Final Results - Year Ended 31 March 2000, Part 3

Quintain Estates & Development PLC 30 May 2000 PART III Note 13 Fixed asset investments a) Investment in joint ventures Group Share of net assets Advances Total £000 £000 £000 Balance 1 April 1999 1,469 8,080 9,549 Acquisitions 4,441 6,746 11,187 Additions 221 7,257 7,478 Disposals (1,097) (4,188) (5,285) _____ _______ _______ 5,034 17,895 22,929 Share of profit after tax 1,438 - 1,438 Revaluation surplus 2,394 - 2,394 Exchange 24 - 24 ______ ______ ______ Balance 31 March 2000 8,890 17,895 26,785 ====== ====== ====== The Group's principal joint ventures are as follows: % of share capital Country of Joint Holding held incorporation venture partner Quercus (General Partner) 500 'A' ordinary Norwich Union Limited shares of £1 each 50 United Kingdom Investments Quercus Norwich Union Property Investments and Partnership 19.8 United Kingdom Quercus (Note) (General Partner) Limited Hanford Mall Canadian Partners Imperial Limited 50 United States Bank of Partnership Commerce Mall Drive Canadian Investment Imperial Associates 50 United States Bank of Limited Commerce Partnership Clarke House 50 ordinary shares Anglerare Limited of £1 each 50 United Kingdom Limited Note: In addition, the Group is entitled to a further share equal to 3.1% of the net assets in the joint venture. Properties held in these joint ventures were valued as at 31 March 2000 by Matthews & Goodman, Chartered Surveyors (Quercus), Jones Lang LaSalle, Chartered Surveyors (Hanford Mall, Mall Drive and Clarke House), as external valuers, on the basis of open market value and in accordance with the Appraisal and Valuation Manual of the Royal Institution of Chartered Surveyors. With the exception of Clarke House Limited, the above joint ventures have accounting periods ending on 31 December. The Group's share of their results for the period 1 January 2000 to 31 March 2000 has been based on their management accounts. b) Investment in associate The Group has retained an interest in the income stream and reversionary value of three properties sold to Aqua Trust during the year ended 31 March 1999. Aqua Trust is owned by Norwich Union Annuities. The Group's 50% share of the reversionary interests were valued as at the balance sheet date by Insignia Richard Ellis Limited, Chartered Surveyors, as external valuers, on the basis of open market value and in accordance with the Appraisal and Valuation Manual of the Royal Institution of Chartered Surveyors. Group £000 Balance 1 April 1999 342 Acquisitions 63 Additions 76 Disposals (63) Revaluation surplus 45 _____ Balance 31 March 2000 463 ===== c) Other fixed asset investments : own shares Group £000 Balance 1 April 1999 - Additions 56 ____ Balance 31 March 2000 56 ==== As at 31 March 2000, 44,716 ordinary shares of 25p in Quintain Estates and Development PLC with a cost of £75,000 were held in the Quintain Employee Share Trust to satisfy accrued bonus entitlements of employees. At the year end, the market value of these shares was £56,000. d) Other fixed asset investments: investment in subsidiaries Company £000 Balance 1 April 1999 110,254 Additions 183,750 ________ Balance 31 March 2000 294,004 ======== Acquisition of English & Overseas Properties plc On 2 June 1999, the Company acquired the whole of the issued share capital of English & Overseas Properties plc for a total consideration of £33,032,000. A summary of the assets acquired together with the fair value adjustments and the consideration for the transaction is shown below : Fair Balance value sheet at balance acquisition Fair value adjustments sheet Property Debt marked Other revalu- to market adjust- ation ments (Note a) (Note b) (Note c) £000 £000 £000 £000 £000 Investment properties 48,616 (685) - - 47,931 Other fixed assets 234 - - (110) 124 Investment in joint ventures 2,213 - - - 2,213 Investments 2,907 - - - 2,907 Stocks 11,679 (188) - - 11,491 Debtors 2,737 - - (147) 2,590 Cash at bank 5,341 - - - 5,341 Creditors : amounts falling due within one year (8,033) - - 223 (7,810) amounts falling due after more than one year (30,941) - (720) - (31,661) Minority interest (94) - - - (94) ______ ______ ______ ______ ______ Net assets acquired 34,659 (873) (720) (34) 33,032 ====== ====== ====== ====== ======= Consideration: Shares issued 13,720 Cash 18,526 Costs 786 ______ 33,032 ====== Notes a) The revaluation of investment properties and stocks is based on agreed sales contracts b) Fair value adjustments were made to revalue bank debt to reflect the market rate of interest at the time of acquisition c) Fair value adjustments were also made to write off surplus assets, provide against irrecoverable debtors and eliminate a dividend provision. A summary profit and loss account for English & Overseas for the period from the beginning of its financial year to the effective date of acquisition and for its previous financial year was as follows Period 1 January 1999 Year ended to 2 June 1999 31 December 1998 £000 £000 Turnover 4,764 11,570 ===== ====== Operating profit 1,020 4,250 Share of operating profit in joint ventures 14 344 Profit on sale of investment properties 1 206 Net interest payable (1,172) (3,097) _______ _______ (Loss)/Profit on ordinary activities before taxation (137) 1,703 Tax on (loss)/profit on ordinary activities (32) (128) _____ _____ (Loss)/Profit on ordinary activities after taxation (169) 1,575 Minority interest (37) (48) _____ _____ (Loss)/Profit for the financial period (206) 1,527 Dividends - (334) _____ _____ Retained (loss)/profit for the financial period (206) 1,193 ===== ===== There were no other recognised gains and losses in the period from 1 January 1999 to 2 June 1999. Acquisition of Chesterfield Properties Plc On 5 July 1999, the Company acquired the whole of the issued share capital of Chesterfield Properties Plc for a total consideration of £150,267,000. A summary of the assets acquired together with the fair value adjustments and the consideration for the transaction is shown below: Fair Balance value sheet at balance acquisition Fair value adjustments sheet Debt Property marked Tax Other reval- to adjust- adjust- uation market ments ments (Note a) (Note b) (Note c) (Note d) £000 £000 £000 £000 £000 £000 Investment 218,644 2,272 - - - 220,916 properties Other fixed 1,089 - - - (320) 769 assets Investment in 8,129 845 - - - 8,974 joint ventures Investment in 63 - - - - 63 associates Investments 2,184 - - - - 2,184 Stocks 56,184 4,232 - - - 60,416 Debtors 18,369 - - 3,008 (3,320) 18,057 Cash at bank 7,471 - - - - 7,471 Creditors : amounts falling (69,513) - (512) (1,523) (1,044) (72,592) due within one year amounts falling (93,745) - (712) - - (94,457) due after more than one year Provisions for (958) - - - - (958) liabilities and charges Minority (576) - - - - (576) interest _______ _____ ______ _____ ______ _______ Net assets 147,341 7,349 (1,224) 1,485 (4,684) 150,267 acquired ======= ===== ===== ===== ===== ======= Consideration : Shares issued 56,634 Cash 89,314 Costs 4,319 _______ 150,267 ======= Notes a) The revaluation of investment properties, joint ventures and stocks is based on external valuations, directors' valuations or agreed sale contracts as at the time of acquisition. b) Fair value adjustments were made to revalue bank debt to reflect the market rate of interest at the time of acquisition. c) Fair value adjustments were made to recognise a deferred tax asset in respect of tax losses and to recognise an additional tax liability in respect of the period to the acquisition date. d) Fair value adjustments were made to debtors to eliminate the balance on a rent equalisation account in relation to the initial rent free period for 1 Neathouse Place, London SW1 and to write off debtors following the re-assessment of outstanding rent and service charges. Fair value adjustments were made to creditors to recognise the liabilities for change of control payments implemented by Chesterfield prior to any negotiations with the Group. The fair value adjustments to other fixed assets were made to write down surplus assets. A summary profit and loss account for Chesterfield for the period from the beginning of its financial year to the effective date of acquisition and for its previous financial year was as follows : Period 1 January 1999 Year ended 31 to 5 July 1999 December 1998 £000 £000 Turnover 17,521 36,600 ====== ====== Operating profit 6,593 19,753 Share of operating profit in joint ventures and associates 393 343 Profit/(Loss) on sale of investment properties 3,565 (711) Amounts written off investments - (5,719) Net interest payable (9,854) (20,392) ______ _______ Profit/(Loss) on ordinary activities before taxation 697 (6,726) Tax on profit/(loss) on ordinary activities (202) (5,984) _____ ________ Profit/(Loss) on ordinary activities after taxation 495 (12,710) Minority interest (48) (16) _____ ________ Profit/(Loss) for the financial period 447 (12,726) Dividends (400) (2,606) ____ _______ Retained profit/(loss) for the financial period 47 (15,332) ==== ======= There were no other material recognised gains and losses in the period from 1 January 1999 to 5 July 1999. With effect from 16 February 2000, Chesterfield Properties Plc changed its name to Chesterfield Properties Limited. c) Other fixed asset investments: investment in subsidiaries Principal subsidiaries (whose results are included in the Group financial statements) Principal activity % of share capital held by Company Subsidiary Incorporated in the United Kingdom: Albion Properties Birmingham Limited Property investment 100% Albion Properties Colchester Limited Property investment 100% Albion Properties Norwich Limited Property investment 100% Cadmus Investments Limited Property investment 100% Chesterfield Investments (No.1) Limited Property investment 100% Chesterfield (Neathouse) Limited Property investment 100% Chesterfield Properties Limited Property investment 100% Comchester Properties Limited Property investment 100% Comgrove Properties Limited Property investment 100% Corfield Properties Limited Property investment 100% Croydon Land & Estates Limited Holding company 100% Croydon Land Limited Property investment 100% Croydon Land (No.2) Limited Property investment 100% Croydon Properties Limited Property trading 100% Croydon Properties (No.2) Limited Property trading 100% The Crystal Peaks Investment Company Limited Property investment 100% English & Overseas Investments plc Property investment 100% English & Overseas Properties plc Property investment 100% EPIC Commercial Properties Limited Property investment 100% Estates Property Investment Company Limited Property investment 100% Estates Property Investment Company (Holdings) Limited Holding company 100% George Wilson Developments (Dover) Limited Property investment 100% Keswick Holdings Limited Property investment 100% Licensed Retail Properties Limited Property investment 51% Listed Offices Limited Property investment 100% Meridian Delta Limited Property investment 100% Permitobtain Limited Property investment 100% Qhere Limited Property investment 100% Qoin Limited Property investment 100% Quaystone Properties Limited Property investment 51% Quocumque Limited Property investment 100% Quondam Estates Investment Limited Property investment 100% Quondam Estates (No.2) Investment Limited Property investment 100% Quondam Properties Limited Holding company 100% Quo Vadis Estates Limited Property investment 100% Quo Vadis Properties Limited Property investment 100% Tenstall Limited Property investment 100% Towergate Homes plc Residential 100% housebuilder Incorporated in France : Continental Investment Development s.a. Holding company 99% SCI Bureaux Du Chateau Rouge Property investment 80% Incorporated in the United States: Chesterfield Holdings Inc Holding company 100% Chesterfield Investments Inc Property investment 100% In the United Kingdom, 49% of Licensed Retail Properties Limited and Quaystone Properties Limited is owned by Yates Brothers Wine Lodges PLC. In France, the minority stake in SCI Bureaux Du Chateau Rouge is held by Zamara Corporation (15%) and Lille Gestion (5%). The overseas subsidiaries have accounting periods ending on 31 December. The Group's share of their results for the period 1 January 2000 to 31 March 2000 has been based on their management accounts. All companies operate principally in their countries of incorporation. A complete list of subsidiaries will be annexed to the next annual return delivered to the Registrar of Companies. Note 14 Debtors Group Company 2000 1999 2000 1999 £000 £000 £000 £000 Trade debtors 10,155 3,252 993 2,579 Amounts due from subsidiary undertakings - - 4,650 7,855 Amounts due from joint ventures - 1,363 - - VAT recoverable 801 - 2,398 - Deferred tax asset 1,994 - - - Amounts due under contracts of sale 32,653 1,216 - - Other debtors 8,961 1,524 968 1,458 Prepayments and accrued income 1,735 164 133 107 ______ _____ _____ ______ 56,299 7,519 9,142 11,999 ====== ===== ===== ====== Note 15 Short term investments The current asset investment acquired during the year at a cost of £1,140,000 is listed on the London Stock Exchange and had a market value as at the year end of £1,922,000. Note 16 Creditors : amounts due falling within one year Group Company 2000 1999 2000 1999 £000 £000 £000 £000 Bank and other loans (secured) 169,752 1,270 62,927 - Trade creditors 1,209 1,481 242 644 Other creditors 4,939 3,145 361 389 Dividend proposed 4,610 2,762 4,610 2,762 Corporation tax payable 5,520 2,778 - 82 Other taxation and social 53 893 44 189 security Accruals and deferred income 16,440 8,888 2,846 3,157 _______ ______ ______ _____ 202,523 21,217 71,030 7,223 ======= ====== ====== ===== Note 17 Creditors : amounts falling due after more than one year Group Company 2000 1999 2000 1999 £000 £000 £000 £000 Bank and other loans 219,710 124,345 28,000 - (secured) Convertible unsecured loan 3,000 3,000 3,000 3,000 stock 10% First Mortgage Debenture 9,469 9,670 - - Stock 2011 _______ _______ ______ _____ 232,179 137,015 31,000 3,000 Net obligations under hire 27 8 27 8 purchase contracts _______ _______ ______ _____ 232,206 137,023 31,027 3,008 Deferred financing costs (3,736) (1,710) (35) - _______ _______ ______ _____ 228,470 135,313 30,992 3,008 ======= ======= ====== ===== The loans are secured by fixed and floating charges over assets owned by subsidiary undertakings. In addition, the Company has guaranteed the bank loans, undertaking a minimum net worth covenant for the Group of £180,000,000. The unlisted convertible unsecured loan stock is repayable on 1 April 2007 and interest is charged at 8% per annum. The loan stock is convertible at any time at the option of the holder into ordinary shares of the Company at a conversion price of 150p per share. The 10% First Mortgage Debenture Stock 2011 issued by Estates Property Investment Company Limited is secured by fixed and floating charges over the assets of the subsidiary undertaking and has a redemption value of £8,250,000. The premium over par arising from fair valuing the debenture on acquisition is amortised over its remaining life. Note 18 Borrowings The maturity profile of the Group's debt is as follows: Bank loans and Other Total Total Undrawn overdrafts loans debt debt facilities 2000 1999 2000 1999 £000 £000 £000 £000 £000 £000 Up to one year 152,100 17,652 169,752 1,270 - - Between one and two years 434 2,475 2,909 120 - - Between two and five years 73,228 - 73,228 38,225 9,633 1,500 Over five years 143,573 12,469 156,042 98,670 79,880 114,000 _______ ______ _______ _______ ______ _______ 369,335 32,596 401,931 138,285 89,513 115,500 ======= ====== ======= ======= ====== ======= After taking account of interest rate swap arrangements, the risk profile of the Group's borrowings as at 31 March 2000 was as follows: 2000 1999 Fixed Capped Floating Total Fixed Capped Floating Total £000 £000 £000 £000 £000 £000 £000 £000 Sterling 100,093 90,000 194,335 384,428 80,285 - 58,000 138,285 French francs - - 4,285 4,285 - - - - United States dollars 13,218 - - 13,218 - - - - _______ ______ _______ _______ ______ _____ ______ _______ 113,311 90,000 198,620 401,931 80,285 - 58,000 138,285 ======= ====== ======= ======= ====== ===== ====== ======= The interest rate profile of the Group's fixed rate debt is as follows: Percent 2000 1999 £000 £000 3.0 - 4.0 10,000 10,000 6.0 - 7.0 46,829 29,500 7.0 - 8.0 44,482 40,785 8.0 - 9.0 12,000 - _______ ______ 113,311 80,285 ======= ====== The weighted average rate and the weighted average period of the Group's fixed rate debt as at 31 March 2000 were as follows : 2000 1999 % Years % Years Sterling 6.90 5 7.81 8 United 7.44 9 - - States Group 6.96 6 7.81 8 The weighted average rate of the Group debt as at 31 March 2000 was 7.36% (1999: 6.96%) The fair value of the Group's financial liabilities as at 31 March 2000 are set out below: Book value/ Fair Difference notional value 2000 1999 principal £000 £000 £000 £000 Fixed rate debt 45,816 44,886 930 (879) Interest rate swaps 161,395 160,569 826 (4,737) Caps 90,000 89,463 537 - _______ _______ _____ ______ 297,211 294,918 2,293 (5,616) ======= ======= ===== ======= The fair values were calculated by JC Rathbone Associates as at 31 March 2000 and reflect the replacement values of the financial instruments used to manage the Group's exposure as at that date. The Group has taken advantage of the exemption under FRS 13 to exclude short term debtors and creditors from these disclosures. Its policies relating to financial instruments are set out in the Chairman's Statement and in the accounting policies as described in note 1. The Group's share of floating rate debt held within its joint ventures as at 31 March 2000 was as follows : 2000 1999 £000 £000 Up to one year 1,103 - Between one and two years 8,661 - Between two and five years 9,445 - _____ ____ 19,209 - ====== ===== Note 19 Provisions for liabilities and charges The movement in the year in provisions for liabilities and charges was as follows: £000 Balance 1 April 1999 1,186 Balance assumed on acquisition 958 Exchange movement (139) ACT utilised 284 Release to profit and loss account (188) _____ Balance 31 March 2000 2,101 ===== The provisions represent deferred tax comprising: 2000 1999 Provided Not Provided Not provided provided £000 £000 £000 £000 ACT recoverable - - (284) - Accelerated timing differences and revaluation surplus 819 26,388 - 17,435 Other timing differences 1,282 - 1,470 - _____ ______ _____ ______ 2,101 26,388 1,186 17,435 ===== ====== ===== ====== Other timing differences relate to swap breakage costs where a deduction has been claimed in one of the Group's subsidiaries in an earlier year but a corresponding credit is being released to the profit and loss account of another subsidiary over the life of a new swap arrangement. Note 20 Called up share capital £000 Authorised 140,000,000 shares of 25p each 35,000 ====== Allotted, called up and fully paid In issue at 1 April 1999 : 92,080,299 ordinary shares of 23,020 25p each (i) Issue of 8,340,499 ordinary shares of 25p each at 164.5p as part consideration for acquisition of English 2,085 & Overseas Properties plc (ii) Issue of 31,289,519 ordinary shares of 25p each at 181p as part consideration for acquisition of 7,823 Chesterfield Properties Plc ______ In issue at 31 March 2000 : 131,710,317 ordinary shares 32,928 of 25p each ====== At the year end, the following options granted under the Company's Share Option Schemes remained outstanding: Date of Number of Exercise price Exercise period grant ordinary shares per share from to 26.07.94 130,000 110.0p 26.07.97 26.07.04 18.08.95 270,000 114.0p 18.08.98 18.08.05 23.07.96 158,494 113.0p 23.07.99 23.07.06 06.08.97 290,510 136.0p 06.08.00 06.08.07 22.09.99 1,292,076 151.5p 22.02.02 22.02.09 28.05.99 406,951 163.2p 28.05.02 28.05.09 _________ 2,548,031 ========= On 6 December 1993, Scottish Equitable PLC and The Standard Life Assurance Co. were granted options over 1,500,000 ordinary shares each. The options may be exercised at any time, in whole or in part, before 6 December 2003 at an exercise price of 110p per ordinary share. Scottish Equitable PLC holds £3,000,000 of the Company's unlisted convertible unsecured loan stock repayable by 1 April 2007. The loan stock is convertible into ordinary shares at a conversion price of 150p per ordinary share. Note 21 Reserves Group Share Merger Capital Revaluation Profit and premium reserve reserve reserve loss account £000 £000 £000 £000 £000 Balance 1 April 1999 38,297 46,529 2,750 58,623 20,743 Premium on issue of - 59,533 - - - shares less costs Surplus on revaluation investment properties - - - 48,092 - joint ventures - - - 2,394 - associate - - - 45 - Realisation of property - - - (5,527) 5,527 revaluation gains of previous years Tax on realisation of - - - (1,181) - revaluation surplus Exchange movement in - - - - (559) year Retained profit for the - - - - 5,613 financial year ______ _______ _____ _______ ______ Balance 31 March 2000 38,297 106,062 2,750 102,446 31,324 ====== ======= ===== ======= ====== Company Share Merger Profit and premium reserve loss account £000 £000 £000 Balance 1 April 1999 38,297 46,529 19,127 Premium on issue of shares less costs - 59,533 - Retained profit for the financial year - - 6,561 ______ _______ ______ Balance 31 March 2000 38,297 106,062 25,688 ====== ======= ====== In accordance with section 131 of the Companies Act 1985, the amount equivalent to the premium arising on the issue of shares as consideration for the acquisition of Chesterfield Properties Plc and English & Overseas Properties plc has been shown in the merger reserve. As permitted by section 230 of the Companies Act 1985, the profit and loss of the Company is not presented as part of these financial statements. The profit for the year attributable to shareholders dealt with in the financial statements of the Company was £13,805,000 (1999 : £13,338,000). Note 22 Capital commitments At 31 March 2000, the Group had capital commitments of £11,181,000 (1999:£926,000). Note 23 Commitments under operating leases As at 31 March 2000, the Group had annual commitments under non-cancellable operating leases as set out below: 2000 1999 Land and Other Land and Other buildings buildings £000 £000 £000 £000 Operating leases which expire : Within one year 15 - - - In two to five years 265 - 50 - After five years - - 93 - ______ _______ ______ _______ 280 - 143 - ====== ======= ======= ======= Note 24 Contingent liabilities The Group through Chesterfield Properties Limited has guaranteed the payment of current interest on a secured bank loan facility of US $ 27,800,000 (of which US $ 24,000,000 was drawn down as at 31 March 2000) in the event of default by Hanford Mall Partners, a limited partnership in which the group has a 50% interest, but is not the general partner. The Group has also through English and Overseas Properties plc guaranteed a secured facility of £2,500,000 (against which £2,206,749 was outstanding as at the year end) in respect of a joint venture company, Clarke House Limited, in which the Group has a 50% interest. The Group's joint venture partner has given a counter- indemnity for 50% of this potential liability. Note 25 Notes to the Consolidated Cash Flow Statement 2000 1999 £000 £000 a) Reconciliation of operating profit to net cash inflow from operating activities Operating profit 31,546 19,898 Depreciation charge 135 138 Loss on disposal of fixed assets 74 - Decrease in debtors 1,331 622 (Decrease) increase in creditors (6,619) 931 Decrease in trading stock 44,491 6,572 Write-down of trading stock 41 109 ________ _______ 28,270 ======= ======= b) Reconciliation of net cash flow movement to net debt 2000 1999 £000 £000 Increase in cash during year 33,150 8,629 Cash (inflow) outflow from debt and lease (81,562) 11,033 financing Cash outflow from increase in liquid resources 1,140 - ________ _______ Change in net debt resulting from cash flows (47,272) 19,662 Costs of issue of non-equity finance 3,349 1,889 Amortisation of issue costs (1,315) (1,285) Net debt acquired with subsidiaries (182,601) - Other non-cash movements 490 885 ________ _________ Movement in net debt during year (227,349) 21,151 Net debt, beginning of year (116,714) (137,865) ________ ________ Net debt, end of year (344,063) (116,714) ======== ======== c) Analysis of debt As at 1 April As at 31 1999 Cash flow Acquisitions Other March 2000 £000 £000 £000 £000 £000 Short term investments - 1,140 - - 1,140 Cash 19,869 33,150 - - 53,019 Debt due after more than one year (135,313) (35,899) (126,118) 68,860 (228,470) Debt due within one year (1,270) (45,663) (56,483) (66,336) (169,752) ________ ________ _________ _____ _________ (116,714) (47,272) (182,601) 2,524 (344,063) ======== ======== ========= ===== ======== d) Acquisition of subsidiary undertakings Chesterfield contributed £40,000,000 to the Group's net operating cash flow, paid £6,067,000 in respect of net returns on investments and servicing of finance together with £2,017,000 on capital expenditure and financial investment and repaid loans of £19,884,000. English & Overseas contributed £7,280,000 to the Group's net operating cash flow, paid £1,222,000 in respect of net returns on investments and servicing of finance, generated £17,403,000 under the category of capital expenditure and financial investment and repaid loans of £17,362,000. e) Cash flow relating to exceptional items The operating cash flow includes £1,373,000 relating to exceptional reorganisation costs. f) Major non-cash transactions Part of the consideration for the purchase of subsidiary undertakings comprised shares. Further details of the acquisitions are set out in note 13.

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