Interim Results - Pre-tax Profits Up 37% Pre Costs
Quintain Estates & Development PLC
22 November 1999
QUINTAIN ESTATES AND DEVELOPMENT PLC:
INTERIM RESULTS FOR THE SIX MONTHS TO
30th SEPTEMBER 1999
HIGHLIGHTS
* Property portfolio, inc. joint ventures, expanded to
more than £611m + 101%
* Contracted annual rental income increased to £43.2m + 80%
* Estimated rental value is now £52.5m + 55%
* Group operating profit rose to £12.2m + 23%
* Profit before tax:
- £6.4m before exceptional acquisition costs + 37%
- £5.0m after exceptional acquisition costs + 8%
* Earnings per share:
- 4.4p before exceptional acquisition costs + 10%
- 3.4p after exceptional acquisition costs - 15%
* Interim dividend of 2p per share declared + 33%
* Potential to create 1m sq ft of new space within Special
Projects division - planning consent already granted for
600,000 sq ft with an end gross development value of £100m+
* Asset sales of £87m concluded during first half with further
sales of £100m anticipated in second half
'The pace of disposals will increase during the second half of the year as
will the opportunities for realising the full potential of our enlarged
portfolio. The first six months of the year have been an exciting period
for Quintain. I believe we have, once again, demonstrated our ability to
absorb quickly a substantially increased portfolio and we look forward to
the remainder of the current year with optimism and confidence,'
Nigel Ellis, Chairman.
Chairman's Statement
For the six months to 30th September 1999
The past six months have been the most active in Quintain's history, as it
successfully completed and absorbed the acquisitions of English & Overseas
Properties and Chesterfield Properties for a total cost of £183m. The impact
of these acquisitions has been to double the size of Quintain's property
portfolio, including joint ventures, to more than £611m.
However, the real impact of these acquisitions has not been merely to expand
the size of Quintain's property portfolio. As shareholders know, our strategy
is to acquire properties with complementary financial characteristics and then
create a high-income producing portfolio with significant reversionary
potential.
The acquisitions of English & Overseas and Chesterfield have both fulfilled
these criteria and taken Group contracted annual rental income to £43.2m with
an ERV of £52.5m. These acquisitions have also significantly expanded our
Special Projects division, currently generating an annual rent roll of £7m,
where there is the potential to create as much as 1m sq ft of new space in a
variety of locations and sectors. Planning consent has already been granted
for 600,000 sq ft of new development, with an end gross development value in
excess of £100m, and in addition we have 200 acres of strategic land holdings
capable of generating further development opportunities.
During this period the Company's focus has been on the rationalisation and
integration of the two new portfolios and, naturally, the half year results
reflect that concentration. For the six months to the end of September Group
operating profit increased more than a fifth to £12.2m against £9.9m during
the comparable period last year, while profit before tax and before charging
exceptional acquisition costs of £1.4m amounted to £6.4m, a rise of 37%.
Earnings per share, before the exceptional acquisition costs, rose 10% to 4.4p
per ordinary share.
The Board is, therefore, pleased to declare an interim dividend of 2p per
ordinary share, a third higher than last year, which reflects our confidence
in the Company's future profitability.
As expected at the time of the acquisitions, the interim results show net
asset value per share marginally lower than at the year end, reflecting the
effect of the acquisitions. However, the Directors have conducted their usual
half year review of the portfolio and I am confident that at the year end our
net asset value per share will be ahead of last year.
Our corporate acquisition programme has resulted in gearing, at 30th September
1999, of 133%, although this is now falling following property sales, and by
the year end should be nearer our 100% target. Interest cover remains within
our target range at 1.55x.
Our Special Projects portfolio, including development opportunities across a
broad range of sectors, has progressed substantially over the last six months,
especially at Beddington Cross, Croydon and Victoria Deep Water Terminal,
Greenwich.
At Beddington Cross I am pleased to report that we have forward sold our 17
acre industrial development in Croydon, for a minimum price of £23.8m rising
to as much as £28m over the next two and a half years as the remaining
development is completed and let. The sale has resulted in the realisation of
a revaluation surplus of £4m with an initial FRS 3 profit of £225,000 being
reflected in these results.
At Victoria Deep Water Terminal, Greenwich, we have completed the exchange of
our fragmented land holdings for one 11 acre site immediately adjacent to the
Millennium Dome, with an option to purchase a further 4.5 acres at 10% below
current industrial land values. The benefit of this deal is that we now own
one integrated site, only 50 metres from the Dome and 100 metres from the
largest underground station in Europe. The majority of the site is income
producing and we expect to take vacant possession of all the land by Spring
2002. In the meantime we are examining a wide range of development
opportunities presented by the site, particularly in light of its proximity to
the Millennium Dome and Greenwich Council's masterplan for the area.
Our other major projects include Oxford Street where the Marks and Spencer's
interest has been acquired and we are now reconfiguring our 83,000 sq ft
retail holding, with a 200 ft frontage, and we expect to announce some key
lettings shortly. In Sheffield, we secured planning consent for a further
70,000 sq ft of retail and leisure use, to complement the existing 120,000 sq
ft comprising an Odeon multiplex, nightclub and 10 storey car park. In
addition we are proposing to replace the nightclub with a 170 room hotel.
I am also pleased that, since the end of September, we have exchanged
contracts on the sale of a joint venture office building in Reigate for £5.5m,
yielding a profit in excess of £1m for the Group, and agreed the forward sale
of the retail element of another joint venture development in Avery Row,
Mayfair, at a yield of 6.38%. Sales of all the residential units are in
solicitors' hands and should complete over the next few months.
During the period we have sold assets with a total value of £87m, of which
approximately two thirds comprised acquisition properties, generating profits
of £1.4m. It is worth noting that these sales are in addition to the £94m of
Chesterfield sales that were achieved during the course of completing that
acquisition. We expect to achieve further sales in excess of £100m, including
the Chesterfield entertainment business, over the remainder of the current
year.
Since acquiring Chesterfield we have now reviewed that company's overseas
assets, comprising shopping centres in the USA and an office complex in
France. In all cases, we have improved the level and quality of income and
will be selling each property as appropriate. At the same time, we are
currently negotiating the sale of Tower Gate Homes, which we acquired through
our purchase of English and Overseas Properties.
Finally, I would like to pay tribute to David Kirkpatrick who retired from the
Board during the period and who made a much appreciated contribution to the
Company's progress during his term in office. He is being retained on a fixed-
term consultancy to the Group.
The pace of disposals will increase during the second half of the year as will
the opportunities for realising the full potential of our enlarged portfolio.
The first six months of the year have been an exciting period for Quintain. I
believe we have, once again, demonstrated our ability to absorb quickly a
substantially increased portfolio and we look forward to the remainder of the
current year with optimism and confidence.
Nigel Ellis
Chairman
QUINTAIN ESTATES AND DEVELOPMENT PLC
Consolidated profit & loss account
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30.9.99 30.9.98 31.3.99
Notes £000 £000 £000
Turnover
- continuing and share of joint ventures 12,907 17,937 33,035
- acquisitions 12,017 - -
_______ _______ _______
24,924 17,937 33,035
Less - share of joint ventures turnover (839) - (97)
_______ _______ _______
Group turnover 2 24,085 17,937 32,938
Cost of sales 2 (6,686) (5,373) (8,356)
_______ _______ _______
Gross profit 17,399 12,564 24,582
Administrative expenses (3,829) (2,652) (4,684)
Exceptional reorganisation costs (1,373) - -
_______ _______ _______
Operating profit - continuing 7,300 9,912 19,898
- acquisitions 4,897 - -
_______ _______ _______
Group operating profit 12,197 9,912 19,898
Share of operating profit in joint ventures 284 - 97
Profit on sale of investment properties 1,354 558 1,080
Net interest payable (8,826) (5,821) (11,911)
_______ _______ _______
Profit on ordinary activities before taxation 5,009 4,649 9,164
Tax on profit on ordinary activities 3 (1,002) (951) (1,107)
_______ _______ _______
Profit on ordinary activities after taxation 4,007 3,698 8,057
Minority interests (135) (66) (176)
_______ _______ _______
Profit for the financial period 3,872 3,632 7,881
Dividends 4 (2,634) (1,397) (4,160)
_______ _______ _______
Retained profit for the period 1,238 2,235 3,721
======= ======= =======
Earnings per ordinary share
- undiluted 5 3.4p 4.0p 8.7p
- diluted 5 3.4p 3.9p 8.5p
======= ======= =======
QUINTAIN ESTATES AND DEVELOPMENT PLC
Consolidated statement of total recognised gains and losses
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30.9.99 30.9.98 31.3.99
£000 £000 £000
Profit for the financial period 3,872 3,632 7,881
Unrealised surplus on revaluation - - 35,045
Tax on realisation of revaluation surplus - (425) (1,649)
Currency translation movements (575) - -
_______ _______ _______
Total recognised gains and losses for
the financial period 3,297 3,207 41,277
======= ======= =======
QUINTAIN ESTATES AND DEVELOPMENT PLC
Consolidated balance sheet
Unaudited Unaudited Audited
as at as at as at
30.9.99 30.9.98 31.3.99
Notes £000 £000 £000
Fixed assets
Investment properties 7 535,166 297,557 309,650
Other fixed assets 509 401 369
Other investments 17 - -
Investment in associates 392 - 342
Investment in joint ventures
- share of gross assets 39,298 - 9,668
- share of gross liabilities (14,750) - (119)
_______ _______ _______
24,548 - 9,549
_______ _______ _______
560,632 297,958 319,910
_______ _______ _______
Current assets
Stocks 51,333 5,966 3,455
Debtors 44,740 10,380 7,519
Cash at bank and in hand 18,934 16,542 19,869
_______ _______ _______
115,007 32,888 30,843
Creditors: amounts falling due within one year (171,687) (25,187) (21,217)
_______ _______ _______
Net current (liabilities)/assets (56,680) 7,701 9,626
_______ _______ _______
Total assets less current liabilities 503,952 305,659 329,536
Creditors: amounts falling due
after more than one year (237,140) (149,593) (135,313)
Provisions for liabilities and charges (2,132) - (1,186)
Equity minority interests (4,536) (2,413) (3,075)
_______ _______ _______
Net assets 260,144 153,653 189,962
======= ======= =======
Capital and reserves
Called up share capital 32,938 22,770 23,020
Share premium account 97,898 37,546 38,297
Merger reserve 46,529 46,529 46,529
Revaluation reserve 53,875 29,652 58,623
Capital reserves 2,175 2,750 2,750
Profit and loss account 26,729 14,406 20,743
_______ _______ _______
Equity shareholders' funds 8 260,144 153,653 189,962
======= ======= =======
Net asset value per share
- undiluted 6 198p 169p 206p
- diluted 6 194p 165p 202p
======= ======= =======
QUINTAIN ESTATES AND DEVELOPMENT PLC
Consolidated cash flow statement
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30.9.99 30.9.98 31.3.99
Notes £000 £000 £000
Net cash inflow from operating activities 9a 16,893 9,890 28,270
_______ _______ _______
Return on investments and servicing of
finance
Net interest paid (9,081) (5,243) (12,569)
Issue costs of loans (1,186) (217) (1,889)
_______ _______ _______
Net cash outflow from return on investments
and servicing of finance (10,267) (5,460) (14,458)
_______ _______ _______
Corporation tax paid (1,235) (694) (2,304)
_______ _______ _______
Capital expenditure and financial investment
Purchase of tangible fixed assets (19,840) (16,154) (34,951)
Proceeds of disposal of tangible fixed assets 69,087 11,915 52,173
Disposal of subsidiary companies 5,356 - -
Net cash disposed of with subsidiary companies (159) - -
Purchase of subsidiary companies (112,477) - -
Net cash acquired with subsidiary companies 12,810 - -
Loans to joint ventures and associates (4,176) - (9,443)
_______ _______ _______
Net cash (outflow)/inflow from capital
expenditure and financial investment (49,399) (4,239) 7,779
_______ _______ _______
Equity dividends paid (2,762) (2,277) (3,643)
_______ _______ _______
Net cash (outflow)/inflow before management
of liquid resources and financing (46,770) (2,780) 15,644
_______ _______ _______
Financing
Issue of ordinary share capital for cash - 1,000 2,000
Cost of share issue (907) - -
Loans drawn down 102,012 23,992 109,992
Loan repayments (55,477) (17,890) (121,025)
Loans advanced by minority interests 207 980 2,018
_______ _______ _______
Net cash inflow /(outflow) from financing 45,835 8,082 (7,015)
_______ _______ _______
(Decrease)/increase in cash 9b (935) 5,302 8,629
======= ======= =======
QUINTAIN ESTATES AND DEVELOPMENT PLC
Notes to the accounts
1 Basis of preparation
The half year figures for 1999 and 1998 are unaudited and have been prepared
on the basis of the accounting policies adopted in the accounts to 31st March
1999. The comparative figures for the financial year ended 31st March 1999 are
not the Company's statutory accounts for that financial year. Those 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
Turnover is stated net of VAT, representing sales of trading stocks, gross
property rents, commissions and fees receivable and comprises:
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30.9.99 30.9.98 31.3.99
£000 £000 £000
Sales of commercial trading properties 2,384 5,320 7,678
Sales of residential trading properties 2,632 - -
Gross rents receivable 19,069 12,033 24,381
Other income - 584 879
_______ _______ _______
Total turnover 24,085 17,937 32,938
======= ======= =======
Cost of sales comprises:
Sales of commercial trading properties 2,121 4,490 6,781
Sales of residential trading properties 1,988 - -
Gross rents receivable 2,577 883 1,575
Other income - - -
_______ _______ _______
Total cost of sales 6,686 5,373 8,356
======= ======= =======
Cost of sales in 1998 has been restated by the reduction of £600,000 in
respect of certain staff costs now shown as administrative expenses.
3 Tax on profit on ordinary activities
The tax charge on operating profits has benefited from capital allowances and
losses brought forward.
4 Dividend
The interim dividend of 2.0p (1998: 1.5p) per ordinary share is payable on
17th December 1999, to members on the register at 3rd December 1999. Dividends
are calculated on 131,710,383 (1998: 91,080,299) shares, being the number of
ordinary shares in issue.
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30.9.99 30.9.98 31.3.99
£000 £000 £000
Interim dividend of 2.0p
(1998: 1.5p) per share 2,634 1,366 1,366
Final dividend of 2.5p per share paid to
new shareholders - 31 31
Final dividend of 3.0p per share - - 2,763
_______ _______ _______
2,634 1,397 4,160
======= ======= =======
5 Earnings per ordinary share
Earnings per ordinary share has been calculated on the profit attributable to
ordinary shareholders of £3,872,000 (1998: £3,632,000) and the weighted
average number of shares in issue during the period ended 30th September 1999
of 113,154,357 (1998: 90,538,290).
The earnings per share excluding exceptional reorganisation costs has been
calculated on the profit attributable to ordinary shareholders of £3,872,000
(1998: £3,632,000) adjusted by £1,099,000 (1998: nil) in respect of the
exceptional acquisition related items net of tax and the weighted average
number of shares in issue of 113,154,357 (1998: 90,538,290).
The earnings per share on a diluted basis has been calculated on an adjusted
profit attributable to ordinary shareholders of £3,964,000 (1998: £3,715,000)
and the adjusted weighted average number of shares of 116,902,795 (1998:
92,417,418).
6 Net asset value per ordinary share
Net asset value per ordinary share on an undiluted basis at 30th September
1999 has been based on net assets of £260,144,000 (1998: £153,653,000) and
131,710,383 (1998: 91,080,299) ordinary shares, being the number of ordinary
shares in issue. Net asset value per ordinary share on a fully diluted basis
has been calculated on adjusted net assets of £263,144,000 (1998:
£156,653,000) and 135,458,821 (1998: 94,959,427) ordinary shares.
7 Investment properties
Investment properties are valued annually at the end of each financial year
and are shown in the Balance Sheet as at 30th September 1999 at the previous
year end valuations adjusted for subsequent expenditure and disposals.
8 Reconciliation of movements in equity shareholders' funds
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30.9.99 30.9.98 31.3.99
£000 £000 £000
Profit for the period 3,872 3,632 7,881
Dividends (2,634) (1,397) (4,160)
_______ _______ _______
Retained profit for the period 1,238 2,235 3,721
Other recognised gains and losses for
the period (net)
Issue of shares less costs 69,519 1,000 2,002
Revaluation of investment properties - - 33,311
Revaluation of investment in associate - - 342
Revaluation of joint venture - - 1,392
Tax on realisation of revaluation surplus - (425) (1,649)
Currency translation difference (575) - -
_______ _______ _______
Net additions to equity shareholders' funds 70,182 2,810 39,119
Equity shareholders' funds, beginning
of period 189,962 150,843 150,843
_______ _______ _______
Equity shareholders' funds, end of period 260,144 153,653 189,962
======= ======= =======
9 Notes to the consolidated cash flow statement
a)Reconciliation of operating profit to net cash inflow from operating
activities
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30.9.99 30.9.98 31.3.99
£000 £000 £000
Operating profit 12,197 9,912 19,898
Depreciation charge 523 70 138
Loss on disposal of fixed assets (90) - -
Decrease/(increase) in debtors 1,246 (3,706) 622
Increase in creditors 213 568 931
Decrease in stock 2,804 3,046 6,572
Write down of trading stocks - - 109
_______ _______ _______
16,893 9,890 28,270
======= ======= =======
b)Reconciliation of net cash flow movement to net debt
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30.9.99 30.9.98 31.3.99
£000 £000 £000
(Decrease)/increase in cash during period (935) 5,302 8,629
Cash (inflow)/outflow from debt and
lease financing (46,535) (5,697) 11,033
_______ _______ _______
Change in net debt resulting
from cash flows (47,470) (395) 19,662
Costs of issue of non-equity finance 1,186 217 1,889
Amortisation of issue costs (302) (303) (1,285)
Net debt acquired with subsidiaries (181,779) - -
Other non cash movements - - 885
_______ _______ _______
Movement in net debt during period (228,365) (481) 21,151
Net debt, beginning of period (116,714) (137,865) (137,865)
_______ _______ _______
Net debt, end of period (345,079) (138,346) (116,714)
======= ======= =======
c)Analysis of debt
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30.9.99 30.9.98 31.3.99
£000 £000 £000
Cash 18,934 16,542 19,869
Debt due after more than one year (234,801) (149,593) (135,313)
Debt due within one year (129,212) (5,295) (1,270)
_______ _______ _______
Net debt, end of period (345,079) (138,346) (116,714)
======= ======= =======
10 Copies of this statement are being sent to shareholders shortly and are
available from the Company's Registered Office at 58 Davies Street, London W1Y
1LB.
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 London Stock Exchange 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 of 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 1999.
KPMG Audit Plc
Chartered Accountants
8 Salisbury Square
London EC4Y 8BB
Year 2000
In the Report and Accounts for the year ended 31st March 1999, the Company
reported on the formal steps it was taking to minimise the risk to its
operations and assets from the Year 2000 issue. This included an extensive
review of both internal systems and hardware of the building systems in the
investment portfolio and agents' and suppliers' systems and hardware.
The review of the internal critical systems was complete at the year end. The
major part of the review of external systems is now also complete but is
ongoing in order to continually assess for any change. All reasonable steps
have been taken with regard to third parties and managing agents have
confirmed that their systems are Year 2000 compliant. The costs of the Year
2000 review are not significant and have been written off.
Whilst there can be no certainty that all future problems on this issue have
been covered, the directors are satisfied that all reasonable steps have been
taken to ensure the Year 2000 issue will not materially affect the Group's
operations or financial position.
Contact: Quintain Estates and Development Tel: 0171-495 8968
Nigel Ellis, Chairman
Adrian Wyatt, Chief Executive
Baron Phillips Associates Tel: 0171-224 1302
Baron Phillips
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