RNS Number:7907H
Terrace Hill Group PLC
26 January 2005
TERRACE HILL GROUP PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS FOR YEAR TO 31 OCTOBER 2004
CHAIRMAN'S STATEMENT
Year to 31 October 2004
I am pleased to present our results for the Year to 31 October 2004 which
illustrate the progress we continue to make towards our goal of enhancing
shareholder value.
Profit and Loss account to 31 October 2004
Profit before tax for the Year amounted to #4,083,801 (18 months to 31 October
2003: #5,092,831). Operating Profit for the year of #5,259,244 exceeded
Operating Profit for the previous 18 month period to 31 October 2003 of
#3,295,314.
Triple Net Asset Value
Our Net Asset Value (NAV) increased in the Year from #46.5 million to #70.8
million. NAV per share increased in the same period from 30.22p per share to
38.12p, an increase of 26.14%.
We announced on 13 April 2004 that we would in future provide figures for Triple
Net Asset Value ("TNAV") which is common practice amongst quoted companies in
the property sector. Our TNAV per share at 31 October 2004 was 39.99p. The
increase in TNAV over the year to 31 October 2004 was over 25%. In our case the
principal adjustments required from Net Asset Value to arrive at TNAV are, on a
realistic basis, to revalue current work-in-progress to current realisation
value and to allow for tax that would be payable were we to realise our assets
at their revalued amounts. This is more fully explained on page 15.
At 31 October 2004 our development programme had a total end value approaching
#600 million (30 April 2004: #500 million), a figure which includes joint
ventures. Gearing inside development vehicles and entering into joint ventures
allow us to greatly increase the range of our activities while reducing risks.
In most joint ventures we are entitled to project coordination fees and
enhancement of our equity dependent on results. We anticipate that our
development programme is capable of providing significant financial returns to
the Group over the next five years.
Balance Sheet at 31 October 2004
Total Group assets at 31 October 2004 stood at #180,581,071 compared to
#125,315,628 at 31 October 2003, and net assets, after minority interests, at
#70,841,074, an increase of 52.24% over net assets at 31 October 2003 of
#46,532,000.
Bank debt of #75.6 million net of #17.8 million cash stood at 81.6% of equity
(2003: 119.1%). Of the bank debt 68.35% was with limited (interest etc.) or no
recourse to the parent company. Properties held as investments were #91.3
million (#40.4 million residential and #50.9 million commercial) compared to
#83.5 million last year. Work-in-progress was #55.7 million (#50.7 million
commercial and #5 million residential) compared to #18 million last year.
Management
We have decided to appoint Philip Leech as Managing Director with effect from 26
January 2005. Philip joined Terrace Hill in 1993. Aged 41, he is a Chartered
Surveyor, having spent seven years with Strutt and Parker before joining Dixons
Commercial Properties and then Terrace Hill. Philip has very successfully run
the North East office since 1994 which has been consistently and substantially
profitable. Philip has also in recent times procured important new development
projects, such as Baltic Business Quarter, Gateshead (expected to be developed
out over some 10 years with an end value expected to be well over #100 million)
along with other projects referred to in the Operational Review. We all look
forward to a successful future with Philip at the helm.
With effect from 26 January Nigel Turnbull and Ross Macdonald will step down
from their roles of Joint Managing Directors as part of their planned, phased
retirement. Nigel and Ross, now in their 60's, have expressed the wish to have
more leisure time. As you are aware, the Group was formed by the amalgamation in
September 2002 of Capitaltech PLC (of which Ross had been Chief Executive since
its incorporation in 1994) with Westview and Terrace Hill Limited (which Nigel
had joined also in 1994). Nigel and Ross, both with Scottish professional
backgrounds, have worked very well together.
I would like to thank Nigel and Ross for their hard and diligent efforts in
establishing and growing Terrace Hill and their successful efforts in getting us
to our current position of strength. I am pleased that both Nigel and Ross will
be remaining as Executive Directors which will greatly assist Philip and me.
Dividend
Showing our confidence in the future we have decided to recommend a final
dividend for the Year to 31 October 2004 of 0.5p per share (previous period
final dividend 0.15p per share) making a total dividend for the year of 0.8p per
share (the total dividend for 18 months to 31 October 2003 was 0.405p per
share). This dividend will be payable on 1 April 2005 to shareholders on the
register at 18 March 2005.
Institutional Investment
The group placed on 29 April 2004 28,600,000 shares with institutions at 29p
each raising #8.128 million net of costs. We were pleased with this as it gives
us for the first time a substantial institutional component to our shareholder
base. We are also aware of subsequent substantial institutional purchases of
shares on the market. The largest institutional shareholder is Caledonia
Investments plc with 7.53%.
Current and Future Trading
Further details of current activity and projects are given in the Operational
Review following, so I shall not comment further on these in this statement.
As we have said before we look forward to continuing to deliver increased
shareholder value over the years ahead. We are now even more confident about our
ability to do so.
Robert F M Adair, Chairman
26 January 2005
OPERATIONAL REVIEW
The year to 31 October 2004 has been a period both of considerable growth and
progress.
The Commercial Division
London office and the South East
As was indicated in the last report, West End tenant demand in 2003 was
relatively subdued and the current year opened on the same note. As the year
progressed optimism returned to the market induced by a lack of available supply
of category A space and increased business confidence.
This has been reflected in the success the Group has had in achieving almost
100% occupancy of the joint venture office developments at No. 11 and No. 16
Berkeley Street with achieved rents rising through the year. This tenant
confidence is expected to continue in 2005.
Similarly, a development in King Street being primarily 10,500 sq ft of offices
by Serah Properties plc (in which we earlier acquired a minority interest) in
joint venture with Canada Life, although completed in autumn 2002, had lacked
tenant or purchaser interest. During the year under review we were able, at an
attractive price, to increase our holding in Serah to 83.13% and to arrange a
sale of the offices to The Royal Bank of Scotland Group plc for #9.2 million for
its own occupation. There remain four shops of which two have now been let.
The office market around the M25 continued to suffer from relatively limited
tenant interest but subsequent to the year end, the Hertz Corporation committed
at #22 psf to take all the space in the 69,000 sq ft office development, UB1, in
Uxbridge (a joint venture with Liberty Property Trust). The intention is to hold
this investment to benefit from anticipated strong rental growth from the
current low base.
In contrast to mixed tenant demand there has been strong interest from
institutional investors. This was reflected in a price of #6.6 million and a
yield of 6.65% obtained on the sale of the Southend, Essex leisure facility
occupied by Virgin Active. In addition, in the light of strong purchaser
interest, an opportunity was taken to dispose of office investments in Slough
and Crawley for #1.6 million and #5.5 million respectively, the latter just
after the year end.
A highlight of the year was the acquisition for #6.76 million satisfied in
shares and cash of Grosvenor Land Holdings plc. This Company's portfolio
consists of principally serviced business accommodation. As a corporate
acquisition the purchase was at a good discount to full property asset value and
as at the year end, benefiting from a further fall in investment yields, NAV
amounted to #9.25 million. Since acquisition a retail property at Rushden has
been sold for #1.3 million.
Outside London and the M25 conurbation, demand in the South East has been
strong. A 43,200 sq ft development of foodstore, fitness centre and children's
nursery at Guildford was successfully completed and sold. In phase 1 of the
small office development at the same site 8 out of 13 units have been sold.
Construction on the second phase will commence in early 2005.
Particularly strong interest from purchasers has been experienced at Tunbridge
Wells where construction is well underway on the first two phases of Decimus
Park, a 170,000 sq ft industrial park.
Looking to the future, commitments have been made to several new developments in
the region. During the year an income producing 4.2 acre industrial estate was
purchased in Edmonton, North London for #5 million. Alternative planning uses
including residential are being considered.
Pinewoods, formerly occupied by Hewlett Packard, a 20 acre site south of
Bracknell has been purchased with a view to the development in phases of up to
150,000 sq ft of offices.
Since the year end the Group has completed the purchase of Davis House,
Victoria, for #16.1 million. While planning permission exists for office and
residential redevelopment, Terrace Hill's intention is to improve the existing
consent to create a 130,000 sq ft mixed use scheme.
Most recently, the Group has acquired a 17 acre site in Farnborough, adjoining
the Farnborough Aerospace Centre, suitable for office and industrial
development.
The North East and Scotland
Good progress has been made over the year in the North East Region, both in
terms of disposing of mature assets and the start of development of new schemes.
On the disposals front Westminster, a multi-let office development at the
Teesdale Business Park was sold to private investors for #5.57 million,
representing a record net initial yield for the Park of 6.7%. Also at Teesdale
Business Park a 0.75 acre site was sold with the benefit of detailed planning
consent for #1.5 million, representing a significant mark up on cost. At King
Albert Chambers in Hull, work commenced on the refurbishment of the two ground
floor retail units with one being pre let to Ethel Austin. Simultaneously the
upper parts have been sold to a residential developer who is carrying out an 11
unit apartment scheme.
After a long lead in period two significant developments commenced. At Baltic
Business Quarter, a 50 acre site on the south bank of the Tyne at Gateshead,
construction has started on the infrastructure for the first phase comprising
approximately 16 acres. Pre sale agreements for new buildings for Gateshead
College of Further Education 193,106 sq ft and One North East 60,000 sq ft are
now in solicitors hands and a detailed planning application has also been
submitted for a further three office buildings totalling 90,000 sq ft.
At Middlehaven, Middlesbrough, construction has commenced on the first office
building of the Manhattan Gate development which has planning consent for a
total of 160,000 sq ft. This development is being carried out in Joint Venture
and the first building of 30,700 sq ft. will be available for occupation in July
2005.
In Newcastle City Centre planning consent has been obtained for an 83,000 sq ft.
net seven storey office development on Gallowgate. This proposed development is
a joint venture with the landowner, Whitehall upon Tyne Ltd.
Two industrial investments in Blyth and Bishop Auckland have been acquired with
a view to conversion to retail use. Planning applications have been submitted on
both sites for a total of 170,500 sq ft. non-food retail space.
Also, on an industrial site in Galashiels, a purchase agreement has been
exchanged with completion conditional upon obtaining retail planning consent for
45,000 sq ft.
The West Country and Wales
The Group's 44,000 sq. ft. office development at 33 Colston Avenue, Bristol (in
joint venture with Northridge Capital Ltd) once let, was sold at a better than
expected sale price of #11.7 million to an institutional investor, reflecting a
yield of 7%.
Two new developments have started on site.
In Bristol demolition is now complete and construction is due to start on
Templar House, 90,000 sq ft of high quality office space located near to Temple
Meads Station. This is Terrace Hill's fourth joint venture with Northridge
Capital Ltd.
The Group's first venture in Swansea has resulted, in conjunction with the Welsh
Development Agency, in the commencement of construction of 40,000 sq ft of
offices on Swansea Waterfront.
At the date of this report, the Group now has a development programme
approaching #600 million of which approaching #200 million is underway. A
strength for the future is the increasing number of long-term projects notably
Baltic Business Quarter, the Pinewoods purchase and Farnborough. The pipeline of
future activity continues to grow as does the management team employed to run
this expanding range of projects.
The Residential Division
Residential Property
The Group commenced its residential property investment activity in mid 1999,
acquiring portfolios of flats and houses at discounts to open market value from
financial institutions and former Business Expansion Schemes in what was seen as
a rising market. This investment activity peaked in the year ended 30 April
2002, the balance sheet at that date having showed residential property held
worth some #75 million. While the overall market continued to rise, higher
rental yields, and greater capital growth were achieved, in the North of England
and Scotland than elsewhere, resulting in the portfolio becoming focused away
from the South East. Achieving an improving portfolio by buying large holdings
and retaining the desirable, and shifting the emphasis north, has involved a
substantial turnover in five years of such activity.
In the last two years, having expected a slowing in the market, particularly in
England, the total number of units held, especially in Southern England and
London has fallen as a result of sales.
Although the number of units held has been substantially reduced in our last two
financial periods, in a rising market the average value of units retained has
continued to rise and the total amount invested in residential property has not
declined proportionately to the number of units.
During the year, the major residential property acquisition was a traditional
block of 36 flats in a good quality residential area on the junction of Spath
Road and Holme Road, West Didsbury, Manchester. This property, together with
Sallyport House, Newcastle, now form the bulk of the English holdings.
The Group also acquired 24 flats at Paisley near Glasgow Airport, in an exchange
arrangement with at.home nationwide to whom were transferred 12 flats in
Aberdeen and a number of units in London. Disposed of during the year under
review were 163 units in England and Wales and 63 units in Scotland.
The resultant portfolio is now heavily focused on Glasgow and West Central
Scotland where values continue to rise.
During the year the Group acquired a site adjoining Glasgow Green, in the east
side of Glasgow, for the development of 60 new build flats, targeted at lower
price levels than existing competition, together with the sympathetic
reinstatement of a listed building to create four houses.
A joint venture was formed with the long established Scottish Group, Lithgows
Ltd, to maximise residential development value from a number of Lithgows'
brickwork sites in central and western Scotland. These sites have the potential
to deliver around 700 plots which can either be sold to other developers or
developed by ourselves for further profit. From this joint venture the Group
acquired an 11.1 acre Annandale Works site at Kilmarnock and has since extended
its ownership to the adjoining Ellerslie Inn. The Group has also commenced a
site assembly in North Lanarkshire.
Corporate Finance
The FSA Regulated Corporate Finance Subsidiary, Mercantile Securities (Scotland)
Limited, which, as does the Residential Division, operates out of the Glasgow
Office, acted for the Group in the acquisitions of Grosvenor Land Holdings PLC
and of an increased stake in SERAH Properties PLC, and in the Group's buyback by
tender of 1,410,022 Ordinary Shares in August 2004. Terrace Hill believes that
having this capability enhances its ability to make corporate purchases on a
cost effective basis and minimises the risk of abortive costs.
Registrars
Park Circus Registrars Limited, the company registrar subsidiary, also operates
from Glasgow; currently it acts for 10 publicly traded companies and another 31
investment vehicles (see website www.pcregistrars.co.uk). It provides a cost
effective service that represents good value compared to competitors.
Triple Net Asset Value (unaudited)
As indicated in the Chairman's Statement, to arrive at (unaudited) Triple Net
Asset Value (TNAV), the following adjustments are made
(1) Revaluation of current assets: properties (and rights to properties) held
in work-in-progress have been revalued from cost (or if less realisable
value) to market value. The valuation has been performed by relevant
directors qualified as chartered surveyors based on external evidence and
takes account of costs to complete and whether or not the property has been
let and/or presold.
(2) Taxation: the amount of taxation which would be payable were all of the
Group's properties to be sold at the value used for the TNAV calculation
has been deducted. This includes Deferred Tax which would be payable on
sale of investment properties (as indicated in Note 8 to the Accounts) and
additional taxation estimated to be payable on realisation of the uplift of
trading properties to market value.
(3) Finance: the adjustment required to revalue the group's financial assets
and liabilities to current values is immaterial so no adjustment is
required this year. No other adjustments are relevant to the Group's
calculation.
(4) Goodwill: goodwill, positive and negative, is excluded.
The Table below shows the calculation in detail.
Proforma Triple Net Asset Value per Share
31 October 2004
#
Shareholders' Funds (per Audited Consolidated
Balance Sheet and after Minority Interests) 70,841,074
Revaluation to market value of property etc
held in work-in-progress 17,737,168
Less: Minority Interests in Revaluation 1,224,853
Revaluation after Minority Interests 16,512,315
Deferred Tax (Note 8 to Accounts) (7,804,824)
Estimated taxation on Revaluation (4,690,787)
Goodwill (546,256)
Proforma Triple Net Asset Value 74,311,522
Proforma Triple Net Asset Value per Share 39.99p
D Ross Macdonald, Joint Managing Director
Nigel J C Turnbull, Joint Managing Director
GROUP PROFIT AND LOSS ACCOUNT
for the 12 months ended 31 October 2004
12 months 18 months
ended ended
31 October 31 October
2004 2003
# #
TURNOVER
Group:
Continuing operations 24,601,571 39,646,355
Acquisitions 2,889,953 -
------------- -------------
27,491,524 39,646,355
Share of joint venture 3,739 -
------------- -------------
27,495,263 39,646,355
------------- -------------
GROUP OPERATING PROFIT
Continuing operations 4,340,552 3,295,314
Acquisitions 962,002 -
------------- -------------
5,302,554 3,295,314
Share of joint venture operating loss (43,310) -
------------- -------------
5,259,244 3,295,314
Gain on disposal of fixed asset investments 780 22,996
Amounts written off other investments (143,796) (201,507)
Net gain on disposal of investment property 3,252,070 7,123,244
Permanent diminution in value of an (279,436) (300,000)
investment property
Gain/(loss) on liquidation of former 142,551 (4,321)
subsidiary
Interest receivable 545,821 490,103
Interest payable (4,693,433) (5,332,998)
------------- -------------
PROFIT ON ORDINARY ACTIVITIES
BEFORE TAXATION 4,083,801 5,092,831
Taxation credit/(charge) 3,000 (872,196)
------------- -------------
PROFIT ON ORDINARY ACTIVITIES AFTER TAX 4,086,801 4,220,635
Minority Interest (256,291) (150,123)
------------- -------------
PROFIT ATTRIBUTABLE TO MEMBERS OF PARENT 3,830,510 4,070,512
COMPANY
Dividends (1,486,588) (624,487)
------------- -------------
TRANSFER TO RESERVES 2,343,922 3,446,025
------------- -------------
Basic and diluted earnings per share 2.238p 3.033p
------------- -------------
GROUP BALANCE SHEET
at 31 October 2004
31 October 31 October
2004 2003
As restated
# #
FIXED ASSETS
Intangible assets
Positive goodwill 2,467,835 2,583,058
Negative goodwill (1,921,579) (1,307,356)
------------- -------------
546,256 1,275,702
Tangible assets 91,380,965 83,545,057
------------- -------------
91,927,221 84,820,759
Investments
Joint venture-share of gross assets 4,032,545 -
Joint venture-share of gross liabilities (3,939,620) -
------------- -------------
92,925 -
Investments in associates - 1,053,516
Other fixed asset investments 446,101 84,706
------------- -------------
539,026 1,138,222
------------- -------------
92,466,247 85,958,981
CURRENT ASSETS
Work in progress 55,687,146 18,046,537
Debtors 14,626,625 7,297,480
Cash at bank and in hand 17,801,053 14,012,630
------------- -------------
88,114,824 39,356,647
CREDITORS:amounts falling due within one (64,222,764) (35,218,287)
year
------------- -------------
NET CURRENT ASSETS 23,892,060 4,138,360
------------- -------------
TOTAL ASSETS LESS CURRENT LIABILITIES 116,358,307 90,097,341
CREDITORS:amounts falling due after more (44,671,808) (42,986,307)
than one year
PROVISIONS FOR LIABILITIES AND CHARGES (121,618) (476,779)
------------- -------------
NET ASSETS 71,564,881 46,634,255
------------- -------------
CAPITAL AND RESERVES
Called up share capital 3,716,467 3,079,508
Shares to be issued - 192,551
Share premium account 19,368,539 11,822,703
Revaluation reserves - investment properties 21,474,093 13,396,853
Revaluation reserves - other 17,566 6,008
Capital redemption reserve 849,430 821,230
Merger reserve 8,115,384 8,227,582
Profit and loss account 17,299,595 8,985,565
------------- -------------
EQUITY SHAREHOLDERS' FUNDS 70,841,074 46,532,000
MINORITY INTERESTS 723,807 102,255
------------- -------------
71,564,881 46,634,255
------------- -------------
Approved by the Board
D R Macdonald T G Walsh
Director Director
25 January 2005
NOTES
1. The financial information set out in this announcement does not constitute
the company's statutory financial statements for the periods ended 31
October 2003 and 31 October 2004.
2. The financial information is extracted from the financial statements of the
group for the year ended 31 October 2004 which were approved by the board
of directors on 25 January 2004.
3. The calculation of basic and diluted profit per ordinary share is based on
the following:
12 months to 18 months to
31-Oct-04 31-Oct-03
#'000 #'000
Surplus 3,831 4,071
The weighted average number of ordinary
shares in issue during the period:
Basic 171,192,095 134,207,985
Dilutive potential ordinary shares
arising from share option schemes - -
171,192,095 134,207,985
4. Copies of this announcement are available, free of charge, for a period of
one month from Noble & Company Limited, 1 Frederick's Place, London,
EC2R 8AB. Copies of the full financial statements will be posted to
shareholders as soon as possible.
Contacts: Ross Macdonald, Director, Terrace Hill Group PLC, 0141 332 2014
Alasdair Robinson, Noble & Company Limited, 0131 225 9677
Hugo de Salis, St Brides Media & Finance, 020 7242 4477
This information is provided by RNS
The company news service from the London Stock Exchange
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