Interim Results - Operating Profit Up 4.3%
Great Portland Estates PLC
16 November 1999
INTERIM RESULTS FOR THE SIX MONTHS
ENDED 30th SEPTEMBER 1999
* Operating profit up 4.3% to £53.9 million (1998: £51.7 million)
* Interim dividend up 4.2% to 3.125p (1998: 3.0p)
* Rationalisation programme well ahead of schedule
* £70 million of sales producing £3 million of capital and trading profits
* Over £100 million of acquisitions in the last six months
* 70% of portfolio now in central London and in-town shopping centres
* West End investments of £650 million
Richard Peskin, Chairman, said:
'The results for the period to 30th September demonstrate steady progress with
net rents and adjusted earnings moving nicely along. The last few months have
been particularly active for us with nearly £200 million of actual and agreed
acquisitions and over £70 million of sales. As a result of this activity, our
favoured areas of investment, namely central London and in-town shopping
centres, now comprise 70% of the total portfolio and further rationalisation
will continue to take place.'
Enquiries:
Great Portland Estates P.L.C. 0171 580 3040
Richard Peskin, Chairman
Patrick Hall, Deputy Managing Director
John Whiteley, Finance Director
STATEMENT BY THE CHAIRMAN
Results and Dividend
I am pleased to report that the Group has continued to make
satisfactory progress in the six months to 30th September 1999. Net
rents have risen by 4% to £53.9 million and profits on ordinary
activities before tax are £28.3 million. Profits on the sale of
investment properties amounted to £1.3 million, leaving adjusted
earnings per share 4% ahead at 5.4p (1998: 5.2p) and your directors
have declared an interim dividend of 3.125p (1998: 3.0p). As usual,
and in common with most of the sector, an interim valuation was not
commissioned, because your Board needs to be convinced that this is a
justifiable exercise in the context of time and expense however, it
is a topic which remains under review. The book net asset value per
share as at 30th September 1999 was 286p.
Acquisitions and Sales
Since I last wrote to shareholders in June, the Board has been active
in implementing its strategy of concentrating our main activities in
central London and retail, particularly in-town shopping centres.
Indeed, since 31st March, acquisitions amounting to £100 million have
been made, of which £16 million has been spent in extending our
holdings in Burnley, Bury, Cardiff, Chelmsford and Harlow. The more
substantial purchases comprise Barnard's Inn, Fetter Lane, EC4
(105,000 sq.ft. of offices acquired for £35 million, producing £2.8
million per annum and sandwiched between our buildings at Barnard's
Court and Buchanan House) and, for £38 million, the Quedam Centre,
Yeovil, 160,000 sq. ft. shopping centre with a current annual income
of £2.6 million. In addition, two West End properties on the Pollen
Estate, where we have a 12.2% beneficial interest, have been purchased
for £13 million they are 28 Savile Row, W1 (15,000 sq.ft.), where
vacant possession was obtained and refurbishment works are under way,
and 10/12 Cork Street, W1 (21,000 sq.ft.). Heads of terms have also
been agreed to acquire for £90 million the 400,000 sq.ft. retail and
leisure development of the Western Sector, High Wycombe, which
immediately adjoins our 150,000 sq.ft. Octagon Shopping Centre.
Last June I advised shareholders that, in accordance with its enhanced
rationalisation policy, the Board intended to dispose of at least £150
million of non-core assets within twenty-four months and, in the
period under review, some £32 million has been sold, producing profits
on sale of investment properties of £1.3 million. Since 30th
September £38 million has been realised, providing trading profits of
at least £500,000 and further capital profits of some £1 million we
are, therefore, virtually half way to our stated two year target in
less than six months, and with anticipated total gains of around £3
million.
Developments and Lettings
During the six months the ongoing refurbishment and development
schemes have proceeded according to schedule and budget. Throughout
the portfolio 240,000 sq.ft. of refurbishments were completed
including, in particular, the pre-let 37/41 Mortimer Street, W1
(25,000 sq.ft.) and 79 New Cavendish Street, W1 (36,000 sq.ft.) which
became available in October, whilst the 83,000 sq.ft. extension at
Curzon Square, Burnley will be ready in Spring 2000 and is 98% pre-
let. The piazzanisation of Oxford Market, W1 has proved to be a
splendid example of sensible co-operation for inner city regeneration
between a developer and a local authority (City of Westminster) and
will be officially opened this month it has succeeded in creating
both value and excitement as a result of our imaginative design.
The occupancy level of the portfolio has fallen slightly to 98.6%, but
it must be remembered that this is largely due to the very recent
inclusion of 79 New Cavendish Street, W1, which has already attracted
good interest from prospective tenants. For the record, 80% of the
voids last June have subsequently been leased and a further 81,000
sq.ft. have been relet.
With regard to the current development programme, at Bury planning
permission has been gained for a revised, larger scheme, and at
Ranelagh House, Elystan Place, SW3 planning permission was granted on
appeal for ten flats, with work commencing in the new year.
Demolition of the former Barclaycard Centre, Northampton started in
August and, under its new nomenclature of Sol Central, a 200,000
sq.ft. Urban Entertainment Centre will be built for occupation in mid-
2001, of which 60% is pre-let or in solicitors hands. Looking
further ahead, I have already mentioned the Western Sector, High
Wycombe (which will take about four years to complete) and planning
applications are shortly to be submitted for 22/25 Northumberland
Avenue, WC2 and Toshiba House, Frimley. In addition, we are examining
the longer-term possibilities of various large schemes within our
holdings north of Oxford Street and I hope to be able to report more
definitively in June.
Finance
We used the majority of our £175 million of cash balances held at 1st
April 1999 to repay, temporarily, our syndicated loan. Following the
capital expenditure and disposal proceeds set out above, net debt at
30th September was largely unchanged at £589.1 million, gearing stood
at 55% and we had committed unused bank facilities of £190 million.
The fair value of existing financial instruments under FRS 13 was
higher than the book value at which the debt was carried in the
balance sheet by some £81 million, after tax (31st March 1999: £115
million), or 21p per share (31st March 1999 30p).
Year 2000
Our year 2000 programme has progressed since June. A report, received
over a year ago on all properties where responsibility rests with the
Group, indicated that the vast majority of equipment was either
compliant or not date sensitive, and, where appropriate, replacement
and modification work has been commissioned to ensure compliance. The
cost of the programme has not been significant, and we believe that,
whilst no absolute assurance can be given on the basis that the Group
may be impacted by third parties, appropriate actions have been taken
in relation to the Group's own business-critical systems.
Outlook
As a result of the Company's activities over the last few months, our
favoured areas of investment, namely Central London and in-town
shopping centres, now comprise 70% of the portfolio. For the period
under review, rental growth has continued in these markets, based on
good occupational demand, especially in the West End, where one-third
of our investments is situated. With the economic barometer
apparently set fair, the Board believes that the outlook remains
positive and that its strategy will continue to deliver rental and
asset growth.
Richard Peskin
Chairman and Managing Director
Unaudited Group Profit and Loss Account
____________________
For the six months ended 30th September 1999
Year to Notes Six months to Six months to
31st March 30th September 30th September
1999 1999 1998
£m £m £m
115.3 Rent receivable 2 58.7 56.9
(1.8) Ground rents (0.9) (1.0)
----------- ----------- -----------
113.5 Net rental income 57.8 55.9
(4.0) Property and refurbishment costs (1.7) (2.1)
(4.0) Administration expenses (2.2) (2.1)
----------- ----------- -----------
105.5 53.9 51.7
1.3 Trading profits - -
----------- ----------- -----------
106.8 Operating profit 53.9 51.7
Profit on sale of investment
2.2 properties 1.3 1.8
----------- ----------- -----------
Profit on ordinary
109.0 activities before interest 55.2 53.5
4.3 Interest receivable 3 2.2 2.4
(56.0) Interest payable 4 (29.1) (27.5)
----------- ----------- -----------
Profit on ordinary
57.3 activities before taxation 28.3 28.4
Tax on profit on ordinary
(14.5) activities 5 (6.7) (6.8)
----------- ----------- -----------
Profit on ordinary
42.8 activities after taxation 21.6 21.6
(34.9) Dividends 6 (11.8) (11.3)
----------- ----------- -----------
7.9 Retained profit for the period 9.8 10.3
----------- ----------- -----------
11.3p Earnings per share - basic 7 5.7p 5.7p
----------- ----------- -----------
10.8p Earnings per share - adjusted 7 5.4p 5.2p
----------- ----------- -----------
9.25p Dividend per share 6 3.125p 3.0p
----------- ----------- -----------
Unaudited Group Balance Sheet
____________________
At 30th September 1999
31st March Notes 30th September 30th September
1999 1999 1998
£m £m £m
Tangible fixed assets
1,713.6 Investment properties 8 1,707.7 1,620.8
11.7 Investments 12.2 11.0
----------- ----------- -----------
1,725.3 1,719.9 1,631.8
----------- ----------- -----------
Current assets
3.4 Stock of trading properties 3.6 5.6
9.6 Debtors 12.8 20.8
174.6 Cash at bank and short-term deposits 25.9 11.8
----------- ----------- -----------
187.6 42.3 38.2
Creditors: amounts falling
79.0 due within one year 68.9 86.0
----------- ----------- -----------
108.6 Net current (liabilities)/assets (26.6) (47.8)
----------- ----------- -----------
Total assets less current
1,833.9 liabilities 1,693.3 1,584.0
----------- ----------- -----------
Creditors: amounts falling
due after more than one year
456.0 Debenture loans 456.0 357.2
110.9 Convertible loans 110.8 110.9
198.1 Bank and other loans 47.8 118.2
----------- ----------- -----------
765.0 614.6 586.3
----------- ----------- -----------
1,068.9 1,078.7 997.7
----------- ----------- -----------
Capital and reserves
188.7 Called up share capital 188.7 188.7
238.4 Share premium account 238.4 238.4
556.1 Revaluation reserve 533.6 482.2
61.7 Other reserves 85.5 61.6
24.0 Profit and loss account 32.5 26.8
----------- ----------- -----------
1,068.9 Equity shareholders' funds 1,078.7 997.7
----------- ----------- -----------
Unaudited Group Statement of Cash Flows
___________________
For the six months ended 30th September 1999
Year to Six months to Six months to
31st March 30th September 30th September
1999 1999 1998
£m £m £m
Net cash inflow from operating
112.4 activities 46.2 48.3
Returns on investments and
servicing of finance
----------- ----------- -----------
4.2 Interest received 2.8 2.9
(56.3) Interest paid (29.2) (28.7)
----------- ----------- -----------
Net cash outflow from returns on
(52.1) investments and servicing of finance (26.4) (25.8)
(12.2) Tax paid (2.1) (3.0)
Capital expenditure
----------- ----------- -----------
(78.4) Payments to acquire investment properties (24.0) (57.6)
Receipts from sale of investment
22.2 properties 31.7 17.9
(0.3) Payments to acquire investments (0.5) -
----------- ----------- -----------
Net cash inflow/ (outflow) from
(56.5) capital expenditure 7.2 (39.7)
(34.3) Equity dividends paid (23.6) (23.0)
----------- ----------- -----------
Net cash inflow / (outflow) before
(42.7) use of liquid resources and financing 1.3 (43.2)
Management of liquid resources
Cash withdrawn from/(placed on)
(56.1) short-term deposit 150.4 110.8
----------- ----------- -----------
Financing
----------- ----------- -----------
(38.8) Redemption of loans (170.0) (62.2)
40.0 Drawdown of bank loans 20.0 -
99.8 Issue of debenture loans - -
(0.9) Costs of loan issues - -
----------- ----------- -----------
Net cash (outflow) / inflow from
100.1 financing (150.0) (62.2)
----------- ----------- -----------
1.3 Increase in cash 1.7 5.4
----------- ----------- -----------
Reconciliation of Operating Profit
to Net Cash Inflow from Operating Activities
____________________
Year to Six months to Six months to
31st March 30th September 30th September
1999 1999 1998
£m £m £m
-----------------------------------------------------------------------------
106.8 Operating profit 53.9 51.7
(Increase)/decrease in stock
2.1 of trading properties (0.2) (0.1)
0.2 (Increase)/decrease in debtors (3.9) (3.1)
3.3 (Decrease)/increase in creditors (3.6) (0.2)
---------- -------------- --------------
Net cash inflow from
112.4 operating activities 46.2 48.3
---------- -------------- --------------
Reconciliation of Net Cash Flow to Movement in Net Debt
____________________
Year to Six months to Six months to
31st March 30th September 30th September
1999 1999 1998
£m £m £m
-----------------------------------------------------------------------------
1.3 Increase in cash in the period 1.7 5.4
(Decrease)/increase in short-
56.1 term deposits (150.4) (110.8)
(138.9) Cash inflow from increase in debt (20.0) -
38.8 Cash outflow from redemption of loans 170.0 62.2
Change in net debt arising
---------- -------------- --------------
(42.7) from cash flows 1.3 (43.2)
0.3 Other non-cash movements 0.1 0.2
---------- -------------- --------------
(42.4) Movement in net debt in the period 1.4 (43.0)
(548.1) Net debt at the beginning of the period (590.5) (548.1)
---------- -------------- --------------
(590.5) Net debt at the end of the period (589.1) (591.1)
---------- -------------- --------------
Analysis of Net Debt
____________________
At At
1st April Cash Non-Cash 30th September
1999 Flow Changes 1999
£m £m £m £m
-----------------------------------------------------------------------------
Cash 1.8 1.7 - 3.5
Short-term deposits 172.8 (150.4) - 22.4
Debt due within one year (0.1) - (0.3) (0.4)
Debt due after one year (765.0) 150.0 0.4 (614.6)
---------- ---------- ---------- ----------
(590.5) 1.3 0.1 (589.1)
---------- ---------- ---------- ----------
Notes Forming Part of the Interim Statement
____________________
1. BASIS OF PREPARATION OF INTERIM FINANCIAL INFORMATION
The interim financial information has been prepared on the basis of
the accounting policies set out in the Group's 1999 statutory
accounts. Investment properties are professionally valued each year
at 31st March but are not revalued at 30th September. The financial
information contained in this report does not constitute statutory
accounts within the meaning of section 240 of the Companies Act 1985.
The abridged accounts for the year ended 31st March 1999 are an
extract from the accounts for that year which, together with an
unqualified audit report, have been delivered to the Registrar of
Companies.
2. TURNOVER AND SEGMENTAL ANALYSIS
Rent receivable by location
Year to Six months to Six months to
31st March 30th September 30th September
1999 1999 1998
£m £m £m
-----------------------------------------------------------------------------
14.3 West End - North of Oxford Street 8.8 6.9
21.1 West End - Other 9.8 10.2
17.4 London City 8.0 8.8
22.5 South East of England 11.5 11.1
40.0 Rest of United Kingdom 20.6 19.9
----------- --------------- --------------
115.3 58.7 56.9
----------- --------------- --------------
Rent receivable is stated exclusive of value added tax, and arose
wholly from continuing operations in the United Kingdom. No
operations were discontinued during the period.
3. INTEREST RECEIVABLE
Year to Six months to Six months to
31st March 30th September 30th September
1999 1999 1998
£m £m £m
-----------------------------------------------------------------------------
3.7 Short-term deposits 1.9 2.1
0.6 Other 0.3 0.3
----------- --------------- --------------
4.3 2.2 2.4
----------- --------------- --------------
4. INTEREST PAYABLE
Year to Six months to Six months to
31st March 30th September 30th September
1999 1999 1998
£m £m £m
-----------------------------------------------------------------------------
12.7 Bank loans and overdrafts 5.3 6.2
43.3 Other 23.8 21.3
----------- --------------- --------------
56.0 29.1 27.5
----------- --------------- --------------
5. TAXATION
Taxation has been calculated using the estimated effective tax rate
for the full year. The difference between the standard rate of tax
and the effective rate principally reflects the benefit of capital
allowances available on plant and equipment in respect of investment
properties.
6. DIVIDENDS
An interim dividend of 3.125p per share (1998: 3.0p) will be paid on
6th January 2000 to shareholders on the register at 26th November
1999.
7. EARNINGS PER SHARE
Earnings per share for the six months are based on income attributable
to ordinary shareholders of £21,600,000 (1998: £21,600,000) and on the
weighted average of 377,462,638 shares in issue (1998: 377,446,904
shares). There is no impact on earnings per share of conversion of
the convertible unsecured loan stock, or convertible bonds, or the
exercise of share options.
The directors believe that earnings per share before exceptional items
and profits or losses on sales of investment properties and
investments provide a more meaningful measure of the Group's
performance. Accordingly, earnings per share on that adjusted basis
have been disclosed on the face of the profit and loss account, and
calculated as follows:
Year to Six months to Six months to Six months to Six months to
31st March 30th September 30th September 30th September 30th September
1999 1999 1999 1999 1998
Earnings Profit Earnings Profit Earnings
per share after tax per share after tax per share
pence £m pence £m pence
11.3 Basic 21.6 5.7 21.6 5.7
Profit on
sale of
investment
(0.5)properties (1.3) (0.3) (1.8) (0.5)
---------- ------------ ------------ ------------- -------------
10.8 Adjusted 20.3 5.4 19.8 5.2
---------- ------------ ------------ ------------- -------------
8. INVESTMENT PROPERTIES
In the six months to 30th September 1999 additions to investment
properties were £24.0 million, and properties valued at 31st March
1999 at £29.9 million were sold. Investment properties have not been
revalued at 30th September 1999.
9. FINANCIAL CALENDAR
1999
Ex-dividend date for interim dividend 22nd November
Registration qualifying date for interim dividend 26th November
2000
Interim dividend payable 6th January
Announcement of full year results 6th June*
Circulation of Annual Report and Accounts 2000 16th June*
Annual General Meeting 18th July*
Final dividend payable 21st July*
* Provisional
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