Interim Results - Operating Profit Up 4.3%

Great Portland Estates PLC 16 November 1999 INTERIM RESULTS FOR THE SIX MONTHS ENDED 30th SEPTEMBER 1999 * Operating profit up 4.3% to £53.9 million (1998: £51.7 million) * Interim dividend up 4.2% to 3.125p (1998: 3.0p) * Rationalisation programme well ahead of schedule * £70 million of sales producing £3 million of capital and trading profits * Over £100 million of acquisitions in the last six months * 70% of portfolio now in central London and in-town shopping centres * West End investments of £650 million Richard Peskin, Chairman, said: 'The results for the period to 30th September demonstrate steady progress with net rents and adjusted earnings moving nicely along. The last few months have been particularly active for us with nearly £200 million of actual and agreed acquisitions and over £70 million of sales. As a result of this activity, our favoured areas of investment, namely central London and in-town shopping centres, now comprise 70% of the total portfolio and further rationalisation will continue to take place.' Enquiries: Great Portland Estates P.L.C. 0171 580 3040 Richard Peskin, Chairman Patrick Hall, Deputy Managing Director John Whiteley, Finance Director STATEMENT BY THE CHAIRMAN Results and Dividend I am pleased to report that the Group has continued to make satisfactory progress in the six months to 30th September 1999. Net rents have risen by 4% to £53.9 million and profits on ordinary activities before tax are £28.3 million. Profits on the sale of investment properties amounted to £1.3 million, leaving adjusted earnings per share 4% ahead at 5.4p (1998: 5.2p) and your directors have declared an interim dividend of 3.125p (1998: 3.0p). As usual, and in common with most of the sector, an interim valuation was not commissioned, because your Board needs to be convinced that this is a justifiable exercise in the context of time and expense however, it is a topic which remains under review. The book net asset value per share as at 30th September 1999 was 286p. Acquisitions and Sales Since I last wrote to shareholders in June, the Board has been active in implementing its strategy of concentrating our main activities in central London and retail, particularly in-town shopping centres. Indeed, since 31st March, acquisitions amounting to £100 million have been made, of which £16 million has been spent in extending our holdings in Burnley, Bury, Cardiff, Chelmsford and Harlow. The more substantial purchases comprise Barnard's Inn, Fetter Lane, EC4 (105,000 sq.ft. of offices acquired for £35 million, producing £2.8 million per annum and sandwiched between our buildings at Barnard's Court and Buchanan House) and, for £38 million, the Quedam Centre, Yeovil, 160,000 sq. ft. shopping centre with a current annual income of £2.6 million. In addition, two West End properties on the Pollen Estate, where we have a 12.2% beneficial interest, have been purchased for £13 million they are 28 Savile Row, W1 (15,000 sq.ft.), where vacant possession was obtained and refurbishment works are under way, and 10/12 Cork Street, W1 (21,000 sq.ft.). Heads of terms have also been agreed to acquire for £90 million the 400,000 sq.ft. retail and leisure development of the Western Sector, High Wycombe, which immediately adjoins our 150,000 sq.ft. Octagon Shopping Centre. Last June I advised shareholders that, in accordance with its enhanced rationalisation policy, the Board intended to dispose of at least £150 million of non-core assets within twenty-four months and, in the period under review, some £32 million has been sold, producing profits on sale of investment properties of £1.3 million. Since 30th September £38 million has been realised, providing trading profits of at least £500,000 and further capital profits of some £1 million we are, therefore, virtually half way to our stated two year target in less than six months, and with anticipated total gains of around £3 million. Developments and Lettings During the six months the ongoing refurbishment and development schemes have proceeded according to schedule and budget. Throughout the portfolio 240,000 sq.ft. of refurbishments were completed including, in particular, the pre-let 37/41 Mortimer Street, W1 (25,000 sq.ft.) and 79 New Cavendish Street, W1 (36,000 sq.ft.) which became available in October, whilst the 83,000 sq.ft. extension at Curzon Square, Burnley will be ready in Spring 2000 and is 98% pre- let. The piazzanisation of Oxford Market, W1 has proved to be a splendid example of sensible co-operation for inner city regeneration between a developer and a local authority (City of Westminster) and will be officially opened this month it has succeeded in creating both value and excitement as a result of our imaginative design. The occupancy level of the portfolio has fallen slightly to 98.6%, but it must be remembered that this is largely due to the very recent inclusion of 79 New Cavendish Street, W1, which has already attracted good interest from prospective tenants. For the record, 80% of the voids last June have subsequently been leased and a further 81,000 sq.ft. have been relet. With regard to the current development programme, at Bury planning permission has been gained for a revised, larger scheme, and at Ranelagh House, Elystan Place, SW3 planning permission was granted on appeal for ten flats, with work commencing in the new year. Demolition of the former Barclaycard Centre, Northampton started in August and, under its new nomenclature of Sol Central, a 200,000 sq.ft. Urban Entertainment Centre will be built for occupation in mid- 2001, of which 60% is pre-let or in solicitors hands. Looking further ahead, I have already mentioned the Western Sector, High Wycombe (which will take about four years to complete) and planning applications are shortly to be submitted for 22/25 Northumberland Avenue, WC2 and Toshiba House, Frimley. In addition, we are examining the longer-term possibilities of various large schemes within our holdings north of Oxford Street and I hope to be able to report more definitively in June. Finance We used the majority of our £175 million of cash balances held at 1st April 1999 to repay, temporarily, our syndicated loan. Following the capital expenditure and disposal proceeds set out above, net debt at 30th September was largely unchanged at £589.1 million, gearing stood at 55% and we had committed unused bank facilities of £190 million. The fair value of existing financial instruments under FRS 13 was higher than the book value at which the debt was carried in the balance sheet by some £81 million, after tax (31st March 1999: £115 million), or 21p per share (31st March 1999 30p). Year 2000 Our year 2000 programme has progressed since June. A report, received over a year ago on all properties where responsibility rests with the Group, indicated that the vast majority of equipment was either compliant or not date sensitive, and, where appropriate, replacement and modification work has been commissioned to ensure compliance. The cost of the programme has not been significant, and we believe that, whilst no absolute assurance can be given on the basis that the Group may be impacted by third parties, appropriate actions have been taken in relation to the Group's own business-critical systems. Outlook As a result of the Company's activities over the last few months, our favoured areas of investment, namely Central London and in-town shopping centres, now comprise 70% of the portfolio. For the period under review, rental growth has continued in these markets, based on good occupational demand, especially in the West End, where one-third of our investments is situated. With the economic barometer apparently set fair, the Board believes that the outlook remains positive and that its strategy will continue to deliver rental and asset growth. Richard Peskin Chairman and Managing Director Unaudited Group Profit and Loss Account ____________________ For the six months ended 30th September 1999 Year to Notes Six months to Six months to 31st March 30th September 30th September 1999 1999 1998 £m £m £m 115.3 Rent receivable 2 58.7 56.9 (1.8) Ground rents (0.9) (1.0) ----------- ----------- ----------- 113.5 Net rental income 57.8 55.9 (4.0) Property and refurbishment costs (1.7) (2.1) (4.0) Administration expenses (2.2) (2.1) ----------- ----------- ----------- 105.5 53.9 51.7 1.3 Trading profits - - ----------- ----------- ----------- 106.8 Operating profit 53.9 51.7 Profit on sale of investment 2.2 properties 1.3 1.8 ----------- ----------- ----------- Profit on ordinary 109.0 activities before interest 55.2 53.5 4.3 Interest receivable 3 2.2 2.4 (56.0) Interest payable 4 (29.1) (27.5) ----------- ----------- ----------- Profit on ordinary 57.3 activities before taxation 28.3 28.4 Tax on profit on ordinary (14.5) activities 5 (6.7) (6.8) ----------- ----------- ----------- Profit on ordinary 42.8 activities after taxation 21.6 21.6 (34.9) Dividends 6 (11.8) (11.3) ----------- ----------- ----------- 7.9 Retained profit for the period 9.8 10.3 ----------- ----------- ----------- 11.3p Earnings per share - basic 7 5.7p 5.7p ----------- ----------- ----------- 10.8p Earnings per share - adjusted 7 5.4p 5.2p ----------- ----------- ----------- 9.25p Dividend per share 6 3.125p 3.0p ----------- ----------- ----------- Unaudited Group Balance Sheet ____________________ At 30th September 1999 31st March Notes 30th September 30th September 1999 1999 1998 £m £m £m Tangible fixed assets 1,713.6 Investment properties 8 1,707.7 1,620.8 11.7 Investments 12.2 11.0 ----------- ----------- ----------- 1,725.3 1,719.9 1,631.8 ----------- ----------- ----------- Current assets 3.4 Stock of trading properties 3.6 5.6 9.6 Debtors 12.8 20.8 174.6 Cash at bank and short-term deposits 25.9 11.8 ----------- ----------- ----------- 187.6 42.3 38.2 Creditors: amounts falling 79.0 due within one year 68.9 86.0 ----------- ----------- ----------- 108.6 Net current (liabilities)/assets (26.6) (47.8) ----------- ----------- ----------- Total assets less current 1,833.9 liabilities 1,693.3 1,584.0 ----------- ----------- ----------- Creditors: amounts falling due after more than one year 456.0 Debenture loans 456.0 357.2 110.9 Convertible loans 110.8 110.9 198.1 Bank and other loans 47.8 118.2 ----------- ----------- ----------- 765.0 614.6 586.3 ----------- ----------- ----------- 1,068.9 1,078.7 997.7 ----------- ----------- ----------- Capital and reserves 188.7 Called up share capital 188.7 188.7 238.4 Share premium account 238.4 238.4 556.1 Revaluation reserve 533.6 482.2 61.7 Other reserves 85.5 61.6 24.0 Profit and loss account 32.5 26.8 ----------- ----------- ----------- 1,068.9 Equity shareholders' funds 1,078.7 997.7 ----------- ----------- ----------- Unaudited Group Statement of Cash Flows ___________________ For the six months ended 30th September 1999 Year to Six months to Six months to 31st March 30th September 30th September 1999 1999 1998 £m £m £m Net cash inflow from operating 112.4 activities 46.2 48.3 Returns on investments and servicing of finance ----------- ----------- ----------- 4.2 Interest received 2.8 2.9 (56.3) Interest paid (29.2) (28.7) ----------- ----------- ----------- Net cash outflow from returns on (52.1) investments and servicing of finance (26.4) (25.8) (12.2) Tax paid (2.1) (3.0) Capital expenditure ----------- ----------- ----------- (78.4) Payments to acquire investment properties (24.0) (57.6) Receipts from sale of investment 22.2 properties 31.7 17.9 (0.3) Payments to acquire investments (0.5) - ----------- ----------- ----------- Net cash inflow/ (outflow) from (56.5) capital expenditure 7.2 (39.7) (34.3) Equity dividends paid (23.6) (23.0) ----------- ----------- ----------- Net cash inflow / (outflow) before (42.7) use of liquid resources and financing 1.3 (43.2) Management of liquid resources Cash withdrawn from/(placed on) (56.1) short-term deposit 150.4 110.8 ----------- ----------- ----------- Financing ----------- ----------- ----------- (38.8) Redemption of loans (170.0) (62.2) 40.0 Drawdown of bank loans 20.0 - 99.8 Issue of debenture loans - - (0.9) Costs of loan issues - - ----------- ----------- ----------- Net cash (outflow) / inflow from 100.1 financing (150.0) (62.2) ----------- ----------- ----------- 1.3 Increase in cash 1.7 5.4 ----------- ----------- ----------- Reconciliation of Operating Profit to Net Cash Inflow from Operating Activities ____________________ Year to Six months to Six months to 31st March 30th September 30th September 1999 1999 1998 £m £m £m ----------------------------------------------------------------------------- 106.8 Operating profit 53.9 51.7 (Increase)/decrease in stock 2.1 of trading properties (0.2) (0.1) 0.2 (Increase)/decrease in debtors (3.9) (3.1) 3.3 (Decrease)/increase in creditors (3.6) (0.2) ---------- -------------- -------------- Net cash inflow from 112.4 operating activities 46.2 48.3 ---------- -------------- -------------- Reconciliation of Net Cash Flow to Movement in Net Debt ____________________ Year to Six months to Six months to 31st March 30th September 30th September 1999 1999 1998 £m £m £m ----------------------------------------------------------------------------- 1.3 Increase in cash in the period 1.7 5.4 (Decrease)/increase in short- 56.1 term deposits (150.4) (110.8) (138.9) Cash inflow from increase in debt (20.0) - 38.8 Cash outflow from redemption of loans 170.0 62.2 Change in net debt arising ---------- -------------- -------------- (42.7) from cash flows 1.3 (43.2) 0.3 Other non-cash movements 0.1 0.2 ---------- -------------- -------------- (42.4) Movement in net debt in the period 1.4 (43.0) (548.1) Net debt at the beginning of the period (590.5) (548.1) ---------- -------------- -------------- (590.5) Net debt at the end of the period (589.1) (591.1) ---------- -------------- -------------- Analysis of Net Debt ____________________ At At 1st April Cash Non-Cash 30th September 1999 Flow Changes 1999 £m £m £m £m ----------------------------------------------------------------------------- Cash 1.8 1.7 - 3.5 Short-term deposits 172.8 (150.4) - 22.4 Debt due within one year (0.1) - (0.3) (0.4) Debt due after one year (765.0) 150.0 0.4 (614.6) ---------- ---------- ---------- ---------- (590.5) 1.3 0.1 (589.1) ---------- ---------- ---------- ---------- Notes Forming Part of the Interim Statement ____________________ 1. BASIS OF PREPARATION OF INTERIM FINANCIAL INFORMATION The interim financial information has been prepared on the basis of the accounting policies set out in the Group's 1999 statutory accounts. Investment properties are professionally valued each year at 31st March but are not revalued at 30th September. The financial information contained in this report does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. The abridged accounts for the year ended 31st March 1999 are an extract from the accounts for that year which, together with an unqualified audit report, have been delivered to the Registrar of Companies. 2. TURNOVER AND SEGMENTAL ANALYSIS Rent receivable by location Year to Six months to Six months to 31st March 30th September 30th September 1999 1999 1998 £m £m £m ----------------------------------------------------------------------------- 14.3 West End - North of Oxford Street 8.8 6.9 21.1 West End - Other 9.8 10.2 17.4 London City 8.0 8.8 22.5 South East of England 11.5 11.1 40.0 Rest of United Kingdom 20.6 19.9 ----------- --------------- -------------- 115.3 58.7 56.9 ----------- --------------- -------------- Rent receivable is stated exclusive of value added tax, and arose wholly from continuing operations in the United Kingdom. No operations were discontinued during the period. 3. INTEREST RECEIVABLE Year to Six months to Six months to 31st March 30th September 30th September 1999 1999 1998 £m £m £m ----------------------------------------------------------------------------- 3.7 Short-term deposits 1.9 2.1 0.6 Other 0.3 0.3 ----------- --------------- -------------- 4.3 2.2 2.4 ----------- --------------- -------------- 4. INTEREST PAYABLE Year to Six months to Six months to 31st March 30th September 30th September 1999 1999 1998 £m £m £m ----------------------------------------------------------------------------- 12.7 Bank loans and overdrafts 5.3 6.2 43.3 Other 23.8 21.3 ----------- --------------- -------------- 56.0 29.1 27.5 ----------- --------------- -------------- 5. TAXATION Taxation has been calculated using the estimated effective tax rate for the full year. The difference between the standard rate of tax and the effective rate principally reflects the benefit of capital allowances available on plant and equipment in respect of investment properties. 6. DIVIDENDS An interim dividend of 3.125p per share (1998: 3.0p) will be paid on 6th January 2000 to shareholders on the register at 26th November 1999. 7. EARNINGS PER SHARE Earnings per share for the six months are based on income attributable to ordinary shareholders of £21,600,000 (1998: £21,600,000) and on the weighted average of 377,462,638 shares in issue (1998: 377,446,904 shares). There is no impact on earnings per share of conversion of the convertible unsecured loan stock, or convertible bonds, or the exercise of share options. The directors believe that earnings per share before exceptional items and profits or losses on sales of investment properties and investments provide a more meaningful measure of the Group's performance. Accordingly, earnings per share on that adjusted basis have been disclosed on the face of the profit and loss account, and calculated as follows: Year to Six months to Six months to Six months to Six months to 31st March 30th September 30th September 30th September 30th September 1999 1999 1999 1999 1998 Earnings Profit Earnings Profit Earnings per share after tax per share after tax per share pence £m pence £m pence 11.3 Basic 21.6 5.7 21.6 5.7 Profit on sale of investment (0.5)properties (1.3) (0.3) (1.8) (0.5) ---------- ------------ ------------ ------------- ------------- 10.8 Adjusted 20.3 5.4 19.8 5.2 ---------- ------------ ------------ ------------- ------------- 8. INVESTMENT PROPERTIES In the six months to 30th September 1999 additions to investment properties were £24.0 million, and properties valued at 31st March 1999 at £29.9 million were sold. Investment properties have not been revalued at 30th September 1999. 9. FINANCIAL CALENDAR 1999 Ex-dividend date for interim dividend 22nd November Registration qualifying date for interim dividend 26th November 2000 Interim dividend payable 6th January Announcement of full year results 6th June* Circulation of Annual Report and Accounts 2000 16th June* Annual General Meeting 18th July* Final dividend payable 21st July* * Provisional

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