Interim Results
Workspace Group PLC
22 November 2004
WORKSPACE REPORTS ENCOURAGING PROGRESS
AS OCCUPANCY IMPROVES
Workspace Group PLC ('Workspace') today announces its interim results for the
six months to 30 September 2004. Workspace provides over 5 million sq. ft of
flexible business accommodation for more than 3,900 small and medium size
enterprises ('SMEs') in London and the South East.
• Net Asset Value per share £19.87, up 23% over the year (30 September
2003: £16.15)
• Pre-tax profits on trading operations £6.92m (2003: £6.61m)
• Pre-tax profits £6.54m (2003: £6.64m)
• Basic earnings per share on trading operations 29.6p (30 September 2003:
28.8p)
• Basic earnings per share 27.6p (30 September 2003: 28.9p)
• £28.3m acquisitions and £34.5m disposals in the half year
• Like for like occupancy, excluding development schemes, up to 90.9%
(88.9% at 31 March 2004)
• Annual rent roll £40.34m, up 5.9% over the half year (31 March
2004: £38.09m; 30 September 2003: £37.00m)
• Interim dividend up 9.7% to 11.3p (30 September 2003: 10.3p)
• Inclusion into the FTSE 250 index
Commenting on the results, Harry Platt, Chief Executive, said,
' Our occupancy level has risen through 90% in a steadily improving London
economy, yet our space remains extremely affordable and competitive with an
average rent of £9 per square foot.
' We have continued to invest in property, consolidating our position as the
leading provider of space to SMEs in London and the South East and increasing
the range and style of accommodation that we offer to our customers.
' We are delighted with the progress that the group is making. Looking forward,
the future continues to look bright. We are confident that we will see improving
rental and capital values as demand for our space continues to improve. In
addition, many of our properties have the potential to add value, following
refurbishment initiatives, extensions, or complete re-development.
' We look forward to reporting further progress in the remainder of the year.'
-ends-
Date: Monday 22 November
For further information:
Workspace Group PLC City Profile Group
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
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Operating & Financial Review
Chairman's Statement
These are good results. We continue to focus on consistently building long term
value and this has again delivered net asset value (NAV) growth of 7.8% in the
half year and 23% over the full year to yield £19.87 NAV per share.
In an improving London economy, operating profit at £15.88m increased by 13.8%
over the same period last year (2003: £13.95m). Enquiries and occupancy levels
have continued to improve with occupancy now nearly 91%. However, profits after
tax and earnings per share were affected by increases in interest rates through
the period and by a small loss on the disposal of Three Mills which nonetheless
showed a pre-tax exit internal rate of return of 11.8%.
Following the quarter end, the Company moved into the FTSE 250. This is a
landmark for the Group, the market capitalisation of which has increased by 322%
since March 1999 (equivalent to 29% p.a. compound) entirely through organic
growth. With the Company's current share price your Board has decided that it
may be appropriate to subdivide the stock. It is proposed, therefore, that
subject to stable stock market conditions and no other adverse factor, a bonus
share issue will be made during the second half of the year.
We are increasing the interim dividend by 9.7% to 11.3 pence per share (2003/4:
10.3p), in line with previous practice.
The Group continues to have significant capacity for further investment. We
intend to make further selective acquisitions from our long-term target list.
The increasing occupancy levels should establish the foundation for renewed
rental growth next year and we are accordingly confident, not only of reporting
good results this year, but also of setting the stage for improved long term
growth for the Company.
Chief Executive's Statement
Trading
The improvements in occupancy recorded in the first quarter continued through
the second. At the end of the quarter, 43 of the Group's 100 estates
representing 36% of space and 42% of rent roll were 95% occupied or more. 85% of
the Group's portfolio (by area) comprising 77 properties was at least 85%
occupied. Of the remaining 15%, almost half the properties were estates where
developments/refurbishments have either recently been completed, are in progress
at present or where works are planned. This improvement has clawed back the
falls in occupancy that occurred last year and sets the scene for renewed rental
growth next year. The rent roll, including net acquisitions, at the period end
was £40.34m up 5.9% on 31 March 2004 and 9% on the same stage last year. As a
result, rental income at £21.42m was 12.2% up on the equivalent six months last
year.
Trading earnings growth has been affected by interest rate increases. Average
LIBOR rates over the 6 months to 30 September 2004 were 4.76%, some 1.16%
greater than those for the comparable period last year. Allowing for the impact
of the Group's interest rate collars, this alone increased interest costs by
approximately £0.9m with the result that earnings growth (Trading Profits before
Tax) was held back to a 4.8% increase.
During the second quarter, two properties were purchased for a total of £23.6m
taking the total of acquisitions to £28.3m for the year to date. The Group has
targeted £65m of acquisitions for the year in total. During the period the
management intensive film studios at Three Mills (comprising Three Mills
Studios, Sugar House Business Centre and the Sugar House Lane Yard) were sold
for a total consideration of £22.6m taking the total consideration for disposals
to £34.5m for the half year. A small £0.41m loss was recorded in the sale of
Three Mills. However, this was following a £4.13m valuation surplus last year
and it showed a good 11.8% pre-tax internal rate of return over its holding
period. Further details on these acquisitions and disposals, together with the
projects in hand, are given below.
Portfolio
The table below shows the main details of acquisitions and disposals during the
half year: -
Name of Property Description Acquisition/ Initial/Exit Market Rent
Sale price Annual Income at 30/09/04
£000 £000
Acquisitions
First Quarter
The Quadrangle, 26,000 sq.ft
Fulham, SW6 business centre, £4.64m 29.0 427.0
26 units
Second Quarter
Southbank 64,000 sq.ft
House , SE1 business centre, £16.00m 965.4 1,246.7
212 units
Southgate
Office 33,900 sq.ft.
Village, office park
Enfield, N14 in 8 blocks £7.63m 653.7 450.2
------------------------------------------------
£28.27m 1,948.1 2,123.9
------------------------------------------------
Disposals
First Quarter
Hooley Lane, Land for
Redhill development £10.00m NIL
Union Street Land for
Site, SE1 development £1.88m 12.0
Second Quarter
Three Mills
Estate Film studios, £22.60m *868.9
industrial
units and
business
centre
------------------------------------------------
£34.48m £880.9
------------------------------------------------
* excludes income from short term lettings.
Full details of the disposals at Hooley Lane and Union Street were given in the
Group's Annual Report and Accounts 2004. In brief, following the grant of
planning consents for change of use and redevelopment, these sites were sold to
residential developers. Substantial pre-tax internal rates of returns of 49%
(Hooley) and 23% (Union Street) were achieved on these properties. Three Mills
estate was sold to the London Development Agency as part of the land assembly
for its Olympic bid.
The acquisitions reflect the variety of opportunities which we seek. The
Quadrangle has provided the Group with a presence in Fulham where we have long
sought better representation; Southbank House has been monitored for a long
time, and complements our other buildings on the Southbank. Finally, Southgate
Office Village offers a modern office park at the heart of Southgate servicing
this suburban location. Presently, some of the major tenants are banks but over
time the Group anticipates it will be able to re-target it towards local
businesses.
Following these movements in disposals and acquisitions the portfolio
statistics, and progress through the year to date, may be summarised as follows:
30 September 30 June 31 March
2004 2004 2004
Number of estates 100 101 102
Total floorspace at end of period (sq.ft.) 5,035,667 5,335,073 5,316,951
of which:
Like for like portfolio (sq. ft.) 4,787,694 4,763,456
Net Acquisitions/Disposals (sq. ft.) 55,358 26,012
Three Mills and developments (sq. ft.) 192,615 545,605
Lettable units (number) 4,608 4,584 4,547
Annual rent roll of occupied units (£m) 40,335,068 38,766,883 38,091,471
Average rent (£/sq. ft) 9.05 8.62 8.55
Average rent of like-for-like portfolio
(£/sq. ft) 8.58 8.60 8.57
Occupancy overall 88.5% 84.3% 83.8%
Occupancy of like-for-like portfolio 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
during the quarter due in part to the disposal of Three Mills which, as a film
studio, had a significant amount of short term let space which was not included
in occupancy statistics.
As noted in the Chief Executive's review, occupancy has improved again in the
2nd quarter, moving to 90.9%. Rents have increased by £2.24m over the half year;
£1.17m as a result of acquisitions (net of disposals) with £1.07m from the
existing portfolio, largely driven by the occupancy increases. Overall the
average rent of the like for like portfolio has been stable over the six months
moving from £8.57 to £8.58 per square foot.
Occupancy improvements were recorded over the half year at the properties
refurbished last year with Quality Court at 53.4% (31 March 2004: 15.0%) and
Barley Mow 55.5% (31 March 2004: 48.0%). Occupancy has been lost at Clerkenwell
(31 March 2004: 48.6%) as the building has now been fully vacated for its
refurbishment, which is now in progress. Works continue at the Enterprise Estate
(adjacent to the Oxo Tower) where a rolling refurbishment and improvement
programme is in progress. Phase 1, Hatfield House, 52-54 Stamford Street is now
complete and fully let. Part one of the second phase, the creation of a new
reception area serving 1-2 Hatfields and, in due course, Enterprise House, is
approaching completion. This will be followed by part two, a refurbishment of
the offices above this, together with a two-storey extension. Once this is
complete, in Summer 2005, Enterprise House itself will be refurbished. One of
the two single floor extensions at the Leathermarket, completed in the
Spring was let following the period end.
The programme to add value at selected Group properties has continued. Following
receipt of planning permission for the redevelopment of the Group's property at
Thurston Road, Lewisham, to provide retail and residential accommodation, the
Group has been in discussions with the local Council on proposals for the
further intensification of the use of the site. An agreement has been exchanged
with Places for People for the redevelopment of the Group's Greenheath Business
Centre, to provide a mixture of residential accommodation and new business
space. This is a formula which not only releases a significant proportion of the
Group's investment in the site, but also provides new, better quality
replacement accommodation. Similar arrangements are under examination at the
Group's Wharf Road and Aberdeen Studios estates.
Valuation
The interim valuation yielded a net surplus of £27.0m, an uplift of 4.3%, taking
the total value of investment property to £652.5m and net worth to £322.2m. Net
Asset Value per share increased by 7.8% over the half year, despite the impact
of the substantial tax liabilities (£3.8m) arising from the Redhill and Three
Mills disposals.
This increase in the valuation was driven, in part, by the increases in rent
(£1.07m or 2.8% from the existing portfolio) which was due in turn to the
occupancy improvements referred to earlier.
Following a review of its portfolio, the Group has identified that as much as
45% has potential for 'added value' activities such as refurbishment, extensions
and redevelopment over the longer term. Much of this is not immediately
realisable but will mature as pressures on land availability increase in London.
Little value arising from this is recognised in the Group's portfolio valuation,
which continues to be based on existing use value except where consent for an
improved use has been obtained. Further, the valuation does not recognise the
accruing value of an increasingly focused portfolio which facilitates
interrelation between properties.
Financial Review
Once again, turnover (up 12.1%), gross profit (up 14.1%), operating profit (up
13.8%) and trading profits before tax (up 4.8%) were all increased. Profits
before tax were, however, down slightly by 1.5% due principally to the loss on
the disposal of Three Mills referred to earlier. Trading PBT growth was
impacted, as mentioned earlier, by interest rate increases over the period.
Notwithstanding these increases (average cost of floating rate funding up by 13%
to 5.70%) trading interest cover was only marginally down at 1.77 times (1.90
for the period to 30 September 2003). With interest rates continuing to track
levels higher than those anticipated (in terms of forward rates) six months ago,
the effect on earnings growth is likely to continue through the second half of
the year, showing some recovery next year if, as expected, interest rates
stabilise.
The effective rate of tax, at 32% (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 taken in the quarter
relating to these disposals total 24 pence per share. The NAV growth reported
has been achieved after absorbing this cost.
The interim dividend of 11.3 pence per share represents a 9.7% increase on that
paid last year (2003: 10.3 pence). This increase is in line with the previous
policy of increasing dividends by 10% p.a. overall with an interim dividend of
approximately one third the anticipated total dividend.
Following the interim valuation, showing a surplus of £27.0m, NAV per share
increased by 144 pence, 7.8% over the six months to £19.87.
Net cash flow from operating activities was up £2.48m at £16.2m for the six
months (compared with the same period last year). With the substantial proceeds
from disposals the net inflow from net acquisitions and disposals for the half
year was £1.5m compared with a £46.2m outflow last time. Overall bank debt
reduced slightly from £305.8m to £302.2m over the six months. 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: -
6 Months to Year to 6 Months to
30 September 2004 31 March 2004 30 September 2003
Gross profit: turnover 74% 72% 72%
Operating profit: turnover 59% 58% 58%
Trading PBT: turnover 26% 28% 28%
EPS per share (pence) 27.6 65.7 28.9
NAV per share (£) 19.87 18.43 16.15
Interest cover 1.73 1.97 1.90
Trading interest cover 1.77 1.91 1.90
Gearing 94% 103% 108%
Available facilities(£m) 68.3 15.5 30.0
Prospects
The Group aims to maintain its current high levels of occupancy into 2005. Such
stable, robust occupancy levels will provide the environment for rents to rise
next year through re-application of our rent review programme. Meanwhile, our
asset values should continue to benefit from the increased interest in
commercial property, the improved prospects for rental growth, and the impact of
our selective added value programme in the intensification and change of use of
certain estates.
The Group continues to monitor a large number of target acquisitions and
anticipates making further property acquisitions before the year end. The Group
has £68m immediate investment capacity - with further potential beyond this as
new facilities are arranged. The Group is now by far the leading provider of
flexible, affordable space for small and medium sized enterprises (SMEs) in
London and the South East. With its continuing acquisition programme its leading
position will be reinforced.
For 2004/05 as a whole, the Group remains confident of reporting a further year
of good progress.
Consolidated Profit and Loss Account
for the 6 months ended 30 September 2004
Audited Unaudited Unaudited 6 months ended 30 September
year ended 3 months ended
31 March 30 September
Trading Other Total Total
Operations Items
2004 Notes 2004 2003 £2004 2003
£000 £000 £000 £000 £000 £000 £000
---------------------------------------------------------------------------------------
51,068 Turnover - 2 13,507 12,102 26,911 - 26,911 24,014
continuing
operations
(14,229) Rent payable and (3,503) (3,271) (7,100) - (7,100)(6,654)
direct costs
---------------------------------------------------------------------------------------
36,839 Gross profit 10,004 8,831 19,811 - 19,811 17,360
(7,145) Administrative (1,996) (1,709) (3,928) - (3,928)(3,407)
expenses
---------------------------------------------------------------------------------------
29,694 Operating profit 8,008 7,122 15,883 - 15,883 13,953
continuing
operations
1,009 (Loss)/profit on (407) 5 - (384) (384) 32
disposal of
investment property
45 Interest 3 27 7 45 - 45 18
receivable
(15,628) Interest payable 4 (4,598) (3,782) (9,005) - (9,005)(7,364)
and similar charge
---------------------------------------------------------------------------------------
15,120 Profit on ordinary 3,030 3,352 6,923 (384) 6,539 6,639
activities before
taxation
(4,587) Taxation on profit 5 (1,017) (1,031) (2,144) 49 (2,095)(2,018)
on ordinary
activities
---------------------------------------------------------------------------------------
10,533 Profit attributable 2,013 2,321 4,779 (335) 4,444 4,621
to shareholders
(4,981) Dividends 6 (1,861) (1,658) (1,861) - (1,861)(1,658)
---------------------------------------------------------------------------------------
5,552 Retained for the 152 663 2,918 (335) 2,583 2,963
period
---------------------------------------------------------------------------------------
65.7p Basic earnings per 7 12.5p 14.5p 29.6p (2.0)p 27.6p 28.9p
share
63.9p Diluted earnings 7 12.2p 14.2p 28.9p (1.9)p 27.0p 8.3p
per share
---------------------------------------------------------------------------------------
Statement of Total Recognised Gains and Losses
Audited Unaudited
year ended 6 months ended
31 March 30 September
-------- ----------------------------------- ---------------------
2004 2004 2003
£000 £000 £000
-------- ----------------------------------- ---------------------
10,533 Profit for the financial period 4,444 4,621
49,699 Unrealised surplus on revaluation of 27,033 14,398
investment properties
(1,215) Taxation on valuation surpluses realised (3,849) -
on sale of properties
-------- ----------------------------------- ---------------------
59,017 Total recognised gains relating to the 27,628 19,019
financial period
-------- ----------------------------------- ---------------------
Note of Historical Cost Profits and Losses
Audited Unaudited
year ended 6 months ended
31 March 30 September
-------- ------------------------------------------- ---------------------
2004 2004 2003
£000 £000 £000
-------- ------------------------------------------- ---------------------
15,120 Reported profits on ordinary activities 6,539 6,639
before taxation
4,408 Realisation of property revaluation 14,252 -
gains of previous years
(1,215) Taxation on valuation surpluses realised (3,849) -
on sale of properties
-------- ------------------------------------------- ---------------------
18,313 Historical cost profit on ordinary 16,942 6,639
activities before taxation
-------- ------------------------------------------- ---------------------
8,745 Historical cost profit for the period 12,986 2,963
retained after taxation and dividends
-------- ------------------------------------------- ---------------------
Consolidated Balance Sheet
as at 30 September 2004
Audited Unaudited
31 March 30 September
---------- -------------------------- ------- -------- ---------
(restated) (restated)
2004 2004 2003
£000 Notes £000 £000
---------- -------------------------- ------- -------- ---------
Fixed Assets
Tangible assets
626,060 Investment properties 9 652,450 555,355
3,654 Other fixed assets 3,378 3,467
---------- -------------------------- ------- -------- ---------
629,714 655,828 558,822
---------- -------------------------- ------- -------- ---------
Current Assets
- Stock: properties for sale - 10,673
6,795 Debtors 10 8,032 10,002
1,150 Investments 11 3,831 3,962
181 Cash at bank and in hand 196 414
---------- -------------------------- ------- -------- ---------
8,126 12,059 25,051
(30,942) Creditors: amounts falling due 12 (33,622) (29,331)
within one year
---------- -------------------------- ------- -------- ---------
(22,816) Net current liabilities (21,563) (4,280)
---------- -------------------------- ------- -------- ---------
606,898 Total assets less current 634,265 554,542
liabilities
(305,756) Creditors: amounts falling due 13 (306,239) (291,101)
after more than one year (including
Convertible Loan Stock)
(5,483) Provision for liabilities and 15 (5,801) (4,502)
charges
---------- -------------------------- ------- -------- ---------
295,659 322,225 258,939
---------- -------------------------- ------- -------- ---------
Capital and reserves
1,673 Called up share capital 16 1,688 1,672
42,912 Share premium account 17 43,586 42,868
209,565 Revaluation reserve 17 222,346 178,672
47,715 Profit and loss account 17 60,701 41,933
(6,206) Investment in own shares 18 (6,096) (6,206)
---------- -------------------------- ------- -------- ---------
295,659 Shareholders' funds - equity 322,225 258,939
interests
---------- -------------------------- ------- -------- ---------
£18.43 Net asset value per share 8 £19.87 £16.15
---------- -------------------------- ------- -------- ---------
£17.72 Diluted net asset value per share 8 £19.17 £15.62
---------- -------------------------- ------- -------- ---------
Consolidated Cash Flow Statement
for the 6 months ended 30 September 2004
Audited Unaudited
31 March 30 September
---------- -------------------------- -------- ------- ---------
2004 Notes to 2004 2003
£000 cash flow £000 £000
----------- -------------------------- -------- -------- --------
31,615 Net cash inflow from operating 1 16,247 13,767
activities
(15,692) Return on investments and 2 (9,320) (7,417)
servicing of finance
(4,110) Taxation (2,329) (1,915)
(70,155) Capital proceeds/(expenditure) - 2 1,498 (46,190)
net
(4,952) Equity dividends paid (3,349) (3,299)
----------- -------------------------- -------- -------- --------
(63,294) Net cash inflow/(outflow) before 2,747 (45,054)
use of liquid resources
and financing
1,959 Management of liquid resources 2 (2,681) (853)
59,720 Financing 2 1,289 45,175
----------- -------------------------- -------- -------- --------
(1,615) Net cash inflow/(outflow) 3 1,355 (732)
----------- -------------------------- -------- -------- --------
Reconciliation of net cash flow
to movement in net debt
(1,615) Increase/(decrease) in cash 1,355 (732)
(1,959) Increase/(decrease) in liquid 2,681 853
resources
(59,766) Outflow from movements in debt (483) (45,111)
financing
----------- -------------------------- -------- -------- --------
(63,340) Changes in net debt resulting 3 3,553 (44,990)
from cash flows
----------- -------------------------- -------- -------- --------
(242,425) Net debt at beginning of period (305,765) (242,425)
(305,765) Net debt at period end (302,212) (287,415)
----------- -------------------------- -------- -------- --------
Notes to the cash flow statement
for the 6 months ended 30 September 2004
1.Reconciliation of operating profit to operating cash flows
Audited year Unaudited
ended 31 March 6 months ended 30 September
----------- -------------------------------- -------- --------
2004 2004 2003
£000 £000 £000
----------- -------------------------------- -------- --------
29,694 Operating profit 15,883 13,953
585 Depreciation charges 341 281
56 (Increase)/decrease in debtors (1,756) (1,061)
1,280 Increase in creditors 1,779 594
----------- -------------------------------- -------- --------
31,615 16,247 13,767
----------- -------------------------------- -------- --------
2.Analysis of cash flow
Audited year Unaudited
ended 31 March 6 months ended 30 September
2004 Notes to 2004 2003
£000 cash flow £000 £000
---------- --------------------------- ------- -------- --------
Returns on investments and
servicing of finance
45 Interest received 45 18
(15,737) Interest paid (including (9,365) (7,435)
financing costs)
---------- --------------------------- ------- -------- --------
(15,692) Net cash outflow (9,320) (7,417)
---------- --------------------------- ------- -------- --------
Capital expenditure
(81,934) Purchase of tangible fixed (32,831) (47,496)
assets
28 Net distribution/(purchase) of 110 28
own shares
11,751 Sale of tangible fixed assets 34,219 1,278
---------- --------------------------- ------- -------- --------
(70,155) Net cash inflow/(outflow) 1,498 (46,190)
---------- --------------------------- ------- -------- --------
Management of liquid
resources
1,959 (Increase)/decrease in 3 (2,681) (853)
short-term deposits
---------- --------------------------- ------- -------- --------
1,959 Net cash (outflow)/inflow (2,681) (853)
---------- --------------------------- ------- -------- --------
Financing
220 Issue of ordinary share 289 175
capital
59,500 Drawdown of bank loans 3 1,000 45,000
---------- --------------------------- ------- -------- --------
59,720 Net cash inflow 1,289 45,175
---------- --------------------------- ------- -------- --------
3.Analysis of net debt
----------------------------- -------- ------- -------- --------
At 1 April Cash flow Non-cash At 30 September
2004 Items 2004
£000 £000 £000 £000
----------------------------- -------- ------- -------- --------
Cash at bank
and in hand 181 15 - 196
Bank
overdrafts (1,340) 1,340 - -
----------------------------- -------- ------- -------- --------
(1,159) 1,355 - 196
----------------------------- -------- ------- -------- --------
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) (1,000) - (285,500)
Less cost of raising of
finance 1,144 304 (187) 1,261
----------------------------- -------- ------- -------- --------
(305,756) (696) 213 (306,239)
----------------------------- -------- ------- -------- --------
Short-term deposits 1,150 2,681 - 3,831
----------------------------- -------- ------- -------- --------
Total (305,765) 3,340 213 (302,212)
----------------------------- -------- ------- -------- --------
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 2004 included an
unqualified report of the auditors. The Group's unaudited accounts for the
period ended 30 September 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
Unaudited Unaudited
Audited Year 3 months ended 6 months ended
ended 31 March 30 September 30 September
---------- --------------------- -------- -------- --------- --------
2004 2004 2003 2004 2003
£000 £000 £000 £000 £000
---------- --------------------- -------- -------- --------- --------
39,504 Rental Income 10,696 9,606 21,417 19,086
9,059 Service charge and other 2,440 2,042 4,838 4,141
recoveries
2,505 Services, fees, commissions, 371 454 656 787
and sundry income
---------- --------------------- -------- -------- --------- --------
51,068 13,507 12,102 26,911 24,014
---------- --------------------- -------- -------- --------- --------
3. Interest receivable
Unaudited Unaudited
Audited Year 3 months ended 6 months ended
ended 31 March 30 September 30 September
---------- --------------------- -------- -------- --------- --------
2004 The following amounts were 2004 2003 2004 2003
£000 earned during the year £000 £000 £000 £000
---------- --------------------- -------- -------- --------- -------
30 Short-term deposits 24 7 41 18
15 Other 3 - 4 -
---------- --------------------- --------- ------- --------- --------
45 27 7 45 18
---------- --------------------- --------- ------- --------- --------
4. Interest payable and similar charges
Audited Year 3 months ended 6 months ended
ended 31 March 30 September 30 September
---------- --------------------- -------- -------- --------- --------
2004 2004 2003 2004 2003
£000 £000 £000 £000 £000
---------- --------------------- -------- -------- --------- --------
319 11% Convertible Loan Stock 69 79 149 159
2011
1,391 11.125% First Mortgage 347 347 695 695
Debenture Stock 2007
814 11.625% First Mortgage 204 204 407 407
Debenture Stock 2007
14,210 Bank and other interest on 4,304 3,386 8,296 6,543
amounts wholly repayable
within five years*
---------- --------------------- -------- -------- --------- --------
16,734 4,924 4,016 9,547 7,804
(1,106) Interest capitalised on (326) (234) (542) (440)
development properties
---------- --------------------- --------- ------- --------- --------
15,628 Charged to profit and 4,598 3,782 9,005 7,364
loss account
---------- --------------------- --------- ------- --------- --------
* includes amortisation of cost of raising finance
5. Taxation
Audited Year 3 months ended 6 months ended
ended 31 March 30 September 30 September
---------- --------------------- -------- -------- --------- --------
2004 2004 2003 2004 2003
£000 £000 £000 £000 £000
---------- --------------------- -------- -------- --------- --------
Current tax:
3,534 UK corporation tax on 930 840 1,777 1,623
profit for the year
(323) Adjustment in respect - - - -
of previous years
---------- --------------------- -------- -------- --------- --------
3,211 Total current tax 930 840 1,777 1,623
---------- --------------------- -------- -------- --------- --------
Deferred tax:
1,376 Origination and 87 191 318 395
reversal of timing
differences
---------- --------------------- -------- -------- --------- --------
4,587 Tax on profit on 1,017 1,031 2,095 2,018
ordinary activities
---------- --------------------- -------- -------- --------- --------
Timing differences are mainly in respect of capital and industrial building
allowances and capitalised interest.
6. Dividends
Audited Year 3 months ended 6 months ended
ended 31 March 30 September 30 September
---------- --------------------- -------- -------- --------- --------
2004 2004 2003 2004 2003
£000 £000 £000 £000 £000
---------- --------------------- -------- -------- --------- --------
1,653 Interim dividend per 1,832 1,651 1,832 1,651
ordinary share 11.3p
(2003: 10.3p)
3,321 Final dividend per ordinary - - -
share
7 Under provision in prior 29 7 29 7
year
---------- --------------------- -------- -------- --------- --------
4,981 1,861 1,658 1,861 1,658
---------- --------------------- -------- -------- --------- --------
The proposed interim dividend is payable on 1 February 2005 to shareholders on
the register at the close of business on 7 January 2005.
7. Earnings per share
The following table shows a reconciliation of profits used in calculating
earnings per share.
Audited year Unaudited 6 months ended 30 September
ended 31 March
-------- ------- ---------------- -------- ------- -------- ---------
Profit Earnings Earnings Earnings
per share Profit Profit per share per share
2004 2004 2004 2003 2004 2003
£000 Pence £000 £000 Pence Pence
-------- ------- ---------------- -------- ------- -------- --------
10,533 65.7 Profit for the 4,444 4,621 27.6 28.9
period
attributable to
shareholders
(706) (4.4) Other items 335 (22) 2.0 (0.1)
-------- ------- ---------------- -------- ------- -------- --------
9,827 61.3 Profit for the 4,779 4,599 29.6 28.8
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 Unaudited 6 months ended 30 September
ended 31 March
-------- ------- ---------------- -------- ------- -------- ---------
Profit Earnings Earnings Earnings
per share Profit Profit per share per share
2004 2004 2004 2003 2004 2003
£000 Pence £000 £000 Pence Pence
-------- ------- ---------------- -------- ------- -------- --------
10,533 Profit for the 4,444 4,621
period
attributable to
shareholders used
for calculating
basic earnings per
share
223 Interest saving 104 112
net of taxation on
11% Convertible
Loan Stock
-------- ------- ---------------- -------- ------- -------- --------
10,756 63.9 Profit for the 4,548 4,733 27.0 28.3
period
attributable to
shareholders used
in calculating the
underlying diluted
earnings per share
(706) (4.2) Other items 335 (22) 1.9 (0.1)
-------- ------- ---------------- -------- ------- -------- --------
10,050 59.7 Profit for the 4,883 4,711 28.9 28.2
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 6 months ended 30 September
2004 2004 2003
--------- --------------- ------------ -----------
16,021,462 Used for calculating basic 16,128,828 16,002,851
earnings per share
227,276 Dilution due to Share Option 222,762 155,290
Scheme
580,000 Dilution due to Convertible Loan 500,000 580,000
Stock
--------- --------------- ------------ -----------
16,828,738 Used for calculating diluted 16,851,590 16,738,141
earnings per share
--------- --------------- ------------ -----------
8 Net assets per share
Net assets per share have been calculated by dividing net assets of £322,225,000
(2003: £258,939,000) by 16,216,145 (2003: 16,031,788 ) being the number of
shares in issue at 30 September 2004 less investment in own shares of 667,066
(2003: 689,666).
Diluted net assets per share have been calculated by dividing net assets (as
above) plus £2,500,000 (2003: £2,900,000) for the conversion of the Convertible
Loan Stock by the number of shares as below:
Audited year
ended 31 March 6 months ended 30 September
2004 2004 2003
--------- --------------- ------------ -----------
16,733,811 Shares in issue at end of 16,883,211 16,721,454
period
(689,666) Less ESOT shares (667,066) (689,666)
580,000 Dilution due to Convertible Loan 500,000 580,000
Stock
227,276 Dilution due to Share Option 222,762 155,290
Scheme
--------- --------------- ------------ -----------
16,851,421 Used for calculating diluted net 16,938,907 16,767,078
assets per share
--------- --------------- ------------ -----------
9 Investment properties
Audited 31 March Unaudited 30 September
2004
-------- --------------- ------- ------- ------- ------ ------- --------
Freehold Mainly Long Short Total Total
2004 Freehold leasehold Leasehold 2004 2003
£000 £000 £000 £000 £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 33,273 399 70 - 33,742 45,498
the period
(9,497) Disposals during (13,191) (21,194) - - (34,385) -
the period
642 Reclassification - - - - - 642
from other
fixed assets
- Reclassification - - - - - (10,673)
to current assets
49,699 Revaluation 19,043 5,375 2,615 - 27,033 14,398
during the
period
-------- --------------- ------- ------- ------- ------ ------- --------
626,060 Balance at 508,435 70,455 73,560 - 652,450 555,355
period end
-------- --------------- ------- ------- ------- ------ ------- --------
The historical
cost of investment
properties
416,039 Balance at 336,228 37,854 55,559 7 429,648 381,885
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 Unaudited 30 September
31 March
---------- ----------------------------- ---------- ---------
2004 2004 2003
£000 £000 £000
---------- ----------------------------- ---------- ---------
Amounts falling due within one year:
4,765 Trade debtors 4,693 4,781
464 Deposits on investment acquisitions - -
4 Taxation and social security 4 2,776
1,562 Prepayments and accrued income 3,335 2,445
---------- ----------------------------- ---------- ---------
6,795 8,032 10,002
---------- ----------------------------- ---------- ---------
11. Investments
Investments of £3,831,000 (2003: £3,962,000) comprise short-term deposits with
an original maturity date of less than three months and tenants' security
deposits.
Tenants' deposits represent returnable security deposits received from tenants.
These are ring-fenced as per the terms of the individual lease contracts and
cannot be used to fund the working capital of the Group, and are accordingly
held separately from other cash balances.
12. Creditors: Amounts falling due within one year
Audited Unaudited 30 September
31 March
---------- ----------------------------- ---------- ---------
2004 2004 2003
£000 £000 £000
---------- ----------------------------- ---------- ---------
1,340 Bank overdraft (secured) - 690
1,902 Trade creditors 3,146 4,023
2,242 Corporation tax payable 5,539 1,632
1,757 Taxation and social security 1,574 284
5,461 Tenants' deposits 5,870 5,261
9,884 Accruals 10,834 10,506
5,035 Deferred income - rent and service charges 4,827 5,284
3,321 Dividends 1,832 1,651
---------- ---------------------------- ---------- ---------
30,942 33,622 29,331
---------- ---------------------------- ---------- ---------
13. Creditors: Amounts falling due after more than one year
Audited Unaudited 30 September
31 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 12,500 12,500
2007
7,000 11.625% First Mortgage Debenture Stock 7,000 7,000
2007
283,356 Other secured loans 284,239 268,701
---------- ---------------------------- ---------- --------
305,756 306,239 291,101
---------- ---------------------------- ---------- --------
14. Borrowings and financial instruments
i Maturity of financial liabilities
A maturity analysis of loans is shown below:
Audited Unaudited 30 September
31 March
---------- ----------------------------- ---------- -------
2004 2004 2003
£000 £000 £000
---------- ----------------------------- ---------- -------
1,340 Less than one year - 690
- Between two years and three years 219,500 -
304,000 Between three years and four years - 289,500
- Between four years and five years 85,500 -
2,900 In five years and more 2,500 2,900
---------- ----------------------------- ---------- -------
308,240 307,500 293,090
(1,144) Less cost of raising finance (1,261) (1,299)
---------- ----------------------------- ---------- -------
307,096 306,239 291,791
---------- ----------------------------- ---------- -------
ii Fair value of financial assets and liabilities
Book and fair values of financial assets and liabilities are:
Audited 31 March Unaudited 30 September
-------- ---------------- -------- -------- -------- --------
Book value Fair value Book value Fair value Book value Fair value
2004 2004 2004 2004 2003 2003
£000 £000 £000 £000 £000 £000
-------- ---------------- -------- -------- -------- --------
Primary
financial
instruments
(1,340) (1,340) Short-term - - (690) (690)
liabilities
(305,756) (312,196) Long-term (306,239) (313,134) (291,101) (296,621)
borrowing
1,331 1,331 Financial 4,027 4,027 4,376 4,376
assets
Derivative
financial
instruments
206 (2,639) Interest rate 186 (1,566) 225 (4,936)
collars
-------- ---------------- -------- -------- -------- --------
(305,559) (314,844) (302,026) (310,673) (287,190) (297,871)
-------- ---------------- -------- -------- -------- --------
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 53.3p
(2003:66.6p) per share and 21.5p (2003: 46.6p) per share based on diluted share
capital.
15. Provision for liabilities and charges
Audited 31 Unaudited 30 September
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 318 395
---------- ----------------------------- ---------- ---------
5,483 Balance at period end 5,801 4,502
---------- ----------------------------- ---------- ---------
If the investment properties were sold for their revalued amount there would be
a potential liability to corporation tax of £54,130,000 (31 March 2004:
£51,293,000, 30 September 2003: £44,305,000). In accordance with FRS 19 no
provision has been made for these amounts.
16. Share capital
Audited 31 Unaudited 30 September
March
---------- ----------------------------- ---------- ---------
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 1,672,145
---------- ----------------------------- ---------- ---------
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 30 September
March
----------- ---------------------------- ---------- ---------
2004 2004 2003
£000 £000 £000
----------- ---------------------------- ---------- ---------
(a) Share premium account
42,697 Balance at 1 April 2004/2003 42,912 42,697
215 Additions 674 171
----------- ---------------------------- ---------- ---------
42,912 Balance at period end 43,586 42,868
----------- ---------------------------- ---------- ---------
(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) -
49,699 Revaluation adjustment 27,033 14,398
----------- ---------------------------- ---------- ---------
209,565 Balance at period end 222,346 178,672
----------- ---------------------------- ---------- ---------
(c) Profit and loss account
38,970 Balance at 1 April 2004/2003 47,715 38,970
5,552 Retained profit for the period 2,583 2,963
4,408 Transfer from revaluation reserve 14,252 -
(1,215) Taxation on valuation surpluses realised on (3,849) -
----------- sale of properties ---------- ---------
----------------------------
47,715 Balance at period end 60,701 41,933
----------- ---------------------------- ---------- ---------
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 30 September 2004, the number of shares held by the Trust totalled 667,066
shares (2003: 689,666) with a nominal value of £66,707 (2003: £68,967) and the
book value of the shares amounted to £6,096,157 (2003: £6,205,627). At 30
September 2004 the market value of the shares held by the Trust was £13,341,320.
665,930 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 equity shareholders' funds
Audited 31 Unaudited 30 September
March
----------- ---------------------------- ---------- ---------
2004 2004 2003
(restated) £000 (restated)
£000 £000
----------- ---------------------------- ---------- ---------
10,533 Profits for the financial period 4,444 4,621
(4,981) Dividends (1,861) (1,658)
49,699 Unrealised surplus on revaluation of 27,033 14,398
properties
(1,215) Taxation on valuation surpluses realised on (3,849) -
sale of properties
220 Issue of shares 689 175
28 Net distribution/(purchase) of own shares 110 28
----------- ---------------------------- ---------- ---------
54,284 Net addition to shareholders' funds 26,566 17,564
241,375 Opening shareholders' funds 295,659 241,375
----------- ---------------------------- ---------- ---------
295,659 Closing shareholders' funds 322,225 258,939
----------- ---------------------------- ---------- ---------
20. Capital commitments
At the period end the estimated amounts of commitments for future capital
expenditure not provided for were:
Audited 31 Unaudited 30 September
March
----------- --------------------------- --------- ---------
2004 2004 2003
£000 £000 £000
----------- ---------------------------- --------- ---------
8,166 Under contract 7,102 4,349
15,391 Board authorised but not contracted 10,178 2,474
----------- ---------------------------- --------- ---------
21. Post Balance Sheet Events
Following the period end contracts were exchanged for the purchase of Chiswick
Studios, London, W4 for a cash consideration of £2.9m.
22. Interim statement
This statement was approved by the Board on 19 November 2004. Copies of this
statement will be dispatched to shareholders on Monday 22 November 2004 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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