Interim Results
Mentmore PLC
03 December 2002
3 December 2002
MENTMORE plc
ANNOUNCEMENT OF INTERIM RESULTS
FOR THE SIX MONTHS ENDED 31 OCTOBER 2002
Highlights
• Growth in occupancy levels resulting in:
• Group turnover from continuing operations increasing 7.5% to
£39.1million
• EBITDA before property profits increasing 4.0% to £17.7million
• Results include £1.0 million of non-trading costs.
• Earnings per share of 3.57p (2001: 3.55p).
• Interim dividend increased 5.7% to 0.425p (2001: 0.402p).
• Appointment of Martin Nye as group chief executive with effect from
January 2003.
• Strategic review completed to demonstrate the underlying value
inherent in the group with plans to focus on personal storage and records
management.
• Process started that is expected to lead to sale of serviced business
space ('SBS') taking advantage of favourable market conditions. Business
to be sold is highly cash generative, property based and serves 5000 small
and medium sized business customers.
• Acquisition on 30 September,2002 of Aardvark Self Storage, nine
additional sites, giving national cover in personal storage and bringing
the total number of centres to 53.
• Revenues for personal storage increased by 17.4%. At end of October
annualised storage revenues of £24.7m, an increase of 34.2% on last year.
• Improving operating trend continued at Iron Mountain Europe - group's
share of operating profit before goodwill amortisation increased by 33.4%
to £2.3 million.
• Good progress made in trading at SBS as benefits from continued
programme of refurbishment and investment start to be seen.
Nick Smith, chairman, commenting on the results said:
'It has been an important period in the group's development and these good
trading results were achieved at a time when many of the developments and
upgrades that we have undertaken were either not yet fully operational or were
still under development.
Current trading continues in line with expectations. With the changes announced
today and under Martin Nye's leadership, the shape of the group is likely to
change during 2003, leaving the business more focused and enabling us to build
on our strong market positions.'
Contacts:
Mentmore plc 020 8946 3159
Nick Smith, Chairman
Clive Drysdale, Finance Director
ABN Amro 020 7678 8000
Ranald McGregor-Smith / Phillip Rose
Bridgewell 020 7003 3000
Greg Aldridge / Ian Dighe
Buchanan Communications 020 7466 5000
Charles Ryland
Catherine Miles
Chairman's statement
six months ended 31 October
Before goodwill amortisation and exceptionals 2002 2001
Total operating profits £13.9m £14.1m
EBITDA(1) £17.7m £16.9m
Profit before tax £9.3m £9.4m
Earnings per share 3.57p 3.55p
(1) Earnings before interest, taxes, depreciation, amortisation and property profits
I am pleased to present my report on what has been an important period in the
group's development.
• Occupancy levels have grown, resulting in an increase in turnover from
continuing operations of 7.5% to £39.1 million (2001: £36.4 million) and an
increase in EBITDA before property profits of 4.0% to £17.7 million (2001: £16.9
million), despite challenging trading conditions.
• This improvement reflects the resilience of small and medium sized
businesses, which form the majority of our customer base, and the benefits of
the continued programme of refurbishment and investment.
• The interim dividend has been increased by 5.7% to 0.425 pence.
• We are delighted to announce the appointment of Martin Nye as group chief
executive, effective from January.
• Strategic review undertaken to demonstrate inherent value in group; refocus
towards personal storage and records management and a plan to dispose of our
serviced business space division.
• During the period we acquired Aardvark Self Storage. This is in line with the
Board's strategy of focusing on increasing its presence in personal storage on a
national basis.
• Iron Mountain Europe continued its improved profit performance with operating
profits increasing by 33.4% to £2.3 million.
Disposal of serviced business space
As highlighted at the time of the preliminary results and in our AGM statement,
we have been carrying out a full review of our strategic options with the
intention of demonstrating the underlying value inherent in the group.
The group plans to refocus towards personal storage and records management and
to take advantage of market conditions to start a process expected to lead to
the sale of serviced business space ('SBS'). This division had operational net
assets at 31 October 2002 of £253.4 million which included goodwill of £67.0
million. The proceeds of the disposal are expected to be used to principally to
reduce debt and to support growth in personal storage.
This would be a large and complex transaction requiring shareholder approval and
is unlikely to be completed by the end of our financial year. We will make
further announcements in due course.
Chief executive
Martin Nye has been appointed group chief executive and will take up his
appointment in January. He has a successful record in serviced based industry
and until recently was chief executive at Endeva, the UK's leading home delivery
and service operation for electrical goods. Prior to this he held a number of
senior executive roles within Exel plc, most recently as President, Global
Technology division. He will be reviewing the best options for growing our
business. We are delighted to be welcoming Martin to the Board.
Financial review
Earnings increased by 4.0% to £17.7 million (2001: £16.9 million) before
interest, taxes, depreciation, amortisation and property profits, despite
challenging trading conditions during the period.
The trading results were achieved at a time when many of the developments and
upgrades that we have undertaken were either not yet fully operational or were
still under development. Profits were also adversely affected by non-trading
items that amounted to £1.0 million; £0.7 million related to the implementation
of a new financing facility for the group and £0.3 million concerned director
changes. Property disposals generated £1.1 million of profit (2001: £80,000).
After adjusting for the non-trading costs and property disposals, pre tax profit
before goodwill amortisation and the disposal of investments reduced by 2.6% to
£9.1 million (2001: £9.3 million) and, on the same basis, earnings per share
were flat at 3.51 pence.
Personal storage
During the six months we let an additional 9,000 square metres of space (2001:
7,000 square metres). Reflecting the additional space added since last year, we
had occupancy levels of 63.5% (2001: 65.2%) at the period end. Revenues
increased by 17.4% and at the end of October we had annualised storage revenues
of £24.7 million, an increase of 34.2% on last year. Non storage sales reached
10.6% of storage revenues (2001: 8.8%).
The highlight of the period was the acquisition of Aardvark for £30.0 million in
September. Aardvark adds nine additional stores to the personal storage
portfolio and gives representation in Scotland, with the result that we can
truly claim national coverage. The stores have 39,000 square metres of lettable
space of which only 42% was let on acquisition. The business has subsequently
traded ahead of our expectations and we are delighted with its people. Following
the Aardvark transaction we have 46 centres in the UK and seven in Paris giving
total capacity of 231,000 square metres.
We continue to let space in Paris according to plan. The business is still in a
growth phase but consequential trading losses are reducing in line with our
expectations.
Serviced business space
Here too we continued to make good progress.
In Imex, we improved occupancy levels to 83.1% (2001: 81.4%). Revenues grew by
6.0% to £11.4 million at a time when no new sites were acquired and the
disposals of several non core sites were made.
Revenues in Argo grew organically by 15.4% over last year to £4.5 million. Their
product has been well received as a high quality offering, sensibly priced to
reflect the non-city centre locations. We are achieving prices and occupancy
levels within our target range.
In Shops has upgraded a number of sites to the Selections brand; the first four
will be trading in time for the peak Christmas period. However, as a result of a
reduction in capacity while these sites were out of commission and some
difficult trading conditions, revenues reduced by 7.7% to £11. 2 million. The
upgrades have achieved our goal of improving the quality of the offering to the
public by enhancing the environment and the merchandise available. Returns in
these upgraded centres are expected to show material improvement compared with
the previous format.
Records management
Iron Mountain Europe continued its improving operating trend. Our share of
revenues increased by 28.8% over last year to £16.7 million. Our share of
operating profits before goodwill amortisation increased by 33.4% to £2.3
million.
The high service standards and constantly improving product offering has enabled
us to continue to win new contracts. During the period we acquired the data
business of TDG plc. Their customers have welcomed the change and we have
started to move their boxes into our premises.
We started operations at our new London facility in June and it is already
contributing to our service and profit improvement plans.
Dividend
We are increasing the interim dividend by 5.7% to 0.425 pence per ordinary
share. This will be paid on 7 April 2003 to shareholders on the register on 7
March 2003.
Outlook
Current trading continues in line with expectations.
The shape of the group is likely to change during 2003. This would leave the
business more focused and enable us to build on our strong market positions.
Nicholas Smith
Chairman
3 December 2002
Group profit and loss account
for the six months ended 31 October 2002
Six months Six months
ended ended Year ended
31 October 31 October 30 April
2002 2001 2002
Notes £'000 £'000 £'000
Group turnover 2 39,124 37,945 77,405
Continuing operations:
Group and share of joint venture 55,315 49,350 102,988
Less: group's share of joint venture (16,669) (12,941) (27,705)
Group 38,646 36,409 75,283
Acquisitions 478 - -
39,124 36,409 75,283
Discontinued activities - 1,536 2,122
39,124 37,945 77,405
Operating profit 8,677 9,442 20,096
Continuing operations:
Existing activities 11,449 12,361 25,911
Acquisitions (£95,000 after goodwill amortisation) 154 - -
Goodwill amortisation (2,926) (2,855) (5,726)
8,677 9,506 20,185
Discontinued activities - (64) (89)
Group operating profit 8,677 9,442 20,096
Share of operating profit in joint venture:
Before goodwill amortisation 2,340 1,754 3,546
Goodwill amortisation (748) (675) (1,365)
1,592 1,079 2,181
Total operating profit 2 10,269 10,521 22,277
Before goodwill amortisation 13,943 14,051 29,368
Goodwill amortisation 2 (3,674) (3,530) (7,091)
Profit on disposal of fixed assets 1,143 - -
Share of joint venture profit on disposal of fixed - - 1,021
assets
Profit on disposal of operations - - 1,529
Profit on disposal of investment - 9,646 9,646
Profit on ordinary activities before interest 11,412 20,167 34,473
Net interest payable (5,833) (4,630) (9,525)
Profit on ordinary activities before taxation 5,579 15,537 24,948
Taxation 3 (2,773) (3,502) (6,739)
Profit on ordinary activities after taxation 2,806 12,035 18,209
Before goodwill amortisation and exceptionals 4 6,480 6,419 16,154
Goodwill amortisation and exceptionals (3,674) 5,616 2,055
Dividends (774) (729) (2,270)
Retained profit for the period 2,032 11,306 15,939
Earnings per share 4
Basic 1.55p 6.66p 10.07p
Basic before goodwill amortisation and exceptionals 3.57p 3.55p 8.93p
Diluted 1.54p 6.62p 10.01p
Diluted before goodwill amortisation and exceptionals 3.56p 3.53p 8.88p
Dividends per share 0.425p 0.402p 1.252p
Group balance sheet
as at 31 October 2002
31 October 31 October 30 April
2002 2001 2002
Notes £'000 £'000 £'000
Fixed assets
Intangible assets 109,326 103,790 100,906
Tangible assets 280,855 234,105 250,965
Investment in IMEjoint venture 29,942 30,795 28,096
- share of gross assets 66,167 59,068 60,457
- share of gross liabilities (48,035) (42,095) (42,781)
- share of net assets 18,132 16,973 17,676
- loans to joint venture 11,810 13,822 10,420
Own shares 17 216 14
Other investments 250 250 250
420,390 369,156 380,231
Current assets
Stocks 1,843 4,490 1,824
Development in progress 17,672 10,556 16,312
Assets held for resale - 5,221 -
Debtors 10,562 10,397 8,757
Cash at bank and in hand 10,387 8,767 4,093
40,464 39,431 30,986
Creditors: amounts falling due within one year (40,706) (49,695) (54,796)
Net current liabilities (242) (10,264) (23,810)
Total assets less current liabilities 420,148 358,892 356,421
Creditors: amounts falling due after more than one year (197,473) (143,856) (136,278)
Provisions for liabilities and charges (4,672) (4,021) (4,475)
Net assets 218,003 211,015 215,668
Capital and reserves
Called up share capital 18,212 18,129 18,131
Share premium account 130,469 130,131 130,148
Other reserve 27,226 27,226 27,226
Profit and loss account 42,096 35,529 40,163
Equity shareholders' funds 7 218,003 211,015 215,668
Group cash flow statement
for the six months ended 31 October 2002
Six months Six months
ended ended Year ended
31 October 31 October 30 April
2002 2001 2002
Notes £'000 £'000 £'000
Cash flow from operating activities 5 12,113 15,435 31,490
Returns on investment and servicing of finance (6,165) (2,462) (6,854)
UK corporation tax (2,198) (2,116) (5,061)
Capital expenditure and financial investment (12,832) (3,027) (19,109)
Proceeds from sale of investment 40 29,884 30,155
Development on behalf of joint venture (1,343) (12,018) (15,688)
Loans (made to)/repaid by joint venture (1,389) 2,310 5,712
Capital expenditure (10,140) (23,203) (39,288)
Acquisitions and disposals (18,624) 4 2,452
Equity dividends paid (1,541) (1,484) (2,214)
Cash (outflow)/inflow before use of financing (29,247) 6,350 704
Financing
- issue of shares 359 321 340
- increase/(decrease) in debt 44,258 (6,846) (10,179)
Increase/(decrease) in cash in the period 15,370 (175) (9,135)
Reconciliation of net cash flow to movement in net debt
for the six months ended 31 October 2002
Six months Six months
ended ended Year ended
31 October 31 October 30 April
2002 2001 2002
Notes £'000 £'000 £'000
Increase/(decrease) in cash in the period 15,370 (175) (9,135)
Cash (inflow)/outflow from change in debt and lease
financing
(44,258) 6,846 10,179
Change in net debt resulting from cash flows (28,888) 6,671 1,044
Loans and finance leases (acquired)/divested
with subsidiary undertakings (6,274) - 2,219
Non-cash movements (8,614) (69) (63)
Movement in net debt in the period (43,776) 6,602 3,200
Net debt at beginning of the period (153,151) (156,351) (156,351)
Net debt at end of the period 6 (196,927) (149,749) (153,151)
Non-cash movements include £7.6 million of deferred acquisition loan notes
relating to transactions completed in the period. The balance comprises loan
amortisation costs written off in the period and foreign exchange differences.
Notes to the interim results
for the six months ended 31 October 2002
1. Basis of preparation
The interim results have not been audited but have been reviewed by the
auditors. They have been prepared on the basis of accounting policies consistent
with those adopted for the year ended 30 April 2002. The comparative figures for
the year ended 30 April 2002 and other financial information contained herein do
not constitute statutory accounts within the meaning of Section 240 of the
Companies Act 1985. Statutory accounts for the year ended 30 April 2002, which
received an audit report which was unqualified and did not contain statements
under Section 237(2) or (3) of the Companies Act 1985, have been filed with the
Registrar of Companies.
2. Segmental analysis
Six months Six months
ended ended Year ended
31 October 31 October 30 April
2002 2001 2002
£'000 £'000 £'000
Group turnover
Continuing operations:
Personal storage 12,026 10,247 20,916
Serviced business space 27,098 26,162 53,575
Property disposals - - 792
39,124 36,409 75,283
Discontinued operations:
Other - 1,536 2,122
39,124 37,945 77,405
Total operating profit
Continuing operations:
Personal storage 3,790 3,604 7,589
Serviced business space 7,813 8,677 18,160
Records management 2,340 1,754 3,546
Property disposals - 80 162
Goodwill amortisation (3,674) (3,530) (7,091)
10,269 10,585 22,366
Discontinued operations:
Other - (64) (89)
10,269 10,521 22,277
3. Taxation
The tax charge on profits before goodwill amortisation for the six months ended
31 October 2002 is based on an estimated effective rate of 30.0% for the year
ending 30 April 2003. After goodwill amortisation, for which no tax relief is
available, the effective rate of tax was 49.7%. The tax charge includes £0.5
million for the Iron Mountain Europe joint venture.
4. Earnings per share
Basic earnings per share are calculated on profit after tax of £2.8 million
(2001: £12.0 million), divided by 181.4 million ordinary shares (2001: 180.8
million ordinary shares) being the weighted average number of shares in issue
during the period. Diluted earnings per share are calculated after allowing for
the dilutive effect of conversion into ordinary shares of the weighted average
number of share options outstanding during the period. The number of shares used
for the diluted earnings per share calculation was 181.9 million (2001: 181.7
million). The weighted average number of shares used to calculate earnings per
share excludes shares held by the Quest.
4. Earnings per share continued
Basic earnings per share before goodwill amortisation and exceptionals has been
separately disclosed on the face of the profit and loss account to facilitate
comparison of the underlying performance of the group. The calculation uses the
same weighted average number of shares in issue as for the basic earnings per
share but reflects the following items:
Six months Six months
ended ended Year ended
31 October 31 October 30 April
2002 2001 2002
£'000 £'000 £'000
Profit after tax
As for basic earnings per share 2,806 12,035 18,209
Goodwill amortisation (group and joint venture) 3,674 3,530 7,091
Profit on disposal of investment (after tax) - (9,146) (9,146)
As for basic earnings per share before goodwill
amortisation and exceptionals 6,480 6,419 16,154
Six months Six months
ended ended Year ended
31 October 31 October 30 April
2002 2001 2002
p p p
Earnings per share
Basic earnings per share 1.55 6.66 10.07
Goodwill amortisation (group and joint venture) 2.02 1.95 3.92
Profit on disposal of investment - (5.06) (5.06)
Basic earnings per share before goodwill amortisation and
exceptionals 3.57 3.55 8.93
Diluted earnings per share before goodwill amortisation and exceptionals
similarly reflects the above adjustments but uses the same weighted average
number of shares in issue as for diluted earnings per share.
5. Reconciliation of operating profit to cash flow
from operating activities
Six months Six months
ended ended
31 October 31 October Year ended
2002 2001 30 April
2002
£'000 £'000 £'000
Group operating profit 8,677 9,442 20,096
Goodwill amortisation 2,926 2,855 5,726
Depreciation charge 2,728 2,270 4,646
(Profit)/loss on sale of tangible fixed assets - (80) 21
(Increase)/decrease in stocks and assets held for resale (19) 1,208 320
(Increase)/decrease in debtors (1,161) (493) 613
Increase/(decrease) in creditors (1,044) 242 98
Increase/(decrease) in provision for liabilities and
charges 6 (9) (30)
12,113 15,435 31,490
6. Net debt
31 October 31 October
2002 2001 30 April
2002
£'000 £'000 £'000
Net debt comprises:
Cash at bank and in hand 10,387 8,767 4,093
Overdrafts - (4,722) (9,076)
Bank loans (195,668) (145,551) (144,125)
Deferred acquisition loan notes (11,646) (8,243) (4,043)
(196,927) (149,749) (153,151)
Bank loans, finance leases and deferred acquisition loan notes include amounts
due after more than one year amounting to £197.0 million (2001: £143.8 million).
7. Reconciliation of movement in shareholders' funds
31 October 31 October 30 April
2002 2001 2002
£'000 £'000 £'000
Profit for the period 2,806 12,035 18,209
Other recognised gains and losses in the period (99) 45 46
Shares issued net of expenses 402 359 378
Dividends (774) (729) (2,270)
Net addition to shareholders' funds 2,335 11,710 16,363
Opening shareholders' funds 215,668 199,305 199,305
Closing shareholders' funds 218,003 211,015 215,668
8. Acquistions
During the period the group made acquisitions for a total consideration of £23.1
million which have generated provisional goodwill of £11.3 million.
9. Interim results statement
The interim results statement, which was approved by the Board on 3 December
2002, will be posted to all shareholders. Thereafter copies may be obtained from
the Company Secretary,Mentmore plc, Park House, 14 Pepys Road, London SW20 8NH.
Notes to Editors
Serviced Business Space ('SBS') details:
In September 1999 Mentmore Abbey plc (as Mentmore was formerly known) merged
with Birkby PLC ('Birkby') at a cost of approximately £175 million and assumed
£62 million of debt. At that time the three key business segments within Birkby
included:
IMEX: 141 workspace units for commercial use mainly for light industrial
and manufacturing businesses, research and development and storage.
In Shops: The UK's leading operator of 59 indoor markets for small,
independent retailers with an established nationwide network.
Manor Credit: A business offering a flexible range of instalment credit
and leasing facilities.
Additionally Birkby had a 20% stake in Workspace Group PLC that had been
purchased for £16.2 million.
Subsequent transactions:
Since the merger £44 million has been realised including:
£29.9 million raised from sale of 20% stake in Workspace Group PLC in
May 2001
£9.8 million raised from sale of Manor Credit in March 2000
£4.0 million raised from sale of Birkby's Dutch outlets (including debt)
Additionally there have been a number of individual non-core site disposals.
SBS currently:
Operating profit from SBS before share of plc costs for six months ended
31 October 2002 was £9.0 million
and for year ended 30 April 2002 was £19.7 million. At 31 October 2002, SBS had
operational net assets of £253.4 million that included goodwill of £67.0
million.
During ownership by Mentmore, the product offering and standard of the portfolio
has been improved considerably. In addition, customers have been offered an
increased range of services.
The assets currently within SBS includes:
147 IMEX sites light commercial workspace units
19 ARGO sites high service element workspace units including business centres
and serviced offices
53 In Shops sites including 5 sites upgraded to the new Selections Brand
Synex telecom resale business into IMEX and ARGO customer base. Acquired in
January 2001. Turnover in the six months to 31 October 2002 was £0.9 million
Contacts:
ABN Amro
Phillip Rose 020 7678 8000
Bridgewell
Greg Aldridge 020 7003 3000
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