Final Results

Workspace Group PLC 24 June 2002 WORKSPACE POSITIONED FOR FURTHER GROWTH AS IT REPORTS SOLID PERFORMANCE Workspace Group PLC ('Workspace') today announces its preliminary results for the year ended 31 March 2002. Workspace provides approximately 4.8 million sq. ft of flexible business accommodation for over 3,200 small and medium size enterprises ('SMEs') in London and the South East. • Trading pre-tax profits up 21% to £11.5 million (2001: £9.5 million) • Net asset value per share up 15.3% to £13.53 (31 March 2001: £11.73) • Trading earnings per share up 19.7% to 52.8p (2001: 44.1p) • Valuation surplus £26.9 million - equivalent to £1.65 per share • Annual rent roll £29.6 million (31 March 2001: £24.94 million)* • Like for like occupancy levels remain stable at 91.0% • Average rents increased to £7.20 per sq. ft (2001: £6.39)* • Turnover up 7.9% to £39.1 million (2001: £36.2 million) • Final dividend of 18.5p - Total dividend up 10.4% to 25.5p (2001: 23.1p) • Leading IPD performance continues * Excludes Midlands portfolio sold in June 2001 Commenting on the results, Harry Platt, Chief Executive, said, ' Workspace has had another excellent year. Occupancy levels have remained high, enquiries were strong and growth in rents and asset values has been encouraging. ' Our market is huge. There are 3.7 million businesses in the UK, of which 1.1 million employ one to 25 people. 35% are based in London and the South East, with over half of these in London itself. Workspace is the largest provider of mixed accommodation to SMEs in London. However, our market penetration is still very low, and this presents us with a significant opportunity. We acquired £60 million of property this year in our core market locations. We can now offer even greater choice to our customers. ' Looking forward, the prospects for Workspace are bright. Our portfolio has excellent potential for further growth and the SME market is strong and vibrant. We have the funding to acquire more properties that will enhance our leading position in the market.' -ends- Date: 24 June 2002 For further information: Workspace Group PLC City Profile Group Harry Platt, Chief Executive Simon Courtenay Mark Taylor, Finance Director Ed Senior 020-7247-7614 020-7448-3244 e-mail: info@workspacegroup.co.uk e-mail: simon.courtenay@city-profile.com web: www.workspacegroup.co.uk Chairman's Statement Results I am pleased to be able to present the eighth successive year of record financial results since our flotation on the London Stock Exchange in December 1993. Rental income for 2001/02 was £30.9m, up 8.2% on the previous year, while turnover was up 7.9% to £39.1m. With occupancy stable throughout the year these increases are attributable primarily to rental growth. Profit before tax from trading operations increased by 21.1% to £11.5m. Trading earnings per share were 52.8p, up 19.7%.. The value of the Group's portfolio increased to £414.7m following £71.2m of acquisitions and capital expenditure on properties, £48.0m of disposals and increases on valuation of £26.9m. This has resulted in an increase in net asset value per share of 15.3% to £13.53. The Group's performance has again been assessed by the Investment Property Databank (IPD) - the standard industry benchmark - and the results confirm that our outstanding record of outperformance continues. They show an ungeared total annual return for our portfolio of 17.4%, against the IPD All-Fund performance of 7.0%. We achieved top or first percentile ranking when viewed over one, three, five and eight years. Dividend The Board recommends a final dividend payment of 18.5p, making 25.5p for the year - an increase of 10.4% over last year. The business year We serve small and medium-sized enterprises (SMEs) - a sector which is dynamic, innovative, thriving and resilient. It has shown all these characteristics in what has been a year of economic uncertainty. The Group's success over the past 15 years stems from its understanding of this sector's changing needs and the ability to move quickly to meet them. It is to the great credit of management and staff, and the well-developed business model, that in this challenging year occupancy has remained at 90%, rental levels have continued to increase and the value of the property portfolio has grown proportionately. The Board regards as imperative the need to keep the Workspace offer at the forefront of our market. This year we have seen the rollout of our digital services products to many of our London business centres to support broadband communications and internet services. A voice service using the same fibre network is currently being examined. Other business services we offer to customers include insurance, energy and telecommunications. Combined with our core product of short, flexible leases and an easy in/easy out approach in interesting, affordable space, this adds up to the best and broadest offer to the SME sector in London and the South East. Such an excellent offer needs communicating to the market and we have stepped up our marketing and letting activities with new ideas, materials, advertising and promotions. The Group's continued profitable growth is clear evidence of the commercial success of these activities. The ability to market and manage our properties effectively is critical to our success. So too is our property investment activity. The Board has always critically reviewed the portfolio with the objective of ensuring the best value from either continued growth as managed workspace or change of use/ redevelopment. The Board does not extend the Group into activities where its skills are limited. We have always focused on our strengths and our policy is to work with specialist partners where opportunities outside managed workspace arise from our estates. This approach has led to some significant successes in recent years, with scope for more to come. Trading out of lower growth assets into areas of higher potential continued apace in the year with the finalisation of the sale of our Midlands portfolio in June 2001 for £42.3m. We reinvested those funds - plus those from further sales of £6.8m - into £59.6m of new assets in the South East. This focus on the region of highest growth, where we have a major presence, plays to our strengths of space management, market knowledge, direct management and marketing, and to our well-tuned acquisition activity. The market for new, suitable acquisitions has been competitive. Nevertheless, the Group's network and reputation for delivery has ensured a steady stream of excellent opportunities and acquisitions, which we report fully later. The Board also keeps under constant review our funding arrangements - the other major component of our business model. As a property investment company with the clear aim of growing shareholder value Workspace Group has always seen great virtue in using debt at sensible gearing levels to acquire new properties. No significant new equity has been required - and therefore raised - since 1994 and the over four-fold increase in our net worth to £221.3m has been achieved on borrowing alone. With this record and having proven to the lending market the reliability of our rental income stream, we are now able to borrow at better terms than ever before. This year the property loan facility with National Westminster Bank has been extended from £33 million to £100 million. With its improved standing the Group is developing further borrowing initiatives. It may be repetitive to say so, but this has been yet another year of significant achievement - confirmed by our consistent year-on year-growth. The effort and drive to achieve and maintain this comes from the team at Workspace Group. We are a property-based business but what makes us different is our people. Their ideas, skills and enthusiasm make Workspace Group the successful investment it is. My thanks go to them all. Prospects Workspace Group has a clear strategy of providing space to small and medium-sized enterprises in London and the South East - a market in which it is the leading provider. Its clear focus on creating shareholder value has consistently produced performance levels among the best in the sector. The Group works constantly on maintaining this record and the current year has started most encouragingly. I am confident that we have the strategy and the team to continue this progress in this new year and into the future. Operating Review Once again, we have exceeded our targets for the year and delivered I.P.D first percentile performance (the standard industry benchmark). At the same time we have refocused our activities to concentrate solely on London and the South East - further strengthening our position in what has always been our core region. With the continuing growth and regeneration of London, rental and asset growth is reinforced, as is the opportunity for adding value from redevelopment. Trading Review It is pleasing to present results that include improvements in rental levels, stable occupancy and growing asset values - particularly in a year which presented significant challenges for many of the Group's small and medium-sized enterprise (SME) customers. The Group has also succeeded in reinvesting the proceeds of the sale of its Midlands portfolio in London-based properties with excellent potential. The Group's business model is simple. It focuses on providing small unit accommodation to new and small businesses. There are 3.7m businesses in the UK, of which 1.1m employ one to 25 people. Around 35% are based in London and the South East, with over half of these in London itself. London alone accounts for 20% of business start-ups and closures in the UK each year and sees greatest growth in the higher 'value-added' activities. Therefore the Group is now focused on those areas where its target markets are most active. By a significant margin the Group is the largest provider of mixed accommodation to SMEs in its target areas. However, with just 3,247 customers at 31 March 2002 its market penetration is still very low. By focusing its activities in London and the South East the Group has increased brand awareness which has had a ratchet effect on tenant enquiries. With clusters of properties now held in key locations throughout London the Group is able to offer greater choice to its customers and is better able to support their changing requirements as their businesses develop. Our new customers are often people looking to move from a home environment to more formal business premises. Many of them will, in time, relocate within our portfolio as their need for space increases. Churn - the formation, expansion, reduction and closure of businesses - is a key characteristic of the SME market. It provides us with new tenants, the relocation of others, and creates a continuing opportunity to review and increase rents. During the year under review we received 4,792 enquiries which yielded 738 new lettings. The principal generators of enquiries continued to be estate signboards and referrals from existing tenants. These enquiries are crucial to the Group's success: not only do they provide new lettings but they are also an indication of levels of activity within the SME sector and industry sub-sectors, enabling us to effectively focus our offer on emerging 'value-adding' businesses - those best able to pay improving rents. With its in-house management operations - lettings, estate management and credit control - the Group is attuned to the flexibility needed by the SME marketplace. This enables us to foster close contact with our customers, to monitor changes in the market and to maintain exacting standards. We try to work closely with our customers and to understand and be responsive to their needs. This is reflected in our flexible leasing approach and through a combination of entry and exit interviews and active centre management. These intensive management skills have been essential in a year of many challenges for our customers, during which we have been able to maintain like-for-like occupancy in the 89% to 91% range - a level which the Group regards as effective full occupancy. Low vacancy rates and continuing high levels of enquiries have aided the rental review programme and improved rentals on re-lettings (approximately 40% of the Group's portfolio is subject to rental review or re-letting each year) with the result that rents have again increased strongly throughout the year. On a like-for-like basis, the increase over the year was 9.0% (2001: 15.3%) from £6.68 to £7.28 per sq ft. The rolling rent review and lease renewal programme continued and in the year impacted on 16% of the opening rent roll (excluding Midlands properties). The uplift achieved during the year of £1.5 million on reviews and renewals represents a 38% increase on previous passing levels. Once again the Group achieved a substantial outperformance of the IPD benchmark. This illustrates not only the good returns obtainable from its property holdings but also the lower levels of volatility in its particular sector compared with commercial property more generally. The most significant event of the year was the disposal for £42.3m of the Group's Midlands portfolio and the subsequent reinvestment of the funds realised into London and the South East. The Midlands portfolio, which was acquired in 1994 had been a steady performer. Given the prospects of much greater growth in London and South East and our focus in improving shareholder returns, the Board decided to concentrate its investment in these areas. During the year we made acquisitions totalling £59.6m. Details of these acquisitions and sales are given later. With a total reversionary income of £7.37m it is anticipated that the return from these properties will reach 10.0% over the next couple of years. Consequently, while the switch from the Midlands has had the anticipated impact of diluting earnings growth in 2001/02, in the current year this will be clawed back as returns improve. Following this investment activity focused around central and west London, at 31 March 2002 the Group held 87 properties comprising 4.8m sq ft with an average capital value of £78 per sq ft and an average rental value of £7.20 per sq ft. Of this portfolio nearly 50% (by area) is located within 5 miles of the London Eye and 80% within the M25 Portfolio During the year the Group secured 13 acquisitions and made five disposals. Quality Court was acquired with a view to offering affordable managed office accommodation in Central London. It will be connected to the Group's digital network and offer office suites for short-term let. The product offering is little different to that provided by the Group's existing business centres - other than that it is located in 'edge-of-prime' space. Another centrally located property was acquired at Clerkenwell Workshops. Three acquisitions were completed in South London. Surrey House is located immediately adjacent to the Group's Great Guildford Street centre in Southwark and is currently let to the Inland Revenue. The expiry of this tenancy in five years' time will provide expansion space for this thriving centre in an emerging location. The Group also acquired Union Court in Clapham and Kingsmill in Kingston - a development with Greater London Enterprise (GLE) which was completed shortly before the year-end and is currently being marketed. The Group has increased significantly its offering to customers in West London. Westwood Business Centre, Europa House and School Road are all located close to the Group's existing Acton Business Centre. Likewise, Westbourne Studios and Ladbroke Hall are close to Pall Mall Deposit, Grand Union Centre and the Shaftesbury Centre. This clustering of properties helps us to provide a range of space to customers wishing to relocate - both in terms of size and standard of accommodation. Westbourne Studios is a new development which wraps around the A40 Westway, with office pods either side of the flyover and an exhibition area under it. This centre is focused on the media and links well with the Group's Soho and 3 Mills Studios properties. In addition to these properties, a further business centre, Windmill Business Centre, was acquired in Hanwell. Two acquisitions were made in the eastern region: Alpine Way, Beckton, and Harlow Enterprise Park, a small industrial park in Harlow, Essex. The Alpine Way development shows how closely the Group works with its customers. EMT, a long-standing tenant in the distribution sector, had grown to the stage where it occupied 43% of the units at Bow. Further expansion on the estate was not in the interest of landlord or tenant. The Group therefore agreed the forward purchase of a new warehouse unit, under its cooperation agreement with Greater London Enterprise (GLE), and pre-let the space to EMT, who will relocate there on completion. The space at Bow will then be re-let at higher rental values than the current package with EMT. Although acquired separately, collectively these properties complement and extend the Group's existing portfolio and enable us to improve our customer offer. As described earlier, the Group's Midlands portfolio was the principal disposal during the period. We also sold Ashburton Estate, situated on the land earmarked for the proposed new stadium development for Arsenal Football Club. This proposed development had effectively blighted the site and made it difficult to let vacant space. A disposal at full value, excluding the effect of the proposed development, was therefore considered the best course. Arklow Road was sold to a prospective occupier of a significant proportion of the estate. The land at Westminster Business Centre was sold under an option agreement linked to the earlier sale of South Block. The land at Barlby Road had been acquired for £160,000 for use as an overspill car park for Pall Mall Deposit. Various development options have been examined for the site but none yielded as high a site value as that offered by the purchaser. All disposals during the year were achieved at levels in excess of the book value. Following these acquisitions and disposals the total value of the Group's portfolio was £418.5m. Short leasehold assets (Alpha Business Centre, cost £1 value £0.3m) are included in the accounts at cost. Further, property used for Group occupation (Magenta House, value £1.8m) is reported as a fixed asset. Adjusting for these and land held for disposal at 3 Mills, treated as stock, the net value of the Group's portfolio for accounts purposes was £414.7m. The valuation was conducted by Insignia Richard Ellis in compliance with the Practice Statements contained in the Appraisal and Valuation Manual prepared by the Royal Institution of Chartered Surveyors on the basis of open market valuation as defined in Statement 4. For properties held throughout the year (comparing their value at 31 March 2001, plus additions and improvements at cost, with that at 31 March 2002) the uplift was £26.3 million or 8.07%. A further uplift of £0.6 million or 0.92% arose from acquisitions. Again, the Group's performance exceeded the IPD All-Fund benchmark by a wide margin, achieving highest levels. As may be seen from the table below the ungeared performance of our portfolio, when compared with IPD (Investment Property Databank) returns, was top or first percentile over all periods. One Three Years Five Eight Total Return (p.a.) Year Years Years Workspace Group 17.4% 21.9% 21.8% 19.4% IPD All Fund 7.0% 11.1% 12.6% 11.3% Workspace Group Percentile Rank 1st top 1st top The Group has consistently outperformed the IPD index in all periods since this benchmarking was initiated. Improvements in valuation arise partly from market movements but also as a result of value-adding activity through acquisition, management and refurbishment/redevelopment. Comparison against indices such as these segregates simple market movement from our value-adding activity. With its top-ranking performance the Group has demonstrated its consistent ability to generate enhanced returns from its investments. The Group's core activity is investment in and letting of small unit accommodation. As such it is not a property development company but will, when appropriate, engage and work with partners in development activities to improve the quality of the assets it holds, and hence the return from these assets. During the year the Group obtained planning consent for the proposed residential development at the Bridport site on some vacant land at 3 Mills. It also submitted applications for schemes at Thurston Road; Hooley Lane, Redhill; Barley Mow; the Leathermarket; and Artesian Close. The development of 3 Mills will be undertaken by Copthorn Homes, under a sale agreement providing for both an initial payment for the land and an overage payment depending on the outcome of the development. The proposals at Thurston Road and Redhill are for retail and residential developments respectively. As such the Group will seek a partner or purchaser for these sites once the 'added value' has been secured through the granting of planning consent. The proposal at Barley Mow has been developed jointly with the local authority and includes the existing library site as well as part of the Barley Mow site. The scheme extends to the demolition of the existing library and the construction of a new facility with business centre space over it. As a major project this will require a substantial pre-development process. A number of other projects are under examination across the Group's properties. Many of these schemes respond to the call - both from the Government in its White Paper and the Mayor of London in his Plan for London - for more intensive use of land with mixed-use developments. It is anticipated that a number of proposals for the replacement of existing properties with mixed-use schemes, including new centres with residential and live-work space, may arise over future periods. Services The Group has for a number of years extended its service offering beyond accommodation alone. On a number of estates we provide gas and electricity - currently to 1100 customers - and our business insurance programme now has over 500 customers. Our insurance offering has won two awards, 'Broker Initiative of the Year' at the British Insurance Awards (1999) and the Insurance Age 'Awards 2000' for its risk management programme. Many of the Group's customers have benefited from the programme; some by the attractive pricing and extended range of cover, some by obtaining cover where other insurers had refused the risk. Some simply benefit by being able to negotiate better terms from their existing insurer. In setting its priorities for 2001/02 the Group targeted an extension of its customer offer through the introduction of digital services at a number of its properties. Vylan, an initiative to provide customers with the latest broadband technology on a rental basis, was launched in June 2001 with a pilot study at three properties: Great Guildford Street, Pall Mall Deposit and Leathermarket. Connections were also made at Westminster Business Square and Archer Street. The Group has also linked its head office at Magenta House and 3 Mills Studios to the network since there were clear benefits from such connections. The Vylan pilot study showed, as anticipated, that new customers had greater interest in the offering than existing customers, and that a number of existing tenants expressed an interest but have to complete existing service contracts. It demonstrated how our core product can be enhanced, and confirmed that, with the use of internet and broadband becoming more extensive, the Group will have a letting advantage at these 'enabled' properties. In view of this, the Board confirmed the extension of the project to the main phase, incorporating a further 14 properties - bringing the overall total to 21, representing 1.9m sq ft in almost 2000 units. At the year end the wide area network was almost complete and the cabling of properties had commenced. The provision of services at these properties is scheduled to come on-stream during the summer of 2002. At the same time approval was given for the investigation of the use of the network to carry voice traffic. During the year a survey of customers was undertaken together with focus group meetings at a number of properties. Alongside the Group's routine entry and exit interviews, these have confirmed that over 90% of tenants would recommend the Group to others. It identified also that 60% of our tenants employ five or fewer staff with the majority of the remainder employing fewer than 20 staff. 78% of customers had been trading for more than three years with just 6% being start-ups (trading for less than one year). Financial Review Profits Trading profits before tax at £11.46 million are 21.1% ahead of last year. In addition, profits on disposals yielded £0.57m (2001: £10.06m). Trading earnings per share increased by 19.7% to 52.8p. The valuation surplus of £26.86 million represents £1.65 per share, taking the net asset value at 31 March 2002 to £13.53 per share (2001: £11.73), an increase of 15.3%. This continues the unbroken pattern of growth delivered by the Group since its flotation in December 1993. 2001/2002 2000/2001 Compound growth growth growth 1997 - 2002 Improvement in Trading PBT 21.1% 13.6% 18.9% Improvement in Trading EPS 19.7% 9.8% 16.4% Improvement in dividends per share 10.4% 10.0% 11.2% Improvement in NAV 15.3% 29.8% 26.6% Overheads have increased as a percentage of turnover from 13.8% to 15.3% mainly due to start up costs for Vylan and increased staffing costs. Net interest reduced during the year by £1.12 million. This reduction was attributable to a combination of lower interest rates and the benefit of lower borrowing levels for part of the year following the disposal of the Midlands portfolio. Interest costs of £0.24 million (2001: £1.14 million) were capitalised during the year. The Group considers that, with its careful focus on asset values underpinned by six-monthly independent valuations, its policy of capitalising interest presents no risk of overstatement of asset values. Taxation The effective rate of Corporation Tax in 2002 was 25.5% (2001: 31.9%). The effective rate excluding surpluses on property disposals was 25.5% (2001: 25.9%). Prior year values have been restated to take into account the impact of FRS 19 the application of which has obliged recognition, for the first time, of deferred taxation liabilities on accelerated capital allowances. This has had the impact of reducing Net Asset Value per share at 31 March 2002 by 19 pence per share (restated 2001: 20 pence). Dividend A final dividend of 18.5p per share is proposed. The interim dividend was 7.0p per share, and so the total dividend proposed for the year is 25.5p (an increase of 10.4%). The dividends are covered 2.14 times by earnings (2.04 times if based on trading income only). Internal performance measures Internal benchmark comparison shows: Performance measures 2002 2001 2000 1999 1998 Turnover per member of staff (£000) 294 272 277 277 247 Year-end investment in property per member of staff 2,984 2,581 2,340 2,268 1,967 (£000) Administration costs as a percentage of revenue 15.3% 13.8% 14.5% 15.1% 14.2% Total return on equity 20.6% 40.7% 36.9% 36.3% 32.5% Return on equity is computed by reference to pre-tax profits plus valuation surpluses/deficits divided by opening shareholders' funds (allowing for share capital increases during the year). Our target is to achieve over a 20% return on equity year on year, and in due course (with expansion of the portfolio), to maintain administration costs as a percentage of revenue at below 12% Financing The Group again increased and extended its property loan facility with National Westminster Bank from £33 million to £100 million with a maturity of 5 years at an interest rate margin of 0.95% over LIBOR. The Group also holds a £2.5 million overdraft facility with National Westminster Bank at an interest rate of 1.1% over base. At the year-end the Group's facilities and drawings thereon were: 2002 2002 2002 2001 Facility Agreement Drawn % Drawn £m £m £m Debenture Stock 19.5 19.5 11% 19.5 Convertible Loan Stock 2.9 2.9 2% 4.0 WestLB Loan 122.0 114.5 64% 115.9 NatWest Property Loan 100.0 44.5 25% 21.5 NatWest Overdraft 2.5 2.8 1% 1.8 Deposits - (5.8) (3%) (5.6) ________ ________ ________ ________ 246.9 178.4 100% 157.1 ________ ________ ________ ________ With the planned investment programme it is anticipated that additional facilities of approximately £80 million will be sought in 2002/03. Borrowings over recent years 2002 2001 2000 1999 1998 % Fixed/hedged 77% 89% 93% 93% 59% Average interest rate (year end) 5.3% 6.99% 8.48% 8.91% 9.56% Interest cover 2.15 2.70 1.87 2.32 1.98 Trading Interest Cover 2.09 1.82 1.72 2.11 1.88 Year-end gearing % 81% 83% 104% 63% 85% Year-end gearing remained steady at 81%, as borrowing increases were covered by valuation surpluses in the year. Both gearing and interest cover levels are within the levels historically set by the Board of 120% and 1.5 times. The Board again examined the possibility of redeeming or replacing its original £19.5 million Debenture Stock, which carries high coupons averaging 11.30%. This initiative was not pursued due to the potentially high cost of redemption. However, holders of £1.14m of the Group's Convertible Loan Stock converted this stock into equity shares, giving rise to the issue of 228,000 shares during the year. The Debenture and Convertible Loan Stock represent just 13% of total borrowings. The maturity of net debt at 31 March 2002 is shown below: - 2002 2001 Maturity of net debt % % Under 12 months 1% - 1 - 5 years 34% 23% 5 - 10 years 65% 29% 10 years + - 48% Total 100% 100% At 31 March 2002 the average cost of floating rate funds was a margin of 1.0% over LIBOR or base rate (2001:1.02%). At 31 March 2002 the secured borrowings were covered 2.24 times by the value of charged property (with a further £11.8 million uncharged giving an overall cover of 2.31 times). Balance Sheet and Cash Flow The Group's net current liabilities at 31 March 2002 were £18.84 million (2001: £18.59 million). Current liabilities include tenants' deposits in the form of advance rent payments and quarterly and monthly rents and service charge payments in advance amounting in aggregate to £9.2 million (2001: £8.2 million). The Directors consider that in the normal course of business these liabilities are unlikely to require payment and properly form part of the working capital of the Group. Net cash inflow for operating activities at £23.4 million (2001: £22.8 million) improved, principally due to the contribution from the newly acquired properties together with increased profitability from existing properties. Acquisitions 2001/2002 Name of Property Description Purchase Price Initial Actual Market Rent Income £000 at 31/03/02 £000 £000's Harlow Enterprise Centre, Freehold, 51,851 sq. ft , Harlow single storey industrial estate 3,600.0 344.3 371.7 Quality Court, London WC2 Freehold, 24,102 sq. ft 4,220.0 - - office building £5.6m (development + costs to come) Westwood Business Centre Freehold, 68,530 sq. ft 98 Victoria Road, Acton NW10 mixed industrial and offices 5,450.0 389.4 572.4 Europa Building, Acton NW10 Freehold 27,592 sq. ft 2,500.0 120.0 385.5 industrial building Windmill Place, Hanwell Freehold 25,881 sq. ft business 3,350.0 305.0 484.4 centre Middlesex Surrey House, London SE1 Freehold 16,869 sq. ft offices 5,000.0 335.0 395.3 Clerkenwell Workshops Freehold 54,598 sq. ft business 9,100.0 109.0 882.5 centre London EC1 Union Court, Clapham SW4 Freehold 67,427 sq. ft business 6,500.0 301.0 738.9 centre Alpine Way, Beckton, E6 Freehold, 1.75 acre site 1,200.0 for 35,000 sq. ft warehouse (£2.4m - - development costs + to come) Westbourne Studios Long leasehold 56,816 sq. ft 12,250.0 807.0 1,471.5 business centre Ladbroke Grove, W10 School Road, Acton, NW10 Freehold, 2,895 sq. ft 245.0 24.0 -* industrial unit Ladbroke Hall, London W10 Freehold, 15,250 sq. ft 1,940.0 134.3 238.4 business centre Kingsmill Business Park, Long leasehold, 42,450 sq. ft development of small B1 units Kingston-upon-Thames 4,200.0 - 631.7 Total 59,555.0 2,869.0 6,172.3 (with development (with £1.2m on costs of £8.0m letting of development to come) properties) * included in Europa Building + properties under development Disposals 2001/2002 Name of Property Disposal Price Exit Annual Income £000 £000 Midlands Portfolio 42,300.0 4,361.2 Ashburton Trading Estate, London N7 2,800.0 230.0 Arklow Trading Estate, London SE14 2,900.0 114.9 Land at Westminster Business Square, SE11 500.0 - Land at Barlby Road, W10 600.0 - Total 49,100.0 4,706.1 Consolidated Profit and Loss Account for the year ended 31 March 2002 2002 2001 Notes Trading Other Total Trading Other Total Operations Items £000 Operations Items (Restated) £000 £000 (Restated) (Restated) £000 £000 £000 Turnover - continuing operations 2 39,083 - 39,083 36,222 - 36,222 Rent payable and direct costs 2 (11,172) - (11,172) (10,258) - (10,258) _____ _____ _____ _____ _____ Gross Profit 27,911 - 27,911 25,964 - 25,964 Administrative expenses (5,964) - (5,964) (4,988) - (4,988) _____ _____ _____ _____ _____ Operating profit 21,947 - 21,947 20,976 - 20,976 Surplus on disposal of investment 3 - 567 567 - 10,063 10,063 properties Interest receivable 4 333 - 333 418 - 418 Interest payable 5 (10,819) - (10,819) (11,934) - (11,934) _____ _____ _____ _____ _____ Profit on ordinary activities before 11,461 567 12,028 9,460 10,063 19,523 taxation Taxation on profit on ordinary activities 6 (2,927) (141) (3,068) (2,447) (3,791) (6,238) _____ _____ _____ _____ _____ Profit on ordinary activities after 8,534 426 8,960 7,013 6,272 13,285 taxation Equity Minority Interests - - - - - - Profit attributable to shareholders 8,534 426 8,960 7,013 6,272 13,285 Dividends 7 (4,192) - (4,192) (3,723) - (3,723) _____ _____ _____ _____ _____ Retained for the year 4,342 426 4,768 3,290 6,272 9,562 _____ _____ _____ _____ _____ Basic earnings per share 8 52.8p 2.6p 55.4p 44.1p 39.5p 83.6p Diluted earnings per share 8 51.7p 2.5p 54.2p 43.2p 37.0p 80.2p Statement of total recognised gains and 2002 2001 losses £000 £000 Profit for the financial period 8,960 13,285 Unrealised surplus on revaluation of 26,863 38,673 investment properties Taxation on valuation surpluses realised (150) (510) on sale of properties _____ _____ Total recognised gains relating to the 35,673 51,448 financial period _____ _____ Prior Year Adjustment (3,128) - _____ _____ Total gains recognised since last annual 32,545 51,448 report _____ _____ Note of historical cost profits and losses 2002 2001 £000 £000 Reported profits on ordinary activities 12,028 19,523 before taxation Realisation of property revaluation gains/ 5,014 2,346 (losses) of previous years Taxation on valuation surpluses realised (150) (510) on sale of properties _____ _____ Historical cost profit on ordinary 16,892 21,359 activities before taxation _____ _____ Historical cost profit for the year 9,632 11,398 retained after taxation and dividends _____ _____ 2001 comparatives have been restated due to the application of FRS 19 (Deferred Tax). See notes 6 and 15. BALANCE SHEETS As at 31 March 2002 Group Group Company Company 2002 2001 2002 2001 (Restated) (Restated) Notes £000 £000 £000 £000 Fixed assets Tangible assets Investment properties 9 414,707 366,525 12,810 44,585 Other fixed assets 3,540 999 233 207 Shares in subsidiary undertakings - - 24 23 Investment in own shares 1,015 1,015 1,015 1,015 ______ ______ _____ _____ 419,262 368,539 14,082 45,830 Current assets Stock: properties for sale 150 - 150 - Debtors 10 6,189 5,844 204,227 125,781 Investments 11 5,443 5,373 - - Cash at bank and in hand 340 206 - - _______ ______ _______ _______ 12,122 11,423 204,377 125,781 Creditors: amounts falling due within one year 12 (30,964) (30,013) (54,011) (35,711) ______ ______ _____ _____ Net current (liabilities)/assets (18,842) (18,590) 150,366 90,070 ______ ______ _____ _____ Total assets less current liabilities 400,420 349,949 164,448 135,900 Creditors: amounts falling due after more than one year (including Convertible Loan Stock) 13/14 (175,730) (158,371) (66,457) (45,040) Provision for liabilities and charges 15 (3,365) (3,128) (1,252) (1,279) ______ ______ _____ _____ 221,325 188,450 96,739 89,581 ______ ______ _____ _____ Capital and reserves Called up share capital 1,648 1,618 1,648 1,618 Share premium account 42,030 40,666 42,030 40,666 Revaluation reserve 144,588 122,739 355 15,703 Profit and loss account 33,059 23,427 52,706 31,594 ______ ______ _____ _____ Shareholders' funds - equity interests 221,325 188,450 96,739 89,581 Equity minority interest - - - - ______ ______ _____ _____ Capital employed 221,325 188,450 96,739 89,581 ______ ______ _____ _____ Net asset value per share 8 £13.53 £11.73 2001 comparatives have been restated due to application of FRS 19 (Deferred Tax). See notes 6 and 15. CASH FLOW STATEMENT for the year ended 31 March 2002 Notes 2002 2001 To cashflow £000 £000 Net cash inflow from operating activities 1 23,429 22,793 Returns on investments and servicing of finance 2 (11,261) (12,371) Taxation (5,564) (3,085) Net Capital expenditure 2 (23,278) (12,994) Equity Dividends paid (3,796) (3,428) Net cash outflow before use of liquid resources and financing (20,470) (9,085) Management of liquid resources 2 (70) 6,051 Financing 2 19,751 4,517 Net cash (outflow)/inflow 3 (789) 1,483 Reconciliation of net cash flow to movement in net debt (Decrease)/Increase in cash (789) 1,483 Increase/(Decrease) in liquid resources 70 (6,051) Outflow from movements in debt financing (18,201) (3,848) Changes in net debt resulting from cash flows 3 (18,920) (8,416) Net debt at 1 April 2001 (157,147) (148,731) Net debt at 31 March 2002 (176,067) (157,147) Notes to the Cash Flow Statement for year ended 31 March 2002 1. Reconciliation of operating profit to operating cash flows 2002 2001 £000 £000 Operating profit 21,947 20,976 Depreciation charges 554 524 Profit on sale of tangible fixed assets - (38) Increase in debtors (976) (202) Increase in creditors 1,904 1,533 _______ _______ 23,429 22,793 _______ _______ 2.Analysis of cash flow: Notes 2002 2001 To cashflow £000 £000 Returns on investments and servicing of finance Interest received 347 391 Interest paid (11,608) (12,762) ________ ________ Net cash outflow (11,261) (12,371) ________ ________ Capital expenditure Purchase of tangible fixed assets (71,761) (48,436) Sale of tangible fixed assets 48,300 35,442 Grants Received 183 - ________ ________ Net cash outflow (23,278) (12,994) ________ ________ Management of liquid resources (Increase)/Decrease in short term deposits 3 (70) 6,051 ________ ________ Net Cash (outflow)/inflow (70) 6,051 ________ ________ Financing Issue of ordinary share capital 1,394 898 Drawdown of Bank Loan 3 23,000 3,103 Repayment of Convertible Loan Stock 3 (1,140) - (Repayment)/Drawdown on mortgage 3 (3,503) 516 ________ ________ Net cash inflow 19,751 4,517 ________ ________ 3.Analysis of Net Debt At 1.4.01 Cash Flow At 31.3.02 At 1.4.00 Cash Flow At 31.3.01 £000 £000 £000 £000 £000 £000 Cash at bank and in hand 206 134 340 201 5 206 Bank Overdrafts (1,844) (923) (2,767) (3,322) 1,478 (1,844) ________ _______ ______ ________ _______ _______ (1,638) (789) (2,427) (3,121) 1,483 (1,638) ________ _______ ______ ________ _______ _______ Debt due within one year: Securitised Loan (2,798) (862) (3,660) (2,529) (269) (2,798) Less Cost of Raising Finance 287 20 307 340 (53) 287 Debt due after one year: 11% Convertible Loan Stock (4,040) 1,140 (2,900) (4,040) - (4,040) 11.125% First Mortgage Debenture (12,500) - (12,500) (12,500) - (12,500) 11.625% First Mortgage Debenture (7,000) - (7,000) (7,000) - (7,000) Securitised Loan (115,177) 4,365 (110,812) (114,930) (247) (115,177) Bank Loan (21,500) (23,000) (44,500) (18,397) (3,103) (21,500) Less Cost of raising of finance 1,846 136 1,982 2,022 (176) 1,846 ________ _______ ______ ________ _______ _______ (160,882) (18,201) (179,083) (157,034) (3,848) (160,882) ________ _______ ______ ________ _______ _______ Short term deposits 5,373 70 5,443 11,424 (6,051) 5,373 ________ _______ ______ ________ _______ _______ Total (157,147) (18,920) (176,067) (148,731) (8,416) (157,147) Notes to the Accounts for the year ended 31 March 2002 1.Basis of Preparation The audited financial information contained in this preliminary announcement report does not comprise statutory accounts within the meaning of Section 240 of the Companies Act 1985. The figures in this preliminary announcement have been prepared under generally accepted accounting policies in the United Kingdom. The accounting policies adopted are those set out in the Annual Report and Accounts for the year ended 31 March 2002 which includes an unqualified report of the auditors. The adoption of financial reporting standards FRS17 'Retirement Benefits' and FRS18 'Accounting Policies', required to be implemented this year, has not had any impact on the reported results and net assets. Adoption of FRS19 'Deferred Tax' has resulted in a restatement of comparative figures and current year charges as detailed in note 15. 2. Segmental Analysis 2002 2001 Gross Gross Turnover Costs Profit Turnover Costs Profit £000 £000 £000 £000 £000 £000 Rental income 30,864 (628) 30,236 28,534 (946) 27,588 Service charges and other recoveries 6,877 (10,211) (3,334) 6,194 (9,047) (2,853) Services, fees, commissions and sundry income 1,342 (333) 1,009 1,494 (265) 1,229 _____ ______ _____ _____ ______ _____ 39,083 (11,172) 27,911 36,222 (10,258) 25,964 _____ ______ _____ _____ ______ _____ All business in the Group was continuing and occurred in the United Kingdom. 3. Surplus on Disposal of Investment Properties The profit arising on the sale of properties is calculated by reference to the book value at the date of sale. Book value comprises the valuation as at 31 March 2001 plus additions at cost since that date. Proceeds from the sale of investment properties totalled £49,112,000. Book value of these assets plus costs of sale totalled £48,545,342 yielding a surplus of £566,658. 4. Interest Receivable The following amounts were earned during the year: 2002 2001 £000 £000 Short term deposits 325 374 Other 8 44 ________ ________ 333 418 ________ ________ 5. Interest Payable The following amounts were payable during the year: 2002 2001 £000 £000 11% Convertible Loan Stock 2011 361 444 11.125% First Mortgage Debenture Stock 2007 1,391 1,391 11.625% First Mortgage Debenture Stock 2007 814 814 Mortgage interest on securitised loan not wholly repayable within five years* 7,486 8,922 Bank and other interest on amounts wholly repayable within five years 1,007 1,501 ________ ________ 11,059 13,072 Interest capitalised on development properties (240) (1,138) ________ ________ Charged to profit and loss account 10,819 11,934 ________ ________ *Net of amortisation of cost of raising finance £549,800 (2001: £352,000) 6. Taxation 2002 2001 (Restated) £000 £000 Current tax: UK corporation tax on profit for the year 2,956 6,219 Prior year adjustments (125) 82 ________ ________ Total current tax 2,831 6,301 Deferred tax: Origination and reversal of timing differences 237 (63) ________ ________ Tax on profit on ordinary activities 3,068 6,238 ________ ________ Timing differences are mainly in respect of capital and industrial allowances and capitalised interest. The tax assessed for the period is lower than the standard rate of corporation tax in the UK. The differences are explained below: - 2002 2001 £000 £000 Profit on ordinary activities before taxation 12,028 19,523 ________ ________ Profit on ordinary activities at standard rate of corporation tax in 3,608 5,857 the UK of 30% (2001: 30%) Capital allowances in excess of depreciation (510) (283) Expenses not deductible for tax purposes 13 13 Interest capitalised (72) (341) Timing differences 20 26 Capital gains adjustments (103) 947 Prior year adjustments (125) 82 ________ ________ 2,831 6,301 ________ ________ 7. Dividends 2002 2001 £000 £000 Interim dividend of 7.0p (2001 - 6.5p) per Ordinary Share 1,143 1,070 Proposed final dividend of 18.5p (2001 - 16.6p) per Ordinary Share 3,049 2,653 ________ ________ 4,192 3,723 ________ ________ The interim dividend was paid on 1 February 2002 and the proposed final dividend is payable on 1 August 2002 to shareholders on the register at the close of business on 5 July 2002. 8. Earnings Per Share and Net Assets Per share The following table shows a reconciliation of profit used in calculating earnings per share. Profits Earnings per share 2002 2001 2002 2001 (Restated) (Restated) £000 £000 pence pence Profit for the year attributable to shareholders 8,960 13,285 55.4 83.6 Other items (426) (6,272) (2.6) (39.5) Profit for the year attributable to shareholders ____ ____ ____ ____ used for calculating earnings per share excluding other 8,534 7,013 52.8 44.1 items ____ ____ ____ ____ Reconciliation of profit used in calculating diluted earnings per share Profits Earnings per share 2002 2001 2002 2001 (Restated) (Restated) £000 £000 pence pence Profit for the year attributable to shareholders used for calculating basic earnings per share 8,960 13,285 Interest saving net of taxation on 11% ordinary 253 311 Convertible Loan Stock ________ ________ Profit for the year attributable to shareholders used in 9,213 13,596 54.2 80.2 calculating the underlying diluted earnings per share Other items (426) (6,272) (2.5) (37.0) ________ ________ ________ ________ Profit for the year attributable to shareholders used in 8,787 7,324 51.7 43.2 calcuating the diluted earnings per share excluding other items ________ ________ ________ ________ The following table shows a reconciliation of the weighted average number of shares used for calculating the basic and diluted earnings per share. 2002 2001 Used for calculating basic earnings per share 16,161,670 15,890,584 Dilution due to Share Option Scheme 263,166 244,256 Dilution due to Convertible Loan Stock 580,000 808,000 ________ ________ Used for calculating diluted earnings per share 17,004,836 16,942,840 ________ ________ Net assets per share have been calculated by dividing net assets of £221,325,000 (2001: £188,450,000) less investment in own shares of £1,015,000 by 16,279,405 (2001: 15,979,510) being the number of shares in issue at 31st March 2002 less investment in own shares of 200,000. Other items in both years comprise profits on disposal of investment properties. 9(a) Investment Properties-Group Mainly Long Short Freehold Freehold Leasehold Leasehold Total £000 £000 £000 £000 £000 Balance at 1 April 2001 256,913 57,532 52,080 - 366,525 Additions during the year 50,697 3,010 17,509 - 71,216 Disposals during the year (18,950) (3,052) (25,975) - (47,977) Reclassifications (1,770) (150) - - (1,920) Revaluation during the year 15,865 8,737 2,261 - 26,863 ________ ________ ________ ________ ________ Balance at 31 March 2002 302,755 66,077 45,875 - 414,707 ________ ________ ________ ________ ________ The historical cost of investment properties Balance at 1 April 2001 154,788 48,564 40,426 7 243,785 ________ ________ ________ ________ ________ Balance at 31 March 2002 187,170 47,577 34,605 7 269,359 ________ ________ ________ ________ ________ The directors are advised that the value of the properties at 31 March 2002 was not less than their book cost (see Note 9(b)). The reclassifications arise from the transfer to other fixed assets of the property occupied by the Company as its head office (at a value of £1,770,000) and to stock (£150,000) of land to be sold. Additions during the year are stated net of £91,705 relating to grants receivable (2001 - £100,000) and include capitalised interest, gross of tax element, of £240,385. 9(b) Valuation The Group's investment properties were valued by Insignia Richard Ellis, Chartered Surveyors, at 31 March 2002 on the basis of open market existing use value and in accordance with the guidance notes issued by the Royal Institution of Chartered Surveyors. The valuation at that date amounted to £418,517,000 (2001 - £366,875,000). This included £300,000 (2001: £350,000) in respect of the Company's short leasehold interest (expiring 11 February 2011) in the Alpha Business Centre, Walthamstow. For accounts purposes, as the unexpired term of the leasehold interest in Alpha Business Centre is less than 20 years, the valuation of the property has been retained at a nominal £1. It also included property at 3 Mills, classified as trading stock (value £1,740,000) and Magenta House, classified as a fixed asset (value £1,770,000). After these adjustments the aggregate valuation for accounts purposes is £414,707,000 (2001 - £366,525,000). 10. Debtors Group Company 2002 2001 2002 2001 £000 £000 £000 £000 Amounts falling due within one year: Trade debtors 4,214 3,202 - - Amounts owed by subsidiary undertakings - - 202,096 120,785 Deposits on investment acquisitions - 571 - - Deposit on investment disposal - 50 - - Taxation and social security 724 42 - - Corporation Tax - payment on account - - 2,131 4,996 Prepayments and accrued income 1,104 1,792 - - _____ ____ ______ ______ 6,042 5,657 204,227 125,781 _____ ____ ______ ______ Amounts falling due after one year: Advance Commissions 147 187 - - _____ _____ ______ _____ Total Debtors 6,189 5,844 204,227 125,781 _____ ____ ______ ______ 11. Investments Investments of £5,443,000 (2001 - £5,373,000) comprise short-term deposits of £2,401,000 with an original maturity date of less than 3 months (held short-term for debt service) under the securitised loan facility with WestLB and other deposits of £3,042,000. 12 Creditors: Amounts falling due within one year Group Company 2002 2001 2002 2001 £000 £000 £000 £000 Secured mortgage borrowings (Note 13) 3,353 2,511 - - Bank Loan and overdraft (secured) 2,767 1,844 - - Trade creditors 2,462 1,496 - - Amounts owed to subsidiary undertakings - - 50,812 32,752 Corporation tax payable 1,993 4,576 - - Taxation and social security 909 1,676 - 220 Tenants' deposits 4,163 3,255 - - Accruals 7,203 7,054 150 86 Deferred income-rent and service charges 5,065 4,948 - - Dividends 3,049 2,653 3,049 2,653 ________ ________ ________ ________ 30,964 30,013 54,011 35,711 ________ ________ ________ ________ See note 13 for details of security in relation to the bank loans and overdraft. 13. Creditors: Amounts falling due after more than one year. Group Company 2002 2001 2002 2001 Long-term borrowings consist of: £000 £000 £000 £000 Unsecured: 11% Convertible Loan Stock 2011 2,900 4,040 2,900 4,040 Secured: 11.125% First Mortgage Debenture Stock 2007 12,500 12,500 12,500 12,500 11.625% First Mortgage Debenture Stock 2007 7,000 7,000 7,000 7,000 Other secured loans 156,683 137,342 44,057 21,500 ______ ______ _____ _____ 179,083 160,882 66,457 45,040 Less: amount falling due within one year (3,353) (2,511) - - ______ ______ _____ _____ 175,730 158,371 66,457 45,040 ______ ______ _____ _____ The secured loans are secured on properties of value £406,692,000. Interest on the Debenture Stocks is payable on 31 March and 30 September each year. Interest on the 11% Convertible Unsecured Loan Stock 2011 is payable on 30 June and 31 December each year. Other secured loans include a loan of £114,472,000 carrying an interest rate of 1.0% over LIBOR and repayable in 2011 and a loan totalling £44,500,000 carrying an interest rate margin of 0.95% over LIBOR repayable in 2006 together with an overdraft of £2,767,200 at an interest rate margin of 1.1% over base. Workspace Holdings Ltd, the subsidiary company used for the WestLB financing, holds an interest rate collar on £120.1 million which has a cap of 8% and a floor of 4.5% each until 15 July 2009. The 11% Convertible Unsecured Loan Stock 2011 holders have the option to convert in each year on the basis of one ordinary share for every £5 of stock held. Loans totalling £116,726,600 have a maturity of five years or more. 14. Borrowings and Financial Instruments (i) Policies The Group finances its operations through a mixture of retained profits and borrowings. The Group borrows at both fixed and floating rates of interest and then uses interest rate swaps and caps to generate the desired interest and risk profile. Details of the interest rate collar held by the Group to manage interest rate exposure on its £122m facility with WestLB are given in Note 13. No premium payment was made for this collar which is financed by a 0.22% adjustment to the interest rate margin paid on the borrowing. The Group's policy is to fix or cap interest rates on at least 50% of its borrowings. At the year-end 13% (2001: 15%) of the Group's borrowings were fixed with a further 64% (2001: 74%) subject to a collar. The Group's policy is to ensure that at least 50% of borrowings have a maturity in excess of 5 years. At 31 March 2002 65% (2001: 77%) of the Group's borrowings mature after 5 years or more. The Group has taken advantage of the exemption for disclosure of short-term debtor and creditor balances. (ii) Financial Assets All of the Group's financial assets which comprised cash at bank and in hand are denominated in sterling. The interest rate profile at 31 March 2002 was: 2,002 2001 £000 £000 Fixed rate financial assets 5,783 5,579 ________ ________ iii. Financial Liabilities All of the Group's financial liabilities are denominated in sterling. The interest rate profile of the Group's financial liabilities at 31 March 2002 was: 2002 2001 £000 £000 Floating rate financial instruments 161,432 141,032 Fixed rate financial liabilities 22,400 23,540 ______ ______ 183,832 164,572 As noted above (note 13) the Group has the benefit of an interest rate collar until July 2009. For its fixed rate financial liabilities: Weighted average interest rate 11.3% Weighted average period fixed 6.5 years Floating rate financial liabilities comprise mortgages that bear interest at rates based upon 1, 3, 6 or 12 month LIBOR. The average margin on these borrowings at 31 March 2002 was 1.0%. iv. Maturity of Financial Liabilities A maturity analysis of loans is shown below: Group Company 2002 2001 2002 2001 £000 £000 £000 £000 Less than one year 6,120 4,355 - - Between one year and two years 3,660 3,660 - - Between two years and three years 3,670 3,660 - - Between three years and four years 4,275 3,670 - - Between four years and five years 49,380 25,775 44,500 21,500 In five years and more 116,727 123,452 22,400 23,540 ______ ______ ______ _____ 183,832 164,572 66,900 45,040 Less cost of raising finance (1,982) (1,846) (443) - ______ ______ ______ _____ 181,850 162,726 66,457 45,040 ______ ______ ______ _____ Cost of raising finance comprises £1,539,00 being amortised over 10 years and £443,000 being amortised over 5 years. (v) Borrowing Facilities At 31 March 2002 the Group had undrawn borrowing facilities of £27,804,000 on which conditions precedent had been met (total undrawn £55,232,800). Of the total undrawn nil had a maturity of less than 12 months with the remainder having a maturity of in excess of two years. (vi) Fair Value of Financial Liabilities Book and fair values of financial liabilities are: 2002 2002 2001 2001 Book Value Fair Value Book Value Fair Value £000 £000 £000 £000 Primary Financial Instruments Short term liabilities (6,120) (6,120) (4,355) (4,355) Long term borrowing (175,730) (181,293) (158,371) (165,299) Financial Assets 5,783 5,783 5,579 5,579 Derivative Financial Instruments Interest Rate Swaps 283 (2,298) 322 1,076 ______ ______ _______ _______ (175,784) (183,928) (156,825) (162,999) ______ ______ _______ _______ The fair value of the interest rate cap/collar swap have been determined by reference to market prices and discounted expected cash flows at prevailing interest rates. All other fair values have been calculated by discounting expected cash flows at prevailing interest rates. The total fair value adjustment equates to 48.3 pence per share (29.5 pence based on diluted share capital). 15. Provision for Liabilities and Charges Group Company £000 £000 Deferred Taxation: Balance at 1 April 2001 (as previously stated) - - Prior year adjustment 3,128 1,279 ________ ________ Balance at 1 April 2001 (as restated) 3,128 1,279 Deferred tax charge/(credit) for the year 237 (27) ________ ________ Balance at 31 March 2002 3,365 1,252 ________ ________ If the investment properties were sold for their revalued amounts there would be a potential liability to corporation tax of £37,597,000 (2001: £29,892,000). In accordance with FRS 19 no provision has been made for these amounts. This information is provided by RNS The company news service from the London Stock Exchange

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