Interim Results
September 04 2003 - 3:03AM
UK Regulatory
RNS Number:3748P
Estates & General PLC
04 September 2003
Estates & General PLC
Interim results for the six months to 30 June 2003
ESTATES & GENERAL REPORTS ROBUST RESULTS
Estates & General PLC, ("Estates & General") the strategic property investment
company, has today announced its interim results for the six months to 30 June
2003. Estates & General has a #120 million property portfolio weighted towards
the South East of England.
Highlights:
* Underlying rental surplus up by 12.4% to #1.81 million (2002: #1.61 million)
* Pre-tax profits #2.52 million (2002: #3.40 million)
* Interim dividend maintained at 1.5 pence per share (2002: 1.5 pence)
* NAV per share up 3.2% to 227 pence (31 December 2002: 220 pence)
Commenting on the results, Roger Dossett, Managing Director said:
"Over the past few years we have re-structured our portfolio considerably. We
have sold assets where the potential for adding further value had been maximised
and invested in assets with longer-term growth prospects.
We have a substantial asset base of well-let property, securely funded with
limited exposure to interest rate movements. The resultant income surplus
provides a sound foundation for our trading activity.
Net asset value has been enhanced by a combination of rental profits and trading
surpluses and we have the firepower available for further acquisitions as
opportunities occur."
-ends-
Date: 4 September 2003
For further information contact:
Roger Dossett, Managing Director Estates & General PLC 01923-285999
Phil Holland, Finance Director Estates & General PLC 01923-285999
e-mail: info@estates-general.co.uk
Web: http://www.estates-general.co.uk/
Simon Courtenay City Profile 020-7448-3244
CHAIRMAN'S STATEMENT
The restructuring of the property portfolio over the last few years has provided
an excellent base for the continuing strong performance of the Group. Whilst
the level of transactions has been much reduced from 2002, the underlying
strength of the rental income is evident in the results for the first period of
2003.
Financial performance
Profit before tax for the half year to 30 June 2003 was #2.52 million (2002 -
#3.40 million) with underlying rental profitability increasing by 12.4% to #1.81
million (2002 - #1.61 million). Profit in the period from asset sales was
#0.71 million (2002 - #2.46 million). The utilisation of brought forward tax
losses and the impact of property sales give rise to a deferred tax charge of
#0.10 million (2002 - #0.43 million). There is no cash tax liability. Earnings
per ordinary share for the period were 8.7 pence (2002 - 10.7 pence).
Net asset value per ordinary share has increased by 3.2% to 227 pence (31
December 2002 - 220 pence). On a "triple net" basis net assets per ordinary
share would be 200 pence (31 December 2002 - 192 pence). This would include the
post-tax adjustment to mark the Group's debt to market and reflect the fact that
there is no inherent tax liability in the Group revaluation reserve.
Dividend
The Board has declared an unchanged interim dividend of 1.5 pence per share.
This will be paid on 3 October 2003 to shareholders on the register at the close
of business on 19 September 2003.
Portfolio activity
In February I announced the disposal of the Group's office investment at Regents
Wharf, Kings Cross, London. The gross consideration totalled #21.11 million,
giving a profit of #0.46 million over 31 December 2002 book value. This sale
was in line with the Group's strategy of disposing of assets where their
potential value had been maximised with little scope for further upside in the
short to medium term. The impact of falling rents in the City and the West End
of London, together with the increasing availability of space, has reinforced
the view that the time was right to reduce our exposure to the London market.
A significant increase in the demand for retail property has been evident in
recent months. Improving rental values coupled with robust consumer spending
have made retail investments appear stronger for the "income" buyer. With
medium term interest rates falling over the first six months of the year,
investors were prepared to accept lower yields from retail property. This will
not continue indefinitely and advantage was taken of this trend to dispose of a
retail warehouse in Swansea, South Wales. The property comprised approximately
37,000 square feet let to B&Q for a further 20 years. Proceeds totalled #4.29
million representing and exit yield of 6.18% and giving a profit after costs of
#0.21 million.
In addition the proceeds from small land sales at Hayle in Cornwall totalled
#0.11 million, giving a surplus of #0.04 million over book value.
The property portfolio continues to be well occupied with vacant space
representing less than 1% of the total rent roll. The underlying covenant
strength of the Group's tenants significantly reduces the risk of default on the
payment of rent and therefore improves the predictability of future cash flows.
Portfolio analysis by capital value*
_____________________________________________________________________________________________________________
Office Industrial Retail Development Total 30 Jun 03 31 Dec 02
Site
#m #m #m #m #m
_____________________________________________________________________________________________________________
South East 75.20 9.53 - 0.14 84.87 69% 71%
West & South West 6.00 0.72 - 1.35 8.07 6% 8%
North & Midlands 15.19 6.27 6.22 - 27.68 23% 19%
East Anglia 0.97 - - - 0.97 1% 1%
Scotland - 1.39 - - 1.39 1% 1%
_____________________________________________________________________________________________________________
97.36 17.91 6.22 1.49 122.98 100% 100%
_____________________________________________________________________________________________________________
30 Jun 03 79% 15% 5% 1% 100%
31 Dec 02 80% 12% 7% 1% 100%
_____________________________________________________________________________________________________________
*Value is 31 December 2002 valuation adjusted for additions and disposals.
Acquisition
Contracts were exchanged on 2 September 2003 for the acquisition of a modern
industrial property in Redditch. The property consists of 103,000 square feet
of production space, together with 19,000 square feet of office space producing
a total rent of #648,560 per annum and is let to a strong covenant for a further
12 years. The property is being acquired for #8.20 million, representing an
initial yield of 7.5%. The Group's investment criteria continue to be focused
on good quality property that provides a secure underlying income stream from a
strong covenant with the potential to add value through active management.
Funding
The sales that I have detailed above produced net proceeds totalling #25.19
million. These have been used to reduce Group debt, with higher rate bank loans
being repaid in full, releasing a large value of uncharged property.
As at 30 June 2003 net Group debt stood at #57.22 million (31 December 2002 -
#84.80 million) with gearing reduced to 91% (31 December 2002 - 140%). Variable
rate loans are 91% hedged by derivative products acquired in recent years. The
average rate of interest incurred by the Group, including derivatives and
debenture coupons, is 7.29% (31 December 2002 - 7.35%).
Compliance
A revised Combined Code on Corporate Governance for all companies listed on the
London Stock Exchange will be effective for financial periods commencing on or
after 1 November 2003. This draws from the recommendations of both the Higgs
Report on non-executive directors and the Smith Report on audit committees that
were published earlier this year. The Code recognises that smaller companies
may find it difficult to fully comply with all its provisions but the Board is
committed to ensuring that the highest possible standards of governance are
maintained and our compliance will be detailed in future Annual Reports.
In this era of increasing "internationalisation" of business, greater
comparability of company accounts has long been desired when evaluating
performance. The European Union has stated that for financial periods starting
on or after 1 January 2005 all companies listed on European exchanges must
prepare their group accounts in accordance with International Accounting
Standards. There are many differences between the requirements of UK and
International Standards in both presentation and accounting policies. This
means that from 2005 onwards the Group's financial statements will be in a form
somewhat different from those in this and previous reports.
Prospects
The current year is proving to be challenging for the property sector. Whilst
yields continue to be very keen, disposals can be profitable but reinvestment is
increasingly difficult at sensible prices. Evidence shows that office rental
values have stabilised, providing increased optimism for future growth.
Stock markets across the world have shown signs of making progress toward
recovering losses seen in recent years. However, uncertainty remains with
regard to the performance of major economies, the rate at which they will grow
and the sustainability of the stock market recovery. Short and medium term
interest rates have been historically low, although medium and longer-term rates
have seen small increases in recent months. For as long as this continues and
overall returns from property compare well with alternative investment choices,
property investment will retain its attraction.
The results achieved for this period underline the success of the Group's
investment strategy. We will continue to look to acquire good property assets
let to quality covenants with a secure recurring income stream and to seek added
value through our management approach. Based on this strategy I am confident
that 2003 will prove to be another successful year for the Group.
David G M Cull
Chairman
3 September 2003
INDEPENDENT REVIEW REPORT TO ESTATES & GENERAL PLC
Introduction
We have been instructed by the Company to review the financial information for
the six months ended 30 June 2003 which comprises the Group profit and loss
account, Group balance sheet, Group cash flow statement, Group statement of
total recognised gains and losses and related notes 1 to 12. We have read the
other information contained in the Interim report and considered whether it
contains any apparent misstatements or material inconsistencies with the
financial information.
This report is made solely to the Company in accordance with Bulletin 1999/4
issued by the Auditing Practices Board. Our work has been undertaken so that we
might state to the Company those matters we are required to state to them in an
independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than
the Company, for our review work, for this report, or for the conclusions we
have formed.
Directors' responsibilities
The Interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the Directors. The Directors
are responsible for preparing the Interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts, except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied, unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom auditing standards and therefore
provides a lower level of assurance than an audit. Accordingly, we do not
express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2003.
Deloitte & Touche LLP,
Chartered Accountants
London
3 September 2003
GROUP PROFIT AND LOSS ACCOUNT
Six months to Six months to Year to
30 Jun 03 30 Jun 02 31 Dec 02
Notes (Reviewed) (Reviewed) (Audited)
#m #m #m
_____________________________________________________________________________________________________________
Turnover - continuing operations 1 13.65 6.74 16.82
Cost of sales (7.71) (0.46) (2.46)
_____________________________________________________________________________________________________________
Gross profit 1 5.94 6.28 14.36
Administrative expenses (0.91) (0.91) (2.32)
Other operating income - - 0.03
_____________________________________________________________________________________________________________
Operating profit - continuing operations 5.03 5.37 12.07
Profit on sale of investment properties 0.38 2.46 2.57
Interest receivable and similar income 0.09 0.15 0.19
_____________________________________________________________________________________________________________
Profit on ordinary activities before interest payable 5.50 7.98 14.83
Net interest payable and similar charges (2.98) (4.58) (8.07)
_____________________________________________________________________________________________________________
Profit on ordinary activities before taxation 2.52 3.40 6.76
Tax on profit on ordinary activities 2 (0.10) (0.43) (0.65)
_____________________________________________________________________________________________________________
Profit on ordinary activities after taxation 2.42 2.97 6.11
Equity dividends (0.42) (0.42) (1.25)
_____________________________________________________________________________________________________________
Profit attributable to ordinary shareholders 9 2.00 2.55 4.86
Earnings per 10p ordinary share - basic 3 8.7p 10.7p 22.0p
_____________________________________________________________________________________________________________
Earnings per 10p ordinary share - diluted 3 8.6p 10.5p 21.7p
_____________________________________________________________________________________________________________
GROUP BALANCE SHEET
As at As at As at
30 Jun 03 30 Jun 02 31 Dec 02
Notes (Reviewed) (Reviewed) (Audited)
#m #m #m
____________________________________________________________________________________________________________
Fixed assets
Intangible assets 4 0.26 0.32 0.32
Tangible assets 5 115.30 134.00 132.28
____________________________________________________________________________________________________________
115.56 134.32 132.60
____________________________________________________________________________________________________________
Current assets
Stocks 7.84 17.10 15.28
Debtors 6 1.00 5.91 3.80
Investments 7 9.29 1.60 0.59
Cash at bank and in hand 1.67 1.81 1.63
____________________________________________________________________________________________________________
19.80 26.42 21.30
____________________________________________________________________________________________________________
Creditors: amounts falling due within one year (5.06) (13.93) (12.72)
____________________________________________________________________________________________________________
Net current assets 14.74 12.49 8.58
____________________________________________________________________________________________________________
Total assets less current liabilities 130.30 146.81 141.18
Creditors : amounts falling due after more than one year (67.29) (86.95) (80.17)
____________________________________________________________________________________________________________
Net assets 63.01 59.86 61.01
____________________________________________________________________________________________________________
Capital and reserves 2.77 2.77 2.77
Called up share capital
Share premium account 9 9.93 9.93 9.93
Revaluation reserve 9 4.60 9.29 8.22
Capital redemption reserve 9 0.34 0.34 0.34
Other reserves 9 11.44 11.44 11.44
Profit and loss account 9 33.93 26.09 28.31
____________________________________________________________________________________________________________
Equity shareholders' funds 63.01 59.86 61.01
____________________________________________________________________________________________________________
Net asset value per ordinary share 10 227p 216p 220p
GROUP CASH FLOW STATEMENT
Six months to Six months to Year to
30 Jun 03 30 Jun 02 31 Dec 02
(Reviewed) (Reviewed) (Audited)
Notes #m #m #m
_________________________________________________________________________________________________________
Net cash inflow from operating activities 11a 11.84 5.93 15.49
Returns on investments and servicing of finance (3.00) (3.56) (8.03)
Capital expenditure and financial investment 19.57 (33.04) (33.41)
Equity dividends paid (0.83) (0.72) (1.16)
_________________________________________________________________________________________________________
Cash inflow / (outflow) before management of
liquid resources and financing 27.58 (31.39) (27.11)
Management of liquid resources (8.70) 2.56 3.57
Financing (18.84) 28.66 23.19
_________________________________________________________________________________________________________
Increase / (decrease) in cash in the period 0.04 (0.17) (0.35)
_________________________________________________________________________________________________________
Reconciliation of net cash flow to movement in net debt
Increase / (decrease) in cash in the period 0.04 (0.17) (0.35)
Cash outflow / (inflow) from decrease / (increase) in 18.84 (28.66) (23.19)
debt
Cash outflow / (inflow) from increase/(decrease) in
liquid resources 8.70 (2.56) (3.57)
_________________________________________________________________________________________________________
Change in net debt resulting from cash flows 27.58 (31.39) (27.11)
Net debt - opening balance 11b (84.80) (57.69) (57.69)
_________________________________________________________________________________________________________
Net debt - closing balance 11b (57.22) (89.08) (84.80)
_________________________________________________________________________________________________________
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Six months to Six months to Year to
30 Jun 03 30 Jun 02 31 Dec 02
(Reviewed) (Reviewed) (Audited)
#m #m #m
____________________________________________________________________________________________________________
Profit for the financial period 2.42 2.97 6.11
Deficit arising on revaluation of properties - - (1.16)
____________________________________________________________________________________________________________
Total recognised gains and losses relating to the period 2.42 2.97 4.95
____________________________________________________________________________________________________________
NOTES TO THE INTERIM REPORT
1. Turnover and profit analysis
Turnover Gross Profit
Six months Six months Year to Six months Six months Year to
to 30 Jun 03 to 30 Jun 02 31 Dec 02 to 30 Jun 03 to 30 Jun 02 31 Dec 02
(Reviewed) (Reviewed) (Audited) (Reviewed) (Reviewed) (Audited)
#m #m #m #m #m #m
________________________________________________________________________________________________________________
Rental income from investment 5.17 5.72 11.26 5.12 5.56 11.02
properties
Rental income from properties held 0.51 0.76 1.55 0.49 0.72 1.50
as stock
________________________________________________________________________________________________________________
Total rental income 5.68 6.48 12.81 5.61 6.28 12.52
Sale of properties held as stock 7.97 0.26 4.01 0.33 - 1.84
________________________________________________________________________________________________________________
Total 13.65 6.74 16.82 5.94 6.28 14.36
________________________________________________________________________________________________________________
2. Tax on profit on ordinary activities
Six months Six months Year to
to 30 Jun 03 to 30 Jun 02 31 Dec 02
(Reviewed) (Reviewed) (Audited)
#m #m #m
_____________________________________________________________________________________________________________
UK Corporation tax charge for the period - - -
Deferred tax
Capital allowances in excess of depreciation 0.25 - 0.40
Removal of timing differences on sale of asset (0.44) - -
Utilisation of losses 0.29 0.43 0.25
_____________________________________________________________________________________________________________
0.10 0.43 0.65
_____________________________________________________________________________________________________________
Total 0.10 0.43 0.65
_____________________________________________________________________________________________________________
Taxation has been calculated at a rate of 30% (2002: 30%), being an estimate
applicable to the full year ending 31 December 2003.
3. Earnings per 10p ordinary share
Earnings per 10p ordinary share are based upon the profit after tax attributable
to ordinary shareholders of #2.42 million (30 June 2002: #2.97 million; 31
December 2002: #6.11 million). The calculation of the basic earnings per 10p
ordinary share is based on the average number of ordinary shares in issue during
the period of 27,735,542 (30 June 2002: 27,735,542; 31 December 2002:
27,735,542).
The calculation of the diluted earnings per 10p ordinary share is based on a
weighted average of 28,051,341 ordinary shares (30 June 2002: 28,165,605; 31
December 2002: 28,150,495). The difference in the number of ordinary shares
between the basic and diluted earnings per share reflects the impact were the
outstanding share options exercised.
4. Intangible assets - Goodwill
#m
______________________________________________________________________________________________________________
Cost
At 1 January 2003 0.32
Disposals during the period (0.06)
______________________________________________________________________________________________________________
At 30 June 2003 0.26
______________________________________________________________________________________________________________
The Companies Act 1985 provides that goodwill be systematically amortised. This
conflicts with the principle set out in FRS 10 that goodwill with an indefinite
useful economic life should not be amortised. The Directors consider that in
order to give a true and fair view the principle as set out in FRS 10, not to
amortise the goodwill should be adopted.
Goodwill stated above at historical cost represents the difference between the
value of the underlying property assets of subsidiaries when acquired and the
consideration paid to the vendor. This is due to the different basis of
valuation used to value property assets and that used to value the share capital
of the companies. The acquisition of single asset property companies provides
scope for the recovery of that difference in value.
It is not possible to quantify the effects of the departure from the requirement
of the Companies Act 1985 as under current legislation the asset has an
indefinite useful economic life.
The amount charged during the period relates to the proportion of purchased
goodwill allocated to property sold during the period. This charge has been made
against the profit on sale of investment properties.
5. Tangible assets
Investment properties totalling #115.14 million are included in tangible fixed
assets. These have been stated at 31 December 2002 valuation, adjusted for
additions and disposals during the period. Other tangible fixed assets
totalling #0.16 million are included at net book value.
6. Debtors
Included within debtors is the net deferred tax asset as follows:
30 Jun 03 30 Jun 02 31 Dec 02
(Reviewed) (Reviewed) (Audited)
#m #m #m
____________________________________________________________________________________________________________
Tax losses carried forward 2.26 2.37 2.55
Capital allowances in excess of depreciation (1.77) (1.56) (1.96)
____________________________________________________________________________________________________________
Total net asset 0.49 0.81 0.59
____________________________________________________________________________________________________________
Tax losses carried forward and recognised in the financial statements relate
mainly to excess management expenses incurred in previous years. The Directors
are of the opinion that based on current forecasts, profits for the foreseeable
future will be of a level to utilise these losses in full.
In addition tax losses totalling #18.18 million are carried forward at 30 June
2003 but have not been recognised in the financial statements. These may be
utilised to offset profits that arise on future property sales.
6. Debtors (continued)
No provision has been made for deferred tax assets or liabilities arising on the
revaluation of investment properties to their market value.
#m
Analysis of movement in the net deferred tax asset:
______________________________________________________________________________________________________________
Asset at 1 January 2002 1.24
Items in profit and loss account for the six months to 30 June 2002 (0.43)
______________________________________________________________________________________________________________
Asset at 30 June 2002 0.81
Items in profit and loss account for the six months to 31 December 2002 (0.22)
______________________________________________________________________________________________________________
Asset at 31 December 2002 0.59
Items in profit and loss account for the six months to 30 June 2003 (0.10)
______________________________________________________________________________________________________________
Asset at 30 June 2003 0.49
______________________________________________________________________________________________________________
7. Investments
30 Jun 03 30 Jun 02 31 Dec 02
(Reviewed) (Reviewed) (Audited)
#m #m #m
____________________________________________________________________________________________________________
Secured cash 9.21 - -
Cash on deposit 0.08 1.60 0.59
____________________________________________________________________________________________________________
Total 9.29 1.60 0.59
____________________________________________________________________________________________________________
8. Fair values of financial assets and liabilities
Book value Fair value
30 Jun 03 30 Jun 02 31 Dec 02 30 Jun 03 30 Jun 02 31 Dec 02
(Reviewed) (Reviewed) (Audited) (Reviewed) (Reviewed) (Audited)
#m #m #m #m #m #m
_____________________________________________________________________________________________________
Assets
Cash deposits held at variable rates 0.07 1.60 2.22 0.07 1.60 2.22
_____________________________________________________________________________________________________
Liabilities
Primary financial instruments:
Debenture stock at fixed rates 20.43 20.43 20.43 29.62 24.66 29.60
Bank loans at fixed rates - 4.45 - - 4.52 -
Bank loans at variable rates 48.15 67.45 67.05 48.15 67.45 67.05
Derivative instruments held
to manage the Group's interest
rate cost:
Interest rate swaps - - - 1.65 0.87 2.03
_____________________________________________________________________________________________________
68.58 92.33 87.48 79.42 97.50 98.68
_____________________________________________________________________________________________________
Total fair value adjustment 10.84 5.17 11.20
_____________________________________________________________________________________________________
9. Reserves
Share Capital Profit and
premium Revaluation redemption Other loss
account reserve reserve reserves account Total
#m #m #m #m #m #m
_____________________________________________________________________________________________________________
As at 1 January 2003 9.93 8.22 0.34 11.44 28.31 58.24
Profit for the period - - - - 2.00 2.00
Realised on disposal - (3.62) - - 3.62 -
_____________________________________________________________________________________________________________
As at 30 June 2003 9.93 4.60 0.34 11.44 33.93 60.24
_____________________________________________________________________________________________________________
10. Net asset value per share
Net asset value per share has been calculated using the number of ordinary
shares in issue on 30 June 2003: 27,735,542 (30 June 2002: 27,735,542; 31
December 2002: 27,735,542).
11. Cash flow statement
a) Reconciliation of operating profit to operating cash flows
Six months Six months Year to
to 30 Jun 03 to 30 Jun 02 31 Dec 02
(Reviewed) (Reviewed) (Audited)
#m #m #m
____________________________________________________________________________________________________________
Operating profit 5.03 5.37 12.07
Depreciation 0.03 0.05 0.08
Decrease in stocks 7.44 0.23 2.05
Decrease / (increase) in debtors 0.50 (2.19) 0.64
(Decrease) / increase in creditors (1.16) 2.47 0.65
____________________________________________________________________________________________________________
Net cash inflow from operating activities 11.84 5.93 15.49
____________________________________________________________________________________________________________
b) Analysis of net debt
At 1 Jan Non-cash At 30 Jun
2003 Cash Flow changes 2003
#m #m #m #m
____________________________________________________________________________________________________________
Cash at bank and in hand 1.63 0.04 - 1.67
Debt due after one year (79.73) 12.20 0.65 (66.88)
Debt due within one year (7.29) 6.64 (0.65) (1.30)
____________________________________________________________________________________________________________
(85.39) 18.88 - (66.51)
____________________________________________________________________________________________________________
Cash on deposit and secured cash 0.59 8.70 - 9.29
____________________________________________________________________________________________________________
Net debt (84.80) 27.58 - (57.22)
____________________________________________________________________________________________________________
12. Basis of accounting
The Interim report has been prepared by the Directors in accordance with
applicable United Kingdom accounting standards and is consistent with the
accounting policies set out in the 2002 Report and Accounts. The Interim report
was approved by the Directors on 3 September 2003.
The Interim report does not constitute statutory accounts. The comparative
figures for the year to 31 December 2002 have been extracted from the Group's
financial statements that have been delivered to the Registrar of Companies.
The report of the auditors was unqualified and did not contain a statement under
Section 237 (2) or (3) of the Companies Act 1985.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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