Final Results

Quintain Estates & Development PLC 30 May 2002 30 May 2002 QUINTAIN ESTATES AND DEVELOPMENT PLC ('Quintain' / 'Company' / 'Group') PRELIMINARY ANNOUNCEMENT OF RESULTS FOR THE YEAR ENDED 31 MARCH 2002 HIGHLIGHTS PROFIT AND LOSS ACCOUNT 31 March 31 March 2002 2001 Change Restated Turnover (£000) 50,430 60,042 - 16.0% Profit before tax (£000) 17,384 22,910 - 24.1% Profit before tax and accounting changes (£000) 17,048 20,825 - 18.1% Profit before tax, exceptional items and accounting changes (£000) 16,121 14,875 + 8.4% Earnings per share (pence) 11.7p 14.6p - 19.9% Earnings per share before accounting changes (pence) 12.5p 13.7p - 8.8% Earnings per share before exceptional items and accounting changes (pence) 11.9p 9.7p + 22.7% Dividends per share (pence) Final 4.75p 4.0p +18.8% Total for year 7.5p 6.5p +15.4% BALANCE SHEET 31 March 31 March 2002 2001 Change Restated Net asset value per share (pence) 308p 278p +10.8% Diluted net asset value per share (pence) 302p 273p +10.6% Net debt (£000) 234,242 330,506 - 29.1% Gearing (%) 59% 93% The figures for 2001 have been restated to take account of the impact of UITF 28, Operating Lease Incentives, and FRS 19, Deferred Tax. Nigel Ellis, Chairman, commented: 'The year to 31 March 2002 has been a good year for Quintain, in which considerable progress has been made. It has obviously been of particular excitement for us to have demonstrated to our shareholders that our first acquisition of land on the Greenwich Peninsula in 1997 has led to our involvement in one of Europe's largest urban regeneration projects. 'I am confident that our shareholders can look forward to benefiting from a company that will continue to outperform the sector.' For further information: Quintain Estates and Development 020 7495 8968 Adrian Wyatt / Rebecca Worthington Financial Dynamics 020 7831 3113 Stephanie Highett/ Dido Laurimore CHAIRMAN'S STATEMENT - MAY 2002 Once again I am pleased to report that Quintain has had another satisfactory year. We have achieved a total return of 13%, or 12% net of inflation which has again exceeded our target of 10% net of inflation. We have also again met our stated objective to outperform the property average with an ungeared return of 12% compared with the Investment Property Databank (IPD) return of 7%. These results have been achieved by an 11% increase in net asset value per share, together with a 15% rise in the total annual dividend. In the year to 31 March 2002, the undiluted NAV has risen 11% to 308p per share from last year's 278p and by 11% to 302p from 273p on a diluted basis. Adjusting for accounting policy changes, earnings per share have fallen by 9% from 13.7p per share to 12.5p per share, but this is due to the nature of the Company's business and particularly because of the major special projects. The new accounting abstract on lease incentives, UITF 28, has further distorted reported profits but has not had any material impact on the total return. Underlying profits, however, have continued to improve with an increase of 23% from 9.7p to 11.9p per share before the accounting changes. Further details of the results are included in the Financial Review. The major driver this year in terms of valuation uplift was, of course, the progress with the Meridian Delta Project at North Greenwich. We are obviously delighted to have completed this landmark development agreement with English Partnerships alongside our consortium partner, Lend Lease, and look forward to delivering one of Europe's largest regeneration projects. We report on this in greater detail in the Operating Review. As a result of this year's strong performance, and in line with the Company's preference for a progressive dividend policy, the Board is recommending a final dividend of 4.75p per share. This is in recognition of both the growth in underlying profits and in NAV. With the interim dividend of 2.75p per share, this makes a total distribution for the year of 7.5p per share as compared with 6.5p in the previous year, an uplift of 15%. It is intended that the final dividend will be paid on 25 July 2002 to shareholders on the register at 28 June 2002. During the year, the share price improved as a result of a number of factors. The Company purchased 1,290,000 of its own shares during the reporting period at an average price of 181p and there was increased recognition in the market of the notable potential of the Company's portfolio and strategy. At the share price on 27 May 2002 of 245p, our ordinary shares now stand at a discount of approximately 20% on the NAV per share of 308p compared to a discount of 30% in May 2001. The Board will consider further share purchases in the future if the discount widens again. However, any purchases will, as always, be constrained by gearing levels and also by the amount of available distributable reserves which, in such a young company, can be a major limiting factor. Furthermore, the Company must weigh the advantages of such share purchases against other investment opportunities. Board changes I am very proud to have been associated with such a successful company. I have now been Chairman for six years and whilst I think it is time for a change, I will stay on to oversee a smooth succession. We announced to shareholders in March 2002 that Mike Riley had been appointed as Chief Executive. Mike joined us in August 2001 from HVB Real Estate Capital, where he was Joint Managing Director. This has meant that Adrian Wyatt can now take over as Executive Chairman to drive the overall strategy and identify new investment opportunities. Adrian is, of course, the founder of the Company and the inspiration behind its success. I would also like to thank John Evans for his valuable contribution during his time as non-executive director prior to his retirement on 24 April 2002. John was the first Chairman of the Company and, in line with the Board's corporate governance policy, stood down after more than nine years service on Quintain's board. He will, I hope, continue to advise the Company on its property purchases. We were also delighted to welcome David Pangbourne, a former partner of Deloitte & Touche, onto the Board in August 2001 as an independent non-executive director. We expect to appoint another independent non-executive director in the near future. Once again I should like to take this opportunity of thanking Quintain's staff and my fellow directors for their continuing hard work, loyalty, support and most of all the flow of ideas which continue to be so important to the Company's long term success. Outlook The year to 31 March 2002 has been a good year for Quintain, in which considerable progress has been made. It has obviously been of particular excitement for us to have demonstrated to our shareholders that our first acquisition of land on the Greenwich Peninsula in 1997 has led to our involvement in one of Europe's largest urban regeneration projects. I am confident that our shareholders can look forward to benefiting from a company that will continue to outperform the sector. Nigel Ellis Chairman 30 May 2002 OPERATING REVIEW - MAY 2002 We have continued to deliver consistent portfolio outperformance against the UK real estate market, as measured by IPD, despite a general slowdown in the UK property market and turbulent conditions in the financial and equity markets worldwide. We have often asserted that Quintain's modus operandi is well suited to both bull and bear markets and we believe our track record supports this view. Since flotation six years ago, your Company has ranked in the second percentile as measured by IPD, whilst delivering average ungeared annual returns of 16.8%, compared with the 12.2% achieved by the sector. We continued to degear last year and made total sales of £114 million. At the year end gearing was 59% compared with 93% at 31 March 2001 and with the benefit of this financial flexibility we have embarked upon a substantial buying programme. A general view prevails in the market that there is a shortage of stock but we are pleased to report that we can still access interesting opportunities. Through the application of our stock picking, asset management and structuring skills we should continue to achieve high rates of return. Your Company is strong financially. Rents passing are £35 million, the ERV is £51 million, all debt is fixed or capped (average cost 6.4%) rent covers interest payments until 2021 years assuming no lease renewals. Portfolio Management We believe a rigorous approach to stock picking individual assets and sectors where we see value remains our core skill and will continue to deliver enhanced returns. Our approach to asset management is disciplined; each property has a business plan and is reviewed quarterly by the executive team. In the short term we will have many opportunities to create value through rent reviews, re-lettings and lease restructuring. Fund Management We have significant experience in fund management and expect to continue creating fund structures in the future, where we believe it to be appropriate and advantageous. As a result, the Company will benefit from secure fee income, enhanced returns on capital and an efficient way of recycling capital. 'Quercus', the joint venture with Morley to invest in nursing homes continues to grow. By the year end, its gross assets were valued at £210 million and comprised 121 homes with 4,855 beds. The geared return to date is circa 13%. The Government is committed to improving the health sector and this augurs well for the nursing home industry. As nursing homes become more profitable and cash flow more stable, we should see a beneficial re-rating which will push up values. Shortly after the year end, we announced the formation of a joint venture with Hermes Pension Fund and HBOS to invest in public houses. The venture is a £54 million limited partnership called 'Quart' which we believe offers notable potential for growth. Quart owns 37 pubs totalling £43 million in value and Quintain's return will come from rents, management and performance related fees. Development The residential joint venture with Berkeley Homes at Croydon has been successful. All 40 units have been sold on a conditional basis and completion is due in August. The retail scheme in Scunthorpe is nearing completion. In terms of floor area, it is already 73.5% let with a further 5.3% under offer and tenants include Woolworths, T J Hughes and Littlewoods. Planning consent has been granted on our property in Gracechurch Street, London, for 117,000 sq ft of offices with retail on the ground floor. The proposed mixed use scheme in Deansgate, Manchester, could comprise up to 150,000 sq ft of residential and 45,000 sq ft of retail. The 65 acre Emerson's Green site also holds exciting prospects as it is integral to the urban village allocated in the South Gloucestershire Structure Plan. The planning application was delayed, but is now being progressed for submission within the next 3 years. The major event of the year was to secure preferred bidder status for the Dome and its environs and we were delighted to announce very recently the completion of the land and development agreement with English Partnerships. As reported to shareholders, we have formed a joint venture with Lend Lease Europe Limited ('Lend Lease') called Meridian Delta Limited ('MDL'), which is owned 51% by Lend Lease and 49% by Quintain. Lend Lease have internationally recognised skills in master planning and large scale developments. MDL will apply for planning consent for a mixed-use scheme on the Greenwich Peninsula. On completion, this could deliver a 'new quarter' for London - a town within a city comprising 14 million sq ft of public and private residential accommodation, retail, offices and public space and buildings. We estimate that the gross development value could be circa £4 billion. MDL has concurrently entered into a joint venture with the Anschutz Corporation whereby Anschutz Entertainment Group will build and manage a 20,000 seat, state of the art arena inside the Dome for international sporting events and concerts. The development of the peninsula could take 20 years to build, many planning and transport issues will have to be overcome and legal and practical complexities abound. However, it presents the opportunity to design and build one of the most exciting projects in the world and we look forward to working with English Partnerships and other Government agencies to deliver this landmark project. Building on our experience at the Greenwich peninsula we expect to undertake further urban regeneration projects. We always strive to communicate our strategy in a clear and precise manner and so it was most pleasing to be awarded first prize for the best set of accounts by a property company at the BDO Stoy Hayward Property Accounts Awards in November 2001. Our congratulations are due to the accounts team. We are a Company moving forward with a unique blend of experience across a variety of sectors. The defensive qualities of the Company have been demonstrated this year and the management has positioned Quintain to take advantage of new opportunities. We remain value investors and believe this will continue to produce above average returns for our shareholders. Our progressive dividend policy allows you to benefit from the success of your Company. Adrian Wyatt Mike Riley 30 May 2002 Financial Review The policy of the Company is to give a clear and transparent view of its financial status and performance. We will be always pleased to answer any other financial questions that shareholders may have. Returns on shareholders' equity Quintain's total return, as measured by dividend plus increase in net asset value, was 13.5% for the year to 31 March 2002 (2001: 20.6%). Shareholders will note a lower increase in the underlying value of the portfolio reflecting the current state of the property market. Profit and loss account Reported profit before tax for the year was £17.4 million (2001: £22.9 million). Prior to the accounting policy changes explained below, profit before tax was £17.0 million (2001: £20.8 million) and underlying profit before tax was £16.1 million (2001: £14.9 million). The major factors affecting profit are discussed below. In the year to 31 March 2002, gross rental income fell by £3.7 million, of which £1.7 million was attributable to the effects of adopting UITF 28. Properties sold during the year had a passing rent of around £12 million. Voids have increased during the year and now stand at 5.6% of ERV. The largest unintended void in the year of 0.9% of ERV was at Claybrook Drive, Redditch, where the tenant went into receivership. Every effort is being made to relet void space. We carry out covenant analysis of our portfolio and the current position is set out in the adjacent table. We also have development properties where we have taken leases back from tenants. As at 31 March 2002 these properties made up 5.9% of ERV with the main addition in the year being the obtaining of vacant possession of 36 Gracechurch Street, EC3, where we have obtained planning permission for a redevelopment with our neighbouring property 37-41 Gracechurch Street, EC3. Rents passing are £35 million and the reversionary income of the current portfolio is £51 million. The average unexpired lease term is 18 years. The buying programme will have a significant impact on these numbers. Property outgoings have increased slightly from £6.5 million to £6.7 million. In particular head rents have increased by £0.3 million due to the acquisition of an additional unit at Mount Royal, Oxford Street. £0.5 million of bad debts were written off in the year compared with £0.3 million in the previous year. Profit from the sale of trading properties has remained constant at £0.7 million despite significantly lower sales in the period. The main contributor to other income is £1.7 million from the receipt of a surrender premium. Administration expenses for the year were £8.6 million. This is an increase of £0.7 million after adjusting for an exceptional receipt in the prior year of £0.8 million. The increase arose due to the employment of additional staff. In particular, the Board has been strengthened and project management has been improved, necessitated by the increased number of significant property deals in which Quintain is now involved. Shareholders will note that we do not net administration expenses against property costs. Net interest payable in the year amounted to £21 million compared with £25.6 million in the prior year. The fall reflects both a lower level of debt and a reduction in the average cost of debt. Interest capitalised in the year was £1.7 million (2001: £1.9 million), the largest element of which was on our development at The Parishes, Scunthorpe. Interest receivable in the year was £1.2 million compared with £1.5 million in the previous year. Taxation The Company has maintained a low effective tax rate of 12.5% as a result of group tax losses, inherited from corporate acquisitions, and balancing allowances on the disposal of properties. This rate compares with a restated rate under FRS 19 of 15.6% for the previous year. A full reconciliation of the tax rate is shown in note 7 to the accounts. This reflects a charge of £1.2 million arising from timing differences in the use of capital allowances, which under FRS 19 now need to be provided. There are still significant capital allowances and tax losses available and I would anticipate a reduced effective tax rate over the next few years. Earnings and dividend Earnings per share before accounting policy changes are 12.5p, down 8.8% from 13.7p the previous year. On this basis, underlying earnings per share are 11.9p, up 22.7% from the previous year. Earnings per share after accounting policy changes are 11.7p, down 19.9% from the previous year. The recommended final dividend of 4.75p per share would give rise to a total dividend of 7.5p, an increase of 15.4% compared with the 6.5p dividend for the year to 31 March 2001. Cashflow Sales of direct property during the year generated proceeds of £93 million. In addition to this, proceeds were received of £21 million from transactions completed in the previous year and £19 million from the sale of companies. £23 million was spent on new properties and capital expenditure. Also during the year £97 million of bank debt was repaid. Balance Sheet At 31 March 2002, the investment property portfolio was valued at £608.2 million, compared with £655.6 million at the previous year end. The movement in the value of the portfolio reflected purchases of £5 million, capital expenditure of £18 million, disposals of £109.3 million and a revaluation uplift of £37.0 million. As a result of the introduction of UITF 28, valuations have been reduced by £2.4 million as this amount is included in trade debtors. Further details are set out in note 1n to the accounts. The net asset value per share on an undiluted basis as at 31 March 2002 was 308p, an uplift of 10.8% from the 278p restated for the prior year. The restatement arose as a result of the accounting policy changes set in note 1n to the accounts. On a diluted basis the net asset value per share rose 10.6% from 273p to 302p. Of this increase, the revaluation reserve contributed 27p and retained profits. The purchase and cancellation of Quintain shares has increased the diluted net asset value per share by 1.2p. Meridian Delta Limited The revaluation of Quintain's land on the Greenwich Peninsula was the largest adjustment to values at the year end. Outline terms were agreed in December 2001, and an agreement was reached on 29 May 2002 between Meridian Delta Limited (MDL) and English Partnerships for the redevelopment of the Greenwich Peninsula. MDL is owned 49% by Quintain and 51% by Lend Lease Europe Limited, a wholly owned subsidiary of Lend Lease. A further joint venture between MDL and Anshutz has been signed in relation to the Dome Limited Partnership. Further details of this agreement are given in the Operating Review. The financial commitments for Quintain include an additional £3.9 million in order to achieve planning. If planning consent is given, MDL is required to put in a minimum level of infrastructure, with a commitment by Quintain of £4.5 million. MDL also has a minimum obligation to develop 330,000 square feet every 5 years, for 15 years, subject to a commercial viability test, and to sell to third parties land to allow development of 670,000 square feet every five years. MDL is committed to cover Dome maintenance expenses in the event that the Dome Limited Partnership is unable to meet these expenses. Quintain's maximum obligation under this is £10.5 million over 15 years and ceases after the Dome Limited Partnership has been in profit for 3 successive years. Quintain is also committed to investing £5 million into the Dome Limited Partnership business and £1.5 million to cover infrastructure and roof maintenance costs. Joint ventures At 31 March 2002, Quintain had a net investment in joint ventures of £28.5 million. Of this, £27.2 million was invested in Quercus, a joint venture with CGNU. This investment produced a return on equity of 13%. Quintain funds 20% of the investment, which is in nursing homes and hotels, and is entitled to 23.1% of the equity. Further details of this joint venture and others can be found in note 12a to the accounts. Net investment in overseas joint ventures was £1.2 million of which £0.4 million was cash. After the year end the Company formed a limited partnership with Hermes Property Asset Management and Bank of Scotland Corporate Banking. Quintain sold 37 public houses into the limited partnership for a consideration of £42.7 million and retained a 12.9% stake. Debt Gearing fell to 59% from 93% last year. Compared with a target level of 100%, this gives ample scope for new deals. The net repayment of debt during the year resulted in the Company being fully hedged at the year end with a mixture of fixed rates and CAPS. Company policy is to be between two thirds and fully hedged, as given the nature of its income, it seeks to match the revenue profile with certainty in relation to its financing costs. The weighted average rate of interest of the Company's debt at the year end was 6.4% (2001: 7.2%) and the weighted average maturity of borrowing was approximately 6 years. £257 million of bank facilities were restructured during the year in order to increase flexibility. Of the £77 million of borrowings repayable within one year, we have repaid £38 million to HBOS out of cash receipts from the formation of the pub fund. The fair value deficit of fixed rate debt and interest rate hedging instruments as disclosed in FRS13 was £3.6 million, equivalent to a reduction in the Company's net asset value per share of 2.7p, compared with 5.0p per share at the previous year end. After taking account of tax relief, these figures would be 1.9p and 3.5p respectively. Interest cover for the year ended 31 March 2002 was 1.7 times, compared with 1.8 times for the previous year. Financial reporting In addition to the changes caused by UITF 28 and FRS19, there will be a further change for the year ended 31 March 2003 arising from UITF 34, pre contract costs. Costs arising on a transaction will be charged to the profit and loss account until a contract is virtually certain. Quintain Estates and Development PLC Consolidated Profit and Loss Account for the year ended 31 March 2002 Notes 2002 2001 Restated £000 £000 _______ _______ Turnover 55,339 64,410 Less - share of joint ventures turnover 12a (4,909) (4,368) _______ _______ Group turnover 2 50,430 60,042 Cost of sales 2 (8,609) (14,254) _______ _______ Gross profit 2 41,821 45,788 Administrative expenses 4/5 (8,548) (7,015) _______ _______ Group operating profit 33,273 38,773 Share of operating profit in joint ventures 12a 4,280 3,741 Share of operating (loss) profit in associates 12b (44) 6 Profit on sale of investment properties 3a 927 5,950 Net interest payable 6 (21,052) (25,560) _______ _______ Profit on ordinary activities before taxation 17,384 22,910 Tax on profit on ordinary activities 7 (2,166) (3,583) _______ _______ Profit on ordinary activities after taxation 15,218 19,327 Equity minority interests (230) (313) _______ _______ Profit for the financial year 14,988 19,014 Dividends 8 (9,637) (8,330) _______ _______ Retained profit for the financial year 5,351 10,684 ====== ====== Earnings per share (after changes in accounting policy) 9 - basic 11.7p 14.6p ====== ====== - diluted 11.6p 14.3p ====== ====== Earnings per share (before changes in accounting policy) 9 - basic 12.5p 13.7p ====== ====== - diluted 12.3p 13.5p ====== ====== Dividends per share 8 - interim 2.75p 2.5p - final 4.75p 4.0p _______ _______ - total for the year 7.5p 6.5p ====== ====== The results in the Group Profit and Loss Account relate to continuing operations. Quintain Estates and Development PLC Consolidated Statement of Total Recognised Gains and Losses for the year ended 31 March 2002 Notes 2002 2001 Restated £000 £000 _______ _______ Profit for the financial year : Group 12,088 17,091 Joint ventures 12a 2,900 1,923 _______ _______ 14,988 19,014 Unrealised surplus on revaluation of investment properties 20 36,550 42,733 Share of unrealised (deficit) surplus on revaluation of investment properties held in : Joint ventures 20 (51) (1,937) Associates 20 160 238 Tax on realisation of revaluation surplus 20 (1,843) (1,361) Currency translation movements 20 (179) 496 _______ _______ Total recognised gains and losses relating to the year 49,625 59,183 Prior year adjustments as set out below (3,968) - _______ _______ Total gains and losses recognised since the last year end 45,657 59,183 ====== ====== Consolidated Note of Historical Cost Profits and Losses for the year ended 31 March 2002 Notes 2002 2001 Restated £000 £000 _______ _______ Profit on ordinary activities before taxation 17,384 22,910 Realisation of property revaluation gains of previous 20 13,397 11,147 years _______ _______ Historical cost profit on ordinary activities before 30,781 34,057 taxation ====== ====== Historical cost profit for the year retained after taxation, minority interests and dividends 16,905 20,470 ====== ====== Quintain Estates and Development PLC Reconciliation of Movements in Equity Shareholders' Funds for the year ended 31 March 2002 Notes 2002 2001 Restated £000 £000 _______ _______ Profit for the financial year 14,988 19,014 Dividends 8 (9,637) (8,330) _______ _______ 5,351 10,684 Other recognised gains and losses relating to the year 34,637 40,169 Issue of shares less costs 2,057 49 Purchase of own shares 20 (2,347) (6,425) _______ _______ Net addition to equity shareholders' funds 39,698 44,477 Opening shareholders' funds as restated 355,207 310,730 _______ _______ Closing shareholders' funds 394,905 355,207 ====== ====== Opening shareholders' funds As previously reported 359,175 313,807 Prior year adjustments : UITF 28 1n (270) - FRS 19 1n (3,698) (3,077) _______ _______ As restated 355,207 310,730 ====== ====== Quintain Estates and Development PLC Balance Sheets as at 31 March 2002 Notes Group Company 2002 2001 2002 2001 Restated £000 £000 £000 £000 _______ _______ _______ _______ Fixed assets Investment properties 10 608,185 655,649 - - Other fixed assets 11 450 656 450 656 Investment in joint ventures share of gross assets 12a 61,849 54,473 - - share of gross liabilities (33,310) (29,149) - - 28,539 25,324 - - Investment in associates 12b 1,149 707 345 75 Other fixed asset investments 12c 292 343 293,356 296,794 _______ _______ _______ _______ 638,615 682,679 294,151 297,525 Current assets Trading properties 7,656 5,121 - - Debtors 13 20,899 41,734 6,180 1,759 Short term investments 14 18 19 - - Cash at bank and in hand 17a 37,647 46,513 7,451 5,513 _______ _______ _______ _______ 66,220 93,387 13,631 7,272 Creditors : amounts falling due within one year 15 (108,129) (64,484) (94,377) (61,680) _______ _______ _______ _______ Net current (liabilities) assets (41,909) 28,903 (80,746) (54,408) Total assets less current liabilities 596,706 711,582 213,405 243,117 Creditors : amounts falling due after more than one year (including convertible debt) 16 (192,500) (348,274) (6,484) (37,772) Provisions for liabilities and charges 18 (6,850) (5,673) - - Equity minority interests (2,451) (2,428) - - _______ _______ _______ _______ Net assets 394,905 355,207 206,921 205,345 ====== ====== ====== ====== Capital and reserves Called up share capital 19 32,098 31,977 32,098 31,977 Share premium account 20 39,950 38,337 39,950 38,337 Other capital reserves 20 110,095 109,772 107,345 107,022 Revaluation reserve 20 155,448 132,253 - - Profit and loss account 20 57,314 42,868 27,528 28,009 _______ _______ _______ _______ Equity shareholders' funds 394,905 355,207 206,921 205,345 ====== ====== ====== ====== Net asset value per share undiluted 9 308p 278p ====== ====== diluted 9 302p 273p ====== ====== Signed on behalf of the Board N G Ellis Director 30 May 2002 A R Wyatt Director Quintain Estates and Development PLC Consolidated Cash Flow Statement for the year ended 31 March 2002 Notes 2002 2001 £000 £000 _______ _______ Net cash inflow from operating activities 24a 20,403 70,250 Return on investments and servicing of finance Interest received 1,154 1,448 Interest paid (21,257) (27,786) Issue costs of loans (82) (885) ________ ________ Net cash outflow from return on investments and servicing of finance (20,185) (27,223) Corporation tax paid (3,802) (4,593) Capital expenditure and financial investment Purchase of tangible fixed assets (23,389) (78,363) Proceeds from disposal of tangible fixed assets 112,956 75,124 Loans to joint ventures and associates (317) - _______ _______ Net cash inflow (outflow) from capital expenditure and financial investment 89,250 (3,239) Acquisitions and disposals Proceeds from disposal of subsidiary companies 18,873 - Purchase of subsidiary companies - (2,788) _______ _______ Net cash inflow (outflow) from acquisitions and 18,873 (2,788) disposals Equity dividends paid (8,654) (7,824) Net cash inflow before management of liquid resources and financing 95,885 24,583 ====== ====== Management of liquid resources 24c 13,779 (34,963) ====== ====== Financing Issue of ordinary shares for cash 2,057 49 Loan drawdowns 71,211 173,805 Loan repayments (175,673) (199,639) Purchase of own shares (2,347) (6,425) ________ _______ Net cash outflow from financing (104,752) (32,210) ======= ====== Increase (decrease) in cash 24b 4,912 (42,590) ======= ====== Quintain Estates and Development PLC Notes to the Accounts for the year ended 31 March 2002 1. Accounting policies The principal accounting policies, which have been applied consistently throughout the year and the preceding year except as noted below, are as follows: a) Basis of accounting The accounts have been prepared under the historical cost convention as modified by the revaluation of investment properties and in accordance with all applicable accounting standards and the requirements of the Companies Act 1985, except as explained below. b) Basis of consolidation The Group accounts consolidate the accounts of the Company and all its subsidiaries and include the Group's share of the results of its joint ventures and associates. No profit and loss account is presented for the Company, as permitted by section 230 of the Companies Act 1985. The results of newly acquired entities are included in the consolidated accounts from the effective date of acquisition. The purchase consideration is allocated to assets and liabilities on the basis of fair value at the date of acquisition. c) Goodwill Goodwill arising on consolidation is capitalised and amortised through the profit and loss account over a period of 20 years or less in line with the directors' view of its useful economic life. d) Foreign currencies All assets, liabilities and results denominated in foreign currencies are translated into sterling at rates of exchange ruling at the year end. The rates ruling at the current year end were as follows : 2002 2001 _______ _______ France £1 = € 1.63 € 1.61 United States £1 = US $ 1.42 US $ 1.42 Differences arising from the translation of the net equity investment in overseas subsidiaries are dealt with through reserves. e) Turnover Turnover is stated net of VAT and comprises rental income, sales of trading stocks, commissions and fees receivable. Rent increases arising from rent reviews due during the year are taken into account only to the extent that such reviews are agreed with tenants at the accounting date. f) Disposal of properties Sales of properties are recognised in the accounts if an unconditional contract is exchanged by the balance sheet date and the sale is completed before the accounts are approved by the Board. Profits or losses arising from the sale of investment properties are calculated by reference to book value and treated as exceptional items while those arising from the sale of trading stocks are included in the profit and loss account as part of the operating profit of the Group. g) Depreciation In accordance with SSAP 19, Accounting for Investment Properties, no depreciation is provided in respect of the Group's freehold investment properties and leasehold investment properties with over 20 years to run. This represents a departure from the provisions of the Companies Act 1985 which requires all properties to be depreciated. Such properties are held not for consumption but for investment and the directors consider that to depreciate them would not give a true and fair view. Depreciation is only one of the many factors reflected in the annual valuation of properties and accordingly the amount of depreciation which might otherwise have been charged cannot be separately identified or quantified. Depreciation is provided on other fixed assets on a straight line basis having regard to their estimated useful lives of between three and eight years. h) Valuation of properties Investment properties are independently valued annually by external professional valuers on an open market basis. Investment properties under development are stated at estimated market value on completion, supported by independent valuation, less estimated costs to complete. Any surplus or deficit on revaluation is transferred to the revaluation reserve except that deficits below original cost which are expected to be permanent are charged to the profit and loss account. Finance charges incurred on investment properties under development are capitalised within the historical cost until practical completion. Trading properties are is stated at the lower of cost and net realisable value. i) Investments in joint ventures and associates In accordance with FRS 9, Associates and Joint Ventures, joint ventures are included under the gross equity method. As a result, the Group's balance sheet discloses the Group's share of the gross assets and gross liabilities of the joint ventures. Associates are shown at the Group's share of their net assets. In both cases, the Group's share of operating profit, net interest payable and taxation are included in the Group's profit and loss account. j) Other investments Fixed asset investments are stated at cost less any provision for impairment in value. k) Financial instruments The Group uses interest rate swaps for hedging purposes in line with its risk management policies to alter the risk profile of existing underlying exposure in respect of floating rate debt. Amounts payable and receivable in respect of interest rate swaps are recognised as adjustments to interest expense over the period of the contracts. l) Deferred taxation Deferred tax is recognised on all timing differences that have originated but not reversed at the balance sheet date, except that as permitted by FRS 19, Deferred Tax, no provision is made for the tax on unrealised property revaluation surpluses. Deferred tax assets are recognised to the extent that they are considered recoverable. m) Pensions The Group makes pre-defined contributions to employees' personal pension plans. n) Changes in accounting policy 1) UITF 28 : Operating lease incentives As required by the Urgent Issues Taskforce Abstract 28, all incentives offered to tenants to enter into or renew leases have been accounted for by spreading the monetary value either over the relevant lease or a shorter period ending on a date from which it is expected that the prevailing market rental will be payable under the lease. Previously, rents had been recognised only over the periods for which these were due. The only impact on cash flow will be an acceleration of tax payments. In accordance with the requirements of this abstract, the previous year's results have been restated to reflect its impact in relation to those lease agreements providing for such incentives and commencing on or after 1 April 2000. The effect of adopting the standard on the Group's results for the current and previous years is summarised below : 2002 2001 £000 £000 _______ _______ Increase in group turnover 336 2,085 Increase in tax on profit on ordinary activities (101) (270) _______ _______ Increase in profit for the financial year 235 1,815 Decrease in unrealised surplus on revaluation (336) (2,085) Decrease in opening reserves (270) - _______ _______ Decrease in shareholders' funds (371) (270) ====== ====== Decrease in carrying value of investment properties (2,421) (2,085) Increase in debtors 2,421 2,085 Increase in creditors: amounts falling due within one year (371) (270) _______ _______ Decrease in net assets (371) (270) ====== ====== 2) FRS 19 : Deferred tax In the current year, the Group has adopted Financial Reporting Standard 19 which requires full provision in the accounts to be made for deferred tax on all timing differences with certain exceptions. Previously, provision was made for timing differences to the extent that it was probable that a liability would crystallise in the foreseeable future. While having no impact on cash flow, the change to full provision will increase the tax rate, though the use of brought forward tax losses will continue to impact and the future disposal of investment properties could give rise to provision releases. No discounting has been applied. In adopting the standard, the Group has restated the previous year's results, the outcome of which, together with the impact in the current year, is summarised below : 2002 2001 £000 £000 _______ _______ Increase in tax on profit on ordinary activities (1,177) (621) _______ _______ Decrease in profit for the financial period (1,177) (621) Decrease in opening reserves (3,698) (3,077) _______ _______ Decrease in shareholders' funds (4,875) (3,698) ====== ====== Increase in provisions (4,875) (3,698) _______ _______ Decrease in net assets (4,875) (3,698) ====== ====== 2. Turnover, cost of sales and gross profit These comprised : 2002 2001 Turnover Cost of Gross Turnover Cost of Gross sales profit sales profit Restated Restated £000 £000 £000 £000 £000 £000 _______ _______ _______ _______ _______ _______ Rents receivable 45,164 (6,720) 38,444 48,889 (6,516) 42,373 Sales of trading properties 2,585 (1,889) 696 8,459 (7,738) 721 Other income 2,681 - 2,681 2,694 - 2,694 _______ _______ _______ _______ _______ ______ 50,430 (8,609) 41,821 60,042 (14,254) 45,788 ====== ====== ====== ====== ====== ===== The cost of sales in relation to rents receivable consisted of : 2002 2001 £000 £000 _______ _______ Rents payable 1,231 954 Property management fees 683 587 Legal and professional fees 1,243 1,234 Irrecoverable service charges 1,327 1,185 Amortisation of short leasehold properties 333 661 Other property costs 1,903 1,895 _______ _______ 6,720 6,516 ====== ====== 3. Segmental analysis a) Geographical segmental analysis The geographical split of the Group's business was as follows : 2002 2001 Turnover Operating Net assets Turnover Operating Net assets profit profit Restated Restated Restated £000 £000 £000 £000 £000 £000 _______ _______ _______ _______ _______ _______ United Kingdom 47,326 31,514 581,082 56,674 36,604 632,596 France 1,267 643 7,020 1,270 811 6,903 United States 1,837 1,116 8,895 2,098 1,358 16,908 _______ _______ _______ _______ _______ _______ 50,430 33,273 596,997 60,042 38,773 656,407 ====== ====== ====== ====== Net investment in joint ventures and 29,688 26,031 associates Net debt (note 24b) (231,780) (327,231) _______ _______ 394,905 355,207 ======= ====== Turnover by geographical destination is the same as turnover by origin. The Group's profit on the sale of investment properties of £927,000 (2001 : £5,950,000) is shown after charging a loss of £546,000 (2001: £570,000) incurred on a disposal in the United States. All other sales arose in the United Kingdom. b) Business segmental analysis The Group operates in only one business segment. The following subdivision of the Group's operations is intended to assist an understanding by users of these financial statements of its performance in these sectors. Gross rents Net rents Book Valuation Ungeared Ungeared receivable receivable value uplift return return 2002 2001 Restated £000 £000 £000 £000 % % RPI properties - own properties 2,993 2,933 35,065 524 10.0 8.9 Short leasehold properties 1,565 1,022 12,967 324 25.3 5.2 High yielding properties 13,573 11,098 99,161 2,144 8.5 12.2 Properties held for their lease restructuring potential 5,887 5,182 61,075 116 8.1 8.1 Properties held for their reversionary potential 1,540 1,340 12,164 398 13.3 22.8 Special projects 14,871 12,865 331,718 33,861 16.8 22.3 Properties held for resale 4,735 4,004 56,035 (988) 5.4 18.2 _______ _______ _______ _______ Total - own properties 45,164 38,444 608,185 36,379 12.7 15.2 ====== ====== ====== ====== RPI properties - joint ventures 3,319 3,245 42,652 68 12.9 15.2 ====== ====== ====== ====== Total - RPI properties 6,312 6,178 77,717 592 11.2 11.6 ====== ====== ====== ====== Definitions : RPI properties are those whose rents increase in line with the Retail Price Index - typically annually. Short leasehold properties are those leaseholds of 50 years or less. High yielding properties are those yielding more than the average of the CB Hillier Parker Rent Index. Properties held for their lease are those where it is anticipated restructuring potential additional income / value can be created through the reorganisation of their lease structure. Properties held for their are those where the current market reversionary potential rent exceeds the existing (or passing) rent. Special projects are those properties with large capital values and significant development potential. Properties held for resale are those whose income / value potential has been fully realised. The ungeared return for the year takes account of net rental income, profits from disposal and revaluation surpluses and expresses this sum as a percentage of a capital base consisting of opening book values adjusted for acquisitions and disposals on a time apportioned basis. Further information on returns achieved in the year is set out in note 25. 4. Administrative expenses These included : 2002 2001 £000 £000 ______ ______ Directors' remuneration 2,071 1,729 Staff costs 2,531 2,161 Legal and other professional fees 2,404 1,549 Office costs 837 965 Profit on sale of fixed assets (6) (8) Depreciation of tangible fixed assets 273 224 Operating lease payments 278 280 General expenses 160 115 ______ ______ 8,548 7,015 ===== ===== Legal and other professional fees in 2001 were shown net of a recovery of £805,000 in respect of costs. a) Fees paid to the auditors and their affiliates : 2002 2001 £000 £000 ______ ______ Audit : Group 170 120 Parent company only 25 25 Non-audit 374 702 ==== ==== Fees paid to other accountancy firms were £263,000 (2001 : £102,000). b) Staff costs Total payroll costs were as follows : 2002 2001 £000 £000 ______ ______ Wages and salaries 3,583 3,004 Social security costs 414 348 Other pension costs 240 190 ______ ______ 4,237 3,542 ===== ===== c) Staff numbers The average number of persons, all engaged in property portfolio management and administration, employed by the Group during the year was 34 (2001 : 27). 5. Directors' emoluments, share options and interests in ordinary shares a) Emoluments Basic Payment Bonus Fees Benefits 2002 2001 2002 2001 salary made on Total Total Pensions Pensions appointment £000 £000 £000 £000 £000 £000 £000 £000 £000 ______ ______ ______ ______ ______ ______ ______ ______ ______ Executive N G Ellis 125 - 106 - 3 234 268 - - (Chairman) A R Wyatt 395 - 319 - 33 747 732 40 37 M E Riley (appointed 13 August 153 90 - - 11 254 - 16 - 2001) N S K Shattock 190 - 136 - 17 343 321 19 16 E S Dugdale 175 - 136 - 13 324 319 18 16 R J Worthington (appointed 24 July 2001) 52 - - - 9 61 - 5 - Non-executive J B Evans - - - 38 - 38 38 - - B S Thomas - - - 30 - 30 25 - - M Meech - - - 25 - 25 19 - - D Pangbourne (appointed 23 August - - - 15 - 15 - - - 2001) R A Barfield (resigned 4 July 2000) - - - - - - 7 - - _____ _____ _____ _____ _____ _____ _____ Total 2002 1,090 90 697 108 86 2,071 98 ==== ==== ==== ==== ==== ==== ==== _____ _____ Total 2001 818 - 740 88 83 1,729 69 ==== ==== ==== ==== ==== ==== ==== Fees paid to Ms Thomas comprise payments of £25,000 (2001 : £25,000) made to BT Consulting and £5,000 (2001 : £nil) in respect of expenses. b) Share options Number of Number of Number of Number of Exercise Market price Exercise Exercise options options options options price per at date of period period 31 March Granted Exercised 31 March share exercise from to 2001 in year in year 2002 _________ _________ _________ _________ _________ _________ _________ _________ A R Wyatt 752,474 - (13,761) 738,713 151.5p 206.0p 22.02.02 22.02.09 98,060 - - 98,060 163.2p 28.05.02 28.05.09 128,762 - - 128,762 155.3p 13.06.03 13.06.10 - 40,101 - 40,101 199.5p 04.09.04 04.09.11 M E Riley - 157,895 - 157,895 190.0p 05.09.04 05.09.11 N S K Shattock 200,000 - - 200,000 114.0p 18.08.98 18.08.05 88,494 - - 88,494 113.0p 23.07.99 23.07.06 82,352 - - 82,352 136.0p 06.08.00 06.08.07 39,604 - - 39,604 151.5p 22.02.02 22.02.09 49,029 - - 49,029 163.2p 28.05.02 28.05.09 38,625 - - 38,625 155.3p 13.06.03 13.06.10 - 60,150 - 60,150 199.5p 04.09.04 04.09.11 E S Dugdale 130,000 - - 130,000 110.0p 26.07.97 26.07.04 70,000 - - 70,000 114.0p 18.08.98 18.08.05 70,000 - - 70,000 113.0p 23.07.99 23.07.06 72,132 - - 72,132 136.0p 06.08.00 06.08.07 66,007 - - 66,007 151.5p 22.02.02 22.02.09 49,029 - - 49,029 163.2p 28.05.02 28.05.09 38,625 - - 38,625 155.3p 13.06.03 13.06.10 - 30,075 - 30,075 199.5p 04.09.04 04.09.11 R J Worthington 74,256 - (35,000) 27,256 151.5p 210.0p 22.02.02 22.02.09 (12,000) 204.5p 9,194 - - 9,194 163.2p 28.05.02 28.05.09 14,487 - - 14,487 155.3p 13.06.03 13.06.10 - 30,075 - 30,075 199.5p 04.09.04 04.09.11 ________ ________ ________ ________ 2,071,130 318,296 (60,761) 2,328,665 ======= ====== ====== ======= Ms Worthington's options as at 31 March 2001 are shown as at the date of her appointment as director and represent those granted to her in her previous position as a senior manager of the Company. The range of closing middle market prices for the ordinary shares of the Company during the year was 173.5p to 219.5p. The price at the year end was 219.5p. c) Interests in ordinary shares The interests, all of which were beneficial, of directors holding office at the end of the year in the ordinary shares of the Company were as follows : Number of Number of shares shares 2002 2001 N G Ellis 9,000 9,000 A R Wyatt 2,020,520 2,020,116 M E Riley 15,000 - N S K Shattock 73,249 66,339 E S Dugdale 20,871 20,708 R J Worthington 16,389 1,156 J B Evans 16,500 16,500 B S Thomas 10,000 10,000 M Meech 3,668 3,668 _________ ________ 2,185,197 2,147,487 ======== ======= For directors appointed in the year, the position for 2001 shows their holdings as at the date of their appointment. There were no changes in directors' interests in ordinary shares between the year end and the date these accounts were signed. 6. Net interest payable 2002 2001 £000 £000 ______ ______ Interest payable on bank loans and overdrafts 20,904 24,110 Interest payable on other loans 764 1,386 Finance charges on hire purchase contracts - 1 ______ ______ 21,668 25,497 Amortisation of financing costs 817 1,350 ______ ______ 22,485 26,847 Interest capitalised (1,661) (1,651) Interest receivable (1,152) (1,460) ______ ______ Group interest charge 19,672 23,736 Share of joint venture interest payable 1,380 1,824 ______ ______ 21,052 25,560 ===== ===== Of the interest capitalised in the year, the amount capitalised to investment properties was £1,483,000 (2001 : £996,000) and to trading properties £178,000 (2001 : £655,000). The share of joint venture interest is shown after interest capitalised of £nil (2001 : £264,000). 7. Tax on profit on ordinary activities 2002 2001 Restated £000 £000 ______ ______ UK Corporation tax on revenue profit for the year at 30% (2001 : 1,631 2,988 30%) Overseas taxation 266 129 ______ ______ Tax on current year revenue profit 1,897 3,117 Adjustments to prior years' UK Corporation tax (2,902) - ______ ______ (1,005) 3,117 Deferred tax on origination and reversal of timing differences 1,177 466 (note 18) Deferred tax asset realised in the year (note 13) 1,994 - ______ ______ 2,166 3,583 ===== ===== Factors affecting the tax charge for the year Tax on revenue profit for the year at 30% (2001 : 30%) 5,215 6,873 Capital allowances (2,324) (835) Use of tax losses and ACT (1,236) (2,846) Disallowable expenditure 700 600 Non-taxable income and other differences (458) (675) ______ ______ 1,897 3,117 ===== ===== The adjustments to prior years' UK Corporation tax relate principally to an increased claim for capital allowances and the utilisation of brought forward losses against the taxable profits of earlier years. The current year Corporation tax charge includes tax payable by the Group on its the share of joint venture profits. 8. Dividends 2002 2001 £000 £000 ______ ______ Interim (paid) : 2.75p (2001 : 2.5p) per share 3,538 3,214 Final (proposed) : 4.75p (2001 : 4.0p) per share 6,099 5,116 ______ ______ 9,637 8,330 ===== ===== 9. Earnings per share and net asset value per share Earnings per share 2002 2002 2002 2001 2001 2001 Basic Based on Based on Basic Based on Based on underlying underlying underlying underlying profits profits and profits profits and changes in changes in accounting accounting policy policy Restated Restated Restated £000 £000 £000 £000 £000 £000 Profit for the financial year 14,988 14,988 14,988 19,014 19,014 19,014 Profit on sale of investment properties - (743) (743) - (5,182) (5,182) after tax Effect of changes in accounting policy: UITF 28 - - (235) - - (1,815) FRS 19 - - 1,177 - - 621 _______ _______ _______ _______ _______ _______ 14,988 14,245 15,187 19,014 13,832 12,638 ====== ====== ====== ====== ====== ====== Weighted average number of shares (000) 127,808 127,808 127,808 129,963 129,963 129,963 ====== ====== ====== ====== ====== ====== Earnings per share on a diluted basis have been calculated on an adjusted profit of £15,156,000 (2001 : £19,182,000) and the adjusted weighted average number of shares of 131,090,000 (2001 : 133,373,000). The profit has been adjusted by £168,000 relating to interest on the unlisted convertible unsecured loan stock. The weighted average number of shares has been adjusted by 1,282,000 shares and 2,000,000 shares relating to share options and the unlisted convertible unsecured loan stock respectively. Undiluted net asset value per share has been based on net assets of £394,905,000 (2001 : £355,207,000) and 128,393,000 shares (2001 : 127,907,000). Net asset value per share on a diluted basis has been calculated on adjusted net assets of £397,905,000 (2001 : £358,207,000) and 131,674,000 shares (2001 : 131,317,000). 10. Investment properties Group Freehold Long Short Total leasehold leasehold £000 £000 £000 £000 _______ _______ _______ _______ Cost or valuation : Balance 1 April 2001 468,038 171,581 18,115 657,734 Prior year adjustment : UITF 28 (277) (1,757) (51) (2,085) _______ _______ _______ _______ 467,761 169,824 18,064 655,649 Transfers (to) from trading properties (787) 2,402 - 1,615 Exchange movement (99) - - (99) Additions 21,347 1,161 290 22,798 Interest capitalised 1,483 - - 1,483 Disposals (86,381) (20,826) (2,100) (109,307) Short leasehold amortisation - - (333) (333) Revaluation surplus including minority 33,937 2,270 508 36,715 interests Current year adjustment : UITF 28 (417) 161 (80) (336) _______ _______ _______ _______ Balance 31 March 2002 436,844 154,992 16,349 608,185 ====== ====== ====== ====== The historical cost of the Group's investment properties as at 31 March 2002 was £447,957,000 (2001 : £524,835,000) and includes capitalised interest of £3,426,000 (2001 : £1,943,000). As explained below, investment properties have been valued externally as at 31 March 2002 at £610,606,000 (2001 : £657,734,000) and these valuations have been adjusted to take account of the impact of UITF 28 in the current year by £2,421,000 (2001 : £2,085,000). With the exception of those noted below, all investment properties in the United Kingdom and the United States were valued independently as at 31 March 2002 by Jones Lang LaSalle, Chartered Surveyors, and Matthews & Goodman, Chartered Surveyors, as external valuers, on the basis of open market value and in accordance with the Appraisal and Valuation Manual of the Royal Institution of Chartered Surveyors. The Group's land interests on the Greenwich Peninsula have been valued independently by FPD Savills Commercial Limited, Chartered Surveyors, as external valuers, on the basis of the open market value and in accordance with the Appraisal and Valuation Manual of the Royal Institution of Chartered Surveyors. Northdale House, Wembley, an hotel investment property, has been valued independently by TRI Hospitality Consulting, as external valuers, on the basis of open market value having regard to discounted cash flow. Chateau Rouge, Lille, France has been valued independently by Bourdais Expertises s.a., Chartered Surveyors, as external valuers, in accordance with the French Valuation Charter adopted by the French Association of Chartered Surveyors. 11. Other fixed assets Group and Company Short Motor Fixtures, Total leasehold vehicles fittings & equipment £000 £000 £000 £00 _______ _______ _______ _______ Cost: Balance 1 April 2001 628 169 426 1,223 Additions 85 - 5 90 Disposals (13) (94) - (107) _______ _______ _______ _______ Balance 31 March 2002 700 75 431 1,206 Depreciation: Balance 1 April 2001 (166) (109) (292) (567) Charge for year (157) (36) (80) (273) Disposals - 84 - 84 _______ _______ _______ _______ Balance 31 March 2002 (323) (61) (372) (756) Net book value : 31 March 2002 377 14 59 450 ====== ====== ====== ====== 31 March 2001 462 60 134 656 ====== ====== ====== ====== 12. Fixed asset investments a) Investment in joint ventures Group Shares of Advances Total net assets £000 £000 £000 _______ _______ _______ Balance 1 April 2001 5,880 19,444 25,324 Exchange movement 49 - 49 Reclassification (39) 356 317 Share of net profit 2,900 - 2,900 Revaluation deficit (51) - (51) _______ _______ _______ Balance 31 March 2002 8,739 19,800 28,539 ====== ====== ====== The Group's principal joint ventures, whose main activity is to invest in property, were as follows : Holding % of share Country of Joint venture capital held incorporation partner ______________ ___________ _____________ ______________ Quercus (General Partner) Limited 500 'A' ordinary 50 United Kingdom Norwich Union shares of £1 each Investments Quercus Property Partnership 19.8 United Kingdom Norwich Union (Note) Investments and Quercus (General Partner) Limited Hanford Mall Partners Limited Partnership 50 United States Canadian Imperial Bank of Commerce Note In addition, the Group is entitled to a further share equal to 3.1% of the net assets in the joint venture. The Group's share of the results of its principal joint venture operations was as follows : Quercus Hanford Mall Other Quintain (Note) Partners joint share in Limited ventures joint Partnership ventures £000 £000 £000 £000 _______ _______ _______ _______ Summarised profit and loss account Rents receivable 3,319 1,546 44 4,909 Cost of sales (74) (303) - (377) _______ _______ _______ _______ Net rental income 3,245 1,243 44 4,532 Administrative expenses (118) (134) - (252) _______ _______ _______ _______ Group operating profit 3,127 1,109 44 4,280 Net interest payable (784) (596) - (1,380) _______ _______ _______ _______ Profit before and after taxation 2,343 513 44 2,900 ====== ====== ====== ====== Summarised balance sheet Investment properties at valuation 42,652 11,235 - 53,887 Other assets 6,854 1,006 102 7,962 _______ _______ _______ _______ Total assets 49,506 12,241 102 61,849 Bank loans falling due after more than one (19,370) (9,196) - (28,566) year Other liabilities (2,941) (1,803) - (4,744) _______ _______ _______ _______ Net external assets 27,195 1,242 102 28,539 ====== ====== ====== ====== Represented by : Joint venture partner's capital 7,694 925 120 8,739 Joint venture partner's loans 19,501 317 (18) 19,800 _______ _______ _______ _______ Total investment 27,195 1,242 102 28,539 ====== ====== ====== ====== Note The figures for Quercus include both Quercus Property Partnership and Quercus (General Partner) Limited. Properties held in joint ventures were valued independently as at 31 March 2002 by Matthews & Goodman, Chartered Surveyors and TRI Hospitality Consulting (both Quercus) and Jones Lang LaSalle, Chartered Surveyors (Hanford Mall) as external valuers on the basis of open market value and in accordance with the Appraisal and Valuation Manual of the Royal Institution of Chartered Surveyors. The Quercus joint ventures have accounting periods ending on 31 December. The Group's share of their results for the period 1 January 2002 to 31 March 2002 has been based on their management accounts. b) Investment in associates Group Company £000 £000 ______ ______ Share of net assets : Balance 1 April 2001 707 75 Additions 326 326 Share of net loss / impairment (44) (56) Revaluation surplus 160 - ______ ______ Balance 31 March 2002 1,149 345 ====== ====== During the year, the Group acquired an interest of 40% in the ordinary share capital of City Executive Centres Limited, a serviced office operator, and an interest of 49% in Meridian Delta Limited, a company whose purpose is to develop the land holdings in the London Borough of Greenwich belonging to the English Partnerships and the Group. c) Other fixed asset investments Group Company £000 £000 ______ ______ Own shares : Balance 1 April 2001 81 81 Additions 2 2 Marked to market adjustment 21 21 ______ ______ Balance 31 March 2002 104 104 Other : Balance 1 April 2001 262 262 Additions 177 40 Amount written-off (251) (251) ______ ______ Balance 31 March 2002 188 51 As at 31 March 2002, 47,160 ordinary shares of 25p in Quintain Estates and Development PLC with a cost of £75,000 were held in an Employee Share Trust to satisfy accrued bonus entitlements of employees. At the year end, the market value of these shares amounted to £104,000. The amount written off in relation to Other fixed asset investments concerns an investment in ZagMe Limited, which is in liquidation. Subsidiaries : Balance 1 April 2001 - 296,451 Disposals - (3,250) _______ _______ Balance 31 March 2002 293,201 - Total 31 March 2002 292 293,356 ====== ====== Total 31 March 2001 343 296,794 ====== ====== Principal subsidiaries (whose results are included in the Group financial statements) : Principal activity % of share % of share capital held by capital held by Company Subsidiary _________________ ____________ _____________ Incorporated in the United Kingdom : Albion Properties Birmingham Limited Property investment 100% Albion Properties Colchester Limited Property investment 100% Albion Properties Norwich Limited Property investment 100% Cadmus Investments Limited Property investment 100% Chesterfield Investments (No.1) Limited Property investment 100% Chesterfield (Neathouse) Limited Property investment 100% Chesterfield (No.9) Limited Property investment 100% Chesterfield Properties Limited Property investment 100% Comchester Properties Limited Property investment 100% Comgrove Properties Limited Property investment 100% Corfield Properties Limited Property investment 100% Croydon Land Limited Property investment 100% Croydon Land (No.2) Limited Property investment 100% Croydon Properties Limited Property trading 100% Croydon Properties (No.2) Limited Property trading 100% The Crystal Peaks Investment Company Limited Property investment 100% English & Overseas Investments plc Property investment 100% English & Overseas Properties plc Property investment 100% EPIC Commercial Properties Limited Property investment 100% Estates Property Investment Company Limited Property investment 100% George Wilson Developments (Dover) Limited Property investment 100% Keswick Holdings Limited Property investment 100% Licensed Retail Properties Limited Property investment 100% Listed Offices Limited Property investment 100% Permitobtain Limited Property investment 100% Qhere Limited Property investment 100% Qoin Limited Property investment 100% Quaystone Properties Limited Property investment 51% Quintain Meridian Limited Property investment 100% Quintain (No.1) Limited Property investment 100% Quintain (No.9) Limited Property investment 100% Quivercare Limited Property investment 100% Quocumque Limited Property investment 100% Quondam Estates Investment Limited Property investment 100% Quondam Estates No.2 Limited Property investment 100% Quo Vadis Estates Limited Property investment 100% Quo Vadis Properties Limited Property investment 100% Tenstall Limited Property investment 100% Incorporated in France : Continental Investment Development s.a. Holding company 99% SCI Bureaux Du Chateau Rouge Property investment 80% Incorporated in the United States : Chesterfield Holdings Inc. Holding company 100% Chesterfield Investments Inc. Property investment 100% In the United Kingdom, 49% of Quaystone Properties Limited is owned by Yates Group PLC. In France, the minority stake in SCI Bureaux Du Chateau Rouge is held by Zamara Corporation (15%) and Lille Gestion (5%). The French subsidiaries have accounting periods ending on 31 December. The Group's share of their results for the period 1 January 2002 to 31 March 2002 has been based on their management accounts. All companies operate principally in their countries of incorporation. A complete list of subsidiaries will be annexed to the next annual return delivered to the Registrar of Companies. 13. Debtors Group Group Company Company 2002 2001 2002 2001 Restated £000 £000 £000 £000 ______ ______ ______ ______ Trade debtors 6,827 6,009 33 - Deferred tax asset (note 7) - 1,994 - - Amounts due under contracts for sale 140 21,466 - - Other debtors 12,388 11,253 5,803 1,487 Prepayments and accrued income 1,544 1,012 344 272 ______ ______ ______ ______ 20,899 41,734 6,180 1,759 ===== ===== ===== ====== 14. Short term investments Group Group Company Company 2002 2001 2002 2001 £000 £000 £000 £000 ______ ______ ______ ______ Treasury stock 18 19 - - ______ ______ ______ ______ 18 19 - - ===== ===== ===== ====== 15. Creditors : amounts due within one year Group Group Company Company 2002 2001 2002 2001 Restated £000 £000 £000 £000 _______ _______ _______ _______ Bank and other loans (secured) 76,945 25,489 - - Trade creditors 4,188 2,238 197 124 Other creditors 4,582 4,026 701 122 Amounts due to subsidiary undertakings - - 86,318 50,791 Dividend proposed 6,099 5,116 6,099 5,116 Corporation tax payable 5,642 5,376 - - Other taxation and social security 154 536 268 543 Accruals and deferred income 10,519 21,703 794 4,984 _______ ______ _______ ______ 108,129 64,484 94,377 61,680 ====== ===== ====== ====== 16. Creditors : amounts falling due after more than one year Group Group Company Company 2002 2001 2002 2001 £000 £000 £000 £000 _______ _______ _______ _______ Bank and other loans (secured) 186,575 339,279 3,500 34,800 Convertible unsecured loan stock 3,000 3,000 3,000 3,000 10% First Mortgage Debenture Stock 2011 5,369 9,251 - - _______ ______ ______ ______ 194,944 351,530 6,500 37,800 Net obligations under hire purchase contracts - 16 - 16 _______ _______ _______ _______ 194,944 351,546 6,500 37,816 Deferred finance costs (2,444) (3,272) (16) (44) _______ _______ ______ ______ 192,500 348,274 6,484 37,772 ====== ====== ===== ===== The loans are secured by fixed and floating charges over assets owned by subsidiary undertakings. In addition, the Company has guaranteed the bank loans, undertaking a minimum net worth covenant for the Group of £225,000,000. The unlisted convertible unsecured loan stock is repayable on 1 April 2007 and interest is charged at 8% per annum. The loan stock is convertible at any time at the option of the holder into ordinary shares of the Company at a conversion price of 150p per share. The 10% First Mortgage Debenture Stock 2011 issued by Estates Property Investment Company Limited is secured by fixed and floating charges over the assets of the subsidiary undertaking and has a redemption value of £5,369,000. The premium over par arising from fair valuing the debenture on acquisition is amortised over its remaining life. 17. Financial instruments a) Financial assets As at 31 March 2002, the Group's financial assets comprised cash balances as set out below : 2002 2001 £000 £000 ______ ______ Sterling 36,202 45,577 Euros 813 794 United States dollars 632 142 ______ ______ 37,647 46,513 ===== ===== b) Financial liabilities The Group is subject to interest rate, liquidity and foreign currency risk as discussed in the Financial Review. The Group does not speculate in treasury products but uses these only to limit potential interest rate fluctuations. It usually borrows at floating rates of interest and uses hedging mechanisms to achieve an interest rate profile where the majority of borrowings are fixed or capped. At the year end, 100% (2001 : 77%) of the Group's net debt was fixed or protected, and the weighted average rate of debt was 6.4% (2001 : 7.2%). The Group borrows in the same currency as the assets being financed to minimise foreign currency risk. No currency derivatives are used. The maturity profile of the Group's debt was as follows : Bank loans 2002 2001 2002 2001 and Other Total Total Undrawn Undrawn overdrafts loans debt debt facilities facilities £000 £000 £000 £000 £000 £000 _______ _______ _______ _______ _______ _______ Up to one year 76,945 - 76,945 25,489 205 - Between one and two years 3,500 - 3,500 77,527 41,500 17,000 Between two and five years 75,792 - 75,792 117,735 40,220 48,751 Over five years 107,283 8,369 115,652 156,268 100,000 68,357 _______ _______ _______ _______ _______ _______ 263,520 8,369 271,889 377,019 181,925 134,108 ====== ====== ====== ====== ====== ====== After taking account of interest rate swap arrangements, the risk profile of the Group's borrowings as at 31 March 2002 was as follows : 2002 2001 Fixed Capped Floating Total Fixed Capped Floating Total £000 £000 £000 £000 £000 £000 £000 £000 _______ _______ _______ _______ _______ _______ _______ _______ Sterling 180,619 79,574 - 260,193 145,706 90,000 122,181 357,887 Euros 4,412 - - 4,412 4,218 - - 4,218 United States dollars 7,284 - - 7,284 14,914 - - 14,914 _______ _______ _______ _______ _______ _______ _______ _______ 192,315 79,574 - 271,889 164,838 90,000 122,181 377,019 ====== ====== ====== ====== ====== ====== ====== ====== The interest rate profile of the Group's fixed rate debt was as follows : Percent 2002 2001 £000 £000 _______ _______ 4.0 - 5.0 39,412 - 5.0 - 6.0 95,250 4,218 6.0 - 7.0 42,000 89,500 7.0 - 8.0 15,653 49,869 8.0 - 9.0 - 21,251 _______ _______ 192,315 164,838 ====== ====== The weighted average rate and the weighted average period of the Group's fixed rate debt as at 31 March 2002 were as follows : 2002 2001 2002 2001 % % years years _______ _______ _______ _______ Sterling 6.4 7.1 6 8 Euros 4.7 5.6 4 5 United States dollars 7.7 7.7 7 8 Group 6.4 7.1 6 8 The fair value of the Group's financial liabilities as at 31 March 2002 are set out below : Book value Fair 2002 2001 / notional value Difference Difference principal £000 £000 £000 £000 _______ _______ _______ _______ Fixed rate debt 20,065 20,300 (235) (688) Interest rate swaps 172,250 175,651 (3,401) (5,876) Capped 79,574 79,528 46 45 _______ _______ ______ ______ 271,889 275,479 (3,590) (6,519) ====== ====== ====== ====== The fair values were calculated by J C Rathbone Associates as at 31 March 2002 and reflect the replacement values of the financial instruments used to manage the Group's exposure as at that date. The Group has taken advantage of the exemption under FRS 13 to exclude short term debtors and creditors from these disclosures. Its policies relating to financial instruments are set out in the accounting policies as described in note 1k. The maturity profile of the Group's share of floating rate debt held within its joint ventures as at 31 March 2002 was as follows : 2002 2001 £000 £000 ______ ______ Up to one year - 9,735 Between two and five years 28,566 14,438 ______ _____ 28,566 24,173 ===== ===== 18. Provisions for liabilities and charges The movement in the year in provisions for liabilities and charges was as follows : £000 _____ Balance 1 April 2001 1,975 Prior year adjustment : FRS 19 3,698 _____ 5,673 Charge to profit and loss account (note 7) 1,177 _____ Balance 31 March 2002 6,850 ===== The provisions represent deferred tax and comprise : 2002 2002 2001 2001 Provided Not Provided Not provided provided Restated £000 £000 £000 £000 _____ _____ _____ _____ Revaluation surplus - 29,626 881 26,388 Accelerated capital allowances 6,850 - 4,792 - _____ ______ _____ ______ 6,850 29,626 5,673 26,388 ==== ===== ==== ===== 19. Called up share capital £000 ______ Authorised : 200,000,000 shares of 25p each 50,000 ===== Allotted, called up and fully paid In issue at 1 April 2001 : 127,907,082 ordinary shares of 25p each 31,977 Issue on exercise of options over 1,500,000 shares at 110p 375 Issue on exercise of options over 275,791 shares under Staff Option Schemes at between 136p and 151.5p 69 Purchase and cancellation of 1,290,000 own shares at between 178p and 193p (323) ______ In issue at 31 March 2002 : 128,392,873 ordinary shares of 25p each 32,098 ===== As at the year end, the following options granted under the Company's Share Option Schemes remained outstanding : Date of grant Number Exercise Exercise Exercise of price period period ordinary shares per share from to _________ _________ _________ _________ 26.07.94 130,000 110.0p 26.07.97 26.07.04 18.08.95 270,000 114.0p 18.08.98 18.08.05 23.07.96 158,494 113.0p 23.07.99 23.07.06 06.08.97 220,975 136.0p 06.08.00 06.08.07 22.02.99 1,014,733 151.5p 22.02.02 22.02.09 28.05.99 399,596 163.2p 28.05.02 28.05.09 13.06.00 417,281 155.3p 13.06.03 13.06.10 04.09.01 135,007 155.3p 04.09.04 04.09.11 04.09.01 425,311 199.5p 04.09.04 04.09.11 05.09.01 157,895 190.0p 05.09.04 05.09.11 _________ 3,329,292 ======== On 6 December 1993, Scottish Equitable PLC and The Standard Life Assurance Company were granted options over 1,500,000 ordinary shares each exercisable at any time, in whole or in part, before 6 December 2003 at an exercise price of 110p per ordinary share. During the year, The Standard Life Assurance Company exercised the whole of its option. Scottish Equitable PLC holds £3,000,000 of the Company's unlisted convertible unsecured loan stock repayable by 1 April 2007. The loan stock is convertible into ordinary shares at a conversion price of 150p per ordinary share. 20. Reserves Group Capital Merger Capital Total : Share Revaluation Profit and redemption reserve reserve Other premium reserve loss account reserve capital reserves Restated Restated £000 £000 £000 £000 £000 £000 £000 _______ _______ _______ _______ _______ _______ _______ Balance 1 April 2001 960 106,062 2,750 109,772 38,337 134,338 44,751 Prior year adjustments : UITF 28 - - - - - (2,085) 1,815 FRS 19 - - - - - - (3,698) _______ _______ _______ _______ _______ _______ _______ 960 106,062 2,750 109,772 38,337 132,253 42,868 Premium on issue of shares less - - - 1,613 - - costs Purchase of own shares 323 - - 323 - - (2,347) Surplus on revaluation of - investment properties - - - - - 36,550 - Share of surplus on revaluation of : Joint ventures - - - - - (51) - Associates - - - - - 160 - Realisation of property revaluation gains of previous years - - - - - (11,554) 11,554 Tax on realisation of revaluation - - - - - (1,843) - surplus Exchange movement in year - - - - - - (179) Short leasehold amortisation - - - - - (67) 67 Retained profit for the financial - - - - - - 5,351 year _______ _______ _______ _______ _______ _______ _______ Balance 31 March 2002 1,283 106,062 2,750 110,095 39,950 155,448 57,314 ====== ====== ====== ====== ====== ======= ====== Company Capital Merger Total : Share Profit and redemption reserve Other premium loss account reserve capital reserves Restated Restated £000 £000 £000 £000 £000 _______ _______ _______ _______ _______ Balance 1 April 2001 960 106,062 107,022 38,337 28,009 Premium on issue of shares less costs - - - 1,613 - Purchase of own shares 323 - 323 - (2,347) Retained profit for the financial year - - - - 1,866 _______ _______ _______ _______ _______ Balance 31 March 2002 1,283 106,062 107,345 39,950 27,528 ====== ====== ====== ====== ====== As permitted by section 230 of the Companies Act 1985, the profit and loss of the Company is not presented as part of these financial statements. The profit for the year attributable to shareholders dealt with in the financial statements of the Company was £11,503,000 (2001 : £17,076,000). 21. Capital commitments As at 31 March 2002, the Group had capital commitments of £15,912,000 (2001 : £27,985,000). 22. Commitments under operating leases As at 31 March 2002, the Group's annual commitments under non-cancellable operating leases were as set out below : Land and Land and buildings buildings 2002 2001 £000 £000 ______ ______ Operating leases which expire : Within one year 13 - In two to five years 265 278 ______ _____ 278 278 ===== ===== 23. Contingent liabilities a) Group The Group, through Chesterfield Properties Limited, has guaranteed the payment of current interest on the outstanding amount of a secured bank loan of which US $ 26,192,000 was drawn down as at 31 March 2002 in the event of default by Hanford Mall Partners, a limited partnership in which the Group has a 50% interest, but is not the general partner. b) Company As at 31 March 2002, the Company had guaranteed the external borrowings of some of its subsidiaries amounting to £239,966,000 (2001 : £339,136,000). 24. Notes to the Consolidated Cash Flow Statement a) Reconciliation of operating profit to net cash inflow from operating activities 2002 2001 Restated £000 £000 _______ _______ Operating profit 33,273 38,773 Depreciation charge 606 885 Profit on sale of fixed assets (6) (8) (Increase) decrease in debtors (2,392) 1,034 (Decrease) increase in creditors (6,929) 5,475 (Increase) decrease in trading stock (4,222) 24,091 Write-down of trading stock 73 - _______ _______ 20,403 70,250 ======= ====== b) Reconciliation of net cash flow movement to net debt 2002 2001 £000 £000 _______ _______ Increase (decrease) in cash during year 4,912 (42,590) Cash outflow from debt and lease financing 104,462 25,834 Cash (inflow) outflow from movement in liquid resources (13,779) 34,963 _______ _______ Change in net debt resulting from cash flows 95,595 18,207 Costs of issue of non-equity finance 82 885 Amortisation of issue costs (817) (1,350) Other non-cash movements 591 (910) _______ _______ Movement in net debt during year 95,451 16,832 Net debt, beginning of year (327,231) (344,063) _________ ________ Net debt, end of year (231,780) (327,231) ======= ======= c) Analysis of net debt As at Cash flow Other As at 1 April 31 March 2001 2002 £000 £000 £000 £000 ________ ________ ________ ________ Liquid resources 36,103 (13,779) - 22,324 Cash 10,429 4,912 - 15,341 Debt due after more than one year (348,274) 155,918 (144) (192,500) Debt due within one year (25,489) (51,456) - (76,945) ________ ______ _____ ________ (327,231) 95,595 (144) (231,780) ======= ===== ==== ======= Liquid resources consist of short term investments and cash which is not available on demand. 25. Divisional analysis and performance The split between the Group's two divisions and their performance in the year was as set out below : Total Total QED QED Q3P Q3P Q3P Q3P Group Group including including joint joint venture venture RPI RPI properties properties Restated Restated Restated Restated 2002 2001 2002 2001 2002 2001 2002 2001 Investment properties at valuation (£000) 608,185 655,649 514,555 557,127 93,630 98,522 136,282 123,326 Ungeared return as per note 3(b) (%) 12.7 15.2 13.7 16.0 7.5 8.8 8.6 10.3 Ungeared return adjusted for administrative expenses (%) 11.4 14.2 12.3 15.0 6.2 6.8 7.6 8.8 Geared return - ungeared return Adjusted for administrative expenses and net 14.0 23.0 15.7 25.5 5.1 4.7 8.3 7.7 interest payable (%) The financial information set out in this announcement does not constitute the Group's statutory accounts for the years ended 31 March 2002 or 2001 but is derived from these accounts. Statutory accounts for 31 March 2001 have been delivered to the Registrar of Companies whereas those for 2002 will be delivered following the Group's Annual General Meeting. The auditors have reported on those accounts; their reports were unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. 1. Subject to approval at the Annual General Meeting, the recommended final dividend of 4.75 p per ordinary share will be paid on 25 July 2002 to shareholders on the register on 28 June 2002. This will bring the total dividend for the year to 7.5p, an increase of 15.4%. 2. The 2002 Annual General Meeting of Quintain Estates and Development PLC will be held at 58 Davies Street, London W1K 5JF on 23 July 2002 at 10.30 am. 3. The Report and Financial Statements for the year ended 31 March 2002 will be posted to shareholders shortly. Non-shareholders may request a copy from the Company Secretary at the registered office, 58 Davies Street, London W1K 5JF. By order of the Board of Quintain Estates and Development PLC Rebecca Worthington Company Secretary 30 May 2002 This information is provided by RNS The company news service from the London Stock Exchange

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