Preliminary Results

Benchmark Group PLC 27 September 2000 PRELIMINARY ANNOUNCEMENT Year Ended 30 June 2000 Benchmark Group PLC ('Benchmark'), the specialist Central London property investment and development company, announces its Audited Results for the year ended 30 June 2000. Highlights * Net asset value per share increased 26.8% to 343.1p (1999: 270.5p) * Total return in NAV per share from June 1996, including cumulative dividends paid out or proposed, is 20.8% per annum * Investment properties increased 17% in value over the year based on independent valuation * Net rental income increased 4.1% to £20.3m (1999: £19.5m) * Annualised net rental income increased to £39.7m per annum (1999: £23.4m) * Pre-tax profit increased to £15.5m (1999: £15.1m); post tax profit increased to £13.3m (1999: £13.2m) * Earnings per share increased to 11.2p (1999: 10.9p) - earnings per share (excluding net profits on disposal of trading and investment properties) reduced to 3.5p (1999: 8.2p) * Final dividend of 2.3p recommended - total dividends for the year increased 10.7% to 4.15p (1999: 3.75p) * Net gearing as at 30 June 2000 of 64.3% (1999: 53.9%) - net borrowings £267.0m (1999: £175.9m) * £186.5m spent on acquisitions in Central London during the year including the Golden Square Estate, W1; Buchanan House, St James's Square, W1; Medius, Sheraton Street, W1; Mitre House and Compter House, Cheapside, EC2 and properties in Grafton Street, W1 * £167.0m of total sales achieved during the year, providing a net profit of £10.1m, giving a surplus of 6.6% over book value, or £21.9m (15.4%) over historic cost * Additional disposal of leasehold interest in 99/121 Kensington High Street and 1 Derry Street and the freehold of 25 Kensington Square, W8 to a joint venture with Deutsche Bank AG in which Benchmark holds a 50.1% interest. The £83m sale resulted in a net profit over book value of £1.9m, or £12.9m over historic cost on the 49.9% part disposal Tan Sri Quek Leng Chan, Chairman of Benchmark said: 'Since its recapitalisation in October 1996, Benchmark has undergone a rapid transformation to become a key Central London property specialist and as at the year end it had a portfolio of £696 million compared to £20 million in June 1996. During this period, the annual compound growth in net asset value per share, including the cumulative dividends per share that have been paid or are proposed, has resulted in a total return of 20.8% per annum. 'We have created an excellent Central London portfolio and will seek to continue to grow and increase shareholder value against the backdrop of a strong Central London property market.' For further information, please contact: Nigel Kempner Jeremy Carey or Karen Roberts Chief Executive Tavistock Communications Benchmark Group PLC Tel: 020 7600 2288 Tel: 020 7287 6881 CHAIRMAN'S STATEMENT The year ended 30 June 2000 was another year of achievement for the Group as it continued to grow as a major specialist Central London property company whilst achieving a good blend of solid income, commercial developments and properties with future potential. The Central London property market has produced particularly strong office rental growth in the West End and now the City market is showing signs of rental growth. Strong retail interest in the West End has meant that there have been few vacant shop units and those which became available have been leased quickly. There is little doubt that London is presently an important sought after world destination for business, lifestyle and culture. This has led to continuing strong demand in all sectors of the property market with very little supply of the right quality resulting in upward pressure on rents and prices. All the evidence points to sustainable growth which we shall exploit by continuing to specialise in Central London and particularly the West End. During the year we have completed the first phase of our development programme by the sale of all the apartments at The Panoramic, our residential development in Pimlico on the Thames, and completing the lettings of our commercial projects at Stirling Square, Glasshouse Street and Grosvenor Street and we currently have an office vacancy factor in terms of area of 3.5%. We have now put in place the next phase of our commercial development and refurbishment programme at Golden Square, Wardour Street, Grafton Street and Bruton Street. We are hoping to receive planning and listed building consents this autumn for the creation of a new food hall for Waitrose on our Belgravia Estate which will allow us to start work at the end of the year. We have continued our disposal programme to transform unrealised valuation surpluses into realised profits, and we have reinvested the proceeds in new acquisitions to create opportunities to enhance future returns. The operations run by Nexus Estates, our serviced offices subsidiary, at 1 Cornhill and Leadenhall Street, have been successful and those buildings are fully taken up ahead of schedule. We are now bringing its skills to the West End market where we will be opening, at the end of the year, a flexible lease business centre of 35,000 sq ft in Grafton Street, Mayfair. Nexus has established a good name and we are now seeking a financial partner to help Nexus expand its business in the UK and internationally. RESULTS The net asset value per share at 30 June 2000 was 343.1p compared with 270.5p a year earlier, an increase of 26.8%. Our investment properties were valued at 30 June 2000 by DTZ Debenham Tie Leung Limited, Chartered Surveyors. This revaluation showed a net increase of £96.2 million over the 30 June 1999 figures representing an uplift of 17% in the value of the investment properties held at the year end, excluding non- income producing developments. Pre-tax profits for the year increased to £15.5 million from £15.1 million in the previous year and post-tax profits for the year increased to £13.3 million from £13.2 million. Earnings per share were 11.2p compared with 10.9p in the previous year. Normalised earnings per share, excluding profits on sales, reduced by 57.3% from 8.2p to 3.5p largely as a result of the development programme which, although successfully leased, only flows through fully in rental terms, when rent free periods expire during the next financial year 2000/2001. Net rental income for the period increased from £19.5 million to £20.3 million. Taking into account sales and acquisitions since the year-end, net rental income on an annualised basis at the date of this report is currently £39.7 million per annum. An interim dividend of 1.85p net per share was paid on 30 March 2000 and the Board now recommends the payment of a final dividend of 2.30p net per share to be paid on 15 November 2000 to shareholders on the register at 13 October 2000. This would make a total dividend payable for the year of 4.15p net per share representing an increase of 10.7% over last year. FINANCIAL In June 2000 we successfully converted our secured banking facilities with HSBC Bank Plc into unsecured facilities, and the addition of a similar unsecured facility with Barclays Bank PLC will provide us with much greater flexibility for the active management of our existing property portfolio and to finance new property acquisitions. Our net borrowings at the year-end were £267 million representing net gearing of 64% compared with 54% as at 30 June 1999 and 61% at 31 December 1999. Shareholders' funds as at 30 June 2000 were £415 million, compared with £326 million as at 30 June 1999, and our gross property assets were just under £700 million. ACQUISITIONS AND DISPOSALS We spent £186.5 million on acquisitions in Central London during the year. Total disposals of £167.0 million were completed, realising a net profit of £10.1 million over book value or £21.9 million over historic cost. It should be remembered that we have now adopted a policy of undertaking a full independent property valuation at the half-year, as well as at the year-end. Following the acquisitions and disposals, at the date of this statement, we now have a total portfolio of about 1.37 million sq ft of offices, retail and leisure related space within the Circle Line in Central London. Some 88% of the portfolio by value is in the West End and 62% by value is freehold or held on leases with an unexpired term of at least 100 years. We have concentrated on increasing the average lot size by value of our holdings and this is now £22.4 million compared with £17.0 million a year ago. In addition to the above disposals, we sold for £83 million our long leasehold interest in our Kensington Estate to a new company in which we hold a 50.1% interest and Deutsche Bank AG the remainder. PERFORMANCE AND OUTLOOK Since its recapitalisation in October 1996, Benchmark has undergone a rapid transformation to become a key Central London property specialist and as at the year end it had a portfolio of £696 million compared to £20 million in June 1996. During this period, the annual compound growth in net asset value per share, including the cumulative dividends per share that have been paid or are proposed, has resulted in a total return of 20.8% per annum. I would like to thank my co-directors and our entire team for their valuable contributions during the year. We have created an excellent Central London portfolio and will seek to continue to grow and increase shareholder value against the backdrop of a strong Central London property market. Tan Sri Quek Leng Chan Chairman 26 September 2000 REVIEW OF OPERATIONS PROPERTY REVIEW ACQUISITIONS During the year, some £186.5 million was spent on the acquisition of properties in Central London. The principal transactions were: * In August 1999, we completed the acquisition of six properties owned by subsidiaries of Chesterfield Properties PLC for £19.51 million. * In August 1999, the freehold interest in a portfolio of 13 properties, known as the Golden Square Estate, was acquired from Taylor Clark Properties Limited for £22.5 million. * In September 1999, the freehold of Buchanan House, 3 St James's Square, SW1 was acquired from Shell Pension Trust Limited for £38.0 million. * In December 1999, the 52% long leasehold interest in 164 New Bond Street and 11/14 Grafton Street, W1, where we already own a 48% interest, was acquired from Prudential Assurance Company Limited for £13.75 million. * In March 2000, the freehold of New Chapter House, 166/170 Bishopsgate and 14/15 New Street, EC2 was acquired from a property company for £10.0 million. * In March 2000, the long leasehold interest of 8 and 9/10 Grafton Street and 22/24 Bruton Lane, W1 was acquired from a pension fund for £15.46 million. * In March 2000, the freehold of 40/41 Old Bond Street, W1 was acquired from our 25% associate company, Agnew's Property Investments Limited, for £5.4 million so that the Company now has a 100% interest in this property. * In April 2000, the long leasehold interest of Novello House, 160 Wardour Street (now renamed Medius, Sheraton Street), W1 was acquired from the Crown Estate for £14.85 million with the aim of carrying out a major office development. * In June 2000, the long leasehold interest in Mitre House, 120 Cheapside, EC2 and Compter House, 4/9 Wood Street, EC2 were acquired from Hammerson plc for £37.5 million. DISPOSALS During the year, we continued to pursue our stated objective of disposing of non-core properties and, taking advantage of a strong London property market, to sell properties at prices reflecting or exceeding their most recent independent valuation. Total sales of £167.0 million were achieved, giving a net profit of £10.1 million over book value or £21.9 million over historic cost. The principal transactions were: * In August 1999, a portfolio of six properties was sold to Shaftesbury PLC for £21.5 million. * In August 1999, the freehold of Ibex House, Minories, EC3 was sold for £37.9 million. * In April 2000, four properties were sold for £26.6 million and they were 37/38 Curzon Street, W1; Outer Temple, 222 Strand, WC2; St Mary Abchurch House, 123 Cannon Street, EC4; and 15/16 Brook's Mews, W1. * In June 2000, the long leasehold of 16 Grosvenor Street, W1 was sold for £8.82 million. * Sale of all apartments at The Panoramic, SW1 and three at Stirling Square, 5/7 Carlton Gardens, SW1 for £67.9 million. In addition, we sold our long leasehold interest in 99/121 Kensington High Street and 1 Derry Street and the freehold of 25 Kensington Square, W8 ('Kensington Estate') to a new company (121 KHS Limited) in which we hold a 50.1% interest and Deutsche Bank AG the remainder. These properties were sold for £83 million and the disposal resulted in a net profit of £12.9 million over historic cost on the 49.9% part disposal. PORTFOLIO ACTIVITY - LETTINGS AND RENTAL INCOME 1999/2000 has been a record year in terms of lettings. During this period, we carried out 15 major lettings of 262,000 sq ft of office and retail space. These lettings will generate additional rental income of £12.8 million annually and have resulted in the total annualised rent roll on a consolidated basis now being £39.7 million compared to £23.4 million a year ago. DEVELOPMENTS Stirling Square, 5/7 Carlton Gardens, St James's, SW1 Practical completion on the 95,000 sq ft of office space was achieved on 1 September 1999 and by April 2000, the entire space was fully let. The lettings to BAE Systems, Texas Pacific, Citibank and Kohlberg Kravis Roberts together generate a gross annual rent of £5.9 million. This space was let at rents between £62.50 per sq ft and £68 per sq ft for the ground to fifth floors and £43.40 for the lower ground floor. Of the six residential units on the top two floors, three have been sold. The Panoramic, Grosvenor Road, Pimlico, SW1 The refurbishment works on the 90 apartments were completed in September 1999. 81 units were pre-sold for £46.8 million, with the remaining 9 units being sold by March 2000 for a total of £11.1 million. 33 Glasshouse Street, W1 The refurbishment works were completed in September 1999 and the entire 25,000 sq ft of office space was let by December 1999 to produce a gross annual rent of £1.0 million. This space was let at rents between £37.50 per sq ft and £41 per sq ft. 15 & 16 Grosvenor Street, W1 The refurbishment of No. 16 was completed in November 1999 and the entire 16,000 sq ft of office space was let to Elmsdale Media at £41.20 per sq ft overall. Our long leasehold interest in the property was subsequently sold to a pension fund in June 2000 for £8.82 million. The redevelopment of our freehold at No. 15, behind the existing period facade was completed in April 2000 and the entire 11,500 sq ft of offices has been let to Pirelli UK at a rental of £650,000 per annum equating to £56.50 per sq ft overall. Medius, Sheraton Street, W1 This is the renamed Novello House, which we are refurbishing to produce 68,000 sq ft of offices and 9,000 sq ft of other space. We started on site in May 2000 and we expect to achieve practical completion in June 2001. Much preliminary leasing interest has been received for both the entire property and individual floors. Belgravia Estate, SW1 The agreement for lease of a new food hall of 20,650 sq ft has been exchanged with Waitrose and the outstanding planning and listed building applications are due to be determined in November 2000. A new lease has been exchanged with the Grosvenor Estate to enable the development to proceed and to ensure that the Motcomb Street and Halkin Street areas are managed by us as an integrated shopping and residential area to maximise the value of our interest. As part of the improvements to the Estate, we will carry out a road improvement scheme to Motcomb Street and a streetscape environmental improvement scheme. Golden Square Estate, W1 The first phase of the project involves the refurbishment of 9,800 sq ft of offices which have been pre-let to WCRS at a rental equivalent of £42.75 per sq ft (best space), with practical completion targeted for October 2000. The next phase involves a more comprehensive redevelopment, providing 41,500 sq ft of offices and 16,250 sq ft of other uses, for which the planning, listed building and conservation applications have been submitted in August 2000. Kensington Estate, W8 These properties are owned by our 50.1% subsidiary, 121 KHS Ltd. The remaining 49.9% is owned by Deutsche Bank AG. 121 KHS has accepted from Storehouse Properties a surrender of its lease of the Bhs store comprising 110,000 sq ft on the lower ground, ground, first and second floors. The store has been split into two units and the 41,000 sq ft unit at the junction of Derry Street and Kensington High Street has been pre-let to Gap for a term of 20 years with upwards only rent reviews at 5 yearly intervals with a tenants' option to break the lease at the fifteenth year. Gap anticipates commencing trading in December 2000. The other new store next to Marks & Spencer will comprise 50,500 sq ft and has been pre-let to H&M Hennes Limited ('H&M') for a term of 20 years with upwards only rent reviews at 5 yearly intervals. H&M anticipate commencing trading in Spring 2001. These two new lettings will produce a total annual rental of £3.82m, compared to £1.39m from the old Storehouse lease. Storehouse will receive a premium pay-out for the surrender and the freeholder, The Crown Estate, will receive an additional rent equating to 11.25% of the rents received annually from these two retail lettings. NEXUS ESTATES PLC This is our business centre subsidiary and during the year under review, two centres were opened in the City. 148 Leadenhall Street, EC3 was opened in September 1999 with 125 workstations, and the flagship centre at 1 Cornhill was opened in January 2000 with 302 workstations. Both centres were fully taken up by the year end, well ahead of the original forecast dates. The centres have been well received by our clients, a result of a deliberate product differentiation in a highly competitive market. We are now working with Nexus on 35,000 sq ft of fully flexible 'wired' accommodation in our Grafton Street/Bruton Lane property, which we expect to open in December 2000. During the year, Nexus made an operating loss of £1.06 million (1999 - £99,000) and a pre-tax loss of £1.53 million. The losses were in line with budget and were mainly due to start-up expenses. We anticipate that Nexus will be profitable in the next financial year 2000/2001. PORTFOLIO BALANCE The analysis takes into account all acquisitions and disposals made after the year-end but excludes Medius, Sheraton Street; 1 Cornhill and the remaining three apartments at 5 Carlton Gardens, SW1. * Lease profile 53% of our annual net rental income extends beyond 10 years. Lease Profile % Less than 5 years 34.7% 5-10 years 12.0% 11-15 years 32.2% more than 15 years 21.1% * Location Approximately 88% by value of our properties are in the West End. Location % West End 87.9% City 12.1% * Use 71% of the annual net rental income is derived from offices and 24% from retail use. The 'others' category includes residential and car parking use. Use % Office 70.6% Retail 24.2% Others 5.2% * Tenure Despite our concentration in the West End, where many properties are leasehold, we hold 62% by value of our properties as freeholds or on leases with at least 100 years unexpired. Tenure % Less than 25 years 0.5% 25-49 years 3.1% 50-74 years 10.2% 75-100 years 24.0% More than 100 years 32.6% F/hold 29.6% * Tenant profile Tenants in the financial services sector contribute 24%, whilst 19% of our gross annual income comes from major retailers. Banks 5.4% Government 0.5% Oil Companies 0.5% Financial Services 23.6% U.K. Corporates 13.5% Chartered Surveyors 3.6% Major Retailers 19.0% Computer Companies 2.3% Media Companies 3.1% Others 28.5% FINANCIAL REVIEW NET ASSETS PER SHARE The investment portfolio was revalued by DTZ Debenham Tie Leung Limited, Chartered Surveyors, at the year end. The revaluation showed a net increase of £64.6 million representing an 11.0% uplift on the investment properties held at the year end. This was in addition to the net increase in capital value of £31.6 million that arose at 31 December 1999, when, in line with best practice, the portfolio was revalued for the interim results for the first time. Correspondingly, the total uplift for the full year in the value of the investment properties held as at the year end was 17% (1999 - 6.9%). These percentage uplifts exclude non-income producing developments. The net assets per share have increased from 270.5 pence as at 30 June 1999 to 343.1 pence at the year end, an increase of 26.8% (1999 - 11.1%). OPERATING RESULTS Net rental income for the year increased to £20.3 million from £19.5 million previously. Profit before tax improved by 2.6% to £15.5 million (1999 - £15.1 million) and on an after tax basis, profits also increased to £13.3 million (1999 - £13.2 million). The biggest improvement this year was the combined profit on disposal of investment and trading properties where profits increased by 193% to £12.0 million (1999 - £4.1 million). Earnings per share including net profits on disposal of trading and investment properties improved to 11.2 pence from 10.9 pence. OVERHEADS Total overheads for the year amounted to £3.9 million (1999 - £3.2 million). This represents 19.3% of net rental income (1999 - 16.6%) but it is distorted by the large development and refurbishment programme which, although substantially completed in this financial year, has not generated rental income because of rent free periods granted under the new lettings. Taking the current annualised rent roll of £36.9 million, the total overheads would represent 10.6% (1999 - 13.9%). TAXATION The taxation charge of £2.22 million (1999 - £1.97 million) represents 14.3% of our pre-tax profits (1999 - 13.0%). The low tax charge is a consequence of capital allowances claimed, the utilisation of brought forward losses and a prior year over- provision of £0.7 million. FINANCE The Group finances its operations by a mixture of equity, convertible bonds and bank borrowings. The Group's objective is to maintain sufficient resources to meet its financing requirements at the lowest achievable cost and minimal risk, whilst maintaining sufficient flexibility to fund property acquisitions and capital expenditure. No speculative treasury transactions are undertaken. The main risk arising from the Group's financial liabilities is interest rate risk. The Group borrows at both fixed and floating rates of interest and additionally uses interest rate derivatives to manage the Group's exposure to interest rate movements. The most significant event during the year was the conversion of our secured facility with HSBC to an unsecured facility of £101 million and the addition of an unsecured facility with Barclays Bank for £20 million. Since the year end each of these facilities has been increased by £10 million. At the year end, net borrowings amounted to £267.0 million (1999 - £175.9 million) representing a gearing of 64.3% (1999 - 53.9%). The charts below show the breakdown of the type of borrowings and also the maturity profile as at the year end. TYPE OF BORROWINGS Type of Borrowings % Secured, Non-Recourse 26.6 Secured, Recourse 11.6 Unsecured 61.8 Debt Maturity Profile Year Drawn Undrawn Committed 2001 26.85 3.15 2002 0 0 2003 0 0 2004 7.275 0 2005 90 0 2006 0 2007 23.86 0 2008 72.46 7.54 2009 0 0 2010 0 0 2011 0 0 2012 0 0 2013 50 0 4 YEAR REVIEW Since its recapitalisation in October 1996, Benchmark has undergone rapid transformation to become a key Central London property specialist and as at the year end it had a portfolio of £696 million compared to £20 million in June 1996. Its track record in terms of acquisitions, disposals and capital expenditure is shown on the table below: - £ million 1996/97 1997/98 1998/99 1999/00 Total Acquisitions 176.9 222.0 35.3 186.5 620.7 Disposals - 49.0 85.9 167.0* 301.9 Capital Expenditure 2.4 31.4 63.8 44.4 142.0 * Excluding sale of 49.9% of Kensington Estate During this period, a total gross area of 949,000 sq ft has been or is being refurbished or redeveloped. As Benchmark is primarily a property investment company, one key performance indicator is growth in the net asset value (NAV) per share. Date 30.6.96 30.6.97 30.6.98 30.6.99 30.6.00 NAV per Share, pence 168.1 189.3 243.4 270.5 343.1 During this period, the annual compound growth in NAV per share has been 19.5% per annum and by including the cumulative dividends per share that have been paid or are proposed, the total return has been 20.8% per annum. CONSOLIDATED PROFIT AND LOSS ACCOUNT Year ended 30 June 2000 Note 2000 1999 £'000 £'000 GROSS RENTAL INCOME 25,129 23,221 Ground rents (1,398) (1,361) Irrecoverable property costs (3,009) (1,967) Amortisation of leasehold properties (464) (390) ----- ----- NET RENTAL INCOME 20,258 19,503 Net operating result from Nexus (1,064) (99) Profit on disposal of trading properties 1 3,193 2,491 Administration expenses (3,903) (3,247) ----- ----- OPERATING PROFIT 18,484 18,648 Profit on disposal of investment properties 1 8,790 1,603 ----- ----- PROFIT ON ORDINARY ACTIVITIES BEFORE INTEREST 27,274 20,251 Interest receivable 2 383 345 Interest payable and similar charges 3 (12,173) (5,458) ----- ----- PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 15,484 15,138 Taxation 4 (2,220) (1,974) ----- ----- PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 13,264 13,164 Minority interests 236 - ----- ----- PROFIT FOR THE FINANCIAL YEAR 13,500 13,164 Dividends 5 (5,014) (4,521) ----- ----- RETAINED PROFIT FOR THE YEAR 8,486 8,643 ===== ===== EARNINGS PER SHARE EXCLUDING NET PROFITS ON DISPOSAL OF TRADING AND INVESTMENT PROPERTIES 6 3.5p 8.2p ===== ===== EARNINGS PER SHARE - BASIC AND DILUTED 6 11.2p 10.9p ===== ===== CONSOLIDATED BALANCE SHEET As at 30 June 2000 2000 1999 Note £'000 £'000 FIXED ASSETS Tangible assets Investment and development properties 690,802 495,821 Other tangible assets 2,979 1,564 Investments 1,953 3,048 ------ ------ 695,734 500,433 ------ ------ CURRENT ASSETS Trading properties 4,892 9,321 Debtors 26,510 8,235 Investments 750 750 Cash at bank and in hand 1,317 282 ------ ------ 33,469 18,588 CREDITORS - AMOUNTS FALLING DUE WITHIN ONE YEAR (55,573) (19,267) ------ ------ NET CURRENT LIABILITIES (22,104) (679) ------ ------ TOTAL ASSETS LESS CURRENT LIABILITIES 673,630 499,754 CREDITORS - AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR (192,095) (123,713) CONVERTIBLE UNSECURED LOAN STOCK (49,265) (49,210) PROVISIONS FOR LIABILITIES AND CHARGES (3,234) (705) ------ ------ NET ASSETS 429,036 326,126 ====== ====== CAPITAL AND RESERVES Called up share capital 7 60,518 60,280 Share premium account 8 150,234 149,737 Revaluation reserve 8 145,040 83,693 Other reserves 8 51 51 Profit and loss account 8 59,452 32,365 ------ ------ SHAREHOLDERS' FUNDS 415,295 326,126 Minority interests 13,741 - ------ ------ TOTAL CAPITAL EMPLOYED 429,036 326,126 ====== ====== NET ASSETS PER SHARE 6 343.1p 270.5p ====== ====== GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Year ended 30 June 2000 2000 1999 £'000 £'000 Profit for the financial year 13,500 13,164 Share of surplus arising on revaluation of investment properties 82,290 24,081 Revaluation surplus arising from part disposal of investment property 1,870 - Tax on realisation of revaluation surpluses on investment property disposals (4,212) - ------ ------ Total recognised gains and losses for the year 93,448 37,245 ====== ====== NOTE OF HISTORICAL COST PROFITS AND LOSSES Year ended 30 June 2000 2000 1999 £'000 £'000 Profit on ordinary activities before taxation 15,484 15,138 Realisation of property revaluation surpluses in prior periods 22,813 6,444 ------- ------- Historical cost profit on ordinary activities before taxation 38,297 21,582 ------ ------- Historical cost profit retained after tax and dividends 26,851 15,087 ======= ====== RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS Year ended 30 June 2000 2000 1999 £'000 £'000 Total recognised gains and losses for the year 93,448 37,245 Dividends (5,014) (4,521) Issue of shares 735 - ------ ------ Increase in total capital employed 89,169 32,724 Opening shareholders' funds 326,126 293,402 ----- ------ Closing shareholders' funds 415,295 326,126 ====== ====== CONSOLIDATED CASH FLOW STATEMENT Year ended 30 June 2000 2000 1999 Note £'000 £'000 OPERATING ACTIVITIES Net cash inflow before sales of and additions to trading properties 9(a) 13,820 12,676 Net cash inflow from sales of and Additions to trading properties 9(a) 7,622 44,724 ------ ------ NET CASH INFLOW FROM OPERATING ACTIVITIES 9(a) 21,442 57,400 ------ ------ RETURNS ON INVESTMENTS AND SERVICING OF FINANCE Interest received 368 361 Interest paid (14,085) (11,480) ------ ------ NET CASH OUTFLOW FOR RETURNS ON INVESTMENTS AND SERVICING OF FINANCE (13,717) (11,119) ------ ------ TAXATION Corporation tax paid (1,097) (4,379) ------ ------ CAPITAL EXPENDITURE Acquisition of investment properties (222,314) (92,498) Disposals and other capital receipts 129,176 46,288 Purchase of other fixed assets (1,860) (1,407) Repayment of loan notes by investment 1,095 - ------ ------ NET CASH OUTFLOW FOR CAPITAL EXPENDITURE (93,903) (47,617) ------ ------ EQUITY DIVIDENDS PAID (4,641) (4,340) ------ ------ CASH OUTFLOW BEFORE USE OF LIQUID RESOURCES AND FINANCING (91,916) (10,055) ------ ------ MANAGEMENT OF LIQUID RESOURCES Decrease in cash deposit held as security - 2,700 ------ ------ FINANCING Issue of shares 735 - Increase in debt 9(b) 92,216 6,467 ------ ------ NET INFLOW FROM FINANCING 92,951 6,467 ------ ------ INCREASE/(DECREASE) IN CASH IN THE YEAR 9(b) 1,035 (888) ====== ====== NOTES TO THE ACCOUNTS 1 PROFIT ON DISPOSAL OF TRADING AND INVESTMENT PROPERTIES The profit on disposal of trading and investment properties for the year ended 30 June 2000 comprises: Trading Investment Properties Properties Total £'000 £'000 £'000 Aggregate consideration 25,000 142,015 167,015 Less: sales costs (72) (2,761) (2,833) ------ ------ ------ Net proceeds 24,928 139,254 164,182 Less: historical cost of properties (21,735) (120,526) (142,261) ------ ------ ------ Historical cost profit 3,193 18,728 21,921 Less: revaluation surpluses in prior periods - (11,801) (11,801) ------ ------ ------ 3,193 6,927 10,120 ------ ------ ------ Historical cost profit arising from partial sale of property - 12,875 12,875 Less: revaluation surpluses in prior periods - (11,012) (11,012) ------ ------ ------ - 1,863 1,863 ------ ------ ------ 3,193 8,790 11,983 ====== ====== ====== 2 INTEREST RECEIVABLE 2000 1999 £'000 £'000 Loan notes - related company 119 84 Bank deposits 72 88 Deposits held as security against loans 56 77 Other 136 96 ------ ------ 383 345 ====== ====== The loan notes were issued by Agnew's Property Investments Limited ('APIL') in which the Company has a 25% interest. Other interest includes interest earned on late tenant payments, late completion of property disposals, monies held by solicitors and interest of £28,812 charged to APIL in respect of refurbishment expenditure initially funded by the Group. 3 INTEREST PAYABLE AND SIMILAR CHARGES 2000 1999 £'000 £'000 Amounts payable on bank loans and overdrafts 12,881 8,989 5.75% Convertible Unsecured Loan Stock 2013 2,940 2,836 Less: interest capitalised (3,648) (6,367) ------ ------ 12,173 5,458 ====== ====== 4 TAXATION 2000 1999 £'000 £'000 Taxation based on profit for the year: Corporation tax at 30% (1999 - 30.75%) 539 1,349 Deferred tax 680 625 ------ ------ Current year tax 1,219 1,974 Prior year over-provision (703) - ------ ------ Tax on operating activities 516 1,974 Tax arising on capital items 1,704 - ------ ------ 2,220 1,974 ====== ====== The tax charge has benefited from the utilisation of brought forward losses and capital allowances claimed. Relief has been taken during the year for interest capitalised of £2.9 million (1999 - £4.3 million). 5 DIVIDENDS 2000 1999 £'000 £'000 Interim dividend paid of 1.85p (1999 - 1.75p) per share 2,230 2,110 Final dividend proposed of 2.3p (1999 - 2.0p) per share 2,784 2,411 ------ ------ Total dividends payable for the year of 4.15p (1999 - 3.75p) per share 5,014 4,521 ====== ====== 6 EARNINGS/NET ASSETS PER SHARE The weighted average number of shares in issue during the period was 120,616,866 (1999 - 120,559,542) and the earnings attributable to ordinary shares was £13,500,000 (1999 - £13,164,000). The earnings on ordinary activities excluding net profits on disposal of trading and investment properties comprises net rental income less administration expenses less net interest payable and attributable taxation and amounted to £4,179,000 (1999: £9,836,000). The number of shares in issue at 30 June 2000 was 121,036,371 (1999: 120,559,542) and the net assets attributable to shareholders at 30 June 2000 was £415,295,000 (1999: £326,126,000). Diluted earnings per share have been calculated for all periods adopting the method set out in Financial Reporting Standard 14 - Earnings per Share. In calculating diluted earnings per share, the weighted average number of shares has been increased to 120,638,427 to take into account the dilutive effect of share options. The 5.75% Convertible Unsecured Loan Stock 2013 has not diluted earnings. 7 SHARE CAPITAL 2000 1999 Number Class £'000 £'000 Authorised: 177,000,000 ordinary shares of 50p each 88,500 88,500 ----------- ------- ------ Allotted, called up and fully paid: 120,559,542 ordinary shares of 50p each 60,280 60,280 476,829 ordinary shares of 50p each 238 - ----------- ------ ------ 121,036,371 ordinary shares of 50p each 60,518 60,280 =========== ====== ====== During the year options over 476,829 ordinary shares were exercised under the Company's 1996 Unapproved Executive Share Option Scheme. 8 RESERVES Profit Share Revaluation Other and loss Premium reserve Reserves account Total £'000 £'000 £'000 £'000 £'000 GROUP As at 1 July 1999 149,737 83,693 51 32,365 265,846 Premium on shares issued 497 - - - 497 Share of surplus arising on revaluation of investment properties - 82,290 - - 82,290 Revaluation surplus arising from part disposal of investment property - 1,870 - - 1,870 Revaluation surpluses realised on investment property disposals - (22,813) - 22,813 - Tax on realisation of revaluation surpluses on investment property disposals - - - (4,212) (4,212) Retained profit for the year - - - 8,486 8,486 ------ ------ ------ ----- ----- As at 30 June 2000 150,234 145,040 51 59,452 354,777 ======= ======= ======= ====== ====== 9 NOTES TO THE CONSOLIDATED CASHFLOW STATEMENT (a) Reconciliation of operating profit to operating cash flows 2000 1999 £'000 £'000 Operating profit 18,484 18,648 Depreciation 445 40 Profit on sale of trading properties (3,193) (2,491) Amortisation of leasehold properties 464 390 Increase in debtors (8,013) (1,705) Increase in investments - (750) Increase/(decrease) in creditors 5,633 (1,456) ------- ------- Net cash inflow before sales of and additions to trading properties 13,820 12,676 Net cash inflow from sales of and additions to trading properties 7,622 44,724 ------- ------- Net cash inflow from operating activities 21,442 57,400 ======= ======= (b) Reconciliation of net cash flow to movement in net debt 2000 1999 £'000 £'000 Increase/(decrease) in cash in the year 1,035 (888) Decrease in cash held as security against loans - (2,700) Cash inflow from increase in debt (92,216) (6,467) ------- ------- Movement in net debt (91,181) (10,055) Net debt at start of year (175,854) (165,799) ------- ------- Net debt at end of year (267,035) (175,854) ======= ======= (c) Analysis of net debt 2000 Cashflow 1999 £'000 £'000 £'000 Cash at bank and in hand 1,317 1,035 282 Debt due within one year (26,992) (23,779) (3,213) Debt due after more than one year (241,360) (68,437) (172,923) -------- -------- -------- Net debt (267,035) (91,181) (175,854) ======= ======= ======= 10. Basis of preparation The above financial information does not constitute the Company's full statutory accounts for the years ended 30 June 1999 or 2000 but is derived from those accounts. Statutory accounts for the year ended 30 June 1999 have been delivered to the Registrar of Companies, whereas those for 2000 will be delivered following the company's Annual General Meeting. The auditors have reported on those accounts; their reports were unqualified and did not contain a statement under Section 237 (2) or (3) of the Companies Act 1985. The Annual Report and Accounts will be posted to shareholders on or before 9 October 2000 and will be available from the Company's Registered Office at: 25 Sackville Street, London W1X 1DA.

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