Interim Results

BPT PLC 21 November 2000 BPT REPORT HALF YEAR PROGRESS BPT plc (formerly The Bradford Property Trust PLC), the largest quoted owner of tenanted residential property in the private rented sector in the UK, reports its interim figures for the half year ended 5 October 2000. Financial Highlights Operating profit increases 9% to £26.9m (1999 £24.6m) Profit before tax increases 6% to £19.7m (1999 £18.7m) Earnings per ordinary share increases 5% to 9.43p (1999 8.95p) Interim dividend per ordinary share increases 6% to 5.00p (1999 4.70p) Net asset value increased from £548.9m (5 April 2000) to £562.9 Net asset value per ordinary share increases 2% to 382p (5 April 2000 373p) Corporate Highlights Open market value of property portfolio increased in half year from £760.8m to £798.9m. Vacant possession value of residential portfolio now exceeds £1 billion. Invested over £44m in acquiring residential properties. Invested in Scout Solutions, an internet joint venture to promote the private rented residential property sector. Commenting on the prospects for the Group, Chairman Philip Warner said: 'On the 3 August 2000 the Board announced that it had decided to investigate with a number of parties whether the interests of existing shareholders would be best served by a cash offer being made for all of the share capital of the Company. This would result in BPT ceasing to be a Stock Exchange listed company.'' 'This decision was taken by the Board as a result of the disappointing share price performance over the last twelve months or so as reflected in the significant discount of BPT's share price to underlying net asset value. In addition the Board believes that a restructured balance sheet and the availability of new and additional forms of finance would give BPT more opportunity to expand its residential management business.'' 'Since August the Board, advised by Schroder Salomon Smith Barney, has conducted a process designed to maximise value for shareholders. This process continues and a further announcement will be made to all shareholders at the appropriate time.' 'Current economic fundamentals in the UK provide confidence that asset value growth, albeit not matching that of last year, will be maintained in the foreseeable future and I expect the group to make continuing progress in 2001.'' For further information contact: BPT plc Citigate Dewe Rogerson Tim Watts, Managing Director Grace Marriner Tel: 01372 743113 Tel: 0113 2979899 Nigel Denby, Finance Director Tel: 01274 723181 CHAIRMAN'S STATEMENT Operating profits for the six months ended 5 October 2000 increased by 9% to £26.9m (1999 £24.6m) principally due to growth in net rental income and an improved margin on properties sold. After higher interest costs of £8.0m (1999 £6.9m), profit before tax was £19.7m (1999 £18.7m). Earnings per ordinary share were 9.43p an increase of 5% in comparison to 8.95p last year. The directors have decided to declare an interim dividend of 5.0p per ordinary share, an increase of 6% over the 4.7p paid last year. It will be paid on 5 January 2001 to shareholders on the register at the close of business on 1 December 2000. The level of activity in the six month period has remained high as BPT's management team has pursued its consistent strategy of growth within the private rented residential sector. The directors have for the first time undertaken an interim open market valuation of the whole of the property portfolio. This has resulted in pre-tax net asset value increasing 2% from 373p six months earlier to 382p per ordinary share. On 3 August 2000 the Board announced that it had decided to investigate with a number of parties whether the interests of existing shareholders would be best served by a cash offer being made for all of the share capital of the Company. This would result in BPT ceasing to be a Stock Exchange listed company. This decision was taken by the Board as a result of the disappointing share price performance over the last twelve months or so as reflected in the significant discount of BPT's share price to underlying net asset value. In addition the Board believes that a restructured balance sheet and the availability of new and additional forms of finance would give BPT more opportunity to expand its residential management business. Since August the Board, advised by Schroder Salomon Smith Barney, has conducted a process designed to maximise value for shareholders. This process continues and a further announcement will be made to all shareholders at the appropriate time. The Board recognises that over recent months this process has created uncertainty for our staff. On behalf of the Board and all shareholders I thank our staff, particularly the senior management team which has been closely involved in the process, for successfully maintaining the smooth running of normal business. Current economic fundamentals in the UK provide confidence that asset value growth, albeit not matching that of last year, will be maintained in the foreseeable future and I expect the group to make continuing progress in 2001. Philip Warner Chairman 21 November 2000 OPERATING AND FINANCIAL REVIEW MARKET CONDITIONS As has been widely reported, growth in UK housing values softened from the peak level experienced in March 2000. Generally growth in vacant possession values of residential property at a more modest level has still been experienced following a quieter period in May and June 2000. An internal valuation of the property portfolio has been undertaken as at 5 October 2000. For the residential portfolio as a whole, vacant possession values increased in the six month period by an average of 2%, with little geographical variation. RENTAL INCOME Gross and net rental income increased by 9% and 10% respectively in the six month period through continuing growth in residential rents and the effect of a further expansion of the residential portfolio. Regulated rents reviewed in the period increased by an equivalent annual average of 8% (1999 6%) and market rents by 4% (1999 6%). Last year increases in regulated rents were subject to the Government's rent capping limits, which were found to be unlawful in January 2000. This decision is currently subject to appeal in the House of Lords. As at 5 October 2000, the total annualised rent roll of the group was £43.1m, an increase of £1.3m since 5 April 2000. Tenant demand for quality rental property has continued at a good level, especially for the new build properties that continue to be acquired by BPT from housebuilders. In the six month period, the area management teams handled over 1,100 vacant residential properties of which 57% (1999 56%) were retained for letting at market rents and 43% (1999 44%) were placed on the market for sale. The majority placed for sale continues to be those previously subject to regulated tenancies. SALES ACTIVITY The total number of residential properties sold in the period fell from 494 units last year to 461 units this year. This was mainly due to the ending of the sales programme at the refurbished estates at Upper Rissington and Thurlby St Hughes last year. The average residential unit sales value increased in the period by 4% (1999 11%) from £64,600 to £67,500 after taking into account a different sales mix. Total gross revenues of £28.2m (1999 £28.2m) were realised in the six month period from sales of property stock and £3.0m (1999 £3.6m) from sales of investment properties. Since 5 October 2000, sales from within the remaining commercial portfolio have been completed for proceeds of £2.5m, in line with their valuation at 5 April 2000. In addition, two blocks of tenanted apartments on the south coast of England, considered not to be achieving an adequate capital return, have been sold for £2.3m, again in line with valuation. ACQUISITION ACTIVITY During the six month period the group acquired 484 residential properties at a cost of £44.2m (1999 £38.1m), and spent £0.3m on certain refurbishment projects. Completed purchases of property stock in the period totalled £22.6m including £6.5m invested in 158 residential properties subject to life tenancy reversion agreements under the brand BPT Bridgewater. The majority of the balance were for properties subject to regulated tenancies. Completed acquisitions of residential investment properties by BPT (Assured Homes) in the period totalled £20.9m, including £5.2m acquiring land sites or paying advance lease premiums. In August 2000 an unbroken block of 42 apartments (Victoria Court, Kingsbridge Avenue, Acton, W3) was acquired for £5.6m from Liverpool Victoria Friendly Society. 20 of the apartments were subject to regulated tenancies with the balance let on assured shorthold tenancies, and the investment on acquisition generated gross rental income of £0.25m. In addition in the period a newly converted block of 18 apartments in Ilkley, West Yorkshire and 16 new houses in Swindon were acquired from Crest Nicholson, 12 new apartments in York were acquired from Shepherd Homes, 12 new apartments (out of a total for BPT of 24 new apartments) in Benton, Newcastle were acquired from Miller Homes and 7 modern tenanted apartments were acquired at Baltic Quay, SE18. During the period a land site was acquired in Headingley, Leeds from Crest Nicholson with a contract for the construction by them of 36 new apartments. This is part of a much larger housing development on this site which was recently acquired by Miller Homes. In addition, lease premiums were paid to Crest Nicholson for 33 apartments in the prestigious redevelopment of Century House, Westminster Bridge Road, SE1 which will take place over the next two and a half years, and, since 5 October 2000, for 25 apartments in a redevelopment of Queens College Chambers, Birmingham which will be completed in mid 2001. At 5 October 2000, contracts exchanged or firm agreements entered into with a value of £28.9m are in place with a growing number of national housebuilders for the future delivery of 237 new houses and apartments to BPT (Assured Homes) for the private rented residential market. CORPORATE ACTIVITY In October 2000, BPT subscribed for 42.5% of the equity of a newly formed company, Scout Solutions Limited. Half of the equity subscription of £0.46m has been paid by BPT with the balance due on 31 March 2001. Along with BPT, Pemberstone Group plc, a group with interests in residential property, and Scout Solution's separate management team are the original shareholders. The corporate objective of Scout Solutions is to seek ways to increase revenues and reduce costs to participants in the residential property sector. Through BPT's interest in this collaborative venture using internet technology, BPT is also seeking to establish ways in which better property marketing and matching of tenants can enhance returns. PROPERTY PORTFOLIO AND VALUATION For the first time the directors have undertaken an interim open market valuation of the whole of the property portfolio at the half-year stage. At 5 October 2000, the director's open market valuation of the investment property portfolio and property stock was £191.7m (5 April 2000 £181.2m) and £607.2m (5 April 2000 £579.6m) respectively, making a total of £798.9m (5 April 2000 £760.8m) for the group's property assets. This results in a valuation surplus before tax on property stock of £303.3m (5 April 2000 £297.7m) above the book value of £303.9m (5 April 2000 £281.9m) reported in the consolidated balance sheet. At 5 October 2000 the vacant possession value of the whole residential portfolio was approximately £1,017.8m (5 April 2000 £986.3m), a potential surplus before tax of £256.5m (5 April 2000 £256.4m) to its open market value. Allsop & Co were instructed to review the external valuation of the same sample of approximately 19% of the whole residential portfolio they undertook at 5 April 2000. Their updated aggregate open market value of the sample was £142.6m as at 5 October 2000 in comparison to the £141.0m valuation calculated by the directors of the same portfolio. The sample was reduced to 2,081 residential properties since it excluded those sold since 5 April 2000. FINANCING Net borrowings (before issue costs) increased during the period from £211.4m at 5 April 2000 to £233.7m at 5 October 2000, an increase of £22.3m. This represents gearing of 42% based on net asset value of £562.9m, after incorporating the open market value of property stock, or 93% based on reported shareholders' funds of £251.7m. All borrowings are unsecured. At 5 October 2000, after allowing for interest rate swaps contracts, 71% and 29% of net borrowings were paying fixed and variable rates of interest respectively. At this date, the average interest rate cost of gross borrowings was 7.3% per annum in comparison to 7.4% six months earlier. As at 5 October 2000, the notional FRS 13 fair value adjustment in respect of financial liabilities has been calculated as an 'asset' of £2.4m before tax or £1.7m after tax in comparison to an 'asset' of £0.1m before tax six months earlier. Tim Watts Managing Director Nigel Denby Finance Director 21 November 2000 BPT plc Consolidated Profit and Loss Account (unaudited) For the half year ended 5 October 2000 Year to 5 April 2000 1999 2000 Notes £'000 £'000 £'000 Turnover including share of 49,352 47,619 95,470 joint ventures Less: Shares of joint ventures - (51) (70) Turnover 1 49,352 47,568 95,400 Cost of sales and other (20,874) (21,659) (41,395) property outgoings 28,478 25,909 54,005 Administrative expenses (1,622) (1,307) (3,025) Operating profit 1 26,856 24,602 50,980 Share of operating profit of - 41 60 joint ventures Operating profit including 26,856 24,643 51,040 joint ventures Profit on sale of investment 388 361 1,524 properties Investment income 483 569 902 Profit on ordinary activities 27,727 25,573 53,466 before interest Interest payable and similar (7,983) (6,897) (14,608) charges Profit on ordinary activities 19,744 18,676 38,858 before taxation Tax on profit on ordinary (5,824) (5,514) (11,716) activities Profit on ordinary activities 13,920 13,162 27,142 after taxation Dividends on equity and non- 2 (7,414) (6,969) (15,844) equity shares Retained profit for the period 6,506 6,193 11,298 Earnings per ordinary share 3 9.43p 8.95p 18.43p Fully diluted earnings per 3 9.42p 8.93p 18.40p ordinary share All items dealt with in arriving at operating profit for 2000 and 1999 relate to continuing operations. Other Primary Statements (unaudited) For the half year ended 5 October 2000 Statements of Total Recognised Year Gains and Losses to 5 April 2000 1999 2000 Notes £'000 £'000 £'000 Profit for the period after 13,920 13,162 27,142 taxation Unrealised surplus on 4 revaluation of investment 3,936 - 28,396 properties Elimination of unrealised revaluation surplus on investment properties (1,1220) - - transferred to property stock Share of joint venture's unrealised surplus on - - 549 revaluation of investment properties Taxation on realisation of property revaluation gains of (323) (158) (227) previous years Total recognised gains for the 16,411 13,004 55,860 period Note of Historical Cost 2000 1999 2000 Profits and Losses £'000 £'000 £'000 Reported profit on ordinary activities before taxation 19,744 18,676 38,858 Realisation of investment property revaluation gains of 1,669 704 1,881 previous years Share of realisation of joint venture's investment property revaluation gains of previous - 33 65 years Historical cost profit on ordinary activities before 21,413 19,413 40,804 taxation Historical cost profit for the period retained after taxation 7,852 6,772 13,017 and dividends Reconciliation of Movements in 2000 1999 2000 Shareholders Funds £'000 £'000 £'000 Profit for the period after 13,920 13,162 27,142 taxation Dividends paid or proposed 2 (7,414) (6,969) (15,844) Issue of ordinary shares - 1,000 1,000 Share options exercised 7 22 - 207 Other recognised gains and 2,491 (158) 28,718 losses (net) Net issue in shareholders 9,019 7,035 41,223 funds Opening shareholders funds 242,657 201,434 201,434 Closing shareholders funds 251,676 208,469 242,657 BPT plc Consolidated Balance Sheet (unaudited) At 5 October 2000 5 5 April October 2000 2000 Notes £'000 £'000 Fixed assets Intangible asset 552 610 Tangible assets 4 193,552 183,053 Other investments 16,801 16,150 210,905 199,813 Current assets Property stock 303,932 281,868 Debtors 5,089 4,175 Cash at bank and in hand 5,208 3,985 314,229 290,028 Creditors Amounts falling due within one year: Bank borrowings and loan notes 5 (50,771) (25,060) Trade and other (36,240) (33,524) Net current assets 227,218 231,444 Total assets less current 438,123 431,257 liabilities Creditors Amounts falling due after more than one year Bank borrowings 5 (20,000) (20,000) Senior unsecured notes and 5 (166,070) (168,193) sterling bonds Provisions for liabilities and (377) (407) charges Net assets 251,676 242,657 Shareholders' funds 7 251,676 242,657 BPT plc Consolidated Cash Flow Statement (unaudited) For the half year ended 5 October 2000 Year to 5 April 2000 1999 2000 Notes £'000 £'000 £'000 Net cash inflow before property 39,492 39,749 79,752 stock acquisitions Acquisition of property stock (22,949) (18,793) (44,613) Net cash inflow from operating 8 16,543 20,956 35,139 activities Dividend received from joint - - 1,000 venture Returns on investments and (7,445) (6,703) (14,007) servicing of finance Taxation (3,618) (1,904) (16,774) Capital expenditure and financial (19,015) (13,407) (23,878) investment Acquisitions - (20,421) (23,292) (13,535) (21,479) (41,812) Ordinary dividends paid (equity) (8,794) (7,897) (14,786) Cash outflow before liquid (22,329) (29,376) (56,598) resources and financing Management of liquid resources Investment in bank deposits - (1,400) 6,900 Financing Issue of ordinary share capital 22 - 207 Debt due within a year: Increase/(decrease) in short term 22,500 (20,000) (2,000) bank borrowings Decrease in bank term loans - (500) (2,116) Redemption of 6% guaranteed loan - (126) (483) notes 1999 Debt due beyond one year: Increase in bank term loans - - - Repayment of 7.143% unsecured - (15,000) (15,000) sterling bonds 2014 Issue of £75m 6.90% Bonds 2014 - 73,963 73,951 Net cash inflow from financing 22,522 38,337 54,559 Increase in cash in the period 9 193 7,561 4,861 BPT plc Notes to the Interim Statement Year to 5 April 2000 1999 2000 £'000 £'000 £'000 1 Turnover Rental income 21,177 19,407 39,837 Property trading sales 28,175 28,161 55,563 49,352 47,568 95,400 Operating profit Net rental income 15,542 14,155 29,164 Property trading profit 12,936 11,754 24,841 28,478 25,909 54,005 Administrative expenses (1,622) (1,307) (3,025) 26,856 24,602 50,980 2 Dividends Dividends on equity shares: Ordinary: Interim payable of 5.00p per share 7,333 6,888 6,888 (1999: 4.70p) Final paid - - 8,794 Dividends on non-equity shares: Preference 10% paid 81 81 162 7,414 6,969 15,844 An interim dividend of 5.00p per ordinary share will be payable on 5 January 2001 to shareholders on the register at the close of business on 1 December 2000. 3 Earnings per Ordinary Share The calculation of earnings per ordinary share is based upon the profit for the period attributable to ordinary shareholders of £13,839,264 (1999: £13,081,000) and the weighted average number of ordinary shares in issue during the period of 146,812,088 (1999: 146,231,650). The fully diluted earnings per ordinary share is based upon the weighted average number of ordinary shares during the period of 146,893,959 (1999: 146,497,708). 4 A revaluation of investment properties has been undertaken by the directors as at 5 October 2000. 5 Maturity of Finance Debt 5 5 Octobe April r 2000 2000 £'000 £'000 In one year or less 50,771 25,060 Between one and two years 23,519 13,517 Between two and five years 30,556 40,553 Between five and ten years 33,736 35,902 Over ten years 98,259 98,221 236,841 213,253 Finance debt is stated net of attributable issue costs of £1,078,000 (5 April 2000 £1,100,000) and £961,000 (5 April 2000 £996,000) in respect of the discount on issue of the of the listed £75m 6.90% Bonds 2014. 6 Financial Instruments and Liabilities The summary interest rate profile of the group's financial liabilities at 5 October 2000, after taking account of interest rate swap contracts taken out by the group was: 5 October 5 April 2000 2000 £'000 £'000 Fixed Rate Liabilities 164,589 154,531 Weighted average rate of 7.66% (7.63%) Weighted average period of 9.38 years (10.07 years) Capped Rate liabilities 10,000 10,000 Weighted average rate of 7.18% (7.18%) Weighted average period of 0.45 years (0.96 years) Floating Rate liabilities 62,252 48,722 236,841 213,253 The summary fair value adjustment in respect of financial liabilities at 5 October 2000, as calculated by JC Rathbone Associates Limited was: Fair Value Adjustment 5 October 5 April 2000 2000 £'000 £'000 Financial Instruments 5,602 4,302 Derivative Financial Instruments (3,200) (4,174) Before allowance for taxation 2,402 128 Net of tax at 30% 1,681 90 7 Share Capital At 5 October 2000, 146,901,317 ordinary shares were in issue. 10,800 ordinary shares were issued in the period under the terms of the BPT plc 1984 Share Option Scheme for an aggregate consideration of £22,140. Since 5 October 2000, 77,000 ordinary shares have been issued under the terms of the BPT plc 1984 Share Option Scheme for an aggregate consideration of £77,000. 8 Reconciliation of Operating Profit to Year Net Cash Inflow from Operating to Activities 5 April 2000 1999 2000 £'000 £'000 £'000 Operating Profit 26,856 24,602 50,980 Depreciation of tangible fixed assets 338 330 639 Goodwill amortisation 58 - 116 Loss on sale of tangible fixed assets 10 1 20 Increase in property stock (net) (11,443) (7,283) (19,520) (Increase)/decrease in trade and (914) 1,171 263 other debtors and prepayments Increase in trade creditors 1,425 4,659 1,016 Increase/(decrease) in other taxation 8 5 (87) and social security Increase/(decrease) in accruals and 199 (2,456) 1,568 deferred income Increase in tenants' rent deposits 6 177 394 Decrease in provision for liabilities - (250) (250) and charges Net cash inflow from operating 16,543 20,956 35,139 activities 9 Reconciliation of Net Cash Flow to Year to Movement in Net Debt 5 April 2000 1999 2000 £'000 £'000 £'000 Increase in cash in period 193 7,561 4,861 Loans acquired with subsidiaries - - (1,116) Increase/(decrease) in short term - 1,400 (6,900) deposits with banks (Increase)/decrease in short term (22,500) 20,000 2,000 bank borrowings Decrease in medium term loans form - 500 2,116 banks Repayment of 6% guaranteed loan notes - 126 483 1999 Repayment of 7.143% unsecured - 15,000 15,000 sterling bonds 2014 Issue of £75m 6.90% Bonds 2014 - (73,963) (73,951) Debt issue costs (58) 597 612 Movement in net debt in period (22,365) (28,779) (56,895) Opening net debt (209,268) (152,373) (152,373) Closing net debt (231,633) (181,152) (209,268) 10The interim financial statements, which do not constitute statutory accounts, have been prepared on a basis consistent with the statutory financial statements for the year ended 5 April 2000. The statutory financial statements for the year ended 5 April 2000 have been reported upon without qualification by the auditors and have been delivered to the Registrar of Companies. Copies of this statement are to be sent to all shareholders and are available from the registered office.

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