Final Results
Mentmore PLC
09 July 2003
FOR IMMEDIATE RELEASE 9 JULY 2003
MENTMORE PLC
UPDATE ON STRATEGIC REVIEW
PRELIMINARY ANNOUNCEMENT OF RESULTS FOR THE YEAR ENDED 30 APRIL 2003
MENTMORE IS FOCUSING ON PERSONAL STORAGE AND RECORDS MANAGEMENT, WHICH HAVE
STRONG MARKET POSITIONS AND GROWTH PROSPECTS. COMBINED WITH OPTIMISATION OF THE
CAPITAL STRUCTURE, THIS WILL DELIVER TANGIBLE VALUE TO SHAREHOLDERS.
Update on strategic review
• December 2002 - strategic review announced with plans to focus on
personal storage and records management. Both offer strong market positions and
growth prospects.
• Conditional sale of serviced business space ('SBS') to Ashtenne
Holdings plc for £189.0 million less debt, announced separately today, together
with a capital reorganisation to eliminate a deficit on company distributable
reserves.
• Strategic plan now finalised and targeted at delivering tangible value
to shareholders. Highlights include:
- improving operational performance of personal storage before making
further investments;
- continuing to support growth in records management whilst ensuring
that the value of our 49.9% shareholding is fully recognised;
- optimising the group's capital structure, including an intention to
return cash to shareholders when appropriate and the payment of dividends;
- a review of the group cost structure to ensure overheads are
appropriate for the restructured group.
Preliminary announcement of results for the year ended 30 April 2003
• Before exceptional costs and goodwill amortisation:
- EBITDA increased 11.3% to £39.4 million (2002: £35.4 million);
- Total operating profit increased 5.7% to £31.1 million (2002: £29.4
million);
- Interest cost of £12.3 million (2002: £9.5 million) covered 2.52
times (2002: 3.08 times) by total operating profits;
- Earnings per share decreased by 10.2% to 6.75p (2002: 7.52p).
• After exceptional costs and goodwill amortisation:
- Provision for impairment and exceptional costs of disposal of SBS
amounting to £61.7 million;
- Other exceptional costs of £4.7 million primarily relating to the
cost of restructuring the funding of the group as part of the process of
disposing of SBS;
- Loss before tax of £53.8 million (2002: profit of £24.9 million after
including exceptional profit on disposal of investment of £9.6 million);
- Loss per share of 31.85p (2002: earnings per share of 10.07p).
• Provisions for the loss on disposal of SBS result in the company
having a deficit of £28.5 million on distributable reserves:
- Capital reorganisation proposed to provide distributable reserves of
£71.5 million - subject to both shareholder and High Court approval;
- Therefore unable to propose a final dividend but have intention to
pay a special one-off interim dividend of 0.89p per share in lieu as soon as the
requisite approvals are obtained. Taking this into account total dividends for
the year would have been 1.315p per share, an increase of 5% on last year (2002:
1.252p per share).
• Pre exceptional operating cash flow of £29.2 million (2002: £31.5
million) representing 115% of operating profit before goodwill amortisation and
exceptionals (2002: 121%). All figures before share of joint venture.
• Net debt at 30 April 2003 was £206.3 million (2002: £153.1 million)
giving gearing of 130% (2002: 71%). The net cash proceeds of the disposal of
SBS will immediately be used to reduce the group's debt.
• Personal storage operating profit before goodwill amortisation and
exceptional items increased by 5.6% to £8.0m (2002: £7.6 million), including the
effect of acquisitions. The focus is on improving performance before further
expansion to take advantage of growth opportunities.
• Iron Mountain Europe ('IME'), our records management joint venture
with Iron Mountain Incorporated, performed strongly with operating profit before
goodwill amortisation and exceptional items up 57% to £5.6m (2002: £3.5
million). Committed to working with our joint venture partner to ensure the
increasing value of IME is recognised.
• SBS operating profit before goodwill amortisation and exceptional
items declined by 3.7% to £17.5m (2002: £18.2 million). This result was
achieved despite a challenging economic environment and the further investment
made in the infrastructure and management of the division.
Commenting on the results and prospects, Martin Nye, chief executive, said:
'Good progress has been made over the last six months in our plan to maximise
the value inherent in Mentmore. The sale of SBS to Ashtenne Holdings plc allows
us to focus on increasing the value of our two higher growth businesses,
personal storage and records management. As part of our ongoing commitment to
deliver tangible shareholder value, we are going to optimise our capital
structure and intend to return cash to shareholders when appropriate.
All of our businesses have made an encouraging start to the new financial year
and are trading in line with our plans. We are making investments in
strengthening our management and processes which will hold back profit growth
somewhat this year but will position us well going forward.'
Contacts:
Mentmore plc 020 8946 3159
Nick Smith, chairman
Martin Nye, chief executive
Clive Drysdale, group finance director
Bridgewell 020 7003 3102
Greg Aldridge
Buchanan Communications 020 7466 5000
Charles Ryland / Catherine Miles
Chairman's statement
Overview
The year has seen a major change in the group's strategic direction, with the
announcement in December 2002 that the group planned to focus on its personal
storage and records management operations and to sell its serviced business
space division ('SBS').
We are pleased to announce that we have conditionally agreed to sell SBS to
Ashtenne Holdings plc for a consideration of £189.0 million. The sale is
conditional on shareholder approval and this is the subject of a circular to
shareholders issued today.
The SBS disposal gives rise to provisions for impairment and exceptional costs
which, before tax, amount to £61.7 million and lead to the company having a
deficit on its distributable reserves.
We are therefore also asking for shareholder approval for a capital
reorganisation as a part of our strategy to optimise the group's capital
structure, including the resumption of the payment of dividends and an intention
to return cash to shareholders when appropriate.
Your Board strongly recommend that you vote in favour of both resolutions.
Group turnover from continuing operations increased by 9.1% to £82.1 million
(2002: £75.3 million) and profit on ordinary activities before interest,
goodwill amortisation and exceptionals increased by 5.7% to £31.1 million (2002:
£29.4 million).
Martin Nye joined us as group chief executive in mid January and is making a
major contribution to the group. His priority has been to develop the group's
future strategy; details of our plans are included in his report.
Strategic developments
Our review of the group's strategic options concluded that notwithstanding
significant investment in SBS over a number of years, returns would not meet
those originally anticipated and that the group should focus on its personal
storage and records management operations; these offer stronger market positions
and higher future returns than SBS. Your Board, therefore, decided to take
advantage of beneficial market conditions for industrial properties of the type
comprising SBS by disposing of the division.
We have taken an important first step in implementing our strategy by entering
into a conditional agreement to sell the SBS business. The sale process has been
comprehensive and your Board believes that this transaction optimises value for
shareholders. The net cash proceeds of the disposal will immediately be used to
reduce the group's debt.
There will be a loss to the group on the disposal of £61.7 million, primarily as
a result of the write-off of goodwill arising on the acquisition of Birkby plc
in 1999. The company will have a deficit on its distributable reserves of £28.5
million. Your Board therefore today announces a capital reorganisation, which,
subject to certain approvals, will eliminate this deficit, enabling dividend
payments and a return of capital to shareholders when appropriate.
Following the sale of SBS, the significance of Iron Mountain Europe ('IME'), our
joint venture records management company, within the group will increase. We
have started discussions with Iron Mountain Incorporated as to how we best
recognise the value of our investment in IME. We are discussing many options and
there is a commitment from both parties to finding a solution that benefits all.
The discussions will continue over the coming months but we are more concerned
with finding the right solution rather than a quick solution.
Trading
Results for the year are overshadowed by pre tax exceptional costs of £66.4
million of which £65.5 million relates to losses arising as a result of the
disposal.
Group turnover from continuing operations increased by 9.1% to £82.1 million
(2002: £75.3 million) and profit on ordinary activities before interest,
goodwill amortisation and exceptionals grew by 5.7% to £31.1 million (2002:
£29.4 million). EBITDA before exceptional costs increased by 11.3% to £39.4
million (2002: £35.4 million).
Against a difficult economic and competitive environment personal storage
operating profit before goodwill amortisation increased 5.6% to £8.0 million
(2002: £7.6 million). This was a result of market pressures, to which we were
slow to react. We are addressing the issues of management in this division and
expect to see improvements over coming periods.
The group's share of the operating profit before goodwill amortisation of IME
grew by 57.0% to £5.6 million (2002: £3.5 million) and EBITDA by 49.8% to £7.7
million (2002: £5.1 million). These results demonstrate the strength of this
business and the fact that our investments in management, systems and
infrastructure are now paying off.
Serviced business space operating profits before goodwill amortisation declined
3.7% to £17.5 million (2002: £18.2 million).
Capital reorganisation and dividend
There will be no final dividend this year as the company does not have
sufficient distributable reserves. If shareholders support the capital
reorganisation proposals, we shall seek the required approval from the High
Court. Assuming all consents are received, this will put us in a position from
which we shall be able to return funds to shareholders.
It would be our intention to resume dividend payments and to pay a special
one-off interim dividend of 0.89p per ordinary share in lieu of this year's
final dividend as soon as the requisite approvals for the capital reorganisation
are obtained. The capital reorganisation would also allow the company to
initiate a programme of returning cash to shareholders when appropriate.
Amended banking arrangements have been negotiated for the continuing group which
will support general working capital requirements and growth. This may involve
proceeds being used to fund organic growth and if the directors consider such
investments appropriate, acquisitions within the personal storage and records
management sectors.
In addition, at the annual general meeting, the company intends to seek an
authority from shareholders for the power to purchase up to 10% of its own
ordinary shares for subsequent cancellation. The directors will only use this
authority if, in the light of market conditions prevailing at the time, they
believe that the effect of any purchase would be to enhance earnings per share
and be in the interests of shareholders as a whole.
People
In thanking our staff for their loyalty and support I recognise that it was a
year when the business environment was difficult and where a great many of our
people were affected by the uncertainties surrounding the SBS sale. In these
circumstances their contribution has been exceptional.
Martin Nye is now firmly established as group chief executive and he has already
taken on full responsibility for the group's trading. He has led the development
of our ongoing strategy and will be responsible for its delivery. Following the
annual general meeting I shall move to the role of non-executive chairman. I
look forward to this change, which will be in line with plans announced this
time last year.
Trading update and outlook
All of our businesses have made an encouraging start to the new financial year
and are trading in line with our plans. Investments in management and processes
are being made but we are not anticipating a return on this investment until
later in the financial year. The directors are confident of the prospects and
outlook for the continuing group in the current financial year and are
encouraged by the prospects of the markets served by our two continuing
operations.
As previously announced, IME is participating in the sale process for the
records management business of Hays plc.
By focusing on personal storage and records management, businesses with strong
market positions and growth prospects, we are providing a firm base on which to
implement a strategy of delivering value to shareholders.
Chief executive's statement
The last six months have seen good progress in our plan to maximise the value
inherent in Mentmore for shareholders.
We announced in December 2002 our intention to focus on our personal storage and
records management businesses and sell the serviced business space ('SBS')
division. That business has now been sold subject to shareholder approval for
£189.0 million to Ashtenne Holdings plc. Completion is scheduled for 31st July.
The sale allows us to focus on increasing the value of our two higher growth,
higher return businesses.
Whilst the proceeds from the disposal will substantially reduce gearing and
interest charges, there are some other financial consequences.
• SBS contributed operating profit before goodwill amortisation of £17.5 million
in 2003 and earnings per share of 2.86p in 2003 on a pro forma basis, which
will not be repeated in 2004;
• provision for impairment and exceptional costs on disposal of £61.7 million
together with the write off of other costs of £3.8 million relating to the
disposal are included in the 2003 results; and
• we are not able to pay any dividends, although we are initiating a capital
reorganisation to address this situation.
We also announced last December that my first priority as group chief executive
was to develop a plan to take the group forward. With the completion of the sale
of SBS, Mentmore is focused on two valuable businesses with good prospects for
long term growth. You will see from the operating review that follows that we
have clear strategies for each business to increase its value. The highlights of
our strategy are as follows:
• to improve the operational performance of personal storage before further
investments are made to take advantage of the attractive growth opportunities;
• to continue to support the successful growth of Iron Mountain Europe ('IME')
whilst ensuring that the value of the group's 49.9% shareholding in IME is fully
recognised;
• to optimise the group's capital structure, including an intention to return
cash to shareholders when appropriate;
• to resume the payment of dividends as soon as possible, including making a
special one-off interim dividend of 0.89p per share in lieu of the 2003 final
dividend; and
• to review the group's cost structure further when the level of corporate
activity diminishes to ensure we have the appropriate overheads for the
restructured group.
With this framework in place, I am confident that we can develop the business to
deliver value for shareholders.
Operating review
Personal storage
Spaces personal storage is the largest provider of self-storage facilities in
the UK and we also have a good position in the Paris market through Une Piece en
Plus ('UPP'). Personal storage contributed £8.0 million of operating profit
before goodwill amortisation this year, which is 5.6% ahead of last year's
total, but includes the impact of the acquisitions in 2002.
The market has been competitive, particularly in London and the South East,
where there has been an increasing amount of new capacity over the last few
years coupled with a lower number of house moves. This has led to declining
occupancy in a number of our mature sites and a failure to achieve our growth
targets in our newer sites. Our response to these challenges has been slow,
something we are now addressing vigorously.
Stripping out the effect of acquisitions, UK revenues grew by 8.0% to £20.6
million (2002: £19.0 million) and operating profit before goodwill amortisation
decreased by 5.8% to £7.9 million (2002: £8.4 million). Including acquisitions
revenue in the UK grew by 22.2% to £23.3 million and operating profit before
goodwill amortisation grew by 3.2% to £8.6 million. The revenues of UPP grew by
47.3% to £2.7 million (2002: £1.9 million) and operating losses before goodwill
amortisation reduced to £0.6 million (2002: loss of £0.8 million).
Our total space capacity is 243,000 sq. metres, which is currently 65% occupied.
The UK occupancy level declined from 67% last year although this was due in part
to the inclusion of the Aardvark sites that were 40% full when we acquired them
in September 2002. The average price achieved in the UK marginally increased,
reflecting the competitive nature of the market.
We have analysed the UK self storage market in detail and have concluded that it
remains an attractive market with good growth prospects and better than average
returns on capital when sites are mature. The market has been growing in volume
terms by 20% per annum for the last six years and based on a detailed post-code
level assessment of supply and demand, we forecast continuing growth of 10-15%
per annum. We believe that demand will be less of a constraint on growth than
the availability of suitable properties.
We also believe there is good longer term potential in Europe, but we are
focusing on our existing business in the UK and Paris where there are plenty of
attractive growth opportunities. Spaces is well positioned to take advantage of
these as it is the UK market leader with a national network of sites. Attractive
returns are available - the average pre-tax return on capital employed of our
mature sites is in excess of 20%. UPP is also well positioned, with a strong
management team and good infrastructure in central Paris.
In the longer term we plan to have a rolling programme of new site openings and
to consider acquisition opportunities, but believe our short term focus should
be on maximising the value of the current business. Our immediate priorities are
to strengthen the management team and to improve performance. The business has
grown quite rapidly by acquisition and has not put in place the necessary
processes and resources.
We are addressing this with a number of new appointments in operations and sales
and marketing which will enable us to tackle the 76,500 sq. metres of available
capacity. We are also investing in information systems to improve our sales and
administrative processes. These changes will take some time to impact
performance, holding back profit growth this year, but should have a very
positive impact next year.
Key statistics for UK based spaces personal storage are:
2003 2002
No. of centres 46 34
Total space capacity ('000 sq. m.) 218.8 166.0
Current space utilisation (%) 65.8 67.1
Current annualised space revenue (£m) 22.1 17.4
Other income (% of space revenue) 11.8 10.7
Key statistics for UPP are:
2003 2002
No. of centres 7 7
Total space capacity ('000 sq. m.) 24.2 24.2
Current space utilisation (%) 57.1 47.3
Current annualised space revenue (£m) 3.0 2.1
Other income (% of space revenue) 4.6 3.1
Records management
Iron Mountain Europe (IME) is our joint venture with Iron Mountain Incorporated,
the world's leading records management provider. Mentmore has a 49.9%
shareholding in the joint venture. Our share of IME's operating profit was £5.6
million, an increase of 57% on the previous year. The records management
division accounted for 18% of total operating profit before goodwill
amortisation, although with the disposal of SBS this would have been 45% on a
pro forma basis.
IME has further strengthened its market position this year, with a number of
significant customer wins and small acquisitions to extend its capabilities
outside of the UK. IME is one of three leaders in the £5 billion European market
for paper and electronic records management. We estimate that only 10% of the
total market is outsourced and expect continuing growth of more than 15% per
annum as legislation increases and customers see the cost and service benefits
of outsourcing.
IME has a diversified, stable customer base of over 8,000 customers across
Europe. These customers provide a strong, predictable recurring revenue stream,
with income from customers for records management growing by about 6-8% per year
through natural 'creep' of new records being produced. IME benefits from
cross-selling from Iron Mountain Incorporated's North American customer base -
22% of our new sales last year came from such cross-selling.
The business has invested over the last few years in strengthening its
management resources, particularly in sales and account management. Substantial
investment has also gone into developing new facilities to accommodate growth.
Improvements in facility, labour and transportation effectiveness have improved
operating margins before goodwill amortisation from 12.8% last year to 15.4%
this year. The successful integration of the TDG acquisition during the year
also contributed to the improved performance.
Our strategy is straightforward - to build on the success achieved so far and to
go for European market leadership, by leveraging the scale and customer
relationships we have in the UK and US and expanding our footprint in
continental Europe. We see continuing good growth from developing our
relationships with key customers who are looking for consistent levels of
service across Europe.
We believe we can grow organically, through larger outsourcing deals and by
small bolt-on acquisitions, such as the recently completed acquisition of Record
Data in Ireland. This acquisition added new capabilities, customers and further
scale and delayed the need to build a new facility in Dublin for another one to
two years.
We are continuing to invest to deliver and support strong growth over the next
twelve months - particularly in sales and marketing and in country management in
continental Europe.
We are currently running at about 85% utilisation of available capacity, so we
will need to invest in new capacity as we are successful in winning new
business.
With the disposal of SBS, the contribution from Mentmore's share of IME to the
group's result will increase significantly. Our joint venture arrangements
ensure both effective management equality with our joint venture partner, Iron
Mountain Incorporated, as well as appropriate protections for both shareholders
for dealing with issues that arise. We continue to work closely with our joint
venture partner to develop this business. Recognising that since the joint
venture was entered into more than four years ago, both the business and the
market have grown substantially, we are considering ways to ensure that both the
value created so far and the future growth prospects benefit Mentmore and its
shareholders in a tangible way.
Serviced business space
The serviced business space division - comprising the Imex, Argo and In Shops
businesses - contributed £17.5 million operating profit before goodwill
amortisation in the year, a decrease of 3.7% compared to the previous year
(2002: £18.2 million). Assuming the sale of the division is completed on 31st
July, the results for 2003/04 will include just three months contribution.
These results have been achieved despite a challenging economic environment and
the further investment that has been made in the infrastructure and management
of the division.
Imex, the largest part of the division, saw operating profit grow by 5.7% and
managed to maintain an overall occupancy level of around 80%. The investment in
sales and marketing have led to record numbers of new customers joining Imex,
but unfortunately this has primarily been offset by larger customer losses than
normal. Argo, which saw operating profits grow by 10.1%, benefited from
continuing investment in the upgrading of sites. In Shops has had a very
difficult year and the refurbishment programme has taken longer than planned. As
a consequence, their operating profits fell by 37.3%.
Financial review
Group results
The group's profit and loss is materially affected by non-trading items in the
current year, principally the provision for impairment and exceptional costs of
disposal of £61.7 million in respect of the serviced business space ('SBS')
division and £3.8 million of other costs associated with this disposal. The
following summary of the group's results provides an analysis of trading and
non-trading items in comparison to last year:
2003 2003
For the year ended 30 April £million £million
Turnover 82.1 77.4
Continuing operations 82.1 75.3
Discontinued operations - 2.1
Trading profit 32.6 31.9
Total operating profit * 31.1 29.4
Profit on disposal of fixed assets 1.5 2.5
Net interest payable* (12.3) (9.5)
Profit before tax - trading* 20.3 22.4
Profit on disposal of investment - 9.6
Provision for loss on disposal of SBS (61.7) -
Other exceptional costs (4.7) -
Goodwill amortisation (7.7) (7.1)
(Loss)/profit before tax (53.8) 24.9
Underlying earnings per share* 6.75p 7.52p
Basic (loss)/earnings per share (31.85)p 10.07p
*before goodwill amortisation and exceptionals
Group turnover above (which excludes our share from joint ventures) increased by
6.1% to £82.1 million (2002: £77.4 million); of this £2.7 million arose from
acquisitions in the year. Excluding discontinued activities group turnover
increased by 9.1%. Our share of turnover from the Iron Mountain Europe ('IME')
joint venture increased by 30.8% to £36.2 million (2002: £27.7 million).
Trading profit, which includes profits shown as exceptional relating to the
disposal of fixed assets, increased by 2.3% to £32.6 million (2002: £31.9
million). Profits from fixed asset disposals can fluctuate from year to year.
Excluding these, trading profits increased by 5.7% to £31.1 million (2002: £29.4
million) of which £0.8 million arose from acquisitions in the year.
The profit on disposal of fixed assets in 2002 of £2.5 million includes our £1.0
million share of joint venture profit on disposal of fixed assets and £1.5
million relating to the disposal of the Dutch SBS business that was effectively
the sale of two trading properties.
EBITDA for the group before exceptional costs increased by 11.3% to £39.4
million (2002: £35.4 million). Records management delivered the strongest growth
with our share of their EBITDA increasing by 49.8% to £7.7 million (2002: £5.1
million). EBITDA in personal storage and SBS grew by 11.7% and 1.8% to £10.6
million (2002: £9.5 million) and £21.3 million (2002: £20.9 million)
respectively.
Net interest payable before exceptional costs increased by £2.8 million to £12.3
million (2002: £9.5 million) due to debt funding of acquisitions and capital
expenditure. Interest cost for the year was covered 2.52 times (2002: 3.08
times) by trading profit.
The group's tax charge on trading profits before tax was £6.5 million (2002:
£6.2 million) representing an effective rate of 31.8% (2002: 27.9%). There is
generally no tax charge attributable to profits that arise on the disposal of
fixed assets due to the availability of certain reliefs. Excluding profit on the
disposal of fixed assets and tax adjustments relating to prior years the
effective rate of tax was 38.3% (2002: 35.0%).
Before goodwill amortisation and exceptional items profit after tax reduced by
£1.3 million to £12.3 million (2002: £13.6 million). On the same basis,
underlying earnings per share reduced to 6.75 pence (2002: 7.52 pence).
The provision of £61.7 million for impairment and exceptional costs of disposal
of SBS is required because the book value of the net assets being sold is in
excess of the net sales proceeds. £65.0 million of the net assets of SBS
relates to goodwill, of which £54.0 million has been impaired in 2003.
Other exceptional costs in the year of £4.7 million primarily relate to the cost
of restructuring the funding of the group as part of the process of disposing of
SBS. Following this debt levels will substantially reduce and amended bank
facility arrangements will need to be entered into.
The profit on disposal of investment of £9.6 million in 2002 arose following the
sale of the group's investment in Workspace Group PLC in May 2001.
After taking into account goodwill amortisation and exceptional items the group
reported a loss after tax of £57.9 million (2002: profit of £18.2 million) and a
basic loss per share of 31.85 pence (2002: basic earnings per share of 10.07
pence).
Dividends
The directors are unable to recommend a final dividend due to a deficit on
distributable reserves of £28.5 million. It is our intention to declare a
special one-off interim dividend of 0.89 pence per share in lieu of a final
dividend as soon as the requisite approvals for the capital reorganisation are
obtained. This special dividend, taken together with the interim dividend of
0.425 pence per share paid on 7 April 2003, gives an aggregate of 1.315 pence
per share, which represents an increase of 5% on the previous year.
Cash flows
The group continues to be highly cash generative with pre exceptional operating
cash flow as a percentage of operating profit before goodwill amortisation and
exceptional items being 114.6% (2002: 121.5%).
Operating activities before exceptional costs generated £29.2 million (2002:
£31.5 million) which were primarily used to fund capital expenditure of £17.5
million (2002: £39.3 million) and amounts in relation to IME of £6.8 million
(2002: £10.0 million). Investments in acquisitions cost £16.4 million (2002:
disposal proceeds of £2.5 million) and were funded by debt.
Net interest payments increased by £5.7 million to £12.5 million (2002: £6.8
million) which includes £2.3 million relating to exceptional financing charges.
Tax payments reduced by £0.5 million to £4.6 million (2002: £5.1 million).
Cash outflow before financing was £34.2 million (2002: inflow £0.7 million).
Balance sheet
Intangible assets, which comprise goodwill, reduced by £47.5 million. Of this
£54.0 million relates to the impairment charge associated with the disposal of
SBS. Goodwill arising on acquisitions in personal storage amounted to £11.5
million. The balance relates to amortisation in the year and foreign exchange
differences.
Current assets include £19.2 million in relation to the development of IME's
records centre in South East London. This was sold in June to a third party who
leased the building back to IME on an arm's length basis.
Net debt at 30 April 2003 was £206.3 million (2002: £153.2 million) and
comprised net bank borrowings of £195.9 million (2002: £149.2 million) and
deferred acquisition loan notes of £10.4 million (2002: £4.0 million). Net
assets at 30 April 2003 were £156.3 million (2002: £215.7 million) giving
gearing of 130% (2002: 71%).
Equity shareholders' funds reduced by £57.4 million in the year as a result of
the retained loss for the year of £58.6 million less £0.4 million on shares
issued in respect of share option exercises and £0.8 million of currency
translation differences.
Treasury management
The group is primarily exposed to interest rate, liquidity and foreign exchange
risks. These are managed at group level and are controlled by the Board.
Treasury management is undertaken to minimise these risks with transactions only
being made in relation to underlying business requirements. The group's policy
is that there are no transactions undertaken of a speculative nature and
financial instruments are not traded. The group's other policies are outlined
below.
Interest rate risk
The group's policy is to minimise interest cost. Exposure to interest rate
movements on group borrowings is managed by maintaining a mixture of fixed and
variable rate financing. Fixed interest rates are usually achieved through the
use of interest rate swaps. The group also uses financial instruments which cap
interest rate exposure and allow interest rates to fluctuate within upper and
lower limits. The relevant proportion of each type of financing is adjusted to
take account of prevailing market conditions.
At 30 April 2003 £nil of group borrowings were fixed and £75 million operated
within specified upper and lower interest rate limits.
Liquidity risk
The group's policy is to maintain committed borrowing facilities with a maturity
date exceeding at least twelve months to meet anticipated borrowing requirements
in relation to its current business plan. The primary source of funds is bank
debt. The level and type of facility is regularly reviewed, particularly in the
event of corporate transactions.
At 30 April 2003 the group's UK committed banking facilities amounted to £250
million. The principal elements of these were:
• a £125 million amortising term loan facility with all but £80 million having a
repayment due by September 2007; and
• a £125 million revolving credit facility with a bullet repayment in September
2007.
In addition the group has bank facilities in France amounting to €2.4 million.
As at 30 April 2003 the group had unutilised bank facilities of £47 million.
During the year the group complied with all applicable debt covenants.
As part of the disposal of SBS an underwritten amendment to our existing UK
banking facilities has been negotiated whereby, subject to the disposal, the
facility is reduced to £70 million on the basis of a revolving credit facility
with a bullet repayment in September 2007.
Foreign exchange risk
Although the group is becoming more exposed to foreign exchange risk due to its
expansion in continental Europe this still remains immaterial to the group as a
whole. The group's policy covers three areas of exposure - balance sheet net
assets, earnings and transactions:
• where considered material balance sheet net assets are protected from currency
exposures by borrowing in relevant currencies;
• at present the group does not protect earnings of overseas operations against
currency fluctuations;
• foreign currency transactions, where significant, are protected by way of
forward exchange contracts
At 30 April 2003 the group had no forward exchange contracts.
Accounting standards
The group's accounting policies fully reflect the requirements of the Accounting
Standards Board.
No new applicable Financial Reporting Standards have been issued in the year.
Under the transitional arrangements contained within FRS 17, additional defined
benefit pension scheme disclosures have been given in the financial statements
this year. In accordance with FRS 17, retirement benefits continue to be
accounted for under the rules set out in SSAP24.
Group profit and loss account
for the year ended 30 April 2003
Before Before
goodwill Goodwill goodwill Goodwill
amortisation amortisation amortisation amortisation
and and Total and and Total
exceptionals exceptionals 2003 exceptionals exceptionals 2002
Note £'000 £'000 £'000 £'000 £'000 £'000
Turnover 1 82,102 - 82,102 77,405 - 77,405
Continuing operations:
Group and share of joint 115,625 - 115,625 102,988 - 102,988
venture
Less: group's share of joint (36,238) - (36,238) (27,705) (27,705)
venture
Group 79,387 - 79,387 75,283 - 75,283
Acquisitions 2,715 - 2,715 - - -
82,102 - 82,102 75,283 - 75,283
Discontinued activities - - - 2,122 - 2,122
82,102 - 82,102 77,405 - 77,405
Cost of sales (46,230) - (46,230) (42,397) - (42,397)
Gross profit 35,872 - 35,872 35,008 - 35,008
Administrative expenses (10,388) (6,436) (16,824) (9,186) (5,726) (14,912)
Provision for impairment and
exceptional costs of disposal 3 - (61,746) (61,746) - - -
Group operating profit/(loss) 2 25,484 (68,182) (42,698) 25,822 (5,726) 20,096
Continuing operations:
Existing activities 24,736 (67,834) (43,098) 25,911 (5,726) 20,185
Acquisitions 758 (348) 410 - - -
25,494 (68,182) (42,688) 25,911 (5,726) 20,185
Discontinued activities (10) - (10) (89) - (89)
25,484 (68,182) (42,698) 25,822 (5,726) 20,096
Share of operating profit in 5,568 (1,594) 3,974 3,546 (1,365) 2,181
joint venture
Total operating profit/(loss) 1 31,052 (69,776) (38,724) 29,368 (7,091) 22,277
Profit on disposal of fixed - 1,588 1,588 - - -
assets
Share of joint venture profit
on disposal of fixed assets - - - - 1,021 1,021
Profit on disposal of 4 - - - - 1,529 1,529
operations
Profit on disposal of 4 - - - - 9,646 9,646
investment
Profit/(loss) on ordinary
activities before interest 31,052 (68,188) (37,136) 29,368 5,105 34,473
Net interest payable 5 (12,337) (4,365) (16,702) (9,525) - (9,525)
Profit/(loss) on ordinary
activities before taxation 18,715 (72,553) (53,838) 19,843 5,105 24,948
Taxation 6 (6,452) 2,421 (4,031) (6,239) (500) (6,739)
Profit/(loss) on ordinary
activities after taxation 12,263 (70,132) (57,869) 13,604 4,605 18,209
Dividends 7 (774) - (774) (2,270) - (2,270)
Transfer (from)/to reserves 11,489 (70,132) (58,643) 11,334 4,605 15,939
Earnings/(loss) per share 8
Basic 6.75p (31.85)p 7.52p 10.07p
Diluted 6.74p (31.85)p 7.48p 10.01p
Dividends per share 0.425p 1.252p
Group balance sheet
at 30 April 2003
2003 2002
Notes £'000 £'000
Fixed assets
Intangible assets 9 53,364 100,906
Tangible assets 10 287,236 250,965
Investments 11
IME joint venture 34,116 28,096
- share of gross assets 74,713 60,457
- share of gross liabilities (54,914) (42,781)
- share of net assets 19,799 17,676
- loans to joint venture 14,317 10,420
Own shares 12 14
Other 250 250
374,978 380,231
Current assets
Stocks 12 1,336 1,824
Development in progress 12 19,200 16,312
Debtors 13 13,988 8,757
Investments 14 709 -
Cash at bank and in hand 13,396 4,093
48,629 30,986
Creditors: amounts falling due within one year 15 (41,705) (54,796)
Net current assets/(liabilities) 6,924 (23,810)
Total assets less current liabilities 381,902 356,421
Creditors: amounts falling due after more than one 16 (216,848) (136,278)
year
Provisions for liabilities and charges 17 (6,811) (4,475)
Net assets 158,243 215,668
Capital and reserves
Called up share capital 18,211 18,131
Share premium account 130,427 130,148
Other reserve 27,226 27,226
Profit and loss account (17,621) 40,163
Equity shareholders' funds 158,243 215,668
Group cash flow statement
for the year ended 30 April 2003
2003 2002
Notes £'000 £'000
Cash flow from operating activities 22(a) 25,883 31,490
Returns on investments and servicing of finance 22(b) (12,485) (6,854)
Taxation paid (4,561) (5,061)
Capital expenditure and financial investment (24,331) (19,109)
Proceeds from sale of investments 22(b) 2 30,155
Development on behalf of joint venture (2,888) (15,688)
Loans (made to)/repaid by joint venture (3,897) 5,712
Capital expenditure 22(b) (17,548) (39,288)
Acquisitions and disposals 22(b) (16,421) 2,452
Equity dividends paid (2,315) (2,214)
Cash (outflow)/inflow before financing (34,230) 704
Financing
- issue of shares 359 340
- increase/(decrease) in debt and lease financing 22(b) 52,408 (10,179)
Increase/(decrease) in cash in the year 18,537 (9,135)
Reconciliation of net cash flow to movement in net debt
for the year ended 30 April 2003
2003 2002
Notes £'000 £'000
Increase/(decrease) in cash in the year 18,537 (9,135)
Cash (inflow)/outflow from change in debt and lease (52,408) 10,179
financing
Change in net debt resulting from cash flows (33,871) 1,044
Loans and finance leases (acquired)/divested with
subsidiary undertakings (8,274) 2,219
Non-cash movements (10,989) (63)
Movement in net debt in the year (53,134) 3,200
Net debt at 1 May 2002 (153,151) (156,351)
Net debt at 30 April 2003 22(c) (206,285) (153,151)
Statement of total recognised gains and losses
for the year ended 30 April 2003
2003 2002
£'000 £'000
Group (loss)/profit for the year (58,907) 17,764
Share of profit in joint venture for the year 1,038 445
(Loss)/profit for the year (57,869) 18,209
Currency translation differences on foreign currency net investments 859 46
Total recognised gains and losses in the financial year (57,010) 18,255
Prior year adjustment for deferred tax (note 6) - (3,283)
Total recognised gains and losses since last annual report (57,010) 14,972
Reconciliation of movements in shareholders' funds
for the year ended 30 April 2003
2003 2002
£'000 £'000
(Loss)/profit for the year (57,869) 18,209
Other recognised gains and losses in the year 859 46
Shares issued 359 378
Dividends (774) (2,270)
Net (reduction)/addition to shareholders' funds (57,425) 16,363
Opening shareholders' funds as previously stated 215,668 202,588
Prior year adjustment for deferred tax (note 6) - (3,283)
Opening shareholders' funds as restated 215,668 199,305
Closing shareholders' funds 158,243 215,668
Notes to the preliminary announcement
1. Segmental analysis
Total
operating profit/ Operational
Turnover EBIDTA* (loss) net assets
2003 2002 2003 2002 2003 2002 2003 2002
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
By activity:
Continuing operations:
Personal storage 26,034 20,916 10,599 9,486 8,014 7,589 119,916 85,210
Serviced business space 56,068 53,575 21,170 20,904 17,480 18,160 196,977 248,736
Records management - - 7,675 5,122 5,568 3,546 34,116 28,096
Property disposals - 792 - - - 162 - -
Goodwill amortisation
and exceptionals - - (360) - (69,776) (7,091) - -
82,102 75,283 39,084 35,512 (38,714) 22,366 351,009 362,042
Discontinued operations:
Other - 2,122 (10) (84) (10) (89) - -
82,102 77,405 39,074 35,428 (38,724) 22,277 351,009 362,042
*Earnings before interest, taxes, depreciation, amortisation and exceptionals.
Goodwill amortisation and exceptionals comprise goodwill amortisation of £7.7
million and exceptional items of £62.1 million charged against operating profit
(see note 2).
Operational net assets are net assets excluding own shares, current and other
fixed asset investments, development in progress, cash, borrowings, current and
deferred tax and dividends payable.
Turnover all originated in the United Kingdom with the exception of £2.75
million (2002: £2.3 million) which was supplied in other European countries.
Turnover by destination was as follows:
2003 2002
£'000 £'000
United Kingdom 79,352 75,143
Other Europe 2,750 2,262
82,102 77,405
Total operating profit before goodwill amortisation all arose in the United
Kingdom with the exception of losses of £0.6 million (2002: £0.7 million) which
were generated in other European countries.
Further analysis of total operating profit after goodwill amortisation and
exceptionals is as follows:
2003 2002
Dis- Dis-
Continuing continued Continuing continued
operations Acquisitions activities Total activities activities Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Turnover 79,387 2,715 - 82,102 75,283 2,122 77,405
Cost of sales (44,678) (1,552) - (46,230) (40,842) (1,555) (42,397)
Gross profit 34,709 1,163 - 35,872 34,441 567 35,008
Administrative expenses (9,973) (405) (10) (10,388) (8,530) (656) (9,186)
Exceptional charges (note 2) (62,106) - - (62,106) - - -
Goodwill amortisation (5,728) (348) - (6,076) (5,726) - (5,726)
Operating (loss)/profit (43,098) 410 (10) (42,698) 20,185 (89) 20,096
Share of IME operating profit:
Before goodwill amortisation 5,568 - - 5,568 3,546 - 3,546
Goodwill amortisation (1,594) - - (1,594) (1,365) - (1,365)
Total operating (loss)/profit (39,124) 410 (10) (38,724) 22,366 (89) 22,277
2. Operating (loss)/profit
Operating (loss)/profit is stated after charging the following:
2003 2002
£'000 £'000
Goodwill amortisation 6,076 5,726
Depreciation - on owned assets 6,275 4,646
Operating lease rentals - land and buildings 10,891 10,437
- plant, machinery and other 275 239
Auditors' remuneration - audit work 85 62
During the year, the group's auditors were paid £82,000 (2002: £22,000) for
services other than provided as auditors.
2003
Exceptional charges against operating profit comprise (2002: £nil): £'000
Provision for impairment and exceptional costs of disposal
relating to SBS (see note 3) 61,746
Director termination and associated costs 360
62,106
3. Provision for impairment and exceptional costs of disposal
The group has announced the agreement for the disposal of the serviced business
space division for consideration of £189.0 million estimated less debt of £6.5
million. Further details on the contribution of this business to the group's
results are given in note 1 to the preliminary announcement. The provision for
impairment and exceptional costs of disposal comprises £54.0 million for
impairment of goodwill and £7.7 million for disposal expenses and associated
restructuring costs.
4. Profit on disposal of operations and investments
The trade and assets of Homeware Brands were sold on 30 November 2001 at book
value. Its contribution to the group's results in the previous year are shown
under discontinued activities in note 1 to the preliminary announcement. Imex
Holland, which comprised two operating sites, was sold on 4 January 2002 at a
profit of £1.5 million. In the year to 30 April 2002 it contributed turnover of
£0.4 million and operating profit of £0.1 million.
The group's 20% interest in Workspace Group PLC was sold on 21 May 2001 and
generated a profit of £9.6million.
5. Net interest payable
2003 2002
£'000 £'000
On bank loans and overdrafts 11,952 8,472
On deferred acquisition loan notes 265 372
Other financing costs - 4
Share of IME joint venture interest 1,652 1,916
Interest payable and similar charges 13,869 10,764
Bank and other interest receivable (1,059) (370)
Interest receivable from IME joint venture (473) (869)
12,337 9,525
Exceptional interest costs and similar charges 4,365 -
Net interest payable 16,702 9,525
The exceptional interest costs and similar charges primarily relate to the cost
of restructuring the funding of the group as part of the process of disposing of
the SBS division.
6. Taxation
The tax charge for the year comprises:
2003 2002
£'000 £'000
Current tax
UK corporation tax at 30% 481 5,192
UK prior year (718) (707)
Total current tax (237) 4,485
Deferred tax
Origination and reversal of timing differences 2,984 1,413
Group tax charge 2,747 5,898
Share of IME joint venture tax 1,284 841
Total tax charge 4,031 6,739
The UK current tax charge includes a credit of £2.4 million in relation to items
included within exceptional charges which qualify for corporation tax relief
(2002: charge of £0.5 million relating to the profit on disposal of investment).
The total current tax charge for the year varied from the standard rate of
corporation tax in the UK for the following reasons:
2003 2002
£'000 £'000
(Loss)/profit on ordinary activites before taxation (53,838) 24,948
Standard rate of UK corporation tax @ 30% (16,151) 7,484
Effects of:
Goodwill impairment and exceptional costs 17,413 -
Deducting joint venture tax (charge)/credit at the standard rate (1,175) (788)
Goodwill amortisation for which no tax relief is available 2,301 2,127
Capital losses crystallised (135) (2,394)
Capital allowances in excess of depreciation (2,041) (1,253)
Utilisation of tax losses (788) (107)
Other timing differences (155) (53)
Adjustments to tax charge in respect of prior periods (718) (707)
Unrelieved overseas trading losses 198 140
Other permanent differences 1,014 36
Actual total current tax (credit)/charge (237) 4,485
A detailed review of the tax position of the group's properties was undertaken
in the period by an independent firm of property specialists who have determined
that there would be no unprovided liability to tax if the properties were sold
at their balance sheet values due to the availability of indexation relief.
FRS19 (Accounting for deferred tax) was adopted with effect from 1 May 2000. As
a result of the change of accounting policy a prior year adjustment was made
during the previous year to 30 April 2002. The group deferred tax provision in
the balance sheet was increased by £2.5 million and the share of IME joint
venture net assets were reduced by £0.8 million resulting in a total reduction
in shareholders' funds of £3.3 million.
7. Dividends
2003 2002
£'000 £'000
Interim paid 0.425p per ordinary share (2002: 0.402p) 774 729
Final proposed nil per ordinary share (2002: 0.85p) - 1,541
774 2,270
8. Earnings per share
Basic (loss)/earnings per share are calculated on loss after tax of £57.9
million (2002: £18.2 million profit after tax), divided by 181.7 million
ordinary shares (2002: 180.8 million ordinary shares) being the weighted average
number of shares in issue during the year. Diluted earnings per share are
calculated after allowing for the dilutive effect of conversion into ordinary
shares of the weighted average number of share options outstanding during the
year. The number of shares used for the diluted earnings per share calculation
was 181.9 million (2002: 181.9 million). The weighted average number of shares
used to calculate earnings per share excludes shares held by the Quest (see note
11).
Basic earnings per share before goodwill amortisation and exceptionals has been
separately disclosed on the face of the profit and loss account to facilitate
comparison of the underlying performance of the group. The calculation uses the
same weighted average number of shares in issue as for the basic earnings per
share but reflects the following items:
2003 2002
Profit/ (loss) Earnings Profit Earnings
after tax per share after tax per share
£'000 p £'000 p
As for basic earnings per share (57,869) (31.85) 18,209 10.07
Goodwill amortisation 7,670 4.22 7,091 3.92
Exceptionals (after tax) 62,462 34.38 (11,696) (6.47)
Basic earnings per share before goodwill
amortisation and exceptionals 12,263 6.75 13,604 7.52
Diluted earnings per share before goodwill amortisation and exceptionals
similarly reflects the above adjustments but uses the same weighted average
number of shares in issue as for diluted earnings per share.
9. Intangible assets
Goodwill
£'000
Cost
At 1 May 2002 114,615
Arising on acquisition (note 18) 11,511
Exchange movements 1,099
At 30 April 2003 127,225
Amortisation
At 1 May 2002 13,709
Charge for the year 6,076
Impairment charge for the year (SBS) 54,041
Exchange movements 35
At 30 April 2003 73,861
Net book value
At 30 April 2003 53,364
At 30 April 2002 100,906
10. Tangible assets
Plant
equipment
Land and and
buildings vehicles Total
£'000 £'000 £'000
Cost
At 1 May 2002 250,801 29,502 280,303
Arising on acquisitions 21,594 1,464 23,058
Exchange movements 30 558 588
Additions 14,630 9,902 24,532
Disposals (4,477) (510) (4,987)
At 30 April 2003 282,578 40,916 323,494
Depreciation
At 1 May 2002 15,102 14,236 29,338
Arising on acquisitions 418 609 1,027
Exchange movements 8 68 76
Charge for the year 3,424 2,851 6,275
Disposals (128) (330) (458)
At 30 April 2003 18,824 17,434 36,258
Net book value
At 30 April 2003 263,754 23,482 287,236
At 30 April 2002 235,699 15,266 250,965
Land and buildings at cost comprise:
2003 2002
£'000 £'000
Land 96,000 97,869
Freehold buildings 147,361 115,113
Long leasehold 20,772 20,632
Short leasehold 18,445 17,187
282,578 250,801
The net book value of the group's plant, equipment and vehicles does not include
any assets held under finance leases.
11. Investments
Own IME joint
Other shares venture
£'000 £'000 £'000
At 1 May 2002 250 14 28,096
Disposals - (2) -
Loans made to IME - - 3,897
Share of profit retained by joint venture - - 1,038
Exchange movements - - 1,085
At 30 April 2003 250 12 34,116
The group's other investment, which is held at cost, represents a 15% equity
interest amounting to £0.25 million in Citib@se plc, an unlisted company, which
operates in England in the provision of serviced office space.
The company operates a Qualifying Employee Share Ownership Trust ('Quest') which
holds shares issued by the company in relation to the group's employee share
save schemes. At 30 April 2003 the number of shares held by the Quest was 26,411
(2002: 102,290) and are included above at the price at which employees can
subscribe for the shares on exercise of their options. Dividends in respect of
these shares have been waived whilst being held by the Quest. During the year
the Quest disposed of 75,879 shares on exercise of employee share options.
The group's investment in its IME joint venture comprises its share of their net
assets of £19.8 million (2002: £17.7 million) and loans of £14.3 million (2002:
£10.4 million).
The group's principal operating subsidiaries, all of which are wholly owned,
are:
Country of operation
Company Activity and registration
Spaces Personal Storage Limited Personal storage UK
Une Piece en Plus S.A. Personal storage France
Imex Spaces Limited Serviced business space UK
InShops Centres Limited Serviced business space UK
Synex Network Services Limited Serviced business space UK
On 4 January 1999 Iron Mountain Europe Limited, a company registered in the UK,
became a 49.9% owned joint venture undertaking following the disposal of shares
to Iron Mountain Incorporated. The principal operating subsidiaries of the joint
venture, all of which are wholly owned and provide records and information
management services are:
Country of operation
Company and registration
Iron Mountain (UK) Limited UK
Datavault Limited UK
Archive Services Limited UK
Iron Mountain Ireland Limited Eire
Memogarde S.A. France
Archivage Actif Groupe Iron Mountain S.A.S. France
Datavault S.A. Spain
Iron Mountain Espana S.A. Spain
Iron Mountain Deutschland GmbH Germany
11. Investments continued
Further details of the group's share (49.9%) of the joint venture's net assets
as at 30 April 2003 and its share of profits for the year then ended are given
below:
2003 2002
£'000 £'000
Fixed assets 63,794 50,309
Current assets 10,919 10,148
Share of gross assets 74,713 60,457
Liabilities due within one year (22,969) (19,551)
Liabilities due after more than one year (31,945) (23,230)
Share of gross liabilities (54,914) (42,781)
Share of net assets 19,799 17,676
Share of net debt included in net assets above (19,400) (13,044)
The share of net debt disclosed above excludes loans due to the joint venture
partners.
2003 2002
£'000 £'000
Turnover 36,238 27,705
EBITDA 7,675 5,122
Profit before tax 2,322 1,286
Taxation (1,284) (841)
Profit after tax 1,038 445
During the year the group charged IME a management fee of £48,000 (2002:
£48,000), property rentals of £1.8 million (2002: £0.6 million) and had interest
receivable of £0.5 million (2002: £0.9 million). All transactions were
undertaken on an arm's length basis.
12. Stocks and development in progress
2003 2002
£'000 £'000
Stocks comprise:
Work in progress 941 1,678
Finished goods 395 146
1,336 1,824
The development in progress of £19.2m comprises a new records management
facility for IME in SE London. This was sold after the year end to a third party
at cost and leased back to IME on an arm's length basis.
13. Debtors
2003 2002
£'000 £'000
Trade debtors 4,742 3,290
Net investment in finance lease and hire purchase agreements 63 86
Corporation tax 868 -
Other debtors 1,866 1,082
Prepayments and accrued income 6,449 4,299
13,988 8,757
Group debtors falling due after more than one year amounted to £0.1 million
(2002: £0.1 million).
14. Current asset investments
Current asset investments represent short term money market investments that are
immediately realisable.
15. Creditors: amounts falling due within one year
2003 2002
£'000 £'000
Bank loans and overdrafts 882 21,403
Deferred acquisition loan notes 3,042 -
Trade creditors 13,650 10,193
Social security and other taxes 1,456 1,300
Corporation tax - 3,914
Other creditors 1,159 1,811
Accruals and deferred income 21,516 14,634
Proposed dividend - 1,541
41,705 54,796
16. Creditors: amounts falling due after more than one year
2003 2002
£'000 £'000
Bank loans and overdrafts 209,118 131,798
Deferred acquisition loan notes 7,348 4,043
Borrowings 216,466 135,841
Other creditors 382 437
216,848 136,278
The above borrowings are repayable as follows:
2003 2002
£'000 £'000
Between one and two years 5,364 62,781
Between two and five years 211,102 71,671
After five years - 1,389
216,466 135,841
The aggregate amount of all loans repayable by instalment, of which any
instalment is due for repayment after five years is £nil million (2002: £1.4
million) for the group. These were bank loans which were secured on certain
property assets of the group and attracted interest at LIBOR plus a margin of
1.25%.
17. Provisions for liabilities and charges
At Charged
1 May to profit At 30
2002 and loss Paid in Arising on April
account the year acquisitions 2003
Group £'000 £'000 £'000 £'000 £'000
Pensions 131 120 (251) - -
Deferred tax 4,344 2,984 - (517) 6,811
4,475 3,104 (251) (517) 6,811
The group's deferred tax provision comprises:
2003 2002
£'000 £'000
Accelerated capital allowances 8,933 6,668
Short-term timing differences (596) (822)
Losses (1,526) (1,502)
6,811 4,344
18. Acquisitions
During the year the group acquired Aardvark Self Storage and Rent A Space.
Goodwill on acquisition arose as follows:
Provisional
Book value Conformity fair
of of value of net
prior to accounting assets
acquisition policies Revaluations acquired
£'000 £'000 £'000 £'000
Fair value of liabilities acquired
Tangible fixed assets 12,418 - 9,612 22,030
Debtors (including deferred tax of £517,000) 1,318 - - 1,318
Borrowings (including overdrafts of £947,000) (9,221) - - (9,221)
Other creditors (2,381) (160) - (2,541)
2,134 (160) 9,612 11,586
Fair value of consideration
Deferred acquisition loan notes 7,603
Cash and expenses of acquisition 15,494
23,097
Goodwill arising on acquisition 11,511
In accordance with FRS6 the group has disclosed the fair value of the assets
acquired as provisional.
The acquisitions did not have any material impact on the results of the group to
30 April 2003.
19. Commitments and contingent liabilities
(a) Operating lease commitments
The group was committed to make the following payments over the forthcoming 12
months in respect of operating leases which expire:
2003 2002
Land and Land and
buildings Other buildings Other
£'000 £'000 £'000 £'000
Within one year 80 17 - 8
Between one and two years - 82 80 17
Between two and five years 1,005 174 910 213
Over five years 10,223 - 9,870 -
11,308 273 10,860 238
(b) Contingent liabilities
The group had no contingent liabilities on documentary credits at 30 April 2003
(2002: £nil).
20. Pensions
In preparing the financial statements for the current year, the group has
adopted the transitional arrangements of FRS 17 'Retirement Benefits'. As in
previous years, expenses have been charged under SSAP 24.
a) Pension disclosures under SSAP 24
The group's pension costs for the year ended 30 April 2003 are analysed below:
2003 2002
£'000 £'000
Other pension costs comprise:
Regular cost 38 30
Amortisation of experience deficit 82 70
Defined benefit scheme 120 100
Defined contribution scheme 312 292
Amount of the pension charge under SSAP 24 432 392
There are no outstanding contributions in respect of the group's defined
contribution schemes at 30 April 2003 or 2002.
The group's pension costs for its defined benefit scheme are determined with the
advice of independent qualified actuaries. Triennial actuarial valuations of the
pension scheme are performed by a qualified actuary using the projected unit
method. The most recent formal actuarial review of the defined benefit pension
scheme was at 30 April 2003. The market value of the scheme assets at that date
was £2.3m and the level of funding was 83%. The assumptions used by the actuary
are best estimates chosen from a range of possible actuarial assumptions which,
due to the timescale covered, may not necessarily be borne out of practice. The
main actuarial assumptions used in the valuation were:
Investment returns 7.5% pa
Salary increases 4.1% pa
Future pension increases 2.6% pa
The company is eliminating the deficit by increasing its contributions in the
seven year period to 30 April 2010. The deficit in the scheme is being
recognised as a variation from regular cost over seven years in accordance with
actuarial advice. Provisions include £nil (2002: £131,000) in respect of the
deficit of accumulated pensions costs over the amounts funded.
(b) Supplementary pensions disclosures under FRS 17
The profit and loss account charge for pension costs, the accounting policies
and the disclosures above are given on the basis of Statement of Standard
Accounting Practice 24. SSAP 24 is going to be replaced by Financial Reporting
Standard 17. The additional disclosures that follow are given in preparation for
FRS 17 being adopted, relate only to the defined benefit scheme and omit certain
comparative figures in accordance with the transitional rules of FRS 17.
The most recent actuarial valuation of the group's defined benefit scheme was
carried out as at 30 April 2003 by independent actuaries, using the projected
unit method, to assess the scheme's liabilities as at 30 April 2003. The scheme
assets are stated at their market value at 30 April 2003. It should be noted
that the methodology and assumptions prescribed for the purposes of FRS 17 mean
that the disclosures will be inherently volatile, varying greatly according to
investment market conditions at each accounting date.
(i) Contributions
The defined benefit scheme employers' contributions for 2003 were £38,000 (2002:
£30,000) and the employers' contribution rate has been fixed at £10,045 per
month until 30 April 2010. The additional contributions in respect of the
pension scheme actuarial deficit are in accordance with the recommendations of
the scheme actuary.
(ii) Assumptions
The major assumptions used by the actuary in assessing scheme liabilities on a
FRS 17 basis were:
At 30 April At 30 April
2003 2002
% %
Rate of increase in salaries 4.1 4.3
Rate of increase in pensions in payment 2.6 2.8
Discount rate 5.5 5.9
Inflation assumption 2.6 2.8
(iii) FRS 17 balance sheet information
The fair value of the scheme's assets which are not intended to be realised in
the short term and may be subject to significant change before they are
realised, and the present value of the scheme's liabilities, which are derived
from cash flow projections over long periods and thus inherently uncertain,
were:
Long-term
rate of Long-term
return rate of
Value at expected at Value at return
30 April 30 April 30 April expected at
2003 2003 2002 30 April 2002
£'000 % £'000 %
Equities and property 944 7.5 1,007 8.0
Fixed interest 1,163 5.0 1,169 5.5
Cash and other 154 1.5 72 5.0
Fair value of assets 2,261 2,248
Present value of scheme liabilities (2,723) (2,615)
Actuarial deficit (462) (367)
Deferred tax at 30% 139 110
Actuarial deficit after tax (323) (257)
(d) Net assets and profit and loss reserve
If the group's pension scheme deficit had been recognised in the group's
financial statements, the net assets and profit and loss reserve of the group
would be as follows:
2003 2002
Net assets £'000 £'000
Net assets as reported on SSAP 24 basis 158,243 215,668
Add back SSAP 24 pensions creditor (net of deferred tax) - 92
FRS 17 pension liability (net of deferred tax) (323) (257)
Net assets on FRS 17 basis 157,920 215,503
2003 2002
Profit and loss reserve £'000 £'000
Profit and loss reserve as reported on SSAP 24 basis (17,621) 40,163
FRS 17 pension liability (net of deferred tax) (323) (257)
Profit and loss reserve on FRS 17 basis (17,944) 39,906
e) Analysis of the amount that would have been charged to operating profit
2003
£'000
Current service cost 38
Past service cost -
Total operating charge 38
f) Analysis of the amount that would have been credited to other finance income
2003
£'000
Expected return on pension scheme assets 151
Interest on pension scheme liabilities (150)
1
g) Analysis of the amount that would have been recognised in statement of total
recognised gains and losses ('STRGL')
2003
£'000
Actual return less expected return on pension scheme assets (203)
Experience gains and losses arising on the scheme liabilities (1)
Changes in assumptions underlying the present value of the scheme liabilities (100)
Actuarial loss recognised in STRGL (304)
h) Movement in pension scheme deficit during the year
2003
£'000
Deficit in scheme at beginning of year (367)
Current service costs (38)
Contributions 246
Past service costs -
Other finance income 1
Actuarial loss (304)
Deficit in scheme at end of year (462)
It should be noted that the scheme is closed to new entrants and so the use of
the projected unit valuation method required by FRS 17 means that the current
service cost is likely to increase as the last member approaches retirement.
i) History of experience gains and losses
2003
Difference between expected and actual return on scheme assets:
Amount (£'000) (203)
Percentage of scheme assets (%) (9)
Experience gains and losses on scheme liabilities:
Amount (£'000) (1)
Percentage of the present value of the scheme liabilities (%) -
Total amount recognised in statement of total recognised gains and losses:
Amount (£'000) (304)
Percentage of the present value of the scheme liabilities (%) (11)
21. Financial instruments
The major financial risks facing the group, treasury policy and the use of
financial instruments are discussed in the financial review. The group has taken
advantage of the exemption under FRS 13 to exclude short term debtors and
creditors from the following disclosures.
Currency and interest rate risk profile of financial assets and liabilities
After taking into account interest rate swaps the currency and interest rate
profile of the group's financial assets and liabilities was:
Floating Non-interest
Total rate bearing
Financial assets £'000 £'000 £'000
At 30 April 2003:
Sterling 28,762 28,512 250
Euro 40 40 -
28,802 28,552 250
At 30 April 2002:
Sterling 14,918 14,668 250
Euro 15 15 -
14,933 14,683 250
Financial assets comprise: cash £13.4 million (2002: £4.1 million), loans to
joint ventures £14.3 million (2002: £10.4 million), other fixed asset
investments £0.3 million (2002: £0.3 million), current asset investments £0.7
million (2002: £nil) and long-term debtors £0.1 million (2002: £0.1 million).
Cash at bank and in hand bears interest at prevailing market rates. Loans to the
joint venture bears interest at rates agreed between the joint venture partners
and during the year ranged from 3.6% to 4.2%.
It is not possible to compute the weighted average period until maturity for
financial assets on which no interest is paid.
Weighted
Non- Weighted average period
interest Floating Fixed average for which
Total bearing rate rate fixed rate rate fixed
Financial liabilities £'000 £'000 £'000 £'000 % Years
At 30 April 2003:
Sterling 219,062 2,000 217,062 - - -
Euro 1,327 - 1,327 - - -
220,389 2,000 218,389 - - -
At 30 April 2002:
Sterling 156,298 - 146,298 10,000 7.05 0.56
Euro 946 - 946 - - -
157,244 - 147,244 10,000
Financial liabilities comprise borrowings of £220.4 million. The weighted
average period until maturity for financial liabilities on which no interest is
paid is 3 years (2002: none). Floating rate liabilities bear interest based on
LIBOR with the exception of £75 million which is subject to an interest rate
collar which caps LIBOR at 7.26%, has a floor of 5.50% and which expires in May
2004.
21. Financial instruments continued
Maturity of financial liabilities
The maturity of financial liabilities was as follows:
2003 2002
Borrowings Borrowings
£'000 £'000
Within one year 3,924 21,403
Between one and two years 5,364 62,781
Between two and five years 211,101 71,671
After five years - 1,389
220,389 157,244
Fair values of financial assets and liabilities
The book values and estimated fair values of financial assets and liabilities
was as follows:
2003 2002
Book value Fair Book value Fair value
value
£'000 £'000 £'000 £'000
Other fixed asset investments 250 250 250 250
Financial assets excluding other fixed asset investments 28,552 28,552 14,697 14,697
Borrowings (220,389) (220,389) (157,244) (157,244)
Interest rate swaps - - - (866)
Other matters
At 30 April 2003 the group did not have outstanding any forward currency
contracts and had £47 million undrawn amounts under its committed banking
facilities. Currency gains and losses taken through the profit and loss account
during the year were immaterial.
22. Cash flow statement
a) Reconciliation of operating (loss)/profit to cash flow from operating
activities
2003 2002
£'000 £'000
Operating (loss)/profit (42,698) 20,096
Goodwill amortisation and impairment 60,117 5,726
Depreciation charge 6,275 4,646
Loss on sale of tangible fixed assets 105 21
Decrease in stocks 488 320
(Increase)/decrease in debtors (3,754) 613
Increase in creditors 5,481 98
Decrease in provisions for liabilities and charges (131) (30)
Net cash inflow from operating activities 25,883 31,490
b) Analysis of cash flows for headings netted in cash flow statement
2003 2002
Returns on investments and servicing of finance £'000 £'000
Interest received 283 370
Interest paid (12,768) (7,224)
Net cash outflow for returns on investments and servicing of finance (12,485) (6,854)
Proceeds from sale of investments
Workspace Group PLC - 29,947
Own shares 2 208
Net cash inflow from sale of investments 2 30,155
Capital expenditure
Purchase of tangible fixed assets (23,620) (40,074)
Sale of tangible fixed assets 6,072 786
Net cash outflow for capital expenditure (17,548) (39,288)
Acquisitions and disposals
Acquisitions (note 22d) (15,474) (38)
Bank (overdrafts)/cash acquired with acquisitions (947) 3
Sale of Homeware Brands - 658
Sale of Imex Holland - 1,829
Net cash (outflow)/inflow for acquisitions and disposals (16,421) 2,452
Financing
Debt due within one year - increase in borrowings - 4,134
Debt due beyond one year - increase in borrowings 219,233 7,191
Debt due within one year - repayment of borrowings (13,985) (4,200)
Debt due beyond one year - repayment of borrowings (152,840) (17,296)
Capital element of finance lease rental payments - (8)
Net cash inflow/(outflow) from financing 52,408 (10,179)
22. Cash flow statement continued
c) Analysis of changes in net debt
At 30
At 1 May Cash flow Other non-cash April
2002 Acquisitions movements 2003
£'000 £'000 £'000 £'000 £'000
Cash at bank and in hand 4,093 9,303 - - 13,396
Current asset investments - 709 - - 709
Overdrafts (9,076) 8,525 - 11 (540)
(4,983) 18,537 - 11 13,565
Debt due within one year (12,327) 13,985 (2,000) (3,042) (3,384)
Debt due after one year (135,841) (66,393) (6,274) (7,958) (216,466)
(148,168) (52,408) (8,274) (11,000) (219,850)
Total net debt (153,151) (33,871) (8,274) (10,989) (206,285)
Other non-cash movements relate to deferred acquisition loan notes, loan
amortisation costs written off during the year and foreign exchange differences.
d) Acquisitions
2003 2002
£'000 £'000
Cash consideration and acquisition costs paid 13,474 38
Shareholder loans repaid on acquisition 2,000 -
15,474 38
23 Financial statements and annual general meeting
This preliminary statement, which has been agreed with the auditors, was
approved by the board on 8 July 2003. It is not the company's statutory
accounts. Statutory accounts will be sent to shareholders in due course.
The statutory accounts for the year ended 30 April 2002 have been delivered to
the Registrar of Companies and received an audit report which was unqualified
and did not contain statements under section 237(2) or (3) of the Companies Act
1985. The statutory accounts for the year ended 30 April 2003 have not yet been
approved, audited or filed.
The annual general meeting will be held on 20 August 2003.
This information is provided by RNS
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