Final Results

FOR IMMEDIATE RELEASE 22nd March 2004 LONDON & ASSOCIATED PROPERTIES PLC PRELIMINARY RESULTS FOR YEAR ENDED 31 DECEMBER 2003 HIGHLIGHTS London & Associated Properties PLC is a long established, highly focused retail property investment group with a proven track record of delivering growth and shareholder value Fully diluted net asset value per share increased to 88.58p + 32% Pre-tax profits rose to £2.8 million + 15% Gross rental income, inc share of joint ventures, up to £11.4 million + 37% Final dividend of 1.525p recommended + 7% Dividend compound growth over past five years of 8.5% Dividend is covered 1.94 times by post tax profits LAP directly owns or manages town centre retail property valued at £220 million + 38% The total property portfolio produces gross annual rents of £18.7 million + 46% Gearing reduced to 42.4% from 79.4% 'The strong demand for our centres that was evident in 2003 has so far continued into 2004. I therefore look forward to another successful year,' John Heller, Chief Executive. -more- Contact: London & Associated Properties PLC Tel: 020 7415 5000 John Heller, Chief Executive Robert Corry, Finance Director Baron Phillips Associates Tel: 020 7920 3161 Baron Phillips CHAIRMAN'S STATEMENT I am delighted to report a very successful year for London & Associated Properties with a strong performance from both our wholly owned and jointly owned investment portfolio of centrally located shopping centres. This year's results reflect our longstanding strategy of actively managing our centres to grow income and enhance values. Fully diluted net asset value per share has increased by a substantial 32% to 88.58p as at 31 December 2003, from 66.98p a year ago. The principal reason for this strong result is that our shopping centres and those in Analytical Properties, our joint venture with Bank of Scotland, have risen in value by 12% and 7.5% respectively, reflecting both our management input and a strong shopping centre investment market. Additionally, to a lesser extent, we have received a further boost from the exemption of some of our properties from the stamp duty land tax which has added £1.7 million to our net assets. These net assets are now £72.8 million including our listed portfolio at market value. This compares with £54.2 million last year. We also took advantage of the strong market for retail property, by continuing our strategy of disposing of investments where we regarded immediate growth prospects as limited. I am pleased to report that we achieved sales of some £16 million during 2003. This is in excess of book value and takes disposals over the past two years to over £22 million, almost a quarter of our wholly owned portfolio. The cash proceeds from these sales offer us tremendous scope to invest in our remaining large town centre investments, to acquire new property as opportunities present, and to grow Analytical Properties. Our profits before tax rose in 2003 by 15% to £2.81 million from £2.45 million on gross rental income, including our share of joint ventures, of £11.4 million against £8.3million in the previous year. Direct rental income from our own portfolio totalled £7.9 million over the period compared to £8.0 million in 2002. This is despite the loss of rental income following our property sales referred to above. We contracted a net incremental £416,000 of rent on our currently owned portfolio which will flow through to profits. We expect further increases in rental income from our own portfolio during 2004 as additional rent reviews and lease renewals are settled. Our current annualised rent roll, following disposals, is £7.3 million and the estimated rental value currently stands at £8.1 million. The Board is recommending a final dividend of 1.525p per ordinary share, an increase of 7%, which, if agreed by shareholders, will be paid on 9 July 2004 to those shareholders on the register as at 31 March 2004. Over the past five years, the dividend will have grown by a compound 8.5% per annum. The major event of the year was undoubtedly last August's £50 million off-market purchase, through Analytical Properties, of the Church Square Shopping Centre in St Helens. LAP invested £3.9 million of cash. Church Square forms the dominant part of St Helens' prime retail core and generated, at the time of acquisition, net annual rents of £3.6 million from 87 shop and two office tenants including BhS, Boots, Next and River Island. I am pleased to report that already we have agreed new lettings and rent reviews which have added £210,000 per annum to the annual rent roll there. Analytical's two shopping centre investments have been independently valued at £107.8 million compared to a combined purchase price of £95.3 million net of costs. Analytical's other shopping centre investment is King Edward Court, Windsor which we acquired in December 2002. Today, LAP directly owns or manages retail property on behalf of Bisichi, Dragon and Analytical with a gross value of approximately £220 million which produces a gross annual rent of £18.7 million. This compares to £160 million and £12.8 million last year. Our strategy remains to invest exclusively in shopping centres that form a significant part of the prime retail pitch in their respective town or city. Our intensive approach to managing them includes refurbishment and part redevelopment, to create better sized units and improve the tenant mix. Some of these programmes, such as our proposal for Windsor, require significant capital investment. During 2003, we invested £3.4 million improving and upgrading our directly owned portfolio; a report of the progress in each of our major centres' management programmes is covered in the Chief Executive's review. Our associate company, Bisichi Mining plc, has had an extremely satisfactory year with pre-tax profits more than doubling from £628,000 in 2002 to £1.475 million. Through its South African subsidiary Bisichi now mines more than 1 million tonnes of coal a year and has recently acquired important additional reserves adjacent to its existing operation. Dragon Retail Properties, our joint venture with Bisichi, also performed strongly and net assets grew by 27% from £2.2 million in 2002 to £2.8 million following a series of strong lettings and property disposals. Finally I would like to thank my Board colleagues and all the LAP staff for their hard work over the last 12 months in achieving these very good results. I anticipate that 2004 should be another satisfactory year for your company. Michael Heller Chairman 22 March 2004 CHIEF EXECUTIVE'S REVIEW The year under review has been an outstanding period of growth in our investment portfolio in terms of property values and rental levels. This growth reflects both our intensive management programmes which saw record rents achieved at a number of our centres, and the strength of the underlying market. At the end of December 2003 the gross value of LAP's directly owned property portfolio, comprising town centre shopping centres, was valued at over £94 million. This figure was achieved after disposals of some £16 million and represents a rise of over 12% on a like-for-like basis. Our joint venture with Bank of Scotland, Analytical Properties, produced a strong uplift in values of 7.5% to £107.8 million. Analytical owns two major shopping centres that were acquired for a total consideration of £95.3 million net of costs. Today LAP owns or manages on behalf of Analytical Properties, Dragon and Bisichi some £220 million of retail property which generates £18.7 million a year in rental income. Rental income from our directly owned properties was £7.9 million per annum against £8.0 million in 2002. We also contracted £416,000 of incremental rent on an annualised basis. This additional rental income has come as a direct result of the intensive property management and investment programmes which are a central theme of our investment strategy. We are now reaping the benefits of these programmes which have increased rents per square foot by creating more lettable space which attracts higher quality tenants and on which we are able to command higher rents. Void levels within our centres remain extremely low at some 2% of total rental income. Naturally this has also underpinned rental growth, as the limited supply of space has led to premium rents from tenants wishing to be represented within our centres. At Orchard Square, Sheffield, we successfully completed the new Clark's Shoes shop in time for Christmas and it is trading strongly . This project required the amalgamation of five smaller units and the new unit was let at £105,000 per annum, £55,000 per annum more than was paid previously. This represented a record rent per square foot for Orchard Square. In an adjacent unit we took a surrender from a longstanding tenant who had not invested in the store for some time. We re-let the unit to fashion retailer Fat Face at a rent of £56,000 per annum, again a record rent. Both Clark's and Fat Face are prestigious names and typical of the retailers we are attracting to Orchard Square and which form part of our strategy to continually improve this centre. We have also created a new canopied entrance to Orchard Square and erected banners to the side of the Centre to further increase its prominence on Fargate. The impact of the work we have undertaken can be seen from the footfall figures which have risen by around 15% in the last two years alone. Our rent review programme has also benefited from these initiatives and we contracted an incremental annual rent of £141,000 at Orchard Square during 2003. At The Mall in Dagenham we have reconfigured a prominent, but poorly shaped, unit to create two smaller shops at a cost of around £350,000. We let one unit to Ethel Austin at £37,500 per annum while the second, which is being extended at the rear, has been pre-let to Bon Marche at £45,000 per annum. The two units will generate £82,500 a year in rental income on completion compared with £ 45,000 in the old format. At Saxon Square, Christchurch, we successfully completed a round of rent reviews that has added approximately £85,000 per annum of income to the rent roll. The centre remains fully let apart from some space at the rear that we are holding for redevelopment and where we hope to build 10 residential units and a 5,000 sq ft shop. At Kings Square, West Bromwich, we completed a new unit on land adjacent to our centre and let it to Corals at a rent of £30,000 per annum. The cost of constructing this unit was around £240,000. There is still significant demand among retailers for space in Kings Square and we are working hard to find ways of satisfying this demand. Analytical Properties made another significant investment this year with the £ 50 million acquisition of the long leasehold interest in Church Square Shopping Centre in St Helens. This price reflected a net initial yield of 7.1%. Church Square is the largest centre we have acquired to date and comprises, in two separate buildings, 87 shops, two office blocks and the town's market. Analytical has owned Church Square since August 2003. Under LAP's management it is already performing well and we have exceeded the demanding targets set by us and Bank of Scotland when the purchase was completed. Much of the empty space available at that time has been let to first class retailers including Savers, Cool Trader and Frenzy Shoes. We are making good progress with the rent review and lease renewal programme and, including the above new lettings, we have already contracted £210,000 per annum of additional rental income. We expect further progress in the near future since we are looking to finalise a number of additional reviews and renewals which will add significantly to the rent roll. Discussions are also underway with the local authority to extend Church Square. This will create large anchor units in what is currently regarded as the weaker end of the town. Although these plans are at a preliminary stage they have been well received and we are developing more detailed proposals in conjunction with our design team and letting agents. At Analytical's other major shopping centre, King Edward Court in Windsor, we continue to make satisfactory progress. We spent much of last year working closely with the local authority to finalise plans for a proposed redevelopment of a substantial part of the shopping centre. We submitted a planning application in January 2003 to create 100,000 sq ft of new retail space and a 113-bed hotel. We anticipate this major development will cost a total of £15 million. There has been an enthusiastic response from potential occupiers and much of the retail space is already under offer to leading fashion names. Several supermarket operators are interested in the space that we are creating above these fashion retailers. We continue to negotiate with them and anticipate putting this space under offer in the near future. The proposed hotel has been pre-let to Travelodge on a 25 year lease at an initial rent of £475,000 per annum, equivalent to over £4,200 per room. We have commenced a significant lease renewal programme in the Centre. This programme will benefit from the most recent letting to soft furnishings multiple Morada at a rent of £77,500 per annum, equating to £101 per sq ft Zone A. We have also completed the first shop lease renewal during our ownership, which pre-dated the Morada letting, at £97 per sq ft Zone A. At the time of acquisition we estimated the rental value of the shops at King Edward Court to be £92.50 per sq ft Zone A. Analytical's gross income at King Edward Court rose during 2003 to £4.92 million from £4.55 million while net income increased to £3.8 million from £3.5 million. During the year we also completed a new letting to The Purple Picture Gallery at £37,500 per annum against a previous rent of £34,000 per annum in that unit, and we agreed a lease renewal on a first floor office suite to Rank Hovis McDougall at a new rent of £54,000 per annum compared with £ 47,250 per annum. It has been our policy for some time to recycle our capital into fewer, larger shopping centres where we see greater opportunities and economies of scale. Consequently, we took advantage of the current strong demand for retail property and sold a number of investments that we regarded as mature. In total we sold some £16 million of properties, or 17% of our portfolio. Over the past two years we have sold over £22 million, representing about a quarter of our properties by value. The largest sale, at £12.2 million, was the Brunel Centre in Bletchley, which was disposed of in November following completion of a new 35,000 sq ft building, most of which we had pre-let to Wilkinson, a national chain of stores. Our leasehold interest in the Union Centre, Wednesbury, was sold to Sandwell Metropolitan Council for £2 million. The remaining sales were mainly of smaller properties where we had extracted the maximum value from them over the past few years. Following such a comprehensive disposal programme I do not expect to continue selling properties at this rate. We do, however, currently have one further property under offer and we shall continue to look critically at the portfolio. The strong demand for our centres that was evident in 2003 has so far continued into 2004. I therefore look forward to another successful year. John Heller Chief Executive 22 March 2004 FINANCIAL DIRECTOR'S REVIEW This has been an extremely active year for the Group. We have taken advantage of strong market conditions for retail property and have completed £16 million of sales of mature properties. We have also invested approximately £3.4 million in improvements to our wholly-owned properties. A further £3.9 million was invested in Analytical Properties, our joint venture with Bank of Scotland, to purchase the Church Square Shopping Centre, St Helen's. Cash Flow As a result of the above property sales, together with cash generated from our own resources, the cash and facilities available to us has increased by £6.3 million to £20.3 million. This will rise further as new revolving credit facilities are put in place. Some of the proceeds of our property sales were used to repay £5.3 million of term debt. This reduced total long term debt to £41.6 million, with the shortest element repayable in 2009. £21.7 million (52.2% of the company's debt), is at fixed rates of interest, with the balance linked to LIBOR. Profit and Loss The average interest rate paid has risen slightly to 7.3% from 7.0% last year, reflecting the £5.3 million repayment of variable rate debt during the year. Group interest payable is £5.6 million, of which £2.2 million relates to joint ventures and associated companies. The remaining £3.4 million (2002: £3.6 million) is covered 1.7 times by the Company's net income (2002: 1.6 times). Taxation The tax charge for the year equates to 14.4% (2002: 24.7%) of our pre-tax profits. This reduction in the charge is primarily the result of movements in the deferred tax charge reserve, due to the release of the provision for the capital allowances relating to the properties sold, under the FRS19 Accounting Standard. Balance Sheet During the year our property assets grew by 12% on a like-for-like basis and our listed investments have risen to show a surplus of £876,000 over cost. The net assets of the Group rose by 34% to £72.8 million (2002: £54.2 million), while diluted net assets per share rose by 32% to 88.58p (2002: 66.98p), including current assets at market value Gearing has fallen to 38.6% (2002: 79.4%), net of listed investments. If we exclude cash held as agents of our joint venture, gearing is 42.4%. A notional adjustment for 'fair value' of our long term debt is currently 4.83p per share (2002: 5.69p). This would equate to a reduction in net assets of £ 3.9 million (2002: £4.6 million). It remains our policy not to repay long term debt early. Dividend A dividend of 1.525p is recommended, an increase of 7% on last year and showing compound growth of 8.5% over the last five years. The dividend is covered 1.94 times by profits after tax. We have been looking closely at the new reporting requirements for the year ending December 2005 under the new International Financial Reporting Standards (IFRS). I will report more fully on these requirements and their effects on the presentation of the accounts next year. Our associate company Bisichi Mining plc, in which we hold a 42% stake, produced pre-tax profits of £1.475 million, an increase of 135% over the previous year's £628,000. This reflects the further improvements made at its coal mining subsidiary during the year. Dragon Retail Properties, our joint venture with Bisichi, also had another strong year with net assets growing by a further 27% to £2.8 million in the year. Our current financial strength is a direct result of our prudent management of the company finances. We have built up a substantial cash reserve and this will enable us to seize opportunities as and when they present themselves. Robert Corry Finance Director 22 March 2004 London& Associated Properties PLC Consolidated profit and loss account for the year ended 31 December 2003 2003 2002 £000 £000 Notes Gross rental income Group and share of joint ventures 1 11,360 8,336 Less: joint ventures- share of rental income (3,469) (318) 7,891 8,018 Less: property overheads- Ground rents (1,252) (455) Direct property expenses (1,078) (899) Attributable overheads (1,787) (1,742) (4,117) (3,096) Less: joint ventures- share of overheads 1,169 70 (2,948) (3,026) Net rental income 4,943 4,992 Listed investments- net income 62 (355) Operating profit 5,005 4,637 Share of operating profit of joint ventures 1 2,218 249 Share of operating profit of associate 813 407 8,036 5,293 Interest receivable 333 334 Interest payable (5,651) (3,947) Exceptional items- Company- Profit on sale of investment properties 157 757 Associate and joint venture (67) 11 2 90 768 Profit on ordinary activities before taxation 2,808 2,448 Taxation on profit on ordinary activities 3 404 605 Profit on ordinary activities after taxation 2,404 1,843 Dividend 4 1,241 1,141 Retained profit for the year 5 1,163 702 Earnings per share -basic 6 2.98p 2.32p -fully diluted 6 2.95p 2.30p Dividend per share 4 1.525p 1.425p The revenue and operating profit for the year is derived from continuing operations in the United Kingdom Consolidated statement of total recognised gains and losses for the year ended 31 December 2003 2003 2002 £000 £000 Profit for the financial year 2,404 1,843 Currency translation difference on foreign currency net investments of associate Increase on revaluation of investment properties Company 10,127 2,408 Associate and joint ventures 5,660 528 Taxation on gains on disposals of properties (130) - Total gains and losses recognised in the year 18,148 4,869 Consolidated Balance sheet at 31 December 2003 Notes 2003 2002 £000 £000 Fixed Assets Tangible assets 7 94,601 96,143 Investments in joint ventures Share of gross assets 59,129 27,452 Share of gross liabilities (49,427) (24,524) Share of net assets 9,702 2,928 Other investments Associated company 4,636 3,385 Other 3,784 1,834 8,420 5,219 18,122 8,147 112,723 104,290 Current assets Debtors 2,362 1,375 Investments at cost 2,135 2,193 (Market value £3,011,000 (2002: £2,385,000)) Bank balances 11,451 6,718 15,948 10,286 Creditors Amounts falling due within one year (14,450) (12,923) Net current assets (liabilities) 1,498 (2,637) Total assets less current liabilities 114,221 101,653 Creditors Amounts falling due after more than one year (40,988) (45,971) Provisions for liabilities and charges (1,346) (1,657) Net assets 71,887 54,025 Capital and reserves Share capital 8,140 8,009 Share premium account 4,837 4,509 Capital redemption reserve 47 15 Revaluation reserve 39,820 25,781 Other reserves 429 429 Retained earnings 18,614 15,282 Shareholders' funds 71,887 54,025 Net assets per share* Basic 6 89.39p 67.69p Diluted 6 88.58p 66.98p *Including current asset investments at market value Note of historical cost profits and losses for the year ended 31 December 2003 2003 2002 £000 £000 Reported profit on ordinary activities before taxation 2,808 2,448 Share of realisation of property revaluation gains of previous years Company 2,012 2,861 Associate and joint ventures 308 221 Historical cost profit on ordinary activities before tax 5,128 5,530 Retained historical cost profit for the year 3,483 3,784 Reconciliation of movement in shareholders' funds for the year ended 31 December 2003 2003 2002 £000 £000 Profit for the financial year 2,404 1,843 Dividend (1,241) (1,141) Retained profit for the year 1,163 702 Associate's currency translation difference on foreign currency net investments 87 90 Unrealised changes on revaluation of investment properties 15,787 2,936 Gain on realisation of revaluation of property in previous years 572 Taxation on gains on disposals of properties (130) - Shares issued 491 371 Shares purchased (108) - 17,862 4,099 Shareholders' funds at 1 January 2003 54,025 49,926 Shareholders' funds at 31 December 2003 71,887 54,025 Consolidated cash flow statement for the year ended 31 December 2003 2003 2002 £000 £000 £000 £000 Net cash inflow from operating activities 9,642 4,259 Returns on investments and servicing of finance Interest received 318 307 Interest paid (3,322) (3,650) Net cash outflow from returns on investments and servicing of finance (3,004) (3,343) Taxation Corporation tax (400) 152 Capital expenditure and financial investment Purchase of fixed asset investments (3,900) (3,658) Sale of properties 15,763 6,405 Sale of office equipment and motor cars 43 - Property acquisitions and improvements (3,191) (1,513) Purchase of office equipment and motor cars (200) (12) Net cash inflow for capital expenditure and financial investment 8,515 1,222 Equity dividends paid (783) (700) Net cash inflow before use of liquid resources and financing 13,970 1,590 Net cash inflow (outflow) from management of liquid resources Drawdown of short term loan from joint venture 307 - Repayment of short term loan from joint ventures (163) 307 (163) Financing Shares issued for cash 141 55 Issue expenses (8) (9) Cost of shares redeemned (108) - Repayment of medium term bank loan (5,300) (300) Net cash outflow from financing (5,275) (254) Increase in cash in the period 9,002 1,173 Reconciliation of net cash flow to movement in net debt for the year ended 31 December 2003 2003 2002 £000 £000 Increase in cash in the period 9,002 1,173 Net cash inflow from movement in debt 5,300 300 14,302 1,473 Other movements on current asset investments (58) (312) Movement in net debt in the period 14,244 1,161 Net debt at 1 January 2003 (43,242) (44,403) Net debt at 31 December 2003 (28,998) (43,242) Reconciliation of operating profit to net cash inflow from operating activities: 2003 2002 £000 £000 Operating profit 5,005 4,637 Depreciation charges 90 92 (Profit) loss on disposal of fixed assets (7) 3 Dividend from associated company 65 44 Dividend from joint ventures 93 40 (Increase) decrease in debtors (641) 270 Increase (decrease) in creditors 4,979 (1,139) Decrease in current asset investments 58 312 Net cash inflow from operating activities 9,642 4,259 Analysis of net debt At 1 At 31 January Cash Other December 2003 flow movements 2003 £000 £000 £000 £000 Bank balances in hand 6,718 4,733 - 11,451 Bank overdrafts (5,253) 4,269 - (984) Debt due within one year (600) 300 - (300) Debt due after one year (46,300) 5,000 - (41,300) Current asset investments 2,193 - (58) 2,135 Net debt (43,242) 14,302 (58) (28,998) Notes 31 December 2003 Joint venture - Analytical Properties Analytical Properties is a joint venture with Bank of Scotland which acquired its first shopping centre on 2 December 2002, and a second shopping centre on 13 August 2003. These accounts include the group's share of income for the full year for the first acquisition, and from the date of acquisition for the second centre. 2. Exceptional items 2003 2002 £000 £000 Profit on sale of:- Freehold property 157 757 Joint venture - (loss) profit on sale of freehold property (47) 8 Associate-fixed asset investment-(loss) profit on disposal (20) 3 90 768 3. Taxation 2003 2002 £000 £000 Based on the results of the year: Corporation Tax at 30 per cent (2002: 30 per cent) 494 390 Deferred taxation - (reduction) increase in provision (311) 108 Adjustment in respect of previous years 10 (2) 193 496 Joint ventures 30 23 Associate 181 86 404 605 The tax charge for both 2003 and 2002 was reduced due to the effect of accelerated capital allowances. 4. Dividend Per 2003 Per 2002 share £000 share £000 Proposed final dividend 1.525p 1,241 1.425p 1,141 The proposed final dividend will be payable on 9th July 2004 to shareholders registered at the close of business on 31st March 2004. 5. Profit attributable to London & Associated Properties PLC 2003 2002 £000 £000 Dealt with in the financial statements of: London & Associated Properties PLC 795 555 Joint ventures 16 (2) Associate 352 149 1,163 702 6. Earnings per share and net assets per share Earnings per share have been calculated as follows:- Shares Earnings Earnings in issue per share 2003 2002 2003 2002 2003 2002 £000 £000 '000 '000 Pence Pence Group profit on ordinary activities after tax 2,404 1,843 Weighted average share capital for the year 80,772 79,474 Basic earnings 2,404 1,843 80,772 79,474 2.98p 2.32p Issue of outstanding share options 12 18 1,101 1,537 Fully diluted earnings 2,416 1,861 81,873 81,011 2.95p 2.30p Net assets per share have been calculated as follows - Net Shares Net assets assets in issue per share 2003 2002 2003 2002 2003 2002 £000 £000 '000 '000 Pence Pence At 31 December 71,887 54,025 81,397 80,090 Surplus on current asset investments 876 192 - - Basic 72,763 54,217 81,397 80,090 89.39p 67.69p Issue of outstanding share options 312 455 1,101 1,507 Diluted 73,074 54,672 82,498 81,617 88.58p 66.98p The net assets per share have not been adjusted for tax on the uplift of properties or investments to market value 7. Revaluation of investment properties Ninety nine per cent of freehold and long leasehold properties were valued as at 31 December 2003 by external professional firms of chartered surveyors, the balance being valued by the directors. The valuations were made at open market value on the basis of existing use. The increase in book value amounting to £ 10.127 million (2002-£2.408 million) was transferred to the revaluation reserve. 8. The figures for the year ended 31 December 2002are based on the audited accounts for that year, which have been delivered to the Registrar of Companies and on which the Auditors gave an unqualified report. The statutory accounts for the year ended 31 December 2003 have been completed and an unqualified opinion has been issued. The preliminary announcement has been prepared on the basis of the accounting policies set out in the company's published accounts for the year ended 31 December 2002. The figures in the preliminary announcement are an extract and do not constitute statutory accounts within the meaning of the Companies Act 1985.This preliminary statement was approved by the board on 22 March 2004.

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