Interim Results
Quintain Estates & Development PLC
25 November 2003
25 November 2003
QUINTAIN ESTATES AND DEVELOPMENT PLC
('Quintain' / 'Company' / 'Group')
Interim Results for the six months ended 30 September 2003
Highlights:
• Gross profit up 21% to £19.3m (2002: £16.0m)
• Profit before tax stable at £7.3m (2002: £7.4m)
• Earnings per share up 4.5% to 4.6p (2002: 4.4p)
• Net asset value per share 349p (31 March 2003: 348p)
• Interim dividend maintained at 2.75p per share
• Strong progress at the Greenwich Peninsula; London Borough of
Greenwich unanimously resolved to grant outline planning consent and
agreement reached with the Mayor of London on affordable housing
• Planning application submitted to London Borough of Brent in October
for the regeneration of 42 acres at Wembley
• Joint venture agreed with Countryside Properties PLC for £89m mixed
use scheme at Merton Abbey Mills, London SW19
• Hanford Mall Shopping Centre in California sold, generating FRS3
profit of £2.4m
• Gearing reduced to 60% (31 March 2003: 63%; 30 September 2002: 69%)
Nigel Ellis, Chairman, commented:
'I am pleased to report good progress across all areas of the Company during the
last six months. The financial results are more than satisfactory, the sales
programme is ahead of schedule and great advances are occurring at both the
Wembley and Meridian Delta projects.
'The inherent potential within the portfolio, strengthened management and robust
underlying earnings are conducive to outperformance and we therefore continue to
look to the future with confidence.'
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
Once again, I am pleased to report good progress across all areas of the Company
during the last six months. The financial results are more than satisfactory,
the sales programme is ahead of schedule and great advances are occurring at
both the Wembley and Meridian Delta projects.
Gross profits increased 21% to £19.3m (2002: £16.0m) incorporating a 14% uplift
in rental income to £19.8m (2002: £17.4m). Underlying profits have increased by
19% to £4.5m (2002: £3.7m). Administrative expenses, however, have increased by
85%. The additional costs mainly relate to the operational business at Wembley
being included for the entire period under review (2002: two months), but also
reflected the Company's decision to appoint some highly skilled individuals to
strengthen and expand the property team in order to progress the major urban
regeneration projects and develop new business.
Earnings per share have risen by 4.5% to 4.6p per share (2002: 4.4p). In light
of this and in spite of the unsettled economic climate, the board has good
reason to feel optimistic regarding the future. Quintain pursues a progressive
dividend policy but, in line with past practice, we have decided to maintain the
interim dividend at 2.75p per share.
Regarding the property portfolio, as in previous years, we have not carried out
a formal revaluation at the half year. Subject to market conditions, we
anticipate an uplift at the year end. Gearing has reduced from 63% at the year
end to 60% at 30 September 2003 (2002: 69%). This reflects the Company's
decision to take advantage of current market pricing to dispose of certain
assets and will support the ongoing requirement to fund its major urban
regeneration projects.
Property Review
We have deliberately slowed our acquisition programme as yields have fallen to
levels that would not sustain our total return requirement. However, we have
purchased one property for £5.8m with an initial yield of 9%. Sales were £33.1m
in the first half, at around or in excess of book value, with a further £26.7m
exchanging since the period end.
Having achieved the resolution to grant planning permission for the development
of 14 million sq ft at the Greenwich Peninsula in April of this year, we have
agreed the percentage of affordable housing and significant progress is being
made on the infrastructure and S106 negotiations. We remain on target to be on
site next year.
Since the period end, we have bought a 12.6 acre site across the Thames from the
Greenwich Peninsula in a joint venture with the London Development Agency. The
land is safeguarded for a third Blackwall Crossing and is leased back to
Carlsberg-Tetley for a minimum of three years. This acquisition, strategic in
the context of both the Olympics and our ongoing involvement on the Peninsula,
is in line with our regeneration policy of buying assets early that have an
existing income stream, thereby underwriting the planning risk.
Yesterday, we consolidated our landholding at Wembley through the acquisition of
York House, a 118,000 sq ft office building, for £15.3m, reflecting an initial
yield of 8.7%. As a result of this, the acquisition of Wembley (London) Limited
last year and the subsequent purchase of the Palace of Industries site, we now
own 58 acres at Wembley. Of this, 42 acres were incorporated within a planning
application for 5 million sq ft of mixed use development which was submitted at
the end of October. Two public consultations took place during the first half
of this financial year and a third is planned for December. We are working very
closely with the London Borough of Brent, the Greater London Authority and the
London Development Agency to secure a successful planning application and to be
on-site to deliver the first elements of the scheme by the time Wembley Stadium
opens in late 2005.
At Merton Abbey Mills, Quintain has signed a joint venture agreement with
Countryside Properties PLC for an £89m mixed use development comprising
improvements to the existing speciality market, 283 apartments, a pre-let hotel
and health and fitness centre and two restaurants. Building of the first phase
has commenced and 25% of these 124 residential units have already been reserved.
During the period, lettings have taken place at our completed development The
Parishes, Scunthorpe and, with rent free periods falling away, its income
receivable has increased by £0.9m to £1.8m. A surrender premium was taken in
the year to 31 March 2002 on 33,000 sq ft of office space handed back at
Smallbrook Queensway, Birmingham. This has now been refurbished and a recent
letting of 14,000 sq ft to Mortgage Masters means the building is now 97% let.
The works at Neathouse Place, Victoria are complete and negotiations continue
with the tenant on settling the outstanding rent review.
Quintain's strategy has always been to focus on the UK property market. We have
therefore taken advantage of a strong retail market in the United States to sell
Hanford Mall, our shopping centre in California. Our share of proceeds was
£14.2m, giving a £2.4m profit over book value. Our only remaining asset in the
US, the shopping centre in Hialeah, Florida, is being marketed with the
intention of it being sold by the year end.
Management
Regarding the Board, we were sorry that Pam Alexander, who joined us in July of
this year as a non-executive director with strong public sector experience, has
announced her intention to resign as a result of her appointment as Chief
Executive of the South East England Development Agency. We will miss her
contribution and wish her all the best. With our growing portfolio of inner
city regeneration projects, we feel that the Company does benefit from having a
board member with experience of the public sector and are therefore seeking a
replacement. We hope to have good news on this front in the near future.
Outlook
The inherent potential within the portfolio, strengthened management and robust
underlying earnings are conducive to outperformance and we therefore continue to
look to the future with confidence.
Nigel Ellis
Chairman
25 November 2003
Quintain Estates and Development PLC
Consolidated Profit and Loss Account
For the six months ended 30 September 2003
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
30 Sept 2003 30 Sept 2002 31 March 2003
Notes £000 £000 £000
_______ _______ _______
Turnover 30,717 32,548 62,660
Less - share of joint ventures' (2,680) (2,477) (5,055)
turnover
_______ _______ _______
Group turnover 2 28,037 30,071 57,605
Cost of sales 2 (8,742) (14,080) (21,030)
_______ _______ _______
Gross profit 19,295 15,991 36,575
Administrative expenses 3 (7,528) (4,060) (10,377)
_______ _______ _______
Group operating profit 11,767 11,931 26,198
Share of operating profit in joint 1,977 2,198 4,421
ventures
Share of operating profit (loss) in 105 (5) 278
associates
Profit on sale of investment properties 2,699 1,229 841
Net interest payable (9,209) (7,983) (17,770)
_______ _______ _______
Profit on ordinary activities before
taxation 7,339 7,370 13,968
Tax on profit on ordinary activities 4 (1,468) (1,474) (1,647)
_______ _______ _______
Profit on ordinary activities after
taxation 5,871 5,896 12,321
Equity minority interests (60) (199) (288)
_______ _______ _______
Profit for the financial period 5,811 5,697 12,033
Dividends 5 (3,540) (3,499) (10,183)
_______ _______ _______
Retained profit for the financial 2,271 2,198 1,850
period
====== ====== ======
Earnings per share 6
Basic 4.6p 4.4p 9.4p
====== ====== ======
Diluted 4.5p 4.4p 9.3p
====== ====== ======
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
30 Sept 2003 30 Sept 2002 31 March 2003
£000 £000 £000
_______ _______ _______
Consolidated Statement of Total
Recognised Gains and Losses for the
six months ended 30 September 2003
Profit for the financial period 5,811 5,697 12,033
Unrealised (deficit) surplus on (429) 33 49,147
revaluation
Currency translation movements (135) (146) 190
_______ _______ _______
5,247 5,584 61,370
====== ====== ======
Consolidated Note of Historical Cost
Profits and Losses for the six months
ended 30 September 2003
Profit on ordinary activities before 7,339 7,370 13,968
taxation
Realisation of property revaluation
gains of previous periods 493 2,812 2,325
_______ _______ _______
Historical cost profit on ordinary
activities before taxation 7,832 10,182 16,293
====== ====== ======
Historical cost profit for the period
retained after taxation, minority
interests and dividends 2,764 5,010 4,175
====== ====== ======
Reconciliation of Movements
in Equity Shareholders' Funds
for the six months ended
30 September 2003
Profit for the financial period 5,811 5,697 12,033
Dividends (3,540) (3,499) (10,183)
_______ _______ _______
2,271 2,198 1,850
Other recognised gains and losses
relating to the period (564) (113) 49,337
Negative goodwill - 1,555 1,555
Issue of shares less costs 641 959 2,377
Purchase of own shares - (4,190) (6,166)
_______ _______ _______
Net addition to equity shareholders' 2,348 409 48,953
funds
Opening shareholders' funds 443,316 394,363 394,363
_______ _______ _______
Closing shareholders' funds 445,664 394,772 443,316
====== ====== ======
Consolidated Balance Sheet
As at 30 September 2003
Unaudited Unaudited Audited
As at As at As at
30 Sept 2003 30 Sept 2002 31 March 2003
Notes £000 £000 £000
_______ _______ _______
Fixed assets
Investment properties 7 714,529 666,458 722,545
Other fixed assets 454 397 430
Investment in joint ventures
Share of gross assets 69,803 60,519 61,589
Share of gross liabilities (31,610) (31,027) (31,055)
________ ________ ________
38,193 29,492 30,534
Investment in associates 4,501 4,722 4,512
Other fixed asset investments 188 266 188
________ ________ ________
757,865 701,335 758,209
________ ________ ________
Current assets
Trading properties 559 1,449 1,750
Debtors 31,688 40,505 48,729
Short term investments 19 18 14
Cash at bank and in hand 12,883 13,697 22,119
________ ________ ________
45,149 55,669 72,612
Creditors: amounts falling due within
one year (56,225) (77,735) (63,149)
________ ________ ________
Net current (liabilities) assets (11,076) (22,066) 9,463
________ ________ ________
Total assets less current liabilities 746,789 679,269 767,672
Creditors: amounts falling due after
more than one year (290,772) (274,044) (314,346)
Provisions for liabilities and charges (8,993) (7,837) (8,659)
Equity minority interests (1,360) (2,616) (1,351)
________ ________ ________
Net assets 445,664 394,772 443,316
======= ======= =======
Capital and reserves
Called up share capital 9 31,948 31,813 31,825
Share premium account 43,805 40,736 42,623
Other capital reserves 112,330 110,553 112,330
Revaluation reserve 202,156 153,966 202,148
Profit and loss account 55,425 57,704 54,390
________ ________ ________
Equity shareholders' funds 445,664 394,772 443,316
======= ======= =======
Net asset value per share 10
Basic 349p 310p 348p
======= ======= =======
Diluted 342p 304p 342p
======= ======= =======
Consolidated Cash Flow Statement
For the six months ended 30 September 2003
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
30 Sept 2003 30 Sept 2002 31 March 2003
Notes £000 £000 £000
_______ _______ _______
Net cash inflow from operating
activities 11a 6,722 8,425 39,514
====== ====== ======
Dividends from joint ventures
and associates 894 - 1,381
====== ====== ======
Return on investments and
servicing of finance
Net interest paid (9,175) (7,411) (17,052)
Issue costs of loans (41) (319) (431)
_______ _______ _______
Net cash outflow from returns on
investments and servicing of finance (9,216) (7,730) (17,483)
====== ====== ======
Corporation tax paid (61) - (1,193)
====== ====== ======
Capital expenditure and
financial investment
Purchase of tangible fixed assets (17,091) (50,914) (90,663)
Proceeds from disposal of tangible
fixed assets 40,173 50,813 66,401
Loans to join ventures and associates (5,032) (2,261) (2,261)
_______ _______ _______
Net cash inflow (outflow) from capital
expenditure and financial investment 18,050 (2,362) (26,523)
====== ====== ======
Acquisitions and disposals
Purchase of subsidiary companies - (27,577) (27,335)
Net cash acquired with subsidiary - 956 956
companies
_______ _______ _______
Net cash outflow from acquisitions
and disposals - (26,621) (26,379)
====== ====== ======
Equity dividends paid (6,709) (6,099) (9,599)
====== ====== ======
Net cash inflow (outflow) before
management of liquid resources
and financing 9,680 (34,387) (40,282)
====== ====== ======
Management of liquid resources 11b 2,905 18,250 18,953
====== ====== ======
Financing
Issue of ordinary shares for cash 641 959 3,079
Loans drawn down 7,499 88,337 161,088
Loan repayments (27,051) (74,669) (132,548)
Purchase of own shares - (4,190) (6,869)
_______ _______ _______
Net cash (outflow) inflow from (18,911) 10,437 24,750
financing
====== ====== ======
(Decrease) increase in cash 11c (6,326) (5,700) 3,421
====== ====== ======
Notes to the accounts
For the six months ended 30 September 2003
1 Basis of preparation
The half year figures for 2003 and 2002 are unaudited and have been prepared on
the basis of accounting policies adopted in the accounts to 31 March 2003. The
comparative figures for the financial year ended 31 March 2003 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 ended Six months ended Year ended
30 Sept 2003 30 Sept 2002 31 March 2003
£000 £000 £000
_______ _______ _______
Gross rents receivable 19,825 17,440 37,367
Proceeds from sale of trading 1,439 11,074 12,115
properties
Income from leisure operations 5,485 876 5,950
Other income 1,288 681 2,173
_______ _______ _______
Total turnover 28,037 30,071 57,605
====== ====== ======
Rents payable and other property 4,367 3,981 8,210
outgoings
Cost of sales of trading properties 1,254 9,427 9,657
Expenditure on leisure operations 3,121 672 3,163
_______ _______ _______
Total cost of sales 8,742 14,080 21,030
====== ====== ======
3 Administrative expenses
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
30 Sept 2003 30 Sept 2002 31 March 2003
£000 £000 £000
_______ _______ _______
Directors' remuneration 1,475 1,261 2,066
Staff costs 3,675 1,778 4,520
Legal and professional fees 895 263 1,298
Office costs 843 528 1,851
Depreciation 167 126 253
Profit on disposal of fixed assets (9) - (40)
General expenses 482 104 429
_______ _______ _______
7,528 4,060 10,377
====== ====== ======
In 2002, legal and professional fees included a recovery of £754,000 relating to
amounts reflected in that period and in earlier periods.
4 Tax on profit on ordinary activities
The effective rate of taxation on profit on ordinary activities of 20% (2002 :
20%) 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 (2002 : 2.75p) per ordinary share is payable on
19 December 2003 to members on the register as at 12 December 2003. A final
dividend of 5.25p in respect of the year to 31 March 2003 was paid during the
period.
6 Earnings per share
Basic Unaudited Unaudited Audited
Six months Six months Year
ended 30 September ended 30 September ended 31 March
2003 2002 2003
£000 £000 £000
_______ _______ _______
Profit for the financial 5,811 5,697 12,033
period
====== ====== ======
Weighted average number of
shares (000) 127,597 128,438 127,660
====== ====== ======
Earnings per share on a diluted basis have been calculated on an adjusted profit
of £5,895,000 (2002 : £5,781,000) and an adjusted weighted average number of
shares of 131,084,000 (2002 : 132,146,000).
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 2003 at the previous year end
valuations adjusted for subsequent expenditure and disposals.
8 Borrowings
As at 30 September 2003, J C Rathbone Associates estimated that the fair value
of the Group's financial liabilities exceeded their carrying value by
£13,476,000 (2002 : £13,427,000). As at 31 March 2003, the excess was
£17,084,000.
9 Called up share capital
Number Nominal
of shares value
000 £000
_______ _______
Shares in issue as at 1 April 2003 127,301 31,825
Issue of shares under Staff Share Option Schemes 491 123
_______ _______
Shares in issue as at 30 September 2003 127,792 31,948
====== ======
10 Net asset value per share
Net asset value per share on an undiluted basis as at 30 September 2003 has been
based on net assets of £445,664,000 (2002 : £394,772,000) and 127,792,000 (2002
: 127,254,000) ordinary shares. Net asset value per share on a diluted basis
has been calculated on adjusted net assets of £448,664,000 (2002 : £397,772,000)
and 131,279,000 (2002 : 130,962,000) ordinary shares.
11 Notes to the consolidated cash flow statement
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
30 Sept 2003 30 Sept 2002 31 March 2003
£000 £000 £000
_______ _______ _______
a) Reconciliation of operating profit
to net cash inflow from operating
activities
Operating profit 11,767 11,931 26,198
Depreciation charge 762 567 1,124
Profit on disposal of fixed assets (9) - (40)
Increase in debtors (6,813) (10,713) (2,646)
(Decrease) increase in creditors (176) 575 7,438
Decrease in trading stock 1,191 6,065 7,440
_______ _______ _______
6,722 8,425 39,514
====== ====== ======
b) Reconciliation of net cash
movement to net debt
(Decrease) increase in cash during (6,326) (5,700) 3,421
period
Cash outflow (inflow) from debt and
lease financing 19,923 (13,668) (28,540)
Cash inflow from decrease in liquid (2,905) (18,250) (18,953)
resources
_______ _______ _______
Change in net debt resulting from cash 10,692 (37,618) (44,072)
flows
Costs of issue of non-equity finance 41 319 431
Amortisation of issue costs (315) (415) (743)
Other non-cash movements (57) 660 290
_______ _______ _______
Movement in net debt during period 10,361 (37,054) (44,094)
Net debt at beginning of period (275,874) (231,780) (231,780)
_______ _______ _______
Net debt at end of period (265,513) (268,834) (275,874)
====== ====== ======
c) Analysis of net debt
Liquid resources 466 4,074 3,371
Cash 12,436 9,641 18,762
Debt due after more than one year (278,364) (243,945) (297,819)
Debt due within one year (51) (38,604) (188)
_______ _______ _______
(265,513) (268,834) (275,874)
====== ====== ======
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.
This report is made solely to the Company in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the Listing
Rules of the Financial Services Authority. Our review has been undertaken so
that we might state to the Company those matters we are required to state to it
in this report and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone other than the Company
for our review work, for this report, or for the conclusions we have reached.
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 2003.
KPMG Audit Plc
Chartered Accountants
London
25 November 2003
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