Final Results
Capital & Regional PLC
19 March 2002
19 March 2002
CAPITAL & REGIONAL PLC
2001 PRELIMINARY RESULTS
Capital & Regional plc, the co-investing property asset manager, today announces
its preliminary results for year ended 25 December 2001.
Highlights
• Earnings per share on revenue activities up 31% to 12.4p (2000
(restated): 9.5p)
• Pre-tax profit at £11.4m including £1.4m profit on investment sales
(2000 (restated): £14.2m, including £4.1m profit on investment sales)
• Dividend per share increased by 9% to 6.0p (2000: 5.5p)
• Fully diluted net assets per share, after adjustments for deferred tax
and debt valuation increased to 329p (2000 (restated): 324p)
• Since the year end, the creation of two new property funds with Morley
Fund Management Limited focused on in-town covered centres (The Mall
Limited Partnership) and destination retail parks (The Junction
Limited Partnership)
• Appointment of P-Y Gerbeau as Chief Executive of Xscape Ltd
• Since year end, commenced development for a second Xscape destination
in Castleford, Leeds
Commenting on the results, Martin Barber, Chief Executive said:
" The creation of these two property funds is a major step forward in
implementing our strategy to transform the Group from a pure property investment
company to a co-investing asset manager. The establishment of the funds has
created the opportunity for us to leverage our specialised management skills to
achieve superior returns for shareholders and investors in the funds. We are
confident that we can look forward to significant expansion of these funds and
enhanced returns."
- ends -
For further information please contact Capital & Regional on 020 7932 8000:
Martin Barber, Chief Executive
Lynda Coral, Financial Director
Andrew Hayes / Wendy Baker, Hudson Sandler Ltd - 020 7796 4133
CHAIRMAN AND CHIEF EXECUTIVE'S OVERVIEW
STRATEGY
Through the recent creation of two funds, The Mall, a £670m fund focused on
in-town, covered shopping centres, and The Junction, a £340m fund focused on
major retail parks, the Group has taken a significant step towards becoming a
co-investing real estate asset manager, rather than an investor reliant
predominantly on its own balance sheet.
The Group has, in recent years, been building up highly specialised management
teams in selected sectors, with the aim that each team should be a leader in its
field, enabling them to create value for tenants, the Group's shareholders and
investors in funds managed by the Group.
The successful launch of the Mall and Junction funds confirms the direction that
the Group has taken. The initial investors in the funds are the Group and
clients of Morley Fund Management Limited, the UK based asset management arm of
CGNU. Our objective is a significant expansion of both funds, through new
investors contributing either cash or appropriate property assets.
Since the completion of both of these funds took place after our year end, we
thought it would be helpful to draw your attention to the proforma balance sheet
detailed in Note 14 to the Financial Statements. We set out below a condensed
summary.
Proforma Actual
Dec 2001 Dec 2001
Unaudited Unaudited
£m £m
Property assets 82 717
Investments in joint ventures
Share of assets 612 91
Share of liabilities (322) (62)
290 29
Other net liabilities (64) (433)
Convertible loan stock (24) (24)
Net assets 284 289
RETURN OF CAPITAL
In our recent circular issued to shareholders, we stated the intention to return
£50m of capital to shareholders following the completion of The Mall Fund. We
intend to achieve this return of capital through a fixed price tender offer, the
details of which will be announced shortly. The Board believes it is important
for all shareholders to be given the same opportunity to participate in any
return of capital; the Group has a number of shareholders based in the United
States of America and the Board is currently seeking relevant regulatory
approvals for a tender offer. Further details will be announced as soon as
possible.
FINANCIAL RESULTS AND POSITION
Profit before tax of £11.4m (2000 (restated): £14.2m) includes gains of £1.4m on
investment sales (2000: £4.1m). Earnings per share on revenue activities have
increased by 31% to 12.4p from 9.5p in the previous year. The table below
demonstrates how the effect of new accounting requirements (UITF 28 - Operating
Lease Incentives) reduces profit in the year by £1.7m compared to last year.
2001 2000
£000's £000's
Revenue profit 10,767 9,267
UITF 28 effect (843) 809
Revenue profit restated 9,924 10,076
Profit on sale of investment properties & investments 1,439 4,092
Profit before tax 11,363 14,168
The Directors have resolved to pay a final dividend of 3.5p, making a total for
the year of 6.0p per share, an increase of 9% (2000: 5.5p). The dividend will be
paid on 31 May 2002 to shareholders on the register at the close of business on
5 April 2002. Our facility for dividend reinvestment by shareholders continues.
Set out below is the calculation of net asset value per share after contingent
deferred tax on accumulated revaluation surpluses and fair value adjustment of
fixed rate debt instruments to market value.
2001 2000
pence pence
Diluted net assets per share 343.3 360.6
Deferred tax (11.7) (34.4)
Fair value adjustment of fixed rate
debt (2.7) (2.4)
NAV per share 328.9 323.8
Fully diluted net assets per share, after adjustments for deferred tax and debt
valuation increased to 329p compared to 324p last year. The fall in fully
diluted net assets per share from 361p at December 2000 to 343p at December 2001
has been mitigated by the tax benefit of capital allowances retained on transfer
of the shopping centres to The Mall Fund.
The movement during the year in fully diluted shareholders' funds, net asset
value per share and net asset value per share after adjustment for deferred tax
and debt valuation are summarised in the table below.
Shareholders' Diluted Net Net NAV
funds NAV
£m pence pence
25 December 2000 339.6 359.6 322.8
UITF 28 adjustment 1.0 1.0 1.0
25 December 2000 - restated 340.6 360.6 323.8
Retained profit 6.4 7.1 7.0
Tax on disposals (1.0) (1.1) 19.3
Revaluation of properties and joint
ventures (33.6) (36.9) (30.9)
Share re-purchases (23.3) 13.6 9.7
25 December 2001 289.1 343.3 328.9
Transfer to joint ventures (4.9) (5.4) (2.6)
Proforma 284.2 337.9 326.3
In the two years from December 1999 property sales of £286m were completed
realising historic cost gains of £46.5m and since December 2001 property
transfers to co-investment vehicles have been completed at December 2001 values
of £649m at a surplus over historic cost of £74m.
The Group's borrowings at 25 December 2001 were £465.8m (2000: £615.6m)
including £24.6m (2000: 24.6m) of Convertible Subordinated Unsecured Loan Stock
(CULS). The Group's share of non-recourse borrowings by joint ventures was an
additional £44m (2000: £27.8m). Net cash balances were £8.6m (2000: £6.1m).
As shown in the proforma balance sheet in Note 14, disposals completed since the
year end have reduced net debt to £87.4m with the Group's share of joint venture
borrowings increased to £304.5m. December 2001 fully diluted gearing of 138%
(2000: 159%) has been significantly reduced by these disposals since the year
end to 20%. However, including the Group's share of joint ventures borrowings,
gearing would be 119% as per the proforma balance sheet.
OPERATING REVIEW
Shopping Centres
2001 saw further positive development within our core shopping centre portfolio.
We achieved a 7.2% increase in net passing rent level to £38.6m (2000: £36.0m).
Estimated rental value increased by 4% to £44.9m (2000: £43.2m)
The centres have continued to benefit from our creative management and
innovative marketing and promotions. Ancillary income has increased by 38% in
2001 and occupier demand remains strong; void levels continued to decline in
2001 to 3.0% of estimated rental value (2000: 3.8%). Our average weekly
footfalls increased by 3% which equates to an additional 27,250 visits per week
(excluding Birmingham and Romford where major adjacent redevelopment works have
temporarily suppressed footfall).
Across the portfolio we continue to provide a secure, clean and vibrant shopping
environment for both our shoppers and retailers. This is achieved by working
together with all our business partners, local communities and authorities. Our
average budgeted 2002 service charge is currently 24% below the relevant JLL
Oscar benchmark, excluding marketing where we plan to spend some 14% more on
marketing than this peer group.
Operational savings across the portfolio have seen an 18% reduction in
electricity and gas consumption. Our efforts were recognised this year by the
Jupiter Asset Management Environmental Research Group for Environmental Property
Management, following a property industry-wide survey.
We continue to focus ourselves as a 'Community Mall business' and to provide
support to numerous local community groups, such as schools and charitable
organisations. We combine this local support with portfolio-wide national
initiatives such as The Giving Tree scheme and Breast Cancer Awareness
fundraising promotions and we were delighted to raise £40,000 for this
particular organisation over the year.
The Mall Fund
In February 2002 we announced that the Group had completed its negotiations with
Morley to form The Mall Limited Partnership, a new property fund focused on
in-town covered shopping centres which is initially owned jointly by the Group
and clients of Morley Fund Management Limited. Morley acts as Fund Manager and
Capital & Regional is the Property and Asset Manager.
We have sold eight of our shopping centres to The Mall Fund for a total
consideration of £467m. Clients of Morley Fund Management Limited have sold
three shopping centres to The Mall Fund for a total consideration of £189m. From
the respective proceeds, under the terms of the Fund Agreements, the Group and
Clients of Morley Fund Management Limited have each paid £170m in return for a
50 per cent stake each in The Mall Fund. The remaining consideration of £297m
due to us has been received in cash and has been utilised to repay debt.
Completion took place on 28 February 2002.
The creation of The Mall Fund is in line with our stated strategy and is
intended to enable us to leverage our equity and management expertise across a
larger number of properties to generate greater value for our shareholders. We
will, going forward, receive income both from management fees on all the
properties within The Mall Fund and from distributions from The Mall Fund. We
will also benefit, although indirectly, from capital increases in the value of
the properties within The Mall Fund, as such increases are expected to increase
the value of our investment in that fund.
Our strategic objective is to increase this shopping centre fund to
approximately £2bn over the next three years.
The Mall Portfolio Review
Aberdeen, The Trinity Centre (200,000 sq ft)
Continued strong trading performance from this fully let centre driven by a 4.5%
increase in footfall.
Barnsley, The Alhambra Centre (170,000 sq ft)
New tenants, Adams, Body Care and Perfume Shop all commenced trading during
2001. The centre continues to improve with year-on-year footfall up 5.3%.
Bexleyheath, Broadway Shopping Centre (395,000 sq ft)
Acquired in The Mall Fund on 28 February 2002, this is a large, major centre
with strong retailer demand. We plan to work with the Local Authority to
improve the centre's physical environment and to reconfigure large space users
to satisfy this demand.
Birmingham, The Pallasades (300,000 sq ft)
Despite Railtrack's well publicised problems, negotiations on tenure regearing
continue. At the same time we continue to take the opportunity to improve
income and rental value. This year additional rental area was created by
remodelling the South Mall together with the introduction of new tenants.
Edgware, Broadwalk Shopping Centre (195,000 sq ft)
Acquired in The Mall Fund on 28 February 2002, a strong, convenience centre with
excellent public and private transport linkage with good extension and leisure
opportunities.
Epsom, The Ashley Centre (358,000 sq ft)
The remodelling of West Square was completed with Hammicks the bookshop
extending into a previously vacant space. Next also tripled the space it
previously occupied. Footfall increased by approximately 5.5%.
Falkirk, The Howgate Centre (170,000 sq ft)
Clinton Cards doubled its sales area and Scottish fashion multiple, Quiz, took
representation. The completion of the car park refurbishment produced increased
revenues of 3.6% year-on-year.
Ilford, The Exchange Mall (355,000 sq ft)
Acquired in The Mall Fund on 28 February 2002, this is a large, successful
centre, again with significant retailer demand to be satisfied by
reconfiguration.
Romford, Liberty 2 (320,000 sq ft)
Wilkinsons commenced trading from the former Sainsbury's store. We assumed
control of the centre car parks in advance of refurbishment. Planning consent
was achieved on the adjacent Dolphin extension site.
Walthamstow, Selborne Walk (281,000 sq ft)
The re-letting of the former Mothercare unit to First Sport and Thomas Cook was
completed. The surrender of negotiations for KwikSave supermarket were also
concluded and this space will be remodelled during 2002 together with the
introduction of a branded catering offer.
Wood Green, Shopping City (670,000 sq ft)
Our major refurbishment programme was completed in 2001 with a new Woolworths
store opening and year-on-year footfall increased by 4%. Our General Manager,
Mike Thompson, was runner up 'In-Town Manager of the Year' at Shopping Centre
Magazine's 2001 SCEPTRE Awards.
Retail Parks
Tenant demand has remained buoyant throughout the year fuelled by continued
consumer spending and institutional demand for retail parks remains strong.
Our strategy of owning and developing retail parks through joint ownership is
now well underway:
The Junction Limited Partnership
In November of 2001 we exchanged contracts with Morley Fund Management to form a
Retail Park Investment Fund. Initially, both Capital & Regional and clients of
Morley each own 50% of the Fund's equity. Morley acts as Fund Manager and
Capital & Regional is the Property and Asset Manager.
We have transferred six of our retail parks into the Fund for a cash
consideration of £165m, of which £13.7m is deferred payable on the completion of
development works under way. Of these proceeds, £85m has been re-invested in the
Fund with the balance used to reduce Group debt. All of the assets that have
been transferred into the Fund are retail parks, which are, or are capable of
becoming, major anchored parks. Clients of Morley have transferred five of their
retail parks into the Fund for £171m. Completion took place on 3 January 2002.
The Fund is responsible for all development costs associated with the portfolio.
Royal Bank of Scotland has extended an initial facility of £170m with further
development facilities available.
We believe that by merging our portfolio of large scale retail parks with that
of Morley, we have created a major opportunity to enhance value by branding and
providing innovative additional attractions. The Junction Limited Partnership
is intended to be the first branded retail park portfolio focused on creating
destination parks of over 120,000 sq ft. Our target is to increase this retail
park fund to around £1.2bn over the next 3 years.
The roll out of The Junction brand will commence in the summer of 2002 at Hull,
and it is hoped that the entire portfolio will be rebranded within 3 years.
The Junction Portfolio Review
Aylesbury (94,000 sq ft)
A detailed planning application has been submitted for a scheme comprising
195,000 sq ft and consent is anticipated in June 2002.
Beckton (192,000 sq ft)
The redevelopment, including a new 90,000 sq ft Big W, is well underway for
completion set for the summer. Further phases up to 120,000 sq ft of retail and
leisure floor space are planned.
Hull (272,000 sq ft)
The new 100,000 sq ft destination B&Q store opened in October and is trading
above expectations. Planning consent for a further phase of 100,000 sq ft, where
terms have already been agreed for a new 40,000 sq ft destination anchor, is
anticipated during the year.
Leeds (140,000 sq ft)
Our proposals for this retail park, located adjacent to the M1 motorway, include
widening the current restricted planning consent to enable us to attract a
destination retailer providing the catalyst to let vacant space at significantly
higher rents.
Leicester (169,000 sq ft)
This Open A1 non-food retail park is capable of extension by a further 64,000 sq
ft subject to planning, land acquisition and tenant restructuring. A new letting
has already been agreed at £20/sq ft, some £2.75/sq ft higher than the previous
rent.
Maidstone (160,000 sq ft)
This scheme is already the major retail park within this prosperous town. Tenant
engineering and extensions should commence this year.
Oldbury (37,000 sq ft)
A detailed planning application has been submitted for the first phase
comprising 130,000 sq ft pre-let to Homebase and consent is anticipated during
the first half of 2002. Following the Local Planning inquiry, we are hopeful of
a balance of the site currently under our control, comprising 30 acres, being
reallocated for retail and leisure use.
Oxford (138,000 sq ft)
Our proposals for this Open A1 non-food retail park include provision of first
floor space to increase the size of the park to 190,000 sq ft, subject to
planning and tenant restructuring.
Sheffield (160,000 sq ft)
Our plans for this retail park include creating space for two destination
retailers thereby significantly increasing rental levels.
The Capital Hill Partnership
Our limited partnership with Hermes Property Unit Trust is progressing well.
Planning consent has been obtained to extend the existing 160,000 sq ft retail
park in Stratford upon Avon by 15,000 sq ft which has already been pre-let to
Matalan.
An agreement to lease for our second destination retailer, B&Q, has been
exchanged for a 60,000 sq ft store.
We are hopeful of obtaining planning consent to extend the park by a further
75,000 sq ft to 250,000 sq ft during 2002.
The Auchinlea Partnership
In January 2002, we announced the formation of the Auchinlea Partnership with
Pillar to re-develop our existing Junction 10 retail park, Glasgow, together
with an adjacent site of approximately 70 acres to create 'The Glasgow Fort', a
500,000 sq ft shopping and leisure park.
Outline planning consent has already been granted for an open A1 scheme and a
detailed planning application submitted with consent anticipated during the
first half of the year.
Tenant demand is very encouraging and we are looking forward to creating
Scotland's premier shopping park.
Xscape
Xscape, our innovative development concept where retail and food and beverage
are successfully combined with leisure, has had an exciting year in 2001. The
first destination, in Milton Keynes, had its first full year of trading and
attracted 4.2 million visitors. The scheme is almost fully let and the success
of the concept was recognised at the prestigious Property Week Leisure Property
Awards where Xscape won two out of four awards, The Best Major Leisure Scheme
and The Best Innovative Concept.
Mid-year we realised the formidable value and expansion potential of combining
the two worlds of leisure property development with entrepreneurial and business
skills. Consequently, we appointed P-Y Gerbeau (Former CEO of the Millennium
Dome and Vice President of Euro Disney) as Chief Executive of Xscape Ltd,
together with a specialised management team, to help us build Xscape as an
international brand and business.
Under P-Y's direction, the Xscape brand was launched at the end of November. It
has received enthusiastic support from both the consumer and business
communities. Following the implementation of the new focused business, brand and
marketing strategies and product improvements, Xscape Milton Keynes is
fulfilling its potential as a unique destination, successfully mixing retail and
catering, with leisure, 'Xtreme sports' and entertainment.
We believe the key to Xscape's continued success is the combination of a good
property performance and brand goodwill with additional cash flow streams,
including events and sponsorship, together with new target markets, including
corporate hospitality, families and students.
After four months of implementation the results are already validating our new
strategy. We are achieving a 25% increased footfall year-on-year and
substantially increased dwell times. We have targeted new market segments and
introduced new brand partners and sponsors.
To build on the Xscape Milton Keynes success, support Xscape as an international
brand and capitalise on the first mover advantage Xscape has an immediate and
aggressive expansion plan. In March 2002, we announced that the Group, together
with PRICOA Property Investment Management ('PRICOA'), had completed the
purchase of a 20 acre site in Castleford, Leeds to develop the second Xscape
destination. The £58m development is a joint venture between the Group and
Hanover Property Unit Trust, which is managed by PRICOA. Many of our lead
tenants at Milton Keynes, including Cine UK Limited, Snozone Limited (a Capital
& Regional subsidiary), Ellis Brigham Limited and Slivertrek Limited, have
entered into pre-commitments for this new centre in Castleford. The scheme is
66% pre-let and construction has already commenced with completion expected in
Autumn 2003.
We continue our pre-planning of two further Xscape destinations in Braehead,
Glasgow and Castrop Rauxel in the Ruhr, Germany.
MANAGEMENT
The strength and diversity of our management teams continues to underpin the
Group's strong performance. Their innovative and unique approach to the
management and marketing of these property assets enables us to continue to
generate enhanced returns and future growth for our shareholders, tenants and
investors in the funds.
As mentioned above, our team was further strengthened this year, with the
appointment of P-Y Gerbeau as Chief Executive of Xscape Ltd. His distinctive
management approach has already had a very positive impact at Milton Keynes and,
as we embark on the Xscape roll-out programme, his leadership has brought new
and dynamic impetus to our plans.
On behalf of the Board, we would like to express our sincere thanks to all our
management and staff for their continued commitment to the Group during the
year.
OUTLOOK
We believe that there is an exciting opportunity for the Group over the next few
years to deliver significant value to our shareholders through the further
development of our co-investing property asset management model. We are
confident that the strength and depth of our management team, which has been
recognised by Morley Fund Management, will attract further interest from
additional investors. This would enable us to achieve our objectives to expand
our funds under management significantly, at the same time as maintaining a
rigorous process of selection of the property assets acquired.
Tom Chandos Martin Barber
CHAIRMAN CHIEF EXECUTIVE
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the year ended 25th December 2001
Unaudited
Restated
2001 2000
Notes £000 £000
Turnover: group rental income and share of joint ventures'
turnover 72,704 79,495
Less: share of joint ventures' turnover 6 (15,620) (11,877)
Group rental income 57,084 67,618
Net property costs (8,052) (9,687)
Net rental income 49,032 57,931
Profit on the sale of trading and development properties 1 183 306
49,215 58,237
Administrative expenses (8,645) (7,955)
40,570 50,282
Other operating income 679 502
Group operating profit 41,249 50,784
Share of operating profit in joint ventures and associates 6 3,068 476
44,317 51,260
Profit on sale of investment properties and investments 1 1,439 4,092
Profit on ordinary activities before interest 45,756 55,352
Income from listed investments - 659
Interest receivable and similar income 1,587 824
Interest payable and similar charges 2 (35,980) (42,667)
Profit on ordinary activities before taxation 11,363 14,168
Taxation (427) (413)
Profit on ordinary activities after taxation 10,936 13,755
Equity minority interests 250 (431)
Profit attributable to the shareholders of the Company 11,186 13,324
Equity dividends paid and payable (4,731) (5,070)
Profit retained in the year 6,455 8,254
Earnings per share 3a 13.6p 13.7p
Earnings per share - diluted 3b 13.5p 13.7p
Earnings per share on revenue activities 3c 12.4p 9.5p
The results of the Group for the year related entirely to continuing operations
within the meaning of Financial Reporting Standard No. 3.
NOTE OF HISTORICAL COST PROFITS AND LOSSES
For the year ended 25th December 2001
Unaudited
Restated
2001 2000
£000 £000
Reported profit on ordinary activities before taxation 11,363 14,168
Realisation of property revaluation surplus of previous years 22,157 74
Realisation of other investment revaluation surplus of previous years - 18,099
Realisation of property revaluation surplus of previous years in joint ventures - 40
Historical cost profit on ordinary activities before taxation 33,520 32,381
Historical cost profit for year retained after taxation, minority interests and
dividends 24,814 23,365
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
For the year ended 25th December 2001
Unaudited
Restated
2001 2000
£000 £000
Share of unrealised deficit on valuation of investment properties (33,003) (32,852)
Share of unrealised (deficit) / surplus on valuation of other fixed assets (117) 512
Share of unrealised deficit on valuation of properties in joint ventures (537) (561)
Share of tax on revaluation surpluses realised in year (3,218) (3,614)
Deferred tax asset / (liability) provided on unrealised revaluation surpluses 2,205 (2,952)
Exchange differences - 3
(34,670) (39,464)
Profit attributable to shareholders 11,186 13,324
Total recognised gains and losses relating to the year (23,484) (26,140)
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
For the year ended 25th December 2001
Unaudited
Restated
2001 2000
£000 £000
Profit for the year attributable to shareholders of the Company 11,186 13,324
Equity dividends paid and payable (4,731) (5,070)
Profit retained in the year 6,455 8,254
Share capital and share premium issued in year (net of expenses) 34 20
Share capital purchased and cancelled in year (including expenses) (23,325) (20,759)
Other recognised gains and losses relating to year (see above) (34,670) (39,464)
Net addition to shareholders' funds (51,506) (51,949)
Opening shareholders' funds 340,617 392,566
Closing shareholders' funds 289,111 340,617
CONSOLIDATED BALANCE SHEET
As at 25th December 2001
Unaudited
Restated
2001 2000
Notes £000 £000 £000 £000
Fixed assets
Property assets 5 703,338 916,485
Other fixed assets 13,966 14,521
717,304 931,006
Investment in joint ventures: 6
share of gross assets 91,497 68,084
share of gross liabilities (62,014) (38,270)
29,483 29,814
746,787 960,820
Current assets
Property assets 28,126 18,846
Debtors:
amounts falling due after more than one year 7 8,307 5,541
amounts falling due within one year 7 29,795 42,272
Cash at bank and in hand 8,567 6,091
74,795 72,750
Creditors: amounts falling due within one year 8 (70,655) (129,705)
Net current assets / (liabilities) 4,140 (56,955)
Total assets less current liabilities 750,927 903,865
Creditors: amounts falling due after more than one
year (including convertible unsecured loan stock) 9,10 (461,816) (556,582)
Provisions for liabilities and charges 11 - (2,952)
Net assets 289,111 344,331
Capital and reserves
Called up share capital 7,886 8,874
Share premium account 161,927 161,895
Revaluation reserve 82,988 130,770
Other reserves 2,535 1,545
Profit and loss account 33,775 37,533
Equity shareholders' funds 289,111 340,617
Equity minority interests - 3,714
Capital employed 289,111 344,331
Net assets per share adjusted for minority interests 13 366.6p 383.9p
Net assets per share adjusted for minority interests -
diluted 13 343.3p 360.6p
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 25th December 2001
Unaudited
Restated
2001 2000
£000 £000 £000 £000
Net cash inflow from operating activities 38,232 49,514
Dividends received from joint ventures 928 180
Dividends received from associates - 5
Returns on investments and servicing of finance
Dividends received from listed investments - 625
Interest received 1,548 795
Interest paid (35,352) (44,063)
Dividend paid to minority interests (2) -
Loan arrangement costs (89) (317)
(33,895) (42,960)
5,265 6,739
Taxation
UK corporation tax paid (2,962) (622)
UK corporation tax recovered 115 -
USA withholding tax recovered 70 -
(2,777) (622)
Net operating cash flow 2,488 6,117
Capital expenditure and financial investment
Payments for:
Additions to investment properties (20,110) (56,423)
Additions to properties held as current assets (18,407) (20,746)
Additions to other tangible assets (306) (1,239)
Loans to joint ventures (4,820) (2,433)
Receipts from:
Sale of investment properties 216,033 1,632
Sale of properties held as current assets 16,778 43,562
Sale of other tangible assets 112 108
Sale of investments - 25,042
Repayment of loans by joint ventures 1,710 2,337
190,990 (8,160)
193,478 (2,043)
Acquisitions and disposals
Additions to joint ventures - (18,025)
Reclassification of cash in joint arrangement - (591)
Acquisition of minority interests in subsidiary (2,929) (100)
(2,929) (18,716)
190,549 (20,759)
Equity dividends paid (4,855) (5,134)
Cash in / (out) flow before financing 185,694 (25,893)
Financing
Issue of ordinary share capital 34 20
Share capital purchased and cancelled in year (33,491) (10,593)
Bank loans received 72,604 108,765
Bank loans repaid (222,365) (73,596)
(183,218) 24,596
Increase / (decrease) in cash 2,476 (1,297)
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 25th December 2001
Unaudited
1. Asset sales
Fixed assets Current assets Total
2001 2000 2001 2000 2001 2000
£000 £000 £000 £000 £000 £000
Net sale proceeds 216,029 26,674 8,047 35,353 224,076 62,027
Cost of sales (192,433) (4,273) (7,864) (35,047) (200,297) (39,320)
Historical cost profit 23,596 22,401 183 306 23,779 22,707
Revaluation surplus (22,157) (18,173) - - (22,157) (18,173)
1,439 4,228 183 306 1,622 4,534
Permanent diminution in value of fixed
property asset - (225) - - - (225)
Share of joint ventures - 89 - - - 89
Profit recognised on sale of assets 1,439 4,092 183 306 1,622 4,398
2. Interest payable and similar charges
2001 2000
£000 £000
Bank loans and overdrafts wholly repayable within five years 31,985 42,823
Other loans 1,663 1,663
33,648 44,486
Capitalised during year (115) (2,678)
33,533 41,808
Share of joint ventures' (see note 6) 2,447 859
35,980 42,667
3. Earnings per share
a) Earnings per share have been calculated on the weighted average number of
Ordinary shares of 10p each in issue during the year 82,272,918 (2000:
97,042,630) and have been based on profit on ordinary activities after taxation
and minority interests of £11,186,000 (2000 (restated): £13,324,000).
b) Diluted earnings per share have been calculated after allowing for the
exercise of share options which have met the required exercise conditions. The
calculation does not include conversion of the Convertible Unsecured Loan Stock
as the effect on earnings per share is not dilutive. The weighted average number
of Ordinary Shares of 10p each is 82,613,354 (2000: 97,256,996) and the relevant
earnings are £11,186,000 (2000 (restated): £13,324,000).
c) Earnings per share on revenue activities exclude the profit on the sale of
investment properties and investments, and associated tax charge and minority
interests thereon, of £1,007,000 (2000: £4,101,000).
4. Prior year adjustment - UITF 28 'Operating lease incentives'
The Group has adopted Urgent Issues Task Force Abstract 28 (UITF 28), 'Operating
lease incentives', in these financial statements. In accordance with the
requirements of UITF 28, the previous year's results have been restated to
reflect its application to all affected lease agreements starting on or after 26
December 1999. The effect of this restatement together with the impact on the
current year's results are summarised below:
2001 2000
£000 £000
(Decrease) / increase in group rental income (357) 914
Reduction in share of operating profit of joint ventures (486) (105)
Increase in taxation charge (236) (472)
Increase in equity minority interests in profit for the year - (40)
(Decrease) / increase in profit for the year attributable to shareholders of the
Company (1,079) 297
Reduction in unrealised deficit on revaluation of investment properties in joint
ventures 611 253
Reduction in unrealised deficit on revaluation of investment properties 1,018 509
Increase in shareholders' funds in the year 550 1,059
Decrease in carrying value of investment properties (368) (5,196)
Increase in investment in joint ventures 101 148
Increase in prepayments and accrued income due after more than one year 452 5,541
Increase in prepayments and accrued income due within one year 576 1,572
Increase in corporation tax creditor (211) (472)
Increase in accruals and deferred income - (494)
Increase in equity minority interests - (40)
550 1,059
5. Property assets
Investment properties
Freehold Leasehold
properties Properties Total
Group £000 £000 £000
Cost or valuation:
As at 25 December 2000 578,868 342,813 921,681
Less: UITF 28 adjustment (4,940) (256) (5,196)
As at 25 December 2000 - restated 573,928 342,557 916,485
Additions 27,009 7,451 34,460
Amortisation of short leasehold properties - (203) (203)
Disposals (195,262) (18,808) (214,070)
Revaluation (15,702) (17,632) (33,334)
As at 25 December 2001 389,973 313,365 703,338
The year end balance is analysed as follows:
Historical cost 323,627 301,443 625,070
Revaluation surplus 66,346 11,922 78,268
A list of the valuers, and the basis of the valuations, are summarised in note
12.
6. Investment in joint ventures
Restated
2001 2000
£000 £000
At beginning of year 29,666 2,222
UITF 28 adjustment 148 -
At beginning of year - restated 29,814 2,222
Subscription for share capital 650 18,050
Reclassification of net investment in joint arrangement - 10,600
Dividends and capital distributions received (928) (180)
Share of results (see below) 703 (283)
Share of taxation (see below) (227) (34)
Share of property revaluation (deficit) / surplus (529) (561)
At end of year - restated 29,483 29,814
UITF 28 adjustment - (148)
At end of year 29,483 29,666
Analysis of investment in joint ventures:
Xscape Milton Sauchiehall Exchange
Keynes The Capital Hill Centre Easter Court
Partnership£000 Partnership£000 Limited Holdings Properties
£000 Limited Limited Others Total
£000 £000 £000 £000
Group share of results:
Turnover 1,495 1,067 810 11,773 475 15,620
Operating profit 1,142 1,012 818 618 (522) - 3,068
Interest receivable and
similar income 20 9 13 18 3 - 63
Interest payable and
similar charges (1,671) - (461) (269) (46) - (2,447)
Equity minority interests - - - 19 -
- 19
Profit / (loss) before tax (509) 1,021 370 386 (565) - 703
Taxation - - (87) (140) - - (227)
Profit / (loss) after tax (509) 1,021 283 246 (565) - 476
Group share of:
Investment properties 35,913 18,750 20,674 2,244 - - 77,581
Development properties at
cost - - - 4,004 686 - 4,690
Other current assets 3,606 670 1,325 3,396 20 209 9,226
Gross assets 39,519 19,420 21,999 9,644 706 209 91,497
Current liabilities 7,933 461 1,815 2,856 7 16 13,088
Loans 23,400 - 19,775 5,251 500 - 48,926
Gross liabilities 31,333 461 21,590 8,107 507 16 62,014
Share of net assets 8,186 18,959 409 1,537 199 193 29,483
Effective Group share 50% 50% 50% 50% 50% 50%
Potential recourse to the
Group Nil Nil Nil Nil 1,000 Nil
Actual recourse at end of
year Nil Nil Nil Nil 1,000 Nil
A list of valuers and the basis of the valuation are summarised in note 12.
The joint ventures all operate in the UK.
7. Debtors
Restated
2001 2000
£000 £000
Amounts falling due after more than one year
Amounts owed by joint ventures 2,750 -
Prepayments and accrued income 5,557 5,541
8,307 5,541
Amounts falling due within one year
Trade debtors 16,589 16,645
Amounts owed by joint ventures 4,549 4,873
Other debtors 1,480 2,989
Tax recoverable and deferred tax 2,639 255
Prepayments and accrued income 4,538 17,510
29,795 42,272
8. Creditors: amounts falling due within one year
Restated
2001 2000
£000 £000
Bank loans (secured) 3,541 58,351
Unamortised issue costs (240) (352)
Trade creditors 4,631 7,802
Other creditors 2,383 11,746
Taxation and social security 3,085 2,903
Corporation tax 7,952 4,186
Accruals and deferred income 46,543 42,185
Proposed dividends 2,760 2,884
70,655 129,705
9. Creditors: amounts falling due after more than one year
2001 2000
£000 £000
Bank loans (secured) 437,650 532,600
Unamortised issue costs (148) (241)
437,502 532,359
Convertible loan stock (unsecured) 24,642 24,642
Unamortised issue costs (328) (419)
24,314 24,223
461,816 556,582
Bank loans are secured on properties valued at £699,210,000.
10. Bank loans and debt
The Group's interest rate profile is after taking account of the effect of
swaps, as follows:
Weighted Weighted
Total average Average
£000 interest rate period-years
Fixed and swapped loans 198,642 7.45% 2.8
Variable rate loans 267,191 5.38% n/a
465,833 6.26%
Variable rate loan interest rates are based on three month LIBOR.
10. Bank loans and debt (continued)
A valuation was carried out by JC Rathbone Associates Limited as at 25th
December 2001 and 25th December 2000 to calculate the market value of the fixed
rate instruments on a replacement basis and the expiry profile of the resulting
fair value adjustment. The table below shows the market value of fixed rate debt
instruments, and reflects the difference between the interest rate yield curve
as at 25th December 2001 and the rate historically committed; namely the fair
value adjustment.
Fair value Fair value
Book Notional Fair adjustment adjustment
Value value value 2001 2000
£000 £000 £000 £000 £000
Convertible unsecured loan stock 24,642 n/a 24,642 - -
Bank borrowings - n/a - - (324)
Interest rate swaps n/a 174,000 177,570 (3,570) (3,164)
24,642 174,000 202,212 (3,570) (3,488)
Minority interests - 81
Fair value adjustment attributable to Group (3,570) (3,407)
Net of tax at 30% (2000: 30%) (2,499) (2,385)
The fair value adjustment represents approximately 0.77% (2000: 0.57%) of Group
borrowings and has a notional adverse effect on fully diluted net asset value
per share of 2.7p (2000: adverse 2.4p).
Interest rate swaps and bank fixed rates have been valued on a replacement
basis. They have been valued against the offered side of the zero coupon yield
curve commencing on 25th December 2001 and ending on the contracted expiry
dates.
The expiry profile of the fair value adjustment is shown in the table below:
Fair value Fair value
adjustment adjustment
2001 2000
£000 £000
2001 - (1,678)
2002 (3,191) (1,541)
2003 (379) (269)
(3,570) (3,488)
The bank loans are repayable as follows:
2001 2000
£000 £000
Aggregate amount repayable:
Between one and two years 277,700 200
Between two and five years 151,350 523,600
Greater than five years 8,600 8,800
Total loans due after more than one year 437,650 532,600
Loans due in one year or less or on demand 3,541 58,351
Total loans 441,191 590,951
11. Provision for liabilities and charges
Deferred taxation
The amounts of deferred taxation provided and unprovided in the accounts are as
follows:
Provided Provided Not provided Not provided
2001 2000 2001 2000
£000 £000 £000 £000
Tax on capital gains if investment assets were sold at
their current valuation - 2,952 8,815 24,356
Accelerated capital allowances - - 1,870 10,442
- 2,952 10,685 34,798
Included in debtors under the heading Tax recoverable is a £2,205,000 deferred
tax asset.
If a provision was made for deferred taxation that has not been provided it
would have an adverse effect on net assets per share of 13.6p (2000: 39.2p) and
on fully diluted net assets per share of 11.7p (2000: 34.4p).
12. Valuations
The properties were valued at 25th December 2001, as follows:
Valuer Basis of valuation £000
Group properties
DTZ Debenham Tie Leung Open market value 36,900
Insignia Richard Ellis Limited Open market value 31,310
Directors Net sale proceeds of properties
sold after 25th December 2001 616,075
Directors Open market value 25,370
Total fixed property assets 709,655
Other fixed assets DTZ Debenham Tie Leung Open market value 13,500
Total property assets 723,155
Fixed property assets at 25th December 2001 as per balance sheet 703,338
UITF 28 adjustment at 25th December 2001 included in debtors 6,317
Total fixed property assets as valued above 709,655
Valuer Basis of valuation £000
Properties held by joint ventures
Xscape Milton Keynes
Partnership
DTZ Debenham Tie Leung Open market value 75,050
Capital Hill Partnership Knight Frank Open market value 37,500
Sauchiehall Centre Limited Montagu Evans Open market value 42,500
Easter Holdings Limited Easter Holdings Limited Open market value 4,489
159,539
Valuations are at open market value as defined in the Appraisal and Valuation
Manual of The Royal Institution of Chartered Surveyors.
13. Net assets per share
Net assets per share have been calculated on Ordinary shares of 10p each
78,855,975 (2000: 88,734,623) in issue at the year end and have been based on
net assets attributable to shareholders of £289,111,000 (2000: £340,617,000).
Diluted net assets per share assume that all the CULS had converted at the
balance sheet date. Diluted net assets per share have been calculated on
91,268,146 (2000: 101,146,794) Ordinary shares of 10p each and have been based
on adjusted net assets attributable to shareholders of £313,334,000 (2000:
£364,749,000) by adding the £24,223,000 (2000: £24,132,000) balance sheet value
of CULS.
14. Post balance sheet events
On 3rd January 2002 the Group transferred a portfolio of six retail parks into
The Junction Limited Partnership, a joint venture with Morley Fund Management
Limited, for a total consideration of £165,200,000 of which £13,700,000 was
deferred. The Group simultaneously invested £85,000,000 in the new joint venture
and repaid bank loans, due after one year, with the balance of the proceeds
after sale costs.
On 8th January 2002 the Group transferred the Junction 10 Retail Park into a
joint venture with Pillar Property plc for a total consideration of £19,500,000.
The Group simultaneously invested £5,200,000 in the new joint venture and repaid
bank loans, due after one year, with the balance of the proceeds after sale
costs. On 7th March 2002 the Group was reimbursed £1,130,000 of costs, held as
current property assets, relating to the proposed redevelopment of the Junction
10 Retail Park.
On 28th February 2002 the Group transferred its portfolio of eight shopping
centres and a trading property into The Mall Limited Partnership, a joint
venture with Morley Fund Management Limited, for a total consideration of
£467,300,000. The Group simultaneously invested £170,000,000 in the new joint
venture and repaid bank loans, due after one year, with the balance of the
proceeds after sale and transaction costs. The Group incurred exceptional loan
breakage and transaction arising from the transaction, which will be recognised
in the 2002 financial statements.
The effect of the above transactions on the Group balance sheet as at 25th
December 2001 is as follows:
Unaudited The Junction The Mall
Limited Limited
December Auchinlea Partnership
2001 Partnership
Partnership £000 Pro-forma
£000 £000
£000 £000
Fixed assets
Property assets 703,338 (161,002) (19,500) (454,587) 68,249
Other fixed assets 13,966 - - - 13,966
Tangible assets 717,304 (161,002) (19,500) (454,587) 82,215
Investment in joint ventures
Share of gross assets 91,497 170,000 10,700 340,000 612,197
Share of gross liabilities (62,014) (85,000) (5,500) (170,000) (322,514)
29,483 85,000 5,200 170,000 289,683
746,787 (76,002) (14,300) (284,587) 371,898
Current assets
Property assets 28,126 (2,875) (1,130) (3,400) 20,721
Debtors 38,102 12,627 - (5,063) 45,666
Cash at bank and in hand 8,567 - - - 8,567
74,795 9,752 (1,130) (8,463) 74,954
Creditors: amounts falling due within one year (70,655) - - - (70,655)
Net current assets 4,140 9,752 (1,130) (8,463) 4,299
Total assets less current liabilities 750,927 (66,250) (15,430) (293,050) 376,197
Creditors: amounts falling due after one year (461,816) 66,250 15,430 288,155 (91,981)
Net assets 289,111 - - (4,895) 284,216
Net assets per share adjusted for minority
interests - diluted 343.3p (5.4p) 337.9p
Net bank borrowings 457,266 (66,250) (15,430) (288,155) 87,431
Gearing ratios:
- including convertible unsecured loan stock 158.2% 30.8%
- assuming conversion of convertible unsecured
loan stock 138.1% 20.4%
On 18 March 2002 a joint venture with Hanover Property Unit Trust completed a
£3.5m site purchase for the development of the second Xscape complex at
Castleford, Leeds. The effect of this transaction has not been reflected in the
proforma balance sheet.
15. Status of financial information
The financial information contained in this announcement does not constitute
statutory financial statements within the meaning of Section 240 Companies Act
1985. The comparative figures have been extracted from the audited financial
statements for the year ended 25th December 2000 which have been filed at
Companies House (which have been restated for the effect of UITF 28 as detailed
in Note 4). The auditors have reported on those accounts; their reports were
unqualified and did not contain statements under S237(2) or (3) of the Companies
Act 1985. The statutory accounts for the year ended 25 December 2001 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 following the company's annual general meeting.
This information is provided by RNS
The company news service from the London Stock Exchange
Tuesday, 17th December 2024
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