Interim Rslts& Prpsd Disposal
Mentmore PLC
10 December 2003
Immediate Release 10 December 2003
Mentmore plc
('Mentmore' or the 'Group')
Proposed Disposal
and
Interim Results for the six months ended 31 October 2003
Mentmore today announces the proposed disposal of its shareholding in Iron
Mountain Europe ('IME'), its records management joint venture with Iron Mountain
Incorporated ('IMI'), and interim results for the six months ended 31 October
2003.
An analyst briefing will be held at 10:30 am today at Bridgewell Securities, Old
Change House, 128 Queen Victoria Street, London EC4U 4BJ.
Highlights:
Proposed disposal
• Proposed disposal of Mentmore's 49.9% shareholding in IME to IMI for
£82.5m, including repayment of shareholder loans made to the joint venture.
• Proceeds from the disposal proposed to be returned to shareholders.
• Following proposed disposal, Mentmore entirely focussed on the growth area
of personal storage.
Interim results
• Group revenues of £29.4m (2002: £39.1m), with only three month
contribution from serviced business space division following its successful
disposal in July for £189.0m.
• Operating profit before goodwill amortisation and exceptionals of £13.5m
(2002: £13.9m), with improved underlying profitability in both personal
storage and records management.
• Acquisition by IME during the period of the information management
services business of Hays plc, doubling its size and establishing it as the
clear European leader.
• Good progress made in personal storage during the period with revenues
increased 24.9% to £15.0m (2002: £12.0m) and operating profit before
goodwill amortisation up 9.7% to £4.2m (2002: £3.8m). This period includes a
full contribution from the acquisitions made in September 2002.
• Mentmore's share of revenues and operating profit before goodwill
amortisation and exceptionals from IME increased to £35.2m (2002: £16.7m)
and £5.5m (2002: £2.3m) respectively. Excluding the acquired business of
Hays plc, these grew by 26.6% and 53.5% respectively.
• Intention to pay an interim dividend of 0.445p per share, an increase of
4.7% over last year, in addition to the previously announced special
dividend of 0.89p per share to be paid after the capital reconstruction.
Commenting, Martin Nye, chief executive, said:
'We have achieved a great deal since we announced our strategic review this time
last year. Following the proposed disposal of our records management joint
venture we will be totally focussed on our personal storage activities. We shall
continue our improvement programmes and expect to grow capacity at least in line
with market growth over the coming years. Current trading of the group is in
line with the board's expectations and we remain confident of the outlook and
prospects for the group.'
Mentmore plc +44 (0)20 8946 3159
Nick Smith, non-executive chairman
Martin Nye, chief executive
Clive Drysdale, finance director
Buchanan Communications +44 (0)20 7466 5000
Charles Ryland
Catherine Miles
Chairman's statement
Introduction
The last six months have seen further progress in our commitment to deliver
tangible value to shareholders.
This time last year we announced our intention to focus the group on its core
activities of personal storage and records management as both offered strong
market positions and growth prospects. As part of this process we successfully
sold the serviced business space division ('SBS') in July for £189.0m less debt.
In the same month Iron Mountain Europe ('IME'), our records management joint
venture with Iron Mountain Incorporated ('IMI'), acquired the information
management services business of Hays plc ('Hays IMS'), more than doubling its
size and establishing the business as the clear leader in the European market.
We are pleased to announce today that we have entered into a conditional
agreement to dispose of our 49.9% holding in IME to IMI for £82.5m in cash,
including repayment of shareholder loans. The board's intention is to return
the proceeds to shareholders in due course.
Our initiative to strengthen the management team in personal storage has
contributed to that division's improved performance during the period. We are
well placed to take advantage of growth opportunities in this market.
Disposal of IME
In our announcement of the acquisition of the Hays IMS business on 12 July 2003
we made the following statement: 'Following Mentmore's sale of its serviced
business space division announced on 9 July 2003 and the acquisition of Hays
European IMS by Iron Mountain Europe, the significance of the Iron Mountain
Europe joint venture to Mentmore has increased substantially. Mentmore has
already initiated discussions with IMI as to how best recognise the value of
Mentmore's investment in Iron Mountain Europe. Many options are being discussed
and there is a commitment from both parties to finding a solution that benefits
all.'
We have now reviewed all the available options and have concluded that it would
be in the best interest of shareholders to accept an offer from IMI of £82.5m in
cash for our 49.9% shareholding in IME. This consideration includes repayment of
shareholder loans made to the joint venture, which stood at £23.5m at 31 October
2003.
The proposed disposal is subject to shareholder approval at an extraordinary
general meeting, details of which will be included in a circular to be sent to
shareholders early in 2004. Completion of the disposal is expected in early
February 2004.
The decision to recommend selling our IME shareholding was not taken lightly as
the business has built a strong base and its trading continues to improve.
However, in 2004 approximately half of the group's operating profit would have
been generated from a joint venture over which Mentmore does not have ultimate
control. Furthermore, IME will require significant investment to maximise
growth, which IMI is better placed to finance. These cash requirements for
continuing expansion would severely stretch our financial resources and
constrain our ability to invest in our wholly owned personal storage business.
Mentmore accounts for IME as a joint venture. At 31 October 2003 the net
carrying value of the investment was £42.2m, which included shareholder loans
due from IME of £23.5m. In the six months to 31 October 2003 IME contributed
£0.6m loss before tax to the group (year ended 30 April 2003: £2.3m profit).
Group trading
Comparisons between trading periods are distorted by the various transactions
and these results include a final three month contribution from the SBS
division. Overall, group revenues were £29.4m (2002: £39.1m) and total
operating profit before goodwill amortisation and exceptionals was £13.5m (2002:
£13.9m). In both personal storage and records management underlying
profitability has improved. We have seen an encouraging start to the
strengthening of our personal storage business and good progress within records
management, including a successful start to the integration of the acquired
operations.
Personal storage moved ahead in the period, increasing revenues to £15.0m, a
24.9% increase on last year's figure. Operating profit before goodwill
amortisation and exceptional costs increased by 9.7% to £4.2m. This period
includes a full contribution from the acquisitions made in September 2002. It
also has an additional £0.1m charge for group costs compared to 2002 as the
division had to bear all such costs after the SBS disposal.
The division delivered an organic growth in operating profits before goodwill
amortisation in the six months of 8% . This reverses the decline of 4% shown
for the year ended 30 April 2003.
A strengthened and re-organised UK management structure is beginning to impact
results. Since 30 April 2003 occupancy levels have increased from 64.9% to
70.6%, representing an additional 23,000 square metres of space let. The average
price achieved per square metre for self storage was £166.67, marginally up on
the previous six months.
We have had success with a more pro-active approach to sales and marketing and
the introduction of individual centre business plans has driven some significant
trading improvements. There are still a number of under performing centres,
particularly amongst those developed in the last five years. These centres are
receiving appropriate management attention to ensure that they deliver their
profit potential.
In Paris occupancy levels have increased from 57.3% to 70.0%, with particularly
encouraging progress in the newer centres. The average price per square metre
achieved over the six months was £228.98, similar to the levels we achieve for
London. After excluding currency fluctuations, this was marginally ahead of the
previous six months.
As the performance of the personal storage business continues to improve, we
will focus on implementing our growth plans, look to build and strengthen our
portfolio of self storage centres and take advantage of the attractive growth
opportunities.
Iron Mountain Europe continued to grow its base business strongly and progress
on integrating the business acquired from Hays plc has proceeded well. Our share
of revenues increased to £35.2m (2002: £16.7m). Within this the legacy IME
business grew by 26.6%.
Our share of operating profit before goodwill amortisation and exceptionals grew
to £5.5m (2002: £2.3m), of which the legacy IME business grew by 53.5%. There
have been exceptional costs as part of the acquisition integration - our share
of these costs in the period was £0.6m.
Serviced business space was sold to Ashtenne Holdings plc for £189.0m less debt
in July. The net proceeds were used to reduce group borrowings. These results
include revenues of £14.3m and operating profit of £3.8m from SBS.
Capital structure
We have reviewed our capital structure taking into account the future needs of
the group following the disposal of SBS and the proposed disposal of IME. The
board intends to return the proceeds of the IME sale to shareholders in early
2004.
Net debt at the end of the period was £18.0m, with total headroom available of
just over £60m to support growth plans in personal storage.
Dividends
In July we said that we intended paying a special dividend, in lieu of a final
dividend, once a capital reconstruction had been completed. We expect to have
the necessary consents shortly and plan to pay the special dividend of 0.89
pence per share in early February 2004. At the same time, we anticipate paying
an interim dividend in respect of the current year of 0.445 pence per share.
This would represent a 4.7% increase over last year. The date of payment of
these dividends will be announced when the capital reconstruction is complete.
The board anticipates increasing dividends progressively hereafter.
Outlook
Following the actions proposed above we shall be totally focussed on our
personal storage activities, operating in a market that has the potential for
significant growth. We shall continue our internal improvement programmes and
expect to grow capacity at least in line with market growth over the coming
years.
Current trading of the group is in line with the board's expectations and we
remain confident of the outlook and prospects for the group.
Nicholas Smith
Chairman
10 December 2003
Group profit and loss account
for the six months ended 31 October 2003
Six months Six months
ended ended Year ended
31 October 31 October 30 April
2003 2002 2003
Notes £'000 £'000 £'000
Group turnover 2 29,352 39,124 82,102
Group and share of joint venture 50,208 28,695 62,272
Less: group's share of joint venture (35,191) (16,669) (36,238)
Group 15,017 12,026 26,034
Discontinued activities 14,335 27,098 56,068
29,352 39,124 82,102
Operating profit/(loss) 6,743 8,677 (42,698)
Continuing operations:
Before goodwill amortisation and exceptionals 4,157 3,790 8,014
Goodwill amortisation and exceptionals (1,196) (938) (2,496)
2,961 2,852 5,518
Discontinued activities:
Before goodwill amortisation and exceptionals 3,782 7,813 17,470
Goodwill amortisation and exceptionals - (1,988) (65,686)
3,782 5,825 (48,216)
Group operating profit/(loss) 6,743 8,677 (42,698)
Share of operating profit in joint venture:
Before goodwill amortisation and exceptionals 5,534 2,340 5,568
Goodwill amortisation and exceptionals (2,455) (748) (1,594)
3,079 1,592 3,974
Total operating profit/(loss) 2 9,822 10,269 (38,724)
Before goodwill amortisation and exceptionals 13,473 13,943 31,052
Goodwill amortisation and exceptionals 2 (3,651) (3,674) (69,776)
Profit on disposal of fixed assets 23 1,143 1,588
Share of joint venture profit on disposal of 145 - -
fixed assets
Loss on disposal of discontinued activities (1,483) - -
Profit/(loss) on ordinary activities before 8,507 11,412 (37,136)
interest
Net interest payable (6,394) (5,833) (16,702)
Before exceptional costs (6,394) (5,833) (12,337)
Exceptional costs - - (4,365)
Profit/(loss) on ordinary activities before 2,113 5,579 (53,838)
taxation
Taxation 3 (1,595) (2,773) (4,031)
Profit/(loss) on ordinary activities after
taxation 518 2,806 (57,869)
Before goodwill amortisation and exceptionals 4 5,054 6,480 12,263
Goodwill amortisation and exceptionals (4,536) (3,674) (70,132)
Dividends - (774) (774)
Transfer to/(from) reserves 518 2,032 (58,643)
Earnings/(loss) per share 4
Basic 0.28p 1.55p (31.85)p
Basic before goodwill amortisation and 2.78p 2.94p 6.75p
exceptionals
Diluted 0.28p 1.54p (31.85)p
Diluted before goodwill amortisation and 2.78p 2.93p 6.74p
exceptionals
Dividends per share - 0.425p 0.425p
Group balance sheet
as at 31 October 2003
31 October 31 October 30 April
2003 2002 2003
Notes £'000 £'000 £'000
Fixed assets
Intangible assets 41,038 109,326 53,364
Tangible assets 99,316 280,855 287,236
Investment in IME joint venture 42,228 29,942 34,116
- share of gross assets 188,397 66,167 74,713
- share of gross liabilities (169,702) (48,035) (54,913)
- share of net assets 18,695 18,132 19,800
- loans to joint venture 23,533 11,810 14,316
Own shares 12 17 12
Other investments - 250 250
182,594 420,390 374,978
Current assets
Stocks 348 1,843 1,336
Development in progress - 17,672 19,200
Debtors 10,110 10,562 13,988
Investments 1,151 - 709
Cash at bank and in hand 8,581 10,387 13,396
20,190 40,464 48,629
Creditors: amounts falling due within one year (17,185) (40,706) (41,705)
Net current assets/(liabilities) 3,005 (242) 6,924
Total assets less current liabilities 185,599 420,148 381,902
Creditors: amounts falling due after more than (25,672) (197,473) (216,848)
one year
Provisions for liabilities and charges (1,408) (4,672) (6,811)
Net assets 158,519 218,003 158,243
Capital and reserves
Called up share capital 18,211 18,211 18,211
Share premium account 130,427 130,427 130,427
Other reserve 27,226 27,226 27,226
Profit and loss account (17,345) 42,139 (17,621)
Equity shareholders' funds 7 158,519 218,003 158,243
Group cash flow statement
for the six months ended 31 October 2003
Six months Six months
ended ended Year ended
31 October 31 October 30 April
2003 2002 2003
Notes £'000 £'000 £'000
Cash inflow from operating activities 5 8,889 12,113 25,883
Returns on investment and servicing of (6,190) (6,165) (12,485)
finance
Taxation 509 (2,198) (4,561)
Capital expenditure and financial investment 4,651 (12,832) (24,331)
Proceeds from sale of investment - 40 2
Development on behalf of joint venture 19,200 (1,343) (2,888)
Loans made to joint venture (9,218) (1,389) (3,897)
Capital expenditure (5,331) (10,140) (17,548)
Acquisitions and disposals 179,223 (16,624) (16,421)
Equity dividends paid - (1,541) (2,315)
Cash inflow/(outflow) before financing 187,082 (27,247) (34,230)
Financing
- issue of shares - 359 359
- (decrease)/increase in debt (190,915) 42,258 52,408
(Decrease)/increase in cash in the period (3,833) 15,370 18,537
Reconciliation of net cash flow to movement in net debt
for the six months ended 31 October 2003
Six months Six months
ended ended Year ended
31 October 31 October 30 April
2003 2002 2003
Notes £'000 £'000 £'000
(Decrease)/increase in cash in the period (3,833) 15,370 18,537
Cash outflow/(inflow) from change in debt 190,915 (42,258) (52,408)
Change in net debt resulting from cash flows 187,082 (26,888) (33,871)
Loans and finance leases acquired with subsidiary - (8,274) (8,274)
undertakings
Non-cash movements 1,221 (8,614) (10,989)
Movement in net debt in the period 188,303 (43,776) (53,134)
Net debt at beginning of the period (206,285) (153,151) (153,151)
Net debt at end of the period 6 (17,982) (196,927) (206,285)
Non-cash movements relate to deferred acquisition loan notes, loan amortisation
costs written off during the period and foreign exchange differences.
Notes to the interim results
for the six months ended 31 October 2003
1. Basis of preparation
The interim results have not been audited but have been reviewed by the
auditors. They have been prepared on the basis of accounting policies consistent
with those adopted for the year ended 30 April 2003. The comparative figures for
the year ended 30 April 2003 and other financial information contained herein do
not constitute statutory accounts within the meaning of Section 240 of the
Companies Act 1985. Statutory accounts for the year ended 30 April 2003, which
received an audit report that was unqualified and did not contain statements
under Section 237(2) or (3) of the Companies Act 1985, have been filed with the
Registrar of Companies.
2. Segmental analysis
Six months Six months
ended ended Year ended
31 October 31 October 30 April
2003 2002 2003
£'000 £'000 £'000
Group turnover
Continuing operations:
Personal storage 15,017 12,026 26,034
Discontinued activities:
Serviced business space 14,335 27,098 56,068
29,352 39,124 82,102
Total operating profit/(loss)
Continuing operations:
Personal storage 4,157 3,790 8,014
Records management 5,534 2,340 5,568
Goodwill amortisation (3,067) (1,686) (3,730)
Exceptional restructuring costs (584) - (360)
6,040 4,444 9,492
Discontinued activities:
Serviced business space 3,782 7,813 17,480
Other - - (10)
Goodwill amortisation - (1,988) (3,940)
Provision for impairment and exceptional costs of - - (61,746)
disposal
3,782 5,825 (48,216)
9,822 10,269 (38,724)
In the six months to 31 October 2003 exceptional restructuring costs of £0.6
million have been incurred by IME following its acquisition of the European
records management business of Hays. Their charge represents the group's share
of those costs.
3. Taxation
The tax charge on profits before goodwill amortisation and exceptional costs for
the six months ended 31 October 2003 is based on an estimated effective rate of
35.4% for the year ending 30 April 2004. The tax charge includes £0.3 million
for the Iron Mountain Europe joint venture and a credit of £0.5 million
relating to prior periods.
4. Earnings per share
Basic earnings per share are calculated on profit after tax of £518,000 (2002:
£2.8 million), divided by 182.1 million ordinary shares (2002: 181.4 million
ordinary shares) being the weighted average number of shares in issue during the
period. 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 period. The number of shares used
for the diluted earnings per share calculation was 182.1 million (2002: 181.9
million). The weighted average number of shares used to calculate earnings per
share excludes 26,411 shares held by the group's Qualifying Employee Share
Ownership Trust.
4. Earnings per share continued
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:
Six months Six months
ended ended Year ended
31 October 31 October 30 April
2003 2002 2003
£'000 £'000 £'000
Profit/(loss) after tax
As for basic earnings per share 518 2,806 (57,869)
Goodwill amortisation 3,067 3,674 7,670
Exceptional costs charged against total operating 584 - 62,106
profit
Profit on disposal of fixed assets (including joint (168) (1,143) (1,588)
venture share)
Loss on disposal of discontinued activities 1,483 - -
Exceptional interest costs - - 4,365
Tax on goodwill amortisation and exceptionals (430) - (2,421)
As for basic earnings per share before goodwill
amortisation and exceptionals 5,054 5,337 12,263
Six months Six months
ended ended Year ended
31 October 31 October 30 April
2003 2002 2003
p p p
As for basic earnings per share 0.28 1.55 (31.85)
Goodwill amortisation and exceptionals
above(after tax) 2.50 1.39 38.60
Basic earnings per share before goodwill
amortisation and exceptionals 2.78 2.94 6.75
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.
5. Reconciliation of operating profit to cash flow
from operating activities
Six months Six months
ended ended Year ended
31 October 31 October 30 April
2003 2002 2003
£'000 £'000 £'000
Group operating profit/(loss) 6,743 8,677 (42,698)
Goodwill amortisation and impairment 1,196 2,926 60,117
Depreciation charge 2,597 2,728 6,275
Loss on sale of tangible fixed assets - - 105
Decrease/(increase) in stocks 4 (19) 488
Increase in debtors (713) (1,161) (3,754)
(Decrease)/increase in creditors (938) (1,044) 5,481
Increase/(decrease) in provisions for liabilities and - 6 (131)
charges
8,889 12,113 25,883
6. Net debt
31 October 31 October 30 April
2003 2002 2003
£'000 £'000 £'000
Net debt comprises:
Cash at bank and in hand 8,581 10,387 13,396
Current asset investments 1,151 - 709
Overdrafts - - (540)
Bank loans (18,324) (195,668) (209,460)
Deferred acquisition loan notes (9,390) (11,646) (10,390)
(17,982) (196,927) (206,285)
Bank loans and deferred acquisition loan notes include amounts due after more
than one year amounting to £25.7 million (2002: £197.0 million).
7. Reconciliation of movement in shareholders' funds
31 October 31 October 30 April
2003 2003 2002
£'000 £'000 £'000
Profit/(loss) for the period 518 2,806 (57,869)
Other recognised gains and losses in the period (242) (56) 859
Shares issued net of expenses - 359 359
Dividends - (774) (774)
Net addition/(reduction) to shareholders' funds 276 2,335 (57,425)
Opening shareholders' funds 158,243 215,668 215,668
Closing shareholders' funds 158,519 218,003 158,243
8. Interim results statement
The interim results statement, which was approved by the Board on 10 December
2003, will be posted to all shareholders. Thereafter copies may be obtained from
the Company Secretary, Mentmore plc, Park House, 14 Pepys Road, London SW20 8NH.
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