Final Results - Full Details

BPT PLC 14 June 2000 FULL DETAILS BPT BEATS NAV MARKET EXPECTATIONS AT 373p PER SHARE The Directors of BPT plc (formerly called The Bradford Property Trust PLC), the largest quoted owner of tenanted residential properties in the private rented sector in the UK, reports its preliminary audited results for the year ended 5 April 2000. Financial Highlights Operating profit increased 13% to £51.0m (1999 £45.3m before exceptional items) Profit before tax increased 14% to £38.9m (1999 £34.0m before exceptional items) Earnings per ordinary share increased 13% to 18.43p (1999 16.34p before exceptional items) Dividend per ordinary share increased 9% to 10.70p (1999 9.80p) Net asset value increased from £409.5m to £548.9m Net asset value per ordinary share increased 34% to 373p (1999 279p) Corporate Highlights Value of property portfolio increased in year from £565.9m to £760.8m. Strong growth in housing values, especially in the South East of England, supported by external sample valuation from Allsop & Co Invested over £100m in year in acquiring residential properties including five corporate acquisitions. Number of residential property units increased in the year from 10,734 to 11,390. First entry in the public eurobond market through the issue of £75m 6.90% Bonds 2014 in July 1999. Comment on the prospects for the group, Chairman Philip Warner said: 'Although the exceptional rate of growth since early 1999 in UK housing capital values is unlikely to be sustained, continuing favourable fundamentals such as relatively low interest rates lead the Board to anticipate continued growth throughout 2000. In addition, the Internet and e-commerce offer new opportunities for marketing residential properties for rent, which the group is actively pursuing. From the number of proposals being reviewed by BPT's management team, I expect another active year and continuing success in delivering BPT's strategy.' For further information contact: BPT plc Citigate Dewe Rogerson Tim Watts, Managing Director Keeley Middleton Tel: 020 7638 9571 (today) Tel: 020 7638 9571 (today) 01372 743113 (thereafter) 0113 2979899 (thereafter) Nigel Denby, Finance Director Tel: 020 7638 9571 (today) 01274 723181 (thereafter) CHAIRMAN'S STATEMENT Review of the Year I am pleased to report further excellent progress with operating profit increasing by 13% to £51.0m (1999 £45.3m before exceptional items relating to the profit generated on the sale of land and commercial property at Martlesham Heath), profit before tax by 14% to £38.9m (1999 £34.0m before exceptional items) and earnings per ordinary share by 13% to 18.43p (1999 16.34p before exceptional items). The directors recommend a final dividend per ordinary share of 6.00p (1999 5.40p) making a total for the year of 10.70p (1999 9.80p), an increase of 9%. If approved by shareholders, the final dividend will be paid on 4 August 2000 to ordinary shareholders on the register on 7 July 2000. On revaluation of all property assets and the listed fixed asset investment (in Mountview Estates PLC) the pre-tax net asset value of each ordinary share increased by 34% to 373p at 5 April 2000 (1999 279p). These excellent results arise against the background of strong growth in housing values and a record year of activity for BPT. BPT's management team has handled over 2,500 vacant residential property units, selling £65.7m worth of property and investing over £100m acquiring residential property assets. Last year I referred to the introduction in February 1999 of Government imposed limits on increases in regulated rents. However, in January 2000 the Court of Appeal decided, following a judicial review, that the secondary legislation introduced by Government was unlawful. Since then increases in regulated rents are only subject to the normal fair rent rules as determined by rent officers. In June 1999 Fitch IBCA published a credit rating report on the Company and assigned a long term investment grade credit rating of A-. In July 1999 the Company made its first entry into the public eurobond market by issuing £75m 6.90% Bonds 2014. This improved the debt term profile and gave the Company competitive fixed rate longer term debt. Business Strategy BPT continues to implement a clear and consistent business strategy. It is focused on the private rented residential sector to deliver long term total returns to shareholders through growth in both earnings and asset value. This year represents another year of management successfully delivering that strategy. The private rented residential sector is continuing to gain more interest and direct investment from institutions. Two particular features of the sector deserve comment. Firstly, given that this type of property investment is management intensive, economies of scale through portfolio size delivers above average performance. Secondly, returns are related to the quality of residential management, of which generally in the UK there is a lack, which presents a significant barrier to new entrants. BPT, with its size, experienced residential management team and market leadership is in a strong position. The Board has become increasingly concerned at the disappointing share price performance over the past few months, particularly in view of the Company's excellent operational results. The quoted property sector now amounts to less than 2% by value of the FTSE All Share Index and there are clear signs that institutional investors are marginalising the sector and are looking at other methods of investing in commercial and residential property. The Board continues to believe that the residential investment market offers attractive opportunities for BPT and that BPT's strategy remains sound. However, the Board is concerned that BPT's ability to continue to expand the business will be constrained by the limited size of the group's existing balance sheet and lack of institutional support in the public equity markets to fund BPT's anticipated growth. Accordingly, the Board is undertaking a detailed review with its professional advisors on how BPT can best pursue its strategic development and achieve value for shareholders. This review will be completed by the end of July. It will include an analysis of ways in which BPT can further improve the performance of the business through enhancing the quality and operational performance of the asset portfolio (including use of the internet to market residential property for rent), reducing BPT's cost of capital and restructuring the Company to allow BPT to access equity and debt from a wider range of capital markets. The Board's objective is significantly to reduce the present large and, in the Board's view, unwarranted discount of the share price to net asset value. A resolution is being proposed at the Annual General Meeting this year which, if approved, will increase the authority to buy back up to 14.9% of the Company's issued ordinary share capital. Management and the Board In August 1999 the appointment of Christopher Kemball was announced as an additional independent non-executive director. In November 1999 it was announced that, with effect from 1 January 2000, James Story would join the Board as Property Director, North. Prospects Although the exceptional rate of growth since early 1999 in UK housing capital values is unlikely to be sustained, continuing favourable fundamentals such as relatively low interest rates lead the Board to anticipate continued growth throughout 2000. In addition, the Internet and e-commerce offer new opportunities for marketing residential properties for rent, which the group is actively pursuing. From the number of proposals being reviewed by BPT's management team, I expect another active year and continuing success in delivering BPT's strategy. Philip Warner Chairman 14 June 2000 OPERATING AND FINANCIAL REVIEW Financial Results for 1999/2000 Operating profits for the year grew by 13% to £51.0m in comparison to £45.3m (before exceptional items) in the previous year. Net rental income increased by 9% from £26.9m to £29.2m and property trading profits increased by 18% from £21.1m to £24.8m. Last year the group earned an exceptional trading profit of £16.8m. Profit before tax grew by 14% to £38.9m (1999 £34.0m before exceptional items). Earnings per ordinary share were 18.43p (1999 16.34p before exceptional items), an increase of 13% over last year. Net rental income as a percentage of gross rental income was 73.2% this year in comparison to 72.7% the year before. Over the last ten years the percentage of net to gross rental income has increased from 61.9% to 73.2%. Costs charged against gross rental income include those associated with the repair, maintenance, refurbishment, letting and insurance of property together with an apportionment of internal management expenses. Local letting agents' fees increased by £0.1m in the year as progressively more of the residential portfolio is let at market rents. This includes the first time letting costs for new residential properties acquired from housebuilders. Costs associated with the acquisition of property stock, including higher rates of stamp duty of up to 31/2% of cost, are written off against trading profits and were £1.1m in the year. Interest payable increased from £12.5m to £14.6m this year reflecting a higher level of borrowings and a premium paid of £0.3m on the repayment of unsecured sterling bonds. Interest was covered 3.66 times (1999 3.72 times) by profit and by 1.79 times (1999 1.93 times) by net rental income less administration expenses. An interim dividend of 4.70p (1999 4.40p) per ordinary share was paid in January 2000. The directors are recommending a final dividend of 6.00p (1999 5.40p) per ordinary share payable in August 2000, making a total of 10.70p (1999 9.80p) for the year, an increase of 9%. Dividend cover this year is 1.72 times in comparison to 1.67 times (before the effect of exceptional items) last year. Market Conditions The reductions in interest rates towards the end of 1998 and early in 1999 did, as anticipated, create a more favourable climate for the UK housing market. This year, overall growth in vacant possession housing values was particularly strong, especially in the final quarter of the year. Following the trend of previous years, the South East of England has continued to experience the strongest levels of growth particularly within the greater London area. The modest rises in interest rates towards the end of this financial year, given that interest rates are still at a relatively low historic level, should not materially affect continuing house price growth other than to possibly lower its rate. Over the year as a whole, vacant possession values of the whole residential portfolio grew by an average of 30%, with a range of increases of up to 10% in the North of England portfolio, 17% in the Midlands and 35% in the South of England. The residential investment market remains strong and competitive as witnessed by recent auction results. Three residential investment funds were launched during the year by institutional investors and have the potential to invest over £800m in the sector. The expansion of the private investor 'buy-to-let' market, promoted by managing agents, has increased the supply side, especially in city centre locations. This has held back growth in some market rents, most notably central London, however tenant demand experienced by BPT for new, quality residential properties for rent remains strong. Rental Income Growth in regulated rents was reported at the interim stage to be at an equivalent annual average of 6%, the maximum level then allowed. This is lower than the 9% reported in the previous year due to the effect of the introduction by the Government of regulated rent increase capping in February 1999. For the year as a whole, those regulated rents reviewed (every two years) increased by 12% or an equivalent annual average of 6%. In January 2000, the Court of Appeal found the capping to be unlawful and since then there has been no limit on the level of regulated rent increase that can be applied for. The Company decided to apply for the correct fair rents to be charged with effect from the end of March 2000 for those registered rents previously subject to capping. Growth in those market rents (assured and assured shorthold tenancies) reviewed and on properties relet within BPT's portfolio was at an average of 5%, in comparison to 7% last year. At 5 April 2000, the total annualised rent roll of the group (excluding ground rent income) was £41.8m, a net increase of £4.8m in the year. This included an increase of £0.3m in regulated rents following the removal of rent capping. The factors affecting movements in the rent roll in the year are analysed as: Rent Roll Movement 1999/2000 1998/1999 Rent roll at beginning of year £37.0m £34.3m Rent forgone through sales £(2.5)m £(3.6)m Rent addition through acquisitions £5.5m £4.1m Rent increase on rent reviews, tenancy £1.8m £2.2m conversion to market rents and net effect of relet of vacants Rent roll at end of year £41.8m £37.0m Residential Commercial Total Rent Market Roll Regulated Rents 1999 £20.1m £14.9m £2.0m £37.0m 2000 £20.8m £19.2m £1.8m £41.8m The proportion, by number of units, of the group's residential portfolio let on regulated and other types of tenancies over the last five years are: Regulated Assured, & Life Assured Tenancies Shorthold Tenancies and Vacants 1996 75% 25% 1997 71% 29% 1998 67% 33% 1999 65% 35% 2000 62% 38% Sales Activity The overall level of sales activity increased over the previous year through the group taking advantage of both the buoyant housing market and increasing capital values. The total number of residential properties sold (generally vacant and previously occupied by regulated tenants) increased by 33% from 775 units last year to 1,029 units this year. The average residential unit sales value increased by 4% from £60,200 to £62,600, however this average can be significantly affected by changes in the geographic sales mix. This year a larger proportion of sales came from the North of England. In addition to sales of residential properties, sales from the remaining commercial portfolio were made generating revenues of £1.5m. Further sales of commercial properties can be anticipated in the future. Total gross revenues of £55.6m (1999 £46.5m before exceptional property sales) were realised in the year from sales of property stock and £10.1m (1999 £1.9m) from sales of investment properties. Refurbishment Activity This year saw the completion of the refurbishment projects at the Upper Rissington, Thurlby St.Hughes, Huntingdon, St.Ives and Yaxley estates. A further 97 houses on these estates were sold in the year for gross revenues of £8.9m with the majority of the balance, at this stage, being retained for the rental market. The medium term refurbishment programme on the Cooper Lane estate in Bradford has continued and an extensive refurbishment of the Moor Court block of 56 apartments in Gosforth, Newcastle, at a cost of £2.6m, was completed in the year. It is planned that a major refurbishment of the San Remo apartments in Boscombe, Bournemouth will commence later in 2000. Corporate Activities During the year the Company acquired, at a cost of £22.8m, six companies which included as part of net assets acquired, an aggregate residential portfolio of 574 units, valued at £26.6m. These are described below. On 30 April 1999 the Company acquired Residential Leases Limited and Residential Tenancies Limited from Pemberstone PLC for a cash consideration of £18.7m including funding the repayment of £16.1m of inter-company loans from the vendors. The portfolio comprised 391 houses and apartments and had an agreed open market value of £18.8m. On acquisition, the portfolio generated gross annual rental income of £1.5m and all lettings were at market rents. On 27 August 1999 the Company acquired UBI Investments Limited (since renamed BPT (Oulton Properties) Limited) for £1.2m. The consideration comprised the issue of 400,799 BPT ordinary shares at a price of 249.5p and a cash payment of £0.2m. The portfolio, comprising 80 houses and apartments in Oulton, Leeds, with the majority let on regulated tenancies, had an agreed open market value of £2.3m, and generated a gross annual rental income of £0.2m. Net borrowings of £1.1m were assumed with this acquisition. On 9 November 1999 the Company acquired Hamsard 5064 Limited (since renamed BPT (Scotland) Limited) from Pemberstone PLC for a cash consideration of £1.4m. The portfolio, comprising 24 houses and apartments in Lothian, Scotland, has an agreed open market value of £1.5m. On acquisition the portfolio generated a gross rental income of £0.1m, all at market rents. On 17 February 2000, the Company acquired the 50% of a joint venture company, Leyton Properties Limited, it did not own from Warner Estate Holdings PLC, a substantial BPT shareholder, for a cash consideration of £0.9m. The portfolio, comprising 79 maisonettes and freehold ground interests in a further 322 maisonettes in Leyton, E10 and Walthamstow, E17, had an agreed open market value of £4.0m and generated a gross rental income of £0.2m. All but one of the maisonettes were let on regulated tenancies. Net borrowings of £1.6m were assumed with this acquistion. Acquisition Activity During the year the group in total acquired 1,685 residential property units (including the corporate acquisitions referred to above) at a cost of £99.3m (1999 £67.7m). Further details are described below. In addition £3.9m (1999 £5.3m) was incurred refurbishing vacant houses and apartments, as described earlier. Completed purchases of property stock in the second half year totalled £23.9m, in addition to £16.8m previously reported at the interim stage, making £40.7m (1999 £41.6m) for the year as a whole. This included £10.7m (1999 £2.8m) on acquiring interests in 289 properties subject to life tenancy reversions under the brand BPT (Bridgewater) and 299 properties subject to regulated tenancies. Completed acquisitions of residential investment properties by BPT (Assured Homes) in the second half year totalled £16.2m, in addition to £15.8m previously reported at the interim stage, making £32.0m (1999 £26.7m) for the year as a whole. Relationships with national housebuilders continue to develop and acquisitions of 351 new houses and apartments were completed in the year from Beazer Homes, Bovis Homes, Crest Homes, Linden Homes, Laing Homes, Prowting Homes, St.David and Wimpey Homes. The development of a further 46 new houses and apartments by Jackson Building at Martlesham Heath, near Ispwich was also completed. A number of tenanted portfolios, let at market rents, were also acquired including 36 houses, previously in a BES portfolio, from Persimmon Homes, and 41 houses and apartments from Pemberstone PLC. As at the year end, Crest Homes is contracted to convert a block in Ilkley, West Yorkshire into 18 apartments and land has been acquired from Crest Homes comprising a site in Swindon, two sites in Beckenham and a site in Putney, SW15. Crest Homes are contracted to build 71 apartments on these sites. These land purchases have only been undertaken with back-to-back fixed price building contracts. The group is therefore not taking any development cost risk on new build purchases. In addition, a contract has been exchanged with Shepherd Homes for the construction of 12 apartments in York. Since the year end, a land site in Headingley, Leeds has been acquired from Crest Homes and they have been contracted to build 36 apartments on the site. Property Portfolio and Valuation At 5 April 2000, the directors' open market valuation of the whole of the investment property portfolio and property stock was £181.2m (1999 £106.6m) and £579.6m (1999 £459.3m) respectively, making a total of £760.8m (1999 £565.9m) for the group's property assets. This results in a valuation surplus on property stock of £297.7m (1999 £200.9m) above the book value of £281.9m (1999 £258.4m) reported in the consolidated balance sheet. The current basis of valuing tenanted residential property is firstly to assess the current vacant possession value of each individual unit and then to discount that value due to the type of tenancy involved. At 5 April 2000 the vacant possession value of the whole residential portfolio (excluding land sites, garages and freehold ground interests) was approximately £986.3m (1999 £712.3m). Discounts applied to this value vary due to a number of factors but broadly comprise around 30% in respect of regulated tenancies, around 10% in respect of market rented tenancies and vacants, and the relevant actuarially based discount in respect of life tenancies. A broad analysis (based on the open market valuation) between the residential property portfolio and other types of property assets is: Residential Commercial and Total Property Sundry Property 1998 £467.8m (91%) £47.5m (9%) £515.3m 1999 £547.0m (97%) £18.9m (3%) £565.9m 2000 £743.1m (98%) £17.7m (2%) £760.8m The residential portfolio of 5 April 2000 is analysed as: No. of Open Gross Rents Units Market (5.4.2000) Value Current ERV 2000 1999 2000 1999 £m £m £m £m Regulated tenancies 6,273 6,432 403.7 315.4 20.8 26.6 Life tenancy 810 549 34.4 19.4 0.1 0.1 reversions/Occupational leases Assured tenancies etc 3,698 3,031 249.9 164.5 18.7 18.7 (market rents) Vacant property (in progress 609 722 41.9 42.3 - 1.4 to sell/let) 11,390 10,734 729.9 541.6 39.6 46.8 Other interests (land sites/freehold ground 13.2 5.4 0.4 0.4 rents/garages etc) 743.1 547.0 40.0 47.2 External Valuation Review Allsop & Co carried out a valuation of 2,158 residential properties which represent a sample of approximately 20% by number of BPT's residential property portfolio. The sample was chosen by Allsop & Co so as to be representative of the group's entire residential portfolio, including those disclosed as investment properties. All the properties that Allsop & Co valued were inspected externally (but no internal inspections were undertaken). Allsop & Co compared their aggregate Open Market Valuation of the sample properties in the sum of £144.1m with the corresponding valuation of the same properties which was prepared by the Company independently of Allsop & Co in the sum of £142.9m. Allsop & Co is satisfied that the 20% sample of the portfolio valued is representative of the whole portfolio, and the Company confirmed that a uniform approach was adopted in the preparation of the valuation of the overall portfolio. Accordingly, Allsop & Co have reported that they feel able to express a high degree of confidence in the valuation given by the Company of the overall portfolio. Shareholders Funds/Net Asset Value Shareholders' funds at 5 April 2000 totalled £242.7m (1999 £201.4m), an increase of £41.3m in the year. After adjusting for the surplus valuation between the open market value and book value of property stock, and the revaluation of the listed fixed asset investment (in Mountview Estates PLC), net asset value increased in the year by 34% from £409.5m to £548.9m. This gave a pre-tax net asset value per ordinary share of 373p in comparison to 279p a year ago, an increase of 34%. Financing Net borrowings (before issue costs) increased during the year from £152.8m at 5 April 1999 to £211.4m at 5 April 2000. At 5 April 2000 this represented gearing of 39% (1999 37%) based on the net asset value of £548.9m, after incorporating the open market valuation of property stock, or 87% (1999 76%) based on reported shareholders' funds of £242.7m. All borrowings are unsecured. In June 1999 Fitch IBCA published a detailed credit rating report on the Company and assigned a long term investment grade credit rating of A-. In July 1999, the Company issued £75m 6.90% Bonds 2014, listed on the London Stock Exchange. £15m of the £40m 7.143% unsecured sterling bonds 2014, originally issued in March 1998, were repaid during the year. As a consequence the overall average term profile of the group's borrowings was extended from 6 years to 8.5 years. At 5 April 2000, 93% (1999 90%) and 7% (1999 10%) of net borrowings were paying fixed and variable rates of interest respectively. The Company has a number of interest rate swap contracts on a notional principal of £30.0m, swapping fixed rate interest payments into variable rate. After allowing for these swap contracts, interest costs on 79% (1999 71%) of borrowings are fixed and 21% (1999 29%) are variable. Based on the profile of gross borrowings at the year end, the average annual interest rate cost (after allowing for the effect of interest rate swap contracts) was 7.4% (1999 7.3%). Disclosures under FRS 13 are required to show the notional effect of the fair value adjustment of marking fixed rate debt to current market rates. As at 5 April 2000, the net overall effect, including the effect from interest rate swap contracts, would be a reduced 'liability' of £0.1m before tax (1999 additional 'liability' of £7.4m) Tim Watts, Managing Director Nigel Denby, Finance Director 14 June 2000 BPT plc Consolidated Profit and Loss Account for the year ended 5 April 2000 2000 Excluding 1999 Exceptional Exceptional Item Item Notes £'000 £'000 £'000 £'000 Turnover including share of joint ventures Continuing operations 94,060 83,669 28,025 111,694 Acquisitions 1,410 - - - 95,470 83,669 28,025 111,694 Less: Share of joint (70) (97) - (97) ventures Turnover 1 95,400 83,572 28,025 111,597 Cost of sales and other (41,395) (35,521) (11,196) (46,717) property outgoings 54,005 48,051 16,829 64,880 Administrative expenses 1 (3,025) (2,756) - (2,756) Operating profit 1 Continuing operations 50,356 45,295 16,829 62,124 Acquisitions 624 - - - 50,980 45,295 16,829 62,124 Share of operating profit 60 75 of joint ventures Operating profit including 51,040 62,199 joint ventures Profit on sale of 1,524 459 investment properties Investment income 902 666 Profit on ordinary 53,466 63,324 activities before interest Interest payable and (14,608) (12,503) similar charges Profit on ordinary 38,858 50,821 activities before taxation Tax on profit on ordinary (11,716) (15,956) activities Profit for the financial 27,142 34,865 year Dividends on equity and non- 2 (15,844) (14,492) equity shares Retained profit for the 11,298 20,373 financial year Earnings per ordinary share 3 18.43p 23.74p Earnings per ordinary share 3 18.43p 16.34p (excluding exceptional items) Fully diluted earnings per 3 18.40p 23.69p ordinary share Fully diluted earnings per 3 18.40p 16.31p ordinary share (excluding exceptional items) BPT plc Other Primary Statements Statement of Total Recognised Gains and Losses for the year ended 5 April 2000 2000 1999 Notes £'000 £'000 Profit for the financial year 27,142 34,865 Unrealised surplus on revaluation of 28,396 2,502 investment properties Share of joint venture's unrealised surplus on revaluation of 549 224 investment properties Tax on realisation of property revaluation gains of (227) (238) previous years Total recognised gains for the year 55,860 37,353 Statement of Historical Cost Profits and Losses for the year ended 5 April 2000 2000 1999 £'000 £'000 Reported profit on ordinary activities before 38,858 50,821 taxation Realisation of investment property revaluation 1,881 1,341 gains of previous years Share of realisation of joint venture's investment property 65 30 revaluation gains of previous years Historical cost profit on ordinary activities 40,804 52,192 before taxation Historical cost profit for the year retained 13,017 21,506 after taxation and dividends Reconciliation of Movements in Shareholders' Funds 2000 1999 £'000 £'000 Profit for the financial year 27,142 34,865 Dividends paid or proposed 2 (15,844) (14,492) Shares issued in part consideration for 1,000 - acquisition Share options exercised 207 150 Other recognised gains and losses (net) 28,718 2,488 Net increase in shareholders' funds 41,223 23,011 Opening shareholders' funds 201,434 178,423 Closing shareholders' funds 242,657 201,434 BPT plc Consolidated Balance Sheet at 5 April 2000 Notes Group 2000 1999 £'000 £'000 Fixed assets Intangible assets 610 - Tangible assets 183,053 107,840 Investments: Joint ventures: Share of gross assets - 1,589 Share of gross liabilites - (162) Loan accounts - 120 - 1,547 Other investments 16,150 15,564 199,813 124,951 Current assets Property stock 281,868 258,396 Debtors 4,175 4,288 Cash at bank and in hand 3,985 6,958 290,028 269,642 Creditors Amounts falling due within one year 4/5 (58,584) (56,717) Net current assets 231,444 212,925 Total assets less current liabilities 431,257 337,876 Creditors Amounts falling due after more than 4/5 (188,193) (136,192) one year Provisions for liabilities and charges (407) (250) Net assets 242,657 201,434 Capital and reserves: Called up share capital 8,890 8,863 Share premium account 8,505 7,325 Revaluation reserve 57,241 30,242 Capital redemption reserve 127 127 Merger reserve 8,891 8,891 Profit and loss account 159,003 145,986 Shareholders' funds Equity 241,112 199,889 Non-equity 1,545 1,545 242,657 201,434 BPT plc Consolidated Cash Flow Statement for the year ended 5 April 2000 2000 1999 Notes £'000 £'000 Net cash inflow before property stock 79,752 91,849 acquisitions Acquisition of property stock (44,613) (46,551) Net cash inflow from operating activities 6 35,139 45,298 Dividend received from joint venture 1,000 - Returns on investments and servicing of 7 (14,007) (11,765) finance Taxation (16,774) (10,380) Capital expenditure and financial investment 8 (23,878) (29,986) Acquisitions 9 (23,292) - (41,812) (6,833) Ordinary dividends paid (equity) (14,786) (13,744) Net cash outflow before liquid resources and (56,598) (20,577) financing Management of liquid resources (Increase)/decrease in short term deposits 6,900 (6,900) with banks Financing Issue of ordinary share capital 207 150 Debt due within a year: Increase/(decrease) in short term bank (2,000) 11,500 borrowings Decrease in bank term loans (2,116) (6,000) Redemption of 6% guaranteed loan notes 1999 (483) (220) Debt due beyond a year: Increase in bank term loans - 20,000 Repayment of 7.143% unsecured sterling bonds (15,000) - 2014 Issue £75m 6.90% bonds 2014 73,951 - Net cash inflow from financing 54,559 25,430 Increase/(decrease) in cash in the period 10 4,861 (2,047) BPT plc Notes to the Financial Statements for the year ended 5 April 2000 Continuing Operations Acquisitions 2000 1999 £'000 £'000 £'000 £'000 1. Turnover Rental income 38,427 1,410 39,837 37,030 Property trading sales 55,563 - 55,563 46,542 93,990 1,410 95,400 83,572 Exceptional property sales - - - 28,025 93,990 1,410 95,400 111,597 Operating Profit Net rental income 28,540 624 29,164 26,927 Property trading profit 24,841 - 24,841 21,124 53,381 624 54,005 48,051 Profit on exceptional property sales - - - 16,829 53,381 624 54,005 64,880 Administrative expenses (3,025) - (3,025) (2,756) 50,356 624 50,980 62,124 Turnover and operating profit arises from activities in the UK. Exceptional property sales in 1999 relates to the sale of a land site and the commercial property estate at Martlesham Heath near Ipswich. 2. Dividends 2000 1999 Dividends on equity shares: £'000 £'000 Ordinary Interim paid of 4.70p per share (1999 4.40p) 6,888 6,432 Final proposed of 6.00p per share (1999 5.40p) 8,794 7,898 15,682 14,330 Dividends on non-equity shares: Preference 10% paid 162 162 15,844 14,492 3. Earnings per Ordinary Share The calculation of earnings per ordinary share is based on the weighted average number of ordinary shares in issue during the year of 146,379,648 (1999 146,197,495) and the profit for the financial year attributable to ordinary shareholders of £26,980,000 (1999 £34,703,000). The fully diluted earnings per ordinary share is based upon the weighted average number of shares during the year of 146,578, 631 (1999 146,465,373). Restatement of earnings per ordinary share to eliminate capital items only, as recommended by the Institute of Investment Management and Research, would be immaterial. The effect of adjusting earnings per ordinary share for exceptional items is as follows: 2000 1999 £'000 Pence per £'000 Pence per ordinary ordinary share share Earnings as stated 26,980 18.43 34,703 23.74 Less: Exceptional item (after tax) - - (10,819) (7.40) Pre-exceptional earnings 26,980 18.43 23,884 16.34 Diluted earnings per ordinary share, excluding exceptional items, reflect the same adjustment. 4. Maturity of finance debt (net of issue costs) is a follows Group 2000 1999 £'000 £'000 In one year or less 25,060 23,139 Between one and two years 13,517 6,343 Between two and five years 40,553 45,571 Between five and ten years 35,902 38,151 Over ten years 98,221 46,127 213,253 159,331 5. Financial Liabilities The interest rate profile of the group's financial liabilities at 5 April 2000, after taking account of interest rate swap contracts taken out by the group was: Fixed Rate Capped Rate Floating Rate Total Liabilites Liabilities Liabilities 2000 1999 2000 1999 2000 1999 2000 1999 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Unsecured notes/ sterling bonds 81,107 106,192 10,000 10,000 10,000 - 101,107 116,192 Guaranteed loan notes - 483 - - - - - 483 Bonds 73,424 - - - - - 73,424 - Bank borrowings - 1,000 - - 38,722 41,656 38,722 42,656 Total 154,531 107,675 10,000 10,000 48,722 41,656 213,253 159,331 Floating rate liabilities are priced at rates of between Libor and 1.00% over bank base rate. The weighted average interest rate on the fixed rate debt and the average maturity of that debt was as follows: Fixed Rate Capped Rate Weighted Weighted Weighted Weighted Average Average Average Average Rate Period Rate Period (Years) (Years) 2000 1999 2000 1999 2000 1999 2000 1999 Unsecured 8.29% 8.13% 6.06 8.11 7.18% 7.18% 0.96 1.96 notes/sterling bonds Guaranteed loan - 6.00% - 0.74 - - - - notes Bonds 6.90% - 14.5 - - - - - Bank borrowings - 8.75% - 0.98 - - - - Total 7.63% 8.13% 10.07 8.01 7.18% 7.18% 0.96 1.96 The fixed and capped rates are inclusive of loan margins and reflect the effective cost of finance after taking into account the effect of currency and interest rate swaps. Currency Exposures The group has issued US $120m senior unsecured notes which were converted into sterling at various exchange rates to produce £76.6m. At the same time currency swaps were undertaken to ensure that, at redemption, the US senior unsecured notes would cost £76.6m and that the sterling cost of servicing the US dollar note interest was fixed. As at 5 April 2000, after taking into account the effects of currency swap contracts the group had no currency exposure. Borrowing Facilities The group has various borrowing facilities that were not fully utilised at the year end. The undrawn facilities available in which the conditions for utilising those facilities were met were as follows: 2000 1999 £'000 £'000 Total unutilised facilities - expiring in one year or less 53,778 78,344 - between two and five years 12,500 - 66,278 78,344 Fair Values of Financial Liabilities Book Value Notional Fair Fair Value Adjustment (before Principal Value 2000 1999 issue costs) £'000 £'000 £'000 £'000 £'000 Financial instruments: Sterling bonds 25,000 24,422 578 (1,520) US dollar senior note 76,628 73,158 3,470 (1,547) Bonds 75,000 75,430 (430) - Guarantee loan notes - - - (2) Bank borrowings 38,722 38,038 684 (248) Derivative financial instruments: Currency swaps 76,628 4,019 (4,019) (4,653) Interest rate 6,329 (298) 298 (389) swaps - payers - receivers 30,000 458 (458) 940 Interest rate caps 10,000 (5) 5 8 215,35 215,222 128 (7,411) The disclosures above do not include the difference between the market value at 5 April 2000 and the book value of the 10.5% cumulative preference shares of £1 each which, based on a mid-market price of 152.5p, was £810,900. These shares have no formal terms for redemption. The fair values were calculated by JC Rathbone Associates Limited using interest rates and market prices prevailing on 5 April 2000 and reflect the replacement values of the financial instruments. All gains and losses arising from hedging instruments crystallising during the year have been recognised in the profit and loss account. The expiry profile of the fair value adjustment, split between financial instruments and unrecognised gains and losses on hedging instruments, of the group's financial liabilities is: Financial Hedging Instruments Instruments Total 2000 1999 2000 1999 2000 1999 £'000 £'000 £'000 £'000 £'000 £'000 In one year 1,275 (1,104) (967) (509) 308 (1,613) or less In more than one year but not more than two years 1,825 (695) (815) (635) 1,010 (1,330) In more than two years but not more than five years 2,683 (850) (1,351) (1,827) 1,252 (2,677) In more than five years (1,381) (668) (1,051) (1,123) (2,442) (1,791) 4,302 (3,317) (4,174) (4,094) 128 (7,411) Changes in the fair value of hedging instruments are not recognised in the financial statements until the hedged position matures. An analysis of these unrecognised gains and losses is as follows: Total net gains/(losses) £'000 Unrecognised gains and losses on hedges at 6 April 1999 (4,094) Gains and losses recognised in the year (572) Gains and losses arising that were not recognised in the year 492 Unrecognised gains and losses on hedges at 5 April 2000 (4,174) 6. Reconciliation of Operating Profit to Net Cash Inflow 2000 1999 from Operating Activities £'000 £'000 Operating profit 50,980 62,124 Depreciation of tangible fixed assets 639 502 Goodwill amortisation 116 - (Profit)/loss on sale of tangible fixed assets 20 (20) Increase in property stock (net) (19,520) (13,893) (Increase)/decrease in trade and other debtors and prepayments 263 (933) Increase/(decrease) in trade creditors 1016 (3,538) Decrease in other taxation and social security (87) (140) Increase in accruals and deferred income 1,568 1,136 Increase in tenants' rent deposits 394 310 Decrease in provision for liabilities and charges (250) (250) Net cash inflow from operating activities 35,139 45,298 Operating profit cashflow includes a net inflow of £Nil (1998 £16,829,000) relating to profit on exceptional property sales. 7. Returns on Investments and Servicing of Finance 2000 1999 £'000 £'000 Interest received 304 56 Interest paid (13,982) (12,268) Dividends received from fixed asset investments 594 632 Preference dividends paid (non-equity) (162) (162) Debt issue cost (761) (23) (14,007) (11,765) 8. Capital Expenditure and Financial Investment 2000 1999 £'000 £'000 Purchase of tangible fixed assets (33,307) (27,432) Sale of tangible fixed assets 9,895 1,932 Purchase of fixed asset investment (4) (4,498) Repayment of loans by joint ventures 120 146 Purchase of shares by The BPT Employee Benefits Trust(582) (134) (23,878)(29,986) 9. Acquisitions 2000 1999 £'000 £'000 Purchase of subsidiaries (21,279) - Acquisition cost on purchase of subsidiaries (510) - Net debt acquired with subsidiaries (1,503) - (23,292) - 10. Reconciliation of Net Cash Flow to Movement in Net Debt 2000 1999 £'000 £'000 Increase/(decrease) in cash in the period 4,861 (2,047) Loans acquired with subsidiaries (1,116) - Increase/(decrease) in short term deposits with banks (6,900) 6,900 (Increase)/decrease in short term bank borrowings 2,000 (11,500) (Increase)/decrease in medium term loans from bank 2,116 (14,000) Repayment of 6% guaranteed loan notes 1999 483 220 Repayment of 7.143% unsecured sterling bonds 2014 15,000 - Issue of £75m 6.90% Bonds 2014 (73,951) - Debt issue costs 612 (26) Movement in net debt in the period (56,895) (20,453) Opening net debt (152,373) (131,920) Closing net debt (209,268) (152,373) Analysis of net debt At Acquisitions Cashflow Other At movements April non-cash April 1999 changes 2000 £'000 £000 £000 £'000 £'000 Cash at bank and in hand 58 - 3,927 - 3,985 Bank overdrafts (1,656) - 934 - (722) - 4,861 Short term deposits with banks 6,900 - (6,900) - - Debt due within one year Short term bank borrowings (20,000) - 2,000 - (18,000) Bank term loans (1,000) (1,116) 2,116 - - 16% guaranteed loan notes 1999 (483) - 483 - - US senior unsecured - - - (6,338) (6,338) notes Debt due after one year Bank term loans (20,000) - - - (20,000) US senior unsecured notes (76,372) - 111 6,289) (69,972) 7.143% unsecured sterling bonds 2014(39,820) - 15,040 (17) (24,797) 6.90% Bonds 2014 - - (73,341) (83) (73,424) (1,116)(60,491) (152,373) (1,116)(55,630) (149)(209,268) Note: The abridged financial information as set out for the year ended 5 April 2000 has been extracted from the audited Financial Statements. The Financial Statements for the year ended 5 April 2000 have received an unqualified audit opinion. The information relating to the year ended 5 April 1999 is an extract from the published Financial Statements which have been delivered to the Registrar of Companies and received an unqualified audit opinion. The Report and audited Financial Statements for the year ended 5 April 2000 will be posted to shareholders on 30 June 2000.

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