Preliminary Results

RNS Number:2982J
Local Shopping REIT (The) PLC
06 December 2007

6 December 2007

                          The Local Shopping REIT plc
                    ("LSR" or the "Company" or the "Group")

                      Maiden unaudited preliminary results

The Local Shopping REIT plc (LSE: LSR), which provides investors with access to
a diversified portfolio of local shopping assets in the United Kingdom, today
announces unaudited preliminary results for the year ended 30 September 2007,
its first set of results as a publicly quoted REIT. This document includes the
results of the Company for seven months as a private company with a different
capital structure.

Financial Highlights:

?  Successful Admission to trading on the Main Market of the London
   Stock Exchange, raising ?160 million in May 2007

?  The Net Asset Value (NAV) of the Company was 156 pence per share at
   year end

?  Loss before tax of ?4.3 million

?  Market value of portfolio grown by 20% to ?249.3 million (28 March
   2007*: ?207.7 million)

?  Rent roll up by 23.9% to ?17.1million (28 March 2007: ?13.8 million)

?  Average net acquisition yield since IPO of 7.34% - above IPO target of 7%

?  Total debt of ?98.1 million, reflecting an LTV of 40%.  ?130 million
   of undrawn facilities remain with an average maturity in excess of eight 

?  Dividend of 3.419 pence per share to be paid on 3 January 2008 to
   shareholders on the register on 14 December 2007 to be paid as a non-PID 
   (normal dividend).

Operational highlights **

?  Portfolio has increased in size to 632 properties, with 1,976 letting units

?  151 acquisitions showing a total increase of 4% over purchase price

?  33 new lettings secured generating an annual rental income of
   ?353,000 (3.5% above estimated average market rent)

?  87 rent reviews, lease renewals and surrender and re-lettings
   carried out increasing rent by ?159,306 per annum, an average uplift of 14.3%
   (10.0% above Market Rent)

?  Corporate acquisition of Gilfin Property Holdings Ltd for ?12.85
   million, using the Company's tax exempt REIT status and generating over ?2
   million profit on acquisition.

* Date of last published valuation

** From 28 March 2007

Grahame Whateley, Chairman of The Local Shopping REIT plc, commented:

"Our maiden results cover a very exciting period in the evolution of the Local
Shopping REIT.  The highlight of the period was the Admission of Company's
shares to trading on the Official List of the London Stock Exchange on 2 May
2007.  Now, some six months on, the Company is in a very strong financial
position and our portfolio remains well balanced and diversified by both tenant
type and geography.

"The benefits of our active asset management programmes have started to flow
through and will keep on doing so over the coming years.  This, combined with
the skills and expertise of our management team, provides us with confidence
that we are able to create opportunities, as well as act swiftly on those that
present themselves, in order to generate shareholder value."

For further information:

The Local Shopping REIT plc         +44 20 7187 4444
Mike Riley
Nick Gregory

JPMorgan Cazenove                   +44 20 7588 2828
Robert Fowlds
Edward Gibson-Watt

Financial Dynamics                  +44 20 7831 3113
Stephanie Highett
Richard Sunderland
Jamie Robertson


I am pleased to announce the Company's maiden results covering the 12 months to
30 September 2007.

The period under review has been exciting; with the key highlight being the
Admission of the Company's shares to trading on the Official List of the London
Stock Exchange on 2 May 2007, following a successful fundraising of ?160 million
gross.  In addition, the Company received approval from HM Revenue & Customs to
become a Real Estate Investment Trust ("REIT") on the 11 May 2007.

Since the publication of our Prospectus, the Company has been very active.  We
have acquired 151 properties in 106 separate transactions for a total
consideration of ?48.3 million, increasing LSR's total portfolio to 632
properties, providing additional income and further geographical and tenant
diversification.  Asset management activity is also starting to produce
encouraging results, with over 33 new lettings and 87 rent reviews, lease
renewals and surrender and relettings generating over ?500,000 of income. The
details of these are provided in our Joint Chief Executives' business review.


Our investment policy is to focus on investments in local shopping assets in the
United Kingdom, with our core objective being to create shareholder value. Our
portfolio provides good growth prospects, driven by low and affordable rental
levels. We continue our aim, as set out in our Prospectus, to deliver
shareholder value both from buying carefully selected assets and deploying our
long-established and professional asset management skills, together with the
potential for longer term growth through the recycling of proceeds from the sale
of ex-growth and lower yielding properties.


Whilst meaningful year-on-year comparisons are difficult, due to the Placing and
IPO in May, which changed the capital structure of the Company, the results are
a good indication of the progress made.

Net rental income for the year was ?11.5 million, up from ?5.1 million in 2006.
Adjusted profit before tax, which excludes the revaluation loss, and goodwill on
acquisition was ?0.116 million.  The corresponding basic and fully diluted loss
per share was 20.0 pence per share.

Revaluation and Net Asset value

On 30 September 2007 the portfolio was revalued at ?249.3 million, giving a net
loss of ?8.5 million (4.1%) on the portfolio valuation at 28 March 2007.
However, a ?1.9 million, or 4.0% uplift was achieved on new acquisitions.

The adjusted NAV of the Company is now ?154.7 million, which includes the fair
value of our fixed rate debt.


As at 30 September 2007, Company borrowings totalled ?98.1 million, all of which
were secured against certain of our properties.  With the exception of our
corporate facility, our bank borrowings expire in 2016.  All the loans have
interest rate hedging and the average interest rate including margin of is
5.69%.  The loan-to-value ratio at 30 September 2007 was 40%, with a corporate
gearing ratio of 64.7%.

The fair value of debt at 30 September 2007 was ?95.1 million, which is ?3
million lower than the book value.  This benefit is reflected in the Company's
adjusted NAV.  The Company also has undrawn banking facilities of ?130 million,
providing ample funding for the foreseeable future.


I am pleased to announce a final dividend of 3.419 pence per share, which is in
line with the policy outlined at the time of the IPO.  The dividend will be paid
on 3 January 2008, to shareholders on the register on 14 December 2007.  The
ex-dividend date is 12 December 2007.

Share Buyback

Due to well documented changes in the commercial property market over the past
few months, the Board has implemented a strategy for the repurchase of shares,
with the firm belief that this will add value to our existing shareholders.  By
the year end we had repurchased 2.9 million shares at an average price of 129.39
pence.  Having issued 3.9 million shares at 164.86 pence as part consideration
for the Gilfin Company acquisition, the total number of the Company's shares in
issue stood at 97,539,040 on 30 September 2007.  Subsequent to the year end, the
Company has bought back a further four million shares at average price of 124.43
pence.  In total, 6.9 million shares have been purchased at an average price of
126.53 pence, representing 6.92% of the Company's total issued share capital.

The Board believes that the Company's share price does not reflect the intrinsic
value and potential of its portfolio of assets and that utilising its ability to
buy back shares is a good method of enhancing shareholder value in the current


The Company is in a very strong financial position with low gearing levels.  Our
portfolio remains well balanced and diversified by both tenant type and
geography.  In addition, the benefits of our active asset management programmes
have started to flow through and will continue to do so over the next few years.
This, combined with the high yield from our diversified properties, will
continue to underpin our business model.

The Company's primary focus over the next twelve months will be creating value
for our shareholders through active asset management, selective purchases (both
corporate, using our REIT status, and on an individual property level), share
buybacks and the sale of our lower yielding ex-growth properties.

As detailed in the statements below, we have made good progress on our strategy
since flotation, particularly in the light of more testing and unpredictable
times in the commercial property market.  The management team has adapted its
strategy accordingly and the measures taken, combined with the resilience of our
occupier market, particularly compared to more traditional high street
retailers, provide us with confidence that we are ready to act on opportunities
as they present themselves and that we will create shareholder value in the

Grahame Whateley
6 December 2007


In the review below we focus our attention on the period since the portfolio was
last valued on 28 March 2007 which was reported in the Prospectus.

Our Portfolio

Geographic Spread
Region                                                            % of Market Rent
East Anglia                                                                  4.80%
East Midlands                                                                4.28%
North                                                                        5.65%
North West                                                                   8.72%
Scotland                                                                    14.90%
London & South East                                                         28.01%
South West                                                                  10.66%
West Midlands                                                                7.40%
Wales                                                                        5.38%
Yorkshire & Humberside                                                      10.20%

Use Type
Planning Use                                                      % of Market Rent
A1 - Shops                                                                  58.04%
A2 - Financial                                                              10.00%
A3 - Cafes                                                                   9.59%
A4 - Pubs                                                                    0.09%
A5 - Take Aways                                                              5.83%
B1 - Offices                                                                 5.21%
B2 - Industrial                                                              0.47%
B8 - Storage                                                                 0.35%
C3 - Residential                                                             8.68%
D1 - Institutional                                                           0.08%
D2 - Leisure                                                                 0.68%
Miscellaneous                                                                0.98%

Portfolio Performance

Our portfolio was revalued at the year end at ?249.3 million, reflecting an
equivalent yield (excluding residential element) of 7.08%.  It now comprises 632
properties, with 1,976 letting units, and produces annual rental income of ?17.1

Combined Portfolio

Value                      ?249.3 million
Initial Yield                       6.53%
Reversionary Yield                  7.06%
Equivalent Yield                    7.08%
Rent pa                     ?17.1 million
Market Rent pa              ?18.5 million
Commercial Value           ?226.7 million
Residential Value           ?22.6 million

Value Range          No. of Properties       Value ? million                EY
?0 - ?100k                             54               4. 6             7.14%
?101 - ?200k                          222               34.4             7.07%
?201 - ?500k                          219               68.9             7.02%
?501k - ?1 million                     98               70.3             6.99%
?1 million -                           34               50.2             7.22%
?3 million
?3 million +                            5               20.9             7.19%
Total                                 632              249.3             7.08%

This table illustrates the range of property values throughout the portfolio.
The average property value is ?0.394 million and the median is ?0.231 million.

The residential element of our portfolio was valued at ?22.6 million, with the
valuation based on 90% of vacant possession value.  The average value of one of
the residential units in our portfolio is below ?65,000.

We are also encouraged to record a positive revaluation of the acquisitions made
in the period to year end.  Their current market value of ?50.3 million,
reflects a 4.0% increase (excluding costs of acquisition) and an equivalent
yield of 7.09%.

New Purchases

                            30 September 07     Purchase Price            Change
Value                         ?50.3 million      ?48.3 million            +3.99%
Initial Yield                         6.63%
Reversionary Yield                    7.06%
Equivalent Yield                      7.09%

The seed portfolio, as described in our Prospectus, has recorded a small fall of
value, by 4.1%, allowing for one sale, with the equivalent yield (excluding the
residential element) moving out 33bps to 7.07%.

Seed Portfolio - adjusted for sales

                                       30 September 07          28 Feb/28 Mar 07               Change
Value                                   ?199.0 million            ?207.5 million               -4.10%
Initial Yield                                    6.51%                     6.32%               +0.19%
Reversionary Yield                               7.07%                     6.68%               +0.39%
Equivalent Yield                                 7.07%                     6.74%               +0.33%
Rent pa                                  ?13.6 million             ?13.8 million               -1.53%
Market Rent pa                           ?14.7 million             ?14.6 million               +1.08%
Commercial Value                        ?181.8 million            ?190.4 million               -4.56%
Residential Value                        ?17.3 million             ?17.1 million               +1.06%

Since the year end we have made the decision to join Investment Property
Databank (IPD), which will independently monitor our portfolio performance
during the next financial year and beyond. This became effective on 30 September
2007 and we will report further on this development later in the current
financial year.

Acquisitions and Sales

Since 28 March 2007, we have acquired a further 151 properties for a total
consideration of ?48.3 million. This includes the ?14.6 million portfolio of
properties we acquired with the purchase of Gilfin Property Holdings Limited
(see below). The blended yield on these purchases, excluding Gilfin, was 7.34%,
which shows we are able to continue to acquire properties on an accretive basis,
even in more challenging market conditions.

The acquisition of Gilfin Property Holdings Ltd ("Gilfin") on 29 August 2007
demonstrated our ability to use the Company's tax exempt REIT status to complete
corporate acquisitions where there is an unrealised capital gains position.
Gilfin was a privately owned property company which we purchased for ?12.85
million.  50% of the consideration was satisfied in cash and 50% by the issue of
3,897,246 ordinary shares at ?1.6486 per share.   While the valuation yield on
the properties was lower than our average at 6.33%, we see considerable
potential to grow the rents.  Additionally, we are pleased to report that, after
the year end, we sold five of the properties at auction for ?2.685 million, at
an average yield of 5.4% and ?158,000 (6.3%) above the apportioned purchase

In the period from 28 March to 30 September 2007, we sold one property for a
small profit.  However, over the coming year, we intend to sell further lower
yielding, ex-growth properties.  We also intend to sell a number of the
market-let residential units above our shops where their sale would not prevent
us from generating additional value from the property.  Residential sales will
also bring the benefit of reduced irrecoverable costs and lower property
management and letting fees.

Asset Management

We view asset management as an integral part of our business and believe that
our professional and proactive approach to it will help us deliver strong
returns to our shareholders.  Since the portfolio was last valued in March 2007,
our team has successfully implemented the following asset management

  ? Rent reviews on 65 units, increasing rents by a total of ?111,297 per
    annum (an average uplift of 13.4%, and 8.5% above Market Rent)

  ? Lease renewals on 14 units have added a further ?28,709 of rental income
    per annum (an average uplift of 15.7% and 7.3% above Market Rent)

  ? We have surrendered and re-let eight units, adding a total of ?19,300 per
    annum (an average uplift of 17.5% and 22.5% above Market Rent)

  ? 33 vacant units have been re-let at a rent of ?353,300 per annum (3.5%
    above Market Rent)

  ? In line with our strategy to deliver value from the often under-used upper
    parts of our shops, we have secured planning consent for 10 residential
    units with applications submitted for a further 28 units.

Surrender and re-lettings, where we replace a tenant whose business is
struggling to pay the rent with a more effective occupier are a good example of
our hands-on approach to asset management.  By working with the outgoing tenant
we prevent the build up of arrears while typically generating a substantial
increase in rent, often in advance of the next opportunity that we would have to
do so under the previous lease.  Our team is also continually reviewing both the
existing portfolio and potential new acquisitions to identify opportunities to
release value from reconfigurations, adjoining land and under-used upper parts.

While our team undertakes a large volume of asset management initiatives, we are
also keeping our costs down where possible by using standard form Law Society
leases on short-term lettings of smaller units, while the majority of rent
reviews are dealt with in-house and without recourse to third party
determinations.  In working with our tenants we abide by the Code of Practice
for Commercial Leases in England and Wales, believing it is important to offer
our tenants flexible leasing options which are tailored to their business needs.


Our total debt at the year end was ?98.1 million, reflecting a loan to value
ratio of 40%.  This debt is 100% hedged at an overall blended interest rate
including margin of 5.69%.  The weighted average unexpired loan term is over
eight years.  Both our Barclays and HSBC loans have no default provisions
relating to loan to value covenants and are on an interest only basis.

In July we repaid ?26.4 million of the Barclays loan, reducing the outstanding
balance to ?69.2 million.  This resulted in an interest rate margin reduction
from 1.125% to 0.75% and a break fee of ?0.294 million which we accounted for in
the current financial year.

Going forward, the Company is in a strong position, with over ?130 million of
undrawn loan facilities, good banking relationships and attractive interest

Occupier Market

As at 30 September 2007, our commercial void rate was 3.4%, up from the 2.2%
reported in March 2007.  Of the 62 units making up the 3.4% commercial void,
there are eight units with Market Rents greater than ?20,000 per annum, which
account for 34% of the void.  The letting market for these larger units, which
do not conform to our core unit type, is weaker than the letting market for
units within the annual ?5,000-?15,000 range which remains robust.  We also
intend to continue to keep a number of units deliberately vacant while we seek
alternative uses or look to reconfigure them. The deliberate void level,
currently 0.7%, may therefore rise if suitable opportunities to add value
emerge.  The residential void rate has remained constant over the period, at
1.5% compared with 1.4% in March 2007, but we would expect this to fall if a
number of the residential units are sold.  We have seen little evidence of
financial distress among our tenants in the current trading climate, with bad
debts running consistently at only 1.2% of rent demanded since IPO.

Our rents remain affordable, with research by Colliers CRE suggesting rents in
the local shopping market are, on average, less than 7% of turnover.  Our
average shop rent is only ?11.99 psf, or ?13,011 per annum (?250 pw) which gives
us scope to continue to grow rents whilst maintaining their affordability.  In
the long term we believe our tenants will benefit from a number of demographic
trends including the ageing population and the increased volumes of traffic on
our roads.

Investment Market

Since our IPO in May 2007, we have witnessed a significant reversal in sentiment
within the property market.  This change has inevitably had an adverse impact on
investment yields.  In the local shopping market, we have noticed significant
falls in the value of the larger, ?1 million plus individual properties,
shopping parades and neighbourhood centres.  However at the smaller end of the
market, particularly with properties worth below ?150,000, where stamp duty is
not payable, we are still seeing a good volume of transactions and prices appear
to be holding up.

The local shopping market is substantial, estimated to be in the region of ?20
billion*, and imperfect with many locally based private landlords having limited
access to market knowledge and professional asset management expertise. Our
national network of agents, sourcing property acquisitions both on and
off-market, gives us unique access to the local shopping investment market and
we look upon the downturn in the investment market as a source of potential

* Source: Colliers CRE

Business Outlook

As a young company, the past five months have been challenging as we have
adapted and developed our business model to put the Company in a position where
it can operate well in a changing marketplace. Despite the difficult property
investment market and uncertain financial backdrop, we look forward to the
opportunities this coming year will provide.  Our future success will be based
upon a platform of:

  ? Robust financing: debt that is low cost, long term and hedged
  ? A prudent level of gearing
  ? Active asset management to generate income and capital growth
  ? Recycling capital through sales of lower yielding and ex-growth assets
  ? Share buybacks
  ? Using our REIT status to buy companies with deferred tax liabilities
  ? Accretive acquisitions in sustainable locations
  ? Efficient management systems

Mike Riley, Joint Chief Executive Officer, said:

"The period following our successful IPO has been both exciting and challenging
and has provided us with the opportunity to hone our business model to work
within a changing marketplace.  Going forward, we believe the changing market
conditions will provide good opportunities. We intend to use our industry
knowledge and financial strength to create value for the benefit of our

Nick Gregory, Joint Chief Executive Officer, added:

"One of our key differentiators is the professional asset management experience
we bring to our portfolio.  Through our active management programmes, we are
confident that we can unlock value within our existing portfolio and in any new
acquisitions we make in the future."

Mike Riley & Nick Gregory

Joint Chief Executive Officers

6 December 2007


Summary of the year

This report is prepared in accordance with International Financial Reporting
Standards (IFRS).  It is the first time that consolidated accounts have been
prepared for the Company as, prior to the IPO, it formed part of a larger group.

During the year the Company successfully floated on the London Stock Exchange,
raising ?160 million, converted to a Real Estate Investment Trust (REIT) and
completed its first corporate acquisition.

Key performance indicators

In addition to specific measures used to monitor the property portfolio, the
following key performance indicators are used by the directors to review the
performance of the business and to ensure compliance with banking covenants:

                                                                             2006/07              2005/06
Interest cover*                                                                89.1%                67.7%
Loan to value ratio                                                            39.6%                98.8%
Net asset value per share**                                                  159p***                  84p

*Based on profit before interest and tax adjusted for

revaluation movements and other income

**(based on 97,539,040 shares in issue at 30 September 2007

(2006: 4,000,000 reflecting the subdivision see below))

***(adjusted for fair value movements in loans not recognised)

The above show that the business has changed significantly, however, the
measures still incorporate the previous capital structure.  Going forward these
measures should provide more meaningful assessments of the business.

Trading results

Rents have grown from both the acquisition of new properties during the year and
from increases achieved on the rents charged on the existing portfolio.

Property operating expenses, which are 12.5% (2006: 7.6%), are a larger
proportion of rental income in the current year than the previous year.  These
costs include managing agents fees for property management services together
with legal and agents fees incurred in asset management activities as well as
void costs incurred on empty properties.  Close to the year end the contracts
with the managing agents were renegotiated, resulting in the appointment of one
sole agent to manage the whole portfolio.  The rate agreed is lower than
previously charged: therefore these costs are expected to fall as a percentage
of rents in future years.  Asset management fees have also increased as the
emphasis has shifted from growing the portfolio to asset management activities.
Certain changes in work practices, implemented close to the year end are
expected to reduce these costs in the future.

Only two properties have been sold during the year, which resulted in a profit
in excess of their carrying value of ?83,000 (2006: loss of ?47,000).

The portfolio has continued to grow through acquisitions during the year.
However, there has been a reduction in its fair value, which has been included
in the income statement for the year, as required by IFRS.  In accordance with
the Company's accounting policy, 25% of the portfolio, together with all new
purchases over the last six months, have been valued by an independent
professional firm and the remainder of the portfolio has been valued by the
directors who have appropriate qualifications and knowledge of the market to
undertake the valuation.

Administrative expenses have been well controlled and remain the same percentage
of rental income at 19.6% (2006: 19.6%)  These costs also include a one-off
break fee of ?294,000 incurred on the loan repayment made to Barclays Capital.
This cost is offset by the reduction in interest rate charged on the loan after
the fall in the loan to value ratio achieved by the repayment.

Financing costs and available facilities

The Company received interest during the year on the surplus float proceeds
retained to repay part of the Barclays Capital loan and from funds awaiting
investment in properties.  Income has been recognised on the movement in fair
value of the swaps used to hedge the interest rate exposure on the HSBC loan.
None of the swaps held qualified for hedge accounting so these gains have been
recognised in the income statement.  During the year the Barclays Capital loan
was renegotiated to a fixed rate loan, therefore, the fair value of the swaps
previously held to hedge the interest rate exposure on that loan were reversed.
The benefit derived from the fixed rate loan is disclosed in the notes to the
accounts where the fair value of the loan is shown to be ?3 million lower than
its carrying value.

The HSBC facility was also renegotiated in the year and increased to ?150
million.  At the year end ?30 million of this facility had been utilised.

The float proceeds were used to repay a proportion of the Company's debt, in
particular the mezzanine facility provided by the previous parent company,
Castlemore Holdings Limited, which carried an average interest rate of 11.7%.
The debt facilities retained by the Company after the repayments were made are:

  ? a fixed rate loan of ?69 million with Barclays Capital which carries an
    interest rate of 5.595%
  ? a variable rate loan facility (not fully drawn down at the year end) of
    ?150 million with HSBC.  The interest rate exposure on this loan is
    currently over hedged and at the year end loan-to-value ratio carries a
    blended interest rate of 5.69%.  The interest rate charged on this loan will
    increase during the draw down period to a maximum of 75 base points when an
    LTV of 75% is reached; and
  ? a ?10 million revolving corporate credit facility with RBS which carries
    an interest rate of 1% above LIBOR.

At the year end none of the RBS facility had been utilised.

The Barclays Capital and HSBC facilities have no default provisions relating to
loan to value covenants.

Corporate acquisition

On 29 August 2007, the Company completed its purchase of the entire share
capital of Gilfin Property Holdings Limited, ("Gilfin") a property investment
company with a portfolio of shops in Scotland and London valued at ?14.6

The consideration, which was provided in cash and shares, has been fair valued
on the date of exchange and, when compared to the fair value of assets acquired,
together with the costs incurred on the acquisition, has generated negative
goodwill of over ?2 million.  This has been credited to the income statement in
the year in accordance with IFRS 1.

The loan that Gilfin had with Clydesdale bank was repaid in full on the
completion day.


On 11 May 2007, the Group elected to join the REIT regime in the UK.  As a
result of joining the regime, any profits and gains from investment properties
arising after the date of entry should be exempt from corporation tax provided
certain conditions are met.  The Group had deferred tax liabilities brought
forward as at 1 October 2006, in respect of the revaluation reserve on its
properties.  However, entry to the REIT regime effectively extinguishes this
previous deferred tax liability and the liability has been reversed in these

A conversion charge equal to 2% of the market value of the properties owned on
10 May 2007 (the day prior to joining the regime) has been provided for in these
financial statements.  Gilfin automatically joined the REIT regime on its
acquisition and the conversion charge equal to 2% of the market value of its
properties on acquisition has been provided for.

The Group is now required to analyse its business, for tax purposes, between its
property rental business and other activities.  The vast majority of rental
income qualifies under the REIT rules as being derived from the property rental
business and the directors do not consider that the Group operates any other
type of business.  Corporation tax remains payable on any interest income earned
but the Group does not expect to pay any significant amounts of corporation tax
on any of its property rental business.  However, due to the availability of
losses carried forward no provision for corporation tax has been made in these
accounts except for the conversion charge, which must be paid in full,
regardless of the Group's other activities.


A final dividend has been announced by the directors of 3.419 pence per share
(2006: ?Nil) for payment on 3 January 2008 to shareholders on the register at 14
December 2007.  In accordance with IAS 10 the Company has not provided for this
dividend in these financial statements as no dividend had been declared at or
before the year end.  As a result of the Company's capital structure prior to
IPO, the obligation for the Company to distribute 90% of its property rental
income as a PID does not apply for the year ended 30 September 2007.

Investment properties held for resale

At the year end certain properties have been classified as held for resale as
they have been sold after the year end.

Share capital and reserves

Prior to the flotation of the Company, the share capital was reorganised by way
of a subdivision and reclassification of its ordinary shares.  The "A", "B" and
"C" ?1 ordinary shares were sub-divided into ordinary 20 pence shares and
reclassified as "ordinary" shares.  Following this the authorised share capital
of the Company was increased to ?150,000,000 via the creation of 746,000,000 new
Ordinary shares.  On 2 May 2007, 91,954,023 new shares were subscribed for
through the IPO and the Employee Benefit Trust subscribed for 641,521 shares at
their nominal value, which are held in Treasury.  In addition, the Company
issued a further 3,897,246 shares in order to purchase Gilfin.  The Company is
satisfied that all insider information has been notified.

The Company purchased a total of 2,953,750 shares at an average price of ?1.2939
into Treasury during the year and 641,521 shares were transferred to the
Employee Benefit Trust.  These shares are shown as a debit to reserves and are
not included in calculating earnings and net asset value per share.

After flotation, the Company applied to the Companies Court to have the share
premium that had been generated converted to a distributable reserve.
Historically the Company has generated losses due to the level of interest paid,
this conversion enables the Company to pay dividends before the historical
deficits on reserves are reversed from future profits.

Cash flows

The Company's underlying rental business generated cash inflows before the
acquisition of further properties and interest payments of ?8.8 million (2006:
?4.2 million) and after interest payments cash inflows of ?1.4 million  (2006:
outflow of ?0.5 million).

Together with the proceeds from the flotation, further debt was drawn down and
the debt repayments discussed above were made, resulting in an overall inflow of
cash of ?108.3 million (2006: ?119.2 million).  A further ?101.3 million (2006:
?117.9 million) has been invested in property and ?6.7 million in the
acquisition of Gilfin.

Victoria Whitehouse

Finance Director

6 December 2007

Consolidated Income Statement

for the year ended 30 September 2007

                                                                             Note         Year ended         Year ended
                                                                                        30 September       30 September
                                                                                                2007               2006
                                                                                                ?000               ?000

Net rental income                                                               4             11,459              5,108

Profit/(loss) on disposal of investment properties                                                83               (47)

(Loss)/gain from change in fair value of investment properties                  7            (6,424)              5,054

Administrative expenses                                                                      (2,573)            (1,084)

Net other income                                                                                  25                477

Operating profit before goodwill and net financing costs                                       2,570              9,508

Negative goodwill arising on acquisition                                        3              2,046                  -

Operating profit before net financing costs                                                    4,616              9,508

Financing income                                                                5              1,302              1,130
Financing expenses                                                              5           (10,180)            (5,921)

(Loss)/profit before tax                                                                     (4,262)              4,717

Taxation                                                                        6            (3,799)            (1,179)

(Loss)/profit for the period attributable to equity holders of                 11            (8,061)              3,538
the company

 Basic (loss)/earnings per share                                               12            (20.0)p             166.6p

 Diluted (loss)/earnings per share                                             12            (20.0)p             166.6p

Consolidated balance sheet

for the year ended 30 September 2007

                                                             Note                      At 30           At 30
                                                                                   September       September
                                                                                        2007            2006
                                                                                        ?000            ?000
Non current assets
Plant and equipment                                                                       73               -
Investment properties                                        7                       247,608         141,539
Investment in joint ventures                                                                               -
Deferred tax asset                                                                         -             991
Derivative financial instruments                             13                        1,034             772

Total non-current assets                                                             248,715         143,302

Current assets
Derivative financial instruments                             13                          553             369
Trade and other receivables                                  8                         4,829           3,563
Investment properties held for resale                        7                         3,081               -
Cash                                                                                   5,735           2,891

Total current assets                                                                  14,198           6,823

Total assets                                                                         262,913         150,125

Non current liabilities
Interest bearing loans and borrowings                        9                      (98,149)       (136,583)
Deferred tax liabilities                                                                   -         (1,776)
Derivative financial instruments                             13                            -            (70)
Finance lease liabilities                                                            (1,353)           (618)

Total non-current liabilities                                                       (99,502)       (139,047)

Current liabilities
Bank overdraft                                                                         (115)            (91)
Interest bearing loans and borrowings                        9                             -         (3,231)
Trade and other payables                                     10                     (11,523)         (4,387)

Total current liabilities                                                           (11,638)         (7,709)

Total liabilities                                                                  (111,140)       (146,756)

Net assets                                                                           151,773           3,369

Issued capital                                                                        20,098             800
Share Premium                                                                              -               -
Reserves                                                                               3,773               -
Retained earnings                                                                    127,902           2,569

Total attributable to equity holders of the company          11                      151,773           3,369

Consolidated statement of cash flows

for the year ended 30 September 2007

                                                          Note                     Year ended        Year ended
                                                                                 30 September      30 September
                                                                                         2007              2006
                                                                                         ?000              ?000
Operating activities
(Loss)/profit for the year                                                            (8,061)             3,538
Adjustments for:
Losses/(gains) on fair value adjustment of investment                                   6,424           (5,054)
Interest expense                                                                        8,878             4,791
(Profit)/Loss on disposal of investment property                                         (83)                47
Negative goodwill on acquisition                                                      (2,046)                 -
Income tax expense                                                                      3,799             1,179

                                                                                        8,911             4,501

Increase in trade and other receivables                                               (1,175)           (2,566)
Increase in trade and other payables                                                    1,058             2,251

                                                                                        8,794             4,186

Interest paid                                                                         (8,225)           (4,815)
Interest received                                                                         786                90

Cash flows from operating activities                                                    1,355             (539)

Investing activities
Acquisition of subsidiary                                 3                           (6,700)                 -
Proceeds from sale of investment properties                                             1,139             1,805
Acquisition of investment properties                                                (101,289)         (117,892)

Cash flows from investing activities                                                (106,850)         (116,087)

Financing activities
Proceeds from the issue of share capital                                              153,150                 -
Repayment of borrowings                                                             (251,966)           (1,317)
New borrowings                                                                        207,023           120,505
Payment of finance lease liabilities                                                      108                49

Cash flows from financing activities                                                  108,315           119,237

Net increase in cash                                                                    2,820             2,611
Cash at beginning of period                                                             2,800               189

Cash at end of period                                                                   5,620             2,800

Consolidated statement of recognised income and expense

for the year ended 30 September 2007

                                                                                        2007            2006
                                                                                        ?000            ?000

Net income recognised directly in equity                                                   -               -

(Loss)/profit for the year                                                           (8,061)           3,538

Total recognised income and expense for the period attributable to equity            (8,061)           3,538
holders of the company

Notes to the Financial Statements

for the year ended 30 September 2007

Accounting policies

1        Basis of preparation

The financial information set out below does not constitute the Company's
statutory accounts for the years ended 30 September 2007 and 30 September 2006.
Statutory accounts for 2006, which were prepared under UK GAAP, have been
delivered to the registrar of companies.  The auditors have reported on the 2006
accounts: their report was unqualified and did not contain a statement under
section 237(2) or (3) of the Companies Act 1985. The statutory accounts for 2007
which are being prepared in accordance with International Financial Reporting
Standards as adopted by the EU will be finalised on the basis of the financial
information presented by the directors in this preliminary announcement and will
be delivered to the registrar of companies in due course.

On 16 March 2007, the Company changed its name from Castlemore Capital Limited
to The Local Shopping REIT plc and re-registered as a public company, formerly
it was registered as a private company.

The financial information contained in these preliminary results has been
prepared in accordance with the Listing Rules of the Financial Services
Authority and the accounting policies set out on pages 82 to 85 of the
Prospectus issued in April 2007 in connection with the flotation of the Company
which is available on the Company's website (  The following
principle accounting policies have been consistently applied to all periods
presented.  In addition to those included in the Prospectus, the following
policies have been adopted.


The purchase method of accounting is used to account for the acquisition of
subsidiaries by the Group.  The cost of the acquisition is measured as the fair
value of the assets acquired, equity instruments issued plus the costs directly
attributable to the acquisition.  Identifiable assets acquired and liabilities
assumed in a business combination are measured initially at their fair value at
the date of acquisition.  Goodwill represents the excess of the cost of an
acquisition over the fair value of the Group's share of the net identifiable
assets, including any intangible assets acquired.  If the cost of the
acquisition is less than the fair value of the net assets of the entity acquired
the difference is recognised directly in the income statement.

Investment properties held for resale

Investment properties held for resale are included in the Balance Sheet at their
fair value.

Plant and equipment

All plant and equipment is stated at historical cost less depreciation.
Historical cost includes expenditure which is directly attributed to the
acquisition of the items.

Depreciation is charged to the income statement on the following basis:

?         Fixtures and fittings - 15% reducing balance

?         Computer equipment - straight line basis over 3 years.

Ordinary share capital

Ordinary shares are classified as equity.

External costs directly attributable to the issue of new shares are shown in
equity as a deduction, net of tax, from the proceeds.

Shares which have been repurchased are classified as Treasury and shown in
retained earnings.  They are recognised at the trade date for the amount of
consideration paid, together with directly attributable costs.  This is
presented as a deduction from total equity.

Share based payment

The Group operates an equity settled, share based compensation plan comprising
awards under a Long Term Incentive Plan (LTIP) and a Company Share Option Plan
(CSOP) for certain employees.  The fair values of these schemes are measured at
their fair value at the date of grant.  The fair value is then recognised as an
employee cost, with a corresponding increase in equity, on a straight line basis
over the vesting period, based on the Group's estimate of the shares that will
eventually vest.

The fair value is measured using an option pricing model.  The awards under the
LTIP are fair valued using a Monte Carlo simulation model and the fair value of
the awards under the CSOP are measured using a Black Scholes model.

2        Segmental reporting

The Group operates a single business segment providing accommodation to rent
across the United Kingdom. The Group's net assets, revenue and profit before tax
are attributable to this one activity.

3        Acquisition of subsidiary

On 29 August 2007, the Group acquired the entire share capital of Gilfin
Property Holdings Limited for a combination of cash and the issue of new equity.
The Company holds a portfolio of properties located in Scotland and London.

The acquisition had the following effect on the Group's assets and liabilities
on acquisition date:

                                                    Pre-acquisition     Fair value adjustments         Recognised values
                                                   carrying amounts                                       on acquisition
                                                               ?000                       ?000                      ?000

Investment properties                                        14,606                          -                    14,606
Trade and other receivables                                      91                          -                        91
Cash and cash equivalents                                       135                          -                       135
Trade and other payables                                      (423)                          -                     (423)
Loans and borrowings                                        (1,008)                          -                   (1,008)

Net identifiable assets and                                  13,401                          -                    13,401

Consideration paid
Cash paid including costs of                                                                                     (6,835)
Fair value of new equity issued                                                                                  (4,520)

Negative goodwill on acquisition                                                                                   2,046

Cash acquired                                                                                                        135
Cash consideration                                                                                               (6,835)

Net cash outflow                                                                                                 (6,700)

Pre-acquisition carrying amounts were determined based on applicable IFRSs
immediately prior to the acquisition.  The values of assets, liabilities and
contingent liabilities recognised on acquisition are their estimated fair

The negative goodwill arising on the acquisition has been taken directly to the
income statement.

4                Net rental income

                                                                                         2007            2006
                                                                                         ?000            ?000

Gross rental income                                                                    13,101           5,528
Property operating expenses                                                           (1,642)           (420)

                                                                                       11,459           5,108

Included within property operating expenses at 30 September 2007 is ?219,899
(2006: ?21,866) relating to impairments of trade receivables.

5                Net financing costs

                                                                                        2007            2006
                                                                                        ?000            ?000

Interest receivable                                                                      786              90
Fair value gains on derivative financial instruments (note 13)                           516           1,040

Financial income                                                                       1,302           1,130

Bank loan interest                                                                   (7,606)         (3,850)
Other loan interest                                                                  (2,466)         (2,022)
Head rents treated as finance leases                                                   (108)            (49)

Financial expenses                                                                  (10,180)         (5,921)

Net financing costs                                                                  (8,878)         (4,791)

6                Taxation

                                                                                        2007            2006
                                                                                        ?000            ?000
Current tax
Corporation tax charged at 30% (2006: 30%)                                                 -               -
REIT conversion charge                                                                 4,584               -
Adjustment to prior period                                                                 -             170

Total current tax                                                                      4,584             170

Deferred tax charge
Origination and reversal of temporary differences                                      (785)           1,009

Total tax charge in the income statement                                               3,799           1,179

Reconciliation of effective tax rate
                                                                                        2007            2006
                                                                                        ?000            ?000

(Loss)/profit before tax                                                             (4,262)           4,717

Corporation tax in the UK of 30% (2006:30%)                                          (1,279)           1,415

Effects of:
Tax loss not available for carry forward under REIT regime                             1,279               -
REIT conversion charge                                                                 4,584               -
Non-deductible expenses                                                                    -              29
Underprovided in prior periods                                                             -             170
Other                                                                                      -               9
Indexation relief on investment properties                                                 -           (444)
Release of deferred tax following REIT conversion                                      (785)               -

                                                                                       3,799           1,179

7                Investment property


At 1 October 2006                                                               141,539
Additions                                                                       116,630
Disposals                                                                       (1,056)
Fair value adjustments                                                          (6,424)
Investment properties held for resale                                           (3,081)

At 30 September 2007                                                            247,608

Investment properties held for resale at 30 September 2007 are shown separately
as current assets as required by IFRS 5.

The investment properties have all been revalued to their fair value at 30
September 2007.

All new properties acquired since 28 March 2007, together with a random sample
of 25% of the portfolio have been valued by Allsop LLP, a firm of Chartered
Surveyors. The valuations were undertaken in accordance with the Royal Institute
of Chartered Surveyors Appraisal and valuation standards on the basis of market
value. Market value is defined as the estimated amount for which a property
should exchange on the date of valuation between a willing buyer and a willing
seller in an arm's length transaction.

The remainder of the portfolio has been valued by the directors who have an
appropriate recognised professional qualification and recent experience in the
location and category of property being valued.

A reconciliation of the portfolio valuation at 30 September 2007 to the total
value for investment properties given in the Consolidated Balance Sheet is as

                                                                                       2007             2006
                                                                                       ?000             ?000

Valuation                                                                           249,296          140,921
Items not revalued                                                                       40                -
Investment properties held for resale                                               (3,081)                -
Head leases treated as finance leases under IAS 17                                    1,353              618

Total per Consolidated  Balance Sheet                                               247,608          141,539

8                Trade and other receivables

                                                                                        2007            2006
                                                                                        ?000            ?000

Amounts due from jointly controlled entities                                               -             973
Trade receivables                                                                      4,092           1,064
Other receivables                                                                        568           1,446
Prepayments                                                                              169              80

                                                                                       4,829           3,563

9                Interest-bearing loans and borrowings

                                                                                        2007            2006
                                                                                        ?000            ?000
Non-current liabilities
Secured bank loans                                                                    98,149         106,230
Other loans                                                                                -          30,353

                                                                                      98,149         136,583

Current liabilities
Current portion of secured bank loans                                                      -           3,231

All loans are repayable in one instalment in 2016.

10            Trade and other payables

                                                                                        2007            2006
                                                                                        ?000            ?000

Trade payables                                                                           808             438
Other taxation and social security                                                     5,103              96
Other payables                                                                         2,200             758
Accruals and deferred income                                                           3,412           3,095

                                                                                      11,523           4,387

11            Capital and reserves

Reconciliation of movement in capital and reserves

                                    Share capital Share premium     Reserves       Retained         Total
                                             ?000          ?000         ?000           ?000          ?000

At 1 October 2006                             800             -           31          2,538         3,369
Issue of shares                            19,298       137,331        3,742              -       160,371
Own shares acquired                             -             -            -        (3,978)       (3,978)
Cancellation of share premium                   -     (137,331)            -        137,331             -
Share based payments                            -             -            -             72            72
Total recognised income and expense             -             -            -        (8,061)       (8,061)

At 30 September 2007                       20,098             -        3,773        127,902       151,773

Share capital

                                                        Ordinary shares                     Ordinary shares
                                                  2007               2007                     2006           2006
                                                Number              Value                   Number          Value
                                                   000               ?000                      000           ?000

Alloted, called up and fully paid              100,493             20,098                      800            800

The shares in issue at 30 September 2006 were divided into 600,000 "A" Ordinary
?1 Shares; 100,000 "B" Ordinary ?1 Shares and 100,000 "C" Ordinary ?1 Shares.

Prior to the flotation of the Company the share capital was reorganised by way
of a subdivision and reclassification of its ordinary shares.  The "A", "B" and
"C" ?1 ordinary shares were sub-divided into ordinary 20 pence shares, giving
each shareholder five shares for each individual share held and each share
reclassified as an Ordinary shares.

Following this the authorised share capital of the Company was increased to
?150,000,000 via the creation of 746,000,000 new Ordinary shares.

On the 2 May 2007, 91,954,023 new shares were subscribed to through the IPO and
the Employee Benefit Trust subscribed for 641,521 shares at their nominal value,
these shares are held in Treasury.  In addition the Company issued a further
3,897,246 shares in order to purchase Gilfin Property Holdings Limited.

At 30 September 2007 the Company held 2,953,750 (2006: Nil) shares in Treasury.

Share premium

The share premium arose following the issue and subscription for shares with a
nominal value of 20 pence at ?1.74 on the 2 May 2007.  Subsequently, the Company
applied to the courts to have the share premium reserve converted to a
distributable reserve.


The value of shares issued to purchase Gilfin Property Holdings Limited in
excess of their nominal value has been shown as a separate reserve in accordance
with the Companies Act 1985.

12            Earnings per share

Basic earnings per share

The calculation of basic earnings per share was based on the (loss)/profit
attributable to ordinary shareholders and a weighted average number of ordinary
shares outstanding, calculated as follows:

(Loss)/profit attributable to ordinary shares
                                                                                        2007            2006
                                                                                        ?000            ?000

(Loss)/profit for the year                                                           (8,061)           3,538

                                                                                        2007            2006
                                                                                      Number          Number
Weighted average number of ordinary shares                                               000             000

Issued ordinary shares 1 October                                                         800             800
Effect of sub-division of shares                                                       1,324           1,324
Effect of own shares held                                                              (134)               -
Effect of shares issued                                                               38,383               -

Weighted average number of ordinary shares at 30 September 2007                       40,373           2,124

The comparative weighted average number of shares has been adjusted for the
effect of the subdivision of shares which took place in the current year in
accordance with IAS 33.

Diluted earnings per share

There is no difference between basic and diluted earnings per share as the
effect of share options in the year is anti-dilutive.

13            Financial instruments and risk management

Interest rate risk - the Group does not speculate in treasury products. It uses
these products to minimise the exposure to interest rate fluctuations. The Group
borrows from UK banks at fixed and floating rates of interest based on LIBOR and
uses hedging mechanisms to achieve an interest rate profile where the majority
or borrowings are fixed or capped. The Group's policy is to hedge between 60%
and 100% of its interest rate exposure. At 30 September 2007, 100% (2006: 97%)
of the Group's net debt was fixed or protected with a further ?50,378,000 of
swaps in place to cover future debt as its drawn down.

Derivative financial instruments are shown in the consolidated balance sheet as

                                                                      At 1      Mark to         At 30
                                                                   October       market     September
                                                                      2006                       2007
                                                                      ?000         ?000          ?000

Non current assets                                                     772          262        1,034
Current assets                                                         369          184          553
Non current liabilities                                               (70)           70            -

Net value                                                            1,071                     1,587

Amount credited to income statement                                                 516

13            Financial instruments and risk management

The Group's interest rate swaps in place at 30 September 2007 have been
classified as ineffective hedges during the year.

A summary of the swaps and their maturity dates is as follows:

                                           Amount          Rate     Fair value    Fair value      Movements in
                                                                          2007          2006            income
Maturity date                                ?000             %           ?000          ?000              ?000

30 April 2013                              54,000  5.06 to 5.62            582           (53)              635
31 January 2017                            26,378        4.8500          1,005              -            1,005

                                           80,378                        1,587           (53)            1,640

Swaps in place at 30 September 2006

25 April 2010                              77,000 4.5050 to 5.2              -            905            (905)
18 April 2016                              14,431        4.7225              -            219            (219)
                                          171,809                        1,587          1,071              516

The financial derivatives included in the above tables were valued by JC
Rathbone Associates Limited, financial risk consultants, using discounted cash
flow model using published market information.

The Group does not trade financial derivatives.

Fair value

The fair value of the Group's financial liabilities is not considered to be
materially different from the book value with the exception of the following
fixed rate loan held with Barclays Capital.

                                                                                        2007            2006
                                                                                        ?000            ?000
Fixed rate loan
Carrying value of loan                                                                68,775               -
Mark to market adjustment                                                            (2,962)               -

Fair value                                                                            65,813               -

Effective interest rates and re-pricing analysis

In respect of income earning financial assets and interest bearing financial
liabilities, the following table indicates their effective interest rates at the
balance sheet date and the periods in which they mature or, if earlier, are

                          Effective   Total     0 to 1  1 to < 2  2 to < 3  3 to < 4  4 to < 5          5 years
                           Interest               year     years     years     years     years         and over
                                  %    ?000       ?000      ?000      ?000      ?000      ?000             ?000

Cash and cash equivalents  Floating    5,734      5,734        -         -         -         -                -
Bank overdrafts            Floating    (115)      (115)        -         -         -         -                -
Secured bank loans           5.595% (68,775)          -        -         -         -         -         (68,775)
Secured bank loans         Floating (29,374)          -        -         -         -         -         (29,374)

Total                               (92,530)      5,619        -         -         -         -         (98,149)

                      This information is provided by RNS
            The company news service from the London Stock Exchange