Final Results
Embargoed: 0700hrs, 25 February 2005
Contact Details:
Sten Mortstedt, Executive Chairman
Tom Thomson, Vice Chairman & Chief Executive
Steven Board, Chief Operating Officer
CLS Holdings Plc, Tel. 020 7582 7766
Adam Reynolds / Ben Simons
Hansard Communications
Tel. 020 7245 1100
CLS HOLDINGS PLC
PRELIMINARY FINANCIAL RESULTS FOR THE YEAR TO
31 DECEMBER 2004
FINANCIAL HIGHLIGHTS
- Added value to shareholders 20.0 per cent, up 7.2 per cent, based on increase
in adjusted NAV per share and distributions in the year (19.9 per cent based on
statutory NAV up 4.8 per cent).
- Adjusted Net Asset Value (NAV) per share 516.6 pence, up 15.9 per cent
(Statutory NAV per share 508.5 pence up 15.8 per cent).
- Profit before tax £18.8 million up 6.8 per cent.
- Intended distribution by way of a tender offer buy-back of 1 in 41 shares at
485 pence being 11.8 pence per share making a total distribution to
shareholders of 19.3 pence per share for the year, up 12.9 per cent.
- Property portfolio (including share of JVs) valued at £1.02 billion up 11.3 per
cent.
- Net rental income* (including associates and JVs) £67.5 million up 5.8 per
cent.
- Year end cash £56.7million (2003: £56.7 million).
*Net rental income comprises gross rental income and service charge income,
less service charge expenses.
Key statistics and other financial information
31 Dec 31 Dec
2004 2003
PROFIT AND LOSS
Adjusted earnings per share* 22.3 p 20.0 p Up 11.5 %
Earnings per share 21.1 p 20.7 p Up 1.9 %
Net rental income (including associates and £67.5 m £63.8 m Up 5.8 %
JVs)
Operating profit (including associates and £52.5 m £46.4 m Up 13.1 %
JVs)
Net interest payable (including associates and £34.2 m £30.7 m Up 11.4 %
JVs)
Core profit before tax £20.4 m £21.4 m Down 4.7 %
Profit before taxation £18.8 m £17.6 m Up 6.8 %
Retained profit £18.1 m £18.8 m Down 3.7 %
BALANCE SHEET
Adjusted NAV per share* 516.6 p 445.7 p Up 15.9 %
Statutory NAV per share 508.5 p 439.2 p Up 15.8 %
Distribution per share from tender offer 19.3 p 17.1 p Up 12.9 %
buy-backs
Property portfolio (including JVs) £1,022.4 m £918.5 m Up 11.3 %
Property portfolio (excluding JVs) £981.6 m £882.4 m Up 11.2 %
Net asset value £426.4 m £385.0 m Up 10.8 %
Cash £56.7 m £56.7 m - %
Adjusted gearing* 128.9% 125.1% Up 3.8 %
Statutory gearing 130.9 % 126.9% Up 4.0 %
Solidity (net assets as a ratio of gross 39.4 % 39.5% Down %
assets) 0.1
Shares in issue (000's) - excluding treasury 83,853 87,644 Down %
shares 4.3
FRS13 fair value adjustment after tax 28.8 p 20.7 p Up 39.1 %
* FRS19 requires a tax provision to be made in respect of capital allowances to
the extent that they are not covered by available tax losses brought forward.
In practice we consider it likely that the benefit of these capital allowances
will continue to be available whether or not the properties are sold in the
future. The Board has complied with pronouncements from the APB, ASB and
Listing Authority in showing NAV and Earnings per share including the FRS19
provision with equal prominence to the adjusted figures. The effect of FRS 19
has been excluded from those statistics that are described as adjusted, a
reconciliation of which is set out on the final page of this document.
At 31 December 2004 the FRS 19 deferred tax charge included in the profit and
loss account was £1.1 million and the cumulative reduction to net assets was £
6.8 million (31 December 2003: credit to tax of £0.6 million and reduction in
net assets of £5.7 million respectively). The accounting policies are as set
out in the Group's 2003 Annual Report and Accounts.
BUSINESS HIGHLIGHTS
During 2004
- Letting of 24,100 sq m (259,412 sq ft) in Solna, Stockholm to ICA,
Scandinavia's largest food retailer.
- Unrealised gains from three equity investments that were listed in the year
amounted to £12.4 million. The gain has not been booked and does not feature in
our financial results as the investments continue to be held at the lower of
cost and net realisable value.
- Acquisition of seven new properties, two in the UK, four in France and one in
Luxembourg at a cost of £38.2 million.
- One Leicester Square fully let to four tenants, including MTV, at a rental of £
1.7 million p a.
- Sale of Seine Defense, Paris for £7.4 million (€11.0 million) at a profit of £
0.5 million.
- Financing of property assets raised £111.3 million.
After the year end
- Pre-let of close to 18,500 sq m (200,000 sq ft) at London Bridge Tower to
Shangri-La hotel group for 30 years without a break .
CHAIRMAN'S STATEMENT
Introduction
I am very pleased to report that the Company has performed well during 2004.
Our financial results are discussed in detail in the Financial Review and
therefore I will highlight only the principal figures here. Adjusted net asset
value per share has increased by 15.9 per cent to 516.6 pence (Statutory NAV
per share increased by 15.8 per cent to 508.5 pence) and profit before taxation
increased by 6.8 per cent to £18.8 million.
Furthermore significant progress has been made during the year in planning and
re-developing a number of our properties the benefit of which has not yet been
fully reflected in our reported results for 2004, however this work has laid
solid foundations to further strengthen the Group's position.
Business Review
UK
In particular, progress has been made in the UK including a substantial pre-let
of nearly 18,500 sq m (200,000 sq ft) of space at London Bridge Tower to the
Shangri-La hotel group.
SWEDEN
In Sweden a major pre-let took place whereby 24,100 sq m (259,412 sq ft) of
offices and retail space at Solna, Stockholm was let to ICA, Scandinavia's
largest food retailer. The letting, which was one of the largest in Sweden in
recent years comprises 14,700 sq m (158,230 sq ft) of office space let for just
under twelve years and 9,400 sq m (101,182 sq ft) of retail space let for
fifteen years. ICA is due to take occupation and commence rental payments on
the newly re-furbished space this Summer.
CONTINENTAL EUROPE
Our asset portfolio in continental Europe has been further strengthened by five
new acquisitions in France and Luxembourg at favourable yields and at a cost of
£30.8 million.
EQUITY INVESTMENTS
The performance of our equity investments has shown a significant improvement
in the year, principally due to the successful flotations on AIM in London of
Amino Technologies Plc and Clearspeed Technology Plc, and Note AB on the
Stockholm Stock Exchange. Although these three investments produced an
unrealised surplus of £12.4 million at 31 December 2004, the gain has not yet
been reflected in our results. The market value of our equity investments held
as current assets, is £22.9 million. These investments are carried in our
books at £10.5 million, at the lower of cost and net realisable value. We
believe that there is potential latent value in the remaining unlisted
investments we hold and it is likely that a number of these will either be
listed or sold within the next two years.
Market Background
The economies of Europe and the UK in particular have been underpinned by
relatively strong fundamental economic indicators and established performance
which has stimulated demand for commercial property investments. The weight of
money available for investment and relatively stable and low interest rates
have further contributed to enhance property values. Investment in property
has shown the highest returns since October 1994 and the total return in 2004
to investors on the FTSE Real Estate Index, reflecting share price increase and
distributions, was 45 per cent.
Against this backdrop the total return to CLS investors in the year has been 51
per cent (Source : Thomson Data Stream).
Since our flotation in May 1994 our net assets have grown from £127.7 million
to £426.4 million, an increase of 233.9 per cent, a growth rate of 11.6 per
cent compound per annum and 11.9 per cent compound per annum over the last five
years.
Over the same period net asset value per share has increased from 129.0 pence
to 516.6 pence, 13.4 per cent compound per annum. Our property assets, based in
the UK, Sweden and France have increased from £287.0 million to £1,022.4
million (including joint ventures), an increase of 256.2 per cent.
This growth has resulted in our shares outperforming the FTSE Real Estate Index
by 153 per cent and the FTSE All Share Index by 210 per cent since flotation
(as at 31 January 2005).
As a result of our sustained growth, in May 2004 we were admitted into the FTSE
350 index
The closing price of our shares on 24 February 2005 was 417.5 pence compared to
a price of 111 pence on flotation, an increase of 276.1 per cent in that
period, and a growth of 50.9 per cent in the year to 31 December 2004.
The underlying business focus and principles by which we operate
The continually moving commercial environment requires us to be flexible and
vigilant in order to adapt to changing conditions. However this is not
incompatible with our strategic focus on the fundamental principles that drive
the business forward. These can be summarised as follows:
Primary aim is to provide our tenants with high quality premises - our aim is
to provide our tenants with high quality premises that are well managed and
offer flexible facilities in line with their requirements. We recognise the
importance of delivering value for money and being responsive to their needs.
Wherever practicable we offer the latest technological facilities to our
tenants.
Local markets - we only operate in regions where we have a clear understanding
of local markets and have firm relationships with well established and
reputable professional advisers. Operating from locally based offices also
enhances our ablity to work closely with our tenants.
Long-term investments and long-term relationships - we look to develop
long-term relationships with all our business partners including tenants,
lending institutions, advisers or suppliers. We do not trade properties, we
are long-term investors keen to add value by improving our properties and their
surroundings.
Carefully researched business decisions - commercial decisions, in all our
business locations, are subject to rigorous, carefully researched and
analytical processes and are formally presented to senior management before
being effected.
Local management - we employ well qualified and experienced local management
whilst maintaining strong lines of communication with our main London office.
Integrity - we recognise the immense value of working with people who have
solid business integrity, sound expertise and who are people we can trust.
Risk averse - we identify and monitor business risks and construct risk averse
mechanisms in the financing of our assets. Reasonably substantial interest
bearing cash reserves are held on our balance sheet in order to be able to
react quickly to potential opportunities.
Environmental issues - we will continue our work on improving the environmental
development of our properties throughout the Group, as already evidenced by the
prestigious environmental 'P mark' standard we received for developing 'green'
energy efficient properties through the refurbishment of our Solna complex.
The installation of energy efficient plant occurs wherever possible in order to
reduce energy consumption in our newly refurbished buildings. We regard green
energy and cost reduction as a major challenge and we plan to use among other
things, solar and geo-thermal energy efficient heating and cooling plants where
it is practical to do so. Additionally, we seek to source the materials used
in our development projects from sustainable resources.
Open and honest business relationships - we ensure that there are clear, open
lines of communication with our lenders and equity investors.
Prospects
We have made significant progress during 2004 and we look forward to a number
of challenges in the coming months and years. We have several major
developments in progress. In the UK our objective, together with our partners,
of completing the development of London Bridge Tower will require a great deal
of skill and careful attention. We therefore intend to ensure that the very
best team is assembled to bring this important project to a successful
conclusion. In West London, Great West House will be given a major
refurbishment that will rejuvenate the entire profile of the building,
increasing its appeal and value. In Sweden we will finish the extensive
refurbishment to Solna Business Park.
We will develop further our use of leading designs and materials in our
refurbishments. An example of this is the utilisation of façade materials at
Solna incorporating the technology of Keronite, a UK based associate company,
that changes the surface composition of light alloys such as aluminium or
magnesium to produce a diamond hard and corrosion resistant surface.
We will continue to seek out and acquire properties where the returns meet our
investment criteria and we will also assess the individual performance of our
existing investments and make selective sales where appropriate.
On the letting front, the continuing challenge will be to reduce the available
vacant space in each of our major markets. At 31 December the Group had vacant
space of 24,192 sq m (260,406 sq ft) representing 4.1 per cent of lettable
space with a further 37,430 sq m (402,906 sq ft) or 6.4 per cent under
refurbishment.
Our property activities are complemented by the relatively small-scale equity
investment business that is now showing significant potential returns but is
also a cash equivalent reserve and, in addition, diversifies a small element of
our overall business risk.
The CLS share price has performed well in 2004 yet still remains at a discount
to net asset value. We believe in the continuing benefit of distributing cash
by way of tender offer buy–backs, as it enhances the net asset value of the
remaining shares in issue and is tax beneficial for many shareholders. It is
the intention of the Board to recommend a tender offer buy–back of one in forty
one shares at a price of 485 pence per share, resulting in a total distribution
for the year of 19.3 pence per share, an increase of 12.9 per cent on the
previous year.
I would like to thank Anna Seeley, who resigned her Board position last
November, for her contribution to the company and I would also like to thank
my fellow directors, our staff, advisers, lenders and shareholders for the
support they have given to the Company.
In conclusion, I am very satisfied with the continuing strong performance of
the Group and am confident that it will deliver further added value during
2005. We are far from complacent and will continue to seek to optimise
shareholder returns.
Sten Mortstedt
Executive Chairman
25 February 2005
FINANCIAL REVIEW
Introduction: 2004 has seen further strong growth in the assets in each of our
markets. This has been coupled with robust operating performance.
Adjusted NAV of 516.6 pence per share (December 2003: 445.7 pence), grew by
15.9 per cent during 2004 (Statutory NAV of 508.5 pence per share grew by 15.8
per cent over the same period). In the last five years the adjusted net asset
value per share has grown by 16.2 per cent compound per annum, or a total of
211.9 per cent (Statutory NAV has shown a similar growth throughout that
period). The organic growth in adjusted net asset value per share over the
period (taking into account the effect of tender offer buy-backs but excluding
growth attributable to the purchase of shares on the market for cancellation)
has been 191.6 per cent (Statutory NAV has shown similar growth throughout that
period). If all share options were to be exercised, the dilutive effect would
be to reduce adjusted NAV per share by 2.2 pence (Statutory NAV by 2.1 pence).
At the year end the post-tax FRS 13 disclosure, showing the effect of restating
fixed interest loans to fair value, amounted to a reduction of 28.8 pence per
share (December 2003: 20.7 pence).
Added value to shareholders increased by 20.0 per cent (December 2003: 12.8 per
cent), as measured by the increase in adjusted NAV per share and distributions
by tender offer buy-backs. Based on Statutory NAV the return was 19.9 per cent
(December 2003: 15.1 per cent).
During the year the Company distributed £15.7 million (18.1 pence per share) to
shareholders by way of tender offer buy-backs at an average price per share of
384 pence (December 2003 : 15.4 pence per share distributed).
Net assets grew by £41.4 million to £426.4 million in the year, of which just £
0.8 million related to positive foreign exchange translation movements in
respect of the Group's Swedish and French net assets. Foreign exchange
movements are hedged as each property is funded by loans in local currency.
Net asset growth is calculated after taking into account the cost of tender
offer buy-back distributions made during the year, which totalled £15.7 million
as mentioned above.
Adjusted gearing at the year end increased to 128.9 per cent (2003: 125.1 per
cent) (statutory gearing was 130.9 per cent - 2003: 126.9 per cent). Tender
offer buy-backs during the year had the impact of increasing gearing by 3.6 per
cent and the positive effect of foreign exchange translation of overseas net
assets during 2004 reduced gearing by 0.2 per cent.
The Group held £56.7 million cash as at 31 December 2004 (December 2003: £56.7
million), the movement in the year being:
2004 2003
£m £m
Cash inflow from property activities 51.7 52.2
(Increase) / decrease in equity investments held in current assets (6.5) 0.2
Cash inflow from operations 45.2 52.4
Net interest and other finance costs (33.1) (29.0)
Taxation (0.5) (1.4)
Properties purchased and enhanced (67.5) (22.6)
New loans 111.3 25.5
Properties sold 8.5 23.6
Loans repaid (45.2) (29.2)
Tender offer payment to shareholders (15.7) (14.1)
Market purchase of shares for cancellation - (2.9)
Other (3.0) (11.3)
- (9.0)
Existing equity investments held amounted to £10.5 million (December 2003: £4.0
million). Since the successful flotation of Amino Technologies Plc, Clearspeed
Technology Plc and Note AB, the majority by value are listed investments, which
continue to be carried at the lower of cost and net realisable value, and
represent only 1.0 per cent of the gross assets of the Group.
We believe that our unlisted investments have the potential for growth in value
in due course and we continue to be closely involved in their progress and add
commercial support where appropriate.
The carrying value of our portfolio of listed investments was £7.4 million at
the year end. Had they been carried at market value an unrealised gain of £
12.4 million would have arisen.
The underlying elements of the growth in net assets are set out in the table
below. The table includes an un-booked adjustment in respect of the unrealised
equity investment gains mentioned above. This inclusion is for information
purposes. Due to the existing corporate structure of the Group it is not
expected that deferred taxation would become payable if either the properties
or the listed investments were sold. It is currently anticipated that the
overseas property assets would be sold within corporate entities.
Continental Equity
Movement in Net Assets Group UK Sweden Europe investments
£000 £000 £000 £000 £000
Opening Net Assets 385.0 181.6 91.6 103.8 8.0
Direct investment
Income from investment in property 64.9 30.5 16.5 18.5 (0.6)
Realised gains in equity investments 1.5 1.5
Cable company losses (3.6) (3.6)
Administrative expenses (9.8) (4.2) (3.1) (1.8) (0.7)
Net interest payable (34.2) (16.8) (10.1) (5.1) (2.2)
Profit before taxation from direct investment activities 18.8 9.5 3.3 11.6 (5.6)
Taxation -
Current taxation (0.6) (2.7) (0.6) 2.7
Deferred tax provision (FRS19) (1.1) 0.2 (1.3)
Equity minority interest 1.0 1.0
Retained profit 18.1 7.0 3.3 11.0 (3.2)
Indirect investment gains
Revaluation gains on property investments 34.2 21.6 3.0 9.6
Revaluation gains on joint venture properties 4.7 4.7
38.9 26.3 3.0 9.6
Increase in equity due to direct and indirect investment 57.0 33.3 6.3 20.6 (3.2)
Other equity movements
Share issues 0.4 0.4
Shares purchased and associated costs (0.1) (0.1)
Exchange and other movements 0.8 1.5 (0.7)
Movements on inter-company debt (14.9) 10.7 (5.7) 9.9
Minority interest (1.0) (1.0)
Capital distributions by way of tender offer buy-backs (15.7) (15.7)
Net Assets at 31 December 2004 426.4 184.6 110.1 118.0 13.7
Unrealised unbooked gains on listed investments 12.4 12.4
Net Assets at 31 December 2004 after un-booked gains 438.8 184.6 110.1 118.0 26.1
NAV (including un-booked equity investment gain) 523.3p 220.1p 131.3p 140.7p 31.1p
Increase in adjusted Net Assets 53.8 3.0 18.5 14.2 18.1
Increase per share in Net Assets 64.2p 3.6p 22.1p 16.9p 21.6p
Return on adjusted net asset 18.0% 18.3% 6.9% 19.8% 115.0%
The slight fall in core profit, which shows profit arising solely from property
rental, has arisen because of the impact of refinancing of properties and
increased interest rates in the UK.
2004 2003
£m £m
Profit before tax 18.8 17.6
Deduct:
Realised gains/(losses) in equity investments 1.5 (1.4)
Cable company losses (3.6) (4.6)
Profit on sale of properties 0.5 1.9
Lease surrenders and variations - 0.3
(1.6) (3.8)
Core profit 20.4 21.4
(Decrease)/increase on previous year (4.7)% 8.6%
REVIEW OF THE PROFIT AND LOSS ACCOUNT
Financial Results by Location: The results of the Group have been analysed by
location and main business activity as set out below:
Continental
2004 Europe Equity
Total UK Sweden investments 2003
£m £m £m £m £m £m
Net rental income 67.5 31.9 16.9 18.7 - 63.8
Less income in JVs (2.6) (2.6) - - - (1.4)
Other income 2.6 0.6 0.6 - 1.4 3.9
Net rental and
property related
income
(excluding JVs) 67.5 29.9 17.5 18.7 1.4 66.3
Operating expenses (18.8) (6.1) (4.1) (2.5) (6.1) (19.6)
Realised gains/ 1.5 - - - 1.5 (1.4)
(losses) in equity
investments
Associates / JVs 2.3 2.5 - - (0.2) 1.1
operating profit
Operating profit 52.5 26.3 13.4 16.2 (3.4) 46.4
Gain from sale of 0.5 - - 0.5 - 1.9
investment
properties
Net interest (34.2) (16.8) (10.1) (5.1) (2.2) (30.7)
payable and
related charges
Profit on ordinary 18.8 9.5 3.3 11.6 (5.6) 17.6
activities before
tax
Tax (1.7) (2.5) - (0.6) 1.4 (0.1)
Minority interest 1.0 - - - 1.0 1.3
Retained profit 18.1 7.0 3.3 11.0 (3.2) 18.8
Retained profit 31 18.8 10.0 1.3 10.4 (2.9)
December
2003
Increase/ (0.7) (3.0) 2.0 0.6 (0.3)
(decrease) in
retained profit
Net rental income:has increased by 5.8 per cent to £67.5 million and reflects a
full year contribution from Coop in Solna, Sweden (£1.9 million) and increased
rentals in France due to indexation and lease restructuring (£1.4 million).
Other income:of £2.6 million (2003: £3.9 million) includes the consolidation
of gross margins of telecoms subsidiaries of £1.5 million and dilapidations
income of £0.2 million at Great West House, Brentford. Of the remainder, gym
membership fees generated from the Solna development amounted to £0.5 million.
Operating expenses:
Administrative expenditure: relating to the core property business amounted to
£9.1 million, an increase of £1.5 million over the previous year. The main
reasons for the increase were the write off of capitalised fit-out costs at
Solna, Sweden, amounting to £0.3 million, increased expenditure on professional
fees of £0.5 million and increased costs of £0.6 million resulting from
strengthening of the management team and small increases as a result of
inflation.
The consolidation of £5.1 million of operating costs for WightCable Limited and
WightCable North Limited were also included within this category of
expenditure. Other non-property related overheads amounted to £0.7 million.
Net property expenses: of £3.9 million (2003: £4.2 million) included
depreciation of £0.4 million, letting fees of £0.5 million, mainly relating to
the successful letting of One Leicester Square and vacant space within the
French portfolio. Of the remainder, operating costs of the gym at Solna
amounted to £0.8 million, void costs were £0.4 million (mainly Great West
House, Brentford, undergoing refurbishment and Vista Office Centre, Hounslow),
bad debts amounted to £0.7 million and repairs and maintenance costs were £0.2
million for minor refurbishment works in Paris and the UK.
Realised gains / (losses) in equity investments: amounted to £1.5 million.
Included within that amount was a gain of £2.7 million in respect of a
settlement of the creditor voluntary arrangement at WightCable North Limited,
whereby its liability was significantly reduced through negotiation of an early
settlement of debt. Also included within this net gain was a provision of £1.5
million set against the goodwill held in our balance sheet relating to one of
our unlisted investments. Other trading gains in the year on listed investments
amounted to £0.4 million.
2004 2003
£m £m
Gains/(losses) relating to listed investments 0.4 (0.2)
Write downs of unlisted investments (1.6) (1.2)
Profit on settlement of CVA at WightCable North 2.7 -
Limited
1.5 (1.4)
Net interest and financial charges: amounted to £34.2 million and showed an
increase of £3.5 million over net expenditure in 2003, reflecting the
re-financings within the French portfolio and at Solna and increased interest
rates in the UK.
The Group's policy is to expense all interest payable to the profit and loss
account, including interest incurred in the funding of refurbishment and
development projects.
A breakdown of the net charge is set out below:
2004 2003 Difference
£m £m £m
Interest receivable 1.7 1.7 -
Foreign exchange 0.1 0.4 (0.3)
Interest receivable and similar income 1.8 2.1 (0.3)
Interest payable and similar charges (36.0) (32.8) (3.2)
Net interest and financial charges (34.2) (30.7) (3.5)
Interest payable and similar charges of £36.0 million (2003: £32.8 million)
included joint venture interest of £1.8 million (2003: £1.1 million) relating
to the Group's interest in Teighmore Limited, owner of Southwark Towers, and a
full years' charge for New London Bridge House Limited which was acquired in
September 2003. Depreciation of interest rate caps amounted to £1.0 million
(2003: £0.9 million) and amortisation of issue costs of loans totalled £1.1
million (2003: £0.9 million).
The average cost of borrowing for the Group at 31 December 2004, which includes
depreciation of interest rate caps, is set out below:
December 2004 UK Sweden Continental Total
Europe
Average interest rate on fixed rate debt 7.3% 5.8% 4.6% 6.4%
Average interest rate on variable rate 6.6% 3.9% 3.3% 4.6%
debt
Overall weighted average interest rate 7.1% 4.8% 4.0% 5.7%
December 2003
Average interest rate on fixed rate debt 8.1 % 6.1 % 4.6 % 6.7 %
Average interest rate on variable rate 5.5 % 4.4 % 3.5 % 4.7 %
debt
Overall weighted average interest rate 6.7 % 5.3 % 4.0 % 5.6 %
Taxation: The Group's current taxation charge has benefited from the
utilisation of losses, significant capital allowances, particularly in
telecommunications companies held by our investment division, and amortisation
deductions. These factors will have less effect in the future as corporation
tax losses are used against expected profits and as allowances and amortisation
deductions decrease in existing subsidiaries.
REVIEW OF THE BALANCE SHEET
Tangible Assets: The tangible assets of the Group (including plant and
machinery) have increased to £986.6 million (2003: £889.3 million). The net
increase of £97.3 million included expenditure on refurbishments of £29.0
million of which £24.2 million was expended at Solna, mainly on the
construction of retail and office space for ICA. Foreign exchange translation
gains on Swedish and French property holdings amounted to £5.7 million in the
year. After taking account of the effect of foreign exchange translation on
loans to finance these assets, the net effect was a gain of £0.8 million.
Four new properties were purchased in France at a cost of £24.1 million, and we
completed the purchase of a property in Luxembourg at a cost of £6.7 million.
Quayside Lodge, Fulham was acquired during the year at a cost of £6.0
million.We sold our property at Seine Defense during the year for £7.4 million,
yielding a profit on disposal of £0.5 million.
Revaluation movements on the Group's investment properties were as follows:
2004 2003
£m £m
UK 26.3 (0.6)
Sweden 3.0 (6.9)
Continental Europe 9.6 4.5
Total revaluation 38.9 (3.0)
Based on the valuations at 31 December 2004 and annualised contracted rent
receivable at that date of £74.6 million (2003: £69.4 million), the portfolio
shows a yield of 6.9 per cent (2003: 7.2 per cent).
The uplift in the UK revaluation included £4.7 million in respect of the
Group's share of the gain in value of joint venture properties at London Bridge
Tower and New London Bridge House. London Bridge Tower has been valued as an
investment property, no account has been taken of speculative development
gains.
An analysis of the location of investment property assets and related loans is
set out below:
Total % UK* % Sweden* % Continental % Equity %
* Europe** investments
£m £m £m £m £m
Investment 981.6 100.0 438.6 44.7 273.1 27.8 269.9 27.5 0.0 0.0
Properties
Loans (609.3) 100.0 (278.6) 45.8 (153.6) 25.2 (173.2) 28.4 (3.9) 0.6
Equity in 372.3 100.0 160.0 43.0 119.5 32.1 96.7 26.0 (3.9) (1.1)
Property
Assets
Other 54.1 100.0 24.6 45.5 (9.4) (17.4) 21.3 39.4 17.6 32.5
Net Equity 426.4 100.0 184.6 43.3 110.1 25.8 118.0 27.7 13.7 3.2
Equity in 37.9% 36.4% 43.9% 35.8% -
Property
as a
Percentage
of Investment
£m £m £m £m £m
Opening 385.0 181.6 91.6 103.8 8.0
Equity
Increase 41.4 3.0 18.5 14.2 5.7
Closing 426.4 184.6 110.1 118.0 13.7
Equity
**The following exchange rates were used to translate assets and liabilities at
the year end : SEK/GBP 12.742 : Euro/GBP 1.4125
* Net assets were reduced by payments for tender offer distributions
totalling £15.7 million which are included within the results of the UK.
Debt Structure: Borrowings are raised by the Group to finance holdings of
investment properties. These are secured, in the main, on the individual
properties to which they relate. All borrowings are taken up in the local
currencies from specialist property lending institutions.
Financial instruments are held by the Group to manage interest and foreign
exchange rate risk. Hedging instruments such as interest rate caps are
acquired from prime banks. The Group has thereby hedged all of its interest
rate exposure and a significant proportion of its foreign exchange rate
exposure.
Net Interest Total % UK % Sweden % Continental % Equity %
Bearing Debt Europe Invest
£m £m £m
£m ments
£m
Fixed Rate Loans (374.2) 61.4 (202.2) 72.6 (90.1) 58.7 (81.8) 47.2 (0.1) 2.6
Floating Rate (235.1) 38.6 (76.4) 27.4 (63.5) 41.3 (91.4) 52.8 (3.8) 97.4
Loans
(609.3) 100.0 (278.6) 100.0 (153.6) 100.0 (173.2) 100.0 (3.9) 100.0
Bank and cash 56.7 17.5 12.4 24.7 2.0
Net Interest (552.6) 100.0 (261.0) 47.2 (141.2) 25.6 (148.5) 26.9 (1.9) 0.3
Bearing Debt
2003 (483.8) 100.0 (222.3) 45.9 (133.1) 27.5 (126.6) 26.2 (1.8) 0.4
Non interest bearing debt, represented by short-term creditors, amounted to £
40.5 million (December 2003: £35.8 million)
Total UK Sweden Continental
Europe
Floating rate loan caps % % %
%
2004
Percentage of net floating rate loans 100.0 100.0 100.0 100.0
capped
Average base interest rate at which 5.3 6.6 4.9 4.8
loans are capped
Average tenure 3.1 2.7 3.4 3.4 years
years years years
2003
Percentage of net floating rate loans 100.0 100.0 100.0 100.0
capped
Average base interest rate at which 6.2 6.4 6.0 6.0
loans are capped
Average tenure 2.9 3.4 1.7 3.0 years
years years years
During 2004 the Group took advantage of the historically low interest rates and
flat yield curves and increased the fixed proportion of loans to 62% (from 53%
in 2003) of outstanding loans at favourable rates while continuing to hedge
floating rate debt with interest rate caps.
New Printing House Square was financed in 1992 through a securitisation of its
rental income by way of a fully amortising bond. This bond has a current
outstanding balance of £38.6 million (December 2003: £39.1 million) at an
interest rate of 10.8 per cent with a maturity date of 2025; and a zero coupon
bond, with a current outstanding balance of £5.0 million (December 2003: £4.5
million), with matching interest rate and maturity date. This debt instrument
has a significant adverse effect on the average interest rate and the FRS 13
adjustment.
The net borrowings of the Group at 31 December 2004 of £552.6 million showed an
increase of £68.8 million over 2003, reflecting the refinancing of our assets
at Solna and within the French portfolio, and new loans for acquisitions.
Under the requirements of FRS13, which addresses among other things, disclosure
in relation to derivatives and other financial instruments, if our loans were
held at fair value, the Group's fixed rate debt at the year end would be in
excess of book value by £34.5 million (2003: £25.9 million) which net of tax at
30 per cent equates to £24.2 million (2003: £18.1 million).
The contracted future cash flows from the properties securing the loans are
currently well in excess of all interest and ongoing loan repayment
obligations. Only £17.4 million (2.9 per cent) of the Group's total bank debt
of £609.3 million is repayable within the next 12 months, with £369.2 million
(60.6 per cent) maturing after five years.
Share Capital: The share capital of the Company totalled £21.4 million at 31
December 2004, represented by 85,497,177 ordinary shares of 25 pence each which
are quoted on the main market of the London Stock Exchange. Of the shares in
issue, 1,644,176 are held as Treasury shares following the tender offer
buy-back in November 2004, and therefore are not included for the purposes of
the proposed tender offer buy-back or for calculating Earnings and NAV per
share.
A capital distribution payment by way of tender offer buy-back was made both in
May and November of 2004 resulting in the purchase of 4.1 million shares and
providing a distribution of £15.7 million to shareholders, together with costs
of £0.1 million.
A total of 50.9 million shares have been purchased at a total cost of £109.6
million since the programme of buy-backs started in 1998. The average cost of
shares purchased for cancellation over this period was 215 pence per share.
The weighted average number of shares in issue during the year was 86,113,994
(2003: 90,791,078).
The average mid-market price of the shares traded in the market during the year
ended 31 December 2004 was 331.4 pence with a high of 410 pence in December
2004 and a low of 270 pence in January 2004.
An analysis of share movements during the year is set out below:
No of shares No of shares
Million Million
2004 2003
Opening shares 87.6 94.1
Tender offer buy-back (4.1) (5.4)
Buy-backs in the market for cancellation - (1.5)
Shares issued for the exercise of options 0.4 0.4
Closing shares for NAV purposes 83.9 87.6
Shares held in Treasury by the Company 1.6 -
Closing shares in issue 85.5 87.6
In total 27.1 million shares were traded in the market during 2004.
An analysis of the ownership structure is set out below:
Number of shares Percentage of shares
Institutions 36,555,729 43.6%
Private investors 1,261,221 1.5%
The Mortstedt family 42,755,371 51.0%
Other 3,280,680 3.9%
83,853,001 100.0%
Shares held in Treasury by the Company 1,644,176
Total 85,497,177
Should the proposed tender offer buy-back be fully taken up, the number of
shares in issue would be reduced by 2,045,195 to 81,807,806 (excluding shares
held in treasury of 3,689,371).
The Company operates share option schemes to enable its staff to participate in
the prosperity of the Group. At 31 December 2004 there were 585,000 options in
existence with an average exercise price of 207.6 pence.
Distribution: As the current share price remains at a considerable discount to
net asset value, your Board is intending to propose a further tender offer
buy-back of shares in lieu of paying a cash dividend, on the basis of 1 in 41
shares at a price of 485 pence per share. This will enhance net asset value
per share and is equivalent in cash terms to a final dividend per share of 11.8
pence, yielding a total distribution in cash terms of 19.3 pence per share for
the year (2003: 17.1 pence).
Corporate Structure: The aim has been to continue to hold individual properties
within separate subsidiary companies, each with one loan on a non-recourse
basis.
PROPERTY REVIEW
Introduction: Our continuing Group strategy is to focus upon low risk high
return properties in our core locations of London, France and Sweden. We
believe that our emphasis on actively managing the portfolio maximises long
term capital returns. The Group now owns 113 properties with a total lettable
area of 585,350 sq m (6,300,850 sq ft), of which 45 properties are in the UK,
23 in Sweden, 43 in France, 1 in Germany and 1 in Luxembourg. We have 506
commercial tenants and 1,291 residential tenants.
Strategy: Our strategy is to target above average returns on equity through
acquisition, active management, refurbishment, and selective sales.
An analysis of contracted rent, book value and yields is set out below:
Contracted % Net % Book % Yield on Yield when
Rent Rent net rent fully let
Value
£000 £000 % %
£000
London City 212 0.3% 212 0.3% 2,800 0.3% 7.6%
Fringes
London Mid town 6,980 9.4% 6,980 10.4% 102,850 10.5% 6.8%
London West End 4,232 5.7% 4,202 6.2% 62,325 6.3% 6.7%
London West 5,547 7.4% 4,992 7.4% 68,881 7.0% 7.2%
London South 9,624 12.8% 9,518 14.1% 139,930 14.3% 6.8%
Bank
London South 1,398 1.9% 1,174 1.7% 18,200 1.9% 6.5%
West
London North 3,210 4.3% 3,236 4.8% 41,700 4.2% 7.8%
West
Outside London 245 0.3% 245 0.4% 1,900 0.2% 12.9%
TOTAL UK 31,448 42.1% 30,559 45.3% 438,586 44.7% 7.0% 7.2%*
Sweden 6,569 8.8% 2,825 4.2% 43,164 4.4% 6.5%
Gothenburg
Sweden 10,553 14.2% 8,811 13.1% 183,095 18.6% 4.8%
Stockholm
Sweden 4,774 6.4% 3,976 5.9% 46,853 4.8% 8.5%
Vanersborg
Total Sweden 21,896 29.4% 15,612 23.2% 273,112 27.8% 5.7% 6.4%**
Continental
Europe
France Paris 16,526 22.1% 16,526 24.5% 217,175 22.2% 7.6%
France Lyon 2,716 3.6% 2,716 4.0% 31,469 3.2% 8.6%
France Lille 579 0.8% 579 0.9% 6,273 0.6% 9.2%
France Antibes 420 0.6% 420 0.6% 4,326 0.4% 9.7%
Total France 20,241 27.1% 20,241 30.0% 259,243 26.4% 7.8% 8.3%
Luxembourg 813 1.1% 813 1.2% 8,779 0.9% 9.3%
Total 813 1.1% 813 1.2% 8,779 0.9% 9.3% 9.3%
Luxembourg
Germany 223 0.3% 206 0.3% 1,841 0.2% 11.2%
Total Germany 223 0.3% 206 0.3% 1,841 0.2% 11.2% 11.2%
Total 21,277 28.5% 21,260 31.5% 269,863 27.5% 7.9% 8.4%
Continental
Europe
Group Total 74,621 100.0% 67,431 100.0% 981,561 100.0% 6.9% 7.3%
Conversion rates : SEK/GBP 12.7420 Euro/GBP 1.4125
- Contracted rent is defined as gross annualised rent supported by a signed
contract.
- Net rent is defined as contracted rent less net service charge costs.
- Yields on net rents have been calculated by dividing the net rent by the book
value.
* Yields on receivable rents and potential rents have been calculated on the
assumption that book values at 31 December 2004 will increase by refurbishment
expenditure of approximately £14.3 million in respect of projects in the UK.
**Yields on receivable rents and potential rents have been calculated on the
assumption that book values at 31 December 2004 will increase by refurbishment
expenditure of approximately £32.4 million in respect of projects in Solna,
Sweden.
Rent analysed by length of lease and location
The table below shows rental income by category and the future potential income
available from new lettings and refurbishments.
Sq. m Sq. ft Contracted Contracted Unlet Space under Total Total
Aggregate But not Space Refurbishment %
Rental Income At or with planning
ERV consent
Producing
£000 £000 £000 £000 £000
UK>10 yrs 53,801 579,125 11,434 1,330 - - 12,764 38.5%
UK 5-10 yrs 43,277 465,841 10,204 490 - - 10,694 32.2%
UK< 5 yrs 39,730 427,668 7,990 - - - 7,990 24.1%
Development 2,653 28,554 - - - - - 0.0%
Stock
Vacant 10,838 116,660 - - 1,652 88 1,740 5.2%
TOTAL UK 150,299 1,617,848 29,628 1,820 1,652 88 33,188 100.0%
Sweden > 10 37,440 403,014 4,288 - - - 4,288 16.0%
yrs
Sweden 5-10 34,042 366,437 3,152 - - - 3,152 11.8%
yrs
Sweden < 5 yrs 172,701 1,858,999 14,456 - - - 14,456 54.2%
Refurbished 37,430 402,906 - - - 4,404 4,404 16.5%
space
Vacant 5,034 54,187 - - 389 - 389 1.5%
TOTAL SWEDEN 286,647 3,085,543 21,896 - 389 4,404 26,689 100.0%
France 5-10 50,623 544,919 8,094 - - - 8,094 37.6%
yrs
France < 5 yrs 82,668 889,860 12,147 - - - 12,147 56.4%
Vacant 8,320 89,559 - - 1,286 - 1,286 6.0%
TOTAL FRANCE 141,611 1,524,338 20,241 - 1,286 - 21,527 100.0%
Luxembourg < 5 3,698 39,806 813 - - - 813 100.0%
yrs
TOTAL 3,698 39,806 813 - - - 813 100.0%
LUXEMBOURG
Germany < 5 3,095 33,315 223 - - - 223 100.0%
yrs
TOTAL GERMANY 3,095 33,315 223 - - - 223 100.0%
Group > 10 yrs 91,241 982,139 15,722 1,330 - - 17,052 20.7%
Group 5-10 yrs 127,942 1,377,197 21,450 490 - - 21,940 26.6%
Group < 5 yrs 301,892 3,249,648 35,629 - - - 35,629 43.2%
Refurbished 37,430 402,906 - - - 4,404 4,404 5.4%
Space
Development 2,653 28,554 - - - - - 0.0%
Stock
Vacant 24,192 260,406 - - 3,327 88 3,415 4.1%
Group Total 585,350 6,300,850 72,801 1,820 3,327 4,492 82.440 100.0%
We estimate that open market rents are approximately 0.8 per cent lower than
current contracted rents receivable, which represents a potential decrease of £
0.6 million. This excludes the additional rents we will receive as a result of
our refurbishment programme. An analysis of the net decrease is set out below:
Contracted Rent Estimated Rental Reversionary
Value Element
£ Million
£ Million %
UK 31.4 28.3 (9.9)
Sweden 21.9 23.7 8.2
Continental Europe 21.3 22.0 3.3
Total 74.6 74.0 (0.8)
The total potential gross rental income (comprising contracted rentals, and
estimated rental value of unlet space and refurbishment) of the portfolio is £
82.4 million p.a.
During the year 51,441 sq m (553,711 sq ft) of space has been vacated and
54,518 sq m (586,832 sq ft) has been re-let. Rent reviews, indexation and
lease extensions have generated further annual income of £0.7 million.
UK Portfolio:
Between December 2003 and 2004, on a like for like basis the UK portfolio
increased in value by £28.4 million from £442.7 million to £471.1 million, an
uplift of 6.4 per cent. This includes joint ventures and is net of acquisitions
and disposals. Over the same period, the UK vacancy rate fell from 8.7 per cent
to 7.2 per cent.
One Leicester Square was one of the contributors to the increase in value when
planning consent was granted at appeal in April 2004 for MTV to operate a
television broadcast studio from the lower three floors of the building. This
enabled us to complete the letting to their parent company, Viacom UK Ltd. The
building is now fully let, generating a total rent of £1.7 million per annum.
At Spring Gardens, Vauxhall, planning consent was granted for the construction
of a new 'infill' office building of 855 sq m (9,203 sq m) to be built between
the existing Units 3 and 4. Raising the total amount of office space on the
estate to 15,914 sq m (171,298 sq ft), this consent is important in that it has
enabled us to grant a new 20 year lease covering nearly half the estate to the
tenant, the Home Office.
Upon completion at the end of 2005, the total rent payable by the Home Office
will increase to £5.4 million per annum, equivalent to £353.27 per sq m (£
32.82 per sq ft). 46 per cent of the rent will be contracted until 2025 and is
to be reviewed annually in line with the Retail Price Index, starting from June
2007. The remainder of the estate is reviewable to open market value and is
secured on leases expiring in 2010 and 2015.
Other key lettings achieved during the year include 2,038 sq m (21,937 sq ft)
of refurbished office space let at the Vista Office Centre, Heathrow to the
Metropolitan Police. The Police signed a 10 year lease with a break at the
fifth year, at a rent of £148 per sq m. They now occupy approximately 20 per
cent of the building.
At CI Tower in New Malden, the Flight Centre continued its expansion within the
building, taking the entire 6th floor measuring 513 sq m (5,522 sq ft). The
lease expires in 2014 and is at a rent of £210 per sq m.
Finally, at Westminster Tower, where we have recently completed an imaginative
refurbishment of the entrance hall, we have been successful in letting the
entire 12th floor to Overseas Exhibition Services Ltd. Extending to 288 sq m
(3,100 sq ft), the floor has excellent views of the River Thames and the Houses
of Parliament, and the rent achieved of £290 per sq m represents an all time
high for the building.
During the year, we added two properties to the portfolio worth £7.2 million
and realised sales of £0.4 million. At the year end, our interest in our two
joint ventures London Bridge Tower and New London Bridge House were valued at £
40.8 million, an increase of 13 per cent. We will continue to hold our
participation in these joint ventures at valuation, based on current investment
value.
We made two noteworthy acquisitions during the year, the first being Quayside
Lodge, William Morris Way, SW6. This £5.7m acquisition completed in June and
the building is expected to provide a yield in excess of 8.6 per cent once
fully let. Of particular interest is this building's location, as it directly
faces the River Thames and is adjacent to the new Imperial Wharf development. A
small leisure and residential building, 35 Albert Embankment, SE1 was added to
the portfolio in the second half of the year, for which we paid £1.4m.
The only property sold during the year was a former nightclub building at
Foxes' Lane, Wolverhampton. This was sold at auction in November and achieved £
0.4 million, exceeding expectations.
In September, planning consent was granted for the refurbishment and
over-cladding of Great West House and Computer House, on the Great West Road
overlooking the A4. Approximately 45 per cent is currently vacant and with this
planning consent in place we are now able to implement this £8.5 million
refurbishment at a time when demand is improving and rents are showing signs of
recovery. The works are underway with completion scheduled for the end of 2005.
Planning consent was obtained in May for the conversion of the top two floors
at Ingram House, John Adam Street, WC2 from office to residential use. These
five apartments will be complete during the first quarter of 2005.
Much hard work has been done during 2004 on the detailed design and pre-letting
of the London Bridge Tower project with our joint venture partners. Since the
end of the year, we have announced the first pre-letting to Shangri-La Hotels
of approximately 20 per cent of the building at just under 18,500 sq m (199,134
sq ft). We look forward to making further progress with our partners in the
months ahead.
The outlook for 2005 is positive. We will continue our focus on reducing the
vacancy rate, increasing rents and enhancing the value of our assets. The
refurbishment of Great West House and elsewhere could prove timely as
confidence returns to the occupational markets.
We will continue to make strategic acquisitions where we feel we can add value
through active management and refurbishment.
Swedish Portfolio:
Lettable space throughout the portfolio has been significantly reduced through
the active management of Solna Business Park. All the apartments at Lövgärdet
are fully let and vacant space at Vänerparken continues to be minimal.
Solna Business Park
The 150, 000 sq m (1.6 million sq ft) development is enhanced by a 62 room
hotel, conference centre, business centre, one of the largest gyms in Stockholm
and extensive restaurant and café facilities. The opening, which is due in
late May 2005 of the 9,340 sq m (100,536 sq ft) ICA MAXI supermarket, is
evidence of the complete transformation that this development has made to the
Solna region.
In total during the year we have let 31,878 sq m (343,135 sq ft) of space.
Fräsaren 11 is now substantially let and the complex as a whole is 86 per cent
let. The highlight of the year was the letting of 24,096 sq m (259,369 sq ft)
of space to ICA at Fräsaren 12 representing 86 per cent of the available space
in that property which is undergoing extensive refurbishment. This letting is
one of the largest Sweden has seen in recent years. Of the remaining 19,273 sq
m (207,455 sq ft) of space to let at this development, 10,139 relates to Smeden
which is also undergoing an extensive refurbishment including major façade
works along its 250 metre frontage due for completion in the early part of the
Summer. The vacant space which includes offices and retail areas is attracting
considerable interest from potential tenants.
Lövgärdet, Gothenburg
All 1,280 apartments are fully let as is the 42,527 sq m (457,761 sq ft) of
commercial space. This is testament to our active management of the
development and our ongoing programme of maintenance works to provide our
tenants with a safe, secure and pleasant environment in which to live and work.
Vänerparken
Our property is considered by the municipality of Vänersborg as a key element
for the provision of facilities and services to the local community. In
addition to its offices, Vänerparken provides hospital services, leisure
facilities, including a marina and swimming pool, and a university for the
town. The university has recently further exetended its lease for two years
from 2006 until 2008.
Continental European Portfolio:
Economic growth is expected to remain stable in France, where the majority of
our properties are situated, at an expected long-term growth in GDP of 2.25 per
cent. The French take-up rate of new lettings was 12.8 per cent above that
experienced in 2003. One significant factor influencing this increased demand
has been a downwards adjustment in Expected Rental Values. Investment levels
at €12 billion (£8.5 billion) was 20 per cent above that predicted at the start
of the year. The mass of capital available, principally from French, German
and US investors coupled with the substantial yield gap between prime real
estate yields of 5.3 per cent and low long term bank base rates, have ensured
that commercial properties have remained an attractive investment.
The portfolio was enhanced by five newly acquired properties at a cost of €45.0
million (£30.8 million) representing net lettable space of 21,693 sq m (233,503
sq ft), all are well let and were purchased on yields of between 8.8 per cent
and 11.4 per cent. Four of the properties are situated in the Paris suburbs
and one in Luxembourg.
The profitable sale of Seine Defense, a 2,346 sq m (25,252 sq ft) vacant
property in Courbevoie, was completed in June 2004 for €11.0 million (£7.4
million).
The vacancy rate of the portfolio remains low at 5.7 per cent, compared to the
national average of 6.3 per cent, reflecting our policy of pro-active
management and close liaison with our tenants and letting teams.
During the year, new leases and lease renewals accounted for a total of 26,275
sq m (282,824 sq ft) representing 18 per cent of the portfolio. The new rentals
generated from these transactions was € 5.6 million (£4.0 million) compared to
previous rental levels of €5.7million (£4.0 million).
Lease indexation generated additional income of €0.7 million (£0.5 million)
during the year equating to an uplift of 3.4 per cent. The resultant overall
uplift in rental income from lease restructuring and indexation was 2.4 per
cent.
Our programme of works to upgrade and improve our properties continues apace.
We remain committed to ensuring our properties are well cared for and
concentrate in particular on entrance foyers, common parts and upgrading
lifts. During the year refurbishments were carried out in respect of Rue de la
Ferme, Sigma and Debussy.
Consolidated Profit and Loss Account
for the year ended 31 December 2004
2004 2003
Unaudited Audited
£000 £000
Gross rental income (including joint ventures) 74,406 70,723
Less: Joint ventures (2,619) (1,421)
Service charge income 6,401 5,699
Turnover from property activities 78,188 75,001
Turnover from non-property activities 5,524 4,657
Total turnover (continuing operations) 83,712 79,658
Service charge expenses (13,293) (12,589)
Cost of sales of non-property activities (4,076) (2,007)
66,343 65,062
Other income 1,117 1,253
67,460 66,315
Administrative expenses (14,845) (15,437)
Net property expenses (3,911) (4,179)
(18,756) (19,616)
Other operating gains/(losses) 1,534 (1,406)
Group operating profit (continuing operations) 50,238 45,293
Share of joint ventures' operating profit (continuing operations) 2,491 1,343
Share of associates' operating loss (continuing operations) (201) (258)
Operating profit including joint ventures and associates 52,528 46,378
Gains from sale of investment property 464 1,932
Profit on ordinary activities before interest 52,992 48,310
Interest receivable and similar income:
Group 1,779 2,135
Joint ventures 22 3
Interest payable and similar charges:
Group (34,217) (31,777)
Joint ventures (1,824) (1,098)
Profit on ordinary activities before taxation 18,752 17,573
Tax on profit on ordinary activities:
Group - current (292) (655)
- deferred (1,097) 591
Joint ventures (304) (21)
Profit on ordinary activities after taxation 17,059 17,488
Equity minority interest 1,078 1,285
Retained profit for the year 18,137 18,773
Basic Earnings per Share 21.1 p 20.7p
Diluted Earnings per Share 20.9 p 20.5p
Consolidated Balance Sheet
at 31 December 2004
2004 2003
Unaudited Audited
£000 £000
Fixed assets
Tangible assets 986,600 889,289
Investments:
Interest in joint ventures:
Share of gross assets 47,049 38,337
Share of gross liabilities (33,201) (29,838)
13,848 8,499
Interest in associates 3,010 3,225
Other investments 171 171
1,003,629 901,184
Current assets
Debtors - amounts falling due after more than one
year 3,096 3,695
Debtors - amounts falling due within one year 10,480 7,976
Investments 10,492 3,963
Cash at bank and in hand 56,680 56,693
80,748 72,327
Creditors: amounts falling due within one year (57,199) (53,249)
Net current assets 23,549 19,078
Total assets less current liabilities 1,027,178 920,262
Creditors: amounts falling due after more than one
year (593,718) (529,575)
Provisions for liabilities and charges (7,078) (5,713)
Net Assets 426,382 384,974
Capital and reserves
Called up share capital 21,374 21,911
Share premium account 69,284 68,928
Revaluation reserve 265,289 222,022
Capital redemption reserve 12,302 11,693
Other reserves 27,717 28,096
Profit and loss account 32,394 33,224
Total equity shareholders' funds 428,360 385,874
Equity minority interests (1,978) (900)
Capital employed 426,382 384,974
Consolidated Cash Flow Statement
for the year ended 31 December 2004
2004 2003
Unaudited Audited
£000 £000
Net cash inflow from operating activities 45,162 52,432
Returns on investments and servicing of finance
Interest received 1,693 1,678
Interest paid (31,493) (29,235)
Issue costs on new bank loans (2,018) (1,216)
Interest rate caps purchased (1,234) (225)
Net cash outflow from returns on investments
and servicing of finance (33,052) (28,998)
Taxation (539) (1,391)
Capital expenditure and financial investment
Purchase and enhancement of properties (67,509) (22,604)
Sale of investment properties 8,486 23,562
Sale/(purchase) of other fixed assets 484 (4,208)
Net cash outflow for capital expenditure and financial
investment (58,539) (3,250)
Acquisitions and disposals
Investment in associate/joint venture (1,751) (6,664)
Purchase of subsidiary undertaking - (1,814)
Cash acquired on purchase of subsidiary undertaking - 572
Net cash (outflow)/inflow before use of liquid resources and
financing (48,719) 10,887
Management of liquid resources
Cash released from short term deposits 7,526 2,004
Financing
Issue of ordinary share capital 428 474
New loans 111,313 25,485
Repayment of loans (45,195) (29,230)
Purchase of own shares (15,795) (17,212)
Net cash inflow/(outflow) from financing 50,751 (20,483)
Increase/(decrease) in cash 9,558 (7,592)
Statement of Total Recognised Gains & Losses
for the year ended 31 December 2004
2004 2003
Unaudited Audited
£000 £000
Profit for the financial year 18,137 18,773
Unrealised surplus/(deficit) on revaluation of properties 34,199 (3,035)
Share of joint venture unrealised surplus on revaluation of
properties 4,699 -
Release of revaluation deficit on property disposal - 20
Currency translation differences on foreign currency net
investments 817 15,091
Other recognised gains relating to the year 39,715 12,076
Total recognised gains and losses relating to the year 57,852 30,849
Note of Historical Cost Profits & Losses
For the year ended 31 December 2004
2004 2003
Unaudited Audited
£000 £000
Reported profit on ordinary activities before taxation 18,752 17,573
Realisation of property revaluation gains of previous years 3,172 3,432
Historical cost profit on ordinary activities before
taxation 21,924 21,005
Historical cost profit for the year retained after taxation
and minority interests 21,309 22,205
Reconciliation of Movements in Shareholders' Funds
for the year ended 31 December 2004
2004 2003
Unaudited Audited
£000 £000
Profit for the financial year 18,137 18,773
Other recognised gains relating to the year 39,715 12,076
New share capital issued 428 474
Reduction in minority interest - (237)
Purchase of own shares (15,676) (17,036)
Expenses of share issue/purchase of own shares (118) (176)
Net additions to shareholders' funds 42,486 13,874
Opening shareholders' funds 385,874 372,000
Closing shareholders' funds 428,360 385,874
Reconciliation of Statutory to disclosed 'Adjusted' statistics
Statutory Deferred tax
figure adjustment Adjusted
figure
Net Assets £426.4 m £6.8 m £433.2 m
NAV per share 508.5 p 8.1 p 516.6 p
Earnings per share 21.1 p 1.2 p 22.3 p
Diluted earnings per 20.9 p 1.2 p 22.1 p
share
Gearing 130.9 % (2.0) % 128.9 %
Basis of preparation and accounting policies
The information contained in this preliminary statement does not constitute
statutory accounts as defined by section 240 of the Companies Act 1985. The
un-audited results for the year to 31 December 2004 have been prepared in
accordance with UK generally accepted accounting principles. The accounting
policies applied are those set out in the Group's 2003 Annual Report and
Accounts. The information relating to the year ended 31 December 2003 is an
extract from the latest published accounts, which have been delivered to the
Registrar of Companies. The audit report on the published accounts was
unqualified and did not contain a statement under section 237 (2) or section
237 (3) Companies Act 1985.
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