 

Post retirement mortality assumption 

Tax-free cash 

Long term expected rate of return on 

the Scheme’s assets 

All members retire at age 60 

An allowance is made for a certain proportion of active 

members to leave service each year before reaching 

Normal Retirement Date 

S1NxA based on year of S1NxA based on year of 

birth using the CMI 2010 birth using the CMI 2010 

core projection model core projection model 

with a long term 

with a long term 

improvement rate of 1% improvement rate of 1% 

per annum and a 

per annum and a 

multiplier of 80% multiplier of 80% 

No allowance 

No allowance 

4.60% pa 5.00% pa 

Other assumptions are as for the long term ongoing funding basis in the actuarial valuation as at 25 December 2010. 

41


23 Pension arrangements (continued) 

Under the mortality tables adopted, the assumed future life expectancy at 

age 60 is as follows: 

life expectancy at age 60 


Years Years 

Male currently aged 40 

Female currently aged 40 

Male currently aged 60 

Female currently aged 60 

30.3 30.2 

32.8 32.7 

28.7 28.6 

31.2 31.1 

Assets 

The major categories of assets as a proportion of total assets are as follows: 

Asset category 


% % 

Equities 

Bonds 

Other 

total 

53 60 

36 36 

11 4 

100 100 

The actual return on the Scheme’s assets net of expenses over the period 

to the Review Date was a gain of £1,812,000 (2011 loss - £721,000). 

The assets do not include any investment in shares or property of the group. 

The expected return on assets is a weighted average of the assumed long-term 

returns for the various asset classes. Equity returns are developed based on 

the selection of an appropriate risk premium above the risk free rate which 

is measured in accordance with the yield on government bonds. Bond returns 

are selected by reference to the yields on government and corporate debt as 

appropriate to the Scheme’s holdings of these instruments. 

Amounts recognised in the balance sheet 


£000 £000 

Fair value of assets 

Present value of funded obligations 

Deficit before tax 

Related deferred tax asset 

net deficit 

26,185 24,373 

(31,782) (29,156) 

(5,597) (4,783) 

1,287 1,196 

(4,310) (3,587) 

42



Amounts recognised in the statement of total recognised gains and losses 

over the year 


£000 £000 

Actuarial gains and losses 

Effect of limit on recognisable surplus 

total amount recognised in statement of total recognised gains and losses 

(1,240) (5,845) 

– – 

(1,240) (5,845) 

Amounts recognised in the profit and loss account over the year 


£000 £000 

Current service cost 

Interest cost 

Expected return on assets 

total amounts recognised in the profit and loss account over the year 

(159) (248) 

(1,357) (1,318) 

1,219 1,556 

(297) 10 

Reconciliation of assets and defined benefit obligation 

The change in assets over the year was: 


£000 £000 

Fair value of assets at 1 January 

Expected return on assets 

Employer contributions 

Benefits paid 

Actuarial gain/(loss) on assets 

Fair value of assets at 31 December 

24,373 25,094 

1,219 1,556 

723 537 

(723) (537) 

593 (2,277) 

26,185 24,373 

The change in defined benefit obligation over the year was: 


£000 £000 

Defined benefit obligation at 1 January 

Current service cost 

Interest cost 

Benefits paid 

Actuarial loss 

Defined benefit obligation at 31 December 

29,156 24,559 

159 248 

1,357 1,318 

(723) (537) 

1,833 3,568 

31,782 29,156 

43



Summary of prior year amounts 

2012 2011 2010 2009 2008 

£000 £000 £000 £000 £000 

Present value of defined benefit obligation 

Scheme assets 

Surplus/(deficit) 

Experience gains and losses on 

scheme liabilities 

Changes in assumptions used to value 

scheme liabilities 

Experience adjustments on scheme assets 

(31,782) (29,156) (24,559) (23,317) (19,403) 

26,185 24,373 25,094 21,903 18,206 

(5,597) (4,783) 535 (1,414) (1,197) 

23 63 1,151 (16) 1,210 

(1,856) (3,631) (1,292) (3,523) 398 

593 (2,277) 1,833 2,586 (4,562) 

The cumulative amount of actuarial gains and losses 

recognised in the statement of total recognised gains 

and losses since the Scheme's inception was a loss of 

£5,108,000 (2011 – loss £4,153,000). 

Defined contribution schemes 

The pension charge in respect of defined contribution 

schemes represents contributions payable by the 

group to such schemes and amounted to £468,000 

(2011 – £434,000), of which £nil (2011 – £nil) was 

unpaid at the balance sheet date. 

24 Capital and other Commitments 

Outstanding capital commitments were as follows: 

Capital expenditure contracted for but not provided 

for in the financial statements 

Group 


£000 £000 

21,068 10,630 

There were no outstanding commitments for capital expenditure in the 

company at either year end. 

25 ultimate ownership 

The ultimate holding company is Cadogan Settled Estates Limited, which is registered in England and Wales and which is ultimately controlled 

by The Eighth Earl Cadogan’s 6 December 1961 Settlement. The consolidated financial statements of Cadogan Settled Estates Limited may be 

obtained from The Registrar of Companies, Companies House, Crown Way, Cardiff, CF14 3UZ. 

44

FIVE YEAR SUMMARY 31 DECEMBER 2012 

2012 2011 2010 2009 2008 

Net Assets 

Properties at valuation 

£m 3,875.2 3,455.1 3,043.6 2,736.1 2,562.5 

net borrowings 

£m 504.3 419.3 425.4 403.5 409.3 

shareholders’ funds 

£m 3,316.5 2,988.1 2,571.5 2,300.8 2,118.6 

net assets per share 

£ 27.64 24.90 21.43 19.17 17.66 

Earnings 

Gross rents 

operating profit: 

Profit on sale of investment properties 

Profit before interest 

Net interest payable 

Profit before taxation 

Taxation 

Profit after taxation 

earnings for ordinary shareholders 

£m 104.7 99.2 92.3 88.5 82.3 

£m 69.0 83.2 62.6 57.0 51.4 

£m 17.3 17.2 4.3 6.4 11.7 

£m 86.3 100.4 66.9 63.4 63.1 

£m 29.0 28.8 24.6 25.4 22.7 

£m 57.3 71.6 42.3 38.0 40.4 

£m 8.2 10.7 10.3 9.9 8.4 

£m 49.1 60.9 32.0 28.1 32.0 

£m 49.1 60.9 32.0 28.1 32.0 

earnings per share 

p 40.9 50.7 26.7 23.5 26.7 

Key financial ratios 

Balance sheet gearing 

Gross rents/interest cover 

interest cover 

% 15.21 14.03 16.54 17.54 19.32 

times 3.61 3.44 3.75 3.48 3.63 

times 2.85 2.93 2.67 2.50 2.78 

45

18 Cadogan Gardens 

London SW3 2RP 

T. 020 7730 4567 

www.cadogan.co.uk

Annual Report 2012 - Cadogan

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