Interim Results

Quintain Estates & Development PLC 03 December 2002 3 December 2002 QUINTAIN ESTATES AND DEVELOPMENT PLC ('Quintain' / 'Company' / 'Group') Interim Results For the six months ended 30 September 2002 Highlights: • Turnover up 9.8% to £30.1m (2001: £27.4m) • Net asset value per share up 1% to 310p (31.03.02: 307p) • Profit before tax £7.4m (2001: £8.3m) • Interim dividend maintained at 2.75p per share (2001: 2.75p) • Acquisition of Wembley (London) Limited for £48m; second substantial urban regeneration project in London • Extensive consultation on Greenwich Peninsula carried out; Meridian Delta Limited on track to submit planning application by end of 2002 • Appointment of James Hamilton Stubber and John Plender to the Board as Chief Operating Officer and non-executive director respectively • £101m of purchases (including the Wembley Complex) and £54m of disposals within the investment portfolio undertaken during the period • Gearing at 69% (2001: 83%). Nigel Ellis, Chairman, commented: 'The last six months have been eventful for Quintain and we continue to make good progress across all our activities. With strong new management in place and significant opportunities arising from Special Projects such as Meridian Delta and Wembley, we look to the future with optimism.' For further information: Quintain Estates and Development 020 7495 8968 Adrian Wyatt / Rebecca Worthington Financial Dynamics 020 7831 3113 Stephanie Highett / Dido Laurimore FINANCIAL HIGHLIGHTS For the six months ended 30 September 2002 2002 Annual Change Turnover £30.1m + 9.8% Profit before tax £7.4m - 10.9% Earnings per share 4.4p - 17.0% Underlying earnings per share 3.1p - 31.1% Interim dividend 2.75p - Net asset value per share 310p + 1.0% ===== ===== 2002 2001 Purchase of investment properties £101m* £5m Other capital expenditure £9m £8m Proceeds from investment property sales £54m £44m Gearing 69% 83% ===== ===== * Includes acquisition of Wembley Complex for £48m. CHAIRMAN'S STATEMENT I am pleased to report that we have had a satisfactory six months, in which we have made a number of acquisitions - most notably the business of Wembley (London) Limited - and made progress across our portfolio. Turnover increased by 9.8% to £30.1m (2001: £27.4m). We have yet to see the impact of purchases totalling £101m, as most were made at the end of the period under review. Proceeds from disposals of investment properties during the period were £54m. Gearing at 69% remains substantially lower than our long run target. As a result of our decision last year to de-gear, using the proceeds to repay lower coupon debt so as to ensure that we have the resources for developing the greater potential of Meridian Delta and Wembley, profit before tax at £7.4m, earnings per share and underlying earnings per share fell 11%, 17% and 31% respectively. The interim dividend is maintained at 2.75p per share. As in previous years, we have not revalued the property portfolio in the interim accounts. However, based on a representative sample, we are confident the year-end results will show further progress. Portfolio review Purchases totalling £101m, the largest of which was the acquisition of Wembley Complex for £48m, also included two mixed-use portfolios for £42m. Other capital expenditure amounted to £9m with the Scunthorpe development accounting for £8m of this. All of the developments where we were on site at 31 March 2002 have now reached practical completion. All the units in the residential block developed in joint venture with Berkeley Homes in Croydon were sold in the period giving rise to a profit of £0.8m. We have also achieved a £0.5m profit from the partial sale of our care village at Silvergrove, Bristol and £1.1m from the sale of a trading property at Livesey Street, Sheffield. Our 300,000 sq ft high street scheme in Scunthorpe opened in October. It is now 88% let and tenants include Woolworths, TJ Hughes, Littlewoods and Hennes & Mauritz. Planning consent was granted on our Gracechurch Street, London EC3 properties last year. Since then, the City of London Market has changed considerably and we now propose to let the vacant property on a short term lease until the market improves and retain Standard Chartered as our tenant on the adjoining property. Our office holdings in the City total 4% of the Company's portfolio. The average unexpired lease length of the UK investment portfolio is 16 years. As reported at the year-end, in May we signed a land and development agreement with English Partnerships. Following six months of consultation with the people of Greenwich and the relevant authorities, Meridian Delta Limited, the vehicle owned 49% by Quintain and 51% by Lend Lease, expects to submit a planning application before Christmas which should deliver a unique contribution to London's regeneration programme. The size and scale of this project makes this a significant event for the Company. The details must largely remain confidential until then, save as previously announced that the application will be for in excess of 12 million sq ft of mixed-use development including perhaps 10,000 homes. In August 2002, we purchased Wembley (London) Limited for £48m, representing the second major mixed-use urban regeneration project in London for Quintain and bringing our interests in areas identified as 'Opportunity Areas' in the Mayor of London's Draft London Plan published in June 2002 to 234 acres. The consideration is payable in three tranches, with £16m paid on completion, £18m due on 1 December 2003 and £14m payable on 1 December 2004. For this, we acquired 44 acres of land and one million sq ft of buildings, including the Wembley Arena, Conference Centre and Exhibition Halls. We are currently preparing a planning application for a landmark mixed-use development on this site which should be ready for submission towards the end of next year. As reported at the year-end, in April we formed a limited partnership, Quart, with Hermes and the Bank of Scotland. Quintain sold an initial tranche of 37 licensed premises into the limited partnership for a consideration of £42.7m and retained a 12.6% stake. In addition, Quintain holds a further 20 public houses on its balance sheet. The majority of these were let to Albion Pub Contracts Limited, which went into liquidation in February 2002. This led to a loss of rent of £0.5m and operating losses and costs arising from the liquidation of a similar amount. Active steps are being taken to remedy the position and, to date, four of these pubs have been accepted into the limited partnership and three sold with vacant possession. Voids have fallen in the six months, with unintended voids now standing at 5.1% of ERV compared with 5.6% at the year-end. Financial review Quintain's results for previous years have been restated in line with the recently introduced UITF Abstract 34 for costs incurred in the period leading to the Quintain and Lend Lease consortium being awarded preferred bidder status for the Greenwich Peninsula. The impact of adopting this Abstract has been to reduce previously reported profits at the pre-tax level by £0.8m with £0.3m reflected in the first half of last year. The effect on earnings per share for the six months to 30 September 2001 has been a reduction of 0.1p. As a result of the acquisition of Chesterfield Properties, Quintain inherited an outstanding litigation action. We are pleased to report that this has now been settled out of court, which has given rise to a £0.8m profit to the Company. This has more than offset the payment to Mike Riley, a former director, of £0.3m and has accordingly led to a reduction in administration expenses of £0.5m. Weighted average interest costs have fallen from 6.4% at 31 March 2002 to 6.2%. Regarding tax, an effective rate of 20% has been assumed based on the anticipated rate for the full year. The rate for last year has been restated from 17.5% to 17% to take account of the changes required by UITF 34. Once again, during the period under review, your Board decided that, with the share price being so far below net asset value, further shares should be purchased and, by the half year-end, 1.8m have been bought in and cancelled. The amount we can buy is limited by the cash requirements of our major projects such as Meridian Delta and Wembley but, subject to this, and of course to the usual legal requirements, further purchases will be considered if the share price continues to remain at levels unacceptably below net asset value per share. Management There have been a number of changes in the Company's Board since the last year-end. I am delighted to report that James Hamilton Stubber joined us on 14 October 2002 as Chief Operating Officer. James was a National Director of Jones Lang LaSalle. He will take over responsibility for the investment property portfolio as well as all the other duties implied by the title. I am also delighted to report that John Plender, a leading journalist at the Financial Times, joined us on 23 July 2002 as a non-executive director to fill the vacancy left by the retirement of John Evans. We will greatly benefit from the depth of his experience and wide perspective, particularly with regard to investment and corporate governance issues. On a sadder note, Mike Riley left by mutual consent on 31 July 2002. In the short time he was here he achieved much and we wish him well. Edward Dugdale, who ran the structured finance division which includes the nursing home portfolio and Quercus, our joint venture with Morley, and was also responsible for Quart, the pubs limited partnership, decided to resign from the Board to pursue other interests. We wish him well. Outlook The last six months have been eventful for Quintain and we continue to make good progress across all our activities. With strong new management in place and significant opportunities arising from Special Projects such as Meridian Delta and Wembley, we look to the future with optimism. Nigel Ellis Chairman 3 December 2002 Quintain Estates and Development PLC Consolidated profit and loss account For the six months ended 30 September 2002 Unaudited Unaudited Audited Six months ended Six months ended Year ended 30 Sept 2002 30 Sept 2001 31 March 2002 Restated Restated Notes £000 £000 £000 _____ _______ _______ _______ Turnover Continuing and share of joint ventures 31,383 29,749 55,339 Acquisitions 1,165 - - _______ _______ _______ 32,548 29,749 55,339 Less - share of joint venture turnover (2,477) (2,374) (4,909) _______ _______ _______ Group turnover 2 30,071 27,375 50,430 Cost of sales 2 (14,080) (4,668) (9,051) _______ _______ _______ Gross profit 15,991 22,707 41,379 Administrative expenses 3 (4,060) (4,564) (8,548) _______ _______ _______ Operating profit Continuing 11,905 18,143 32,831 Acquisitions 26 - - _______ _______ _______ Group operating profit 11,931 18,143 32,831 Share of operating profit in joint 2,198 1,764 4,280 ventures Share of operating loss in associates (5) - (44) Profit (loss) on sale of investment 1,229 (519) 927 properties Net interest payable (7,983) (11,113) (21,052) _______ _______ _______ Profit on ordinary activities before 7,370 8,275 16,942 taxation Tax on profit on ordinary activities 4 (1,474) (1,410) (2,033) _______ _______ _______ Profit on ordinary activities after 5,896 6,865 14,909 taxation Minority interests (199) (129) (230) _______ _______ _______ Profit for the financial period 5,697 6,736 14,679 Dividends 5 (3,499) (3,497) (9,637) _______ _______ _______ Retained profit for the period 2,198 3,239 5,042 ====== ====== ====== Earnings per share 6 Undiluted 4.4p 5.3p 11.5p ====== ====== ====== Diluted 4.4p 5.2p 11.4p ====== ====== ====== Quintain Estates and Development PLC Unaudited Unaudited Audited Six months ended Six months ended Year ended 30 Sept 2002 30 Sept 2001 31 March 2002 Restated Restated Notes £000 £000 £000 _____ _______ _______ _______ Consolidated statement of total recognised gains and losses Profit for the financial period 5,697 6,736 14,679 Unrealised surplus on revaluation 1,588 64 36,659 Tax on realisation of revaluation surplus - (413) (1,843) Currency translation movements (146) 56 (179) _______ _______ _______ Total recognised gains and losses relating to the period 7,139 6,443 49,316 Prior year adjustments as set out below (542) - - _______ _______ _______ Total gains and losses recognised since last year end 6,597 6,443 49,316 ====== ====== ====== Consolidated note of historical cost profits and losses Profit on ordinary activities before 7,370 8,275 16,942 taxation Realisation of revaluation gains of previous periods 2,812 804 13,397 _______ _______ _______ Historical cost profit on ordinary activities before taxation 10,182 9,079 30,339 ====== ====== ====== Historical cost profit for the period retained after taxation, minority interests and dividends 5,010 3,630 16,596 ====== ====== ====== Reconciliation of movements in equity shareholders' funds Profit for the financial period 5,697 6,736 14,679 Dividends (3,499) (3,497) (9,637) _______ _______ _______ 2,198 3,239 5,042 Other recognised gains and losses relating to the period 1,442 (293) 34,637 Issue of shares 959 - 2,057 Purchase of own shares (4,190) (1,401) (2,347) _______ _______ _______ Net addition to equity shareholders' 409 1,545 39,389 funds Opening shareholders' funds, as restated 394,363 354,974 354,974 _______ _______ _______ Closing shareholders' funds 394,772 356,519 394,363 ====== ====== ====== Opening shareholders' funds As previously reported 394,905 355,207 355,207 Prior year adjustment : UITF 34 1 (542) (233) (233) _______ _______ _______ As restated 394,363 354,974 354,974 ====== ====== ====== Quintain Estates and Development PLC Consolidated balance sheet As at 30 September 2002 Unaudited Unaudited Audited As at As at As at 30 Sept 2002 30 Sept 2001 31 March 2002 Restated Restated Notes £000 £000 £000 _____ _______ _______ _______ Fixed assets Investment properties 7 666,458 625,324 608,185 Other fixed assets 397 548 450 Investment in joint ventures Share of gross assets 60,519 59,263 61,849 Share of gross liabilities (31,027) (32,270) (33,310) 29,492 26,993 28,539 Investment in associates 4,722 1,016 1,149 Other fixed asset investments 266 266 292 ________ ________ ________ 701,335 654,147 638,615 ________ ________ ________ Current assets Stocks 1,449 4,466 7,656 Debtors 40,505 36,565 20,124 Short term investments 18 18 18 Cash at bank and in hand 13,697 15,609 37,647 ________ ________ ________ 55,669 56,658 65,445 Creditors: amounts falling due within (77,735) (38,205) (107,896) one year ________ ________ ________ Net current (liabilities) assets (22,066) 18,453 (42,451) ________ ________ ________ Total assets less current liabilities 679,269 672,600 596,164 Creditors: amounts falling due after more than one year (274,044) (307,803) (192,500) Provisions for liabilities and charges (7,837) (6,051) (6,850) Equity minority interests (2,616) (2,227) (2,451) ________ ________ ________ Net assets 394,772 356,519 394,363 ======= ======= ======= Capital and reserves Called up share capital 9 31,813 31,787 32,098 Share premium account 40,736 38,336 39,950 Other capital reserves 110,553 109,962 110,095 Revaluation reserve 153,966 133,622 155,448 Profit and loss account 57,704 42,812 56,772 ________ ________ ________ Equity shareholders' funds 394,772 356,519 394,363 ======= ======= ======= Net asset value per share 10 Undiluted 310p 280p 307p ======= ======= ======= Diluted 304p 274p 302p ======= ======= ======= Quintain Estates and Development PLC Consolidated cash flow statement For the six months ended 30 September 2002 Unaudited Unaudited Audited Six months ended Six months ended Year ended 30 Sept 2002 30 Sept 2001 31 March 2002 Notes £000 £000 £000 _____ _______ _______ _______ Net cash flow from operating activities 11a 8,425 8,088 20,403 ======= ======= ======= Return on investments and servicing of finance Net interest paid (7,411) (11,832) (20,103) Issue costs of loans (319) (131) (82) _______ _______ _______ Net cash outflow from returns on investments and servicing of finance (7,730) (11,963) (20,185) ======= ======= ======= Corporation tax paid - (776) (3,802) ======= ======= ======= Capital expenditure and financial investment Purchase of tangible fixed assets (50,914) (13,815) (23,389) Proceeds from disposal of tangible fixed 50,813 41,134 112,956 assets Loans to join ventures and associates (2,261) - (317) _______ _______ _______ Net cash (outflow) inflow from capital expenditure and financial investment (2,362) 27,319 89,250 ======= ======= ======= Acquisitions and disposals Proceeds from disposal of subsidiary - 18,234 18,873 companies Purchase of subsidiary companies (27,577) - - Net cash acquired with subsidiary 956 - - companies _______ _______ _______ Net cash (outflow) inflow from acquisitions and disposals (26,621) 18,234 18,873 ======= ====== ====== Equity dividends paid (6,099) (5,116) (8,654) ====== ====== ====== Net cash (outflow) inflow before management of liquid resources and financing (34,387) 35,786 95,885 ====== ====== ====== Management of liquid resources 18,250 25,838 13,779 ====== ====== ====== Financing Issue of ordinary shares for cash 959 - 2,057 Loan drawdowns 88,337 54,116 71,211 Loan repayments (74,669) (119,406) (175,673) Purchase of own shares (4,190) (1,401) (2,347) _______ _______ _______ Net cash inflow (outflow) from financing 10,437 (66,691) (104,752) ====== ====== ====== (Decrease) increase in cash (5,700) (5,067) 4,912 ====== ====== ====== Quintain Estates and Development PLC Notes to the accounts For the six months ended 30 September 2002 1 Basis of preparation The half year figures for 2002 and 2001 are unaudited and have been prepared on the basis of accounting policies adopted in the accounts to 31 March 2002, except as noted below. The comparative figures for the financial year ended 31 March 2002 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. Change in accounting policy : Pre-contract costs In accordance with the Urgent Issues Task Force Abstract 34, expenditure incurred prior to obtaining preferred bidder status from English Partnerships in relation to the Millennium Dome and the redevelopment of the rest of the Greenwich Peninsula has been charged in the profit and loss account. In adopting this abstract, the results for the six months ended 30 September 2001 and the year ended 31 March 2002 have been restated as set out below. There was no impact in the current period. Six months ended Six months ended Year ended 30 Sept 2002 30 Sept 2001 31 March 2002 £000 £000 £000 _______ _______ _______ Increase in cost of sales - (304) (442) Decrease in tax on profit on ordinary - 91 133 activities ______ ______ ______ Decrease in profit for the financial - (213) (309) period Decrease in opening reserves (542) (233) (233) _______ _______ _______ Decrease in shareholders' funds (542) (446) (542) ====== ====== ====== Decrease in debtors (775) (637) (775) Decrease in creditors: amounts falling due within one year 233 191 233 _______ _______ _______ Decrease in net assets (542) (446) (542) ====== ====== ====== 2 Turnover and cost of sales Unaudited Unaudited Audited Six months ended Six months ended Year ended 30 Sept 2002 30 Sept 2001 31 March 2002 £000 £000 £000 _______ _______ _______ Gross rents receivable 17,440 23,545 45,164 Proceeds from sale of trading properties 11,074 1,363 2,585 Income from leisure operations 876 - - Other income 681 2,467 2,681 _______ _______ _______ Total turnover 30,071 27,375 50,430 ====== ====== ====== Rents payable and other property outgoings 3,981 3,463 7,162 Cost of sale of trading properties 9,427 1,205 1,889 Expenditure on leisure operations 672 - - _______ _______ _______ Total cost of sales 14,080 4,668 9,051 ====== ====== ====== Other income in 2001 included a surrender premium of £1,550,000. 3 Administrative expenses Unaudited Unaudited Audited Six months ended Six months ended Year ended 30 Sept 2002 30 Sept 2001 31 March 2002 £000 £000 £000 _______ _______ _______ Directors' remuneration 1,261 1,331 2,071 Staff costs 1,778 1,465 2,531 Legal and other professional fees 263 1,064 2,404 Office costs 528 514 1,115 Depreciation 126 137 273 Profit on disposal of fixed assets - (22) (6) General expenses 104 75 160 _______ _______ _______ 4,060 4,564 8,548 ====== ====== ====== Legal and professional fees include a recovery of £754,000 relating to amounts which have been reflected in the current and earlier periods. 4 Tax on profit on ordinary activities The effective rate of taxation on profit on ordinary activities of 20% (2001 : 17%) reflects the benefit of available losses, capitalised interest and permanent timing differences in relation to capital allowances. 5 Dividends The interim dividend of 2.75p (2001 : 2.75p) per ordinary share is payable on 20 December 2002 to members on the register as at 13 December 2002. A final dividend of 4.75p in respect of the year to 31 March 2002 was paid during the period. 6 Earnings per share Unaudited Unaudited Unaudited Unaudited Six Six Six Six Audited Audited months months months months Year Year ended ended ended ended ended ended 30 30 30 30 31 31 September September September September March March 2002 2002 2001 2001 2002 2002 Basic Based on Basic Based on Basic Based on underlying underlying underlying profits profits profits Restated Restated Restated Restated £000 £000 £000 £000 £000 £000 _______ _______ _______ _______ _______ _______ Profit for the financial 5,697 5,697 6,736 6,736 14,679 14,679 period Exceptional items after tax - (528) - (1,550) - - Profit (loss) on sale of - (1,229) - 519 - (743) investment properties after tax _______ _______ _______ _______ _______ _______ 5,697 3,940 6,736 5,705 14,679 13,936 ====== ====== ====== ====== ====== ====== Weighted average number of shares (000) 128,438 127,827 127,808 ====== ====== ====== Earnings per share on a diluted basis have been calculated on an adjusted profit of £5,781,000 (2001 : £6,820,000 restated) and an adjusted weighted number of shares of 132,146,000 (2001 : 131,776,000). 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 2002 at the previous year end valuations adjusted for subsequent expenditure and disposals. 8 Borrowings As at 30 September 2002, J C Rathbone Associates estimated that the fair value of the Group's financial liabilities exceeded their carrying value by £13,427,000 (2001 : £5,732,000). As at 31 March 2002, the deficit was £3,590,000. 9 Called up share capital Number of shares Nominal value 000 £000 _______ _______ Shares in issue as at 1 April 2002 128,393 32,098 Issue of shares under Staff Share Option Schemes 695 173 Purchase of own shares (1,834) (458) _______ _______ Shares in issue as at 30 September 2002 127,254 31,813 ====== ====== 10 Net asset value per share Net asset value per share on an undiluted basis as at 30 September 2002 has been based on net assets of £394,772,000 (2001 : £356,519,000 restated) and 127,254,000 (2001 : 127,147,000) ordinary shares. Net asset value per share on a diluted basis has been calculated on adjusted net assets of £397,772,000 (2001 : £359,519,000 restated) and 130,962,000 (2001 : 131,096,000) ordinary shares. 11 Notes to the consolidated cash flow statement Unaudited Unaudited Audited Six months ended Six months ended Year ended 30 Sept 2002 30 Sept 2001 31 March 2002 Restated Restated £000 £000 £000 _______ _______ _______ a) Reconciliation of operating profit to net cash inflow from operating activities Operating profit 11,931 18,143 32,831 Depreciation charge 567 434 606 Profit on disposal of fixed assets - (22) (6) Increase in debtors (10,713) (11,360) (1,950) Increase (decrease) in creditors 575 238 (6,929) Decrease (increase) in trading stock 6,065 655 (4,149) _______ _______ _______ 8,425 8,088 20,403 ====== ====== ====== b) Reconciliation of net cash movement to net debt (Decrease) increase in cash during period (5,700) (5,067) 4,912 Cash (inflow) outflow from debt and lease financing (13,668) 65,062 104,462 Cash inflow from decrease in liquid (18,250) (25,838) (13,779) resources _______ _______ _______ Change in net debt resulting from cash (37,618) 34,157 95,595 flows Costs of issue of non-equity finance 319 (131) 82 Amortisation of issue costs (415) (432) (817) Other non-cash movements 660 563 591 _______ _______ _______ Movement in net debt during period (37,054) 34,157 95,451 Net debt at beginning of period (231,780) (327,231) (327,231) _______ _______ _______ Net debt at end of period (268,834) (293,074) (231,780) ====== ====== ====== c) Analysis of net debt Liquid resources 4,074 10,265 22,324 Cash 9,641 5,362 15,341 Debt due after more than one year (243,945) (308,701) (192,500) Debt due within one year (38,604) - (76,945) _______ _______ _______ (268,834) (293,074) (231,780) ====== ====== ====== Independent review report by KPMG Audit Plc to Quintain Estates and Development PLC Introduction We have been instructed by the Company to review the attached financial information 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 directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which 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 for use in the United Kingdom. A review consists principally of making enquiries of 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 30 September 2002. KPMG Audit Plc Chartered Accountants London 3 December 2002 This information is provided by RNS The company news service from the London Stock Exchange

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