Final Results
Peel Hldgs PLC
27 June 2003
PEEL HOLDINGS p.l.c.
PRESS RELEASE
The preliminary announcement of the audited results of Peel Holdings p.l.c. for
the year ended 31st March 2003 was made today 27th June 2003.
Changes
from
2003 2002 last year
£'000 £'000 £'000
Turnover 161,181 146,813 14,368
Profit on ordinary activities before taxation 30,151 33,424 (3,273)
Tax on profit on ordinary activities (12,743) (11,011) (1,732)
Minority interests (101) (84) (17)
Profit for the financial year 17,307 22,329 (5,022)
Earnings per ordinary share
Basic earnings 26.66p 34.74p (8.08)p
Diluted earnings 25.78p 33.25p (7.47)p
Ordinary dividend 15.0p 15.0p -
Changes
from
2003 2002 last year
£'000 £'000 £'000
Shareholders' funds 873,205 755,584 117,621
Net assets 875,409 757,692 117,717
Fully diluted net assets per ordinary share 1,301p 1,125p 176p
APPENDED ARE:
(1) The Preliminary Announcement of the results to the London Stock
Exchange.
(2) Extracts from the Chairman's Statement and the Operating and Financial
Review.
Peel Holdings p.l.c. and subsidiary undertakings
Preliminary Announcement of the audited results
for the year ended 31st March 2003
Group Profit and Loss Account for the year ended 31st March 2003
2003 2002
Note £'000 £'000
Turnover 161,181 146,813
Operating profit (including Group's share of joint ventures 99,533 90,256
operating profit)
Profit on disposal of fixed assets 6,431 15,928
Profit on ordinary activities before interest and taxation 105,964 106,184
Net interest payable and similar charges (75,813) (72,760)
Profit on ordinary activities before taxation 30,151 33,424
Tax on profit on ordinary activities (12,743) (11,011)
Profit on ordinary activities after taxation 17,408 22,413
Minority interests (101) (84)
Profit for the financial year 17,307 22,329
Dividends 1 (10,057) (10,056)
Retained profit for the financial year 7,250 12,273
Earnings per ordinary share
Basic earnings 2 26.66p 34.74p
Diluted earnings 2 25.78p 33.25p
The Group's turnover is stated net of turnover for joint ventures and the
Group's reported operating profit, net interest payable and taxation includes
the share of results of joint ventures. These are not material to the Group
results and accordingly are not separately disclosed in this announcement.
The acquisition of Clydeport plc on 13th January 2003 contributed £7,191,000 and
£525,000 to the reported Group turnover and Group operating profit respectively.
Group Balance Sheet as at 31st March 2003
2003 2002
Note £'000 £'000
Fixed assets
Intangible assets
Goodwill 39,336 2,148
Tangible assets
Investment properties 1,707,819 1,571,314
Other fixed assets 202,886 108,459
Joint Ventures
Share of gross assets 57,435 1,550
Share of gross liabilities (42,581) (743)
Loan accounts 12,935 684
27,789 1,491
Investments 34,942 25,928
2,012,772 1,709,340
Current assets
Stocks 11,234 6,600
Debtors 44,257 26,473
Cash at bank and in hand 103,883 193,503
159,374 226,576
Creditors (amounts falling due within one year) (239,825) (111,200)
Net current (liabilities)/assets (80,451) 115,376
Total assets less current liabilities 1,932,321 1,824,716
Creditors (amounts falling due after more than one year) (986,221) (1,022,449)
Provisions for liabilities and charges and deferred income (62,893) (44,758)
Net assets excluding pension (liability)/asset 883,207 757,509
Pension (liability)/asset (7,798) 183
Net assets including pension (liability)/asset 875,409 757,692
Financed by capital and reserves
Consolidated capital and reserves 933,533 815,912
Shares held by Largs Limited in Peel Holdings p.l.c. (60,328) (60,328)
Shareholders' funds 873,205 755,584
Equity minority interests 2,204 2,108
875,409 757,692
Fully diluted net assets per ordinary share 3 1,301p 1,125p
Group Cash Flow Statement for the year ended 31st March 2003
2003 2002
Note £'000 £'000
Cash flow from operating activities (pre-exceptional item) 4(a) 107,165 101,946
Exceptional abortive costs (accrued year ended 31st March 2001) - (358)
Cash flow from operating activities 107,165 101,588
Dividends received from joint ventures - 312
Returns on investments and servicing of finance 4(b) (81,876) (85,085)
Taxation (104) 4,686
Capital expenditure and financial investment 4(c) (37,967) (33,676)
Acquisitions and disposals 4(d) (152,500) (5,506)
Equity dividends paid (9,330) (9,326)
Cash flow before management of liquid resources and financing (174,612) (27,007)
Management of liquid resources 4(e) 34,205 (21,589)
Financing 4(f) 89,746 47,649
Decrease in cash in the year (50,661) (947)
Reconciliation of Cash Flow to Movement in Net Debt
for the year ended 31st March 2003
2003 2002
£'000 £'000
Movement in cash in the year (53,929) (2,013)
Cash movement from management of liquid resources (34,205) 21,589
Movement in overdrafts 3,268 1,066
Net movement in debt due within one year (7,467) (7,363)
Net movement in debt due after more than one year (81,924) (33,714)
Translation and other non-cash adjustments (1,841) 146
Arising on acquisition (2,787) -
Change in net debt in the year (178,885) (20,289)
Net debt at 1st April 2002/1st April 2001 (865,299) (845,010)
Net debt at 31st March 2003/31st March 2002 (1,044,184) (865,299)
Statement of Total Recognised Group Gains and Losses
for the year ended 31st March 2003
2003 2002
£'000 £'000
Profit for the financial year 17,307 22,329
Other recognised gains and losses
Unrealised net surplus on revaluation of investment properties 125,558 473
Foreign exchange adjustments (5,335) (146)
Actuarial loss relating to the pension fund (9,741) (4,381)
110,482 (4,054)
Total recognised net gains and losses for the financial year 127,789 18,275
Reconciliation of Movements in Group Shareholders' Funds
for the year ended 31st March 2003
2003 2002
£'000 £'000
Profit for the financial year 17,307 22,329
Dividends (10,057) (10,056)
Other recognised gains and losses for the financial year 110,482 (4,054)
Purchase of own shares (111) -
Net increase in shareholders' funds 117,621 8,219
Shareholders' funds at 1st April 2002/1st April 2001 755,584 747,365
Shareholders' funds at 31st March 2003/31st March 2002 873,205 755,584
Notes
1. Dividends
2003 2002
£'000 £'000
Convertible preference (paid) 725 726
Ordinary (proposed) 9,332 9,330
Total dividends 10,057 10,056
An interim dividend of 4.8p (2002: 4.8p) per ordinary share was paid on 7th
April 2003. The directors recommend a final ordinary dividend of 10.2p (2002:
10.2p) which, if approved at the Annual General Meeting to be held on 1st
October 2003, will be paid on 2nd October 2003 to ordinary shareholders on the
register at the close of business on 5th September 2003. This would make a
total distribution for the year of 15.0p per ordinary share (2002: 15.0p).
2. Earnings per Ordinary Share
The calculation of earnings per ordinary share is based on a profit after tax,
non-equity dividends and minority interests of £16,582,000 (2002: £21,603,000)
and on 62,209,237 ordinary shares (2002: 62,189,381) being the weighted average
number of ordinary shares in issue during the year ended 31st March 2003. The
calculation of diluted earnings per share is based on profit after tax and
minority interests of £17,307,000 (2002: £22,329,000) and on 67,121,137 ordinary
shares (2002: 67,156,716). This has been adjusted for the effect of potentially
dilutive share options under the Group's share option scheme and the conversion
of all the 5.25% convertible cumulative non-voting preference shares of £1 each.
Basic Diluted Basic Diluted
2003 2003 2002 2002
p p p p
Earnings per ordinary share 26.66 25.78 34.74 33.25
3. Fully Diluted Net Assets per Ordinary Share
Fully diluted net assets per ordinary share are calculated as
follows:
2003 2002
£'000 £'000
Shareholders' funds per Group balance sheet 873,205 755,584
2003 2002
Number Number
Ordinary shares in issue at 31st March 2003/31st March 2002 99,001,243 98,997,154
Shares held by Largs Limited in Peel Holdings p.l.c. (36,785,416) (36,785,416)
62,215,827 62,211,738
Assumed conversion of 13,753,430 (2002: 13,806,882) 5.25%
(plus tax credit) convertible cumulative non-voting preference shares of £1 4,911,900 4,930,990
each
Number of ordinary shares deemed to be in issue at 31st March 2003/31st March 67,127,727 67,142,728
2002
Fully diluted net assets per ordinary share 1,301p 1,125p
4. Notes to the Cash Flow Statement
2003 2002
£'000 £'000
(a) Cash flow from operating activities (pre-exceptional item)
Operating profit 99,533 90,256
Non-cash adjustments:
- current cost of servicing pension 1,088 593
- depreciation 7,707 4,863
- impairment loss - 525
- amortisation of prepayment premia 648 648
- amortisation of goodwill 510 102
- share of results of joint venture companies (217) 788
- movement on other investments - 49
- grant release (997) (374)
Movement in stocks 2,616 2,060
Movement in debtors 3,060 (1,438)
Movement in creditors (6,783) 3,874
107,165 101,946
(b) Returns on investments and servicing of finance
Interest received 4,947 6,721
Interest paid (including capitalised) (80,778) (80,006)
Finance lease interest paid (315) (318)
Exceptional interest charges paid (accrued year ended 31st March 2000) (5,000) (10,750)
Non-equity dividends paid (730) (732)
(81,876) (85,085)
(c) Capital expenditure and financial investment
Purchase of fixed assets (80,606) (95,475)
Sale proceeds from fixed assets 44,899 61,982
Loans to joint ventures (2,260) (183)
(37,967) (33,676)
(d) Acquisitions and disposals
Acquisition (152,495) -
Purchase of remaining minority interest in subsidiary undertaking - (2,412)
Purchase of interests in joint ventures (5) (3,094)
(152,500) (5,506)
(e) Management of liquid resources
Movements from cash deposits 34,205 (21,589)
(f) Financing
Purchase of own shares (111) -
New loans 181,141 16,000
Other movement in loans (92,117) 25,143
Movement in finance lease creditor (281) (714)
Grants received 1,114 7,220
89,746 47,649
Clydeport plc contributed £3,845,000 to the Group's net operating cash flows,
received £203,000 in respect of net returns on investments and servicing of
finance, paid £989,000 in respect of taxation and utilised £35,000 for capital
expenditure.
5. The board of directors approved the above results on 27th June 2003.
6. The financial information set out above does not constitute the
Company's statutory accounts for the years ended 31st March 2003 or 2002, but
is derived from those accounts. Statutory accounts for 2002 have been delivered
to the Registrar of Companies and those for 2003 will be delivered following the
Company's Annual General Meeting. The auditors have reported on those accounts;
their reports were unqualified and did not contain statements under section 237
(2) or (3) of the Companies Act 1985.
Extract from the Chairman's Statement
Introduction
Notwithstanding challenging business conditions, I am pleased to report another
year of progress for the Group's operations, added to which we successfully
completed the acquisition of Clydeport plc in January 2003, followed shortly
after the financial year end with the acquisition of a 75% shareholding in
Teesside International Airport.
Results
During the year to 31st March 2003, the land and property investments of the
Group, excluding The Trafford Centre, were externally valued. This produced a
substantial uplift of £125.56m and helped to increase the net asset value per
share on a fully diluted basis to a record level of 1,301p (2002: 1,125p). This
increased valuation impacted on Group pre-tax profits for the year, which were
marginally lower than last year at £30.15m (2002: £33.42m). After excluding
fixed asset sales, the underlying performance of the Group resulted in an
increase in pre-tax profits from £17.50m in the previous year to £23.72m this
time. Your Board recommends an unchanged final dividend per ordinary share of
10.2p.
These results have been achieved against a backdrop of slowing world economies
and political uncertainty, which have had an adverse influence on confidence.
This is the third successive year in which property has out-performed equities,
although there has been an upturn in equity markets since the financial year
end, and it is pleasing to report that our preferred sectors in real estate
markets, notably shopping centres and retail warehouses, were amongst the
strongest performing sectors. In these testing times, the Ports division has
benefited from the addition of some geographical spread and diversity of cargoes
following the acquisition of Clydeport plc and, looking forward, gives us a
solid platform for growth. Whilst the aviation industry has been going through
a period of dramatic change with many traditional carriers seriously impacted by
global events, passenger growth in the domestic and European scheduled markets
continues to be achieved by low cost carriers operating predominantly from
regional airports, where the Group's Airports division has a growing presence.
Operations
The Group continues to focus on furthering its core business strategy of
increasing net asset growth in the medium to long term by investing in and
actively managing a selective and increasingly prime property portfolio, whilst
bringing forward and developing other assets and businesses in the property,
land and transport sectors. This range of business activities provides the
Group with comprehensive skills and knowledge, enabling us to pool resources
where appropriate and enjoy benefits of scale. However, to facilitate focused
management of our operational disciplines, subsequent to the year end, we have
restructured the Group internally into four divisions; The Trafford Centre, Peel
Land and Property, Peel Ports and Peel Airports.
The Trafford Centre
In September 2003, The Trafford Centre will have been open for five years;
consequently, we are about to embark upon the rent review procedure for most
units within the Centre, and significant increases are anticipated. The
performance of the Centre has met our expectations with customer visits
increasing from 23.5m in the first full financial year to 27.1m in 2003 and
rental income, including turnover rents, increasing from £49.68m to £56.88m over
the same period.
Peel Land and Property
Peel Land and Property is the most diverse division within the Group
encompassing property investment, property development, development land, rural
estates, telecommunications, waste, minerals, energy and advertising. A
significant contribution to the overall valuation increase for the Group has
come from the development land and property investment portfolios of this
division resulting from new planning permissions and new benchmark selling
prices on residential land sales. Our strategy to continue to rationalise the
property investment portfolio by re-investing proceeds from office, industrial
and town centre property sales into retail warehouse property is succeeding and
the Group has experienced substantial increases in rental levels and reductions
in yields.
Peel Ports
During the year, Peel Ports was significantly expanded with the acquisition of
Clydeport plc. The process of integrating and harmonising the management
structure and development of Clydeport and the Manchester Ship Canal Company
into Peel Ports is underway. We see the added expertise of Clydeport's port
management alongside Peel's property skills as being beneficial to the future
expansion of this division.
Peel Airports
Peel Airports was expanded by the acquisition shortly after the year end of a
75% interest in Teesside International Airport. Also, planning permission was
granted to develop Doncaster Finningley Airport and although a judicial review
on the Finningley planning decision was lodged it was subsequently discontinued.
The Group plans to take forward the Doncaster Finningley development in
anticipation of commencing commercial flights in 2005. As envisaged, passenger
throughput at Liverpool John Lennon Airport reached 3m in the year and
Liverpool's capacity is being further increased to cater for 4.5m passengers.
Board Changes
There have been several changes to your Board during the financial year. In
November 2002, Robert Hough stood down as an Executive Director after 13 years,
having made a significant contribution to the growth and success of the Group
over this period through his professionalism and dedication. However, the Group
continues to benefit from his expertise and external experience, as he remains
Non-Executive Deputy Chairman and Chairman of the Group's Airports division.
Additionally, in December 2002, Martin Hill retired as a Non-Executive director
and I would express my appreciation for his support and counsel in the past.
The Board was also strengthened by the appointment of:
Thomas Allison as Ports Director;
Michael Butterworth as Property Director;
David Glover as Construction Director;
Peter Hosker as Legal & Corporate Affairs Director; and
Peter Nears as Strategic Planning Director.
Given their extensive knowledge and understanding of the Group's businesses and
markets in which it operates, we expect them to make a significant contribution
to the continued success of the Group in the future.
Outlook
Looking forward, we remain confident that our direction and strategies will
provide growth in both net assets and profits in the future.
A more detailed report on each of the Group's operations is set out in the
Operating and Financial Review.
As well as welcoming the employees who have joined the Group from Clydeport and
Teesside International Airport, I would like to express my appreciation to the
Board for their efforts and convey the Board's thanks to all our staff in The
Trafford Centre, Land and Property, Ports and Airports businesses who have
contributed to these results with skill, dedication and enthusiasm.
John Whittaker
Chairman
27th June 2003
Extracts from the Operating and Financial Review
Financial Review
Earnings
Operating profit increased by £9.27m (10.3%) to £99.53m (2002: £90.26m).
With regard to the individual operating divisions, property investment profit,
including The Trafford Centre, increased by £9.33m to £93.19m (2002: £83.86m)
and property trading profit by £0.82m to £1.69m (2002: £0.87m). Ports'
operating profit decreased by £1.11m to £2.59m (2002: £3.70m) and Airports'
operating profit decreased by £0.98m to £0.04m (2002: £1.02m). The Ports'
operating profit includes a contribution from Clydeport for the period following
its acquisition. In addition, income from listed investments increased by
£1.04m to £1.09m (2002: £0.05m).
The profit on disposal of fixed assets decreased by £9.50m to £6.43m (2002:
£15.93m), mainly due to a reduced profit of £6.39m (2002: £16.27m) from the
disposal of investment properties from total sale proceeds of £54.51m (2002:
£51.86m). The profit on disposal of fixed assets also included a profit on the
disposal of other fixed assets and investments of £0.04m (2002: £0.34m loss).
The net interest charge increased by £3.05m (4.2%) to £75.81m (2002: £72.76m).
However, this was more than offset by an increase in net rental income resulting
in an increase in the cover of net rental income to total net interest to 137.5%
(2002: 134.8%). Capitalised interest in the year totalled £0.10m (2002:
£0.43m).
As a result of the above factors, profit before tax fell by £3.27m (9.8%) to
£30.15m (2002: £33.42m).
Tax on profit on ordinary activities was £12.74m (2002: £11.01m), an effective
rate of 42.3% of pre-tax profit and which included a non-cash deferred tax
charge of £7.52m (2002: £11.36m).
The basic earnings per share decreased by 8.08p (23.3%) to 26.66p (2002:
34.74p), mainly as a result of the decrease in the profit before tax compared to
last year.
After minority interests and preference dividends, profit attributable to
ordinary shareholders for the year amounted to £16.58m (2002: £21.60m). The
directors therefore propose an unchanged final dividend of 10.2p per ordinary
share which, if approved at the Annual General Meeting to be held on 1st October
2003, will be paid on 2nd October 2003 to ordinary shareholders on the register
at the close of business on 5th September 2003. This will make a total
distribution for the year of 15.0p per ordinary share (2002: 15.0p), which is
covered by earnings 1.8 times (2002: 2.3 times).
Balance Sheet
On 13th January 2003, the Group successfully completed the acquisition of
Clydeport plc, an established Port operator with property holdings, based on the
West Coast of Scotland. The total acquisition cost was £190.02m, funded by
borrowings and cash, and the fair value of the net assets acquired totalled
£152.32m resulting in goodwill of £37.70m.
Consolidated shareholders' funds increased by £117.63m (15.6%) to £873.21m
(2002: £755.58m), producing fully diluted net assets per ordinary share of
1,301p (2002: 1,125p), an increase of 176p (15.6%).
The increase in shareholders' funds was mainly as a result of professional
valuations of investment properties carried out during the year which generated
an uplift of £125.56m (2002: £0.47m), and the retained profit in the year of
£7.25m offset by a £9.74m actuarial loss resulting from the application of FRS
17. Other movements in shareholders' funds included a foreign exchange loss of
£5.34m (2002: £0.15m loss).
The investment property portfolio of the Group at 31st March 2003 totalled
£1,707.82m and is analysed over the various property sectors as follows:
Undeveloped Capital Capital
Land Sq. Ft. Sq. Metres Value Value
Acres '000 '000 £'000 %
The Trafford Centre - 1,315 122 902,441 52.8
Out-of-town retail 22 1,851 172 359,732 21.1
Town centre retail - 73 7 8,363 0.5
Offices 15 845 79 93,866 5.5
Industrial 58 1,444 134 57,459 3.4
Sports and leisure 430 594 55 34,488 2.0
Land 10,066 799 74 185,033 10.8
Environment and resource development 2,373 - - 12,517 0.7
Overseas land and property investment 32 220 20 42,473 2.5
Clydeport investment properties 311 1,119 104 11,447 0.7
13,307 8,260 767 1,707,819 100.0
The Group's portfolio of stock properties increased to £11.23m compared with
£6.60m at 31st March 2002.
Cash Flow
The Group's net debt increased by £178.88m (20.7%) to £1,044.18m at the
financial year end (2002: £865.30m). The principal reasons for the increase in
borrowings was that capital expenditure, including the cost of acquisition of
Clydeport, exceeded cash generated from operations and proceeds from the sale of
fixed assets.
Borrowings and Financial Resources
The Group's net borrowings at 31st March 2003 of £1,044.18m produced a
marginally increased gearing ratio of net debt to shareholders' funds at 119.6%
(2002: 114.5%), the increased debt being partially offset by the increase in
shareholders' funds.
The amount of fixed long term debt in the Group at the financial year end was
£868.61m (2002: £866.42m) representing 75.7% of total gross borrowings (2002:
81.8%) and was held at a fixed annual borrowing cost of 8.0% (2002: 7.9%).
During the year, the Group continued to comply with all of its borrowing
covenants. At 31st March 2003, the Group had unused bank facilities of £89.61m
(2002: £106.88m), which are principally due for renewal within one year.
The Group did not enter into any further interest rate swaps, currency swaps,
forward contracts or any other derivative financial instruments in the year
ended 31st March 2003.
For the purposes of FRS 13, the present market value of the Group's fixed rate
debt shows a post-tax 'marking to market' value of £119.51m in excess of book
value (2002: £92.84m) (or £170.73m pre-tax (2002: £132.63m)). If these
adjustments were incorporated into the balance sheet at the year end, it would
deduct 178p and 254p respectively from the fully diluted net asset value of each
ordinary share (2002: 138p and 198p).
Accounting Standards and Policies
The financial statements comply with all accounting standards issued by the
Accounting Standards Board applicable to financial statements at 31st March
2003. The Group's accounting policies have been applied consistently throughout
the year and the preceding year.
Operating Review
The Trafford Centre
Footfall for the year overall increased by 4% over the previous twelve months
and the turnover reports from the retailers indicate, on average, an increase in
trade of approximately 6%.
For the financial year, total rental income was £56.88m (2002: £52.48m), which
included turnover rents of £5.66m (2002: £3.22m).
Most of the base rents are due to be reviewed during the course of 2003, but in
a number of cases increases will be offset, to some extent, by a corresponding
reduction in the turnover rents, which are calculated as a percentage of
turnover less the base rent. Evidence from recent lettings will be helpful in
establishing open market rental values and securing an overall increase in the
rents receivable.
It is important that The Trafford Centre management continue to make changes
that strengthen and refresh the overall appeal of the Centre and revisions to
the Festival Village end of the Centre are currently under consideration. The
Centre also welcomed several new retailers during the year, notably, Dexters,
Skechers, Principles, Superdrug and Details H&M. Additionally an agreement for
lease was completed with Waterstone's, who are due to open in mid 2003, and
terms were agreed to secure a new Laser Quest operation alongside Dreamieland
and the UCI Cinema to further strengthen the entertainment on offer within the
Centre.
Planning consent was also obtained for a new road access into the Centre
directly from Junction 9 of the M60 motorway, which will make a major
contribution to traffic management in and around the Centre.
The Centre is widely recognised for its efforts on safety and security and has
been working closely with Greater Manchester Police on the installation of an
Automatic Number Plate Recognition system, which will enable the immediate
identification of vehicles that are of interest to the police and the Centre.
The system will be formally launched later in the year and is expected to be a
major asset in the fight against crime, maintaining the Centre's position at the
forefront of good practice.
Efforts have continued throughout the year to secure a Metrolink line through
Trafford Park to the Centre. Final bids are due to be received by GMPTE from the
last two bidders in mid 2003. There will be a funding shortfall and the Group
has made it clear that it is willing to make a substantial contribution, but it
remains to be seen if such a contribution will be sufficient to secure the line.
Following the acquisition at the end of 2002 of the former Barton Power Station
site, close to the Centre, work has commenced on a new 130,000 sq. ft. B&Q
warehouse, due for completion in early 2004. A large DIY offering is in keeping
with the Group's policy of managing the tenant mix, both in and around the
Centre, in order to maintain a balance of complementary retail uses.
Peel Land and Property
Property Investment
The Group continues to focus on its better performing properties whilst at the
same time raising funds from the disposal of the secondary properties. Of the
three commercial property sectors; industrial, offices and retail, out-of-town
retail continues to be the strongest, producing sustained rental and capital
growth, and it is this sector in which the Group continues to invest significant
time and resources.
Disposals of investment properties generated capital receipts of £34.76m
reducing rental income by £2.76m and producing a profit of £2.13m over book
value. Amongst those properties sold were The Packhorse Shopping Centre in
Huddersfield and various properties in Redhill, Amersham, Nottingham, Islington
and Merton.
Despite lost rental income emanating from the sales programme, there were
several new lettings and rent reviews which resulted in a small increase of
£0.20m per annum in overall rental income. The annualised rental income as at
31st March 2003 was £36.26m (2002: £36.06m).
New lettings of empty property produced additional rental income of £3.24m per
annum (2002: £3.59m) against rental income lost from new vacancies of £1.33m per
annum (2002: £0.80m). This is a further reflection of the improving quality of
the property portfolio.
In keeping with the strategy of investing in prime properties, the Group
acquired additional retail warehouse investment properties for a combined cost
of £15.21m with an annualised rental income of £1.16m.
Perhaps the most significant movement during the financial year related to the
reduction in vacant property, which at 31st March 2003 totalled 280,000 sq. ft.
(2002: 497,000 sq. ft.) with an estimated rental value of £1.88m per annum
(2002: £2.69m). In overall terms, 93.4% of the investment portfolio was let as
at 31st March 2003.
During the year, the Group instructed King Sturge to undertake an external
valuation of the investment property portfolio. This resulted in an uplift of
£56.84m and was mainly as a result of hardening yields and rental growth in the
prime properties.
The Group's overseas assets include a 146,000 sq. ft. shopping mall and offices
in Hamilton, Bermuda and two office buildings totalling 73,000 sq. ft. in
Nassau, Bahamas. These properties are either fully or substantially let, with
the exception of Beaumont House in Nassau which was damaged by fire in 2001.
Reconstruction of Beaumont House has commenced and is scheduled for completion
in 2004. These properties are generating income of £3.73m per annum (2002:
£3.78m).
Property Development
Given the Group's substantial development land bank and property investment
portfolio, the Property Development department concentrates its activities
mainly on the development of existing assets.
Work has commenced on extensions at various retail warehouse parks, including
70,000 sq. ft. at Barnsley, 50,000 sq. ft. at Straiton, Edinburgh, and 14,000
sq. ft. at Stockport. Seventeen apartments at Walsall have been completed and
the majority of the units have now been sold. Additionally, construction of a
20,000 sq. ft. office development at Wakefield was completed after the year end
and a sale of the fully let investment property has been agreed.
During the financial year planning approvals for residential development were
obtained and land sales concluded on sites at Castlefield, Manchester, and St
Georges, Hulme, Manchester, for 84 units and 250 units respectively.
Planning applications have been submitted jointly with Manchester City Council
and Artisan on a site in Manchester for 600 residential units and 160,000 sq.
ft. of offices; in Gloucester, jointly with British Waterways, for over 600,000
sq. ft., comprising a designer outlet centre, food store, offices, industrial
property, educational space, 1,000 residential units and a 90 bed hotel; at
Ellesmere Port, for 1.3m sq. ft. of B1, B2 and B8 and 450 residential units.
Also, planning applications to increase the development space at Salford Quays
from 1.4m sq. ft. to 2.5m sq. ft. and in Wakefield from 1.1m sq. ft. to 1.5m sq.
ft. have been submitted.
Planning approval was obtained at Wings Leisure Park, Liverpool, for a 240,000
sq. ft. leisure development. At Blackburn Town Centre, pre-lets are almost
concluded for a 65,000 sq. ft. leisure development and 10 screen cinema and
construction will commence shortly. Construction is well underway on a high
quality 108,000 sq. ft. office development known as the Venus building at
Trafford Quays on land near The Trafford Centre and M60 motorway.
Land Investment, Development & Planning
In a year of mixed fortunes, the range and diversity of the Group's landholdings
was again a significant factor in producing satisfactory results. Sales
completed or contracted totalled £10.49m and produced a profit of £3.53m. Major
sales included the remaining phases of the Fairhills Road site in Irlam,
Granville Road, Sevenoaks and Kingsway, Warrington.
Work continues on the Group's planning application for a new Manchester
Racecourse and Forest Park in Salford. The scheme is developing into what will
be a high quality regional park resource for the Manchester conurbation.
Another major scheme being progressed is Phase 2 of Estuary Park on the old
northern airfield of Liverpool John Lennon Airport. This regional investment
site will accommodate 3.3m sq. ft. of B1, B2 and B8 development. Planning
permission was granted in April 2003 for Estuary Park and also a major coastal
park on 70 acres adjacent to the River Mersey and close to Liverpool John Lennon
Airport. The Group is liaising closely with public sector agencies in the
delivery of this scheme.
A major land purchase of the Barton Estate in West Manchester was completed
shortly after the year end. This estate of 1,311 acres provides a strategic fit
with the Group's existing land ownerships in this area. The Group also
consolidated its landholdings south of Andover, Hampshire, with the purchase of
a further 47 acres to add to the existing 87 acres. Andover is recognised as a
focus for development in the Hampshire Structure Plan.
A major disappointment was the refusal of the Group's proposal for a Motorway
Service Area at Junction 21 of the M6, which went to Public Inquiry in 2001.
Although the Inspector preferred the Junction 21 site to those promoted by
others, he did not feel there was sufficient need to overrule green belt policy.
The Group continues to make representations to, and participate in, regional
planning forums. Regional Planning Guidance for the North West published in
March 2003 gave welcome recognition to the regional roles performed by the
Manchester Ship Canal and Liverpool John Lennon Airport. However, the decision
to reduce future housing supply by 15% will be damaging to the North West
economy. At a time when new supply is being encouraged in the South East, this
has greatly increased regional disparity in build rates between the North and
South. The Group does not feel that the adverse effects from the dampening of
regional GDP and the ageing of overall housing stock have been properly
considered.
Telecommunications
The Group continued to see growth in telecommunications with mast and fibre
optic operators active in seeking sites on and rights over the Group's
landholdings. Rents, including the Clydeport portfolio, reached £0.74m per
annum with reviews already agreed increasing rental income from this source to
£0.85m per annum. The Group also provides telephone services at Doncaster
Finningley Airport. This is a sector with scope for further development and the
activity now justifies its own focused approach and therefore a new company has
been established named Peel Telecommunications Limited to take this forward,
both on the Group's and third party landholdings.
Environment and Resource Development
Formerly referred to as Waste and Minerals, the department has been renamed to
reflect its changing emphasis and expansion into new business sectors. The
department had a positive year, generating income of £2.15m (2002: £1.97m),
which included the final settlement of a compensation claim against the Highways
Agency, relating to its compulsory acquisition of land for the widening of the
M6 Thelwall Viaduct.
Tonnages from the Group's two hard rock quarries achieved record output
generating combined revenue of £0.34m. Income received from the Group's two
major landfill interests, Whitehead and Arpley, showed a modest increase on the
previous financial year.
The proposal, initially by AES and then TXU Energy following acquisition, to
build a gas fired power station at Carrington, has continued to be plagued by
uncertainty and since TXU Energy went into liquidation it now appears unlikely
that the power station will be built.
Following the refusal of planning permission for a waste recycling centre at
Partington in Trafford, the Group submitted a new application on land further
away from housing which was also refused and the Group is currently appealing
against this decision. Although not yet determined, a planning application was
submitted to Salford City Council for the extraction of approximately 3m tonnes
of sand and gravel from the Group's site at Astley.
Against the current political backdrop where the Government is seeking to
encourage the expansion of renewable energy generation, the Group is pursuing a
proposal for a wind farm development in the vicinity of Scout Moor Quarry near
Bury. The Group intends to enter into an agreement with United Utilities to
pursue this scheme and aims to submit an application for planning permission in
Summer 2003.
Advertising
Income for the year was £2.23m (2002: £2.07m). During the year, Peel
Advertising added sites from outside the Group's landholdings with the
acquisition of a small poster business with locations across the North West.
Although generally advertising spend was subdued during the year, posters and
product sampling advertising remained buoyant.
Peel Ports
Following the acquisition of Clydeport plc on 13th January 2003, the Ports
division now comprises Clydeport, which is the largest commercial port operator
on the West Coast of Scotland, and the Manchester Ship Canal Company, a linear
port at the heart of the North West of England. The Manchester Ship Canal and
Clydeport have been brought into Peel Ports under a single management team.
Whilst at an early stage, opportunities have been identified whereby their
combined skills and strengths can together generate new business.
Clydeport
Clydeport manages the four principal Atlantic facing ports; Hunterston,
Greenock, Glasgow and Ardrossan, which together handle approximately 7.50m
tonnes of cargo per annum, making the ports business a major part of the West of
Scotland's economy. Clydeport is actively involved in the management of all
major types of port activity which include; Hunterston, one of Europe's premier
coal terminals, primarily unloading and storing imported coal for onward
shipment by rail and sea to power stations throughout the United Kingdom,
capable of handling in excess of 5m tonnes of coal a year; Greenock, a non tidal
deep-water facility, whose principal activities include containers, forest
products and cruise liner traffic; King George V Dock, Glasgow, which is
equipped to unload and store a wide range of dry bulk cargoes; and Ardrossan
which is a ferry terminal. Turnover from port activities in the year ended 31st
December 2002 totalled £33.12m.
Strong volumes are anticipated at Hunterston for the coming year and beyond,
particularly having recently secured a seven year contract with Scottish Power
to handle and deliver its imported coal requirements from 1st April 2004. This
term of contract is unprecedented within the industry, and secures the future of
the Hunterston terminal going forward. Container volumes at Greenock, in the
calendar year to 31st December 2002, were some 35,000 units, and are expected to
increase to almost 40,000 units following the commencement of a Maersk service
to Southampton, Le Havre and other European destinations. Elsewhere within the
ports, activities are expected to be steady with some modest growth.
In addition to its port activity, as the owner of substantial land holdings
Clydeport has become increasingly involved in large scale waterside property
investment and development and also the management of a growing portfolio of
property investments and developments, directly or through joint ventures. The
largest of these developments is the Glasgow Harbour project, which is a joint
venture with the Bank of Scotland to develop in excess of 120 acres of
predominantly waterfront property in the West End of Glasgow. The project is
progressing well, with the sale of the initial residential phase totalling 5
acres to three housebuilders, who plan to construct up to 600 units.
In the period from 13th January to 31st March 2003 turnover was £7.19m
generating an adjusted operating profit, after amortisation of goodwill, of
£0.53m, which was in line with expectations.
Manchester Ship Canal
With a decrease in the level of both bulk liquids and dry cargoes handled
through the Ship Canal, tonnage overall in the financial year decreased to 6.41m
tonnes (2002: 8.01m tonnes) generating income of £17.98m (2002: £19.89m) and a
trading profit of £2.00m (2002: £3.70m). As predicted last year, following a
rationalisation in distribution methods by Shell UK Limited, tonnage for that
one customer fell by 1.32m tonnes, the single largest factor in the drop in
tonnage handled through the Ship Canal. In the coming year, only a small
increase in tonnage for Shell is expected.
The political situation in Venezuela had an impact on tonnage through the
specialist oil dock located at Eastham as the supply of crude oil from that
country to a bitumen producer adjacent to the dock was interrupted in the latter
part of the year. In addition, the anticipated growth in imports destined for
the retail automotive fuel market did not occur. Tonnage through the dock was
down by 0.09m tonnes on the previous year. At other locations on the Canal, the
level of bulk liquid tonnage handled remained static.
With continuing difficult trading conditions in the dry cargo market, tonnage
through the Ship Canal in this sector was marginally down in the year. Despite
this, investment in additional warehouses continued with new facilities at both
Ellesmere Port and Runcorn Docks. The warehouse at Ellesmere Port has been
designed to handle imports of bulk cement and this new traffic to the Canal will
give a material boost to the operation at that location. At Runcorn docks,
traffic increased on the previous year by 7% as new cargo was attracted.
After a steady increase in traffic in the previous two years to the section of
the Canal between Runcorn and Manchester, it is disappointing to report a
decrease in tonnage this year. Following rationalisation at two production
sites located adjacent to the Canal, tonnage handled on this section of the
Canal fell to 0.96m tonnes (2002: 1.11m tonnes). Transhipment of grain from
Liverpool to the Manchester area continued and efforts to grow this market
continue. In addition, it is felt the opportunity exists for further coastwise
movements into this section of the Canal. With the reduced tonnage came a drop
in income, and coupled with a small increase in expenditure, the deficit in this
section of the Canal increased to £1.64m, in the full year.
Peel Airports
Following recent investment and the favourable planning decision for Doncaster
Finningley Airport, the Airports division now comprises Liverpool John Lennon
Airport, Teesside International Airport where the Group has a 75% investment and
Doncaster Finningley Airport, together with aviation facilities at Sheffield
City Airport, where the Group has a 50% investment, and also at Barton Aerodrome
near Manchester, where the Group holds a majority interest through its joint
venture with Manchester City Council.
Liverpool John Lennon Airport
Passenger throughput for the year to 31st March 2003 increased to 3.02m (2002:
2.31m), an increase of 31% on the previous year keeping Liverpool John Lennon
Airport amongst the fastest growing airports in the UK. Passenger numbers
increased largely as a result of the continued expansion of low cost scheduled
operators and increased holiday programmes from the main charter operators. In
particular TUI increased their Summer 2002 programme from 7,000 to 85,000 seats
and JMC also commenced operations from the Airport in 2003.
easyJet continued its expansion at the Airport by adding two new destinations,
Paris and Alicante, and basing their seventh aircraft there in January 2003, six
months ahead of target. Ryanair also added Brussels as a new destination from
the Airport in addition to its Dublin route. Also, December 2002 saw the
arrival of a new airline to the Airport, Euromanx, which commenced a five times
daily service to the Isle of Man.
Freight throughput steadied at 31,000 tonnes in line with the prior year, which
had previously shown a sharp decrease. Every effort is being made to retain and
build on this important sector of the Airport's business in particular with
three existing customers, namely Emerald Airways, the Royal Mail and TNT.
Further expansion of the retail choice for passengers was achieved in the year,
with a new and expanded airside tax free unit, plus the addition of Boots the
Chemist. An airside business lounge and landside conference facility were also
opened in the year. The financial year to March 2003 saw the first full year of
the Airport owning and operating the on-site car parks and expanding the
distribution channels for car parking bookings to include internet booking and
third party booking via travel agents.
Increased turnover of £21.42m (2002: £14.79m) was generated, resulting in an
adjusted net operating loss after interest of £1.53m (2002: £0.84m loss). The
effect of additional aircraft and passenger throughput was to some degree offset
by increased insurance and security costs post September 11th and a full years
depreciation charge on the new terminal building.
The Airport remains cautiously optimistic, although the war in Iraq continues to
adversely affect the Summer 2003 charter holiday market across the UK. Work is
now underway to further expand the Airport to cater for 4.5m passengers per
annum, in line with the planning approval received in the year. This £20m
capital project attracts European Regional Development Fund support for which
the Airport is grateful, and plans for the next phases of cargo and passenger
development are currently in the process of submission for planning approval.
Doncaster Finningley Airport
The Group's planning application for the redevelopment of Finningley Airfield
for the purposes of a commercial airport with airport related business, leisure
and hotel activities was approved by the Office of the Deputy Prime Minister
shortly after the financial year end. After the decision, a legal challenge was
lodged on behalf of Residents Airport Watch which was subsequently discontinued.
The positive planning decision was enthusiastically received by local
communities and businesses in South Yorkshire and North Nottinghamshire, where
the Airport is recognised as providing the opportunity for air accessibility,
which will enhance economic performance and support the regeneration initiatives
already underway through the Objective One programme. The Group is undertaking
preparatory work, including terminal design, in anticipation of commercial
flights commencing in 2005.
Teesside International Airport
Having been chosen earlier in the year as the preferred bidder, shortly after
the financial year end the Group completed its investment in Teesside
International Airport Limited by acquiring a controlling 75% shareholding, with
the local authority shareholders retaining 25%.
The Airport has the potential to greatly enhance its role in meeting the air
transport needs of the region for the leisure or business traveller, and for the
freight and business aviation sectors. The Group looks forward through its
partnership with the local authorities and the support of regional development
and regeneration agencies to the improvement of aviation services and coupled
with the associated development of adjacent land, this will enable the Airport
to play an important role as a driver of economic development in the region. As
a priority, plans are underway to refresh the passenger terminal facilities to
attract both airlines and passengers. Following the Group's commitment to a
programme of investment at the Airport, Autumn 2003 will see the launch of a
number of new services from Teesside, as a result of the announcement by bmibaby
that it has chosen the Airport as its fourth UK base.
Sheffield City Airport
The decline in commercial services continued, with the final carrier ceasing to
operate in September 2002, and the realignment of the Airport's business model
towards the growing market for general and business aviation for which there is
considerable demand. Serving the lighter end of the market, Sheffield City
Airport will compliment the broad range and scope of aviation activity envisaged
at Doncaster Finningley Airport.
Barton Aerodrome
During the year, the Company through its joint venture with Manchester City
Council acquired Barton Aerodrome near Manchester. The site continues to
operate substantial general aviation activity through a tenancy held by the
Lancashire Aero Club.
www.peel.co.uk
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