Interim Results
Slough Estates PLC
31 August 2000
INTERIM STATEMENT
FOR THE SIX MONTHS TO 30TH JUNE 2000
Summary of Results
* Profit before tax, excluding investment property sales, up 16.0 per
cent to £65.1 million (1999 £56.1 million)
* Profit before tax up 8.4 per cent to £65.8 million (1999 £60.7 million)
* Adjusted earnings per share 10.9p per share (1999 10.8p)
* Interim dividend increased by 6.8 per cent to 4.7p per share (1999
4.4p)
* 400,000 sq.m. (4.3 million sq.ft.) of new buildings completed or under
construction
* Development programme on land owned increases to 1.2 million sq.m.
(13.1 million sq.ft.) which will cost £1 billion over several years
Commenting on the results, the Chairman, Sir Nigel Mobbs, said:
'The Group's policy of selective development in prime business centres
should deliver strong cashflow and earnings returns to add to those which
the Group currently enjoys from a focused and high quality portfolio of
investments.'
Interim Statement
In the first half of 2000 the Group progressed its well established
strategy by adding further sites in prime business locations to its
development portfolio, completing the construction of 133,000 sq.m. of
business space, improving its quality of earnings through the disposal of
assets with limited growth potential and by welcoming many new technology
occupiers to its customer base. Occupancy worldwide has increased to 94.4
per cent.
Results
The half year profit before tax at £65.8 million was 8.4 per cent higher
than in 1999. However, adjusted to exclude capital profits on the sale of
investment properties, pre-tax profits were £65.1 million, £9.0 million or
16.0 per cent higher. The contribution from the development programme
increased rental income by £7.9 million compared with the first half of
1999. This has been largely offset by £7.3 million rental income foregone
as a result of property sales. Since the beginning of 1999 £207 million of
investment properties have been sold because they were not in prime
locations or had limited growth potential. The proceeds are being invested
in new developments in better locations.
Trading property profits of £5.0 million (1999 £1.1 million) were realised
on sales mainly in France and Germany and property joint venture profits
increased by £3.4 million to £6.9 million mainly due to the opening of the
Buchanan Galleries in Glasgow in 1999.
Tax has been provided at an effective rate of 20 per cent compared to the
exceptionally low rate of 10 per cent applied in 1999. As a consequence,
adjusted earnings per share at 10.9p were only marginally ahead of last
year.
Dividends
An interim dividend of 4.7p per share will be paid on 13 October 2000 to
shareholders on the register on 15 September 2000. This represents an
increase of 6.8 per cent over the 1999 interim dividend of 4.4p per share.
Cash Flow
After expenditure of £144 million on the purchase and development of
investment properties and realising £40 million from the sale of investment
properties, the Group had a net cash outflow for the half year of £81.2
million (1999 £9.7 million).
Balance Sheet
The Group's balance sheet remains very strong. Net borrowings rose by £98
million to £1,187 million. There were two significant new financings in
the period, a £225 million Eurobond 2024 issue at a coupon of 6.75 per cent
and a $160 million US private placement with an average maturity of 10.7
years and average interest rate of 7.96 per cent. These funds will provide
a base alongside committed bank facilities for the Group's substantial
development programme. The weighted average cost of total borrowings
remains at 7.7 per cent. Shareholders' equity at 30 June was £2,145
million, based on year end 1999 valuations and subsequent expenditures at
cost, resulting in a net debt to equity ratio of 55 per cent.
Review of Activities
Development Programme
In the last annual report the Group's development potential on land it
already controlled was shown as being 1,172,000 sq.m. at a new money cost
of £875 million. The acquisition of the Cambridge Research Park in April
2000 will add a further 46,000 sq.m. at a built out cost of £125 million.
Cambridge is one of the leading locations for knowledge based business in
the UK and this 45 hectare, low density, land reclamation site has the
benefit of an outline planning consent for early development. The
acquisition included a newly completed 6,000 sq.m. office facility at the
park entrance leased to ntl Group.
The total development programme of 1.2 million sq.m. (13.1 million sq.ft.)
at a new money cost of £1 billion will be spread over the years 2000 to
2007 provided the economic conditions in the countries in which the Group
operates continue to be supportive of profitable development.
In the first half of 2000, 133,000 sq.m. of buildings were completed, of
which 86 per cent is leased or sold, a further 267,000 sq.m. is under
construction and work is expected to commence before the year end on a
further 139,000 sq.m.
United Kingdom
Occupier demand has continued to be firm, particularly in the Thames
Valley. The supply of space is generally meeting that demand though large
office space users are finding some difficulty in identifying suitable
buildings.
The Group's UK occupancy at June was 93.2 per cent, slightly lower than the
93.7 per cent recorded at December 1999, though this is mainly due to
recent completions of new developments.
The attraction of the Thames Valley to the IT and communications sector
continues unabated and we have welcomed many such new occupiers to our
locations this year, including Intel, Bookham Technology and AdvantagE, as
well as providing expansion space for Logical Networks, Celltech Group and
others. At Slough the availability of fibre optic cabling and an
electricity supply within the Group's control is beginning to be of
interest to internet co-location businesses. The Group's two newest
development sites at Cambridge and Farnborough will undoubtedly be
attractive to similar high technology companies.
At Farnborough good progress is being made on achieving a planning consent
and it is hoped that construction of the infrastructure will start in the
autumn, followed shortly by the development of three buildings totalling
23,500 sq.m. Consent should be granted for a total of 155,000 sq.m. of
office and R&D space with some ancillary uses.
At Slough, two Bath Road offices are under construction and the first of
4,650 sq.m. has been pre-let to Celltech Group. Elsewhere construction is
progressing at Feltham, Acton, Uxbridge, High Wycombe, Wokingham, Elstree
and Luton. At Northampton a 9,400 sq.m. distribution unit is being built
for Esselte, an existing customer which is relocating from Feltham.
North America
In July work commenced at the Torrey Pines Science Center, San Diego, on
the second 12,000 sq.m. phase of the 39,500 sq.m. health science research
and development campus being built for Agouron, a subsidiary of Pfizer.
This campus is being let on long leases with annual rental increases.
Plans are being drawn up for an additional 4,200 sq.m. speculative
building.
Two buildings let to research companies Sugen and Exelixis have been
completed at Pointe Grand, South San Francisco. A second building is now
underway for Exelixis and at Gateway the second building for Fibrogen is
under construction. With no land left uncommitted in South San Francisco
the acquisition of the new 9.0 hectare Shearwater site is well timed.
Once planning has been determined it is expected this former brownfield
site at the edge of the Bay will support up to 50,000 sq.m. of health
science and high tech office space. Another site of 10.8 hectares in the
same area is also under contract, subject to satisfactory environmental
conditions.
In Toronto the development of industrial units is progressing well, with
most units leasing before or shortly after completion. The Goreway site,
now that it is fully committed, has been expanded by the acquisition of an
adjacent 12.7 hectares of land. In Burnaby, Vancouver, a 20,800 sq.m.
office is under construction to meet demand from the rapid growth of IT
industry in an area with almost full occupancy.
Continental Europe
Progress continues at a rapid pace at Pegasus Park, Brussels. Regus took
possession of the 5,520 sq.m. serviced office building in May, and a third
8,700 sq.m. building is under construction for Cisco Systems, who have also
contracted to lease a fourth building of 7,900 sq.m. to commence
construction in October. Work is due to start soon on a new speculative
phase of 16,300 sq.m. which includes a prelet 3,600 sq.m. health/fitness
centre.
In France, the Marly la Ville site acquired in December 1999 will be fully
built out and leased by the end of the year. The strong demand for modern
logistics warehouses in the Paris area will have allowed the construction
and letting of 97,700 sq.m. in four buildings all within twelve months.
In central Paris the 4,395 sq.m. Rue Vineuse office redevelopment was
completed in July on schedule, having been sold prior to completion.
The Group's programme of small industrial/business park developments in
Germany continued with phases totalling 18,800 sq.m. under construction at
Neuss, Monchengladbach and Hamburg and a further 18,500 sq.m. scheduled to
commence at Kapellen and Ratingen in the autumn.
Outlook
There are firm grounds to believe that European economies will see
sustained growth in the short to medium term and that North America will
move ahead, albeit not at the same high levels as those that have been
experienced recently. In consequence, inflation and interest rates should
continue to be low which will assist the maintenance of a confident
business environment. It follows that prospects for the property sector
are sound and we believe that prime business centres will show particularly
good growth.
The Group's policy of selective development in such locations should
deliver strong new cashflow and earnings returns to add to those which the
Group currently enjoys from a focused and high quality portfolio of
investments.
Sir Nigel Mobbs
Chairman
For further information contact:
Derek Wilson, Chief Executive
Dick Kingston, Finance Director
Slough Estates plc Tel: 01753 537171
Andrew Best/Buster Cheetham
Shared Value Limited Tel: 020 7321 5010
Slough Estates Web Site www.sloughestates.com
GROUP PROFIT AND LOSS ACCOUNT
For the six months ended 30 June 2000 Note Half Half Year to
year to year to 31
30 June 30 June December
2000 1999 1999
unaudited unaudited audited
£m £m £m
Turnover:
Group 2 153.7 133.5 271.7
Joint ventures 7.4 4.3 11.1
-------- -------- --------
Operating income:
Property investment 95.3 91.4 182.6
Property trading 5.0 1.1 6.1
Utilities (1.2) (1.2) (3.7)
Other income 4.0 3.5 6.3
Administration expenses (6.1) (6.2) (12.5)
-------- -------- --------
Operating profit 2 97.0 88.6 178.8
Share of operating profit/(loss) of
joint ventures and associates
Property 6.9 3.5 9.6
Other - (0.2) (0.3)
6.9 3.3 9.3
Profit on sale of investment properties 0.7 4.6 12.2
-------- -------- --------
Profit before interest and taxation 104.6 96.5 200.3
Interest (net) 3 (38.8) (35.8) (72.3)
-------- -------- --------
Profit on ordinary activities before
taxation 65.8 60.7 128.0
Taxation 4 (13.2) (6.1) (14.6)
-------- -------- --------
Profit on ordinary activities after
taxation 52.6 54.6 113.4
Minority interests - equity (1.2) (0.4) (1.0)
Preference dividends (5.8) (5.8) (11.6)
-------- -------- --------
Profit attributable to ordinary
shareholders 45.6 48.4 100.8
Ordinary dividends (19.4) (18.1) (46.2)
-------- -------- --------
Retained profit 26.2 30.3 54.6
-------- -------- --------
Basic earnings per ordinary share 11.1p 11.9p 24.6p
Adjustment for profits and losses on
sale of investment
properties net of tax and minority (0.2p) (1.1p) (2.9p)
-------- -------- --------
Adjusted basic earnings per ordinary
share 10.9p 10.8p 21.7p
-------- -------- --------
Dividends per share 4.7p 4.4p 11.2p
Weighted average number of ordinary
Shares in issue (millions) 413.0 407.2 409.8
SUMMARISED GROUP BALANCE SHEET
As at 30 June 2000 31
30 June 30 June December
2000 1999 1999
unaudited unaudited audited
£m £m £m
Fixed assets
Tangible assets - properties 3,074.2 2,718.6 2,935.4
- other 69.0 62.1 63.7
Investments in joint ventures:
- share of gross assets 221.2 185.7 220.1
- share of gross liabilities (41.8) (40.8) (41.7)
179.4 144.9 178.4
Investments in associates 3.6 3.3 3.3
-------- -------- --------
3,326.2 2,928.9 3,180.8
-------- -------- --------
Current assets
Stocks 85.3 101.4 92.0
Debtors, prepayments and accrued income 63.7 52.4 55.3
Trading investments 37.0 32.8 34.1
Assets held for resale 24.4 - 27.1
Cash and deposits 94.0 68.9 59.5
-------- -------- --------
304.4 255.5 268.0
-------- -------- --------
Total assets 3,630.6 3,184.4 3,448.8
======== ======== =======
Capital and reserves
Called up share capital 138.5 138.3 138.5
Share premium account 326.4 324.7 325.3
Capital reserves 1,392.1 1,124.7 1,385.5
Profit and loss account 287.8 242.9 257.6
-------- -------- --------
Shareholders' funds 2,144.8 1,830.6 2,106.9
Minority interests 17.1 5.7 15.1
Provision for liabilities and charges 4.1 4.9 4.8
Creditors falling due within one year
Borrowings 66.6 86.6 89.7
Other 176.6 148.8 163.5
Creditors falling due after more than
one year
Borrowings 1,214.9 1,095.9 1,059.7
Other 6.5 11.9 9.1
-------- -------- --------
3,630.6 3,184.4 3,448.8
======= ======= =======
Shareholders' funds attributable to:
Equity shareholders - ordinary shares 2,004.5 1,689.5 1,965.8
Non - equity shareholders - preference
shares 140.3 141.1 141.1
------- ------- -------
2,144.8 1,830.6 2,106.9
------- ------- -------
Ordinary shares in issue (millions) 413.4 412.1 412.8
Dilutive adjustments (millions) 52.9 53.6 53.1
------- ------- -------
Ordinary shares in issue diluted 466.3 465.7 465.9
(millions) ------- ------- -------
Net assets per ordinary share - basic 485p 410p 476p
- diluted 460p 393p 452p
SUMMARISED GROUP CASH FLOW STATEMENT
For the six months ended 30 June 2000
Half Half Year
year to year to to 31
30 June 30 June December
2000 1999 1999
unaudited unaudited audited
£m £m £m
Net cash inflow from
operating activities 100.5 76.8 171.2
Dividends from joint
ventures and associates 4.0 0.5 4.2
Returns on investments
and servicing of
finance
Interest received 3.9 1.8 5.3
Interest paid (49.0) (45.3) (88.3)
Dividends paid to
preference and minority (6.0) (5.9) (11.9)
shareholders ------- ------- -------
(51.1) (49.4) (94.9)
Taxation (3.2) 4.2 (17.2)
------- ------- ------
-
Net cash inflow before
investing activities,
financing and equity
dividends 50.2 32.1 63.3
Capital expenditure and
financial investment
Purchase and
development of
investment properties (144.0) (120.6) (181.0)
Sales of investment
properties 40.0 81.2 166.8
Other asset sales less
additions 1.5 18.2 8.5
------- ------- -------
(102.5) (21.2) (5.7)
Acquisitions and
disposals
Purchase of subsidiary
undertakings (net of
cash and bank
overdrafts acquired) - (6.4) (11.8)
Net movement on joint
ventures, associates
and others (0.8) 11.6 4.8
------- ------- -------
(0.8) 5.2 (7.0)
Equity dividends paid (28.1) (25.8) (43.9)
------- ------- ------
Net cash
(outflow)/inflow before
use of liquid
resources and financing (81.2) (9.7) 6.7
Net cash inflow from
financing and
management of liquid 88.5 14.7 11.0
resources ------- ------- ------
Increase in cash 7.3 5.0 17.7
======= ======= ======
Reconciliation of
operating profit to net
cash inflow from
operating activities
Operating profit 97.0 88.6 178.8
Less other income
reallocated (3.2) (3.3) (5.3)
Add back non cash items 2.1 2.5 5.2
Net rental income from
trading properties 0.6 0.5 1.2
------- ------- ------
96.5 88.3 179.9
Other movements arising
from operations:
Decrease in stocks 8.0 9.2 10.8
Increase in debtors (4.6) (2.7) (1.8)
Increase/(decrease) in
creditors 0.6 (18.0) (17.7)
------- ------- ------
Net cash inflow from
operating activities 100.5 76.8 171.2
------- ------- ------
Notes to the interim statement
1.Basis of preparation
The accounting policies used for the audited accounts at 31 December 1999
have been used in the preparation of the interim statement. The Group has
applied FRS15 for the first time but this has not had a material effect on
the Group's results. The interim statement is unaudited and does not
comprise full financial statements. The results for the year to 31 December
1999 are an abridged statement of the group accounts for that year which
have been delivered to the Registrar of Companies, and on which the
auditors' report was unqualified.
Investment properties as at 30 June 2000 are included at 31 December 1999
valuations plus additions at cost, less disposals, to 30 June 2000.
2. Segmental information
Turnover Operating Profit
Year to Year
Half Half 31 Half Half to 31
year to year to December year to year to December
30 June 30 June 1999 30 June 30 June 1999
2000 1999 audited 2000 1999
unaudited unaudited £m unaudited unaudited audited
£m £m £m £m £m
Business segments:
Property investment 104.6 99.3 200.0 95.3 91.4 182.6
Property trading 37.4 23.0 49.7 5.0 1.1 6.1
Utilities 11.7 11.2 22.0 (1.2) (1.2) (3.7)
Other activities - - - 4.0 3.5 6.3
Common costs - - - (6.1) (6.2) (12.5)
------- ------- ------- ------- ------- ------
153.7 133.5 271.7 97.0 88.6 178.8
------- ------- ------- ------- ------- ------
Geographical segments:
United Kingdom 89.3 102.4 194.7 69.5 75.8 145.6
Canada 6.9 5.4 11.5 4.6 3.5 7.5
USA 15.8 11.9 36.4 12.4 4.0 13.9
Europe 41.7 13.8 29.1 10.5 5.3 11.8
------- ------- ------- ------- ------- ------
153.7 133.5 271.7 97.0 88.6 178.8
------- ------- ------- ------- ------- ------
3. Net interest
Year
Half Half to 31
year to year to December
30 June 30 June 1999
2000 1999 audited
unaudited unaudited
£m £m £m
Interest paid 50.1 48.4 95.3
Less interest received (3.6) (2.7) (4.9)
Less amount charged to
- the development of trading properties (0.6) (0.9) (1.7)
- the development of investment properties (8.8) (11.0) (20.3)
------- ------- ------
Charged to profit and loss account
- group 37.1 33.8 68.4
- joint ventures and associates 1.7 2.0 3.9
------- ------- ------
38.8 35.8 72.3
------- ------- ------
4. Taxation
An effective tax charge of 20% (1999 half year 10%, 1999 full year 11.4%)
of profit on ordinary activities before tax has been included for the six
months and is based on the estimated full year rate.
5. Fair value of borrowings and associated derivatives
30 June 2000 31 December
unaudited 1999
£m audited
£m
Book value 1,281.5 1,149.4
Net fair market value 1,329.0 1,256.8
------- -------
Pre-tax mark to market adjustment 47.5 107.4
Tax relief due on early
redemption/termination (14.3) (32.2)
------- -------
After tax mark to market adjustment 33.2 75.2
------- -------
Tuesday, 14th May 2024
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