Interim Results

LONDON AND ASSOCIATED PROPERTIES PLC 27 September 1999 LONDON & ASSOCIATED PROPERTIES PLC INTERIM RESULTS FOR SIX MONTHS TO 30th JUNE 1999 H I G H L I G H T S * Rental income advances to £3.8m despite property sales + 6% * Pre-tax profits advance to £1.063m + 4% * Strong tenant demand resulted in further £250,000 of annualised rents * Since end of June £15.8m acquisition of Orchard Square, Sheffield adding additional £1.3m to rental income against an Estimated Rental Value of £1.7m * As a result of Orchard Square acquisition total Group property assets top £100m and annualised rent roll is now over £9m * 'Demand from retailers is strong across the entire portfolio and indications are that this will continue throughout the remainder of the year. I am confident that the year end valuation will reflect the good progress we have achieved so far during 1999 and therefore I view the future with confidence,' Michael Heller, Chairman. CHAIRMAN'S STATEMENT I am pleased to report that pre-tax profits for the six months ended 30 June 1999 were £1.063m compared to £1.023m for the same period last year. As in the past, these profits consist primarily of rental income less expenses. We estimate that new lettings, virtually across the entire portfolio, have added a further £250,000 to the current rent roll on an annualised basis. We believe that both the increased rental levels and new lettings achieved during the first six months, which have continued into the second half of the year, should result in a healthy increase in value when our property portfolio is formally valued as at 31 December 1999. In July, we completed the acquisition of Orchard Square Shopping Centre for £15.78m. Following this purchase, the value of group property assets now exceeds £100m and the annualised rent roll is over £9m. Orchard Square occupies a 1.52 acre site and is located on Sheffield's prime shopping street, Fargate. It produces annual gross rents of £1.3m against an Estimated Rental Value of £1.7m. Tenants in the centre include: TK Maxx, which occupies the 28,500 sq ft anchor store, Virgin Megastore, Waterstones and The Body Shop. Over the medium term we believe that we will significantly increase the income through intensive management. We are also examining opportunities to provide larger units tailored to meet the requirements of the larger national multiple retailers. In the two months since acquisition we have identified further opportunities which confirm our view that the current Estimated Rental Value of £1.7m is eminently achievable. This will have a beneficial impact on both income and the consequent capital values. As mentioned above the demand from retailers for space in our type of Centre is currently strong. A typical example of this is at Saxon Square, Christchurch, where we secured the first vacant unit since acquiring the centre in December 1997. A new letting on the unit was agreed within weeks at £29,000, an increase of 100% over the original rent and 45% above the Estimated Rental Value. This is a record rent for the centre, reflecting the strength of tenant demand, and we are confident this will lead to higher rental levels at both reviews and lease renewals over the short to medium term. At the Brunel Centre, Bletchley, new lettings were also agreed during the period which underline the recovery of this shopping centre. These include a new cafe in the concourse and a national fashion retailer is taking an assignment of the former Shoe Express unit. I am pleased to report that we have applied for planning permission to redevelop the former Wetherburn Court site and build the first of two large units. Work on clearing the site is already underway. At King's Square, West Bromwich, which is effectively fully let, a number of tenants have renewed leases at £58 Zone A and firmly established this level as the current benchmark. Since the end of June we have also agreed the surrender of the Kwik Save supermarket for a reverse premium and simultaneously re-let the unit to an existing tenant of the centre at a new annual rent of £95,000, an uplift of some 30%. We are dividing the existing tenant's former premises into three smaller units, where we are confident of increasing the total rent to £100,000 from £84,000 a year. At The Mall, Dagenham, we have increased the annual rent roll by £70,000 following three good lettings, while an additional £100,000 of annual income has been generated at our Barnsley town centre investment where the local authority has taken the office space above the ground floor retail. We have also concluded additional lettings at Brierley Hill, West Midlands with Grattan plc and a national fashion retailer has taken space at both Bedworth and Hebburn. We have continued our programme of selling smaller, mature assets and over the period have disposed of, or contracted to dispose of, properties totalling more than £2m. These include a non-core holding in Barnsley and a shopping parade in Wolverhampton which combined will show a substantial surplus over book value. The cash generated from these sales will be reinvested in new property investments, where we believe there is scope for genuine growth over the medium term, or used to repay borrowings. Shareholders will be aware that the acquisition of Orchard Square was funded through a new £21m 10 year loan from NatWest at very competitive rates, part of which was used to repay an existing loan. As a result of the new funding gearing, net of listed investments, has increased to 115% although this should fall on the disposal of some of our non-core properties and the expected improvement in the portfolio's value at the year end. Disappointingly, in South Africa, Black Wattle Colliery, the coal mining subsidiary of Bisichi, our associated company, encountered a major geological problem in the shape of a 'mudwash' that had not shown up in any borehole results. This adversely affected production and has resulted in Black Wattle Colliery operating at a loss. However, Black Wattle Colliery has now signed an agreement with the owner of an adjacent property to acquire the mineral reserves and with production from this new reserve we anticipate that Black Wattle Colliery will return to profitability in the course of next year. We have incorporated our share of Bisichi's loss, some £41,000 after minority interests, in the six months results against a profit of £115,000 in the same period a year ago. As Chairman of a property company investing in Shopping Centres, I am often asked whether I believe that the growth of e-commerce is a source of concern. We continue to monitor carefully the growth of the internet, particularly in the United States which is more advanced in this area than the United Kingdom. I am pleased to report that current indications are that town centre retailing is virtually unaffected by e-commerce with most of the impact being reported by the out-of-town bulky goods retailers. This is a further justification of your company's strategy not to diversify into retail parks despite their exceptional performance over the last few years. As I have already indicated, demand from retailers is strong across the entire portfolio and indications are that this will continue throughout the remainder of the year. I am confident that the year end valuation will reflect the good progress we have achieved so far during 1999 and therefore I view the future with confidence. Michael Heller 27th September 1999 Chairman Consolidated profit and loss account Six months ended 30 June 1999 6 months 6 months Year ended ended ended 31 30 June 30 June December 1999 1998 1998 Note £'000 £'000 £'000 Revenue Property: Income 3,794 3,590 7,438 Less: - ground rents (204) (197) (396) - direct property expenses (462) (391) (820) - attributable overheads (676) (596) (1,233) _______ _______ _______ 2,452 2,406 4,989 _______ _______ _______ Listed investments: Investment sales 331 314 951 Cost of sales (229) (166) (656) _______ _______ _______ 102 148 295 Dividends receivable 60 57 125 Less: -attributable overheads (5) (4) (10) _______ _______ _______ 157 201 410 _______ _______ _______ Operating profit 2,609 2,607 5,399 Share of operating (loss) profit of associate (41) 115 90 Share of operating profit of joint venture 5 9 14 _______ _______ _______ 2,573 2,731 5,503 Interest receivable 21 27 96 Interest payable (1,525) (1,735) (3,584) (Loss) on sale of fixed assets (6) - (1) _______ _______ _______ Profit on ordinary activities before taxation 1,063 1,023 2,014 Taxation of profit on ordinary activities 1 327 248 474 _______ _______ _______ Profit for the period 736 775 1,540 _______ _______ _______ Earnings per share - basic 2 0.97p 1.03p 2.04p Earnings per share - diluted 2 0.94p 0.99p 1.96p The operating profit derives from continuing operations Consolidated balance sheet at 30 June 1999 30 June 30 June 31 December 1999 1998 1998 Note £'000 £'000 £'000 Fixed assets Properties and other tangible assets 3 75,578 76,430 75,614 Investments 3,012 3,074 3,053 _______ _______ _______ Total fixed assets 78,590 79,504 78,667 _______ _______ _______ Current assets Debtors 1,609 1,712 1,292 Investments (Market value - £3,574,000) 4 2,464 2,442 2,422 Bank balances 3,072 68 2,066 _______ _______ _______ 7,145 4,222 5,780 _______ _______ _______ Creditors due within one year Creditors and accruals (6,155) (6,481) (5,500) Bank borrowings (3,559) (2,636) (3,674) _______ _______ _______ (9,714) (9,117) (9,174) _______ _______ _______ Net current liabilities (2,569) (4,895) (3,394) _______ _______ _______ Total assets less current liabilities 76,021 74,609 75,273 _______ _______ _______ Creditors due after more than one year (34,343) (34,327) (34,335) _______ _______ _______ Provisions for liabilities and charges (111) - (111) _______ _______ _______ Net assets 41,567 40,282 40,827 _______ _______ _______ Equity shareholders' funds 5 41,567 40,282 40,827 _______ _______ _______ Consolidated statement of total recognised gains and losses Six months ended 30 June 1999 6 months 6 months Year ended ended ended 31 30 June 30 June December 1999 1998 1998 £'000 £'000 £'000 Profit for the financial period 736 775 1,540 Currency translation difference on foreign currency net investments 4 (45) (41) Increase on revaluation of investment properties Company - - 347 Associate - - 45 _______ _______ _______ 740 730 1,891 _______ _______ _______ Consolidated cash flow statement for the six months ended 30 June 1999 6 months 6 months Year ended ended ended 31 30 June 30 June December 1999 1998 1998 £'000 £'000 £'000 Operating profit 2,609 2,607 5,399 Depreciation 52 44 94 Dividend from associated company - - 49 (Increase)decrease in current assets 40 (60) 590 _______ _______ _______ Net cash flow from operating activities 2,701 2,591 6,132 Returns on investments and servicing of finance (1,589) (1,709) (3,575) Taxation - - (151) Capital expenditure and financial investment (3) (563) 221 Equity dividends paid - - (532) _______ _______ _______ Cash inflow before use of liquid resources and financing 1,109 319 2,095 Management of liquid resources 12 - (810) Cash outflow from financing - (49) (55) _______ _______ _______ Increase in cash in the period 1,121 270 1,230 _______ _______ _______ Reconciliation of net cash flow to movement in net debt Increase in cash in the period 1,121 270 1,230 Movements on current asset investments 42 24 4 _______ _______ _______ Decrease in net debt in the period 1,163 294 1,234 Net debt at beginning of period (33,886) (35,120) (35,120) _______ _______ _______ Net debt at end of period (32,723) (34,826) (33,886) _______ _______ _______ Analysis of net debt Bank balances in hand 3,072 68 2,066 Bank overdrafts (2,999) (2,076) (3,114) Bank bridging loan (560) (560) (560) Debt due after one year (34,700) (34,700) (34,700) Current asset investments 2,464 2,442 2,422 _______ _______ _______ (32,723) (34,826) (33,886) _______ _______ _______ Notes to the Interim Results 6 months 6 months Year ended ended ended 31 30 June 30 June December 1999 1998 1998 £'000 £'000 £'000 1. Taxation Company 318 234 452 Associate 8 12 19 Joint Venture 1 2 3 _______ _______ _______ 327 248 474 _______ _______ _______ The tax charge for 1998 has been reduced due to the effect of accelerated capital allowances. 6 months 6 months Year ended ended ended 31 30 June 30 June December 1999 1998 1998 2. Earnings per share have been calculated as follows:- Group profit on ordinary activities after tax £736,000 £775,000 £1,540,000 Weighted average number of shares in issue for period 75,790,926 75,483,500 75,631,000 Basic earnings per share 0.97p 1.03p 2.04p Dilution adjustments to earnings £36,000 £31,000 £62,000 Diluted number of shares in issue 82,207,526 81,070,100 81,616,603 Fully diluted earnings per share 0.94p 0.99p 1.96p 3. Properties are included at valuation as at 31 December 1998 adjusted for additions and disposals since that date at cost. 4. Investments held as current assets 30 June 30 June 31 December 1999 1998 1998 £'000 £'000 £'000 Listed investment portfolio at market value 3,574 3,799 3,138 Unrealised excess of market value over costs 1,110 1,357 716 _______ _______ _______ Listed investment portfolio at cost 2,464 2,442 2,422 _______ _______ _______ 5. Purchase of the company's own shares. In accordance with resolutions passed at the company's AGM in 1998 the company purchased 150,000 of its own ordinary shares, at a cost of £48,742 for cancellation. During 1999 the company has not acquired any of its own shares. 6. Year 2000 compliance The group continues to actively look for potential software and hardware problems arising from the millennium date change. Critical items have already been tested and modified or replaced as necessary. Testing and monitoring will continue for the remainder of 1999 and into early 2000. No material additional costs are anticipated. 7. This financial information does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. The figures for the year ended 31 December 1998 are based on the statutory accounts which have been delivered to the Registrar of Companies: the report of the auditors on those accounts was unqualified and did not contain a statement under section 237 (2) or (3) of the Companies Act 1985. The six month figures use the same accounting policies as for the year ended 31 December 1998, and have not been audited or subject to review by the auditors. 8. Board Approval These interim accounts were approved by the Board of London & Associated Properties PLC on 24 September 1999. Registered Office 8-10 New Fetter Lane, London EC4A 1AF . Telephone 020 7415 5000 Company registration no. 341829 (England). Posting to shareholders The interim statement will be posted to all shareholders shortly. Copies will be available from the company Secretary at the Registered Office, and will also be available on the company's Web Site at www.laprops.co.uk. Contact: London & Associated Properties PLC Tel: 020 7415 5000 Michael Heller, Chairman, John Heller, Director or Robert Corry, Finance Director Baron Phillips Associates Tel: 020 7224 1302 Baron Phillips

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