Preliminary Results

Terrace Hill Group PLC 15 January 2004 TERRACE HILL GROUP PLC PRELIMINARY ANNOUNCEMENT OF RESULTS FOR 18 MONTHS TO 31 OCTOBER 2003 CHAIRMAN'S STATEMENT 18 months to 31 October 2003 I am pleased to present our results for the 18 month period ended 31 October 2003, which included some 13 months of the Commercial Division added by our merger with Westview Group. Profit before tax was £5,092,831 (year to 30 April 2002: £53,284) and net asset value at the period end stood at £46,634,255 (30 April 2002: £25,158,735). We are pleased with these results. Our announced strategy in entering into the merger was to add profits to our valuable asset base, and I believe that the results for the period under review show that this has been successfully achieved. Balance Sheet Total group assets were £131.7m as at 31 October 2003. The value of investment properties held at the year end was £89.9m (with £45.7m Residential and £44.2m Commercial). In addition, the Commercial Division had £18m as work in progress on developments under construction. Bank debt stood at 55% of gross assets. At 30 April 2002, net debt, being borrowing less cash, stood at 69% of property value. Profit and Loss Account Profit before tax for the period of 18 months to the period 31 October 2003 amounted to £5,092,831 (year to 30 April 2002: £53,284). In the 6 months to 31 October 2002 and in the 6 months to 30 April 2003 pre tax profits amounted to £75,000 and £2,145,000 respectively. Dividend Maintaining our progressive dividend policy and reflecting our confidence in the future, your directors have decided to recommend a 15.4% increase in the six monthly dividend to 0.15p per share, to be paid as a final dividend. If approved it will be paid on 12 March 2004 to shareholders on the register at 5 March 2004. This dividend compares to the dividend of 0.13p per share paid in respect of the half year to 30 April 2003 and the dividend of 0.125p per share in respect of the half year to 31 October 2002. Current and Future Trading As can be seen from the operational review following, I believe that the Group has made substantial progress and secured opportunities with excellent future potential. We are excited about our prospects, and believe that we are capable of delivering very significant increases in shareholder value over time. Robert F M Adair Chairman 15 January 2004 OPERATIONAL REVIEW The 18 months to 31 October 2003 has been an eventful period in both the Commercial and Residential Divisions. Commercial Division This Division has made significant progress in the period. The property development process by its very nature takes time to generate added shareholder value or cash flow with the result that published accounts covering a short period cannot always meaningfully state the real underlying progress being achieved. This period, seen in this light, has been a period of considerable activity - the benefits of much of this activity will come in the future. In the period to 31st October 2003 transactions of note were - The sale of the Cube - being 24,400 sq ft of new office space in Newcastle to a firm of solicitors at a price of £4.65m. - The sale of our factory outlet centre at Rowsley to a private investor for £8.6m, a figure well in excess of our carrying cost of £6.5m. - The completion of 64 Clarendon Road, Watford, a 67,000 sq ft office complex pre-let to AWG and pre-sold to NPI. - The completion and occupation by Virgin Active of a 45,000 sq ft leisure facility in Essex. Our current intention is to hold this investment as it is now reversionary. - The sale of our car showroom property in St Albans for £1.2m (compared to our carrying cost of £0.96m) where we had obtained planning consent for residential use. - The sale of an office block of 12,750 sq ft on Teesdale for £2.4m showing a profit of £0.7m. This is the latest of several successful developments in a location where we have a further 6.5 acres of development land. - The sale of our let office investment, Fulwood Place for £4.16m. Tenant demand has remained somewhat subdued, sentiment not being aided by the Iraq war. Our office developments at Colston 33 in Bristol and Westminster House, Teesside have continued to attract tenant interest. Office developments at numbers 11 and 16 Berkeley Street in Mayfair (respectively of 17,600 sq ft and 34,000 sq ft) were completed in the summer and tenant interest is now in evidence. We see the West End market as likely to be one of the first to see an improvement. Looking to the future new developments where construction started in the period were - 34 Clarendon Road, Watford, being a 25,000 sq ft refurbishment of an existing office building. This will deliver high quality space with car parking considerably in excess of that allowed on new developments in the area. - A mixed partly pre-let or pre-sold scheme in Guildford consisting of retail, fitness centre and a 'creche' totalling 43,200 sq ft plus 42,000 sq ft of small office units in joint venture with HSBC. Through its three offices in London, the North East and South West, the Division has concentrated on developing expertise and contacts in particular geographic areas. The Group actively seeks partnerships either with landowners, particularly in the public sector, or private equity investors where it wishes to either spread the risk or earn an enhanced return from the project. This is evidenced by some of the new projects which we have secured which are on a 'preferred developer' or on a subject to planning basis. The pipeline of future projects is now considerable. Besides the 'preferred developer' status of Baltic Business Park, Gateshead and Templar House, Bristol, we have during the period secured similar status for schemes in Swansea and Middlehaven, Middlesbrough all with the public sector. In addition, conditional contracts have been signed for developments in Darlington and West Lothian while an industrial scheme at Tunbridge Wells for 170,000 sq ft is expected to be on site in the spring of 2004. Residential Division During the year to 30 April 2002, the group began shifting the balance of its residential portfolio towards Scotland and the North of England and this policy was continued during the period to 31 October 2003. In addition, having seen a sustained period of exceptional growth in residential property values, it was decided to reduce the size of the portfolio by selective selling to focus on higher yielding properties in less expensive areas. The largest such transaction was a disposal of 223 residential units in Edinburgh and the North East of Scotland to Blueroom Properties Limited. The most significant acquisition made in the period was Sallyport House, Newcastle Upon Tyne, a recent development of 43 flats acquired at a price, which we believe, left us room for considerable future growth. Property management continued to be carefully monitored. Rent collected was seldom less than 99% of rent due in each month, maintenance costs continued to be driven down and, while rents in Scotland tended to be static, (but providing a higher yield to value than in England), in England increases obtained on reviews were generally in the region of 10%. At 31 October 2003 the group held a total of 585 residential units with a value of £45.7 million. Of these units 337 were located in Scotland (of which 279 are in Glasgow and the West of Scotland), having an average value of £66,801, and 248 in England and Wales, with an average value of £93,550. Across of the whole portfolio the average value was £78,141. The group believes that property in the lower middle range of market values is better shielded from sudden changes in interest rates and general economic factors. Since the period end, the Group has continued to make selective disposals and has acquired 24 units in Paisley, near Glasgow Airport. The Group is also in advanced negotiation with a view to the acquisition of land with future potential for housing development in Scotland. D. Ross Macdonald, Joint Managing Director Nigel J C Turnbull, Joint Managing Director 15 January 2004 GROUP PROFIT AND LOSS ACCOUNT for 18 months from 1 May 2002 to 31 October 2003 18 months to Year to 31 October 2003 30 April 2002 £ £ TURNOVER Group Ongoing operations 6,814,673 4,843,558 Acquisitions 32,831,682 ------------- ------------ 39,646,355 4,843,558 Share of joint venture 3,981 ------------- ------------ 39,646,355 4,847,539 GROUP OPERATING PROFIT Ongoing operations 2,285,262 1,889,763 Acquisitions 1,010,052 ------------- ------------ 3,295,314 1,889,763 Share of joint venture profit 678 ------------- ------------ TOTAL OPERATING PROFIT 3,295,314 1,890,441 Continuing operations Gain/(loss) on disposal of other fixed asset investments 22,996 (6,577) Net gain on disposal of investment property 7,123,244 1,090,444 Permanent diminution of an investment property (300,000) Discontinued operations (Loss)/gain on liquidation of former subsidiary (4,321) 2,652 Provision for unlisted investments (201,507) (101,940) Interest receivable 490,103 56,759 Interest payable (5,332,998) (2,878,495) ------------- ------------ PROFIT ON ORDINARY ACTIVITIES BEFORE TAX 5,092,831 53,284 Taxation charge (872,196) (27,629) ------------- ------------ PROFIT ON ORDINARY ACTIVITIES AFTER TAX 4,220,635 25,655 Minority interest (150,123) ------------- ------------ PROFIT ATTRIBUTABLE TO MEMBERS OF PARENT COMPANY 4,070,512 25,655 Dividends (624,487) ------------- ------------ TRANSFER TO RESERVES 3,446,025 25,655 ============= ============ Earnings per share - basic and diluted 3.033p 0.038p ============= ============ GROUP BALANCE SHEET at 31 October 2003 31 October 2003 30 April 2002 £ £ FIXED ASSETS Intangible assets Positive goodwill 2,583,058 371,240 Negative goodwill (1,307,356) (4,167,242) ------------- ------------ 1,275,702 (3,796,002) Tangible assets 89,875,057 74,943,556 ------------- ------------ 91,150,759 71,147,554 Investments Joint Venture - share of gross assets 47,500 - share of gross liabilities (40,211) ------------- ------------ 7,289 Other fixed asset investments 1,138,222 278,581 ------------- ------------ 1,138,222 285,870 ------------- ------------ 92,288,981 71,433,424 CURRENT ASSETS Work in progress 18,046,537 Debtors 7,298,376 7,038,069 Cash at bank and in hand 14,048,620 1,905,211 ------------- ------------ 39,393,533 8,943,280 CREDITORS: Amounts due within one year (41,585,173) (4,182,355) ------------- ------------ NET CURRENT ASSETS (2,191,640) 4,760,925 ------------- ------------ TOTAL ASSETS LESS CURRENT LIABILITIES 90,097,341 76,194,349 CREDITORS: Amounts due after more than one year (42,986,307) (51,035,614) PROVISION FOR LIABILITIES AND CHARGES (476,779) ------------- ------------ 46,634,255 25,158,735 ============= ============ CAPITAL AND RESERVES Called up share capital 3,079,508 1,487,073 Deferred consideration 192,551 192,551 Share premium account 11,822,703 9,908,302 Revaluation reserve: investment properties 13,396,853 9,486,716 other 6,008 4,121 Capital redemption reserve 821,230 792,025 Merger reserve 8,227,582 9,281,908 Profit and loss account 8,985,565 (5,993,961) ------------- ------------ 46,532,000 25,158,735 Minority interests 102,255 ------------- ------------ 46,634,255 25,158,735 ============= ============ NOTES 1. The financial information set out in this announcement does not constitute the company's statutory financial statements for the periods ended 30 April 2002 and 31 October 2003. 2. This financial information is extracted from the financial statements of the group for the period ended 31 October 2003 which were approved by the board of directors on 14 January 2004. 3. The calculation of basic and diluted profit per ordinary share is based on the following: 18 months to 12 months to 31-Oct-03 30-Apr-02 £'000 £'000 Surplus 4,071 26 ========= ========= The weighted average number of ordinary shares in issue during the period: Basic 134,207,985 66,637,201 Dilutive potential ordinary shares arising from share option schemes - - ----------- ---------- 134,207,985 66,637,201 =========== ========== 4. Copies of this announcement are available, free of charge, for a period of one month from Noble & Company Limited, 1 Frederick's Place, London, EC2R 8AB. Copies of the full financial statements will be posted to shareholders as soon as possible. Contacts: Ross Macdonald, Joint Managing Director, Terrace Hill Group PLC 0141 332 2014 Alasdair Robinson, Noble & Company Limited, 0131 225 9677 Hugo de Salis, St Brides Media & Finance, 020 7242 4477 This information is provided by RNS The company news service from the London Stock Exchange

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