RNS Number:7220S
Warner Estate Holdings PLC
02 December 2003
ACTIVE WARNER CONTINUES TO GROW
PROPERTY FUNDS UNDER MANAGEMENT
Warner Estate Holdings PLC ("Warner Estate"), the property investment company
has today announced its interim results for the six months to 30 September 2003.
* #842m property under management - annualised rent roll of #62m
* Formation of #110m Regional Office Fund
* Formation of #113m Distribution Warehouse Fund
* Increase in triple net NAV(a) of 6% to 439p (March 2003: 414p)
* Increase in adjusted NAV(b)of 4.6% to 459p (March 2003: 439p)
* Disposal of shareholding in Merivale Moore
* Interim dividend raised by 6.5% to 8.25p (2002: 7.75p)
* Continues 32 years of unbroken dividend growth
(a) adjusted for deferred tax and fair value of debt
(b) excludes the effects of deferred tax arising from the adoption of FRS 19
Philip Warner, Executive Chairman of Warner Estate commented,
" We have made good progress with our strategy of moving into property fund
management with major financial partners. During the first half of the year, we
have established two further funds, a #110 million Regional Office Fund and a
#113 million Distribution Warehouse Fund. These join the #273 million Agora
Northwest Shopping Centre Fund as part of a total of #842 million of property
under management, of which #496 million is in the funds.
" All the funds offer significant opportunities to deliver improved rental
income and capital growth. We have assembled an experienced property team which
is working hard to realise this potential.
" Looking to the future, we have created an excellent platform from which we
can expand our fund business. Warner Estate is in good shape and I am
confident of continuing progress."
-ends-
Date: 2 December 2003
For further information contact:
Warner Estate Holdings PLC City Profile Group
Philip Warner, Chairman Simon Courtenay
Richard Moore, Property Director 020-7448-3244
Peter Collins, Finance Director
020-7907-5100
Web: www.warnerestate.co.uk
CHAIRMAN'S STATEMENT
Warner Estate has continued to make good progress with its strategic move into
jointly owned property investment funds. Two further funds were established
during the first six months of the year, a #110 million Regional Office Fund and
a #113 million Distribution Warehouse Fund. These join the #273 million Agora
Northwest Shopping Centre Fund as part of a total of #842 million of property
under management, of which #496 million is in the funds. The total annualised
rent roll managed by the Group is now #61.7 million per annum.
RESULTS
All the specific sub sectors in which the Group operates have contributed to the
improvement in the Group's adjusted net assets. These increased during the
half-year by 4.6% to 459p per share (March 2003: 439p). A full property
revaluation accounted for 14.5p of the increase of which 8.8p was as a result of
Stamp Duty exemption in respect of "disadvantaged area status" introduced in the
last budget, with most of the balance coming from profits.
Our principal chosen measure of success is the improvement in triple net asset
value, which adjusts for deferred tax and the fair value of debt. This rose by
6.0% to 439p per share (March 2003: 414p). This proportionately larger increase
was due in part to the increase in interest rates on longer term money from 4%
to 4.65% reducing the fair value of debt, together with the fixing of certain of
the funds' debt at rates of between 4.1% and 4.3%.
We have, however, knowingly accepted a temporary reduction in recurring revenue
profits, the measure of core maintainable income, which is the result of our
planned strategic move to create a major additional income stream from asset
management. Recurring profits, which are after deducting profits arising from
property trading and fixed asset disposals, were #6.4 million (September 2002:
#6.7 million) and were ahead of the Group's own budget. This reduction was
exaggerated by the disposal of the Group's shareholding in its former associate
Merivale Moore in August of this year and the resultant loss of dividend income.
Revenue pre-tax profits were #6.4 million (September 2002: #7.2 million) and
total pre tax profits were #6.8 million (September 2002: #7.9 million).
The overall tax charge at 20% compared to an 18% charge in the six months to
September 2002 is the reason why the decline in earnings per share is slightly
greater than that in pre-tax profits with adjusted revenue earnings per share at
10.07p and recurring revenue earnings 10.00p per share (September 2002: 11.74p
and 11.09p respectively). Total adjusted earnings per share were 10.72p
(September 2002: 12.85p).
The Board has increased the interim dividend per share by 6.5% to 8.25p against
7.75p last year. The increase, which is covered 1.2 times by recurring revenue
earnings (September 2002: 1.4 times), reflects the Board's confidence in ongoing
profitability. The dividend will be paid on 27 February 2004 to shareholders
on the register at close of business on 6 February 2004.
PROPERTY
The last six months have continued a particularly busy period with the
establishment of the Regional Office Fund in July and the formation of the
Distribution Fund out of a #166 million industrial purchase in August to range
alongside the Agora Northwest Shopping Centre Fund. The impact of these is shown
in the following table:
Share of Total under
Directly held Funds (Joint Associate Total management
Ventures)
#m #m #m #m #m
Investment property 333.8 111.6 20.1 465.5 556.9
Trading property 46.1 2.3 5.2 53.6 46.1
At 31 March 2003 379.9 113.9 25.3 519.1 603.0
Investment property:
Externally valued 257.6 115.5 - 373.1 488.6
Directors' valuation 69.4 132.6 - 202.0 334.6
Investment property 327.0 248.1 - 575.1 823.2
Trading property 18.9 - - 18.9 18.9
At 30 September 2003 345.9 248.1 - 594.0 842.1
Movement in the six months:
Revaluation 6.4 1.0 - 7.4 8.4
Disposals to joint ventures:
Investment property (83.0) 54.8 - (28.2) 26.6
Trading property (26.6) - - (26.6) (26.6)
Other additions/(disposals) 69.2 78.4 (25.3) 122.3 230.7
Total (34.0) 134.2 (25.3) 74.9 239.1
The breakdown by sector at 30 September 2003 was as follows:
No. of Value Annual Rent Net initial Weighting
Properties #m Roll #m yield
Retail
Retail Warehouses 7 25.6 2.0
High Street 11 30.4 2.0
Retail sub total 18 56.0 4.0 6.80% 17%
Offices
Regional 28 134.8 11.1
M25 and Outer London 9 27.3 2.3
Offices sub total 37 162.1 13.4 7.90% 50%
Distribution and Industrial
Distribution 9 32.9 2.5
Industrial 20 76.0 6.1
Distribution & Industrial 29 108.9 8.6 7.58% 33%
sub total
Total 84 327.0 26.0 7.60% 100%
Trading 11 18.9 1.1
Total directly held 95 345.9 27.1
Funds (50% owned)
Shopping Centres 7 273.3 18.3
Trade Centres 1 0.3 -
Regional Offices 6 109.6 8.2
Distribution 8 113.0 8.1
Total under management 117 842.1 61.7
PROPERTY FUNDS
Agora Northwest Shopping Centre Fund, owned 50/50 with Bank of Scotland
Following its formation in March of this year, the fund was expanded with the
purchase of the Pyramids Shopping Centre, Birkenhead for #42 million in July.
The development programmes at Ellesmere Port, Sale and Liverpool are well
advanced. Ellesmere Port is expected to complete in early 2004 with JJB Sports
already fitting out and the majority of the other units being handed over this
month. At Sale, all the let units were opened for trading in August of this
year and the one remaining unit will be completed on target in April 2004.
Finally, at Liverpool Vivienne Westwood have opened for trading and Cricket are
due to complete shop-fitting in time for Christmas. At the other shopping
centres, we have a capital investment programme of approximately #50 million,
which will add 380,000 sq. ft. of new floor area, and construction, subject to
relevant permissions is planned to start on a phased basis between March 2004
and January 2006.
I am also pleased to report that the Agora Shopping Centre Fund has been ranked
by IPD for the half year to 30 September 2003 in the top 2 percentile, being
fourth out of 141 funds in its benchmark.
Regional Office Fund (Skipper Offices Limited) owned 50/50 with The Royal Bank
of Scotland
This #110 million fund was formed in July from five properties held for resale
in the Group's accounts at 31 March 2003 together with the office complex at
Kingston which was held as a trading property. These properties were sold to the
fund at their cost at 31 March. The fund has a capital investment programme of
approximately #8.4 million, with phased starts between June 2004 and June 2006,
in respect of the properties in Leeds, Kingston and Solihull, of which only
Solihull requires planning permission.
Distribution Warehouse Fund (Fairway Industrial Limited) owned 50/50 with Bank
of Scotland
At the end of August the Group and Bank of Scotland purchased #113 million of
distribution warehouses, part of a larger purchase from Morley. These eight
properties, which are all located at key distribution hubs, have a rent roll of
#8.2 million and a very strong covenant profile. Site coverage is relatively
low and there are opportunities for active management which will now be assessed
further. The balance of the purchase from Morley of #53 million has been taken
on to the balance sheet bringing the Group's weighting in industrial properties
in its core portfolio to 33%.
An interim valuation of the properties held in the Agora Shopping Centre Fund,
with the exception of Preston and Birkenhead which were purchased in March and
June of this year, was carried out by DTZ at 30 September 2003 which produced a
revaluation uplift of which the Group's share, net of cost, was #1 million.
The Agora Shopping Centre Fund was established in early March 2003 and included
in the accounts at 31 March 2003 at a Directors' valuation of #111.5 million
(the Group's share). This value was the purchase price of the shopping centres
plus the full costs of setting up the fund. In accordance with the Group's
accounting policy the properties in the Regional Office Fund and Distribution
Warehouse Fund were included at Directors' valuation using the same basis as
used for Agora in March 2003.
The funds have an annualised rent roll of #34.6 million and an average lease
length of 10 years. There are 447 tenancies and 315 tenants with #23 million
of rents being to government and large corporates and 5 tenants (19 tenancies)
accounting for just under 29% of the rent roll including 10% in respect of
government agencies and 8% in respect of Tesco. In terms of the geographic and
business risk, whilst the very nature of these funds includes an element of risk
because of their focus, the nature and spread of the tenancies reduce this risk
to a very low level.
WHOLLY-OWNED CORE PORTFOLIO
Cushman & Wakefield Healey & Baker carried out an interim valuation of the
investment portfolio as at 30 September 2003, which, together with a Directors'
valuation, produced a figure of #327 million and an average lot size of #3.9
million (March 2003 : #334 million and #4.1 million). The valuation produced
an uplift of #6.4 million, net of capital expenditure, of which #2.2 million was
in respect of disadvantaged area status. The apportionment of this uplift is
illustrated below:
Investment Property Valuation Uplift
Valuation Stamp Total Share of JV Total
#m #m #m #m #m
Retail 1.7 0.4 2.1 1.0 3.1
Regional Offices (0.2) 1.0 0.8 - 0.8
Greater London Offices (0.2) 0.2 0.0 - 0.0
Industrial 2.9 0.6 3.5 - 3.5
Total 4.2 2.2 6.4 1.0 7.4
The above figure of #6.4 million represents percentage increases of 3.9 for
retail, 0.6 for offices, 6.6 for industrial and 2.5 overall.
The core portfolio has an annualised rent roll for both trading and investment
properties of #27.1 million (September 2002 : #36.2 million), the reduction
being due to the disposals of three shopping centres into the Agora Shopping
Centre Fund in March and of six regional offices into the Regional Office Fund
in July. There are 365 tenancies and 273 tenants with #15 million of rents
being from low or medium risk covenants. In terms of exposure to any individual
tenant, there are four tenants with a total of 16 tenancies which account for
just under 19% of the rent roll and which are all rated at Standard and Poors '
A' or better. Geographic and business risks are not significant. The average
lease length on these properties has fallen slightly to 11.5 years in the period
and the level of voids has risen from just under 3% at 31 March to 6%. This
increase is mainly due to the level of voids contained within the recent
industrial purchase from Morley referred to above.
The trading property portfolio was substantially reduced during the period with
the disposal of the Kingston property to the Regional Office Fund. Two other
properties were sold for a small profit. The directors estimate that the value
of the trading stock is worth a further #0.9million above its book cost.
FINANCE
The results for the six months have seen the first significant income from
management fees for asset management. As a result, we have decided that the
management fees we receive from funds should be included in turnover rather than
in administrative expenses as hitherto. In addition, the profits from the funds
are included within recurring profits. Consequently, the prior period analysis
of turnover and expenses has been restated to show the comparable effect. These
accounts include a full analysis of the impact of the funds on the profit and
loss account and balance sheet, as shown in note 9 and summarised as follows:
6 months to:
30.9.03 31.3.03 30.9.02
#m #m #m
Operating Profit 5.0 2.0 0.5
Net interest payable (4.8) (1.9) (0.4)
Profit before tax 0.2 0.1 0.1
Interest received on loans to funds 1.0 0.7 0.3
Management fees 0.6 0.3 0.1
Total contribution 1.8 1.1 0.5
The other major impact on the profit and loss account concerns the sale of the
Group's 25.9% shareholding in Merivale Moore PLC which was disposed of at the
end of August at its value in the accounts at 31 March 2003 with the result that
there was no contribution from the Associate in this period. In the results
for the previous two half-years, the contribution was as follows:
6 months to:
30.9.03 31.3.03 30.9.02
#m #m #m
Operating Profit - 0.8 0.7
Capital profit - 0.2 0.2
Net interest payable - (0.5) (0.5)
Profit before tax - 0.5 0.4
of which recurring profit - 0.1 0.2
CASH FLOW
The net inflow in the period of #54.9 million arose mainly as a result of
receipts of #110 million from disposals to the Regional Office Fund and of #8.9
million from the sale of the Group's shareholding in Merivale Moore offset by
investments in joint ventures of #44.6 million and property purchases of #56.6
million which were financed by an additional #36.3 million of long term debt.
There has been a further #14.3 million outflow relating to property acquisitions
since the period end.
BALANCE SHEET
Shareholders' funds as adjusted to exclude the #4.3 million reduction for
deferred tax, rose to #234 million up from #223 million at 31 March and triple
net asset value rose to #224 million from #211 million. The main contributors
to this increase in adjusted shareholders' funds were #7.4 million from the
revaluation of both Group's properties and the Group's share of the funds'
properties, a #1.8 million increase in the value of the Group's investments and
retained profits of #1.3 million.
DEBT
There have been considerable movements in debt on the Group's balance sheet and
the Group's share of debt in the funds. These are mainly due to the sale of
properties to the Regional Office Fund off-set by the #53 million purchase of
industrial property on to the Group's balance sheet together with increases in
the Group's share in the funds' debt due to the purchase by the Agora Fund of
the shopping centre in Birkenhead and the establishment of the Regional Office
and Distribution funds. The following table shows the split of this debt
compared to the position at 31 March 2003:
On balance sheet Share of funds Total
#m #m #m
Net short term debt 2.7 (3.4) (0.7)
Long term debt with recourse 114.7 - 114.7
Total net recourse debt 117.4 (3.4) 114.0
Long term non-recourse debt 56.8 236.8 293.6
Total debt at 30 September 2003 174.2 233.4 407.6
Gearing (on adjusted shareholders' funds) 75% 174%
Recourse gearing 50% 49%
Total debt at 31 March 2003 192.8 106.5 299.3
Gearing (on adjusted shareholders' funds 86% 134%
Recourse gearing 61% 60%
Our increase in adjusted net asset value and overall reduction in net debt have
seen gearing on adjusted shareholders' funds fall from 86% to 75% with a
corresponding decrease in recourse gearing.
In terms of the interest rate exposure on this debt, the position with regard to
the Group's debt is that #63 million is fixed and the balance is covered by
swaps or caps, although because of the rates at which these derivatives impact,
the Group still has some exposure to upward movements in interest rates. With
respect to the share of the funds' debt, #140 million is swapped at rates of
between 4.1% and 4.3% for the life of the funds. The remaining #93 million is
currently not fixed.
Interest is covered 1.7 times by recurring revenue profits compared to 1.8 times
in the six months to 30 September 2002.
As at 30 September the Group had undrawn borrowing facilities of #43 million.
RETURN ON CAPITAL
The period concerned has benefited from two factors, outside management's
control, which have contributed significantly to the total annualised post-tax
return of 15.9%. These are the one-off impact of disadvantaged area status and
the sharp upward movement in rates for five year money. If these were
excluded, the annualised total return would still be a respectable 7.3%.
INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRS")
As with all quoted companies in the United Kingdom, we shall be required to
adopt IFRS for accounting periods ending on or after 31 December 2005. We will
continue to apply UK Accounting Standards up to and including our year ending 31
March 2005, but will adopt IFRS for the year to 31 March 2006.
The International Accounting Standards Board has not yet finalised the
accounting standards that must be adopted from 2005. If these new standards
are substantially in line with the exposure drafts that are currently being
discussed, they are likely to have a significant impact on our financial
statements. We will provide more information about the impact of the changes
on our accounts as the transition approaches.
PROSPECTS
The property investment market continues to experience strong demand and some
rental markets are beginning to reflect improving sentiment in the wider
economy. Current equities performance is ahead of property but it is to be hoped
that the losses of the recent past will encourage increasing asset allocation
towards property. As we establish a track record in property asset management,
Warner Estate is well placed to take advantage of growing interest in indirect
vehicles. The period under review saw the formation of two further property
funds and we shall be seeking to expand these. We are confident that our chosen
sectors of Northwest shopping centres, regional offices and distribution
warehouses are well placed for growth. The asset management skills of our
professional team will provide added value for shareholders in addition to that
resulting from any improvement in the market. I am confident of continuing
progress.
GENERAL
Finally, a copy of the Interim Results Presentation for the six months to
September 2003 may be viewed on the Company's website at www.warnerestate.co.uk.
Philip Warner
Chairman
2 December 2003
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the six months ended 30 September 2003
Notes Unaudited 6 Unaudited 6 Audited
months months year ended
ended ended 31.3.2003
30.9.2003 30.9.2002 restated
restated
#'000 #'000 #'000
TURNOVER: GROUP AND SHARE OF JOINT 37,235 29,314 53,113
VENTURES AND ASSOCIATE
less: Share of joint ventures and associate (8,776) (6,291) (7,589)
GROUP TURNOVER 2 28,459 23,023 45,524
Cost of sales and other property outgoings (16,570) (7,416) (14,554)
GROSS PROFIT 2 11,889 15,607 30,970
Administrative expenses (1,150) (1,076) (2,241)
GROUP OPERATING PROFIT 2 10,739 14,531 28,729
Share of operating profit in:
Joint ventures 2 4,988 438 2,392
Associate 2 - 660 1,424
4,988 1,098 3,816
TOTAL OPERATING PROFIT 15,727 15,629 32,545
Profit on sale of fixed assets 4 329 607 1,552
Income from fixed asset investments 334 635 814
PROFIT ON ORDINARY ACTIVITIES BEFORE 16,390 16,871 34,911
INTEREST
Net interest payable and similar charges 5 (9,638) (9,016) (18,354)
PROFIT ON ORDINARY ACTIVITIES BEFORE 6,752 7,855 16,557
TAXATION
Taxation on profit on ordinary activities 6 (1,349) (1,306) (2,728)
PROFIT ON ORDINARY ACTIVITIES AFTER 5,403 6,549 13,829
TAXATION
Minority interests (5) - -
5,398 6,549 13,829
Dividends (4,128) (3,950) (8,115)
RETAINED PROFIT 1,270 2,599 5,714
p p P
EARNINGS PER SHARE 7
Revenue 10.04 11.87 24.33
Capital 0.65 1.11 3.08
10.69 12.98 27.41
p P
FULLY DILUTED EARNINGS PER SHARE 7
Revenue 10.04 11.87 24.32
Capital 0.65 1.11 3.07
10.69 12.98 27.39
P P
ADJUSTED EARNINGS PER SHARE 7
Revenue 10.07 11.74 23.32
Capital 0.65 1.11 3.08
10.72 12.85 26.40
CONSOLIDATED BALANCE SHEET
Notes Unaudited Unaudited Audited At
At At 31.3.2003
30.9.2003 30.9.2002
#'000 #'000 #'000
FIXED ASSETS
Tangible fixed assets
Investment properties 8 327,036 404,600 333,821
Other tangible assets 469 494 504
327,505 405,094 334,325
Joint ventures 9
Share of gross assets 258,973 57,261 121,466
Share of gross liabilities (251,061) (56,960) (115,847)
Loan accounts 62,712 18,830 19,354
70,624 19,131 24,973
Investments 10 13,808 23,480 21,007
411,937 447,705 380,305
CURRENT ASSETS
Property stock 18,916 49,451 46,044
Debtors 21,011 8,362 11,301
Investments - 317 -
Cash at bank and in hand 9,026 11,859 16,638
48,953 69,989 73,983
CURRENT LIABILITIES
Creditors: amounts falling due within one year (56,042) (159,637) (95,043)
NET CURRENT LIABILITIES (7,089) (89,648) (21,060)
TOTAL ASSETS LESS CURRENT LIABILITIES 404,848 358,057 359,245
Creditors: amounts falling due after more than (170,564) (136,726) (135,475)
one year
Provision for liabilities and charges
Deferred taxation 11 (4,367) (4,858) (4,364)
Net assets excluding pension liability 229,917 216,473 219,406
Pension liability 3 (180) (171) (235)
NET ASSETS 229, 737 216,302 219,171
CAPITAL AND RESERVES
Called up share capital 13 2,549 2,548 2,548
Other reserves 13 215,281 204,840 205,812
Profit and loss account 13 11,802 8,914 10,811
EQUITY SHAREHOLDERS' FUNDS 13 229,632 216,302 219,171
Minority interest 15 105 - -
SHAREHOLDERS' FUNDS 229,737 216,302 219,171
p p P
Net assets per share 451 425 430
FRS 19 reversal 8 9 9
Adjusted net assets per share 459 434 439
STATEMENT OF TOTAL RECOGNISED GAINS & LOSSES
Unaudited 6 Unaudited 6 Audited year
months ended months ended ended
30.9.2003 30.9.2002 31.3.2003
#'000 #'000 #'000
Profit on ordinary activities after taxation and minority 5,398 6,549 13,829
interest
Unrealised surplus on revaluation of properties 6,421 2,456 2,993
Unrealised surplus/(deficit) on revaluation of investments 2,709 484 (1,404)
Unrealised surplus on disposal of assets into joint venture - - 1,190
Actuarial gain/(loss) on pension scheme assets 72 (207) (317)
Deferred tax arising on pension scheme assets (23) 59 85
TOTAL RECOGNISED GAINS RELATING TO THE PERIOD 14,577 9,341 16,376
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Unaudited 6 Unaudited 6 Audited year
months ended months ended ended
30.9.2003 30.9.2002 31.3.2003
#'000 #'000 #'000
Profit on ordinary activities after taxation and minority 5,398 6,549 13,829
interest
Dividends (4,128) (3,950) (8,115)
1,270 2,599 5,714
New share capital issued 12 28 27
Other recognised gains and losses 9,179 2,792 2,547
Net increase in shareholders' funds 10,461 5,419 8,288
Opening equity shareholders' funds 219,171 210,883 210,883
CLOSING EQUITY SHAREHOLDERS' FUNDS 229,632 216,302 219,171
CONSOLIDATED CASH FLOW STATEMENT
Unaudited 6 Unaudited 6 Audited year
months ended months ended ended
30.9.2003 30.9.2002 31.3.2003
#'000 #'000 #'000
Net cash inflow from operating activities 37,075 17,062 34,691
Dividends received from joint ventures and associate 4,039 126 358
Returns on investments and servicing of finance (5,519) (7,500) (15,160)
Taxation (1,188) (194) (1,770)
Capital expenditure and financial investments 27,916 (17,173) 53,873
Acquisitions and disposals (39,596) 2,002 (3,361)
Equity dividends paid (4,165) (7,568) (11,480)
Management of liquid resources - (8) 44
Net cash inflow/(outflow) before financing 18,562 (13,253) 57,195
Financing 36,371 (508) (2,081)
INCREASE/(DECREASE) IN CASH 54,933 (13,761) 55,114
RECONCILIATION OF OPERATING PROFIT TO NET CASH FLOW
Unaudited At Unaudited At Audited At
30.9.2003 30.9.2002 31.3.2003
#'000 #'000 #'000
Operating profit 10,739 14,531 28,729
Depreciation of tangible fixed assets 58 76 133
Decrease in stocks 27,128 3,923 7,330
Increase in debtors (8,922) (2,964) (2,096)
Increase in creditors 8,072 1,496 595
Net cash inflow from operating activities 37,075 17,062 34,691
NOTES TO THE FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
The interim accounts have been prepared on the basis of accounting policies set
out in the published accounts of the Group for the year ended 31 March 2003.
2. TURNOVER AND OPERATING PROFIT
The Directors believe that the Group operates in only one segment, namely
property. The following analysis is provided for information only:
Property Property Group Total Share of Share of Total
Investment Trading Joint Associate
Ventures (a)
#'000 #'000 #'000 #'000 #'000 #'000
6 months to 30 September 2003
Turnover:
Rents receivable 13,228 893 14,121 5,500 - 19,621
Management fees (b) 564 - 564 - - 564
Property trading - 13,774 13,774 3,276 - 17,050
Total turnover 13,792 14,667 28,459 8,776 - 37,235
Cost of sales and property (2,503) (14,067) (16,570) (3,758) - (20,328)
outgoings
Gross profit 11,289 600 11,889 5,018 - 16,907
Administrative expenses (1,080) (70) (1,150) (30) - (1,180)
Operating profit 10,209 530 10,739 4,988 - 15,727
6 months to 30 September 2002
restated
Turnover:
Rents receivable 17,111 1,656 18,767 373 1,844 20,984
Management fees (b) 92 - 92 - - 92
Property trading - 4,164 4,164 2,048 2,026 8,238
Total turnover 17,203 5,820 23,023 2,421 3,870 29,314
Cost of sales and property (3,116) (4,252) (7,368) (1,868) (2,960) (12,196)
outgoings
Writedown cost of trading stock - (48) (48) - - (48)
Gross profit 14,087 1,520 15,607 553 910 17,070
Administrative expenses (918) (158) (1,076) (115) (250) (1,441)
Operating profit 13,169 1,362 14,531 438 660 15,629
Property Property Group Total Share of Share of Total
Investment Trading Joint Associate
Ventures (a)
#'000 #'000 #'000 #'000 #'000 #'000
Year to 31 March 2003
restated
Turnover:
Rents receivable 33,230 3,767 36,997 2,690 1,942 41,629
Management fees (b) 426 - 426 - - 426
Property trading - 8,101 8,101 2,954 3 11,058
Total turnover 33,656 11,868 45,524 5,644 1,945 53,113
Cost of sales and property (5,747) (8,470) (14,217) (2,977) (313) (17,507)
outgoings
Writedown cost of trading - (337) (337) - - (337)
stock
Gross profit 27,909 3,061 30,970 2,667 1,632 35,269
Administrative expenses (2,002) (239) (2,241) (275) (208) (2,724)
Operating profit 25,907 2,822 28,729 2,392 1,424 32,545
(a) The investment in the associate was sold in August 2003.
(b) Management fees receivable are now material and are included in
turnover. The comparatives have been restated since in previous periods
management fees receivable were set off against property outgoings or
administration costs as appropriate.
3. PENSION COMMITMENTS
The Group operates and contributes to pension schemes for certain Directors and
employees and makes some discretionary allowances. The costs charged to the
profit and loss account for the six months to 30 September 2003 in respect of
these amounted to #98,000 (half year to 30.9.02: #81,000; year to 31.3.03:
#190,000). Pension premiums paid in advance were #46,000 (half year to
30.9.02: #44,000; year to 31.3.03: #47,000).
The Group operated a defined benefit scheme in the UK, The Warner Estate Group
Retirement Benefits Scheme. A full valuation was carried out at 1 October
2003. The values at and updated to 30 September 2002, and 31 March 2003 were
updates of the 1 October 2001 valuation carried out by a qualified independent
actuary.
It has been agreed with the Trustees that the Group contributions for the next
four years will be at 28.4% of pensionable salaries, subject to review by the
Scheme Actuary.
The value of the assets and liabilities of the Scheme were as follows:
Value at Value at Value at
30.9.2003 30.9.2002 31.3.2003
#'000 #'000 #'000
Total market value of assets 4,742 4,427 4,587
Present value of scheme liabilities (4,999) (4,672) (4,922)
Deficit (257) (245) (335)
Related deferred tax asset 77 74 100
Net pension liability (180) (171) (235)
Analysis of amount charged to operating profit
Unaudited 6 Unaudited 6 Audited year
months ended months ended ended
30.9.2003 30.9.2002 31.3.2003
#'000 #'000 #'000
Current service cost 16 18 35
The impact of the adoption of FRS 17: Retirement Benefits is as follows:
Unaudited 6 Unaudited 6 Audited year
months ended months ended ended
30.9.2003 30.9.2002 31.3.2003
#'000 #'000 #'000
Decrease in shareholders' funds (180) (171) (235)
Decrease in administrative expenses 12 15 30
Other finance (cost)/income (6) (2) 3
Increase in profit on ordinary activities before taxation 6 13 33
4. PROFIT ON SALE OF FIXED ASSETS
Unaudited 6 Unaudited 6 Audited
months months year ended
ended ended 31.3.2003
30.9.2003 30.9.2002
#'000 #'000 #'000
Surplus/(deficit) over book value
Investment properties 340 412 1,187
Share of joint ventures (11) - -
Share of associate - 195 365
329 607 1,552
5. NET INTEREST PAYABLE AND SIMILAR CHARGES
Unaudited 6 Unaudited 6 Audited
months months year ended
ended ended 31.3.2003
30.9.2003 30.9.2002
#'000 #'000 #'000
Interest payable on bank loans and overdrafts, mortgages
and other loans
repayable within five years not by instalments 1,787 4,192 6,419
repayable wholly or partly in more than five years 4,116 3,553 9,612
5,903 7,745 16,031
Charges in respect of cost of raising finance 254 742 575
6,157 8,487 16,606
Less capitalised interest - (11) (53)
6,157 8,476 16,553
Interest receivable and similar income :
From joint ventures (1,007) (326) (1,052)
Other interest (293) (5) (400)
4,857 8,145 15,101
Other finance cost/(income)
Expected return on pension scheme assets (145) (136) (271)
Interest on pension scheme liabilities 151 138 268
6 2 (3)
4,863 8,147 15,098
Share of joint ventures' net interest 4,775 375 2,258
Share of associate's net interest - 494 998
9,638 9,016 18,354
6. TAXATION
The taxation charge for the period has been estimated from the expected taxable
profits of the Group after taking account of capital allowances available.
7. EARNINGS PER SHARE
Earnings per share of 10.69p (half year to 30 September 2002: 12.98p; year to
31 March 2003: 27.41p) are calculated on the profit on ordinary activities
after taxation and minority interests of #5,398,000 (half year to 30 September
2002 : #6,549,000; year to 31 March 2003: #13,829,000) and the weighted
average of 50,475,295 (half year to 30 September 2002: 50,459,517; year to 31
March 2003: 50,457,216) shares in issue throughout the period. Profit on
ordinary activities after taxation and minority interests includes capital
profits on the sale of investments net of tax of #329,000 (half year to 30
September 2002: #559,000; year to 31 March 2003: #1,552,000).
Diluted earnings per share are based on the profit available for distribution as
above divided by the weighted average number of shares in issue, being
50,475,295 (half year to 30 September 2002: 50,484,365; year to 31 March 2003:
50,483,730) after the dilutive impact of share options granted.
Adjusted earnings per share are calculated on the same weighted average number
of shares as for the basic earnings per share, but exclude from revenue profits
the deferred taxation credit of #10,000 (half year to 30 September 2002:
#68,000; year to 31 March 2003: #509,000) arising on the adoption of FRS 19.
This deferred tax has been excluded as the Group's experience is that it is
very unusual for capital and industrial building allowances to be claimed back
on the disposal of a property.
8. INVESTMENT PROPERTIES
Freehold Freehold Leasehold with Total
assets held over 50 years
for resale unexpired
#'000 #'000 #'000 #'000
At 31 March 2003 208,280 81,030 44,511 333,821
Additions 69,050 1,654 215 70,919
Disposals (1,441) (82,684) - (84,125)
275,889 - 44,726 320,615
Surplus on revaluation 5,931 - 490 6,421
At 30 September 2003 281,820 - 45,216 327,036
Properties purchased within twelve months of the balance sheet date are included
at Directors' valuation. The remainder of the Group's investment portfolio was
valued by Cushman & Wakefield Healey & Baker on an open market basis in
accordance with the recommended guidelines of the Royal Institution of Chartered
Surveyors as at 30 September 2003
Investment properties were valued as follows:
#'000
Cushman & Wakefield Healey & Baker 257,565
Directors' valuation 69,471
327,036
9. JOINT VENTURES
Unaudited At Unaudited At Audited At
30.9.2003 30.9.2002 31.3.2003
#'000 #'000 #'000
Share of joint ventures
Opening balance 24,973 4,074 4,074
Share of profit for the period 154 61 87
Surplus/(deficit) on revaluation of investments 940 36 (4)
Net equity movements 1,199 (2,002) 3,330
Net loan movements 43,358 16,962 17,486
Closing balance 70,624 19,131 24,973
Unlisted shares at cost less amounts written off 6,763 249 5,525
Group's share of post acquisition retained profits and reserves 1,149 52 94
7,912 301 5,619
Amounts owed by joint ventures 62,712 18,830 19,354
70,624 19,131 24,973
Included in share of joint ventures' gross assets and
liabilities are:
To 30th September 2003 Agora Skipper Fairway Others Total
Shopping Offices Industrial (d)
Centres Limited Limited
(a) (b)
(c)
Group share of results
Turnover 4,335 804 361 3,276 8,776
Operating profit 3,675 667 342 304 4,988
Capital losses - - - (11) (11)
Net interest payable and similar (3,730) (657) (314) (74) (4,775)
charges
(Loss)/profit on ordinary (55) 10 28 219 202
activities before taxation
Taxation on profits on ordinary (3) (9) (9) (27) (48)
activities
(Loss)/profit on ordinary (58) 1 19 192 154
activities after taxation
Asset management fees 422 80 36 - 538
Interest receivable 357 473 108 69 1,007
Group share of:
Investment properties 136,656 54,807 56,521 154 248,138
Other current assets 5,209 3,935 1,316 375 10,835
Gross assets 141,865 58,742 57,837 529 258,973
Current liabilities
Loans (126,135) (54,829) (55,799) - (236,763)
Other liabilities (8,228) (3,800) (1,969) (301) (14,298)
Gross liabilities (134,363) (58,629) (57,768) (301) (251,061)
Share of net assets 7,502 113 69 228 7,912
Effective Group share 50% 50% 50% 50%
Potential recourse to the Group Nil Nil Nil Nil
To 30th September 2002 restated Agora Skipper Fairway Others Total
Shopping Offices Industrial (d)
Centres Limited Limited (c)
(a) (b)
Group share of results
Turnover - - - 2,421 2,421
Operating profit - - - 436 436
Net interest payable and similar - - - (375) (375)
charges
Profit on ordinary activities - - - 61 61
before taxation
Taxation on profits on ordinary - - - - -
activities
Profit on ordinary activities after - - - 61 61
taxation
Asset management fees - - - 131 131
Interest receivable - - - 326 326
Group share of:
Investment properties - - - 53,121 53,121
Trading properties - - - 2,666 2,666
Other current assets - - - 1,474 1,474
Gross assets - - - 57,261 57,261
Current liabilities
Loans - - - (52,744) (52,744)
Other liabilities - - - (4,216) (4,216)
Gross liabilities - - - (56,960) (56,960)
Share of net assets - - - 301 301
Effective Group share 50% 50% 50% 50%
Potential recourse to the Group Nil Nil Nil Nil
To 31st March 2003 restated Agora Skipper Fairway Others Total
Shopping Offices Industrial (d)
Centres Limited Limited (c)
(a) (b)
Group share of results
Turnover 576 - - 5,068 5,644
Operating profit 487 - - 1,905 2,392
Net interest payable and similar (442) - - (1,816) (2,258)
charges
Profit on ordinary activities 45 - - 89 134
before taxation
Taxation on profits on ordinary (24) - - (23) (47)
activities
Profit on ordinary activities after 21 - - 66 87
taxation
Asset management fees 73 - - 344 417
Interest receivable 49 - - 1,003 1,052
Group share of:
Investment properties 111,304 - - 226 111,530
Trading properties - - - 2,336 2,336
Other current assets 6,498 - - 1,102 7,600
Gross assets 117,802 - - 3,664 121,466
Current liabilities
Loans (106,467) - - (3,341) (109,808)
Other liabilities (5,790) - - (249) (6,039)
Gross liabilities (112,257) - - (3,590) (115,847)
Share of net assets 5,545 - - 74 5,619
Effective Group share 50% 50% 50% 50%
Potential recourse to the Group Nil Nil Nil Nil
(a) Agora Shopping Centres was set up on 5 March 2003 and subsequently
acquired the Pyramids in Birkenhead on 25 June 2003.
(b) Skipper Offices Limited was set up on 23 July 2003.
(c) Fairway Industrial Limited was set up on 29 August 2003.
(d) The profit or loss that arose from the Bolton and Middleton shopping
centre joint ventures prior to the setting up of the Agora Shopping Centres
joint venture was included in "other" and accounted for #293,000 of
operating profit and #290,000 of net interest payable in the six months to
30 September 2002 and #1,151,000 of operating profit and #1,571,000 of net
interest payable in the year to 31 March 2003.
Amounts owed by joint ventures comprise: Unaudited At Unaudited At Audited At
30.9.2003 30.9.2002 31.3.2003
#'000 #'000 #'000
(a)
Agora Shopping Centres 20,212 - 16,949
Skipper Offices Limited 28,600 - -
Fairway Industrial Limited 13,900 - -
Others - 18,830 2,405
62,712 18,830 19,354
(a) Included in "other" at 30 September 2002 were loans in respect of the Bolton
and Middleton Shopping centres of #16,700,000.
10. FIXED ASSET INVESTMENTS
Unaudited At Unaudited At Audited At
30.9.2003 30.9.2002 31.3.2003
#'000 #'000 #'000
Investment in associate (a) - 10,222 8,856
Listed investments 12,363 11,701 10,594
Own shares held 1,445 1,557 1,557
13,808 23,480 21,007
(a) The investment in the associate was disposed of in August 2003 for
#8,856,000.
11. DEFERRED TAXATION
Unaudited Unaudited Audited At
At At 31.3.2003
30.9.2003 30.9.2002
#'000 #'000 #'000
Deferred taxation arising from the timing differences noted
below:
Short term timing difference 49 (7) 36
Capital and industrial buildings allowances claimed on 4,318 4,865 4,328
investment properties
4,367 4,858 4,364
The movement in the capital and industrial building allowances claimed on
investment properties in the six months to 30 September 2003 represent #619,000
of allowances claimed reduced by #629,000 on disposal of properties.
The potential amount of deferred taxation, for which no 2,906 3,005 1,409
provision has been made and which would arise if the assets
held as long term investments were sold at the values at
which they appear in the balance sheet, has been calculated
as follows:
12. FINANCIAL INSTRUMENTS
Financial Liabilities
The interest rate profile of the Group's financial liabilities at 30 September
2003, after taking account of interest rate instruments taken out by the Group
was:
Unaudited At Unaudited At Audited At
30.9.2003 30.9.2002 31.3.2003
#'000 #'000 #'000
Floating rate financial liabilities - 56,506 -
Fixed rate financial liabilities 184,203 218,922 210,033
Total 184,203 275,428 210,033
The benchmark rate for determining interest payments for the floating rate
financial liabilities was LIBOR/base rate depending upon the facility.
The weighted average interest rate on the fixed rate debt and the average
maturity of that debt was as follows:
Unaudited At Unaudited At Audited At
30.9.2003 30.9.2002 31.3.2003
% % %
Weighted average interest rate
Group 7.99 7.94 7.97
Joint Ventures 5.52 - 5.63
Weighted average period for which interest rate is fixed Years Years Years
Group 6.43 6.91 6.45
Joint Ventures 4.62 - 5.01
Maturity of financial liabilities Unaudited At Unaudited At Audited At
30.9.2003 30.9.2002 31.3.2003
#'000 #'000 #'000
Within one year or on demand 12,717 138,033 73,937
Between one and two years 17,344 1,394 1,444
Between two and five years 27,757 4,182 6,632
In five years or more 126,385 131,819 128,020
184,203 275,428 210,033
Borrowing facilities
The Group has various borrowing facilities that were not fully utilised at the
period end in which the conditions for utilising those facilities were met.
Unaudited At Unaudited At Audited At
30.9.2003 30.9.2002 31.3.2003
#'000 #'000 #'000
Expiring in one year or less:
Total facilities 50,865 155,000 147,100
Unutilised 42,817 18,361 74,573
Fair values of financial assets and liabilities
The table below sets out by category the changes to the balance sheet values
that would occur if "fair values" applied.
Unaudited At Unaudited At Audited At
30.9.2003 30.9.2002 31.3.2003
Fair value Fair value Fair value
adjustment adjustment adjustment
#'000 #'000 #'000
Group
Primary financial instruments
Liabilities
Long term debt (over one year) (10,625) (13,651) (13,469)
Assets
Long term loan notes (over one year) (426) - (141)
Derivative instruments held to manage debt
Interest rate swaps (2,337) (2,844) (3,089)
Interest rate caps (186) 8 (293)
Joint Ventures
Primary financial instruments
Long term debt (over one year) 426 - 141
Derivative instruments held to manage debt
Interest rate swaps 2,333 - (581)
(10,815) (16,487) (17,432)
The effect on net assets per share of the total fair value adjustment
(#10,815,000 less tax #3,245,000) would be a decrease of 14.9 pence (31 March
2003: 23.9 pence)
The calculation of the fair values has been arrived at as follows:
Debt has been calculated by discounting cash flows at prevailing rates of
interest.
The equity assets have been valued at the quoted share price based upon the
strategic nature of the holdings compensating for any discount.
Interest rate swaps have been valued at the market rate for such swaps.
13. CAPITAL AND RESERVES
Other Reserves
Group Share Share Revaluation Other Profit Total
Capital premium reserve reserves and loss
account account
#'000 #'000 #'000 #'000 #'000 #'000
Company and subsidiaries 2,548 5,548 10,519 186,537 9,655 214,807
Joint ventures - - 67 - 27 94
Associate - - 2,334 807 1,129 4,270
At 31 March 2003 2,548 5,548 12,920 187,344 10,811 219,171
Issue of share capital 1 11 - - - 12
Other reserve movements - - 8,816 642 (279) 9,179
Disposal of associate - - (2,334) 2,334 - -
Retained profit for period - - - - 1,270 1,270
At 30 September 2003 2,549 5,559 19,402 190,320 11,802 229,632
Company and subsidiaries 2,549 5,559 18,395 190,331 11,610 228,444
Joint ventures - - 1,007 (11) 192 1,188
Associate - - - - - -
At 30 September 2003 2,549 5,559 19,402 190,320 11,802 229,632
14 ANALYSIS OF NET DEBT MOVEMENTS
Audited At Reclassi-fication Cash flow Non-cash Unaudited
31.3.2003 items At
31.9.2003
#'000 #'000 #'000 #'000 #'000
Cash at bank and in hand 16,638 - (7,612) - 9,026
Bank overdrafts/short term (72,543) - 62,545 - (9,998)
borrowings
- 54,933 -
Debt due within one year:
Mortgage and other loans (794) - (794)
Bank loan (600) (325) (1,000) - (1,925)
(325) (1,000) -
Debt due after one year:
Mortgage and other loans (80,259) 397 (29) (79,891)
Bank loan (55,216) 325 (35,757) (25) (90,673)
- (36,360) (54)
Net Debt (192,774) - 18,573 (54) (174,255)
15. MINORITY INTEREST
Minority interests represent the share of net assets attributable to the
interests of shareholders in a subsidiary which was not wholly owned by the
Company or its subsidiaries.
16 FINANCIAL STATEMENTS
The consolidated profit and loss account and the consolidated balance sheet are
unaudited and do not constitute statutory accounts within the meaning of section
240 of the Companies Act 1985. The statutory accounts for the year to 31 March
2003, from which the comparatives have been extracted, received an unqualified
auditors' report and have been delivered to the Registrar of Companies. Copies
of the interim report are available from the Company Secretary, Warner Estate
Holdings PLC, Nations House, 103 Wigmore Street, London W1U 1AE.
SIGNIFICANT EVENTS DURING 6 MONTH PERIOD TO 30 SEPTEMBER 2003
DATE
Purchase of Pyramids Shopping Centre, Birkenhead by Agora Fund for #41.75m June 2003
The #109m Regional Office Fund formed through a joint venture with The Royal July 2003
Bank of Scotland Sale of six office properties into the Regional Offices
Fund for #109m
The #113m Distribution Fund formed through a joint venture with Bank of August 2003
Scotland with the purchase of eight large distribution warehouses
The #19m Industrial Fund formed through a joint venture with Barclays Bank August 2003
with the purchase of three industrial estates
A further four distribution warehouses and three industrial estates purchased August 2003
for #34m for the Core portfolio
Sale of shares in Merivale Moore plc for net proceeds of #8.9m August 2003
Purchase of office property in Manchester for #14.8m September 2003
SIGNIFICANT EVENTS POST 30 SEPTEMBER 2003
There have been no significant events post 30 September 2003
This information is provided by RNS
The company news service from the London Stock Exchange
END
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