Final Results - Year Ended 31 March 2000, Part 3
Workspace Group PLC
26 June 2000
Part 3
Notes to the Cash Flow Statement
for year ended 31 March 2000 2000 1999
£000 £000
1. Reconciliation of operating profit to operating cash flows
Operating profit 17,453 13,244
Depreciation charges 485 462
Profit on sale of tangible fixed assets (4) (9)
(Increase)/Decrease in debtors (2,476) 1,132
Increase in creditors 4,725 95
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20,183 14,924
====== ======
2. Analysis of cash flow: Notes 2000 1999
To cashflow £000 £000
Returns on investments and
servicing of finance
Interest received 239 142
Interest paid (9,967) (7,240)
Movement in cost of raising finance (1,927) (4)
------------------------------------------------------------------------------
Net cash outflow (11,655) (7,102)
======== =======
Capital expenditure
Purchase of tangible fixed assets (91,731) (15,086)
Sale of tangible fixed assets 6,576 12,187
Grants Received 130 1,068
------------------------------------------------------------------------------
Net cash outflow (85,025) (1,831)
======== =======
Management of liquid resources
(Increase)/decrease in
short term deposits 3 (9,092) 1,896
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Net Cash (outflow)/Inflow (9,092) 1,896
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Financing
Issue of ordinary share capital 131 18
Mortgage on freehold property 3 117,459 -
Drawdown/(Repayment) of Bank Loan 3 18,397 (5,500)
Repayment of Mortgage 3 (42,960) (1,107)
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Net cash inflow/(outflow) 93,027 (6,589)
------------------------------------------------------------------------------
3. Analysis of Net Debt
At 1.4.99 Cash Flow At 31.3.00 At 1.4.98 Cash Flow At 31.3.99
£000 £000 £000 £000 £000 £000
Cash at bank
and in hand 2 199 201 36 (34) 2
Bank Overdrafts (4,726) 1,404 (3,322) (2,024) (2,702) (4,726)
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(4,724) 1,603 (3,121) (1,988) (2,736) (4,724)
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Debt due within
one year:
Securitised Loan - (2,529) (2,529) - - -
Less Cost of
Raising Finance - *340 340 - - -
Debt due after 1 year
11% Convertible
Unsecured Loan (4,040) - (4,040) (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)
Mortgage: Lombard
North Central (2,960) 2,960 - (4,067) 1,107 (2,960)
Mortgage:
Bradford & Bingley
Building Society (30,000) 30,000 - (30,000) - (30,000)
Bristol & West
Building Society (10,000) 10,000 - (10,000) - (10,000)
Securitised Loan - (114,930) (114,930) - - -
Bank Loan - (18,397) (18,397) (5,500) 5,500 -
Less Cost of
raising of finance 435 *1,587 2,022 431 4 435
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(66,065)(90,969) (157,034) (72,676) 6,611 (66,065)
------------------------------------------------------------------------------
Short term deposits 2,332 9,092 11,424 4,228 (1,896) 2,332
------------------------------------------------------------------------------
Total (68,457)(80,274) (148,731) (70,436) 1,979 (68,457)
==============================================================================
*Net of amortisation in year of £617,000
Notes to the Accounts
for the year ended 31 March 2000
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 1999 which includes the
unqualified report of the auditor and which have been filed with the
Registrar of Companies.
The adoption of new financial reporting standards required to be
implemented this year has not had any impact on the reported results and net
assets.
2. Segmental Analysis 2000 1999
Gross Gross
Turnover Costs Profit Turnover Costs Profit
£000 £000 £000 £000 £000 £000
Rental income 23,397 (802) 22,595 18,207 (674) 17,533
Service charges and
other recoveries 4,609 (6,098) (1,489) 3,765 (5,213) (1,448)
Services, fees,
commissions and
sundry income 1,311 (709) 602 769 (184) 585
------------------------------------------------------------------------------
29,317 (7,609) 21,708 22,741 (6,071) 16,670
==============================================================================
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 1999 plus additions at cost since that date. Surplus
on disposal of investment properties includes the excess of proceeds
from insurance policies over costs, due allowance being given for
the diminution value of the property, following the destruction of the
buildings at Ferry Lane by fire.
4. Interest Receivable
The following amounts were earned during the year: 2000 1999
£000 £000
Short term deposits 230 128
Other 15 7
--- ---
245 135
=== ===
5. Interest Payable
The following amounts were payable during the year: 2000 1999
£000 £000
11% Convertible Loan Stock 2011 444 444
11.125% First Mortgage Debenture Stock 2007 1,391 1,391
11.625% First Mortgage Debenture Stock 2007 814 814
Mortgage interest 7,464 3,669
Bank and other interest on amounts wholly
repayable within five years 995 827
------ -----
11,108 7,145
Interest capitalised on development properties (742) (730)
------ -----
Charged to profit and loss account 10,366 6,415
====== =====
Mortgage interest includes early redemption and other loan breakage costs of
£993,000
6. Taxation
2000 1999
£000 £000
Corporation tax at 30% (1999- 31%) 2,238 1,780
Prior year adjustment - -
----- -----
2,238 1,780
===== =====
The taxation charge for the year ended 31 March 2000 was £2,238,000
representing an effective rate of 25.5% (1999 - 21.4%). Effective tax
rate excluding property disposal amounted to 24.3% (1999: 23.8%).
The increase in the rate of taxation is due principally to the
non-availability this year of ACT previously written off and brought
forward losses (trading or capital) to offset against current tax liabilities
7. Dividends
2000 1999
£000 £000
Interim dividend of 6.0p (1999 - 5.5p)
per Ordinary Share 941 873
Proposed final dividend of 15.0p (1999 - 13.5p)
per Ordinary Share 2,357 2,116
----- -----
3,298 2,989
===== =====
The interim dividend was paid on 1 February 2000 and the proposed
final dividend is payable on 1August 2000 to shareholders on the register
at the close of business on 7 July 2000.
8. Earnings Per Share and Net Assets Per share
The following table shows a reconciliation of profit used in calculating
earnings per share.
Profit Earnings per share
2000 1999 2000 1999
£000 £000 pence pence
Profit for the year attributable
to shareholders 6,523 6,53 41.6 41.2
Other items (217) (1,231) (1.4) (7.8)
Profit for the year attributable
to shareholders
used for calculating earnings
per share excluding
other items 6,306 5,305 40.2 33.4
===== ===== ==== ====
Reconciliation of profit used in calculating diluted earnings per share
Profit Earnings per share
2000 1999 2000 1999
£000 £000 pence pence
Profit for the year
attributable to shareholders
used for calculating basic
earnings per share 6,523 6,536
Interest saving net of taxation on
11% Convertible Loan Stock 311 307
Profit for the year attributable
to shareholders used in calculating
the underlying diluted earnings
per share 6,834 6,843 41.0 40.9
Other items (217) (1,231) (1.3) (7.3)
----- ----- --- ---
Profit for the year attributable
to shareholders used in calculating
the diluted earnings per share
excluding other items 6,617 5,612 39.7 33.6
----- ----- ---- ----
The following table shows a reconciliation of the weighted average
number of shares used for calculating the basic and diluted earnings
per share.
2000 1999
£000 £000
Used for calculating basic earnings per share 15,684,658 15,867,911
Dilution due to Share Option Scheme 166,574 59,779
Dilution due to Convertible Loan Stock 808,000 808,000
------- -------
Used for calculating diluted earnings per share 16,659,232 16,735,690
========== ==========
Net assets per share have been calculated by dividing net assets of
£143,018,000 less investment in own shares of £1,015,000 (1999:
£108,453,900) by 15,713,815 (1999: 15,876,268) being the number of shares
in issue at 31 March 2000 less investment in own shares of 200,000.
9(a) Investment Properties-Group
Mainly Long Short
Freehold Freehold Leasehold Leasehold Total
£000 £000 £000 £000 £000
Balance at 1 April 1999 133,278 12,900 39,800 - 185,978
Additions during the year 53,047 35,014 4,085 - 92,146
Disposals during the year (4,675) - (410) - (5,085)
Revaluation during the year 26,838 421 3,950 - 31,209
Balance at 31 March 2000
208,488 48,335 47,425 - 304,248
The historical cost of
investment properties
Balance at 1 April 1999 86,046 10,736 33,146 7 129,935
====== ====== ====== = =======
Balance at 31 March 2000 134,904 45,750 36,725 7 217,386
====== ====== ====== = =======
The total of investment properties at £304,248,000 (1999 - £185,978,000)
includes £10,903,000 in respect of work in progress on the Union
Street Development (1999 - £5,080,000 on the Union Street and Helix
Business Park developments). As work in progress these properties have
not been included in the accounts at valuation. The directors are advised
that the value of the properties at 31 March 2000 was not less than their
book cost (see Note 9b).
Additions during the year are stated net of £129,800 relating to grants
receivable (1999 - £594,500) and include capitalised interest, gross
of tax element, of £742,000.
9(b)Valuation
The Group's investment properties were valued by Insignia Richard
Ellis, Chartered Surveyors, at 31 March 2000 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 £312,385,000 (1999 - £187,108,000) including £350,000
(1999: £210,000) in respect of the Company's short leasehold interest
(expiring 11 February 2011) in the Alpha Business Centre, Walthamstow
and £18,690,000 in respect of development property at 1-10 Union Street,
Southwark, SE1. 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. Union
Street development has been valued at book/cost £10,903,000. After
these adjustments the aggregate valuation for accounts purposes is
£304,248,000 (1999 - £185,978,000).
10 Debtors Group Company
2000 1999 2000 1999
£000 £000 £000 £000
Amounts falling due within one year:
Trade debtors 3,175 1,270 - -
Amounts owed by subsidiary undertakings - - 118,400 51,399
Prepayments and accrued income 1,594 977 - 415
Deposits on investment acquisitions 240 - - -
Corporation Tax - payment on account - - 1,311 -
5,009 2,247 119,711 51,814
===== ===== ======= ======
Amounts falling due after one year:
Advance Commissions 227 267 - -
Total Debtors 5,236 2,514 119,711 51,814
===== ===== ======= ======
11. Investments
Investments of £11,424,000 (1999 - £2,332,000) comprise short- term deposits
with an original maturity date of less than 3 months. £1,991,000 of
investments were in the hands of the Trustees to Debenture Stock-holders
following the sale of a property, to be released to the Company
upon lodgement of adequate security. The balance of £9,433,000 comprised
deposits held short-term for debt service and other costs under the
securitised loan facility with WestLB of £3,691,000 and other deposits
of £5,742,000.
12.Creditors: Amounts falling due within one year
Group Company
2000 1999 2000 1999
£000 £000 £000 £000
Secured mortgage borrowings (Note 13) 2,189 175 - 188
Bank Loan and overdraft (secured) 3,322 4,726 - 4,000
Trade creditors 2,126 946 - -
Amounts owed to subsidiary undertakings - - 46,037 12,429
Taxation and social security 1,107 1,200 222 220
Deferred income-rent and service charges 4,294 2,344 - -
Tenants' deposits 2,595 1,662 - -
Other creditors - 1,024 - 1,024
Accruals 6,537 3,126 28 139
Corporation tax payable 851 1,172 - 105
Advance Corporation Tax payable - 218 - 218
Dividends 2,357 2,116 2,357 2,116
----- ----- ----- -----
25,378 18,709 48,644 20,439
====== ====== ====== ======
See note 13 for details of security in relation to the bank loans and
overdraft.
Other creditors in 1999 represent amounts owing relating to investment
in the Company's own shares purchased for the Employee Share Ownership Trust.
13. Creditors: Amounts falling due after more than one year.
Group Company
2000 1999 2000 1999
Long-term borrowings consist of: £000 £000 £000 £000
Unsecured:
11% Convertible Loan Stock 2011 4,040 4,040 4,040 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 133,494 42,501 12,266 2,776
157,034 66,041 35,806 26,317
Less: amount falling due within one year (2,189) (175) - (188)
154,845 65,866 35,806 26,128
======= ====== ====== ======
The secured loans are secured on properties of value £297,595,000.
Interest on the Debenture Stocks is payable on 31 March and 30 September
in each year. Interest on the 11% Convertible Unsecured Loan Stock 2011
is payable on 30 June and 31 December each year. Other secured loans carry
interest at a margin ranging from 1.10% to 1.50% over LIBOR/base rate.
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 9% until 16 July 2001, falling then to 8% until 15 July
2009, and a floor of 5% until 16 July 2001, falling to 4.5% until 15 July
2009.
The 11% Convertible Unsecured Loan Stock 2011 holders have the option to
convert in each year on the basis of 10p nominal of ordinary share capital
for every £5 of stock held.
14. Borrowings and Financial Instruments
(i) Policies
The Group finances its operation 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. During the year and as part of
the arrangements for the refinancing provided by WestLB the
Group assigned its £20m interest rate cap and £20m interest
rate swap to WestLB for incorporation in a new £122m
amortising interest rate collar. 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 at least 50% of its
borrowings. At the year-end 15% of the Group's borrowings
were fixed with a further 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 2000 82% 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
Financial assets comprised: 2000 1999
£000 £000
Cash at bank and in hand 201 2
Cash on deposit 11,424 2,332
------ -----
11,625 2,334
====== =====
(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 200 was:
2000 1999
£000 £000
Floating Rate Financial Instruments 138,838 27,686
Fixed Rate Financial Liabilities 23,540 43,540
------- ------
162,378 71,226
======= ======
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 11.25%
Weighted average period fixed 7.69 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
2000 was 1.03%.
(iv) Maturity of Financial Liabilities
A maturity analysis of loans is shown below: Group Company
2000 1999 2000 1999
£000 £000 £000 £000
Less than one year 5,511 4,901 - 4,188
Between one year and two years 15,124 227 12,300 227
Between two years and three years 9,658 246 - 246
Between three years and four years 3,561 2,934 - 268
Between four years and five years 3,571 2,958 - 291
In five years and more 124,953 59,960 23,540 25,268
162,378 71,226 35,840 30,488
Less cost of raising finance (2,022) (435) (34) (172)
160,356 70,791 35,806 30,316
======= ====== ====== =======
(v) Borrowing Facilities
At 31 March 2000 the Group had undrawn borrowing facilities
of 19,000,000 on which conditions precedent had been met.
(vi)Fair Value of Financial Liabilities
Book and fair values of financial liabilities are:
2000 2000 1999 1999
Book Value Fair Value Book Value Fair Value
£000 £000 £000 £000
Primary Financial Instruments
Short term liabilities (5,511) (5,511) (4,901) (4,901)
Long term borrowing (154,845) (163,828) (66,305) (79,425)
Financial Assets 11,625 11,625 2,334 2,334
Derivative Financial Instruments
Interest Rate Swaps - - - (1,022)
Interest Rate Cap/Collar 361 (1,076) 415 102
(148,370) (158,790) (68,457) (82,912)
The fair value of the interest rate cap/collar 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.
15. Availability of Financial Information
Copies of this announcement will be available from the Group's registered
office at Magenta House, 85 Whitechapel Road, London, E1 1DU from 9.00am
on 26 June 2000. The full audited accounts for the year ended 31 March
2000 will be circulated to the shareholders for approval at the Annual
General Meeting which will be held on 31 July 2000. Copies of the
report and accounts will be available from that date at the Group's
registered office.
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