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Wates C.Ldn.Props. (WLP)

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Friday 08 September, 2000

Wates C.Ldn.Props.

Interim Results

Wates City of London Properties PLC
8 September 2000


WATES CITY OF LONDON PROPERTIES plc 
INTERIM STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2000 
 
CHAIRMAN'S STATEMENT

HIGHLIGHTS AND RESULTS 
 
I am pleased to report as follows: 
 
* Proposed sale of four investment properties to Prudential for £252 million. 
 
* Proposed purchase of the outstanding 50% stake in Vintners' Place Limited
for £26.7 million. 
 
* Net assets have increased by £31.6 million, after incorporating a half year
revaluation of the portfolio. This represents an increase in net assets per
share to 142p from 130p. 
 
* Net rental income of the Group and its share of income from joint ventures
for the six month period has grown from £10.63 million in 1999 to £11.52
million in 2000. 
 
* The results for the period after writing down the properties being sold to
Prudential by £7.05 million show a loss of £2.96 million before taxation.
This compares with a profit before taxation of £5.20 million in respect of
the same period last year, which included a £1.23 million profit on the
disposal of shares. 
 
 
B U S I N E S S    R E V I E W 
 
In my statement in March I referred to the discount to net asset value
reflected in our share price, which was then 35%. I said that in my opinion it
was inconsistent with our outstanding property portfolio and that we were
working actively to narrow the discount. 
 
Since then I am pleased to report we have made substantial progress: 
 
 
* We have today announced that we have contracted, conditional on
shareholders' approval, to sell four investment properties to Prudential for
a gross consideration of £252 million. Further details of the transaction are
set out in a circular which will be posted to shareholders today. The gross
sale price is at a discount of 3% to the last year-end valuation of £259
million. These properties have been revalued to the disposal price as at 30
June 2000. The sale of these properties will put us in a position to return
around £70 million to shareholders within the next few months.  
 
* Activity at CityPoint continues to be a major focus of the Group and its
progress to date has resulted in a further substantial revaluation uplift of
£36.41 million in the six month period. Construction completion is scheduled
for the end of this year. Design development has resulted in a further
increase in net lettable space above ground to bring the total to 593,000 sq
ft against 584,000 sq ft reported in March. 62% of this space has been
pre-let and virtually all of this is in tenants' hands for fitting out.
Tenants will move into the building from September. 
 
* The contracted rent roll to date at CityPoint is £18 million, significantly
above initial expectations. Recent lettings include 46,000 sq ft let at
£52.50 psf and there is strong interest in the remaining space at increasing
rent levels. We expect to be announcing shortly further pre-lettings, the
best testament both to the quality of the building and to the current
strength of the City letting market.  
 
* We have today also announced that we have conditionally contracted to buy
the 50% of the issued share capital in Vintners' Place Limited owned by
Sumitomo Corporation. Details of this transaction are set out in the circular
to shareholders. The purchase price of £26.7 million compares to the Group's
share of net assets valued at £29.6 million in last year's accounts. This
acquisition gives us full control over the property and we believe it will
increase its marketability. 
 
* The Group retains its two properties held for future development at 35
Basinghall Street and Austral House, and continues to progress the sites in
preparation for their redevelopment. 
 
F I N A N C E 
 
The Group borrows from banks at both fixed and floating rates of interest.
The interest rate exposure on the floating rate debt is partially hedged
through the use of financial derivative instruments, including interest rate
swaps and options. Details of the Group's borrowings and interest rate
hedging are given in note 10 to the six months results. 
 
As at 30 June 2000 the Group had net borrowings of £290.7 million, a gearing
ratio of 77% and undrawn balances of £64.8 million. The weighted average
maturity of the Group's debt was 5.4 years with average hedging duration of
4.1 years. The average cost of debt is currently 7.5% including margins. The
fair value adjustment was a net cost to the Group of £0.7 million as at 30
June 2000 which is equivalent to 0.2% of net asset value. 
 
At 30 June 2000 the Group's share of net debt in Vintners' Place Limited
amounted to £25.7 million. The Vintners' Place Limited borrowings are all at
floating rates. The entire secured debt of £51.6 million will be refinanced
by a new £60 million facility arranged by HSBC Investment Bank plc at the
time of the acquisition. 
 
 
O U T L O O K 
The Board continues to be committed to maximising shareholder value and is
exploring all options for delivering value to Shareholders. In the meantime,
progress at CityPoint continues satisfactorily and the City letting market
continues to prosper. 
 
 
Paul C R Wates 8 September 2000 
CHAIRMAN  




CONSOLIDATED PROFIT AND LOSS ACCOUNT 
for the six months ended 30 June 2000 

                                                                              
                                      Unaudited      Unaudited        Audited 
                        Note           6 months       6 months           Year 
                                    to 30.06.00    to 30.06.99    to 31.12.99 
                                           £000           £000           £000 
  Net Rental Income                                                           
  Group and share of                     11,520         10,630         22,329 
  joint ventures                                                              
  Share of joint                        (1,809)        (1,697)        (3,391) 
  ventures                                                                    
  Group Net Rental        1               9,711          8,933         18,938 
  Income                                                                      
  Irrecoverable                         (1,682)          (218)          (987) 
  property outgoings                                                          
  Administrative                        (2,124)        (1,734)        (3,593) 
  expenses                                                                    
  Other operating                           307            221            446 
  income                                                                      
  Operating Profit                        6,212          7,202         14,804 
  Share of operating      2               1,803          1,693          3,384 
  profit in joint                                                             
  venture                                                                     
  Profit on disposal      3                   -          1,229          1,229 
  of investments                                                              
  Deficit on              4             (7,046)              -              - 
  investment                                                                  
  properties                                                                  
  Interest                5             (3,925)        (4,925)        (9,146) 
  Loss Before                           (2,956)          5,199         10,271 
  Taxation                                                                    
  Taxation                6                   -              -              - 
  Loss After Taxation                   (2,956)          5,199         10,271 
  Dividends                                   -              -        (1,583) 
  Retained Loss for                     (2,956)          5,199          8,688 
  the Period                                                                  
  Earnings per share      7             (1.12)p          1.96p          3.88p 
  - basic and diluted                                                         
 


STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 

                                                                              
                                      Unaudited      Unaudited        Audited 
                                       6 months       6 months           Year 
                                    to 30.06.00    to 30.06.99    to 31.12.99 
                                           £000           £000           £000 
  Loss for the period                   (2,956)          5,199         10,271 
  Unrealised surplus on                  36,811              -         30,478 
  revaluation of                                                              
  properties                                                                  
  Unrealised deficit on                 (2,250)              -          (746) 
  revaluation of                                                              
  investments in joint                                                        
  ventures                                                                    
  Discount arising on                         -              -            (9) 
  acquisition of                                                              
  properties                                                                  
  Total recognised gains                 31,605          5,199         39,994 
  for the period                                                              
 



CONSOLIDATED BALANCE SHEET 
as at 30 June 2000 
                                                                              
                                          Unaudited    Unaudited      Audited 
                                 Note      30.06.00     30.06.99     31.12.99 
                                               £000         £000         £000 
  Fixed Assets                                                                
  Properties                       8        669,480      493,468      578,130 
  Other fixed assets                            151          201          198 
  Joint ventures:                                                             
  Share of gross assets                      56,647       58,051       57,074 
  Share of gross liabilities               (27,077)     (28,502)     (27,432) 
  Investment in joint ventures     9         29,570       29,549       29,642 
                                            699,201      523,218      607,970 
  Current Assets                                                              
  Work-in-progress                            1,033          735          940 
  Debtors                                     4,149        3,626        5,318 
  Investments                                   140          185          199 
  Cash at bank and in hand                    8,667        9,797       11,420 
                                             13,989       14,343       17,877 
  Creditors: Amounts falling                                                  
  due within one year                      (38,031)    (135,024)    (137,112) 
  Net Current Liabilities                  (24,042)    (120,681)    (119,235) 
  Total Assets Less Current                                                   
  Liabilities                               675,159      402,537      488,735 
  Creditors: Amounts falling                                                  
  due after more than one year    10      (299,325)     (91,520)    (144,506) 
  Net Assets                                375,834      311,017      344,2   
  Capital and Reserves                                                        
  Called up share capital                    66,183       66,183       66,183 
  Share premium account                     163,016      163,016      163,016 
  Capital redemption reserve                  2,934        2,934        2,934 
  Revaluation reserve                        68,677      (2,125)       34,116 
  Profit and loss account                    75,024       81,009       77,980 
  Equity Shareholders' Funds                375,834      311,017      344,229 
  Net Assets Per Share                       142.0p                    130.0p 
 
 
CONSOLIDATED CASH FLOW STATEMENT 
for the six months ended 30 June 2000 

                                                                              
                                         Unaudited      Unaudited     Audited 
                              Note        6 months       6 months        Year 
                                       to 30.06.00    to 30.06.99 to 31.12.99 
                                              £000           £000        £000 
  Cash inflow from             11            3,493          3,623      15,816 
  operating activities                                                        
                                                                              
  Returns on investments                                                      
  and servicing of finance                                                    
  Interest received                            387            340         613 
  Interest paid                           (10,401)        (7,604)    (16,124) 
  Net cash outflow for                                                        
  returns on investments                  (10,014)        (7,264)    (15,511) 
  and servicing of finance                                                    
  Taxation                                                                    
  Corporation tax                                -              -           - 
  Net cash flow from                                                          
  operating activities and                 (6,521)        (3,641)         305 
  after finance charges and                                                   
  taxation                                                                    
  Capital Expenditure                                                         
  Purchase of properties                                                      
  and other additions to                  (40,747)       (26,928)    (82,144) 
  investment and                                                              
  development properties                                                      
  Other fixed assets                          (14)            (5)        (47) 
  Net cash outflow for                    (40,761)       (26,933)    (82,191) 
  capital expenditure                                                         
  Acquisitions and                                                            
  Disposals                                                                   
  Investment in joint                      (1,270)              -           - 
  venture                                                                     
  Equity dividends paid                    (1,585)        (1,059)     (1,057) 
  Management of Liquid                                                        
  Resources                                                                   
  Short term deposits                          250        (6,582)     (7,118) 
  Investments                                    -          4,057       4,100 
                                               250        (2,525)     (3,018) 
  Financing                                                                   
  Bank loans                                47,384         35,507      88,397 
  Movement in Cash in the                  (2,503)          1,349       2,436 
  Period                                                                      
 

NOTES TO THE ACCOUNTS 
 
 
1     GROUP NET RENTAL INCOME

                                                                        
                                Unaudited      Unaudited        Audited 
                                 6 months       6 months           Year 
                              to 30.06.00    to 30.06.99    to 31.12.99 
                                     £000           £000           £000 
        Rent receivable            10,031          9,264         19,605 
        Rent payable                (320)          (331)          (667) 
        Net rental income           9,711          8,933         18,938 
 
 
2     SHARE OF OPERATING PROFIT IN JOINT VENTURE 

                                                                              
                                         Unaudited      Unaudited     Audited 
                                          6 months       6 months        Year 
                                       to 30.06.00    to 30.06.99 to 31.12.99 
                                              £000           £000        £000 
  Vintners' Place Limited:                                                    
  Rent receivable                            2,277          2,150       4,324 
  Rent payable                               (468)          (453)       (933) 
  Net rental income                          1,809          1,697       3,391 
  Irrecoverable property outgoings                                            
  and other expenses                           (6)            (4)         (7) 
  Operating profit                           1,803          1,693       3,384 
 
 
3     PROFIT ON DISPOSAL OF INVESTMENTS 
 
The profit of £1,229,000 in 1999 arose on the sale of listed investments. 
 
 
4     DEFICIT ON INVESTMENT PROPERTIES 
 
The four investment properties being sold have been written down to the
anticipated sale price. The deficit has been included in the six month period
to 30 June 2000 as a permanent diminution in value due to the Group's
intention to sell these properties which will realise that deficit. 
 
 
5     INTEREST 

                                                                              
                                Unaudited      Unaudited              Audited 
                                 6 months       6 months                 Year 
                              to 30.06.00    to 30.06.99          to 31.12.99 
                                     £000           £000                 £000 
  Group:                                                                      
  Interest payable on bank         10,850          7,921               17,218 
  loans                                                                       
  Interest charged to             (7,500)        (3,650)              (9,300) 
  development properties                                                      
  Interest receivable               (320)          (277)                (555) 
                                    3,030          3,994                7,363 
  Joint ventures:                                                             
  Share of net interest               895            931                1,783 
  payable                                                                     
                                                                              
                                    3,925          4,925                9,146 
 
 
6     TAXATION  
 
The tax charge has been eliminated by the tax relief for interest
capitalised. 
 
 
7     EARNINGS PER SHARE 
 
The basic and diluted earnings per share are the same. The basic earnings per
share is calculated on the loss after taxation of £2,956,000 and on the
weighted average of 264,732,346 ordinary shares in issue during the period.
The diluted earnings per share is based on the weighted average of
264,733,112 ordinary shares in issue taking into account the exercise of
employee share options. 
 
8     PROPERTIES 
 

                                                                             
                               Unaudited    Unaudited                Audited 
                                30.06.00     30.06.99               31.12.99 
                                    £000         £000                   £000 
    Investment properties        306,480      304,600                313,130 
    Development properties       363,000      188,868                265,000 
                                                                             
                                 669,480      493,468                578,130 
 

The properties have been revalued by Insignia Richard Ellis at 30 June 2000
and 31 December 1999. At 30 June 1999 the properties are included at the
previous valuation and adjusted for subsequent additions and disposals. The
revaluation surplus relating to CityPoint is £36,411,000. 
 
 
9     INVESTMENT IN JOINT VENTURES 
 
As at 30 June 2000 the Group had a 50% interest in Vintners' Place Limited, a
joint venture company with Sumitomo Corporation and a 50% interest in
Champneys City Point Limited.  
 
 
10     CREDITORS 
 
The weighted average maturity of the Group's debt at 30 June 2000 was 5.4
years with an average hedging duration of 4.1 years. The average cost of debt
is currently 7.5% including margins. 
 
The fair value adjustments in respect of the financial liabilities as at 30
June 2000 were as follows. 
 

                                                         
                      Interest rate swaps    £1.3m loss  
                      Fixed rate debt        £0.6m gain  
 
 
11     RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES 
 

                                                                              
                               Unaudited      Unaudited               Audited 
                                6 months       6 months                  Year 
                             to 30.06.00    to 30.06.99           to 31.12.99 
                                    £000           £000                  £000 
  Operating profit                 6,212          7,202                14,804 
  Depreciation charges                61             53                   109 
  Provision against                    -            106                    96 
  work-in-progress                                                            
  Other non cash                      59             57                  (11) 
  movements                                                                   
  Increase in                       (93)          (279)                 (474) 
  work-in-progress                                                            
  Decrease in debtors              1,102            332               (1,355) 
  Decrease in creditors          (3,848)        (3,848)                 2,647 
                                                                              
                                   3,493          3,623                15,816 
 
 
12     INTERIM STATEMENT 
 
The unaudited results for the six months ended 30 June 2000 have been
prepared on the basis of accounting policies set out in the Group's statutory
accounts for the year ended 31 December 1999 except as noted. The figures for
the year to 31 December 1999 have been extracted from the full accounts for
that year which received an unqualified auditors' report and have been filed
with the Registrar of Companies. 
 
The interim announcement will be sent to shareholders and will be made
available for the public at the Company's registered office at Level 21, City
Tower, 40 Basinghall Street, London EC2V 5DE. 
 
 

                                                                                
                                                                                
                                     

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