RNS Number:2511D
Marylebone Warwick Balfour Grp PLC
23 September 2004
FOR IMMEDIATE RELEASE
23rd September 2004
MARYLEBONE WARWICK BALFOUR GROUP PLC:
PRELIMINARY ANNOUNCEMENT OF RESULTS
FOR THE YEAR ENDED
30th JUNE 2004
Contact:
Marylebone Warwick Balfour Group Plc Tel: 020 7706 2121
Richard Balfour-Lynn, Chief Executive
Andrew Blurton, Joint Finance Director
Baron Phillips Associates Tel: 020 7920 3161
Baron Phillips
CHAIRMAN'S STATEMENT
--------------------
The progress in our core businesses that I reported in March at the interim
stage has continued during the second half. Improved performance has been
particularly notable within our hotels division which has seen an increasingly
strong market since the start of 2004, especially over the summer period.
Following the disposal of Marble Arch Tower in March 2004, our last remaining
investment property, the Group is now focused on three main operating
activities: Hotels, which includes the Malmaison lifestyle hotel group; Business
Exchange, our serviced offices business which is now entirely focused on the UK;
and Retail Stores, which owns Liberty.
At our hotels division with a gross asset value of #426m, Malmaison is leading
the recovery with occupancy levels since 1st July 2003 improving by 15% and
average room rates up by 12%. It continues to grow through the successful
opening of the first London Malmaison in November 2003 and through the recent
acquisition of an existing hotel in Belfast. This latest acquisition is
currently undergoing a major refurbishment and will open under the Malmaison
format in December 2004. Additionally the new Malmaison hotel in Oxford will
open during the course of 2005.
Business Exchange, our serviced office business, with a gross asset value of
#46m, has been hard hit by the lack of corporate activity, especially in London,
with occupancy falling to 65% at the year end. Following a sustained marketing
campaign over the past three months occupancy has now started to recover and
currently stands at 71%. Shortly after the 2003 year end, we closed our European
operations and #13m was included in the accounts to June 2003 in respect of
liabilities relating thereto. No further costs or provisions are required.
At Liberty, with a gross property value of #81m, there are signs that the long
restructuring process is now beginning to be reflected in improved margins and
sales but we will have to wait until the end of this year before we see the real
impact of these changes and we will report on progress in our March interims.
At West India Quay, opposite Canary Wharf, we have virtually completed our #200m
third and final phase of this 1m sq ft development. The 301 bedroom five star
hotel and 47 serviced apartments, managed by Marriott International, opened in
June of this year. In the top third of this 32 storey tower, London's tallest
residential building, we have sold 111 of the 158 apartments at strong prices
providing a stream of positive cash flow and profit for the Group.
Turning to our results for the year to 30th June 2004, Operating income EBITDA
from our three core businesses increased from #20.5m last year to #23.5m this
year. Losses attributable to shareholders have been reduced from #61.4m last
year to #11.8m this year. The revaluation surplus attributable to shareholders
is #18.3m this year, the majority of which comes from the hotel division. This
translates into an increase in equity shareholders' funds of 6% for the year, up
from 93p to 99p per share at 30th June 2004.
We are now a highly focused business with very strong management teams in all
our divisions. This has been a busy year and I would like to take this
opportunity of thanking my co-directors and all employees for their continued
commitment and hard work over the past 12 months.
I anticipate continued improvement within our operating businesses where there
are some encouraging indicators that lead the Board to a feeling of cautious
optimism for the current year. Obviously the only cautionary note is the
strength of recovery in the UK economy and possible effects of higher interest
rates.
Brian Myerson
Chairman
23rd September 2004.
OPERATING REVIEW
----------------
Hotels
------
This has been an increasingly rewarding year for this division, which comprises
the Malmaison group, the Howard Hotel operated by Swissotel, the Park Lane
Marriott, the Radisson in Glasgow and the recently opened West India Quay
Marriott.
Malmaison
---------
At Malmaison there has been an encouraging second half improvement aided by the
opening of our first London hotel at Charterhouse Square, on the edge of the
City, together with refurbishment programmes at our Newcastle and Manchester
properties. After a slow start since its opening in 2003, our Birmingham hotel
occupancy is now up to 74% from 48% last year. EBITDA for the Malmaison group
has increased by #1.3m to #8.6m.
The highly successful and popular Malmaison format has encouraged us to expand
the division as we continue to add value to the business. We have signed a 35
year turnover lease for a new 87 room Malmaison in Oxford, which is a conversion
of the city's former prison. Also we have acquired our first Irish property with
the purchase of an existing hotel in Belfast which we are converting to a
Malmaison format and will re-open in December 2004. This will take the group to
nine hotels.
We have been extremely pleased with the success of Malmaison London in
Charterhouse Square. Although it opened less than 12 months ago, it has achieved
occupancy levels of 80%, the second highest in the group. Within a relatively
short space of time it has established a strong following with high occupancy
both during the week and at weekends. As would be expected, Malmaison
Charterhouse Square has the highest average room rate within Malmaison of over
#135 and an impressive food and beverage revenue.
Elsewhere we have completed the refurbishment of the original 112 bedrooms in
Manchester. Our hotel in Newcastle has been extended to 120 rooms while the
public areas have been reconfigured to create a new cafe and separate brasserie
and bar.
We are currently re-engineering our reservation systems and procedures, which is
already encouraging improved returns from direct corporate accounts. As part of
this process, we are now more tightly controlling all electronic reservations
and third party bookings by strict close out policies implemented throughout the
group. We have also embarked on a number of new initiatives which should further
enhance performance. These include the advent of a central reservation centre
and new booking engine on our website for on-line bookings, which offers
substantial growth potential from this market segment.
Importantly we are investing considerable resources in our staff and we have
reorganised our People and Development function into a regional structure
enabling us to deliver a consistent approach across the business. This month we
started our first graduate intake programme aimed at training these individuals
to Deputy General Managers within three years, and we continue to encourage
promotion from within.
We are greatly encouraged by the increasing demand for Malmaison hotels
throughout the UK, as well as the rising popularity of our bars and brasseries,
and view the current year with confidence. Our present objective is to increase
the size of the Malmaison group from the existing 8 to around 15 hotels within
the next five years. We are currently exploring the potential of a second hotel
in London as well as a number of interesting opportunities in other major UK
centres.
Hotel investments
-----------------
At The Howard we have seen a steady uplift in gross revenues since Autumn 2003.
Occupancy levels over the year have averaged in the high 70%'s while June 2004
was up to 87%. The stronger market for five star hotels has meant room rates are
beginning to recover. With costs under control, the margin earned on these
operations is in line with Group expectations, although increased efficiencies
are still expected as room rate improves.
Gross income at the Park Lane Marriott is recovering well, with occupancy over
the year running at mid 80%, while June 2004 was up to 90%. However, the margin
earned on these operations is currently too low and this is being addressed; we
anticipate reporting an improved performance in our interim results next March.
In Glasgow, our Radisson managed Argyle Street hotel is showing signs of
recovery as the local market for conferences and events begins to grow. During
the first half of the year, occupancy was around 62% and this increased to
approximately 70% in the second half. Cost controls have been improved and the
hotel is now well placed to take advantage of increased demand for quality
hotels in Glasgow.
The Swissotel Howard and the Radisson Argyle Street are run on 20 year Operating
and Management Agreements ("OMA"), whilst Marriott International operates the
Park Lane property on a 30 year OMA. These agreements all provide guaranteed
minimum income levels receivable by MWB.
The #82.5m West India Quay Marriott hotel opened a fortnight before the year end
and is establishing itself in the five star hotel market. We will report more
fully at the interim results stage when the hotel will have traded for six
months.
Serviced Offices
----------------
The year has been particularly challenging for Business Exchange. It started the
financial year with 78% occupancy across the U.K. and during the year fell to
65%. However during the last quarter of the year occupancy stabilised, and has
since recovered to 71%.
Most of this decrease was within London and was caused by large corporate
move-outs at the end of their contract periods. There was little corporate
activity throughout the year to fill vacant space. London occupancy fell from a
starting position of 83% in July 2003 to 62% in June 2004, while regional
occupancy, principally in the northern centres, was stable at 75%.
Revenue per Occupied Workstation ("REVPOW") within the business increased from
#7,650 at the end of July 2003, which reflected corporate move-outs, to #7,900
by 30th June 2004. These increases in REVPOW were primarily driven by the rate
increases implemented during October to December 2003. Revenue Per Available
Workstation ("REVPAW"), which is a function of occupancy, dropped during the
year, falling from #5,975 at the end of July 2003 to #5,410 at June 2004.
During the year, service income has increased by over 15% per workstation
occupied, which we consider to be a good achievement. Some of this increase has
been generated through greater marketing and usage of existing facilities, with
little or no marginal cost, thus producing higher bottom line returns to the
business.
Being a substantially fixed cost business (over 60% of our costs comprise
property and property related expenditure), the falls in occupancy and licence
fee revenues have directly impacted EBITDA and cash flow. Approximately 70% of
EBITDA for the year was generated in the first six months to December 2003
leaving only 30% being generated in the weaker second six months.
In July 2004 we initiated further strategies aimed at developing and enhancing
the business. The first is to improve occupancy by using our agent and broker
relationships to drive occupancy levels back to the 80% plus mark. This is
already having a positive effect. Secondly, we aim to secure greater income from
existing services. Currently, the available business facilities are not totally
used and therefore all increases will have an immediate and positive impact on
EBITDA and cash flow. The third initiative involves further cost savings within
the business. With the market moving favourably, we hope to make important
savings during the year to June 2005 while at the same time improving customer
satisfaction and service delivery.
Although market conditions continue to be tough, there are signs of a recovery
in the serviced office market which we believe will be reflected in an improved
performance at Business Exchange over the course of the coming year.
Liberty
The results for the year reflect Liberty's continuing transition to a more
focussed and dynamically positioned business. The difficult trading conditions
experienced in the first half, in common with other West End retailers, have
shown signs of improvement, with second half sales up 6%. Footfall has continued
to grow and as a result, full year turnover remained stable at around #41m.
Shortly before the year end, we strengthened the operating board of Liberty with
two key appointments. Fraser Allan became the new Finance Director, joining from
Fired Earth where he had been Chief Executive between 1999 and 2003, during
which time he successfully developed the business, realising shareholder value
through a trade sale in 2001.
We also announced the appointment of Christian Viros as a non-executive director
of Liberty. Christian spent more than 10 years as President and Chief Executive
Officer of the Swiss watch company Tag Heuer. Under his direction, sales
increased seventeen fold to #250m and he then sold the business to the luxury
goods group LVMH. Thereafter, Christian became President of the LVMH watches and
jewellery division and a member of its Executive Committee until the end of
2001.
The complete rebuilding of key product categories in the home and fashion areas
have continued, with the full impact of this expected to be felt in the next
financial year. Liberty has also made significant strides in strengthening the
key buying, merchandising and brand development teams within the business.
The cost of these initiatives has been charged against this year's results.
Coupled with the stable level of turnover, pre-tax losses at Liberty for the
year ended 30th June 2004 were #6.3m against losses of #4.8m last year.
Moving forward, our continued focus is on the return to profitability of the
business, and we expect results to be evident in the forthcoming Autumn/Winter
period. Higher margin Liberty branded product is already starting to impact in
store, increasing from under 8% to currently 15% of retail mix. New concept
product introductions are well underway with the opening, through September and
October of this year, of six new departments comprising furniture and lighting,
bed and bed linens, bath shop, eating and cooking, fashion accessories and an
enhanced Christmas shop.
We expect these significant changes in the store environment, and a transformed
product mix, to once again position Liberty as a clear design and fashion leader
in the years ahead.
Asset Management
----------------
Just before the year end we disposed of our long leasehold interest in Marble
Arch Tower, a central London 161,000 sq ft office, leisure and retail complex,
for #73.6m. We acquired this landmark in January 2001 and since then improved
the tenant profile and generally upgraded the building. The sale generated a net
profit after costs of #6.9m and is the principal component of the pre-tax
profits of the division for this year.
As a result of this sale, we have virtually disposed of the Group's entire asset
management division, with gross assets at the year end of less than #5m. These
profitable disposals have enabled the Board to focus on the remaining three
operating divisions referred to above.
West India Quay
---------------
We have now virtually completed our #200m third phase redevelopment of West
India Quay, directly opposite Canary Wharf in London's Docklands. We are
currently retaining this element of the scheme which comprises a 301 bedroom
five star hotel and 47 serviced apartments. These are operated by Marriott
International on a 20 year Operating and Management Agreement, once again with
guaranteed minimum income levels payable to MWB.
In addition to the hotel and serviced apartments at West India Quay, the third
phase also comprises 158 apartments for sale. At the year end we had exchanged
contracts on 111 of those apartments; completions since the year end have
already generated #32m in net proceeds which have been used to reduce debt drawn
to finance the project.
Once sales of the apartments have been completed we will continue to own the
hotel and serviced apartments which are currently valued at #83m. This
successful third and final stage of West India Quay follows on from the
successes achieved on the previous refurbishment and new build phases completed
in 2001.
Richard Balfour-Lynn
CHIEF EXECUTIVE
23rd September 2004
ACCOUNTS REVIEW
for the year ended 30th June 2004
---------------------------------
INTRODUCTION
The Chairman's Statement and Operating Review on pages 1 to 8 provide
information on the Group's operations and the Board's expectations for the
future. This Accounts Review covers in greater depth the more significant
features of the accounts for the year ended 30th June 2004.
EQUITY SHAREHOLDERS' FUNDS
During the year ended 30th June 2004 there has been an increase in shareholders'
funds from #102.3m at 30th June 2003 to #108.9m at this year end. As a result,
equity shareholders funds per share have increased during the year by 6p to 99p
per share. This is summarised as follows:-
Year
6 months 6 months Year ended
ended ended ended 30th June
31st December 30th June 30th June 2004
2003 2004 2004 Pence per
#'000 #'000 #'000 share
Equity shareholders'
funds at beginning of
the year 102,341 89,921 102,341 93p
Revaluation surplus on
Group property - 18,290 18,290 17p
portfolio
Retained profit/(loss)
for the year (12,460) 700 (11,760) (11p)
Other equity movements 40 (38) 2 -
------- ------- ------- -----
Equity shareholders'
funds at end of the
period 89,921 108,873 108,873 99p
======= ======= ======= =====
NET ASSET VALUE
The net assets of the Group are financed primarily by equity shareholders' funds
and equity minority interests. At 30th June 2004, and at the previous year end,
these sources of finance were as follows:-
30th June 30th June
2004 2003
#'000 #'000
Equity shareholders' funds 108,873 102,341
Equity minority interests 40,753 24,641
Preference share minority interests 1,155 1,209
------- -------
Net asset value at 30th June 2004 150,781 128,191
======= =======
The increase in net asset value during the year ended 30th June 2004 arose as
follows:-
Increase in
equity Increase in Increase in
shareholders' minority net asset
funds interests value
#'000 #'000 #'000
At start of the year 102,341 25,850 128,191
Revaluation surplus on
Group property portfolio
during the year 18,290 6,808 25,098
Retained loss for the
year (11,760) 9,543 (2,217)
Other equity movements 2 (293) (291)
------- ------ -------
108,873 41,908 150,781
======= ====== =======
Analysis of net assets at 30th June 2004
The analysis of net assets across of the Group's operations at 30th June 2004,
and at the previous year end is as follows:-
30th June 30th June
2004 2003
#'000 #'000
Hotels
Malmaison 55,847 39,177
Hotel investments 74,786 52,635
Liberty 53,491 54,537
Business Centres (5,865) (14,840)
Asset management 101 14,412
Project management 22,843 4,675
Cash holdings and other assets, less loan
stock (50,422) (22,405)
------- -------
Net asset value at 30th June 2004 150,781 128,191
======= =======
REVIEW OF BALANCE SHEET
Portfolio analysis by division
The Group holds its direct property interests principally as tangible fixed
assets, with smaller amounts held as developments in progress and properties
held for resale.
The Group's property interests are disclosed in the consolidated balance sheet
at 30th June 2004 as follows:-
30th June 30th June
2004 2003
#'000 #'000
Tangible fixed assets 571,598 605,062
Developments in progress 21,265 34,985
Properties held for resale 1,113 3,467
------- -------
Total property interests at 30th June 2004 593,976 643,514
======= =======
Property revaluation surplus arising in the year
A valuation of the Group's fixed asset property portfolio at 30th June 2004 was
undertaken by DTZ Debenham Tie Leung on the basis of Market Value Existing Use
of Operating Properties. The net surplus, after deducting minority interests,
totalled #23.3m, which has been included in the accounts for the year ended 30th
June 2004. Surpluses or temporary deficits arising on valuation of the Group's
investment and operational properties are transferred to revaluation reserve,
while impairment of investment and operational properties to below their
historical cost is charged directly to the profit and the loss account. Further
details of the revaluation are set out in note 7 to the accounts. Developments
in progress and properties held for resale are recorded at the lower of cost and
net realisable value and are, therefore, not revalued in the Group accounts.
During the years ended 30th June 2002 and 30th June 2003, impairments of
operational properties to below their historical cost, principally in relation
to the Group's Business Centre properties, totalled #86m. As a result of the
revaluation at 30th June 2004 referred to above, certain of these impairments
which were charged to the profit and loss account in those years are now
required to be reversed, resulting in a credit to the profit and loss account
this year of #5.0m.
The valuation surplus arising from the valuation and credited to the profit and
loss account of #5.0m, and the valuation surplus credited to the revaluation
reserve of #18.3m, arose as follows:-
Less Net Taken to
previous Less surplus profit & Taken to
Gross book Gross minority to the loss revaluation
valuation value surplus interests Group account reserve
#'000 #'000 #'000 #'000 #'000 #'000 #'000
Hotels
Malmaison 149,533 148,006 1,527 - 1,527 (7) 1,534
Hotel investments 273,460 248,854 24,606 (5,500) 19,106 - 19,106
Liberty 81,106 77,376 3,730 (1,182) 2,548 - 2,548
Business Centres 46,072 45,645 427 - 427 5,546 (5,119)
Asset management 4,538 4,924 (386) 35 (351) (572) 221
------- ------- ------ ------ ------ ------ ------
554,709 524,805 29,904 (6,647) 23,257 4,967 18,290
======= ======= ====== ====== ======
Minority interests (161) 6,808
----- ------
Gross surplus 4,806 25,098
===== ======
The valuations of the Group's hotel interests include value ascribed for plant,
machinery, fixtures and fittings forming part of the service installations of
the building. They therefore represent a valuation of the total interest of the
Group in those properties and no further amount is included in respect of the
book value of such plant and fittings. The valuations exclude however the value
of any goodwill that may arise from the present occupation of the properties.
The Group's business centres are of a type normally sold as fully equipped and
operational entities and are therefore required to be valued by reference to
their trading potential. These values include land and buildings and also trade
fixtures, fittings, furniture, furnishings and equipment of the properties,
rather than valuing the property and then including an additional element for
the net book value of the fixtures and equipment. The valuation excludes
consumables, stock in trade and any goodwill that may arise from the present
occupation of the properties.
Brand values
A review of the Liberty brand was conducted at 30th June 2004 which confirmed
its value at not less than the carrying value of #18.2m at which it is included
in the accounts.
REVIEW OF FUNDING AND LOAN FACILITIES
Funding policy
The Group has two principal central facilities available for investment in all
divisions, providing a total of #58m of funds to the Group. The balance of the
Group's total loans, amounting to #452m at 30th June 2004, is sourced from bank
facilities made available to individual divisions of the Group.
The Group borrows from banks at fixed and floating rates of interest, with the
interest rate exposure from floating rate debt being hedged by financial
derivative instruments. The principal purpose of the Group's hedging
arrangements is to protect the Group against adverse interest rate movements and
to retain some opportunity to benefit from falls in short term interest rates;
they are not used to speculate on interest rate movements. Derivative
instruments used by the Board principally comprise interest rate swaps, floors
and collars.
The Group's treasury policies are designed to ensure that:-
(i) sufficient committed loan facilities are available to support current and
future business requirements. Cash and loan management is a core feature of the
Board's business model and two year rolling cash flow forecasts, updated on a
monthly basis, are controlled by the Executive Directors to manage these
requirements.
(ii) the interest cost on Group debt is supported as much as possible from
maintainable income flows, with the retirement of debt matched against capital
inflows over short and medium term capital programmes.
(iii) interest rate exposure is managed through a combination of fixed rate debt
and interest rate swaps, thus fixing interest rates as much as possible by
reference to passing income at the date of drawdown.
The majority of the Group's borrowings are non-recourse to the holding company,
ring-fenced, and generally with medium term repayment profiles.
Net debt
The Group's loans, borrowings and cash are included in the consolidated balance
sheet at 30th June 2004 as follows:-
Composition at year end 30th June 30th June
2004 2003
#'000 #'000
Total loans and overdrafts in notes 9 and 10 509,800 466,903
Hire purchase and leasing contracts 7,485 18,252
------- -------
Total loans 517,285 485,155
Less cash (49,015) (52,359)
------- -------
Total net debt at year end 468,270 432,796
======= =======
The Group's total loan and borrowing position at 30th June 2004, and at the
previous year end had the following maturity profiles:-
30th June 30th June
2004 2003
#'000 #'000
Repayable:
Within one year or on demand 57,063 24,235
Between one and two years 43,516 109,370
Between two and five years 296,035 280,217
After more than five years 120,671 71,333
------- -------
Total loans 517,285 485,155
Less cash (49,015) (52,359)
------- -------
Total net debt at year end 468,270 432,796
======= =======
Movement in net debt during the year
The increase in total net debt during the year arose principally as follows:-
30th June 30th June
2004 2003
#'000 #'000
Total net debt at start of the year 432,796 437,744
Debt drawn on West India Quay development 57,957 41,146
Debt drawn on development of hotel portfolio 36,003 37,456
Increase/(decrease) in listed Unsecured Loan
Stock 15,000 (7,984)
Net proceeds received on sale of properties (71,443) (78,921)
Net cash inflow from other Group operations
during the year (2,043) 3,355
------- -------
Total net debt at year end 468,270 432,796
======= =======
Net debt attributable to Equity Shareholders' Funds
Certain elements of the Group's net debt have been drawn by subsidiaries that
are not wholly owned by the Group. These principally comprise the Group's Park
Lane hotel, Liberty, Business Exchange and West India Quay. The net debt
attributable to Equity Shareholders' Funds at 30th June 2004 amounted to #366m
(2003: #346m), calculated as follows:-
30th June 30th June
2004 2003
#'000 #'000
Total net debt as above 468,270 432,796
Less net debt attributable to minority
interests (102,043) (86,712)
------- -------
Total net debt attributable to Equity
Shareholders' Funds 366,227 346,084
======= =======
Gearing
Gearing at 30th June 2004 was 311% based on net assets, and 336% based on
shareholders funds, calculated as follows:-
30th June 30th June
2004 2003
#'000 #'000
Total net debt 468,270 432,796
Net assets 150,781 128,191
Gearing based on net assets 311% 338%
======= =======
Total net debt attributable to Equity
Shareholders' Funds 366,227 346,084
Equity Shareholders' Funds 108,873 102,341
Gearing based on Equity Shareholders' Funds 336% 338%
======= =======
The West India Quay hotel completed in June 2004, shortly before the year end,
with the residential apartments completing shortly thereafter. Pre-sales of
apartments of approximately #32m which had been exchanged prior to that date
have since been completed and received in cash. All proceeds received from sales
of apartments have been used to reduce net debt, therefore also reducing gearing
since the year end. If the pre-sales of #32m referred to above had completed
before 30th June 2004, gearing based on net assets would have been reduced from
311% to 289% and gearing based on Equity Shareholders' Funds would have been
reduced from 336% to 323%.
REVIEW OF EARNINGS
Results
The results for the year attributable to shareholders can be summarised as
follows:-
Year ended Year ended
30th June 30th June
2004 2003
#'000 #'000
Profit and loss account
Loss before exceptional items (11,760) (30,988)
Exceptional items - (30,362)
------- -------
(11,760) (61,350)
Credited to reserves
Revaluation reserve 18,290 31,034
Other items 2 (302)
------- -------
Net surplus (2003: deficit) for the year 6,532 (30,618)
======= =======
Per share, based on weighted average number of shares
in issue during the year 5.9p (24.6p)
======= =======
Earnings before interest, taxation, depreciation and amortisation ("EBITDA") of
the Group
The Board's prime measure of return used to monitor the results of each division
is the level of earnings before interest, taxation, depreciation and
amortisation, or EBITDA. The EBITDA of the Group for the year ended 30th June
2004, with comparatives for the previous year, was as follows:-
Year ended Year ended
30th June 30th June
2004 2003
#'000 #'000
Hotels
Malmaison
Operating income 8,568 7,263
Buyout of management contract - (7,000)
Pre-opening costs - (503)
Hotel investments
Operating income 11,256 5,275
Pre-opening costs (995) (1,191)
Liberty (1,047) 574
Business Centres
UK operating income 4,692 7,477
Sale of UK Centres - 2,074
European operating income - (8,164)
Fund management
Operating income - 3,661
Profit on disposal of fund management division - 14,954
Asset management 10,253 6,199
Project management 21,373 14,727
Cash holdings and other assets, less loan stock and
head office administration (9,929) (11,694)
------ ------
Total EBITDA for the year 44,171 33,652
====== ======
Summary of earnings
Profit/(loss)
on ordinary
Group activities
Year ended 30th June 2004 turnover EBITDA EBIT before tax
#'000 #'000 #'000 #'000
Hotels
Malmaison 32,628 8,568 4,802 (2,766)
Hotel investments 34,726 10,261 7,075 (4,665)
Liberty 40,891 (1,047) (3,492) (6,266)
MWB Business Exchange
Operating results 58,625 4,692 (1,291) (4,567)
Previous write-downs of properties
now written back - - 5,547 5.547
Asset management 5,980 10,253 9,590 6,415
Project management 64,713 21,373 21,373 21,390
Cash holdings and other assets, less
loan stock and head office
administration 3,347 (9,929) (10,658) (18,371)
------- ------ ------ ------
240,910 44,171 32,946 (3,283)
======= ====== ====== ======
EBIT = Earnings before interest and tax
Profit/(loss)
on ordinary
Group activities
Year ended 30th June 2003 turnover EBITDA EBIT before tax
#'000 #'000 #'000 #'000
Hotels
Malmaison
Operating income 62,214 7,263 4,360 (2,831)
Buy-out of management contract - (7,000) (7,000) (7,000)
Pre-opening costs - (503) (503) (503)
Exceptional - - (211) (211)
Hotel investments
Operating income 5,275 3,396 (4,809)
Pre-opening costs (1,191) (1,191) (1,191)
Liberty 48,281 574 (2,160) (4,786)
MWB Business Exchange
Operating results 75,867 1,387 (6,459) (11,114)
Property write-downs and other
exceptional items - - (47,279) (47,279)
Fund management
Operating income 2,406 3,661 3,661 2,725
Profit on disposal of fund
management division - 14,954 14,954 14,954
Asset management 11,100 6,199 5,713 186
Project management 23,214 14,727 14,727 14,877
Cash holdings and other assets,
less loan stock and head office
administration 4,210 (11,694) (13,843) (16,906)
------- ------ ------ ------
227,292 33,652 (31,835) (63,888)
======= ====== ====== ======
Interest payable
The interest cost on funds used for the development of Group properties is an
inherent cost of development. All other interest is written off as incurred. Net
interest payable by the Group during the year was #43.8m. Of this amount, #7.6m
was capitalised in respect of development expenditure, leaving a net charge to
the profit and loss account of #36.2m.
The average cost of borrowing on the Group's loans at 30th June 2004, inclusive
of margin, was 7.6% per annum; slightly higher than the rate of 7.4% at 30th
June 2003.
Taxation
The net tax credit of #1.1m (2003: #0.4m) for the year ended 30th June 2004
reflects repayments received from the Inland Revenue, the use of brought forward
tax reliefs and increased capital allowances resulting from the Group's capital
expenditure programmes.
The tax credit is net of a tax charge of #0.7m (2003: #0.5m) representing
Japanese tax incurred on the profits of Liberty's operation in Japan. Of this
amount, 49% is incurred by the minority interest in the Japanese operations of
Liberty, who participate in the after tax profits of these operations. Further,
the Group has a 68% interest in Liberty and thus the net cost to the Group is
only 68% of this charge, or #0.2m (2003: #0.2m).
Earnings per share
The loss per share shown through the profit and loss account for year ended 30th
June 2004 was 10.7p per share, compared with a loss of 49.4p per share for the
year ended 30th June 2003. After taking account of the unrealised surplus
arising on the Group's property portfolio, the Group produced net earnings of
5.9p per share, a significant improvement on the net loss of 24.6p per share for
the year ended 30th June 2003
Dividend
As referred to in the circulars to shareholders in May 2002 and February 2004,
the previous dividend policy of the Company ceased once the proposals set out in
the May 2002 circular had been approved by Shareholders in May 2002. The Board
is continuing to direct disposal proceeds to the repayment of debt until net
debt levels have been reduced to lower levels. Thereafter, the Directors would
continue the Cash Distribution Programme approved by Shareholders at the May
2002 Extraordinary General Meeting, involving the distribution of surplus funds
to shareholders under share buy-backs, cash distributions and similar value
distribution programmes.
Cash flow
The consolidated cash flow statement on page 24 shows the funds generated by the
Group, those raised from external sources, the investments made and the effect
thereof on the Group's net debt.
During the year, the Group spent a total of #33.5m (2003: #71.6m) on the
purchase of fixed assets. This arose principally from capital expenditure in our
hotel division. Disposals of property in our Asset Management division totalled
#73.5m (2003: #81.5m), arising this year from the sale of Marble Arch Tower.
Pre-sales of apartments at West India Quay, which was completed in June 2004
shortly before the year end totalled #64.7m. These sales have therefore been
included in debtors due within one year at 30th June 2004 and are the principal
reason for the increase in this figure over the figure at the previous year end.
A significant proportion of this amount has since been received as the phased
completions of sales take place and all proceeds are expected to have been
received by November 2004.
Net debt increased by #35m to #468m during the year ended 30th June 2004.
Further details of the Group's loans and the principal components of this
increase are set out in the section entitled "Net debt" on pages 13 and 14
above.
International Financial Reporting Standards
The reporting of accounts by listed companies in accordance with International
Financial Reporting Standards ("IFRS") comes into effect for accounting periods
commencing on or after 1st January 2005.
The first audited accounts of the Group prepared in accordance with IFRS will be
those for the year ending 30th June 2006. These will include information for
that year and for the comparatives for the year ending 30th June 2005 prepared
in accordance with IFRS. The unaudited interim accounts for the six months
ending 31st December 2005 will also be prepared in accordance with IFRS as they
will be in respect of an accounting period starting on or after 1st January
2005.
The Group has formed an IFRS Committee from the Head Office and Divisional
Finance Teams, to ensure it has the necessary information required for the
further disclosure and new accounting treatments arising under IFRS. We expect
to report more fully on the effect of this implementation in our accounts for
the year ended 30th June 2005, which will be the last audited accounts of the
Group to be prepared under UK GAAP.
Andrew Blurton
JOINT FINANCE DIRECTOR
London
23rd September 2004
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 30th June 2004
Year ended 30th June 2003
Year Before
ended exceptional Exceptional
30th June items items Total
2004 Restated Restated
Notes #'000 #'000 #'000 #'000
------------------------------------------------------------------------------
Turnover
Group and share of
joint ventures 240,910 199,057 23,179 222,236
Less share of joint
venture turnover - (1,392) - (1,392)
------------------------------------------------------------------------------
Group turnover 1 240,910 197,665 23,179 220,844
Cost of sales (199,387) (189,062) (64,714) (253,776)
------------------------------------------------------------------------------
Gross profit/(loss) 41,523 8,603 (41,535) (32,932)
Administrative expenses (15,429) (18,237) - (18,237)
------------------------------------------------------------------------------
Group operating
profit/(loss) 26,094 (9,634) (41,535) (51,169)
Share of operating
profit of joint ventures - 1,273 - 1,273
------------------------------------------------------------------------------
Total operating
profit/(loss):
Group and share of
joint ventures 26,094 (8,361) (41,535) (49,896)
Profit on disposal of
investment properties
and other fixed assets 2 6,852 3,428 14,954 18,382
Amounts written off
investments - - (321) (321)
------------------------------------------------------------------------------
Profit/(loss) on
ordinary activities
before interest 32,946 (4,933) (26,902) (31,835)
Net interest payable
and similar items 3 (36,229) (32,053) - (32,053)
------------------------------------------------------------------------------
Loss on ordinary
activities
before taxation 1 (3,283) (36,986) (26,902) (63,888)
Taxation credit on
loss on ordinary
activities 4 1,066 401 - 401
------------------------------------------------------------------------------
Loss on ordinary
activities after taxation (2,217) (36,585) (26,902) (63,487)
Equity minority interests 5 (9,608) 5,677 (2,528) 3,149
Non-equity minority
interests 65 (80) (932) (1,012)
------------------------------------------------------------------------------
Loss attributable to
ordinary shareholders
retained for the year (11,760) (30,988) (30,362) (61,350)
==============================================================================
Loss per share 6 (10.7p) (25.0p) (24.4p) (49.4p)
==============================================================================
The results for the year ended 30th June 2003 have been restated to accord with
the amendment to FRS5 published in November 2003. This has no effect on the
gross profit/(loss) or results below that level in the profit and loss account.
All results relate to continuing operations.
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the year ended 30th June 2004
Year ended 30th June 2003
Year ended Continuing operations
30th June
2004 Before
Continuing exceptional Exceptional
operations items items Total
#'000 #'000 #'000 #'000
------------------------------------------------------------------------------
Loss retained for the
financial year
Group (11,760) (31,409) (30,362) (61,771)
Joint ventures - 421 - 421
------------------------------------------------------------------------------
Total loss for the financial
year (11,760) (30,988) (30,362) (61,350)
Net revaluation surplus on
fixed assets credited to
revaluation reserve 18,290 31,034 - 31,034
Currency translation
differences on foreign currency
net investments 2 (465) - (465)
Other movements - 163 - 163
------------------------------------------------------------------------------
Total recognised gains and
losses for the year 6,532 (256) (30,362) (30,618)
==============================================================================
All recognised gains and losses are attributable to equity shareholders'
interests.
RECONCILIATIONS OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS
for the year ended 30th June 2004
2004 2003
#'000 #'000
------------------------------------------------------------------------------
Opening equity shareholders' funds 102,341 144,493
Profit/(loss) for the financial year
- before exceptional items (11,760) (30,988)
- exceptional items - (30,362)
Net revaluation surplus on fixed assets credited to
revaluation reserve 18,290 31,034
Purchase of own shares for cancellation during the year - (14,030)
Currency translation differences on foreign currency net
investments 2 (465)
Other movements - 2,659
------------------------------------------------------------------------------
Closing equity shareholders' funds 108,873 102,341
==============================================================================
CONSOLIDATED BALANCE SHEET
at 30th June 2004
2004 2003
Notes #'000 #'000
------------------------------------------------------------------------------
Fixed assets
Intangible asset 18,200 18,200
Tangible assets 7 571,598 605,062
------------------------------------------------------------------------------
589,798 623,262
------------------------------------------------------------------------------
Current assets
Developments in progress 21,265 34,985
Properties held for resale 1,113 3,467
Stocks 7,054 6,246
Debtors: amounts falling due
- after more than one year 1,126 5,771
- within one year 8 90,637 39,053
Cash 49,015 52,359
------------------------------------------------------------------------------
170,210 141,881
Creditors: amounts falling due within one year 9 (126,633) (126,809)
------------------------------------------------------------------------------
Net current assets 43,577 15,072
------------------------------------------------------------------------------
Total assets less current liabilities 633,375 638,334
Creditors: amounts falling due after more than
one year 10 (462,013) (472,329)
Provisions for liabilities and charges 11 (20,581) (37,814)
------------------------------------------------------------------------------
Net assets 150,781 128,191
==============================================================================
Capital and reserves
Called up share capital 54,900 54,900
Share premium account 12 79,364 79,364
Capital redemption reserve 12 15,650 15,650
Revaluation reserve 12 105,535 80,347
Merger reserve 12 9,403 9,403
Other reserves 12 1,379 1,379
Profit and loss account 12 (157,358) (138,702)
------------------------------------------------------------------------------
Equity shareholders' funds 108,873 102,341
Equity minority interests 13 40,753 24,641
Non-equity minority interests 1,155 1,209
------------------------------------------------------------------------------
150,781 128,191
==============================================================================
Equity shareholders' funds per share 14 99p 93p
==============================================================================
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 30th June 2004
Notes 2004 2003
#'000 #'000
------------------------------------------------------------------------------
Net cash inflow/(outflow) from operating activities 15 (19,453) 51,047
Returns on investments and servicing of finance 16 (43,858) (36,407)
Corporation tax paid (686) (166)
Capital expenditure, financial investment and sales
of fixed assets 17 40,030 9,920
Acquisitions and disposals (8,651) 14,454
------------------------------------------------------------------------------
Net cash inflow/(outflow) before financing (32,618) 38,848
Financing 18 29,274 (32,248)
------------------------------------------------------------------------------
(Decrease)/increase in cash during the year (3,344) 6,600
==============================================================================
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
for the year ended 30th June 2004
2004 2003
#'000 #'000
(Decrease)/increase in cash during the year 19 (3,344) 6,600
Net decrease in hire purchase and leasing
contracts 19 10,767 6,808
Net increase in loans during the year 19 (42,897) (8,460)
------------------------------------------------------------------------------
Decrease/(Increase) in net debt during the year 19 (35,474) 4,948
Opening net debt 19 (432,796) (437,744)
------------------------------------------------------------------------------
Closing net debt 19 (468,270) (432,796)
==============================================================================
NOTES TO THE ACCOUNTS
1. DIVISIONAL ANALYSIS
The analysis of Group turnover is as follows:-
Year ended Year ended 30th June 2003
30th June Total Joint Group
Turnover 2004 Turnover ventures turnover
#'000 #'000 #'000 #'000
------------------------------------------------------------------------------
Hotels
Malmaison 32,628 25,047 (37) 25,010
Hotel investmnts 34,726 37,204 - 37,204
Liberty 40,891 41,833 - 41,833
Business Centres
UK 58,625 63,456 - 63,456
Europe, excluding UK - 12,411 - 12,411
Fund management - 3,761 (1,355) 2,406
Asset management 5,980 11,100 - 11,100
Project management 64,713 23,214 - 23,214
Other 3,347 4,210 - 4,210
------- ------- ------- -------
240,910 222,236 (1,392) 220,844
======= ======= ======= =======
By geographical origin:
United Kingdom 235,325 204,271 (1,392) 202,879
Europe, excluding United Kingdom - 12,411 - 12,411
Japan 5,585 5,554 - 5,554
------- ------- ------- -------
240,910 222,236 (1,392) 220,844
======= ======= ======= =======
Year ended
30th June
2004
Group
Earnings before interest, taxation, depreciation and amortisation EBITDA
("EBITDA") #'000
------------------------------------------------------------------------------
The EBITDA of the Group is calculated as follows:-
Profit on ordinary activities before interest for the year 32,946
Add depreciation, amortisation and property write-backs 11,225
------
Total EBITDA for the year 44,171
======
Year ended 30th June 2003
Before
Earnings before interest, taxation, exceptional Exceptional Group
depreciation and amortisation items items EBITDA
("EBITDA") #'000 #'000 #'000
------------------------------------------------------------------------------
Loss on ordinary activities before
interest for the year (4,933) (26,902) (31,835)
Add depreciation, amortisation and
write-downs for the year 16,005 49,482 65,487
------ ------ ------
Total EBITDA for the year 11,072 22,580 33,652
====== ====== ======
Year ended Year ended
30th June 30th June
2004 2003
Analysis of EBITDA #'000 #'000
------------------------------------------------------------------------------
The analysis of the EBITDA for the year as follows:-
Hotels
Malmaison
Operating income 8,568 7,263
Buyout of management contract - (7,000)
Pre-opening costs - (503)
Hotel investments
Operating income 11,256 5,275
Pre-opening costs (995) (1,191)
Liberty - operating income (1,047) 574
Business Centres
UK operating income 4,692 7,477
Profit on sale of properties - 2,074
European operating income - (8,164)
Fund management
Operating income - 3,661
Profit on sale of properties - 14,954
Asset management 10,253 6,199
Project management 21,373 14,727
Cash holdings and other assets, less loan stock and
head office administration (9,929) (11,694)
------ ------
Total EBITDA for the year 44,171 33,652
====== ======
Year Year
ended ended
30th 30th
June June
2004 2003
Total Total
Loss on ordinary activities before taxation #'000 #'000
------------------------------------------------------------------------------
The analysis of the Group loss on ordinary activities before
taxation is as follows:-
Hotels
Malmaison
Operating income (2,766) (2,831)
Buyout of management contract - (7,000)
Pre-opening costs - (503)
Exceptional - (211)
Hotel investments
Operating income (3,670) (4,809)
Pre-opening costs (995) (1,191)
Liberty
Ordinary (6,266) (4,786)
Business Centres
UK
Ordinary 980 (3,173)
Exceptional - (40,486)
Europe, excluding UK
Ordinary - (7,941)
Exceptional - (6,793)
Asset management
Operating income (437) (360)
Sales of properties 6,852 546
Fund management
Operating income - 2,725
Profit on disposal of fund management division - 14,954
Project management
West India Quay 21,390 174
Royal Victoria Dock - 14,703
Cash holdings and other assets (546) (3,705)
------ ------
Profit/(loss) before head office administration cost 14,542 (50,687)
Head office administration cost (17,825) (13,201)
------ ------
Loss on ordinary activities before taxation (3,283) (63,888)
====== ======
By geographical origin:
United Kingdom (4,471) (50,259)
Europe, excluding United Kingdom - (14,734)
Japan 1,188 1,105
------ ------
(3,283) (63,888)
====== ======
The analysis of the Equity Shareholders' funds, minority interests and net
assets of the Group are as follows:-
Equity Equity Non-equity Net assets
Shareholders' minority minority 30th June
funds interests interests 2004
#'000 #'000 #'000 #'000
Net assets
------------------------------------------------------------------------------------
30th June 2004
Hotels
Malmaison 55,847 - - 55,847
Hotel investments 62,266 12,520 - 74,786
Liberty 36,332 16,008 1,151 53,491
Business Centres (5,865) - - (5,865)
Asset management 264 (167) 4 101
Project management 10,548 12,295 - 22,843
Cash holdings and other
assets, less loan stock (50,519) 97 - (50,422)
------- ------ ----- -------
108,873 40,753 1,155 150,781
======= ====== ===== =======
Equity shareholders' funds
per share 99p
Equity Equity Non-equity Net assets
Shareholders' minority minority 30th June
funds interests interests 2003
#'000 #'000 #'000 #'000
Net assets
------------------------------------------------------------------------------------
30th June 2003
Hotels
Malmaison 39,177 - - 39,177
Hotel investments 45,876 6,759 - 52,635
Liberty 36,231 17,101 1,205 54,537
Business Centres (14,840) - - (14,840)
Asset management 14,575 (167) 4 14,412
Project management 3,876 799 - 4,675
Cash holdings and other
assets, less loan stock (22,554) 149 - (22,405)
------- ------ ----- -------
102,341 24,641 1,209 128,191
======= ====== ===== =======
Equity shareholders' funds
per share 93p
===
2. PROFIT ON DISPOSAL OF INVESTMENT PROPERTIES AND OTHER FIXED ASSETS
Year Year
ended ended
30th June 30th June
2004 2003
#'000 #'000
------------------------------------------------------------------------------
The profit on disposal of investment properties and other
fixed assets arose as follows:-
Profit on disposal of fund management
division - 14,954
Profit on disposal of investment properties 6,852 546
Profit on disposal of other fixed assets - 2,882
----- ------
6,852 18,382
===== ======
3. NET INTEREST PAYABLE AND SIMILAR ITEMS
Year Year
ended ended
30th June 30th June
2004 2003
#'000 #'000
------------------------------------------------------------------------------
The net interest payable and similar charges arose as
follows:-
Unsecured Loan Stock 2005/2006, including 3,931 609
redemption premium
Convertible Unsecured Loan Stock 2020, including - 2,621
redemption premium
Bank loans and overdrafts 38,149 34,841
Finance leases and hire purchase contracts 645 919
Bank charges, debt issue and debt repayment costs 2,714 1,614
------ ------
45,439 40,604
Share of joint ventures - 852
------ ------
45,439 41,456
Less interest receivable and similar income (1,577) (2,181)
------ ------
43,862 39,275
Less interest capitalised before tax relief (7,633) (7,222)
------ ------
Total net interest payable and similar charges 36,229 32,053
====== ======
Interest payable is sourced from the Group's operating cash flows and from its
available bank facilities. Payments and receipts from hedging arrangements are
included above with the financing facility to which they relate.
4. TAXATION CREDIT ON LOSS ON ORDINARY ACTIVITIES
Year Year
ended ended
30th June 30th June
2004 2003
#'000 #'000
------------------------------------------------------------------------------
The taxation credit for the year arose as follows:-
UK Corporation tax
Adjustment in respect of prior years and
utilisation of current year losses in reducing
liabilities of earlier years 1,748 868
Foreign tax
Tax on profit for the year (483) (498)
Adjustment in respect of prior years (199) 31
----- ----
Total corporation tax and similar taxes
credited to profit and loss account 1,066 401
===== ====
The taxation credit on the loss on ordinary activities has been increased (2003:
reduced) from the amount that would arise from applying the prevailing
corporation tax rate to the Group's losses, as follows:-
Year Year
ended ended
30th June 30th June
2004 2003
#'000 #'000
------------------------------------------------------------------------------
UK corporation tax at 30% on Group losses
before tax 985 19,166
Excess of depreciation over capital
allowances claimed (2,689) (3,514)
Permanently disallowable expenditure and
unrelieved losses (4,709) (2,977)
Exceptional write-downs not deductible for
tax - (14,845)
Difference between taxation on chargeable
gains and on accounting profits 1,978 365
Taxation on overseas earnings at higher rate
than UK corporation tax (126) (168)
Non taxable profits and capitalised
expenditure deductible 1,137 1,205
Tax losses brought forward utilised in year 2,941 270
----- ----
Total corporation tax and similar taxes
charge for the year (483) (498)
Reduction in taxation provisions in respect
of prior years and utilisation of current
year losses in reducing liabilities of
earlier years 1,549 899
----- ----
Total corporation tax and similar taxes
credited to profit and loss account 1,066 401
===== ====
No deferred tax was required to be charged either for the year ended 30th June
2004 or for the previous year. In accordance with FRS19, deferred tax of #5.4m
(2003: #7.0m) in relation to potential tax on property revaluation surpluses is
included in deferred tax not provided at 30th June 2004 in note 11 to the
accounts.
5. EQUITY MINORITY INTERESTS
Equity minority interests in the loss on ordinary activities after taxation
arose in the following divisions of the Group:-
Year Year
ended ended
30th June 30th June
2004 2003
#'000 #'000
------------------------------------------------------------------------------
Hotels - 140 Park Lane Limited 570 634
Hotels - West India Quay 331 -
Liberty - Retail Stores plc 1,998 1,434
Business Centres - MWB Business Exchange UK
Limited - 5,686
Project Management - Royal Victoria Dock 69 (4,660)
Project Management - West India Quay (12,705) (37)
Leisure Box Limited 129 92
----- -----
(9,608) 3,149
===== =====
6. LOSS PER SHARE
The loss per share figures are calculated by dividing the loss for the year
after taxation and minority interests, by the weighted average number of shares
in issue during the year, as follows:-
Year ended 30th June 2003
Year
ended Before
30th June Exceptional Exceptional
2004 items Items Total
#'000 #'000 #'000 #'000
Loss on ordinary activities
after taxation and
minority interests (11,760) (30,988) (30,362) (61,350)
======== ======== ======== ========
'000 '000 '000 '000
Weighted average number of
ordinary shares in issue
during the year 109,800 124,237 124,237 124,237
======== ======== ======== ========
Loss per share (10.7p) (25.0p) (24.4p) (49.4p)
======== ======== ======== ========
7. TANGIBLE FIXED ASSETS
investment Operational
----------------properties---------------- --------properties--------------
Plant,
machinery,
Long Short Long Short fixtures &
Freehold leasehold Leasehold Freehold leasehold leasehold equipment Total
#'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000
Group Cost or
valuation
At 1st July
2003 42,100 68,731 - 238,448 140,122 67,942 73,362 630,705
Additions - - - 30,984 4,200 475 926 36,585
Reclassifications (39,600) (23,124) 7,612 39,600 (20,839) 31,270 5,081 -
Disposals - (45,607) - - (19,526) 3,103 (7,279) (69,309)
Revaluation - - 888 16,124 7,345 (22,139) - 2,218
------ ------ ----- ------- ------- ------ ------ -------
At 30th June 2004 2,500 - 8,500 325,156 111,302 80,651 72,090 600,199
====== ====== ===== ======= ======= ====== ====== =======
Depreciation
At 1st July 2003 - - - (674) (69) (217) (24,683) (25,643)
Charge for the year - - - (2,795) (903) (6,430) (7,786) (17,914)
Disposals - - - - 231 - 3,984 4,215
Revaluation - - - 3,469 741 6,531 - 10,741
------ ------ ----- ------- ------- ------ ------ -------
At 30th June 2004 - - - - - (116) (28,485) (28,601)
====== ====== ===== ======= ======= ====== ====== =======
Net book value
At 30th June 2004 2,500 - 8,500 325,156 111,302 80,535 43,605 571,598
====== ====== ===== ======= ======= ====== ====== =======
At 30th June 2003 42,100 68,731 - 237,774 140,053 67,725 48,679 605,062
====== ====== ===== ======= ======= ====== ====== =======
Analysis of valuation surplus for the year
Reflected in
fixed assets
Charged to the
profit and
loss account - - - (7) (291) (11,841) - (12,139)
Credited/(debited
to the revaluation
reserve (note 12) - - 607 14,259 8,377 (4,953) - 18,290
Minority interests
(note 13) - - 281 5,341 - 1,186 - 6,808
------ ------ ----- ------- ------- ------ ------ -------
Net revaluation
surplus reflected
above - - 888 19,593 8,086 (15,608) - 12,959
Reflected in
provisions
Net surplus
reflected in
reduction in
provisions (note 13) and
credited to
the profit and
loss account - - - - 238 16,707 - 16,945
------ ------ ----- ------- ------- ------ ------ -------
Total
revaluation
surplus - - 888 19,593 8,324 1,099 - 29,904
====== ====== ===== ======= ======= ====== ====== =======
Valuation
The Group's Investment and Operational properties were valued as at 30th June
2004 by qualified professional valuers working for the company of DTZ Debenham
Tie Leung, Chartered Surveyors, ("DTZ"), acting in the capacity of External
Valuers. All such valuers are Chartered Surveyors, being members of the Royal
Institution of Chartered Surveyors ("RICS").
All valuations were carried out in accordance with the RICS Appraisal and
Valuation Standards 5th Edition ("the Manual") and the properties were valued on
the basis of Market Value Existing Use of the Properties. Market Value is
defined in the Manual as the estimated amount for which a property should
exchange on the date of valuation between a willing buyer and a willing seller
in an arm's-length transaction after proper marketing, where the parties had
each acted knowledgeably, prudently and without compulsion. Market Value of the
business centres equates to the value as operating entities of the Group's
properties. However, where the Group owns business centres freehold or on a long
leasehold basis, the value on a traditional basis is also calculated by applying
a market rent and investment yield assuming the property was available for
alternative office use. Where this value is greater than the value derived from
the EBITDA approach, the Manual requires the valuer to adopt this higher figure
within their valuation, and this has been followed by DTZ. The DTZ valuation is
not qualified by any reference to existing or alternative use and implies the
value to which a property will derive, having regard to its most valuable use.
In valuing the business centres, leisure properties and hotels of the Group, DTZ
have had regard to the valuation of the properties as fully equipped operational
entities, and to their trading potential. The valuation therefore includes the
land and buildings; the trade fixtures, fittings, furniture, furnishings and
equipment; and the market's perception of the trading potential excluding
personal goodwill; together with an assumed ability to renew existing licences,
consents, certificates and permits. The value excludes consumables and stock in
trade.
The valuations of the business centres and leisure properties are based on
estimates of the annual maintainable earnings before interest, tax, depreciation
and amortisation ("EBITDA") for each property over a ten year cash flow period.
These estimates are based on the historic, current and budgeted trading
information provided by the Group to DTZ. At the end of the cash flow forecast
period, DTZ apply a multiplier to the then EBITDA to establish an exit value
which reflects the characteristics of the property at that date. The multiplier
adopted for leasehold properties reflects the term remaining before lease
expiry, the obligations contained within the lease and the possibility that the
landlord might seek repossession at expiry of the contracted term on statutory
grounds.
DTZ apply a market discount rate to the cashflow forecast of the business
centres and leisure properties to assess the net present value of each property
asset. This is in line with the method currently used by the market for the
valuation of this type of property. For those business centres which are held as
freehold or on a long leasehold basis, DTZ also consider the value of the asset
on a traditional basis by applying a market rent and investment yield assuming
the property was available for alternative office use.
The valuation by DTZ excludes any goodwill associated with the management of the
Company or any of its subsidiaries but recognises that the business centre and
hotel assets would probably be sold as trading entities. In addition, the
valuation represents individual property values and does not reflect any premium
value which may be attributable to an acquisition of the properties as a
portfolio.
The value of the properties reported by DTZ totalled #555m which is reflected in
the net book value of fixed assets of #572m and the onerous short term lease
liabilities of #15m which have been included in provisions in note 25. The
valuation resulted in a net surplus for the year of #23.2m, of which #20.3m is
reflected in the table above and #2.9m is reflected in the movement in
provisions in note 11.
The Group's tangible fixed assets are located within the United Kingdom. The
historic cost of the Group's properties at 30th June 2004 includes capitalised
interest of #31.1m (2003: #23.5m).
8. DEBTORS : amounts falling due within one year
2004 2003
#'000 #'000
Trade debtors 9,742 9,490
Amounts due on property disposals 53,738 -
Amounts due from external related parties 3,170 2,466
Other debtors
Other taxes and social security 1,498 1,960
Other debtors 4,129 4,534
Prepayments and accrued income 18,360 20,603
------ ------
90,637 39,053
====== ======
9. CREDITORS : amounts falling due within one year
2004 2003
#'000 #'000
Current portion of secured bank and other loans 52,905 16,497
Hire purchase and leasing contracts 4,158 7,738
Trade creditors 13,207 15,318
Amounts due to other related parties 227 125
Deferred consideration on purchase of properties - 875
Other creditors
Corporation tax 1,992 4,037
Other taxes and social security 3,155 2,388
Other creditors 22,320 43,411
Accruals 27,245 35,070
Deferred income 1,424 1,350
------- -------
126,633 126,809
======= =======
10. CREDITORS : amounts falling due after more than one year
2004 2003
#'000 #'000
7.5% Unsecured Loan Stock 2005/2006 30,386 13,488
Bank loans (secured) 424,012 426,916
Other loan borrowings 6,475 14,595
Less issue costs (3,978) (4,593)
------- -------
456,895 450,406
Hire purchase and leasing contracts 3,327 10,514
Amount due to other related parties 1,725 1,482
Other creditors 66 9,927
------- -------
462,013 472,329
======= =======
Analysed as:
Loans due after more than one year 456,895 450,406
Other long term liabilities 5,118 21,923
------- -------
462,013 472,329
======= =======
11. PROVISIONS FOR LIABILITIES AND CHARGES
The movement on the deferred tax balances and other provisions during the year
ended 30th June 2004 were as follows:-
-----------30th June 2004---------- 30th June
Deferred 2003
Taxation Other Total Total
#'000 #'000 #'000 #'000
At 1st July 2003 - 37,814 37,814 13,201
Potential tax on short-term
timing differences (3,012) - - 1,185
Trading tax losses and
accelerated capital
allowances 3,012 - - (1,185)
Net increase in other
provisions during the year - 1,594 1,594 1,662
(Decrease)/increase in
provision for properties
carried at negative values - (18,827) (18,827) 22,951
----- ------ ------ ------
At 30th June 2004 - 20,581 20,581 37,814
===== ====== ====== ======
Analysis
Properties held at negative
values 14,799 33,626
Other provisions 5,782 4,188
------ ------
20,581 37,814
====== ======
Certain short leasehold interests in the Group's business centre operations had
negative values at 30th June 2004 and at the previous year end. These
principally reflect the onerous cost of future lease obligations and accordingly
were provided in the profit and loss accounts for the years ended 30th June
2003, and are recorded as provisions above. During the year ended 30th June
2004, amortisation of onerous lease provisions totalled #1.9m (2003: #1.6m)
In July 2003, the Group closed its majority owned subsidiary MWB Business
Exchange Europe Limited ("Business Exchange Europe") and its nine serviced
office centres in Holland, Germany and France. At 30th June 2003 the
consolidated assets and liabilities of Business Exchange Europe were included in
the consolidated balance sheet at that date, and amounted to net liabilities of
#13m. Following closure of the businesses, the individual assets and liabilities
previously consolidated have been replaced by a single net provision covering
the expected costs of closure of the same amount. This net provision has been
sufficient to meet the liabilities arising from the closure and accordingly no
additional provisions were required during the year ended 30th June 2004 or are
expected in future years. At 30th June 2004, #4.9m of the provisions shown above
relate to these closure costs.
The deferred taxation balances at 30th June 2004 arose as follows:-
Amount Amount
Amount not Amount not
provided provided provided provided
2004 2004 2003 2003
#'000 #'000 #'000 #'000
Short term timing differences 5,430 - 8,442 -
Accelerated capital allowances 835 (6,388) 2,864 (7,218)
Trading tax losses (6,265) (22,832) (11,306) (16,210)
Potential tax on property
valuation surplus
eligible for rollover relief - 5,365 - 6,956
------ ------- ------ -------
At 30th June 2004 - (23,855) - (16,472)
====== ======= ====== =======
12. MOVEMENT ON RESERVES
Profit
Revaluation and loss
reserve account
#'000 #'000
At 1st July 2003 80,347 (138,702)
Loss retained for the year - (11,760)
Revaluation surplus for the year 18,290 -
Transfer on sale of properties during the year 11,420 (11,420)
Transfer of depreciation on revalued tangible fixed
assets (4,522) 4,522
Currency translation differences - 2
------- --------
At 30th June 2004 105,535 (157,358)
======= ========
During the year ended 30th June 2004 there was no movement in the share premium
account, the capital redemption reserve, the merger reserve and the other
reserve.
13. EQUITY MINORITY INTERESTS
The movements in equity minority interests of the Group during the year ended
30th June 2004 arose as follows:-
Add Less
Add/(less) minority distributions
minority share of and other
At share of valuation movements At
1st July profit/loss surplus for during the 30th June
2003 for the year the year year 2004
#'000 #'000 #'000 #'000 #'000
Hotels -
140 Park Lane Limited 6,759 (570) 679 - 6,868
Hotels -
West India Quay 1,162 (331) 4,821 - 5,652
Liberty -
Retail Stores plc 17,101 (1,998) 1,179 (274) 16,008
Project management -
Royal Victoria Dock 47 (69) - (30) (52)
Project management -
West India Quay (410) 12,705 - - 12,295
Leisure Box Limited 149 (129) 129 - 149
Others (167) - - - (167)
------ ----- ----- ---- ------
24,641 9,608 6,808 (304) 40,753
====== ===== ===== ==== ======
14. EQUITY SHAREHOLDERS' FUNDS PER SHARE
The equity shareholders' funds per share figures of the Group are calculated by
dividing the equity shareholders' funds at the year end by the number of shares
in issue at that date. They are calculated as follows:-
2004 2003
#'000 #'000
Equity shareholders' funds per consolidated balance sheet 108,873 102,341
======= =======
'000 '000
Number of ordinary shares in issue at year end 109,800 109,800
======= =======
Equity shareholders' funds per share 99p 93p
======= =======
15. NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES
2004 2003
#'000 #'000
Group operating profit/(loss) 26,094 (51,169)
Write-down/(back) of fixed assets (4,805) 41,361
Goodwill written off - 4,299
Depreciation 16,032 16,005
Decrease in properties held for resale 19,634 8,097
and developments in progress
(Increase)/decrease in debtors (45,866) 18,477
(Increase)/decrease in stock (807) 381
(Decrease)/increase in creditors (29,735) 13,596
------- ------
(19,453) 51,047
======= ======
16. RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
2004 2003
#'000 #'000
Interest received 1,581 2,181
Interest paid (45,439) (38,588)
------- ------
(43,858) (36,407)
======= ======
17. CAPITAL EXPENDITURE, FINANCIAL INVESTMENT AND SALES OF FIXED ASSETS
2004 2003
#'000 #'000
Purchase of tangible fixed assets (33,520) (71,570)
Sale of tangible fixed assets 73,550 81,490
------- ------
40,030 9,920
======= ======
18. FINANCING
2004 2003
#'000 #'000
Loans drawn down 161,412 134,684
Loans repaid (121,076) (130,474)
Net decrease in hire purchase and leasing contracts (10,767) (6,808)
Purchase of ordinary shares in the Company - (14,030)
Investment by non-equity minority interests 10 572
Distributions to equity minority interests (305) (6,192)
Unsecured Loan Stock repaid, including premium - (10,000)
------ ------
29,274 (32,248)
====== ======
19. INCREASE/(DECREASE) IN CASH DURING THE YEAR
Movement Movement
30th June during 30th June during 30th June
2004 year 2003 year 2002
#'000 #'000 #'000 #'000 #'000
Cash 49,015 (3,344) 52,359 6,600 45,759
Hire purchase and
leasing contracts (7,485) 10,767 (18,252) 6,808 (25,060)
Bank loans (464,819) (33,904) (430,915) (19,944) (410,971)
Unsecured Loan Stock (30,386) (16,898) (13,488) 7,984 (21,472)
Other loan
borrowings (14,595) 7,905 (22,500) 3,500 (26,000)
------- ------ -------- ----- -------
Net debt (468,270) (35,474) (432,796) 4,948 (437,744)
======= ====== ======= ===== =======
20. FINANCIAL INFORMATION
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 30th June 2004 or 2003 but is derived
from those accounts. Statutory accounts for 2003 have been delivered to the
Registrar of Companies, and those for 2004 will be delivered following the
Company's Annual General Meeting. The auditors have reported on those accounts;
their reports were unqualified and did not contain statements under Section 237
(2) or (3) of the Companies Act 1985.
21. DESPATCH OF ACCOUNTS
A copy of the above document has been submitted to the UK Listing Authority, and
will be available for inspection at the UK Listing Authority's Document Viewing
Facility, which is situated at the Financial Services Authority, 25 The North
Colonnade, Canary Wharf, London E14 5HS, telephone number 020 7676 1000.
The audited accounts of the Company are expected to be sent to shareholders
during October 2004. Thereafter copies will be available from the Company
Secretary, City Group P.L.C. at the Company's registered office, 25 City Road,
London EC1Y 1BQ.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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