Interim Results
Workspace Group PLC
25 November 2002
WORKSPACE ANNOUNCES ROBUST PERFORMANCE
Workspace Group PLC ('Workspace') today announces its interim results for the
six months to 30 September 2002. Workspace provides approximately 5.0 million
sq. ft of flexible business accommodation for over 3,300 small and medium size
enterprises ('SMEs') in London and the South East.
• Trading pre tax profits up 4.7% to £5.84 million (2001: £5.58 million)
• Valuation surplus of £8.6 million in the half year (2001: £14.4 million)
• Net Asset Value per share up 4.7% in the half-year to £14.17 (31 March
2002: £13.53)
up 11.6% over twelve months (30 September 2001: £12.70)
• Basic trading earnings per share up 1.2% to 25.7p (30 September 2001:
25.4p)
• Annual rent roll increased during the half year by 13.1% to £33.4 million
(31 March 2002: £29.56m), up 25.8% on September 2001.
• Core occupancy levels remain stable at 87.15%
• Average like for like rentals up 5.3% over half year to £7.75 per sq. ft
• £34.8 million acquisitions, with £0.8 million disposals during the half
year
• Turnover up 10.0% to £21.4 million (2001: £19.41 million)
• Interim dividend up 7.1% to 7.5p (2001: 7.0p)
Commenting on the results, Harry Platt, Chief Executive, said,
' Workspace continues to make excellent progress. Occupancy remains strong and
rents have continued to grow. We have invested £34 million in new acquisitions
during the six months. The properties have bedded down well and we have extended
our coverage of the capital. With the benefit of our new lending facilities, we
have significant firepower available to make further acquisitions. We are
trailing a number of opportunities currently and I look forward to reporting
further progress shortly.
' The fundamentals in our market place continue to remain good. The SME market
is resilient and continues to offer us massive potential for growth. Looking
forward, the business is continuing to perform well. Enquiries and conversion
rates continue at good levels. I am confident that the Group has the formula to
continue to deliver robust growth.'
-ends-
Date: 25 November 2002
For further information:
Workspace Group PLC City Profile Group
Harry Platt, Chief Executive Simon Courtenay
Mark Taylor, Finance Director Ed Senior
020-7247-7614 020-7448-3244
e-mail: info@workspacegroup.co.uk e-mail: simon.courtenay@city-profile.com
web: www.workspacegroup.co.uk
Operating & Financial Review
Overview
It is pleasing to report again on the continuing steady progress of your
company. This is especially so at a time when there are uncertainties in both
the economy at large and financial markets in particular. We have long argued
the strengths and resilience of the SME sector. Whilst the covenants of some of
our customers may be weak, their combined strength is considerable. This is
shown in these results. As important though, is the long term growth potential
of SMEs in London and the South East as we focus our business on being the main
supplier of accommodation servicing them.
Over the half year rents, including acquisitions, have increased by £3.9 million
(or 13.1%) from £29.56m to £33.44m. On a like for like basis they have increased
by in excess of £1.1 million per annum (an annualised growth rate of 10%,
broadly in line with the last two years) whilst occupancy has been relatively
stable. These increases have resulted in growth of turnover of 10.0%, operating
profits of 7.4% and trading profits before tax of 4.7%.
Our valuation performance has once again been underpinned by improving rental
income. Properties held throughout the period increased in value by 2.2%, with a
valuation surplus overall of £8.60 million, of which £8.09 million has been
included in these interim accounts.
Following the refinancing of its securitised loan through a new senior debt
facility with Bradford & Bingley the Group had, at 30 September, £57m of undrawn
facilities available for drawdown, together with a further £30m of properties
available to secure further borrowings. Further details of this new facility are
given below. This new loan, together with the NatWest facility secured by the
Group shortly before the end of the last financial year, takes to £300m the new
arrangements secured over the last 6 months. Availability of such substantial
sums for investment into the Group's activities is tacit acknowledgement of the
quality of the Group's portfolio and the success of its business.
Whilst the refinancing of its debt has opened substantial opportunity through
increased availability of funding, it has attracted a cost. The results for the
half year include an exceptional £1.8m charge arising from the write-off of
capitalised financing costs associated with the securitisation arranged in 1999
(which would otherwise have been written off over the life of the loan). Whilst
a substantial sum, when measured against the benefits accruing to the Group from
the Tonex portfolio bought with the original loan, it has been returned many
times. By working its debt structure hard the Group has avoided the need to call
for new equity since 1994 during which time the value of its portfolio has
increased almost fivefold from £81.7m to £467.1m. It now has the capacity to
take this process forward through the next stage of its growth.
Your Board considers that, given the continuing improvements in profitability of
your company and its good dividend cover, the interim dividend should be
increased by 7.1% to 7.5p. It intends to increase the dividend for the year as a
whole in line with the pattern of dividend growth established in previous years.
In line with developments in best practice for interim reporting, your Board has
decided to expand the format of its customary quarterly report to provide a more
detailed progress statement for the half year. It is our intention to continue
with our customary quarterly updates. These, together with copies of
institutional presentations will be placed in the 'investor relations' section
of the Group's website. Whilst we have expanded areas of financial reporting
within this new format for our interim report, we have preserved the key tables
detailing acquisitions, disposals and portfolio progress.
On 19 November 2002 Tony Hales, who recently joined the Board of the Company as
a non-executive director, was appointed Chairman. Phillip Rhodes, who has been a
non-executive director since July 1992 and Chairman since September 1999, is
retiring to focus on his other business interests.
Portfolio
During the half year the annual rent roll of occupied units increased by £3.88m,
or 13%, to £33.44m.
Four properties were acquired over the half year together with additions to our
existing interests in three other properties at total cost of £34.8 million
(showing an initial income of £3.2m). One property was disposed of during this
period. The table below shows the main details of acquisitions and disposals in
this period.
Name of Property Description Acquisition/Sale Price Annual Income
________________________________________________________________________________________________________
Acquisitions
First Quarter
Darin Court, Milton Keynes 29,400 sq. ft business centre £3,000,000 £255,300
with 27 units
________________________________________________________________________________________________________
Second Quarter
Stratford Office Village, London 52,000 sq. ft office park £8,800,000 £666,000
E15, with 13 self contained units.
Enterprise House, London SE1 71,700 sq. ft, 35 unit £16,025,000 £1,196,000
business centre and office
buildings
Farnborough Business Centre, 24,400 sq. ft, 16 unit £3,800,000 £327,100
Farnborough industrial and office park
Clerkenwell Workshops Acquisition of head leasehold £700,000 £390,000
interest (freehold already
London EC1R owned)
Alpine Way, Beckton, London E6 Purchase of building works £2,337,000 £350,000
under funding agreement.
Brook Road, Redhill Land, adjacent to existing £185,000 £nil
holding. Acquired to secure
marriage value.
________________________________________________________________________________________________________
Disposals
Brook Road, Redhill Land, disposal of combined £750,000 £20,000
interests at location
At Clerkenwell Workshops the Group acquired the head leasehold interest in the
property, having previously secured the freehold interest in December last year.
This secured access to the full underlying rental stream at the property and
provides the platform for improving returns from the property overall. Alpine
Way was acquired from Greater London Enterprise last year. The terms of the
acquisition provided for the purchase of the land initially followed by payment
for the development works once complete. The works are now complete and the
premises fully occupied. At Redhill the Group purchased a piece of land adjacent
to its existing holding for £185,000 taking the total book cost to £388,000. It
then sold the entire property for £750,000 realising a profit on disposal of
£362,000.
Progress has been made on a number of the Group's 'added value' projects.
Planning Consent and a related Section 106 Agreement have been settled for the
development of 47 flats on some land at the Group's Three Mills site. Likewise
the London Borough of Lewisham Planning Committee approved a retail development
on the Group's Thurston Road site. This decision was subsequently overturned by
the Greater London Authority (GLA) who are concerned to see a more intensive
mixed used of the site. The proposal is now under discussion with GLA to see how
this may be achieved. This could further improve value. A Planning Application
for the Group's land at Hooley Lane, Redhill is still under discussion with the
local Council, whilst the Group has now submitted a Planning Application at
Wharf Road, Islington for a substantial mixed-use scheme.
Following these acquisitions and disposals the portfolio statistics and progress
through the year to date, may be summarised as follows:-
30 September 30 June 31 March
2002 2002 2002
______________________________________________________________________________________________
Number of estates 90 88 87
______________________________________________________________________________________________
Total floorspace at end of period (sq. ft.) 5,011,204 4,870,735 4,849,758
of which:
Like for like portfolio (sq. ft) 4,431,036 4,428,604 4,427,872
Net Acquisitions/(Disposals) (sq. ft) 170,693 29,364 -
Three Mills and development (sq. ft) 409,475 412,767 421,886
______________________________________________________________________________________________
Lettable units (number) 3,943 3,707 3,726
Annual rent roll of occupied units (£) 33,439,357 30,419,208 29,560,157
Average rent (£/sq. ft) 8.03 7.39 7.20
Average rent of like-for-like portfolio (£/sq.ft) 7.75 7.44 7.36
Occupancy overall 83.15% 84.52% 84.67%
Occupancy of like-for-like portfolio 87.15% 89.30% 89.15%
Comparisons of overall occupancy and rent roll are distorted by acquisitions,
disposals and transfers. The 'like-for-like portfolio' is defined as those
properties, excluding Three Mills (which due to the short term nature of
lettings of studio space has a volatile occupancy rate which can obscure overall
patterns), that have been held throughout the year to date and which are not
subject to refurbishment/redevelopment programmes.
Average rent increased over the half year by an annualised rate of 24.4%. The
increase on a like for like basis for the period was 10.9%. The overall average
has been enhanced by the acquisition of a number of more centrally located
London properties which carry higher rental values, in line with our policy of
adding to our holdings in good fringe locations to benefit from the growth of
London.
Occupancy is down slightly over the half year. This is due in part from the
policy of allowing lower occupancy levels on those properties targeted for
improvement or development works in the near future. Also there has been a
decline in occupancy at the Group's Kingsland Viaduct property due to
uncertainties over the East London line. Against this good progress is being
made in lettings at Bow Enterprise Park following the relocation of the
principal customer there to Alpine Way.
An independent external valuation of the Group's portfolio was undertaken by
Insignia Richard Ellis at 30 September 2002. This yielded a valuation surplus of
£8.60 million of which £8.09 million, equivalent to 49 pence per share, has been
recorded in the accounts taking NAV at 30 September to £14.17 per share. This
valuation indicated a current estimated rental value (market rent) of the
Group's portfolio of £46.2 million. Allowing for a void of 10%, this would
indicate an achievable rent roll at current market levels of £41.6 million, 25%
above current passing rents.
During the half year the Workspace Group Employee Share Option Trust acquired
506,770 shares in the Group. These shares were purchased at a price of £10.30.
Of these shares 405,000 have been allocated for satisfaction of options that
have been granted already with the remainder being held to satisfy options to be
granted in the future. In accordance with generally accepted accounting
principles, these shares have been eliminated for EPS and NAV per share
calculation purposes.
Financial Review
At a headline level good progress continues to be made with turnover, PBT and
NAV all ahead of comparable values. However, this progress is disguised to a
degree by the inclusion in the first quarter last year of a contribution from
the Group's former Midlands portfolio which was disposed of on 15 June 2001. The
dilutive effect of this sale had been forecast at the time of the disposal. The
Group stated that the disposal proceeds were to be reinvested in properties in
London and the South East which could potentially reduce earnings by £0.5
million p.a. initially but would offer far greater growth potential. Adjusting
for this yields the following comparison:
6 months to 30 September 2001 6 months to 30 Increase on Adjusted
September 2002 Values
Published Adjusted
£000 £000 £000 £000
_________________________________________________________________________________________________
Turnover 19,408 18,262 21,367 3,105
Gross Profit 13,911 13,005 15,153 2,148
Operating Profit 11,069 10,163 11,889 1,726
PBT 5,584 5,242 5,844 602
_________________________________________________________________________________________________
Adjusted values eliminate the revenues and costs associated with the Midlands
properties together with interest computed on the sale proceeds. As may be seen,
like for like growth in PBT is 11.5%, from £5.24m to £5.84m.
As referred to in the Trading Review, a £1.8m write-off has been charged to the
P&L account in the half year as a result of the refinancing of the Group's
principal debt facility. This was not a cash breakage cost but arose as a result
of writing off previously capitalised expenditure incurred on raising the
original facility with WestLB. The new loan offers greater availability of
finance in terms of the total facility. At the same time the funds immediately
drawable, based on the security provided, increased also. Both this and the
NatWest facility secured earlier in 2002 are priced at a margin slightly below
1% over LIBOR, reflecting the progress that the Group has made over recent
periods in pushing down borrowing costs.
With the expenditure on new investments and improving its existing stock the
Group's gearing has moved up to 95.2% at the period end. With interest cover of
1.97 it is positioned well to service this debt. On announcing its 2000/01
results in June 2001 the Group indicated its target of seeking to expand
organically, focusing on London and the South East and to double the value of
the portfolio over the next five years. This plan was predicated on stable
occupancy, rents increasing by 5% p.a. and an acquisition programme of £50m -
£60m p.a. After 18 months the Group is on target for this plan with all these
parameters being maintained or bettered. Furthermore, with the new financing
facilities in place the Group has established the financial platform to deliver
its proposed acquisition programme.
Prospects
The fundamentals of our market place continue to remain strong. Nearly two
months into the third quarter we are on target to meet our customary £0.5m per
quarter like for like increase in rents, and are confident that we will meet our
targets for the year. Enquiries and conversion rates continue at good levels.
Further, rents continue to increase with the rent review programme showing good
results. We have one acquisition in legal hands, and others under negotiation.
Meanwhile, before the year end we should see some progress for those assets
where we are seeking to 'add value'.
Consolidated Profit and Loss Account
for the 6 months ended 30 September 2002
Audited Unaudited Unaudited 6 months ended
year ended 3 months ended 30 September
31 March 30 September
Trading Other Total
Operations Items
Notes 2002 2001 2002 2001
2002
£000 (restated) £000 £000 £000 (restated)
£000
£000 £000
________________________________________________________________________________________________________________________
39,083 Turnover - continuing operations 2 11,036 9,395 21,367 - 21,367 19,408
(11,172) Rent payable and direct costs (3,266) (2,792) (6,214) - (6,214) (5,497)
________________________________________________________________________________________________________________________
27,911 Gross profit 7,770 6,603 15,153 - 15,153 13,911
(5,964) Administrative expenses (1,638) (1,441) (3,264) - (3,264) (2,842)
________________________________________________________________________________________________________________________
21,947 Operating profit - continuing 6,132 5,162 11,889 - 11,889 11,069
operations
567 Surplus on disposal of investment 311 374 - 313 313 377
property
333 Interest receivable 3 60 144 94 - 94 229
(10,819) Interest payable and similar charges 4 (5,089) (2,583) (6,139) (1,861) (8,000) (5,714)
________________________________________________________________________________________________________________________
12,028 Profit on ordinary activities before 1,414 3,097 5,844 (1,548) 4,296 5,961
taxation
(3,068) Taxation on profit on ordinary 5 (417) (804) (1,773) 491 (1,282) (1,663)
activities
________________________________________________________________________________________________________________________
8,960 Profit on ordinary activities after 19 997 2,293 4,071 (1,057) 3,014 4,298
taxation
- - - - - - -
Equity minority interests
________________________________________________________________________________________________________________________
8,960 Profit attributable to shareholders 6 997 2,293 4,071 (1,057) 3,014 4,298
(4,192) Dividends (1,156) (1,143) (1,179) - (1,179) (1,143)
________________________________________________________________________________________________________________________
4,768 Retained for the period (159) 1,150 2,892 (1,057) 1,835 3,155
________________________________________________________________________________________________________________________
55.4p Basic earnings per share 7 6.7p 14.1p 25.7p (6.7p) 19.0p 26.7p
54.2p Diluted earnings per share 7 6.7p 14.0p 18.8p 26.2p
Statement of Total Recognised Gains and Losses
Audited Unaudited
year ended 6 months ended 30 September
31 March
________________________________________________________________________________________________________________________
2002 2002 2001
£000 £000 (restated)
£000
________________________________________________________________________________________________________________________
8,960 Profit for the financial period 3,014 4,298
26,863 Unrealised surplus on revaluation of investment properties 8,091 14,389
(150) Taxation on revaluation surpluses realised on sale of properties - -
________________________________________________________________________________________________________________________
35,673 Total recognised gains relating to the financial period 11,105 18,687
(3,128) Prior year adjustment - (3,128)
________________________________________________________________________________________________________________________
32,545 Total gains recognised since last financial statements 11,105 15,559
________________________________________________________________________________________________________________________
Note of Historical Cost Profits and Losses
Audited Unaudited
year ended 6 months ended 30 September
31 March
______________________________________________________________________________________________________________________
2001
2002 2002 (restated)
£000 £000 £000
______________________________________________________________________________________________________________________
12,028 Reported profits on ordinary activities before taxation 4,296 5,961
5,014 Realisation of property revaluation (losses)/gains of previous years (87) 4,270
(150) Taxation on valuation surpluses realised on sale of properties - -
______________________________________________________________________________________________________________________
16,892 Historical cost profit on ordinary activities before taxation 4209 10,231
______________________________________________________________________________________________________________________
9,632 Historical cost profit for the period retained after taxation and dividends 1,748 7,425
______________________________________________________________________________________________________________________
Consolidated Balance Sheet
as at 30 September 2002
Audited Unaudited 30 September
31 March
2002 2002 2001
£000 Notes £000 (restated)
£000
______________________________________________________________________________________________________________
Fixed Assets
Tangible assets
414,707 Investment properties 8 462,763 353,734
3,540 Other fixed assets 3,830 1,686
1,015 Investment in own shares 9 6,249 1,015
______________________________________________________________________________________________________________
419,262 472,842 356,435
_______________________________________________________________________________________________________________
Current Assets
150 Stock: properties for sale 150 -
6,189 Debtors 10 6,619 7,973
5,443 Investments 11 1,032 6,188
340 Cash at bank and in hand 1,002 281
_______________________________________________________________________________________________________________
12,122 8,803 14,442
(30,964) Creditors: amounts falling due within one year 12 (24,381) (25,717)
_______________________________________________________________________________________________________________
(18,842) Net current liabilities (15,578) (11,275)
_______________________________________________________________________________________________________________
400,420 Total assets less current liabilities 457,264 345,160
(175,730) Creditors: amounts falling due after more than one year 13 (221,821) (134,636)
(including Convertible Loan Stock)
(3,365) Provision for liabilities and charges 15 (3,742) (3,265)
_______________________________________________________________________________________________________________
221,325 231,701 207,259
_______________________________________________________________________________________________________________
Capital and reserves
1,648 Called up share capital 16 1,661 1,644
42,030 Share premium account 17 42,467 41,905
144,588 Revaluation reserve 17 152,766 132,858
33,059 Profit and loss account 17 34,807 30,852
_______________________________________________________________________________________________________________
221,325 Shareholders' funds - equity interests 231,701 207,259
- Equity minority interests 19 - -
_______________________________________________________________________________________________________________
221,325 Capital Employed 18 231,701 207,259
_______________________________________________________________________________________________________________
£13.53 Net asset value per share £14.17 £12.70
_______________________________________________________________________________________________________________
Consolidated Cash Flow Statement
for the 6 months ended 30 September 2002
Audited year Unaudited
ended 31 March
6 months ended 30 September
_____________________________________________________________________________________________________________________
2002 Notes to 2002 2001
£000 Cash Flow £000 £000
_____________________________________________________________________________________________________________________
23,429 Net cash inflow from operating activities 1 11,835 9,031
(11,261) Return on investments and servicing of finance 2 (6,780) (5,673)
(5,564) Taxation (1,259) (2,301)
(23,278) Capital (expenditure)/proceeds - net 2 (45,011) 26,818
(3,796) Equity dividends paid (3,035) (2,659)
_____________________________________________________________________________________________________________________
(20,470) Net cash (outflow)/inflow before use of liquid (44,250) 25,216
resources and financing
(70) Management of liquid resources 2 4,411 (815)
19,751 Financing 2 42,477 (22,733)
_____________________________________________________________________________________________________________________
(789) Net cash inflow/(outflow) 3 2,638 1,668
____________________________________________________________________________________________________________________
Reconciliation of net cash flow to movement in net
debt
(789) Increase/(decrease) in cash 2,638 1,668
70 (Decrease)/increase in liquid resources (4,411) 815
(18,201) (Outflow)/inflow from movements in debt financing (42,738) 23,870
_____________________________________________________________________________________________________________________
(18,920) Changes in net debt resulting from cash flows 3 (44,511) 26,353
_____________________________________________________________________________________________________________________
(157,147) Net debt at beginning of period (176,067) (157,147)
(176,067) Net debt at period end (220,578) (130,794)
_____________________________________________________________________________________________________________________
Notes to the cash flow statement
for the 6 months ended 30 September 2002
1. Reconciliation of operating profit to operating cash flows
Audited year ended Unaudited
31 March
6 months ended 30 September
__________________________________________________________________________________________________________
2002 2002 2001
£000 £000 £000
__________________________________________________________________________________________________________
21,947 Operating profit 11,889 11,069
554 Depreciation charges 366 265
(976) Increase in debtors (449) (2,400)
1,904 Increase in creditors 29 97
__________________________________________________________________________________________________________
23,429 11,835 9,031
__________________________________________________________________________________________________________
2. Analysis of cash flow
Audited year ended Unaudited 6 months ended 30
31 March September
__________________________________________________________________________________________________________
2002 Notes 2002 2001
£000 to cash flow £000 £000
__________________________________________________________________________________________________________
Returns on investments and servicing of finance
347 Interest received 109 224
(11,608) Interest paid (including financing costs) (6,889) (5,897)
__________________________________________________________________________________________________________
(11,261) Net cash outflow (6,780) (5,673)
__________________________________________________________________________________________________________
Capital expenditure
(71,761) Purchase of tangible fixed assets (45,747) (20,635)
48,300 Sale of tangible fixed assets 727 47,353
183 Grants received 9 100
__________________________________________________________________________________________________________
(23,278) Net cash (outflow)/inflow (45,011) 26,818
__________________________________________________________________________________________________________
Management of liquid resources
(70) Decrease/(increase) in short-term deposits 3 4,411 (815)
__________________________________________________________________________________________________________
(70) Net cash inflow/(outflow) 4,411 (815)
__________________________________________________________________________________________________________
Financing
1,394 Issue of ordinary share capital 449 1,266
23,000 Drawdown/(repayment) of bank loan 3 156,500 (21,500)
(1,140) Repayment of Convertible Loan Stock 3 - (1,140)
(3,503) Repayment on mortgage 3 (114,472) (1,359)
__________________________________________________________________________________________________________
19,751 Net cash inflow/(outflow) 42,477 (22,733)
__________________________________________________________________________________________________________
3. Analysis of net debt
Audited year ended 31 March 2002 Unaudited 6 months ended 30 September
_____________________________________________________________________________________________________________________
At Cash flow At At Cash flow At At Cash At
01/04/02
01/04/01 £000 31/03/02 £000 30/09/02 01/04/01 flow 30/09/01
£000
£000 £000 £000 £000 £000 £000
_____________________________________________________________________________________________________________________
206 134 340 Cash at bank and in 340 662 1,002 206 75 281
hand
(1,844) (923) (2,767) Bank overdrafts (2,767) 1,976 (791) (1,844) 1,593 (251)
_____________________________________________________________________________________________________________________
(1,638) (789) (2,427) (2,427) 2,638 211 (1,638) 1,668 30
_____________________________________________________________________________________________________________________
Debt due within one
year:
(2,798) (862) (3,660) Securitised loan (3,660) 3,660 - (2,798) 162 (2,636)
287 20 307 Less cost of raising 307 *30 337 287 (27) 260
finance
Debt due after one
year:
(4,040) 1,140 (2,900) 11% Convertible Loan (2,900) - (2,900) (4,040) 1,140 (2,900)
Stock
(12,500) - (12,500) 11.125% First Mortgage (12,500) - (12,500) (12,500) - (12,500)
Debenture
(7,000) - (7,000) 11.625% First Mortgage (7,000) - (7,000) (7,000) - (7,000)
Debenture
(115,177) 4,365 (110,812) Securitised loan (110,812) 110,812 - (115,177) 1,197 (113,980)
(21,500) (23,000) (44,500) Bank loan (44,500) (156,500) (201,000) (21,500) 21,500 -
1,846 136 1,982 Less cost of raising 1,982 *(740) 1,242 1,846 (102) 1,744
of finance
_____________________________________________________________________________________________________________________
(160,882) (18,201) (179,083) (179,083) (42,738) (221,821) (160,882) 23,870 (137,012)
_____________________________________________________________________________________________________________________
5,373 70 5,443 Short-term deposits 5,443 (4,411) 1,032 5,373 815 6,188
_____________________________________________________________________________________________________________________
(157,147) (18,920) (176,067) Total (176,067) (44,511) (220,578) (157,147) 26,353 (130,794)
_____________________________________________________________________________________________________________________
* Includes non-cash write-downs of financing costs.
Notes to the Half Year Results
1. Basis of Preparation
The unaudited financial information contained in this interim 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 2002 included an
unqualified report of the auditors. The Group's unaudited accounts for the
period ended 30 September 2002 have been prepared on the basis of the accounting
policies set out in the Annual Report and Accounts for the year ended 31 March
2002. The full accounts for the year ended 31 March 2002 have been filed with
the Registrar of Companies. 2001 comparatives have been restated due to the
application of FRS 19 (deferred tax).
2. Segmental Analysis
________________________________________________________________________________________________________________
Audited Year ended 31 Unaudited Unaudited
March
3 months ended 6 months ended
30 September 30 September
________________________________________________________________________________________________________________
2002 2002 2001 2002 2001
£000 £000 £000 £000 £000
________________________________________________________________________________________________________________
30,864 Rental Income 8,780 7,440 16,969 15,422
6,877 Service charge and other recoveries 1,728 1,679 3,584 3,394
1,342 Services fees, commissions, and sundry 528 276 814 592
income
________________________________________________________________________________________________________________
39,083 11,036 9,395 21,367 19,408
________________________________________________________________________________________________________________
3. Interest receivable
________________________________________________________________________________________________________________
Audited Year ended 31 Unaudited Unaudited
March 3 months ended 6 months ended
30 September 30 September
________________________________________________________________________________________________________________
2002 The following amounts were earned during 2002 2001 2002 2001
the year
£000 £000 £000 £000 £000
________________________________________________________________________________________________________________
325 Short-term deposits 60 143 93 228
8 Other - 1 1 1
________________________________________________________________________________________________________________
333 60 144 94 229
_______________________________________________________________________________________________________________
4. Interest payable and similar charges
________________________________________________________________________________________________________________
Audited Year ended 31 Unaudited Unaudited
March
3 months ended 6 months ended
30 September 30 September
2002 2002 2001 2002 2001
£000 £000 £000 £000 £000
________________________________________________________________________________________________________________
361 11% Convertible Loan Stock 2011 79 91 159 202
1,391 11.125% First Mortgage Debenture Stock 347 347 695 695
2007
814 11.625% First Mortgage Debenture Stock 204 204 407 407
2007
7,486 Mortgage interest on securitised loan not 246 2,001 1,884 4,047
wholly repayable within five years
1,007 Bank and other interest on amounts wholly 2,520 10 3,299 433
repayable within five years
- Finance costs written off 1,861 - 1,861 -
________________________________________________________________________________________________________________
11,059 5,257 2,653 8,305 5,784
(240) Interest capitalised on development (168) (70) (305) (70)
properties
________________________________________________________________________________________________________________
10,819 Charged to profit and loss account 5,089 2,583 8,000 5,714
________________________________________________________________________________________________________________
5. Taxation
________________________________________________________________________________________________________________________
Audited year Unaudited Unaudited 6 months ended 30 September
ended 31
March 3 months ended 30 September
2002 2002 2001 2002 2001 (Restated)
£000 £000 (Restated) £000 £000
£000
________________________________________________________________________________________________________________________
Current tax:
2,956 UK corporation tax on profit for 276 754 905 1,526
the year
(125) Prior year adjustments - - - -
________________________________________________________________________________________________________________________
2,831 Total current tax 276 754 905 1,526
________________________________________________________________________________________________________________________
Deferred tax:
237 Origination and reversal of timing 141 50 377 137
differences
________________________________________________________________________________________________________________________
3,068 Tax on profit on ordinary 417 804 1,282 1,663
activities
________________________________________________________________________________________________________________________
Timing differences are mainly in respect of capital and industrial building allowances and capitalised interest.
6. Dividends
________________________________________________________________________________________________________________
Audited year Unaudited Unaudited
ended 31 March 3 months ended 30 September 6 months ended 30 September
2002 2002 £2001 2002 2001
£000 £000 £000 £000 £000
________________________________________________________________________________________________________________
1,143 Interim dividend per ordinary share 7.5p (2001 : 7.0p) 1,193 1,143 1,193 1,143
3,049 Final dividend per ordinary share (2001 : 18.5p) (37) - (14) -
________________________________________________________________________________________________________________
4,192 1,156 1,143 1,179 1,143
________________________________________________________________________________________________________________
The proposed interim dividend is payable on 3 February 2003 to shareholders on
the register at the close of business on
6 January 2003.
7. Earnings per share and net assets per share
____________________________________________________________________________________________________________________
The following table shows a reconciliation of profits used in calculating
earnings per share.
Audited year ended 31 March Unaudited 6 months ended 30 September
Profit Earnings Profit Profit Earnings Earnings per
per per share 2001
2002 share 2002 2001 (restated) share (restated)
£000 2002 £000 £000 2002 Pence
£000 Pence
____________________________________________________________________________________________________________________
8,960 55.4 Profit for the year attributable to 3,014 4,298 19.0 26.7
shareholders
(426) (2.6) Other items 1,057 (359) 6.7 (2.2)
____________________________________________________________________________________________________________________
8,534 52.8 Profit for the year attributable to 4,071 3,939 25.7 24.5
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 6 months ended 30 September
Profit Earnings Profit Profit Earnings Earnings per
per 2002 per share 2001
2002 share 2001 share
£000 2002 (restated)
£000 2002 (restated)
Pence Pence
£000 £000
____________________________________________________________________________________________________________________
8,960 Profit for the year attributable to 3,014 4,298
shareholders used for calculating basic
earnings per share
____________________________________________________________________________________________________________________
253 Interest saving net of taxation on 11% 112 141
Convertible Loan Stock
____________________________________________________________________________________________________________________
9,213 54.2 Profit for the year attributable to 3,126 4,439 18.8 26.2
shareholders used in calculating the
underlying diluted earnings per share
(426) (2.5) Other items 1,057 (359) 6.3 (2.1)
____________________________________________________________________________________________________________________
8,787 51.7 Profit for the year attributable to 4,183 4,080 25.1 24.1
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 6 months ended 30 September
year ended
31 March
2002
2002 2001
____________________________________________________________________________________________________________________
16,161,670 Used for calculating basic earnings per 15,865,684 16,073,119
share
263,166 Dilution due to Share Option Scheme 217,832 269,150
580,000 Dilution due to Convertible Loan Stock 580,000 580,000
___________________________________________________________________________________________________________________
17,004,836 Used for calculating diluted earnings 16,663,516 16,922,269
per share
____________________________________________________________________________________________________________________
Net assets per share have been calculated by dividing net assets of £231,701,000 (2001: £207,259,000) less investment in
own shares of £6,249,150 by 15,906,795 (2001: 16,443,948) being the number of shares in issue at 30 September 2002 less
investment in own shares of 699,190 (2001: 200,000).
8. Investment properties
_________________________________________________________________________________________________________________
Unaudited 30
September
Audited Mainly Long Short Total Total
Freehold leasehold leasehold
31 March Freehold 2002 2001
2002 £000 £000 £000
£000 £000 £000
£000
_________________________________________________________________________________________________________________
366,525 Balance at 1 April 2002/2001 302,755 66,077 45,875 - 414,707 366,525
71,216 Additions during the period 31,465 554 8,334 - 40,353 19,889
(47,977) Disposals during the period (388) - - - (388) (47,069)
(1,920) Reclassifications - - - - - -
26,863 Revaluation during the period 7,011 1,484 (404) - 8,091 14,389
_________________________________________________________________________________________________________________
414,707 Balance at period end 340,843 68,115 53,805 - 462,763 353,734
_________________________________________________________________________________________________________________
The historical cost of investment
properties
_________________________________________________________________________________________________________________
269,359 Balance at period end 218,160 48,131 42,939 7 309,237 220,876
________________________________________________________________________________________________________________
Valuation
The Group's investment properties were valued by Insignia Richard Ellis,
Chartered Surveyors, at 30 September 2002 on the basis of open market existing
use value and in accordance with the guidance notes issued by the Royal
Institution of Chartered Surveyors.
9. 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 30 September 2002, the number of shares held by the Trust totalled 699,190
shares (2001: 200,000) with a nominal value of £69,919 (2001: £20,000) and the
book value of the shares amounted to £6,249,000 (2001: £1,015,000). The shares,
whilst legally not the property of the Company, have been included in fixed
asset investments. At 30 September 2002 the market value of the shares held by
the Trust was £7,656,000. 630,710 shares held by the Trust are subject to option
awards.
10. Debtors
__________________________________________________________________________________________________________
Audited Unaudited 30 September
31 March
2002 2002 2001
£000 £000 £000
__________________________________________________________________________________________________________
Amounts falling due within one year:
4,214 Trade debtors 4,407 4,761
- Deposits on investment acquisitions - 210
- Deposit on investment disposal - 50
724 Taxation and social security 26 30
1,104 Prepayments and accrued income 2,059 2,755
__________________________________________________________________________________________________________
6,042 6,492 7,806
__________________________________________________________________________________________________________
Amounts falling due after one year:
147 Advance commissions 127 167
__________________________________________________________________________________________________________
6,189 Total debtors 6,619 7,973
__________________________________________________________________________________________________________
11. Investments
Investments of £1,032,000 (2001: £6,188,000) comprise short-term deposits with
an original maturity date of less than three months.
12. Creditors: Amounts falling due within one year
_____________________________________________________________________________________________________________
Audited 31 March Unaudited 30 September
2002 2002 2001
£000 £000 £000
_____________________________________________________________________________________________________________
3,353 Secured mortgage borrowings (note 13) - 2,376
2,767 Bank loan and overdraft (secured) 791 251
2,462 Trade creditors 2,088 2,205
1,993 Corporation tax payable 1,638 3,803
909 Taxation and social security 998 777
4,163 Tenants' deposits 4,575 3,869
7,203 Accruals 7,780 7,009
5,065 Deferred income - rent and service charges 5,318 4,290
3,049 Dividends 1,193 1,137
_____________________________________________________________________________________________________________
30,964 24,381 25,717
_____________________________________________________________________________________________________________
13. Creditors: Amounts falling due after more than one year
____________________________________________________________________________________________________________
Audited 31 March Unaudited 30 September
2002 2002 2001
£000 £000 £000
____________________________________________________________________________________________________________
Long-term borrowings consist of:
Unsecured:
2,900 11% Convertible Loan Stock 2011 2,900 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
156,683 Other secured loans 199,421 114,612
____________________________________________________________________________________________________________
179,083 221,821 137,012
(3,353) Less: amounts falling due within one year - (2,376)
____________________________________________________________________________________________________________
175,730 221,821 134,636
____________________________________________________________________________________________________________
14. Borrowings and financial instruments
i Maturity of financial liabilities
A maturity analysis of loans is shown below:
____________________________________________________________________________________________________________
Audited 31 March Unaudited 30 September
2002 2002 2001
£000 £000 £000
____________________________________________________________________________________________________________
6,120 Less than one year 791 2,627
3,660 Between one year and two years - 3,660
3,670 Between two years and three years - 3,670
4,275 Between three years and four years - 3,660
49,380 Between four years and five years 220,500 4,880
116,727 In five years and more 2,900 120,510
____________________________________________________________________________________________________________
183,832 224,191 139,007
(1,982) Less cost of raising finance (1,579) (1,744)
____________________________________________________________________________________________________________
181,850 222,612 137,263
____________________________________________________________________________________________________________
ii Fair value of financial liabilities
Book and fair values of financial liabilities are:
Audited 31 March Unaudited 30 September
2002 Book value Fair value Book Value Fair value
£000 2002 2002 2001 2001
£000 £000 £000 £000
_____________________________________________________________________________________________________________
Book Value Fair Value
Primary financial instruments
(6,120) (6,120) Short-term liabilities (791) (791) (2,627) (2,627)
(175,730) (181,293) Long-term borrowing (221,821) (227,514) (134,636) (139,936)
5,783 5,783 Financial assets 2,034 2,034 6,469 6,469
Derivative financial
instruments
283 (2,298) Interest rate collars 264 (5,358) 300 1,100
_____________________________________________________________________________________________________________
(175,784) (183,928) (220,314) (231,629) (130,494) (134,994)
_____________________________________________________________________________________________________________
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 71.1p per
share (53.3p based on diluted share capital).
15. Provision for liabilities and charges
_________________________________________________________________________________________________________
Audited 31 March Unaudited 30 September
2002 2002 2001
£000 £000 £000
_________________________________________________________________________________________________________
Deferred taxation:
- Balance at 1 April 2002/ 3,365 -
2001 (as previously stated)
3,128 Prior year adjustment - 3,128
_________________________________________________________________________________________________________
3,128 Balance at 1 April 2002/ 3,365 3,128
2001(as restated)
237 Deferred tax charge for 377 137
the period
_________________________________________________________________________________________________________
3,365 Balance at period end 3,742 3,265
_________________________________________________________________________________________________________
If the investment properties were sold for their revalued amount there would be a potential liability to corporation tax
of £40,050,000 (31 March 2002: £37,597,000; 30 September 2001: £32,928,000).
16. Share capital
_________________________________________________________________________________________________________
Audited 31 March Unaudited 30 September
2002 2002 2001
Number Number Number
_________________________________________________________________________________________________________
Authorised:
21,500,000 Ordinary shares of 10p 21,500,000 21,500,000
each
_________________________________________________________________________________________________________
_________________________________________________________________________________________________________
2002 2002 2001
£ £ £
_________________________________________________________________________________________________________
Issued:
_________________________________________________________________________________________________________
1,647,941 Fully paid ordinary 1,660,599 1,644,395
shares of 10p each
_________________________________________________________________________________________________________
17. Other reserves
____________________________________________________________________________________________________________
Audited 31 March Unaudited 30 September
2002 2002 2001
£000 £000 £000
____________________________________________________________________________________________________________
(a) Share premium account
40,666 Balance at 1 April 2002/2001 42,030 40,666
1,364 Additions 437 1,239
____________________________________________________________________________________________________________
42,030 Balance at period end 42,467 41,905
____________________________________________________________________________________________________________
(b) Revaluation reserve
Property valuation surplus:
122,739 Balance at 1 April 2002/2001 144,588 122,739
(5,014) Disposals during the period 87 (4,270)
26,863 Revaluation adjustment 8,091 14,389
____________________________________________________________________________________________________________
144,588 Balance at period end 152,766 132,858
____________________________________________________________________________________________________________
(c) Profit and loss account
26,555 Balance at 1 April 2002/2001 (as previously stated) 33,059 26,555
(3,128) Prior year adjustment - (3,128)
___________________________________________________________________________________________________________
23,427 Balance at 1 April 2002/2001 (as restated) 33,059 23,427
4,768 Retained profit for the period 1,835 3,155
5,014 Transfer from revaluation reserve (87) 4,270
(150) Taxation on valuation surpluses realised on sale of properties - -
____________________________________________________________________________________________________________
33,059 Balance at period end 34,807 30,852
____________________________________________________________________________________________________________
18. Reconciliation of movements in shareholders' funds
_____________________________________________________________________________________________________________
Audited 31 March Unaudited 30 September
2002 2002 2001
£000 £000 (restated)
£000
_____________________________________________________________________________________________________________
8,960 Profits for the financial period 3,014 4,298
(4,192) Dividends (1,179) (1,143)
26,863 Unrealised surplus on revaluation of properties 8,091 14,389
(150) Taxation on valuation surpluses realised on sale of properties - -
1,394 Issue of shares 450 1,265
_____________________________________________________________________________________________________________
32,875 Net addition to shareholders' funds 10,376 18,809
188,450 Opening shareholders' funds 221,325 188,450
_____________________________________________________________________________________________________________
221,325 Closing shareholders' funds 231,701 207,259
_____________________________________________________________________________________________________________
19. Equity minority interests
_____________________________________________________________________________________________________________
Audited 31 March Unaudited 30 September
2002 2002 2001
£000 £000 £000
____________________________________________________________________________________________________________
40 Share of loss of subsidiary undertaking 76 -
(40) Provision against losses of subsidiary undertaking (76) -
_____________________________________________________________________________________________________________
- - -
_____________________________________________________________________________________________________________
£nil has been appropriated to minority interests in all periods shown in this
statement.
20. Capital commitments
At the period end the estimated amounts of commitments for future capital
expenditure not provided for were:
_____________________________________________________________________________________________________________
Audited 31 March Unaudited 30 September
2002 2002 2001
£000 £000 £000
_____________________________________________________________________________________________________________
6,204 Under contract 3,762 2,556
11,396 Board authorised but not contracted 3,919 2,703
_____________________________________________________________________________________________________________
21. Subsequent events
Following the quarter end an option agreement was exchanged for the sale, for
£2.4m of the plots of land in Union Street, Southwark retained following the
development and disposal of the former Post Office premises. This land is valued
in the Group's accounts at £2.4m.
22. Interim statement
This statement was approved by the Board on 22 November 2002. Copies of this
statement will be dispatched to shareholders on Monday 25 November 2002 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.
This information is provided by RNS
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