RNS Number:4837K
Property Acquisition & ManagementLd
29 April 2003
PROPERTY ACQUISITION AND MANAGEMENT LIMITED
PRELIMINARY ANNOUNCEMENT OF RESULTS FOR THE YEAR ENDED 31 DECEMBER 2002
This is my first statement as your new Chairman following the retirement from the Board of Roger Alcock, and my
subsequent appointment as Chairman on 31 March 2003. I wish to place on record the thanks of your Board to Roger for
his tireless and diligent work on behalf of shareholders during the past three years.
Our third year of operation has witnessed a transitional period for the Group. As reported last year, the Board
concluded that the Group should exit from the activity of bond investment and this has now largely been completed. A
planned fundraising, intended to allow the Group to increase its property activities, could not be successfully
completed during the year due to the adverse stockmarket conditions that have prevailed for much of 2002 and the
start of 2003. This, together with other work to restructure the Group, resulted in exceptional costs of #503,000
(2001: nil) being incurred. The Board also announced the intention to buy back all classes of the Group's shares in
order to try to redress the imbalance between the share prices and underlying net asset values, a process that was
carried out in December 2002 following the granting of the appropriate authorisations from shareholders. These
authorities have not been fully utilised and remain in place should the Board consider it appropriate to buy back
further shares. As stated in August 2002, the Board does not intend to declare an Ordinary share dividend in respect
of 2003.
Property
Once again, the Group's property portfolio has produced a resilient performance. The long established policy of
seeking high yielding properties and spreading risk by balancing the portfolio by use class and geographical location
has resulted in a profit after tax from the property portfolio of #4,574,000 (2001: #3,806,000 - as restated).
#5,301,000 was distributed by way of dividend from CNC Properties Limited ("CNC") to the Company. The value of the
Group's investment properties (ignoring purchases and sales) fell by #3,504,000 during the year, reflecting in
particular specific reductions on four properties together with slight reductions in office property valuations.
These reductions were partially offset by increases in the valuations of our secondary retail and industrial estate
portfolios. Overall, this represents a fall of 2.0% on the opening value of investment properties at the start of the
year.
The profits include #741,000 (2001: #1,192,000) from the sale of properties. As more fully detailed in the Property
Manager's Review, we have continued to trade smaller lower yielding properties at auction where very acceptable
prices have been achieved. The property portfolio was valued by DTZ Debenham Tie Leung at 31 December 2002 at
#181,960,000 (2001: #186,900,000), of which #2,038,000 (2001: #2,007,000) represented the difference between the DTZ
Debenham Tie Leung valuation and the carrying value of the properties held for resale in the statutory accounts.
Accounting conventions do not permit such a revaluation to be reflected in the statutory accounts.
Additions during the year amounted to #1,636,000 (2001: #30,500,000) comprising improvement works to existing
properties and small strategic land acquisitions. As announced on 12 August 2002, the attempts by the Group to carry
out a fundraising proved unsuccessful. The lack of substantial new funds together with the uncertain state of the
property market resulted in the much reduced level of new property acquired during the year.
Letting activity has remained solid overall, albeit with prospective tenants tending to take longer to commit to new
agreements in certain parts of the country. The South East market remains the most difficult at present, however the
South Wales and Midlands have proved more favourable markets for the Group. This pattern of regional variations in
prevailing market conditions is one that CNC has typically faced over many years, and our geographical spread of
properties enables us to balance out these regional peaks and troughs.
In 2003, the focus of our efforts will remain on letting void space within the existing portfolio and continuing the
implementation of asset management strategies to extract maximum value from our assets.
Bonds
In contrast to the resilient performance of our property interests, the poor performance of the bond portfolio
resulted in the decision by the Board to exit from this activity as explained in the annual report last year. At the
time of the interim report in September 2002, the liquidation of the bond portfolio and repayment of the associated
bank loans had been carried out and the remaining holdings were valued at #2,408,000. The remainder of the portfolio
is in the process of being systematically liquidated and at the time of writing, 13 holdings with a value of #381,311
as at the year end remain to be sold. During the year the operation of the bond portfolio resulted in a loss of
#917,000. The Statement of Total Return highlights the effects of this discontinued activity.
Change of Accounting Policy
The Group has changed its accounting policy in order to comply with Financial Reporting Standard 19 "Deferred Tax".
Broadly the effect of this change is to make full provision for deferred taxation on all material timing differences,
but to make no provision when investment properties are revalued unless there is a binding commitment for sale at the
period end. This change of policy has reduced the net asset value as at 31 December 2002 by #2,063,000 (2001:
#1,415,000) and reduced the transfer to the revenue reserve for the year ended 31 December 2002 by #648,000 (2001:
#705,000).
Net Asset Value
At 31 December the net assets of the Group amounted to #48,503,000 (2001: #56,527,000 - as restated) which, after
allowing for the Convertible Redeemable Preference Shares, resulted in a net asset value per Ordinary share of 69.76p
(2001: 79.16p - as restated). After allowing for the market value of properties held for resale as noted above, the
pro forma net asset value per Ordinary share was 73.43p (2001: 82.64p - as restated).
Whilst the buy back and subsequent cancellation of various classes of shares added 1.5p to the basic net asset value
per Ordinary Share, it resulted in a reduction in the net assets of the Group of #3,116,000, representing the cash
cost of the buy back of all classes of shares. In addition, the operation of the bond portfolio resulted in a further
reduction in the net assets of the Group by #951,000. The combination of the buy back of shares and the loss on the
bond portfolio accounted for 51% of the fall in net assets for the year.
Current Trading and Prospects
As detailed above, our well spread property interests have once again produced a dependable performance in a somewhat
uncertain property market. Whilst the Board expects these uncertain conditions to persist during the current year, it
nevertheless believes that the active management of the Group's properties will continue to deliver good returns.
Indeed, the period since the year end has witnessed continued optimism from private investors and housebuilders such
that the Group has been able to conclude a number of advantageous sales during the early months of 2003. In the year
to date, thirteen properties totalling #17m have been sold at prices, net of cost, comfortably in excess of year end
valuations. Even more significantly, the first 12.6 acres in the Ashington Masterplan have been sold to Wimpey Homes,
making a positive contribution to current year profits.
Following divestment of the bond portfolio, the FTSE Global Classification Committee has now reclassified the Company
as a property company rather than an investment company. Your Board continues to examine ways of increasing the
property interests of the Group.
The third Annual General Meeting of the Company will be held at 11:00am on 16 July, at the registered office at TSB
House, Le Truchot, St Peter Port, Guernsey. I look forward to welcoming shareholders on that day.
Quentin Spicer
Chairman
28 April 2003
PROPERTY MANAGER'S REVIEW
The historically strong income attributes of the CNC Properties Group of companies ("CNC") has again proved resilient
in an uncertain year. The profit before tax of CNC of #6,078,000 (2001 #5,591,000) maintained an income return of 8%
based on the value of the restated net assets at the beginning of the year. This profit before tax represents a
return of over 9% on the acquisition costs of CNC of #65m in June 2000. CNC has continued to invest in high yielding
properties and to spread risk by balancing this portfolio by geography and use type throughout the United Kingdom.
CNC has contributed to the Group with the payment of dividends totalling #5,301,000 (2001 #4,353,000), the maximum
permitted under banking covenants. With profits after tax for CNC being #4,540,000 for 2002, and #3,806,000 for 2001
(as restated), transfers from retained earnings have been required of #761,000 and #547,000 (as restated)
respectively to cover these dividends.
Assets under management
In the "Prospects" section of the 2001 Report we noted that despite reduced tenant activity, prices for certain types
of property had increased and that we were considering whether this may be the time to take profit by realising some
properties. We also noted concern that some prices being asked may not have been sustainable and we would only make
acquisitions when satisfied that prices were at lower levels. Nothing significant has arisen since to change
materially our views in this respect. Additions during the year have been limited to improvements and small strategic
land acquisitions. Sales of over #3m have also been completed contributing #741,000 to profits before tax (2001:
#1,192,000). As Property Managers, Collins Stewart Property Fund Management Limited ("CSPFM") have been set a target
by PAM to achieve #1m profit per annum through sales of properties. The majority of the sales completed were the
previously reported low yielding roadside schemes where, by going to auction, we have been able to achieve higher
prices from private investors than valuers consider appropriate for statutory accounts purposes. This programme of
sales is continuing into 2003.
At 31 December 2002 the total value of the investment properties and trading properties totalled #181,960,000, a
reduction of approximately #5m from #186,901,000 in 2001. The major reasons for the decrease were the net property
sales in the year and a deficit on revaluation of #3,504,000. The deficit incorporates an understandably bearish view
by our valuers, DTZ Debenham Tie Leung, on the office market generally, and specific reductions on four properties in
particular, where, in two instances, significant tenants have been put into liquidation, in a third instance,
disappointingly, one tenant failed to renew an existing lease and take additional space following publicly stated
confirmation of their intention to do so, and finally a write down in the Ashington development in view of the
Government's position on greenfield sites. As noted below however, since the year end, progress on the Ashington
development has been more positive, with the first sale of land being achieved.
The high yielding nature of the CNC property portfolio combined with the stated policy of disposing of properties
which both provide a yield below CNC's criteria and can be sold at a profit to valuation, protects CNC against large
falls in values. While office properties after five years of growth may have been valued downwards this year, this
has been offset by increases in our secondary retail portfolio and well located traditional industrial estates. The
decision to follow a profitable disposal policy has not disrupted the equanimity of the portfolio balance which still
remains slightly overweight in offices 43% (2001: 43%), industrial 29% (2001: 29%), retail 23% (2001: 23%) and other
5% (2001: 5%). South Wales has proved to be particularly buoyant with the Midlands showing some strengthening during
the year. Scotland remains uninspiring but as it starts from a lower base may hopefully prove to be a growth area in
years to come. While the North East tends to have a relatively stable micro economy of its own, the North West can
fluctuate from site-to-site depending on the individual nature of the location and tenant demand. It is the South East
market that remains the most depressed, and the hardest work, and we can be grateful that our high yielding criteria
automatically preclude us from investments in central London where many property companies have suffered badly this
year.
Total Return
CNC was acquired for #65m in June 2000 and has since paid dividends totalling #12,034,000. The Net Asset Value of CNC
has increased to over #74m after allowing for revaluation of all properties, provision for the new Financial
Reporting Standard No. 19 requirement for deferred tax of #2,120,000 and additional provisions for historic Pension
Fund shortfalls totalling #1.3m. The total post tax return of dividends and Net Asset Value increases has therefore
been approximately 12% p.a. (2001: 20% - as restated), before allowing for any benefit from the reinvestment of the
dividends received. The high level of dividend distribution, the bearish view of our valuers, the new negative
effects of the deferred tax accounting standard and the closure of the defined benefit pension fund in 2001 have all
contributed to a decline in the rate of total post tax returns.
Gearing and Hedging
Total borrowings net of cash amount to approximately #112m for CNC (#108m for the Group), resulting in a gearing
ratio of approximately 158% for CNC. The main Facility remains the #100m Syndicate including The Royal Bank of
Scotland, Bank of Scotland, Clydesdale Bank, Fortis Bank and Nationwide Building Society. Other Facilities relate to
acquisitions made since the purchase of CNC in June 2000. Generally, in view of the high yielding, and therefore
deemed higher risk nature of the properties, margins vary between 1.25% and 1.5%.
Hedging strategies are reviewed each quarter. CNC has benefited from the low interest rates during the year and the
continued use of the existing mixed strategy of fixed rate, floating rate and swaps with embedded floors.
Approximately 82% of all borrowings are protected against rate increases, while 57% have been able to take advantage
of the lower interest rates.
The fair value adjustment attributable to CNC is #3,648,000 (2001: #4,403,000), before any deduction for tax.
Prospects
The tenant uncertainty first shown in the latter half of 2001, which continued through some parts of the country in
2002, has to be expected to continue into 2003. There has been a disappointing failure to meet letting targets in the
South and parts of the North and Scotland. As experienced in the 1990/91 recession and its aftermath however, we are
starting to see some companies downsizing, economising and therefore choosing certain of the CNC properties in place
of their existing more expensive space. Increased tenant inducements must also be expected. Forecasts are therefore
being revised to allow for starting the take up of larger vacant space in the last quarter of 2003. Reduced success
in letting vacant space has been offset by continued low interest rates. As longer term interest rates start to edge
up, consideration is being given to introducing a new element of long term fixing which if implemented will have an
immediate adverse impact on both cash flow and profits but provide longer term certainty at historically low rates.
Despite the uncertainties there remains a remarkable buoyancy and optimism in parts of the investor market. In
particular, private investors, house builders and elements of the general public remain willing to pay attractive
prices while other cash rich property companies and regeneration bodies see development and site assembly
opportunities which occasionally include parts of the CNC portfolio. Thirteen properties totalling #17m have already
been sold since the year-end at prices, net of cost, comfortably in excess of our valuers expectancy. In addition,
the first 12.6 acres in the Ashington Masterplan have been sold to Wimpey Homes and will be making a positive
contribution to the 2003 results. Two further sales totalling #3m are in solicitor's hands, again, at prices in
excess of expectancy. The property portfolio is reviewed quarterly and it will be interesting to see whether these
successful sales encourage DTZ to increase their valuations in the course of 2003.
While the majority of the core CNC portfolio will be retained for its historically dependable income flow, CNC will
continue to seek profitable disposals of lower yielding properties. Proceeds are being used to reduce borrowing in
line with the slight downward revaluations in 2002 and ensure that CNC has sufficient funds to invest in its
co-partnership ventures which continue to spread investment over a wider portfolio while providing an opportunity for
enhanced returns. This continued diverse mix of risk and utilisation skills of other specialist operators is designed
to protect CNC against any major exposure to any specific market problems. While profitable sales provide a positive
start to the 2003 results, profits on recurring income will consequently be reduced unless additional funds can be
introduced for reinvestment in investment properties when prices return to more attractive levels.
Colin Walker-Robson
Collins Stewart Property Fund Management Limited
28 April 2003
The financial information set out in this announcement does not constitute the Company's statutory accounts for the
years ended 31 December 2002 and 31 December 2001. The financial information for the year ended 31 December 2001 is
derived from the financial statements delivered to the UK Listing Authority and The Channel Islands Stock Exchange.
The Auditors reported on those accounts, their report was unqualified and did not contain a statement under section
65(3) of The Companies (Guernsey) Law, 1994.
The accounts for the year ended 31 December 2002 are unaudited and will be finalised on the basis of the financial
information presented by the Directors in this preliminary announcement and will be delivered to the UK Listing
Authority and The Channel Islands Stock Exchange following approval.
CONSOLIDATED STATEMENT OF TOTAL RETURN
(incorporating the revenue account for the year ended 31 December 2002 (unaudited))
Year ended 31 December 2002
Revenue Capital Total
Note Continuing Discontinued Total Continuing Discontinued Total
operations operations operations operations
#'000 #'000 #'000 #'000 #'000 #'000 #'000
Gains/(losses) on 189 - 189 (3,865) (930) (4,795) (4,606)
investments/investment
properties
Income 4 15,844 938 16,782 - - - 16,782
Management fee 5 (2,179) (461) (2,640) (591) - (591) (3,231)
Other expenses 6 (1,189) (5) (1,194) - - - (1,194)
Gain on cancellation - - - 819 - 819 819
of shares
---------- ---------- ---------- ---------- ---------- ---------- ----------
Return/(loss) on 12,665 472 13,137 (3,637) (930) (4,567) 8,570
ordinary activities
before exceptional
items, finance costs
and taxation
Aborted fundraising 6 - - - (503) - (503) (503)
and restructuring
Pension provision 22 (550) - (550) - - - (550)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Return/(loss) on 12,115 472 12,587 (4,140) (930) (5,070) 7,517
ordinary activities
before finance costs
and taxation
Interest receivable 808 390 1,198 - - - 1,198
and similar income
Interest payable and (5,938) (953) (6,891) (2,313) (357) (2,670) (9,561)
similar charges
---------- ---------- ---------- ---------- ---------- ---------- ----------
Return/(loss) on 6,985 (91) 6,894 (6,453) (1,287) (7,740) (846)
ordinary activities
before taxation
Tax on ordinary 7 (1,538) - (1,538) - - - (1,538)
activities
---------- ---------- ---------- ---------- ---------- ---------- ----------
Return/(loss) on 5,447 (91) 5,356 (6,453) (1,287) (7,740) (2,384)
ordinary activities
after tax for the
year
Minority interests - 8 - - - (1,020) - (1,020) (1,020)
non-equity
---------- ---------- ---------- ---------- ---------- ---------- ----------
Return on ordinary 5,447 (91) 5,356 (7,473) (1,287) (8,760) (3,404)
activities after
minority interests
Dividends in respect 9 (905) - (905) - - - (905)
of non-equity shares
---------- ---------- ---------- ---------- ---------- ---------- ----------
Return/(loss) 4,542 (91) 4,451 (7,473) (1,287) (8,760) (4,309)
attributable to
equity shareholders
Dividends in respect 9 (1,152) - (1,152) - - - (1,152)
of equity shares
---------- ---------- ---------- ---------- ---------- ---------- ----------
Transfer to/(from) 3,390 (91) 3,299 (7,473) (1,287) (8,760) (5,461)
reserves
---------- ---------- ---------- ---------- ---------- ---------- ----------
Return per Ordinary 10 7.74p (15.24)p (7.50)p
Share - basic
Dividend per 9 2.00p - 2.00p
Ordinary Share
(distributed)
Return per Ordinary 10 8.09p (13.23)p (5.14)p
Share (retained) -
fully diluted
The revenue columns of this statement represent the revenue account of the Group.
The Statement of Total Return is presented in accordance with the Statement of Recommended Practice for Financial
Statements of Investment Trust Companies.
CONSOLIDATED STATEMENT OF TOTAL RETURN
(incorporating the revenue account for the year ended 31 December 2001)
Year ended 31 December 2001 (as restated)
Revenue Capital Total
Note Continuing Discontinued Total Continuing Discontinued Total
operations operations operations operations
#'000 #'000 #'000 #'000 #'000 #'000 #'000
Gains/(losses) on 906 - 906 6,342 (7,985) (1,643) (737)
investments/investment
properties
Income 4 13,981 4,888 18,869 - - - 18,869
Management fee 5 (1,443) (900) (2,343) (619) - (619) (2,962)
Other expenses 6 (1,117) (64) (1,181) - - - (1,181)
Gain on cancellation - - - - - - -
of shares
---------- ---------- ---------- ---------- ---------- ---------- ----------
Return/(loss) on 12,327 3,924 16,251 5,723 (7,985) (2,262) 13,989
ordinary activities
before exceptional
items, finance costs
and taxation
Aborted fundraising 6 - - - - - - -
and restructuring
Pension provision 22 (750) - (750) - - - (750)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Return/(loss) on 11,577 3,924 15,501 5,723 (7,985) (2,262) 13,239
ordinary activities
before finance costs
and taxation
Interest receivable 14 236 250 - - - 250
and similar income
Interest payable and (5,097) (2,441) (7,538) (2,246) (2,300) (4,546) (12,084)
similar charges
---------- ---------- ---------- ---------- ---------- ---------- ----------
Return/(loss) on 6,494 1,719 8,213 3,477 (10,285) (6,808) 1,405
ordinary activities
before taxation
Tax on ordinary 7 (1,785) - (1,785) - - - (1,785)
activities
---------- ---------- ---------- ---------- ---------- ---------- ----------
Return/(loss) on 4,709 1,719 6,428 3,477 (10,285) (6,808) (380)
ordinary activities
after tax for the
year
Minority interests - 8 - - - (940) - (940) (940)
non-equity
---------- ---------- ---------- ---------- ---------- ---------- ----------
Return/(loss) on 4,709 1,719 6,428 2,537 (10,285) (7,748) (1,320)
ordinary activities
after minority
interests
Dividends in respect 9 (933) - (933) - - - (933)
of non-equity shares
---------- ---------- ---------- ---------- ---------- ---------- ----------
Return/(loss) 3,776 1,719 5,495 2,537 (10,285) (7,748) (2,253)
attributable to
equity shareholders
Dividends in respect 9 (5,526) - (5,526) - - - (5,526)
of equity shares
---------- ---------- ---------- ---------- ---------- ---------- ----------
Transfer (from) /to (1,750) 1,719 (31) 2,537 (10,285) (7,748) (7,779)
reserves
---------- ---------- ---------- ---------- ---------- ---------- ----------
Return per Ordinary 10 9.54p (13.46)p (3.92)p
Share - basic
Dividend per 9 9.60p - 9.60p
Ordinary Share
(distributed)
Return per Ordinary 10 9.70p (11.70)p (2.00)p
Share (retained) -
fully diluted
The revenue columns of this statement represent the revenue account of the Group.
The Statement of Total Return is presented in accordance with the Statement of Recommended Practice for Financial
Statements of Investment Trust Companies.
The Statement of Total Return for the year ended 31 December 2001 has been restated for the adoption of Financial
Reporting Standard 19 "Deferred Taxation" (see note 2).
CONSOLIDATED BALANCE SHEET
as at 31 December 2002 (unaudited)
2002 2001
(as restated)
Note #'000 #'000
Fixed assets
Intangible fixed assets
Goodwill 733 1,356
Other fixed assets
Investment properties 168,310 170,929
Other tangible assets 12 6
Investment in joint ventures 992 526
---------- ----------
170,047 172,817
Current assets
Listed investments 11 1,437 38,607
Property assets 12 11,612 13,965
Debtors due within one year 13 4,728 5,515
Debtors due in more than one year 13 2,792 1,809
Cash at bank and in hand 5,912 21,873
---------- ----------
26,481 81,769
Creditors - amounts falling due within one year 14 (20,785) (71,120)
---------- ----------
Net current assets 5,696 10,649
---------- ----------
Total assets less current liabilities 175,743 183,466
Creditors - amounts falling due after more than one year 15 (114,089) (114,080)
Provisions for liabilities and charges 16 (2,120) (1,472)
Minority interests - non-equity shares 8 (11,031) (11,387)
---------- ----------
Net assets 48,503 56,527
---------- ----------
Share capital and reserves
Called-up share capital 17 15,287 16,704
Capital redemption reserve 18 1,417 -
Share premium account 18 22,506 47,509
Capital reserve - realised 18 (4,832) (6,218)
Capital reserve - unrealised 18 2,512 (13,550)
Property revaluation reserve 18 5,875 9,740
Revenue reserve 18 5,641 2,342
Distributable reserve 18 97 -
---------- ----------
Total shareholders' funds 48,503 56,527
---------- ----------
Attributable to equity shareholders 38,775 45,582
Attributable to non-equity shareholders 9,728 10,945
Net asset value per Ordinary Share - basic 19 69.76p 79.16p
Pro forma net asset value per Ordinary share - basic 19 73.43p 82.64p
Net asset value per Ordinary Share - fully diluted 19 76.54p 85.34p
Net asset value per Convertible Redeemable Preference Share 19 100.00p 100.00p
Net asset value per ZDP Share 8 124.11p 113.87p
The Balance Sheet as at 31 December 2001 has been restated for the adoption of Financial Reporting Standard 19
"Deferred Taxation" (see note 2).
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2002 (unaudited)
2002 2001
Note #'000 #'000
Net cash inflow from operating activities 20 12,314 12,009
Returns on investments and servicing of finance
Interest received 473 13
Interest paid (9,027) (11,266)
Swap breakage costs paid (2,357) -
Dividends paid on Ordinary Shares (2,993) (4,872)
Dividends paid on Convertible Redeemable Preference Shares (945) (685)
---------- ----------
Net cash outflow from returns on investments and servicing of finance (14,849) (16,810)
Taxation
United Kingdom corporation tax paid (804) -
---------- ----------
Net cash outflow from taxation (804) -
Capital expenditure and financial investment
Purchase of investments - (5,007)
Sale of investments 36,646 10,166
Proceeds from sale of other investments 184 3,774
Investment property additions (885) (666)
Purchase of tangible fixed assets (11) (7)
Sale of tangible fixed assets - 118
---------- ----------
Net cash inflow from capital expenditure and financial investment 35,934 8,378
Acquisitions and disposals
Purchase of subsidiary undertakings - (3,213)
Net overdraft acquired with subsidiary undertakings - (286)
---------- ----------
Net cash outflow from acquisitions and disposals - (3,499)
---------- ----------
Net cash inflow before financing 32,595 78
Financing
Repurchase of Ordinary and Convertible Redeemable Preference Shares (1,902) -
Repurchase of ZDP Shares (1,214) -
Repayment of loan notes (2,675) (313)
(Repayment of borrowings)/new borrowings (36,946) 3,905
---------- ----------
Net cash (outflow)/inflow from financing (42,737) 3,592
---------- ----------
(Decrease)/increase in cash in the year (10,142) 3,670
---------- ----------
NOTES TO THE PRELIMINARY ANNOUNCEMENT
for the year ended 31 December 2002 (unaudited)
1. ACCOUNTING POLICIES
A summary of the principal accounting policies, all of which have been applied consistently throughout the year, is
set out below.
Basis of accounting
The accounts are prepared under the historical cost convention, modified to include the revaluation of investments and
investment properties. The accounts have been prepared in accordance with applicable United Kingdom accounting
standards and with the Statement of Recommended Practice ("SORP") "Financial Statements of Investment Trust Companies"
as it is considered best practice to do so, although the Company, as an overseas Company, does not meet all criteria
set out in the SORP.
Basis of consolidation
The consolidated statement of total return and consolidated balance sheet include the financial statements of the
Company and its subsidiary undertakings for the year.
The results of subsidiaries acquired are included in the consolidated statement of total return from the date control
passes. Goodwill arising on consolidation had previously been capitalised and amortised over a period of 20 years.
However, following a review of the estimated useful life, the Directors decided to amortise goodwill over a period of
five years.
Valuation of investments
Quoted investments are generally valued at mid-market prices. However, when appropriate the quoted investments have
been valued downwards to take account of high volatility and poor liquidity in the market.
Realised surpluses or deficits on the disposal of investments, impairments in the value of investments and unrealised
surpluses or deficits on the revaluation of investments are taken to the consolidated statement of total return as
capital - realised or unrealised as applicable.
Year-end exchange rates are used to translate the value of investments which are denominated in foreign currencies.
Investment properties
Investment properties are revalued quarterly at open market value in accordance with Statement of Standard Accounting
Practice 19 "Investment Properties". As such, no depreciation is provided on investment properties. The surplus or
deficit is included in the consolidated statement of total return and the property revaluation reserve (to the extent
that any deficit is temporary). Permanent deficits are written off to the revenue reserve via the consolidated
statement of total return.
Properties held for resale, land and developments in progress
Properties held for resale, land and developments in progress are valued at the lower of cost and net realisable
value.
Interest
Interest on loans specifically granted for the purchase and development of new development sites is capitalised up to
the date of completion of the property.
Joint ventures
The consolidated statement of total return includes the Group's share of operating profit, interest and attributable
taxation of joint ventures. The investment in joint ventures disclosed in the consolidated balance sheet reflects the
Group's share of net assets of those companies.
Depreciation
No depreciation is provided on investment properties. The Directors consider that these properties should be included
in the financial statements at their open market values in order to give a true and fair view and therefore consider
it necessary to adopt Statement of Standard Accounting Practice 19 "Investment Properties". It would be neither
practical nor of real value to determine the depreciation charge taken into account in arriving at open market values.
Plant, machinery and motor vehicles are depreciated by the straight-line method over periods of between four and five
years.
Investment income
Fixed returns on debt securities are recognised on a time apportionment basis so as to reflect the effective yield on
the debt security. Interest on overseas debt securities is shown gross of any overseas withholding tax. Interest on
United Kingdom securities is shown net of the tax credit in accordance with Financial Reporting Standard 16 "Current
Taxation". The debt securities are accounted for on a clean basis. Bank interest is accounted for on an accruals
basis.
Expenses
All expenses are accounted for on an accruals basis. Expenses are charged through the revenue account except as
follows:
- expenses which are incidental to the acquisition of an investment are included within the cost of the investment;
- expenses which are incidental to the disposal of an investment are deducted from the disposal proceeds of the
investment; and
- expenses are charged to the capital reserve - realised where a connection with the maintenance or enhancement of
the value of the investments can be demonstrated. In this respect, part of the management fee, insofar as it
relates to the property, has been allocated 30% to the capital reserve - realised and 70% to the revenue account,
in line with the Board's expected long-term split of returns, in the form of capital gains and income
respectively, from the property portfolio.
Finance costs
Finance costs, including dividends and other finance costs of non-equity shares, are accounted for on an accruals
basis, and in accordance with the provisions of Financial Reporting Standard 4 "Capital Instruments".
Finance costs of debt, insofar as they relate to the financing of the Group's property portfolio are allocated 30% to
capital and 70% to revenue, in line with the Board's expected long-term split of returns, in the form of capital gains
and income respectively, from the property portfolio.
Pension costs
Contributions to the defined benefit scheme are assessed with regard to advice from qualified actuaries and are
charged to the revenue account.
Since 20 April 2001, any deficits arising from actuarial valuations of the defined benefit scheme are provided for.
Financial instruments
Derivative financial instruments utilised by the Group are interest rate swaps, caps and floors. The Group does not
enter into speculative derivative contracts. All such instruments are used for hedging purposes to alter the risk
profile of an existing underlying exposure of the Group in line with the Group's risk management policies. Amounts
payable or receivable in respect of interest rate swaps are recognised as adjustments to interest expenses over the
period of the contracts.
Termination payments made or received are spread over the life of the underlying exposure in cases where the
underlying exposure continues to exist. In other cases, termination payments are taken to the capital account. In the
first quarter of 2002, a decision was taken that the prospective returns from continuing to hold a significant amount
of the Group's assets in the current bond portfolio was outweighed by the risks. Accordingly, the Directors
instigated a substantial liquidation of the bond portfolio held by PAM High. In order to minimise further interest
costs, the Euro52.3 million and #3 million loans were repaid on 14 June 2002. The costs of breakage were provided for
in the 2001 financial statements, as these loans effectively became repayable on breach of the loan covenants.
Deferred taxation
The Group has adopted Financial Reporting Standard 19 "Deferred Tax". In accordance with this accounting standard,
deferred tax is provided in full on timing differences that result in an obligation at the balance sheet date to pay
more tax, or a right to pay less tax, at a future date, at rates expected to apply when they crystallise, based on
current tax rates and on law.
Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods
different from those in which they are included in financial statements. Deferred tax is not provided on timing
differences arising from the revaluation of fixed assets where there is no commitment to sell the asset, or on
unremitted earnings of subsidiaries and associates where there is no commitment to remit these earnings. Deferred tax
assets are recognised to the extent that it is regarded as more likely than not that they will be recovered. Deferred
tax assets and liabilities are not discounted.
Operating leases
Annual rentals under operating leases are charged to the revenue account as incurred.
Foreign currency
Transactions denominated in foreign currencies are recorded in the local currency at actual exchange rates as at the
date of the transaction or, where appropriate, at the rate of exchange in a related forward exchange contract.
Monetary assets and liabilities denominated in foreign currencies at the year-end are reported at the rates of
exchange prevailing at the year-end or, where appropriate, at the rate of exchange in a related forward exchange
contract. Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is
included as an exchange gain or loss in the consolidated statement of total return as capital or revenue depending on
whether the gain or loss is of a capital or revenue nature respectively.
Capital reserves
Capital reserve - realised
The following are accounted for in this reserve:
- gains and losses on the realisation of investments;
- realised exchange differences of a capital nature; and
- expenses and finance, together with the related taxation effect, charged to this reserve in accordance with
the above policies.
Capital reserve - unrealised
The following are accounted for in this reserve:
- increases and decreases in the valuation of investments held at the year-end; and
- unrealised exchange differences of a capital nature.
2. CHANGE OF ACCOUNTING POLICY - deferred taxation
The Group has changed its accounting policy in order to comply with Financial Reporting Standard 19 "Deferred Tax".
Broadly the effect of this change is to make full provision for deferred taxation on all material timing
differences, but to make no provision when investment properties are revalued unless there is a binding commitment for
sale at the period end. This change of policy has reduced the net asset value as at 31 December 2002 by #2,063,000
(2001: #1,415,000) and reduced the transfer to the revenue reserve for the year ended 31 December 2002 by #648,000
(2001: #705,000).
3. DISCONTINUED OPERATIONS
The declines in the value of the bond portfolio led to a marginal breaching of PAM High's loan to value covenant with
The Royal Bank of Scotland International Limited ("the Bank"). Following discussions with the Bank, the Manager and
Aberdeen Asset Managers, the Directors concluded that the risks of continuing to hold a significant amount of the C
Company's assets in the bond portfolio outweighed the potential rewards. Accordingly, the Directors instigated a
liquidation of the bond portfolio.
Each class of shareholder had, at various meetings of each class of shareholder held on 30 July 2002 and 6 August
2002, approved the change to the investment policy of PAM High, such that investment in bonds be discontinued and
instead emphasis be placed on property, enabling the Group to focus entirely on its property business. Consequently,
the results of PAM High have been classified as discontinued operations.
4. ANALYSIS OF REVENUE AND REVENUE SURPLUS BEFORE TAXATION
Continuing operations Discontinued operations Total
Revenue Return before Revenue Return before Revenue Return
taxation taxation before
taxation
2002 2002 2002 2002 2002 2002
#'000 #'000 #'000 #'000 #'000 #'000
Investment income - - 938 938 938 938
Sale of properties 3,231 741 - - 3,231 741
Rental income 17,351 14,293 - - 17,351 14,293
Share of joint ventures 768 560 - - 768 560
Management fees 450 250 - - 450 250
------ ---------- ---------- ---------- ---------- -------
Group income 21,800 15,844 938 938 22,738 16,782
Cost of sales (5,956) - (5,956)
-------- ---------- ----------
15,844 938 16,782
--------- ---------- ----------
Management fee (note 5) (2,179) (461) (2,640)
Other expenses (note 6) (1,189) (5) (1,194)
Profit on sale of 189 - 189
investments
Exceptional cost - (550) - (550)
pension provision
Net interest payable (5,130) (563) (5,693)
---------- ---------- -------
Revenue surplus/(deficit) 6,985 (91) 6,894
on ordinary activities
before tax
---------- ---------- -------
Continuing operations Discontinued operations Total
Revenue Return before Revenue Return before Revenue Return
taxation taxation before
taxation
2001 2001 2001 2001 2001 2001
#'000 #'000 #'000 #'000 #'000 #'000
Investment income - - 4,888 4,888 4,888 4,888
Sale of properties 2,230 286 - - 2,230 286
Rental income 15,524 12,847 - - 15,524 12,847
Share of joint ventures 379 379 - - 379 379
Management fees 658 469 - - 658 469
------ ---------- ---------- ---------- ---------- ------
Group income 18,791 13,981 4,888 4,888 23,679 18,869
Cost of sales (4,810) - (4,810)
------ ---------- ----------
13,981 4,888 18,869
------ ---------- ----------
Management fee (note 5) (1,443) (900) (2,343)
Other expenses (note 6) (1,117) (64) (1,181)
Profit on sale of 906 - 906
investment properties
Exceptional cost - (750) - (750)
pension provision
Net interest payable (5,083) (2,205) (7,288)
---------- ---------- ------
Revenue surplus on 6,494 1,719 8,213
ordinary activities
before tax
---------- ---------- ------
All activities are undertaken in the United Kingdom and Channel Islands.
5. MANAGEMENT FEES
Collins Stewart Fund Management Limited ("the Manager"), had previously been entitled under its Management Agreement
to receive a fee of #3,500,000 per annum from the Group. #900,000 per annum had been charged to PAM High, out of which
the Investment Adviser to PAM High was paid a fee equal to 1.0% per annum of the value of the investments managed. Of
the balance of #2,600,000 per annum, #800,000 per annum was charged by the Manager to CNC and, until the conclusion of
the CNC "hive-out" on 19 April 2001, the balance of #1,800,000 per annum was offset against the continuing
administration costs of CNC. Following the conclusion of the hive-out, Collins Stewart Property Fund Management
Limited had charged CNC a management fee at a rate of #1,800,000 per annum, pro rated for the period to 31 December
2001.
On 12 August 2002 the Company announced that, with effect from 1 July 2002, the basis of calculating the management
fee had changed with the amount being paid to the Manager being calculated on an ad valorem basis of 1.5% based on
total assets under management or, if lower, the amount derived under the formula contained in the Management
Agreement. The fees of the Property Adviser are paid from the management fee.
6. OTHER EXPENSES
Revenue Capital Total Revenue Capital Total
2002 2002 2002 2001 2001 2001
#'000 #'000 #'000 #'000 #'000 #'000
Administration expenses - - - 485 - 485
Depreciation of tangible fixed assets 5 - 5 22 - 22
Amortisation of goodwill 623 - 623 73 - 73
Auditors' audit fees - Company 50 - 50 58 - 58
remuneration
- other group 89 - 89 83 - 83
undertakings
other services (1) 103 - 103 64 - 64
Directors' remuneration 83 - 83 195 - 195
Losses on foreign exchange 1 - 1 39 - 39
Sundry expenses 240 - 240 162 - 162
---------- ---------- ---------- ---------- ---------- ----
1,194 - 1,194 1,181 - 1,181
---------- ---------- ---------- ---------- ---------- -----
(1) In addition to these costs, included in the cost of the aborted fundraising and restructuring disclosed in the
capital account are payments totalling #150,000 in respect of services provided by Deloitte & Touche.
7. TAX ON ORDINARY ACTIVITIES
2002 2001
(as restated)
Revenue Capital Total Revenue Capital Total
2002 2002 2002 2001 2001 2001
(as restated) (as restated) (as restated)
#'000 #'000 #'000 #'000 #'000 #'000
Current taxation:
Corporation tax at 1,067 - 1,067 1,023 - 1,023
30% (2001: 30%)
Adjustment in respect (177) - (177) - - -
of prior years
------ ---------- ---------- ---------- ---------- ----------
890 - 890 1,023 - 1,023
Deferred taxation:
Origination and 904 - 904 762 - 762
reversal of timing
differences
Adjustment in respect (256) - (256) - - -
of prior years
------ ---------- ---------- ---------- ---------- --------
1,538 - 1,538 1,785 - 1,785
------ ---------- ---------- ---------- ---------- ----------
Adoption of FRS 19 Deferred Tax has required a change in the method of accounting for deferred tax. As a result the
comparative figure for the tax on the profit on ordinary activities for 2001 has been restated from the previously
reported amount of #1,080,000 to #1,785,000. The impact of adopting FRS 19 on the 2002 results is an increase in the
tax charge of #648,000.
The Company and its Guernsey based subsidiaries PAM High and PAM Securities Limited are exempt from Guernsey Income
Tax under the Income Tax (Exempt Bodies) (Guernsey) Ordinances 1989 and 1992 and are charged an annual exemption fee
of #600.
CNC Properties Limited, a subsidiary company registered in England and Wales, has unrelieved tax trading losses of
approximately #7.8 million (2001: #10 million) and capital losses of approximately #89,000 (2001: #1.6 milli on).
The Group has changed its accounting policy in order to comply with Financial Reporting Standard 19 "Deferred Tax",
the impact of which is detailed in note 2.
8. MINORITY INTERESTS
Zero Dividend Preference Shares ("ZDP Shares") issued by Property Acquisition and Management Securities Limited
2002 2001
#'000 #'000
Amount due to minority interests (ZDP Shareholders) at 1 January 2002 11,387 10,446
Capital entitlement accrued during the year 1,020 940
Cost of buy back and cancellation of ZDP Shares (1,214) -
Realised gain on buy back and cancellation of ZDP Shares (162) -
---------- ----------
Amount due to minority interests (ZDP Shareholders) at 31 December 2002 11,031 11,387
---------- ---------
Number of ZDP Shares in issue 8,887,958 10,000,000
---------- ---------
Net asset value per ZDP Share 124.11p 113.87p
---------- ---------
Buy back of ZDP Shares
During the year the Group announced its intention to buy back ZDP Shares. At an Extraordinary General Meeting of the
Property Acquisition and Management Securities Limited ("PAM Securities") and at a class meeting of the ZDP
Shareholders on 3 October 2002, resolutions were passed to authorise PAM Securities to purchase and subsequently
cancel up to 5,000,000 ZDP Shares.
The Company purchased 1,112,042 ZDP Shares on behalf of the PAM Securities during December 2002 and transferred them
to the PAM Securities at cost, which was less than the net asset value per share at the time of the transfer, thus
reducing the loan from PAM Securities to the Company accordingly. As the ZDP Shares were purchased at less than their
net asset value, PAM Securities made a gain upon cancellation of the shares of #161,976, which is attributable to the
holders of the ordinary shares issued by PAM Securities (i.e. the Company).
Number of ZDP Shares bought NAV of ZDP Shares at Cost of ZDP
Date of buy back back time of buy back Shares bought back
# #
13 December 2002 322,000 397,954 338,639
17 December 2002 50,000 61,852 53,500
18 December 2002 496,042 613,773 550,607
19 December 2002 244,000 301,983 270,840
---------- ---------- ---------
1,112,042 1,375,562 1,213,586
---------- ---------- ----------
Rights attached to shares
ZDP Shareholders shall not be entitled to receive and shall not participate in any dividends or other distributions
out of the profits of PAM Securities, a wholly owned subsidiary of the Company, available for dividend and resolved to
be distributed in respect of any accounting period or any other income or right to participate therein.
On a return of assets on liquidation, after payment of all debts and satisfaction of all creditors of PAM Securities,
there shall be paid to ZDP Shareholders from the surplus assets of PAM Securities an amount equal to 100p per ZDP
Share as increased daily at a compound rate as will give an entitlement to 153.86p on the ZDP Redemption Date (five
years after admission to trading), the first increase occurring on the date the ZDP Shares are first admitted to the
Official List of the United Kingdom Listing Authority and the last on the actual date of payment.
ZDP Shareholders will not have the right to receive notice of any general meeting of PAM Securities or to attend or
vote at any such meeting except in respect of any resolution altering, modifying or abrogating any of the rights and
privileges attached to the ZDP Shares or to wind up PAM Securities.
9. DIVIDENDS IN RESPECT OF EQUITY SHARES
2002 2001
#'000 #'000
#1 Convertible Redeemable Preference Shares
Period to 30 April 2002 - 2.85p per share (2001: 2.85p per share) 312 309
Period to 31 August 2002 - 2.85p per share (2001: 2.85p per share) 312 312
Period to 31 December 2002 - 2.85p per share (2001: 2.85p per share) 281 312
---------- ------
905 933
---------- ------
#0.10 Ordinary Shares
First interim - 2.00p per share (2001: 3.20p per share) 1,152 1,840
Second interim - nil (2001: 3.20p per share) - 1,843
Third interim - nil (2001: 3.20p per share) - 1,843
---------- ------
1,152 5,526
---------- ------
Total dividends 2,057 6,459
---------- ------
On 12 August 2002, the Board announced that it did not intend to declare any ordinary dividends for the remainder of
2002 and 2003 but that the convertible redeemable preference dividends would continue to be paid in accordance with
the Company's Articles of Association and Guernsey Company Law.
10. RETURN PER ORDINARY SHARE AND DILUTED RETURN PER ORDINARY SHARE
The revenue return per Ordinary Share is based on the net revenue after non-equity dividends of #4,451,000 (2001 - as
restated: #5,495,000) and on 57,479,685 Ordinary Shares (2001: 57,543,928), being the weighted average number of
shares in issue.
The capital return per Ordinary Share is based on a net capital loss of #8,760,000 (2001: loss of #7,748,000) and on
57,479,685 Ordinary Shares (2001: 57,543,928), being the weighted average number of shares in issue.
The fully-diluted returns per Ordinary Share have been calculated on the assumption that the Convertible Redeemable
Preference Shares were fully converted on the first day of the period and on each subsequent issue at a rate of 8
Ordinary Shares for every 10 Convertible Redeemable Preference Shares, giving a weighted average of 66,197,826 shares
(2001: 66,238,968). The revenue return of 8.09p per Ordinary Share (2001 - as restated: 9.70p) includes the savings of
the finance costs on the Convertible Redeemable Preference Shares.
11. LISTED INVESTMENTS
2002 2001
#'000 #'000
Opening valuation 38,607 52,545
Purchases at cost - 5,007
Sales proceeds (36,646) (10,166)
Realised losses (2,552) (4,151)
Decrease/(increase) in unrealised loss on foreign exchange 270 (162)
Decrease/(increase) in unrealised loss on investments 1,758 (4,466)
------- ------
Closing valuation 1,437 38,607
------- ------
Closing book cost 7,941 46,871
Closing unrealised loss (6,504) (8,264)
------- -------
Closing valuation 1,437 38,607
------- -------
During 2002, a decision was taken by the Directors that the risks of continuing to hold a significant amount of the
Group's assets in the current bond portfolio was outweighed by the risks. Accordingly the Directors instigated a
substantial liquidation of the bond portfolio held by Property Acquisition and Management High Income Limited ("PAM
High").
Due to the liquidation of the bond portfolio, with effect from 31 July 2002, Aberdeen Asset Managers Limited ceased to
act as Investment Adviser and control over the liquidation of the bond portfolio passed to the Manager.
Since the year-end PAM High has sold a further five holdings, which were included in the year-end balance sheet at
#1,056,140, for #1,095,199.
12. PROPERTY ASSETS
2002 2001
#'000 #'000
Properties held for resale 8,548 11,482
Developments in progress 3,064 2,483
---------- ------
11,612 13,965
---------- ------
Property assets are held at the lower of cost and net realisable value.
Land and properties held for resale have been valued at 31 December 2002 by DTZ Debenham Tie Leung, international
property advisers. The effect of this valuation increases the valuation of property assets by #2,038,000 (2001:
#2,007,000) to #13,650,000 (2001: #15,972,000).
13. DEBTORS
2002 2001
#'000 #'000
Due within one year:
Amounts owed by subsidiary undertakings - -
Trade debtors 3,296 2,837
Amounts owed by joint ventures 176 183
Corporation tax recoverable 334 32
Other debtors 701 901
Prepayments and accrued income 221 1,562
---------- ------
4,728 5,515
---------- ------
Due after more than one year:
Amounts owed by joint ventures 2,792 1,809
---------- ------
2,792 1,809
---------- ------
14. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
2002 2001
#'000 #'000
Bank loans and overdrafts 2,775 44,872
Trade creditors 581 329
Amounts owed to joint ventures 903 353
Other creditors 7,319 11,471
Corporation tax 1,147 759
Accruals 4,488 7,960
Dividends 277 2,155
Deferred income 3,295 3,221
---------- ------
20,785 71,120
----------- ------
Included in other creditors above are loan notes of #65,000 (2001: #741,000) which are redeemable on demand. The notes
are funded by a cash deposit and interest is payable at a fixed rate of 5.0%. In addition, the balance includes loan
notes of #nil (2001: #1,999,000) repayable in December 2003. The notes are secured against certain properties of the
Group and interest is payable at 1.0% below the bank rate.
15. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
2002 2001
#'000 #'000
Bank loans 113,151 113,402
Other 938 678
Amounts owed to subsidiary undertakings - -
---------- ------
114,089 114,080
---------- ------
Bank loans:
Payable by instalments:
in less than five years 5,273 6,988
in more than five years 14,014 14,868
Payable within five years 94,991 93,979
Payable in more than five years - 34,995
---------- ------
Total loans 114,278 150,830
Less amounts included in creditors falling due within one year (1,127) (37,428)
---------- ------
Total bank loans falling due after more than one year 113,151 113,402
---------- ------
Bank loans totalling #114,278,000 (2001: #115,835,000) and due in less than five years are secured against certain
properties and other assets of the Group. The final repayment date for the facility of #100 million is 19 May 2005.
16. DEFERRED TAXATION
Amount provided
2002 2001
(as
restated)
#'000 #'000
Deferred taxation liabilities / (assets)
Short term timing differences 3,698 3,169
Unrelieved losses (2,284) (2,706)
Deferral of capital gain 1,009 1,009
Short term differences (303) -
--------- ------
2,120 1,472
---------- ------
At 1 January as restated (see below) 1,472 710
Charge to revenue reserve 648 762
---------- ------
2,120 1,472
---------- ------
The deferred tax balances have been restated following adoption of FRS 19 Deferred Tax (see below).
The adoption of FRS 19 Deferred Tax has required changes in the method of accounting for deferred tax assets and
liabilities. As a result of this change in accounting policy the comparatives have been restated as follows:
Deferred tax Revenue reserve Shareholders'
provision / (asset) funds
#'000 #'000 #'000
2001 as previously reported 57 3,757 57,942
Adoption of FRS 19 at 1 January 2001 710 (710) (710)
During year ended 31 December 2001 705 (705) (705)
---------- ---------- ------
Impact of FRS 19 for 2001 1,415 (1,415) (1,415)
---------- ---------- ------
2001 restated (see above) 1,472 2,342 56,527
---------- ---------- ------
17. CALLED UP SHARE CAPITAL
2002 2001
#'000 #'000
Authorised:
200,000,000 Ordinary Shares of #0.10 each 20,000 20,000
50,000,000 Convertible Redeemable Preference Shares of #1each 50,000 50,000
---------- ------
70,000 70,000
---------- ------
Allotted and fully paid:
55,583,795 (2001: 57,583,795) Ordinary Shares of #0.10 each 5,559 5,759
9,728,262 (2001: 10,945,262) Convertible Redeemable Preference Shares of #1 each 9,728 10,945
---------- ------
15,287 16,704
---------- ------
Buy back of Ordinary Shares and Convertible Redeemable Preference Shares
During the year the Group announced its intention to buy back Ordinary Shares and Convertible Redeemable Preference
Shares, in addition to ZDP Shares, for cancellation. At an Extraordinary General Meeting of the Company and at class
meetings of the Ordinary Shareholders, Convertible Redeemable Preference Shareholders and ZDP Shareholders on 3
October 2002, resolutions were passed to authorise the Company to purchase and subsequently cancel up to 14.99%
(8,631,811 shares) of the Ordinary Shares in issue and 50.00% (5,472,632 shares) of the Convertible Redeemable
Preference Shares in issue.
The Company purchased 2,000,000 Ordinary Shares and 1,217,000 Convertible Redeemable Preference Shares during December
2002 for #870,147 and #1,032,452 respectively. As the shares were purchased for less than their net asset values, the
Company made a gain upon cancellation of the Ordinary Shares of #437,450 and a gain upon cancellation of the
Convertible Redeemable Preference Shares of #219,230.
Ordinary Shares
The Ordinary Shares are entitled to all growth of the Company's net assets after providing for payment in full of the
capital entitlement of the ZDP Shares and the Convertible Redeemable Preference Shares.
Ordinary shareholders are entitled to one vote at general meetings of the Company and, on a poll, to one vote for each
Ordinary Share held.
The Ordinary Shares would rank behind the Convertible Redeemable Preference Shares and the ZDP Shares in the event of
a liquidation.
Convertible Redeemable Preference Shares
The Convertible Redeemable Preference Shares carry the right to be converted into Ordinary Shares in the years 2004 to
2007 at the rate of 8 Ordinary Shares for every 10 Convertible Redeemable Preference Shares. If 85% or more of the
Convertible Redeemable Preference Shares are converted, the Company is entitled to compulsorily convert the remainder.
The Convertible Redeemable Preference Shares will be issued with a fixed capital entitlement upon winding-up of 100p
per share and, unless otherwise converted, will be redeemed at 100p on the Redemption Date. The Convertible Redeemable
Preference Shares will rank for repayment out of the Company's net assets before any payment on the Ordinary Shares
but after the entitlement of the holders of the ZDP Shares by virtue of the agreements between the Company and PAM
Securities.
The holders of the Convertible Redeemable Preference Shares carry the right to receive notice of and attend and vote
at general meetings of the Company, however they shall not have the right to vote on any resolution to approve or
declare a dividend on Ordinary Shares.
The holders of the Convertible Redeemable Preference Shares are entitled to a cumulative preferential dividend at a
rate of 8.55% per annum on the capital paid up on the last business day of June, October and February. They are not
entitled to any further right of participation by way of dividend in the return of the Company.
18. RESERVES
Capital Property Capital
Share reserve- Capital reserve- revaluation redemption Other
premium realised unrealised reserve Revenue reserve reserve distributable Total
reserve
#'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000
As at 1 47,509 (6,218) (13,550) 9,740 3,757 - - 41,238
January 2002
as previously
stated
Prior year - - - - (1,415) - - (1,415)
adjustment
(note 2)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
At 1 January 47,509 (6,218) (13,550) 9,740 2,342 - - 39,823
2002 as
restated
Movements for - (6,614) 1,062 (3,865) 3,299 - 657 (5,461)
the year
Cancellation - - - - - 1,417 (2,560) (1,143)
of shares
Reclass
-ification (25,000) 8,000 15,000 - - - 2,000 -
of share
premium
Scrip (3) - - - - - - (3)
dividend
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
As at 31 22,506 (4,832) 2,512 5,875 5,641 1,417 97 33,216
December
2002
---------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
At an Extraordinary General Meeting of the Company held on 3 October 2002, it was proposed that the capital of the
Company be reduced in accordance with The Companies (Guernsey) Law, 1994 (as amended) by redesignating #25,000,000,
representing part of the share premium account of the Company, as distributable reserves. This resolution was passed in
The Royal Court of Guernsey on 11 October 2002.
19. NET ASSET VALUE PER SHARE AND DILUTED NET ASSET VALUE PER SHARE
The net asset value per share and the net asset values attributable to each class of share at the year-end calculated
in accordance with the Articles of Association:
2002 2001
(as restated)
Ordinary Shares - basic 69.76p 79.16p
Convertible Redeemable Preference Shares 100.00p 100.00p
The movements during the year of the assets attributable to each class of share is as follows:
Convertible
Redeemable
Preference
Shares
Ordinary Shares
Total
#'000 #'000 #'000
Total recognised losses for the year (4,351) 947 (3,404)
Scrip dividend 4 (7) (3)
Dividends appropriated in the year (1,152) (905) (2,057)
Shares redeemed in the year (1,308) (1,252) (2,560)
---------- ---------- ----------
Total movement for the year (6,807) (1,217) (8,024)
Total net assets at 1 January 2002 (as restated) 45,582 10,945 56,527
---------- ---------- ----------
Total net assets at 31 December 2002 38,775 9,728 48,503
---------- ---------- ----------
Basic net asset value per Ordinary Share is based on net assets less the nominal value of Convertible Redeemable
Preference Shares outstanding at the year-end and on 55,583,795 Ordinary Shares (2001: 57,583,795), being the number of
Ordinary Shares in issue at the year-end. The analysis of Shareholders' funds used on the face of the balance sheet has
been computed in accordance with the provisions of Financial Reporting Standard 4 "Capital Instruments".
If the current property assets were included in the accounts at 31 December 2002 at open market value (as valued by DTZ
Debenham Tie Leung), the net asset value per Ordinary Share would increase from 69.76p (2001 - as restated: 79.16p) to
a pro forma net asset value per Ordinary Share of 73.43p (2001 - as restated: 82.64p).
Fully diluted net asset value per Ordinary Share is 76.54p (2001 - as restated: 85.34p). This has been calculated on
the assumption that the Convertible Redeemable Preference Shares were fully converted on the day of issue on the basis
of 8 Ordinary Shares for every 10 Convertible Redeemable Preference Shares held, giving a weighted average of
63,366,405 shares (2001: 66,238,968).
20. RECONCILIATION OF NET REVENUE BEFORE FINANCE COSTS AND TAXATION TO NET CASH INFLOW FROM OPERATING ACTIVITIES
2002 2001
#'000 #'000
Net revenue before finance costs and taxation 12,587 15,501
Increase in funding of joint ventures (1,877) -
Management fee charged to capital (591) (619)
Other charges to capital (503) -
Depreciation 5 22
Amortisation 623 73
Loss on sale of fixed asset - (7)
Decrease in accrued income 1,261 426
Decrease/(increase) in property assets 1,666 (2,049)
Increase in creditors (1,029) (3,213)
Decrease increase in other debtors 172 1,875
---------- ----------
Net cash inflow from operating activities 12,314 12,009
---------- ----------
21. RECONCILIATION OF NET CASH FLOW TO MOVEMENTS IN NET DEBT
2002 2001
#'000 #'000
(Decrease)/increase in cash in the year (10,142) 3,670
Net cash outflow/(inflow) from bank financing 36,946 (3,905)
---------- ----------
Change in net debt arising from cash flows 26,804 (235)
Loans acquired with subsidiary - (21,967)
Repayment of loan notes 2,675 313
Translation difference (417) 875
---------- ----------
Decrease/(increase) in net debt for the year 29,062 (21,014)
Net debt at 1 January 2002 (139,141) (118,127)
---------- ----------
Net debt at 31 December 2002 (110,079) (139,141)
---------- ----------
22. PENSIONS
The Group recorded a provision of #750,000 at 31 December 2001 and agreed to make monthly payments of #15,000 over a
period of five years backdated to February 2001. The Group recorded a further provision of #550,000 at 31 December
2002.
If you have any queries please contact:
Andrew Duquemin
Collins Stewart Fund Management Limited
2nd Floor, TSB House
Le Truchot
St Peter Port
Guernsey
GY1 4AE
Tel: 01481 731 987
Fax: 01481 720 018
This information is provided by RNS
The company news service from the London Stock Exchange
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