3rd Quarter Results
Workspace Group PLC
21 February 2005
WORKSPACE REPORT GOOD PROGRESS AS
DEMAND FROM SMES REMAINS STRONG
Workspace Group PLC ('Workspace'), the leading provider of flexible business
accommodation to small and medium sized enterprises ('SMEs') in London and the
South East today announces its financial results for the third quarter and nine
months to 31 December 2004.
Highlights:
• Net Asset Value per share at 31 December 2004 £20.00, up 8.5% over the
nine months, and up 23% over twelve months (31 March 2004: £18.43; 31
December 2003: £16.25)
• Pre-tax profits on trading operations £10.77 million (2003: £10.26
million)
• Pre-tax profits £10.40 million (2003: £10.97 million)
• Basic earnings per share on trading operations 46.5p (2003: 44.7p)
• Basic earnings per share 44.5p, (2003: 47.8p)
• Turnover £14.14 million for the quarter, up 7.0% on the same quarter
last year, and for the nine month period £41.05 million, up 10.3%
• Total rent roll £41.1 million up 7.8% over the nine month period
(31 March 2004: £38.1 million)
• Average rent of like-for-like portfolio £8.74 per sq. ft up 2.0% over
the nine month period (31 March 2004: £8.57 per sq. ft)
• One acquisition at Chiswick Studios, value £2.87m, in the quarter with
no disposals
Commenting on the results, Harry Platt, Chief Executive said,
' Workspace has continued its good progress during the quarter. Occupancy on a
like-for-like basis remains over 90% and, with robust levels of demand and
encouraging enquiry rates, we are confident of maintaining these levels
throughout 2005, paving the way for future rental growth.
' We have continued to invest in property, consolidating our market leading
position in providing accommodation to SMEs in London and the South East.
Progress has also been made on a number of the Group's 'added value' schemes
which should deliver improved net asset values going forward.
' During 2005 we anticipate making further acquisitions. Given the positive
backdrop of the SME environment, we are confident that we will continue to make
encouraging progress. '
- ends -
Date: Monday 21 February
For further information contact:
Workspace Group PLC City Profile
Harry Platt, Chief Executive Simon Courtenay
Mark Taylor, Finance Director Oliver Winters
020-7247-7614 020-7448-3244
e-mail: info@workspacegroup.co.uk
Web: www.workspacegroup.co.uk
Operating & Financial Review
Chairman's Statement
Once again, these results show the Group continuing to make good progress in
creating shareholder value with operating profit up 14.4% and trading pre-tax
profits up 5.0% for the nine month period. Furthermore, net assets were up 25%
on 12 months ago.
Our intensive management approach in our niche market creates long term
shareholder value over and above general market movements. Our customer focus
has led to high levels of occupancy, good underlying enquiry levels and firmer
rents. Progress has also been made on our 'added value' schemes (projects where
refurbishment, extension or redevelopment to a more intensive use, create
value).
In our interim statement I indicated that the Board was looking at means to
assist the liquidity of your shares. Your Board has decided to call an
Extraordinary General Meeting to approve a bonus issue of our stock. It is
proposed that a 9 for 1 bonus share issue will be made so that, following this
issue, shareholders will hold 10 shares for each share previously held.
Chief Executive's Statement
In the third quarter, occupancy has remained at high levels; over 90.0%
excluding development schemes. This is within the Group's target range. With
continuing good levels of enquiries and robust underlying demand, our target is
at least to maintain occupancy around these levels in 2005, providing the
foundations for rental growth.
The total rent roll now stands at £41.1m up some 7.8% over the nine month period
(31 March 2004: £38.1m). Of this increase of £3.0m some £1.4m reflects the net
effect of acquisitions less disposals. More importantly £1.6m reflects the
increase in the rent roll of the like-for-like portfolio over the nine month
period. This is an increase of 4.1%, with 'like-for-like' average rents now some
£8.74 per sq. ft (compared to £8.57 per sq. ft at the beginning of the year).
These movements of course reflect changes in mix as well as underlying
improvements. Even so, the signs are encouraging, showing improvements in the
occupational markets.
The Group does not revalue the portfolio at this third quarter stage. Our
external valuations are undertaken at the full year and half year stage. During
the last year there has been increasing investor interest in the property
sector, driving yields down and increasing capital values. This has continued
since 30 September 2004, the date of our last valuation. Our focused portfolio
continues to be well placed to benefit from such movements in yields. On top of
this the Workspace approach continues to drive value from our intensive
management skills.
A number of the Group's 'added value' schemes are now at interesting stages. Two
are due to go to Local Authority Planning Committees in February/March (Wharf
Road and Aberdeen Studios); one remains in discussions with the Planning
Authorities (Greenheath); whilst a revised planning application for Thurston
Road, Lewisham, will be made before the end of March. Other schemes remain at
the formative stage. Some of these will come forward in 2005 - whilst others
demand longer term work. Each year the Group would target to have an immediate
active list of at least 4 to 6 projects. Clearly, whilst these projects will
improve net asset values they will also give rise to short term reductions in
income as development works are progressed. The programming of these projects is
therefore a key issue in determining year on year profit growth.
Portfolio
One acquisition has been made in the quarter, with no disposals. Details are
given below:
Name of Property Description Acquisition Price Initial Annual Income £000
Chiswick Studios, 14,225 sq.ft £2.87m £211.0
London W4 6 units
This property is near to our Barley Mow Centre in Chiswick, and provides a
complementary offer. Fixed reversions on existing leases will give an
anticipated 8% yield by 2007.
Following the quarter end contracts have been exchanged and completed for the
purchase of Lombard House, Croydon for £7.75m whilst others are in legal hands
or in negotiation. Furthermore, contracts have been exchanged on the disposal of
Payne Road for £2.1m, a disposal which will be completed by May.
The portfolio statistics and progress through the year to date, may be
summarised as follows:
________________________________________________________________________________________________________
31 December 30 September 30 June 31 March
2004 2004 2004 2004
________________________________________________________________________________________________________
Number of estates 101 100 101 102
________________________________________________________________________________________________________
Total floorspace at end of period (sq. ft.) 5,044,328 5,035,667 5,335,073 5,316,951
________________________________________________________________________________________________________
of which:
Like-for-like portfolio (sq. ft.) 4,782,149 4,787,694 4,763,456
Net Acquisitions/Disposals(sq. ft.) 69,955 55,358 26,012
Three Mills and developments (sq. ft.) 192,224 192,615 545,605
________________________________________________________________________________________________________
Lettable units (number) 4,629 4,608 4,584 4,547
________________________________________________________________________________________________________
Annual rent roll of occupied units (£) 41,060,954 40,335,068 38,766,883 38,091,471
________________________________________________________________________________________________________
Average rent (£/sq. ft) 9.24 9.05 8.62 8.55
________________________________________________________________________________________________________
Average rent of like-for-like portfolio (£/sq. ft) 8.74 8.58 8.60 8.57
________________________________________________________________________________________________________
Occupancy overall 88.1% 88.5% 84.3% 83.8%
________________________________________________________________________________________________________
Occupancy of like-for-like portfolio 90.3% 90.9% 90.0% 88.9%
________________________________________________________________________________________________________
Comparisons of overall occupancy and rent roll are distorted by acquisitions,
disposals and transfers. The 'like-for-like portfolio' is defined as those
properties that have been held throughout the year to date and which are not
subject to refurbishment/redevelopment programmes. Overall occupancy increased
between the first and second quarters partly due to improved lettings and partly
due to the disposal of Three Mills.
Financial Review
Over the quarter, the consistent growth pattern reported previously continued
with turnover up 7.0%, gross profit up 8.5%, operating profit up 15.6% and
trading profits before tax up 5.3% on the comparable period last year. Profits
before tax were, however, down on the same quarter last year since that period
benefited from £0.7m profit on the disposal of Kingsland Viaduct whilst no
disposals were made in the quarter under review. As may be seen in the table
below, performance ratios continue to be consistent. The single most significant
variance impacting on trading performance over the quarter was the increase in
interest cost, up 24.7% to £5.0m for the quarter (2003: £4.0m). Average
borrowings increased by just 4.0% or £11.5m to £303.3m (2003: £291.8m). However,
LIBOR rates were 0.96% higher than for the comparable period last year (an
increase of almost 25%). Approximately 80% of the increased cost of borrowings
in the period arose from this rate increase. LIBOR rates (both short and long
term) have now stabilised at these levels. As a result, assuming these levels
are maintained through 2005/6, the dilutive effect on earnings growth that
interest changes have had in 2004/5 will not recur. Interest charges were also
impacted by a change in policy in respect of the capitalisation of interest on
development projects. The period of capitalisation has been shortened in
readiness for the implementation of International Financial Reporting Standards
next year. This resulted in an additional charge of £0.4m for the nine month
period (reflected in this quarters results).
Profits before tax for the nine month period are impacted by the loss on the
disposal of Three Mills. As reported at the interim stage, this loss arose as a
result of a late price adjustment whereas the valuation at 31 March 2004 had
showed a substantial £4.1m surplus in the previous year.
The effective rate of tax, at 31% (2003: 30%) is increased due partly to the
charges arising on disposal of Three Mills and Hooley Lane where substantial
deferred tax liabilities have crystallised. Tax charges in the year to date
relating to these disposals total 22 pence per share. The NAV growth reported
has been achieved after absorbing this cost.
At 31 December 2004, NAV per share was £20.00 up 8.5% over the year to date.
Net cash flow from operating activities was up £2.5m at £25.5m for the nine
months (compared with the same period last year). With the substantial proceeds
from disposals, the net outflow from net acquisitions and disposals was £3.6m
compared with £59.1m last time. Overall bank debt reduced slightly from £305.8m
to £304.4m over the year to date. This coupled with the valuation surplus led to
a reduction in gearing from 103% to 94%.
Key financial statistics and indicators may be summarised as follows: -
_________________________________________________________________________________________________
9 Months to 6 Months to 12 Months to 9 Months to
31 December 30 September 31 March 2004 31 December
2004 2004 2003
_________________________________________________________________________________________________
Gross profit: turnover 74% 74% 72% 73%
Operating profit:turnover 60% 59% 58% 58%
Trading PBT:turnover 26% 26% 28% 29%
EPS per share (pence) 44.5 27.6 65.7 47.8
NAV per share (£) 20.00 19.87 18.43 16.25
Interest cover 1.75 1.73 1.97 1.97
Trading interest cover 1.77 1.77 1.91 1.91
Gearing 94% 94% 103% 113%
Available facilities(£m) 62.6 68.3 15.5 29.0
_________________________________________________________________________________________________
Prospects
Our view of the Group's prospects remains unchanged from that at the time of the
Group's interim statement. The Group aims to maintain high levels of occupancy
of around 90% during 2005. This, together with robust underlying demand, should
provide the right environment for rental growth. Our asset values should benefit
from this. The progress on our selective 'added value' programme for the
intensification and change of use of certain estates, while impacting rents
short term, will also benefit medium to long term capital growth; as will the
increased investor interest in commercial property. By the year end we
anticipate making further acquisitions. For 2004/05 as a whole we anticipate
reporting once again a year of good progress in both our performance and
strengthening our position as the leading provider of flexible, affordable space
for small and medium sized enterprises (SMEs) in London and the South East.
Consolidated Profit and Loss Account
for the 9 months ended 31 December 2004
Audited Unaudited Unaudited 9 months ended 31 December
year ended 3 months ended
31 March 31 December
_____________________
Trading Other Total Total
2004 Operations Items
£000
_________________________________________________________________________________________________
Notes 2004 2003 £000 £000 2004 2003
£000 £000 £000 £000
_________________________________________________________________________________________________
51,068 Turnover - 2 14,141 13,213 41,052 - 41,052 37,227
continuing
operations
(14,229) Rent payable and (3,587) (3,486) (10,687) - (10,687) (10,140)
direct costs
_________________________________________________________________________________________________
36,839 Gross profit 10,554 9,727 30,365 - 30,365 27,087
(7,145) Administrative (1,727) (2,091) (5,655) - (5,655) (5,498)
expenses
_________________________________________________________________________________________________
29,694 Operating profit 8,827 7,636 24,710 - 24,710 21,589
continuing
operations
1,009 (Loss)/profit on 7 673 - (377) (377) 705
disposal of
investment
property
45 Interest 3 15 22 60 - 60 40
receivable
(15,628) Interest payable 4 (4,992) (4,003) (13,997) - (13,997) (11,367)
and similar
charges
_________________________________________________________________________________________________
15,120 Profit on ordinary 3,857 4,328 10,773 (377) 10,396 10,967
activities before
taxation
(4,587) Taxation on profit 5 (1,114) (1,298) (3,262) 53 (3,209) (3,316)
on ordinary
activities
_________________________________________________________________________________________________
10,533 Profit attributable 2,743 3,030 7,511 (324) 7,187 7,651
to shareholders
(4,981) Dividends 6 - (1) (1,861) - (1,861) (1,659)
_________________________________________________________________________________________________
5,552 Retained for the 2,743 3,029 5,650 (324) 5,326 5,992
period
_________________________________________________________________________________________________
65.7p Basic earnings per 7 16.9p 18.9p 46.5p (2.0)p 44.5p 47.8p
share
63.9p Diluted earnings 7 16.6p 18.3p 45.5p (1.9)p 43.6p 46.6p
per share
Statement of Total Recognised Gains and Losses
_______________________________________________________________________________
Audited Unaudited
year ended 9 months ended
31 March 31 December
_______________________________________________________________________________
2004 2004 2003
£000 £000 £000
10,533 Profit for the financial period 7,187 7,651
49,699 Unrealised surplus on revaluation of 27,033 14,109
investment properties
(1,215) Taxation on valuation surpluses realised on (3,643) (968)
sale of properties
_______________________________________________________________________________
59,017 Total recognised gains relating to the 30,577 20,792
financial period
_______________________________________________________________________________
Note of Historical Cost Profits and Losses
Audited Unaudited
year ended 9 months ended
31 March 31 December
________________________________________________________________________________
2004 2004 2003
£000 £000 £000
________________________________________________________________________________
15,120 Reported profits on ordinary activities before 10,396 10,967
taxation
4,408 Realisation of property revaluation gains of 14,252 3,673
previous years
________________________________________________________________________________
19,528 Historical cost profit on ordinary activities 24,648 14,640
before taxation
________________________________________________________________________________
8,745 Historical cost profit for the period retained 15,935 8,697
after taxation and dividends
________________________________________________________________________________
Consolidated Balance Sheet
as at 31 December 2004
Audited Unaudited
31 March 31 December
________________________________________________________________________________
(restated) Notes (restated)
2004 2004 2003
£000 £000 £000
________________________________________________________________________________
Fixed Assets
Tangible assets
626,060 Investment properties 9 658,137 570,639
3,654 Other fixed assets 3,648 3,662
________________________________________________________________________________
629,714 661,785 574,301
________________________________________________________________________________
Current Assets
- Stock: properties for sale - 10,711
6,795 Debtors 10 6,340 6,579
1,150 Investments 11 2,647 1,423
181 Cash at bank and in hand 4 109
________________________________________________________________________________
8,126 8,991 18,822
(30,942) Creditors: amounts falling due 12 (32,587) (30,905)
within one year
________________________________________________________________________________
(22,816) Net current liabilities (23,596) (12,083)
________________________________________________________________________________
606,898 Total assets less current 638,189 562,218
liabilities
(305,756) Creditors: amounts falling due 13 (306,904) (296,666)
after more than one year (including
Convertible Loan Stock)
(5,483) Provision for liabilities and 15 (5,842) (4,796)
charges
________________________________________________________________________________
295,659 325,443 260,756
________________________________________________________________________________
Capital and reserves
1,673 Called up share capital 16 1,688 1,673
42,912 Share premium account 17 43,586 42,912
209,565 Revaluation reserve 17 222,346 174,710
47,715 Profit and loss account 17 63,650 47,667
(6,206) Investment in own shares 18 (5,827) (6,206)
________________________________________________________________________________
295,659 Shareholders' funds - equity 325,443 260,756
interests
________________________________________________________________________________
£18.43 Net asset value per share (basic) 8 £20.00 £16.25
________________________________________________________________________________
£18.04 Adjusted net asset value per share 8 £19.69 £15.97
(diluted)
________________________________________________________________________________
Consolidated Cash Flow Statement
for the 9 months ended 31 December 2004
Audited Unaudited
year ended 9 months ended
31 March 31 December
________________________________________________________________________________
2004 Notes to 2004 2003
£000 Cash Flow £000 £000
________________________________________________________________________________
31,615 Net cash inflow from operating 1 25,531 23,021
activities
(15,692) Return on investments and 2 (13,883) (10,955)
servicing of finance
(4,110) Taxation (4,129) (2,750)
(70,155) Capital (expenditure)/proceeds - 2 (3,568) (59,079)
net
(4,952) Equity dividends paid (3,349) (3,299)
________________________________________________________________________________
(63,294) Net cash inflow/(outflow) before 602 (53,062)
use of liquid
resources and financing
1,959 Management of liquid resources 2 (1,497) 1,686
59,720 Financing 2 1,889 50,720
________________________________________________________________________________
(1,615) Net cash inflow/(outflow) 3 994 (656)
________________________________________________________________________________
Reconciliation of net cash flow
to movement in net debt
(1,615) Increase/(decrease) in cash 994 (656)
(1,959) Increase/(decrease) in liquid 1,497 (1,686)
resources
(59,766) Outflow from movements in debt (1,148) (50,676)
financing
________________________________________________________________________________
(63,340) Changes in net debt resulting 3 1,343 (53,018)
from cash flows
________________________________________________________________________________
(242,425) Net debt at beginning of period (305,765) (242,425)
(305,765) Net debt at period end (304,422) (295,443)
________________________________________________________________________________
Notes to the cash flow statement
for the 9 months ended 31 December 2004
1. Reconciliation of operating profit to operating cash flows
Audited year Unaudited
ended 31 March 9 months ended 31 December
________________________________________________________________________________
2004 2004 2003
£000 £000 £000
________________________________________________________________________________
29,694 Operating profit 24,710 21,589
585 Depreciation charges 503 420
56 (Increase)/decrease in debtors (946) (462)
1,280 Increase in creditors 1,264 1,474
________________________________________________________________________________
31,615 25,531 23,021
________________________________________________________________________________
2. Analysis of cash flow
Audited year Unaudited
ended 31 March 9 months ended 31 December
2004 Notes 2004 2003
£000 to cash flow £000 £000
________________________________________________________________________________
Returns on investments and
servicing of finance
45 Interest received 60 41
(15,737) Interest paid (including (13,943) (10,996)
financing costs)
________________________________________________________________________________
(15,692) Net cash outflow (13,883) (10,955)
________________________________________________________________________________
Capital expenditure
(81,934) Purchase of tangible fixed (38,907) (67,973)
assets
28 Net distribution/(purchase) of 379 28
own shares
11,751 Sale of tangible fixed assets 34,960 8,866
________________________________________________________________________________
(70,155) Net cash outflow (3,568) (59,079)
________________________________________________________________________________
Management of liquid resources
1,959 (Increase)/decrease in 3 (1,497) 1,686
short-term deposits
________________________________________________________________________________
1,959 Net cash (outflow)/inflow (1,497) 1,686
________________________________________________________________________________
Financing
220 Issue of ordinary share 289 220
capital
59,500 Drawdown of bank loans 3 1,600 50,500
________________________________________________________________________________
59,720 Net cash inflow 1,889 50,720
________________________________________________________________________________
3. Analysis of net debt
_______________________________________________________________________________________
At 1 April 2004 Cash flow Non-cash At 31 December
Items 2004
£000 £000 £000 £000
_______________________________________________________________________________________
Cash at bank
and in hand 181 (177) - 4
Bank
overdrafts (1,340) 1,171 - (169)
_______________________________________________________________________________________
(1,159) 994 - (165)
_______________________________________________________________________________________
Debt due after one year:
11% Convertible
Loan Stock (2,900) - 400 (2,500)
11.125% First
Mortgage Debenture (12,500) - - (12,500)
11.625% First
Mortgage Debenture (7,000) - - (7,000)
Bank loans (284,500) (1,600) - (286,100)
Less cost of raising
finance 1,144 339 (287) 1,196
_______________________________________________________________________________________
(305,756) (1,261) 113 (306,904)
_______________________________________________________________________________________
Short-term deposits 1,150 1,497 - 2,647
_______________________________________________________________________________________
Total (305,765) 1,230 113 (304,422)
_______________________________________________________________________________________
Notes to the Quarterly Results
1. Basis of Preparation
The unaudited financial information contained in this quarterly report does
not comprise statutory accounts within the meaning of Section 240 of the
Companies Act 1985. The statutory accounts for the year ended 31 March 2004
included an unqualified report of the auditors. The Group's unaudited
accounts for the period ended 31 December 2004 have been prepared on the
basis of the accounting policies set out in the Annual Report and Accounts
for the year ended 31 March 2004 (except for the change noted below). The
full accounts for the year ended 31 March 2004 have been filed with the
Registrar of Companies.
The Company has adopted UITF Abstract 38 - accounting for ESOP trusts in
these financial statements. The adoption of this Abstract represents a
change in accounting policy and the comparative figures have been restated
accordingly. Investment in own shares is now shown as a deduction from
shareholders' funds.
2. Segmental Analysis
Audited Year Unaudited Unaudited
ended 31 March 3 months ended 9 months ended
31 December 31 December
___________________________________________________________________________________
2004 2004 2003 2004 2003
£000 £000 £000 £000 £000
___________________________________________________________________________________
39,504 Rental Income 10,950 9,958 32,367 29,044
9,059 Service charge and other 2,506 2,299 7,344 6,440
recoveries
2,505 Services, fees, commissions 685 956 1,341 1,743
and sundry income
___________________________________________________________________________________
51,068 14,141 13,213 41,052 37,227
___________________________________________________________________________________
3. Interest receivable
Audited Year Unaudited Unaudited
ended 31 March 3 months ended 9 months ended
31 December 31 December
___________________________________________________________________________________
2004 The following amounts were 2004 2003 2004 2003
£000 earned during the year £000 £000 £000 £000
___________________________________________________________________________________
30 Short-term deposits 12 8 53 26
15 Other 3 14 7 14
___________________________________________________________________________________
45 15 22 60 40
___________________________________________________________________________________
4. Interest payable and similar charges
Unaudited Unaudited
Audited Year 3 months ended 9 months ended
ended 31 March 31 December 31 December
___________________________________________________________________________________
2004 2004 2003 2004 2003
£000 £000 £000 £000 £000
___________________________________________________________________________________
319 11% Convertible Loan Stock 68 80 217 239
2011
1,391 11.125% First Mortgage 348 348 1,043 1,043
Debenture Stock 2007
814 11.625% First Mortgage 204 203 611 611
Debenture Stock 2007
14,210 Bank and other interest on 4,492 3,685 12,788 10,227
amounts wholly repayable
within five years*
___________________________________________________________________________________
16,734 5,112 4,316 14,659 12,120
(1,106) Interest capitalised on (120) (313) (662) (753)
development properties
___________________________________________________________________________________
15,628 Charged to profit and loss 4,992 4,003 13,997 11,367
account
___________________________________________________________________________________
* includes amortisation of cost of raising finance
5. Taxation
Unaudited Unaudited
Audited Year 3 months ended 9 months ended
ended 31 March 31 December 31 December
________________________________________________________________________________
2004 2004 2003 2004 2003
£000 £000 £000 £000 £000
________________________________________________________________________________
Current tax:
3,534 UK corporation tax on 872 1,004 2,649 2,627
profit for the year
(323) Adjustment in respect - - - -
of previous years
________________________________________________________________________________
3,211 Total current tax 872 1,004 2,649 2,627
________________________________________________________________________________
Deferred tax:
1,376 Origination and 242 294 560 689
reversal of timing
differences
________________________________________________________________________________
4,587 Tax on profit on 1,114 1,298 3,209 3,316
ordinary activities
________________________________________________________________________________
Timing differences are mainly in respect of capital and industrial building
allowances and capitalised interest.
Notes to the Quarterly Results Continued
6. Dividends
Unaudited Unaudited
Audited Year 3 months ended 9 months ended
ended 31 March 31 December 31 December
________________________________________________________________________________
2004 2004 2003 2004 2003
£000 £000 £000 £000 £000
________________________________________________________________________________
1,653 Interim dividend per - - 1,832 1,652
ordinary share 11.3p (2003:
10.3p)
3,321 Final dividend per ordinary - - - -
share
7 Under provision in prior - 1 29 7
year
________________________________________________________________________________
4,981 - 1 1,861 1,659
________________________________________________________________________________
7. Earnings per share
The following table shows a reconciliation of profits used in calculating
earnings per share:
Audited year Unaudited 9 months ended 31 December
ended 31 March
___________________________________________________________________________________
Profit Earnings per Profit Profit Earnings per Earnings
share share per share
2004 2004 2004 2003 2004 2003
£000 Pence £000 £000 Pence Pence
___________________________________________________________________________________
10,533 65.7 Profit for the 7,187 7,651 44.5 47.8
period
attributable to
shareholders
(706) (4.4) Other items 324 (495) 2.0 (3.1)
___________________________________________________________________________________
9,827 61.3 Profit for the 7,511 7,156 46.5 44.7
period
attributable to
shareholders used
for calculating
earnings per share
excluding other
items
___________________________________________________________________________________
Reconciliation of profit used in calculating diluted earnings per share :
Audited year
ended 31 March Unaudited 9 months ended 31 December
____________________________________________________________________________________
Profit Earnings per Profit Profit Earnings per Earnings per
share share share
2004 2004 2004 2003 2004 2003
£000 Pence £000 £000 Pence Pence
____________________________________________________________________________________
10,533 Profit for the 7,187 7,651
period
attributable to
shareholders used
for calculating
basic earnings per
share
223 Interest saving 152 168
net of taxation on
11% Convertible
Loan Stock
____________________________________________________________________________________
10,756 63.9 Profit for the 7,339 7,819 43.6 46.6
period
attributable to
shareholders used
in calculating the
underlying diluted
earnings per
share
(706) (4.2) Other items 324 (495) 1.9 (3.0)
____________________________________________________________________________________
10,050 59.7 Profit for the 7,663 7,324 45.5 43.6
period
attributable to
shareholders used
in calculating the
diluted earnings
per share
excluding other
items
____________________________________________________________________________________
The following table shows a reconciliation of the weighted average number of shares
used for calculating the basic and diluted earnings per share:
Audited year
ended 31 March Unaudited 9 months ended 31 December
2004 2004 2003
______________________________________________________________________________________
16,021,462 Used for calculating basic 16,162,588 16,013,956
earnings per share
227,276 Dilution due to Share Option 184,039 187,960
Scheme
580,000 Dilution due to Convertible Loan 500,000 580,000
Stock
______________________________________________________________________________________
16,828,738 Used for calculating diluted 16,846,627 16,781,916
earnings per share
______________________________________________________________________________________
8 Net assets per share
Net Assets used for calculating net assets per share:
Audited 31
March 2004 Unaudited 31 December
(restated) 2004 2003
£000 £000 (restated)
£000
___________________________________________________________________________________
295,659 Net Assets 325,443 260,756
2,900 Dilution due to Convertible Loan 2,500 2,900
Stock
___________________________________________________________________________________
298,559 Diluted net assets 327,943 263,656
5,483 Deferred tax arising from capital 5,842 4,796
allowances and capitalised
interest on investment
properties
___________________________________________________________________________________
304,042 Adjusted diluted net assets 333,785 268,452
___________________________________________________________________________________
Number of ordinary shares used for calculating net assets per share:
Audited 31 Unaudited 31 December
March 2004 2004 2003
___________________________________________________________________________________
16,733,811 Shares in issue at end of period 16,883,211 16,733,811
(689,666) Less ESOT shares (612,321) (689,666)
580,000 Dilution due to Convertible Loan 500,000 580,000
Stock
227,276 Dilution due to Share Option 184,039 187,960
Scheme
___________________________________________________________________________________
16,851,421 Number of shares adjusted for 16,954,929 16,812,105
dilutive instruments
___________________________________________________________________________________
Net assets per share:
Audited 31 Unaudited 31 December
March 2004 2004 2003
___________________________________________________________________________________
£18.43 Net assets per share (basic) £20.00 £16.25
£17.72 Diluted net assets per share £19.34 £15.68
£18.77 Adjusted net assets per share £20.36 £16.55
(basic)
£18.04 Diluted adjusted net assets per £19.69 £15.97
share
___________________________________________________________________________________
The additional deferred tax liability arising from capital allowances on
investment properties is excluded from the calculation of adjusted net assets as
the Group's experience is that deferred tax on capital allowances in relation to
investment properties is unlikely to crystallise in practice. The deferred tax
on capitalised interest on these properties is added back as it is a permanent
timing difference.
9 Investment properties
Unaudited 31 December
__________________________________________________________________________________________________________________
Audited Freehold Mainly Freehold Long leasehold Short leasehold Total Total
31 March 2004 £000 £000 £000 £000 2004 2003
£000 £000 £000
__________________________________________________________________________________________________________________
505,490 Balance at 1 469,310 85,875 70,875 - 626,060 505,490
April 2004/
2003
79,726 Additions during 38,752 519 158 - 39,429 67,999
the period
(9,497) Disposals during (13,191) (21,194) - - (34,385) (6,890)
the period
642 Reclassification - - - - - 642
from other
fixed
assets
- Reclassification - - - - - (10,711)
to current
assets
49,699 Revaluation 19,043 5,375 2,615 - 27,033 14,109
during the
period
__________________________________________________________________________________________________________________
626,060 Balance at 513,914 70,575 73,648 - 658,137 570,639
period end
__________________________________________________________________________________________________________________
The historical
cost of
investment
properties:
416,039 Balance at 341,707 37,974 55,647 7 435,335 401,131
period end
__________________________________________________________________________________________________________________
Valuation
The Group's investment properties were valued by CB Richard Ellis, Chartered
Surveyors, at 30 September 2004 on the basis of open market value and in
accordance with the guidance notes issued by the Royal Institution of Chartered
Surveyors.
10. Debtors
Audited
31 March Unaudited 31 December
2004 2004 2003
£000 £000 £000
_______________________________________________________________________________
Amounts falling due within one year:
4,765 Trade debtors 2,993 4,533
464 Deposits on investment acquisitions - -
4 Taxation and social security - 42
1,562 Prepayments and accrued income 3,347 2,004
_______________________________________________________________________________
6,795 6,340 6,579
_______________________________________________________________________________
11. Investments
Audited
31 March Unaudited 31 December
2004 2004 2003
£000 £000 £000
_______________________________________________________________________________
- Short-term deposits 1,389 401
1,150 Tenants' deposits 1,258 1,022
_______________________________________________________________________________
1,150 2,647 1,423
_______________________________________________________________________________
Short-term deposits have an original maturity date of less than three months.
Tenants' deposits represent returnable security deposits received from tenants.
These are ring-fenced under the terms of the individual lease contracts and
cannot be used to fund the working capital of the Group. They are accordingly
held separately from other cash balances.
Notes to the Quarterly Results Continued
12. Creditors: Amounts falling due within one year
Audited 31
March Unaudited 31 December
2004 2004 2003
£000 £000 £000
________________________________________________________________________________
1,340 Bank overdraft (secured) 169 309
1,902 Trade creditors 2,052 3,296
2,242 Corporation tax payable 4,605 2,770
1,757 Taxation and social security 2,119 1,774
5,461 Tenants' deposits 6,029 5,143
9,884 Accruals 11,151 10,462
5,035 Deferred income - rent and service charges 4,630 5,498
3,321 Dividends 1,832 1,653
________________________________________________________________________________
30,942 32,587 30,905
________________________________________________________________________________
Tenants' deposits include certain deposits that are ring-fenced in accordance
with the terms of the individual lease contracts (see note 11).
13. Creditors: Amounts falling due after more than one year
Audited 31 Unaudited 31 December
March
2004 2004 2003
£000 £000 £000
________________________________________________________________________________
Long-term borrowings consist of:
Unsecured:
2,900 11% Convertible Loan Stock 2011 2,500 2,900
Secured:
12,500 11.125% First Mortgage Debenture Stock 2007 12,500 12,500
7,000 11.625% First Mortgage Debenture Stock 2007 7,000 7,000
283,356 Other secured loans 284,904 274,266
________________________________________________________________________________
305,756 306,904 296,666
________________________________________________________________________________
14. Borrowings and financial instruments
i Maturity of financial liabilities
A maturity analysis of loans is shown below:
Audited 31 Unaudited 31 December
March
2004 2004 2003
£000 £000 £000
________________________________________________________________________________
1,340 Less than one year 169 309
- Between two years and three years 219,500 -
304,000 Between three years and four years - 295,000
- Between four years and five years 86,100 -
2,900 In five years and more 2,500 2,900
________________________________________________________________________________
308,240 308,269 298,209
(1,144) Less cost of raising finance (1,196) (1,234)
________________________________________________________________________________
307,096 307,073 296,975
________________________________________________________________________________
Notes to the Quarterly Results Continued
ii Fair value of financial assets and liabilities
Book and fair values of financial assets and liabilities are:
Audited 31 March Unaudited 31 December
Book value 2004 Fair value 2004 Book value Fair value Book value Fair value
£000 £000 2004 2004 2003 2003
£000 £000 £000 £000
_____________________________________________________________________________________________________
Primary
financial
instruments
(1,340) (1,340) Short-term (169) (169) (309) (309)
liabilities
(305,756) (312,196) Long-term (306,904) (314,204) (296,666) (302,496)
borrowing
1,331 1,331 Financial 2,651 2,651 1,532 1,532
assets
Derivative
financial
instruments
206 (2,639) Interest rate 177 (1,755) 215 (3,105)
collars
_____________________________________________________________________________________________________
(305,559) (314,844) (304,245) (313,477) (295,228) (304,378)
_____________________________________________________________________________________________________
The fair value of the interest rate collars have been determined by reference to
market prices and discounted expected cash flows at prevailing interest rates.
All other fair values have been calculated by discounting expected cash flows at
prevailing interest rates. The total fair value adjustment equates to 56.7p
(2003: 57.0p) per share and 21.1p (2003: 32.9p) per share based on diluted share
capital.
15. Provision for liabilities and charges
Audited 31 Unaudited 31 December
March
2004 2004 2003
£000 £000 £000
____________________________________________________________________________________
Deferred taxation:
4,107 Balance at 1 April 2004/2003 5,483 4,107
1,376 Deferred tax charge for the period 560 689
- Transfer direct to reserves on sale of (201) -
properties
____________________________________________________________________________________
5,483 Balance at period end 5,842 4,796
____________________________________________________________________________________
If the investment properties were sold for their revalued amount there would be a
potential liability to corporation tax of £54,676,000 (31 March 2004: £51,293,000,
31 December 2003: £41,712,000). In accordance with FRS 19 no provision has been made
for these amounts.
16. Share capital
Audited 31
March Unaudited 31 December
2004 2004 2003
Number Number Number
____________________________________________________________________________________
Authorised:
21,500,000 Ordinary shares of 10p each 21,500,000 21,500,000
____________________________________________________________________________________
2004 2004 2003
£ £ £
____________________________________________________________________________________
Issued:
1,673,381 Fully paid ordinary shares of 10p each 1,688,321 1,673,381
____________________________________________________________________________________
No charge to profit and loss has been made in respect of share options (under
UITF Abstract 17 (revised 2003)- Employee Share Schemes) since all employee
share options are granted at market price on the date of grant and SAYE share
options are exempt under the UITF.
17. Other reserves
Audited 31 Unaudited 31
March December
2004 2004 2003
£000 £000 £000
________________________________________________________________________________
(a) Share premium account
42,697 Balance at 1 April 2004/2003 42,912 42,697
215 Additions 674 215
________________________________________________________________________________
42,912 Balance at period end 43,586 42,912
________________________________________________________________________________
(b) Revaluation reserve
Property valuation surplus:
164,274 Balance at 1 April 2004/2003 209,565 164,274
(4,408) Disposals during the period (14,252) (3,673)
49,699 Revaluation adjustment 27,033 14,109
________________________________________________________________________________
209,565 Balance at period end 222,346 174,710
________________________________________________________________________________
(c) Profit and loss account
38,970 Balance at 1 April 2004/2003 47,715 38,970
5,552 Retained profit for the period 5,326 5,992
4,408 Transfer from revaluation reserve 14,252 3,673
(1,215) Taxation on valuation surpluses realised on (3,643) (968)
sale of properties
________________________________________________________________________________
47,715 Balance at period end 63,650 47,667
________________________________________________________________________________
18. Investment in own shares
The Company has established an Employee Share Ownership Trust (ESOT) to
purchase shares in the market for distribution at a later date in
accordance with the terms of the 1993 and 2000 Share Option Schemes. The
shares are held by an independent trustee and the rights to dividend on the
shares have been waived. At 31 December 2004, the number of shares held by
the Trust totalled 612,321 shares (2003: 689,666) with a nominal value of
£61,232 (2003: £68,967) and the book value of the shares amounted to
£5,827,000 (2003: £6,206,000). At 31 December 2004 the market value of the
shares held by the Trust was £13,348,597. 611,185 shares held by the Trust
are subject to option awards.
In accordance with UITF Abstract 38 - accounting for ESOP trusts,
investment in own shares has been reclassified as a deduction from
shareholders' funds giving rise to restatement of 2003/04 comparatives.
19. Reconciliation of movements in shareholders' funds
Audited 31 Unaudited 31
March December
2004 2004 2003
(restated) £000 (restated)
£000 £000
________________________________________________________________________________
10,533 Profit for the financial period 7,187 7,651
(4,981) Dividends (1,861) (1,659)
49,699 Unrealised surplus on revaluation of 27,033 14,109
investment properties
(1,215) Taxation on valuation surpluses realised on (3,643) (968)
sale of properties
220 Issue of shares 689 220
28 Net distribution/(purchase) of own shares 379 28
________________________________________________________________________________
54,284 Net addition to shareholders' funds 29,784 19,381
241,375 Opening shareholders' funds 295,659 241,375
________________________________________________________________________________
295,659 Closing shareholders' funds 325,443 260,756
________________________________________________________________________________
Notes to the Quarterly Results Continued
20. Capital commitments
At the period end the estimated amounts of commitments for future capital
expenditure not provided for were:
Audited 31 Unaudited 31
March December
2004 2004 2003
£000 £000 £000
________________________________________________________________________________
8,166 Under contract 10,474 1,463
15,391 Board authorised but not contracted 5,059 2,246
________________________________________________________________________________
21. Post balance sheet events
Following the period end contracts were exchanged and completed for the
purchase of Lombard House, Croydon at a consideration of £7.75m.
22. Quarterly statement
This statement was approved by the Board on 18 February 2005. Copies of
this statement will be dispatched to shareholders on 21 February 2005 and
will be available from the Group's registered office at Magenta House,
85 Whitechapel Road, London E1 1DU from 9.00am on that day.
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