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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