Interim Results
Quintain Estates & Development PLC
29 November 2000
INTERIM RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2000
HIGHLIGHTS
Profit before tax £8.2m up 63%
Profit before exceptional
items and tax £7.4m up 15%
Earnings per share 4.9p up 44%
Underlying earnings per share 4.1p up 21%
Interim dividend 2.5p up 25%
Commenting on the results Nigel Ellis, Chairman, said:
'I am pleased to report that we have once again had a successful six months
with an increase in earnings per share of 44%. Our confidence in the
acquisitions last year, particularly Chesterfield Properties, has been borne
out as this was a major contributor to this increase. The original Quintain
portfolio has also performed well, hence an increase in underlying earnings
per share of 21%. We have not carried out an interim valuation of the
portfolio, since, in the Board's opinion, there has been no major movement in
value to date. We expect that subject to no material adverse change in the
market by the year end, net assets per share will be appreciably ahead of last
year.'
For further information
Nigel Ellis / Adrian Wyatt Emma Denne
Quintain Estates and Development PLC Financial Dynamics
020 7495 8968 020 7831 3113
Chairman's Statement
for the six months 30 September 2000
I am pleased to report that we have once again had a successful six months
with an increase in earnings per share of 44%. Our confidence in the
acquisitions last year, particularly Chesterfield Properties, has been borne
out as this was a major contributor to this increase. The original Quintain
portfolio has also performed well, hence an increase in underlying earnings
per share of 21%. We have not carried out an interim valuation of the
portfolio, since, in the Board's opinion, there has been no major movement in
value to date. We expect that subject to no material adverse change in the
market, by the year end net assets per share will be appreciably ahead of last
year.
In these circumstances the Board is pleased to declare an interim dividend of
2.5p per ordinary share, an increase of 25% which, again reflects our
confidence in the Company's future.
During the first half of the year the Company purchased 2 million of its own
shares, and further purchases are contemplated. Purchases to date have
increased assets per share by approximately 1p.
Having sold £23m of assets, by the half year the Company's gearing had reduced
to 104% compared with 133% at 30 September 1999 and 111% at 31 March 2000. As
a result of the inherent upside potential and the lower level of gearing we
have retained assets, particularly from Chesterfield, which we originally
planned to sell. Interest cover remains satisfactory at 1.4.
The property portfolio continues to produce a high level of opportunities. We
are still active in the Short Leasehold market, an example of which is our
property at Eden Street, Kingston, which has now been sold for a profit of
£545,000. As in past years, the High Yielding Properties provide the income
necessary for the running of the business. The Lease Restructuring Portfolio
has continued to be worked and substantial profits are expected in the short
term. Properties held for Reversionary Potential also continue to offer
significant upside as demonstrated by the disposal of an estate at Adlington
which made a 65% return on capital.
Once again the upside potential in our Special Projects section augers well.
The 300,000 sq. ft. development at Beddington Cross is complete. We have
secured one further letting in the first half, with two lettings currently in
lawyer's hands. Shareholders will recall that we pre-sold this development
last year for up to £28m with 123,000 sq. ft. remaining to be let with an ERV
of £1m. A further profit can be booked on completion of these lettings, £5.3m
having already been reflected in last year's figures.
Regarding our site adjacent to the Dome, we propose to make a planning
application in the new year for in excess of one million sq. ft.
We have recently announced our intention to commence our 250,000 sq. ft.
serviced high street retail scheme in Scunthorpe, known as The Parishes.
Letting agreements have been entered into with Woolworths (63,000 sq. ft.), TJ
Hughes (40,000 sq. ft.) and Peacocks Stores (9,000 sq. ft.). A number of
other lettings are in solicitor's hands and, when these have completed, we
will have achieved a level of pre-letting of approximately 60%. Work will
commence on site in January 2001 with the scheme opening in September 2002.
Our Oxford Street development is now complete and fully let, with Etam and
First Sport joining Next and Superdrug. We have recently purchased for
£12.5m, a further £1.5m per annum worth of short leasehold income within the
block. The rent roll is now £4m, with rents ranging up to £330 per sq. ft.
zone A. We believe that the pitch is improving radically and that the rent is
already reversionary. There are still a number of active management
opportunities.
Construction of 40 flats in our joint venture with Berkeley Homes in the
Croydon Central Business District is set to commence in December, with a gross
development cost of £5.2m. As part of our Structured Finance operation we are
building a close care apartment and residential care development in Bristol.
The 22 room nursing home and 15 close care apartments are already pre-let at
£245,000 per annum with annual reviews to the RPI with a minimum uplift 2.5%.
29 apartments are being constructed for sale. Construction costs are
estimated at £3.3m.
Also within the Structured Finance operation, further progress has been made
in our partnership initiatives. Quercus, our nursing home/ learning
difficulties homes partnership with CGNU has committed further funds to take
the purchasing power to £250m. Aqua, our housing and PFI joint venture has
been given a boost with the completion of the Secure Psychiatric Unit and
nurses accommodation at Thamesmead.
While continuing to develop our active joint venture vehicle (Quaystone) with
Yates, we have bought in their remaining 49% in Licensed Retail Properties to
allow us to undertake the reviews rather more imaginatively and to restructure
the portfolio to enhance future prospective returns.
We continue to look for joint ventures in all of our sectors.
Regarding finance, Quintain borrows on a floating rate basis using interest
rate protection instruments as insurance against interest rate increases. At
the half year £190m of debt was protected equating to 54% of the total. In
addition we have further protection from forward fixed rate positions of £70m
at all-in rates of between 6.2% - 6.8%. The weighted average rate of our debt
at 30 September was 7.3%. Corporate Loan Covenants have been agreed with all
our relationship banks on the basis of 1.2 times interest cover and minimum
net worth of £170m. All other covenants relate to the individual properties
charged.
Administration expenses remain higher than anticipated due primarily to the
professional fees for the absorption of English & Overseas and Chesterfield.
In the absence of unforeseen events they should be somewhat lower in the
second half of the year.
I am pleased to report that Martin Meech, was appointed to the Board as a non-
executive director in July this year. He joined Dixons Group plc in 1993 as
Group Property and Development Director, and since January 1999 has been
Managing Director of Dixons Group Retail Properties Limited. He is also
currently a non-executive director of the British Council of Shopping Centres
and Holborn Public Relations Limited.
We look forward to the second half of the year with confidence.
Nigel Ellis
Chairman
Consolidated Profit and Loss Account
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 Sept 30 Sept 1999 31 Mar
2000 2000
Notes £000 £000 £000
Turnover - continuing and
share of joint ventures 32,468 24,924 77,012
Less - share of joint
ventures turnover (4,744) (839) (4,958)
Group turnover 2 27,724 24,085 72,054
Cost of sales 2 (5,948) (6,686) (31,664)
Gross profit 21,776 17,399 40,390
Administrative expenses 3 (3,449) (3,829) (7,471)
Exceptional reorganisation
costs - (1,373) (1,373)
Group operating profit 18,327 12,197 31,546
Share of operating profit
in joint ventures 1,617 284 2,532
Profit on sale of
investment properties 705 1,354 2,945
Net interest payable (12,475) (8,826) (20,855)
Profit on ordinary
activities before
taxation 8,174 5,009 16,168
Tax on profit on ordinary 4
activities (1,635) (1,002) (2,845)
Profit on ordinary
activities after
taxation 6,539 4,007 13,323
Minority interests (175) (135) (466)
Profit for the financial
period 6,364 3,872 12,857
Dividends 5 (3,241) (2,634) (7,244)
Retained profit for the
period 3,123 1,238 5,613
Earnings per share 6
undiluted 4.9p 3.4p 10.5p
diluted 4.8p 3.4p 10.4p
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 Sept 30 Sept 31 Mar
2000 1999 2000
£000 £000 £000
Consolidated Statement of Total Recognised Gains and Losses
Profit for the financial
period 6,364 3,872 12,857
Unrealised surplus on
revaluation - - 50,531
Tax on realisation of
revaluation surplus (438) - (1,181)
Exchange movements 405 (575) (559)
Total recognised gains in the
period 6,331 3,297 61,648
Consolidated Note of Historical Cost Profits and Losses
Profit on ordinary activities
before taxation 8,174 5,009 16,168
Realisation of property
revaluation gains of
previous periods 5,109 4,748 6,708
Historical cost profit on
ordinary activities before
taxation 13,283 9,757 22,876
Historical cost profit for
the period retained after
taxation, minority
interests and dividends 7,794 5,986 11,140
Reconciliation of Movements in Equity Shareholders' Funds
Profit for the financial period 6,364 3,872 12,857
Dividends (3,241) (2,634) (7,244)
3,123 1,238 5,613
Other recognised gains and
losses in the period (33) (575) 48,791
Issue of shares less costs 49 69,519 69,441
Purchase of own shares (3,382) - -
Net (reduction) addition to
equity shareholders' funds (243) 70,182 123,845
Opening shareholders' funds 313,807 189,962 189,962
Closing shareholders' funds 313,564 260,144 313,807
Consolidated Balance Sheet
Unaudited Unaudited Audited
As at As at As at
30 Sept 30 Sept 31 Mar
2000 1999 2000
Notes £000 £000 £000
Fixed assets
Investment properties 7 623,314 535,166 602,370
Other fixed assets 1,275 509 483
Investment in joint ventures
- share of gross assets 53,414 39,298 49,917
- share of gross (26,497) (14,750) (23,132)
liabilities
26,917 24,548 26,785
Investment in associate 475 392 463
Other fixed asset
investments 56 - 56
652,037 560,615 630,157
Current assets
Stocks 7,953 51,333 11,058
Debtors 29,873 44,740 56,299
Short term investments 17 17 1,140
Cash at bank and in hand 21,312 18,934 53,019
59,155 115,024 121,516
Creditors: amounts falling
due within one year (145,984) (171,687) (202,523)
Net current liabilities (86,829) (56,663) (81,007)
Total assets less current
liabilities 565,208 503,952 549,150
Creditors: amounts falling
due after one year (247,471) (237,140) (228,470)
Provisions for liabilities and
charges (2,101) (2,132) (2,101)
Equity minority interests (2,072) (4,536) (4,772)
Net assets 313,564 260,144 313,807
Capital and reserves
Called up share capital 9 32,415 32,938 32,928
Share premium account 38,336 97,898 38,297
Capital redemption reserve 522 - -
Merger reserve 106,062 46,529 106,062
Capital reserve 2,750 2,750 2,750
Revaluation reserve 96,808 53,875 102,446
Profit and loss account 36,671 26,154 31,324
Equity shareholders' funds 313,564 260,144 313,807
Net asset value per share 10
undiluted 242p 198p 238p
diluted 239p 194p 236p
Consolidated Cash Flow Statement
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 Sept 30 Sept 31 Mar
2000 1999 2000
Notes £000 £000 £000
Net cash inflow from operating
activities 11a 18,502 16,893 70,999
Return on investments and
Servicing of finance
Net interest paid (12,398) (9,081) (19,161)
Issue cost of loans (198) (1,186) (3,349)
Net cash outflow from return on
investments and servicing of
finance (12,596) (10,267) (22,510)
Corporation tax paid (2,780) (1,235) (1,426)
Capital expenditure and
financial investment
Purchase of tangible fixed assets (24,771) (19,840) (49,495)
Proceeds from disposal of
tangible fixed assets 55,255 69,087 64,073
Loans to joint ventures and
associate (245) (4,176) (7,257)
Net cash inflow from capital
expenditure and financial
investment 30,239 45,071 7,321
Acquisitions and disposals
Proceeds from disposal of
subsidiary companies - 5,356 5,356
Net cash disposed of with
subsidiary companies - (159) (159)
Purchase of subsidiary companies (2,780) (112,477) (112,945)
Net cash acquired with subsidiary
companies - 12,810 12,401
Net cash outflow from acquisitions
and disposals (2,780) (94,470) (95,347)
Equity dividend paid (4,663) (2,762) (5,396)
Net cash inflow (outflow)
before management of liquid
resources and financing 25,922 (46,770) (46,359)
Management of liquid resources - - (1,140)
Financing
Issue of ordinary shares for cash 49 - -
Cost of share issues - (907) (913)
Loans drawn down 84,935 102,012 196,466
Loan repayments (139,231) (55,477) (114,904)
Loans advanced by minority
interests - 207 -
Purchase of own shares (3,382) - -
Net cash (outflow) inflow from
financing (57,629) 45,835 80,649
(Decrease) increase in cash (31,707) (935) 33,150
Notes to the accounts
1. Basis of preparation
The half year figures for 2000 and 1999 are unaudited and have been
prepared on the basis of the accounting policies adopted in the accounts
to 31 March 2000. The comparative figures for the financial year ended 31
March 2000 are not the Company's statutory accounts for that financial
year. These accounts have been reported on by the Company's auditors and
delivered to the Registrar of Companies. The report of the auditors was
unqualified and did not contain a statement under section 237 (2) or (3)
of the Companies Act 1985.
2. Turnover and cost of sales
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 Sept 30 Sept 31 Mar
2000 1999 2000
£000 £000 £000
Gross rents receivable 22,273 19,069 41,865
Sales of commercial trading
properties 857 2,384 21,605
Sales of residential trading
properties 2,536 2,632 7,106
Other income 2,058 - 1,478
Total turnover 27,724 24,085 72,054
Rents payable and other property
outgoings 2,836 2,577 7,181
Sales of commercial trading
properties 637 2,121 19,161
Sales of residential trading
Properties 2,475 1,988 5,322
Total cost of sales 5,948 6,686 31,664
3. Administrative expenses
Unaudited Unaudited Audited
Six Six Year
months months
Ended ended ended
30 Sept 30 Sept 31 Mar
2000 1999 2000
£000 £000 £000
Directors' remuneration 1,191 1,133 1,546
Staff costs 1,363 1,258 2,477
Legal and other
professional fees 181 664 1,869
Office costs 599 678 1,230
Depreciation 115 115 136
General expenses - (19) 213
3,449 3,829 7,471
Legal and other professional fees are shown net of a recovery of £839,000
(1999: £nil) in respect of costs some of which relate to previous years.
4. Tax on profit on ordinary activities
The effective rate of taxation on ordinary activities of 20% (1999: 20%)
reflects the benefit of available capital allowances and losses brought
forward.
5. Dividend
The interim dividend of 2.5p (1999: 2.0p) per ordinary share is payable
on 12 January 2001 to members on the register at 15 December 2000. A
final dividend of 3.5p in respect of the year to 31 March 2000 was paid
during the period.
6. Earnings per share
Unaudited
Six months ended
30 Sept 2000
Adjusted for Based on
exceptional underlying
items profits
Basic
£000 £000 £000
Profit for the financial
period 6,364 6,364 6,364
Exceptional items after
tax - (587) (587)
Profit on sale of
investment properties
after tax - - (495)
6,364 5,777 5,282
Weighted average number of
shares (000) 130,005
Unaudited
Six months ended
30 Sept 1999
Adjusted for Based on
exceptional underlying
items profits
Basic
£000 £000 £000
Profit for the financial
period 3,872 3,872 3,872
Exceptional items after
tax - 961 961
Profit on sale of
investment properties
after tax - - (947)
3,872 4,833 3,886
Weighted average number of
shares (000) 113,154
Audited
Year ended
31 Mar 2000
Adjusted for Based on
exceptional underlying
Basic items profits
£000 £000 £000
Profit for the financial
period 12,857 12,857 12,857
Exceptional items after
tax - 961 961
Profit on sale of
investment properties
after tax - - (2,427)
12,857 13,818 11,391
Weighted average number of
shares (000) 122,432
Earnings per share on a diluted basis have been calculated on an adjusted
profit of £6,448,000 (1999: £3,964,000) and an adjusted weighted average
number of shares of 133,108,000 (1999: 116,903,000).
7. Investment properties
Investment properties are valued annually at the end of each financial
year and are shown in the Balance Sheet as at 30 September 2000 at the
previous year end valuations adjusted for subsequent expenditure and
disposals.
8. Borrowings
The fair value of the Group's financial liabilities as at 30 September
2000 as calculated by JC Rathbone Associates disclosed a positive surplus
in relation to their book value of £1,669,000 (1999: £3,252,000). As at
31 March 2000, the surplus was £2,293,000.
9. Called-up share capital
The issued share capital of the Group decreased during the period owing
to the buy back of shares in the market for cancellation.
Number of shares Nominal value
000 £000
Shares in issue as at 1 April 2000 131,710 32,928
Purchase of own shares (2,090) (522)
Issue on exercise of options 37 9
Shares in issue as at
30 September 2000 129,657 32,415
10. Net asset value per share
Net asset value per share on an undiluted basis as at 30 September 2000
has been based on net assets of £313,564,000 (1999: £260,144,000) and
129,657,000 (1999: 131,710,000) ordinary shares. Net asset value per
share on a diluted basis has been calculated on adjusted net assets of
£316,564,000 (1999: £263,144,000) and 132,761,000 (1999: 135,459,000)
ordinary shares.
11. Notes to the consolidated cash flow statement
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 Sept 30 Sept 31 Mar
2000 1999 2000
£000 £000 £000
a) Reconciliation of operating profit to net
cash inflow from operating activities
Operating profit 18,327 12,197 31,546
Depreciation charge 441 523 135
(Profit) loss on disposal of fixed
assets (414) (90) 74
(Increase) decrease in debtors (3,541) 1,246 1,331
Increase (decrease) in creditors 1,959 213 (6,619)
Decrease in trading stock 1,730 2,804 44,491
Write-down of trading stock - - 41
18,502 16,893 70,999
b) Reconciliation of net cash movement
to net debt
(Decrease) increase in cash
during period (31,707) (935) 33,150
Cash outflow (inflow) from debt
and lease financing 54,274 (46,535) (81,562)
Cash (inflow) outflow from
increase in liquid resources (1,123) - 1,140
Change in net debt resulting from
cash flows 21,444 (47,470) (47,272)
Costs of issue of non-equity
finance 198 1,186 3,349
Amortisation of issue costs (609) (302) (1,315)
Net debt acquired with
subsidiaries - (181,762) (182,601)
Other non-cash movements (183) - 490
Movement in net debt during
period 20,850 (228,348) (227,349)
Net debt beginning of period (344,063) (116,714) (116,714)
Net debt end of period (323,213) (345,062) (344,063)
c) Analysis of net debt
Short term investments 17 17 1,140
Cash 21,312 18,934 53,019
Debt due after more than one
year (248,720) (234,801) (228,470)
Debt due within one year (95,822) (129,212) (169,752)
(323,213) (345,062) (344,063)
INDEPENDENT REVIEW REPORT BY KPMG AUDIT PLC TO QUINTAIN ESTATES AND
DEVELOPMENT PLC
Introduction
We have been instructed by the Company to review the financial information set
out above and we have read the other information contained in the interim
report and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the Directors. The Listing
Rules of the Financial Services Authority require that the accounting policies
and presentation applied to the interim figures should be consistent with
those applied in preparing the preceding annual accounts except where they are
to be changed in the next annual accounts in which case any changes, and the
reasons for them, are to be disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin
1999/4: Review of interim financial information issued by the Auditing
Practices Board. A review consists principally of making enquiries of Group
management and applying analytical procedures to the financial information and
underlying financial data and, based thereon, assessing whether the accounting
policies and presentation have been consistently applied unless otherwise
disclosed. A review is substantially less in scope than an audit performed in
accordance with Auditing Standards and therefore provides a lower level of
assurance than an audit. Accordingly, we do not express an audit opinion on
the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30th September 2000.
KPMG Audit Plc
Chartered Accountants
8 Salisbury Square
London EC4Y 8BB
28 November 2000
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