RNS Number:4716F
CLS Holdings PLC
14 February 2000
CLS HOLDINGS PLC
RESULTS FOR THE YEAR ENDED 31 DECEMBER 1999
FINANCIAL HIGHLIGHTS
- NAV per share up 32.5% to 243.9 pence
- Profit before tax up 53.0% to #16.9 million (1998: #11.1 million)
- Investment division profits of #4.6 million (1998: #0.7 million)
- #36.1 million cash at bank up 24.5%
- Buy-back during 1999 of 9.6% of shares for #14.3 million
(1998: 2.6% of shares for #3.6 million)
- Proposed tender offer buy-back of 1 in 40 shares at a price
of 185 pence per share
Key statistics
31.12.99 31.12.98
NAV per share 243.9 p 184.1 p Up 32.5%
FRS 13 adjustment 10.2 p 20.4 p Down 50.0%
(after tax)
Earnings per share 14.0 p 8.8 p Up 58.1%
Shares in issue 101,962 112,748 Down 9.6%
(000's)
Capital 7.5 p 10.0p * Down 25.5%
Distribution per
share
* includes interim dividend and in addition, an interim tender
offer buy back of shares.
The Group's financial performance is continuing to show strong
growth.
Other financial information
31.12.99 31.12.98
Property portfolio #499.2 m #404.7 m Up 23.4%
Net rental income #33.7 m #28.8 m Up 17.3%
Other property related #4.9 m #2.7 m Up 79.0%
income
Operating profit #32.2 m #26.6 m Up 20.9%
Financial income #5.7 m #2.1 m Up 173.9%
Profit before taxation #16.9 m #11.1 m Up 53.0%
Profit after taxation #14.8 m #10.1 m Up 46.5%
Net asset value #248.7 m #207.6 m Up 19.8%
Cash #36.1 m #29.0 m Up 24.5%
Gearing 100.7% 93.0% Up 8.3%
Interest cover 1.60 1.54 Up 3.9%
times times
BUSINESS HIGHLIGHTS
- Formation of Investment Division
- 18 January 1999 Hoechst lease surrender for #8.0 million
- 2 March 1999 Acquisition of Colne House, Watford at initial
yield of 10 per cent
- Completion of lettings at Elan House, EC4
- 23 June 1999 #34.5 million acquisition of Solna Business Park, Sweden
- 30 June 1999 Aegis lease surrender for #1.85 million
- Completion of lettings at 230 Blackfriars Road, SE1 to American Express
and Medical Defence Union
- Completion of leisure development at One Leicester Square
- First major letting at Solna Business Park to the Swedish Post Office of
up to SEK14.2 million (#1.0 million) per annum
For further information, please contact:
Glyn Hirsch, Chief Executive, CLS Holdings plc 020 7582 7766
Jilly Woolridge/Rebecca Shand, Equity Marketing 020 7242 8005
CHAIRMAN'S STATEMENT
The group enjoyed another successful year and the results show our
continued progress.
The total return to shareholders during the year was 23.6 per cent
(#49.0 million) based on movement in shareholders' funds and share
buy-backs implemented during the year. The group achieved a 53.0
per cent increase in pre-tax profits to # 16.9 million. Net
assets of the group increased from #207.6 million to #248.7
million, giving a 32.5 per cent increase in net assets per share to
243.9 pence (1998: 184.1 pence). At the year end the post-tax FR13
adjustment amounted to 10.2 pence per share, down from 20.4 pence.
Rental income, represented by rents, service charge and other
income received from tenants increased by 17.3 per cent to #33.7
million. This increase would have been greater but for the empty
space in the course of refurbishment. Gearing at the year end was
100.7 per cent.
The Company's share price has improved by 23 per cent during 1999
but still remains at an even greater discount to net asset value
than at last year end, despite a strong property market. In these
circumstances your Board continues to believe in the benefits of
distributing cash as capital dividends by way of a tender offer
buy-back in lieu of a cash dividend. The Board has therefore
decided to recommend a tender offer buy-back of 1 in 40 shares at a
price of 185 pence per share, which will further enhance net asset
value per share.
During the year the main achievements in the property field have
been lease surrenders at Vista Office Centre and New London House,
the successful completion of our refurbishments of 230 Blackfriars
Road and One Leicester Square, and the acquisition of Solna
Business Park in Stockholm. A full account of the group's
property activities appears in the Property Review.
Additionally #4.6m of our pre-tax profits have been derived from
our expanding investment division, as compared with #0.7 million in
1998. Further details of our investments are set out in the
Investment Review.
During the year the group increased its shareholding in Citadel
Holdings plc from 12.3 per cent to 17.4 per cent. The strong
performance of that company continues, thus increasing the value of
our performance warrants. These have not been included as an asset
in our balance sheet. We made no significant investments in 1999 in
UK property assets apart from the acquisition of Colne House,
Watford at #6.7 million. Although we have looked at a number of
opportunities we do not believe that the yields at which many
properties are being sold provide attractive opportunities for a
significant increase in investment returns in the near future.
We have therefore sought to maximise returns from our existing
portfolio through active management and new lettings. At the year
end only 5.7 per cent of our UK property portfolio was unlet.
During the coming year we will continue to seek further property
investments in the office sector both inside and outside the UK
which can offer significant returns to the group. We are pleased
that currently less than 0.9 per cent of our rental income is
derived from retail property. We also plan to commence three new
developments in the UK on property we already own, comprising over
100,000 square feet of predominantly office use. We envisage
further investment in Solna Business Park to increase the lettable
space which we believe will generate considerable additional rent
and profit.
We also intend to continue to expand our investments outside the
property industry. The combination of stable and increasing cash
returns from our core property activities combined with astute
investments in the telecommunications and high technology sectors
has produced attractive returns for shareholders and the Board
believes that these will continue.
It is in conjunction with the development of our investment
business that we are delighted to announce the appointment of
Patrik Granster to the Board as an additional non-executive
director. He is a founder of Speed Ventures AB, an established
Swedish venture fund company, and his knowledge of and contacts in
the Swedish financial market will be of great benefit to this part of
our business.
The current year has started well, we are close to letting Drury
Lane and Vista is progressing satisfactorily.
In September 1998 we invested #0.1 million in shares in Microcosm
and at 31 December 1999 this investment was carried in the balance
sheet at cost. In January 2000 our shares in Microcosm were
exchanged for shares in Conextant Systems (a NASDAQ listed company
with a market capitalisation in excess of US$10 billion) and these
shares have now been sold for #1.6 million. The profit from this
transaction will be included in the results for the first half of
the year ended 31 December 2000.
I take this opportunity to thank my fellow Directors, our staff,
professional advisers, bankers and shareholders for their support
during the year.
FINANCIAL REVIEW
Results The results for the year have shown substantial growth,
with pre-tax profit amounting to #16.9 million showing an increase of
53.0 per cent over the previous year. The Balance Sheet has
continued to strengthen with net asset value increasing to 243.9
pence per share, an increase of 32.5 per cent. Gearing has
increased to 100.7 per cent and cash reserves of #36.1 million
were held at the balance sheet date.
A number of redevelopment and refurbishment projects have been
successfully completed during the year, principally One Leicester
Square and 230 Blackfriars Road, and the revenue from these
properties, together with our new acquisition, will underpin
further growth in the Group's core property activities.
During 1999 the Group has developed its investment division to
incorporate trading in covered share options and share investments
within the IT and telecommunications sector. These activities
have made a contribution to profits of #4.6 million of which #1.7
million was reported in the first half of the year (1998: #0.7
million).
In May 1999 the Group increased its shareholding in Citadel
Holdings plc from 12.3 per cent to 17.4 per cent. As a
consequence of its increased influence in this Company, the Group
has treated it as an associate company and has included its share of
the results of Citadel, on a pro-rata basis. The Group has also
included its share of the results of its joint venture in
Teighmore Limited (the company that owns Southwark Towers), from 1
October 1999, in which it has a 25 per cent share of profits.
There have been no sales of property during the year, in 1998
gains from sale of investment properties and subsidiaries amounted to
#2.6 million.
Net rental income Rental income at #33.7 million has been
restated to include the effect of service charge income and
expenditure, a net expense of #2.4 million. This reflects an
increasing proportion of the portfolio, mainly relating to Swedish
properties, being invoiced at an all inclusive rent.
The increase in net rental income of #5.0 million is mainly the
result of revenue generated by Solna Business Centre in the second
half and a full year contribution from the Vnerparken property
portfolio acquired in September 1998. The increase also reflects
the inclusion of the Group's share of joint venture and associate
company turnover, amounting to #1.2 million.
Other property related income Other property related income of
#4.9 million showed an increase of #2.2 million over the previous
year. The three main elements included a profit of #2.5 million on
the surrender of a lease at Vista Office Centre, a profit of #0.8
million on the surrender of a lease at New London House and the
management charge to Citadel Holdings plc of #0.8 million.
Administrative expenditure Administrative expenditure increased by
#1.4 million to #4.8 million. The principal reasons for this
increase were:
- The inclusion of Solna Business Centre results in the second
half and Vnerparken for the full year resulted in an increase in
administrative expenditure of #0.6 million over the previous year.
- Costs of #0.2 million relating to new computer systems,
partly in preparation for year 2000.
- An increase in personnel costs of #1.0 million, reflecting
staff and directors' bonuses and a strengthening of the management
team. This included the addition of a number of senior staff in
late 1998 and 1999, in the areas of development, international
investment and finance. Of the annual increase in staff costs,
#0.2 million was recovered within the management charge to Citadel
Holdings plc.
Non Recoverable property expenses Non recoverable property
expenses amounted to #1.4 million of which #0.5 million related to
properties undergoing refurbishment.
Financial Costs Net interest and financial charges at #15.3
million showed a decrease of #2.9 million over net expenditure in
1998.
Interest receivable and financial income at #5.7 million, included
interest receivable of #1.6 million, #4.6 million in respect of
our investment division and foreign exchange losses of #0.5
million. This is dealt with in more detail in our investment
review.
Interest payable and related charges at #21.0 million (1998: #20.4
million) included for the first time associate and joint venture
interest payable of #0.6 million. Also included were interest
costs of #0.9 in respect of the acquisition of Solna Business
Park. During the year a number of loans were refinanced and the
related legal and arrangement fees are being amortised over the
duration of the loans. The overall reduction in the base rate
during 1999 and the low funding cost for the Solna acquisition was
reflected in the average cost of borrowing falling to 7.5 per cent at
31 December 1999 (1998: 8.8 per cent). The average cost of
borrowing for the UK portion of our debt was 8.5 per cent and 5.8
per cent for the international element.
A substantial development programme for a number of properties has
been undertaken during the year, principally at One Leicester
Square, 230 Blackfriars Road and Vista Office Centre. This has
resulted in interest amounting to # 1.1 million having been
incurred at One Leicester Square and 230 Blackfriars Road for
which minimal rental income was recognised during the first nine
months of the year. The interest has been expensed through the
profit and loss account as it was incurred. Financial costs also
include the depreciation of interest rate caps amounting to #0.8
million.
Taxation The Group's taxation charge is maintained at a
relatively low rate as a result of substantial corporation tax
losses brought forward in some subsidiaries and significant
capital allowances on many of the Group's properties. These
factors should continue to benefit the Group in the immediate
future.
The Group has made a voluntary tax payment of #2.0 million in
order to utilise surplus ACT. The utilisation of ACT increases the
tax losses that are available to be offset against future tax
liabilities.
Financial Results by Location and sector The results of the
Group have been analysed by location and main business activity as
set out below:
Property Property Investment
Total London International Division
#m #m #m #m
Turnover (excluding
associate / JV) 37.4 31.7 5.7
Operating expenses (6.2) (5.0) (1.2)
Operating profit 31.2 26.7 4.5
Associate / JV operating
profit 1.0 0.2 0.8
Treasury operations 4.6 4.6
Net interest payable and
related charges (19.9 (16.7) (3.2)
Profit on ordinary
activities before tax 16.9 10.2 2.1 4.6
Investment Properties The investment property assets of the
group, including plant and machinery, have increased by 23.4 per
cent per cent to #499.8 million (1998: #405.0 million). During
the year the quality of the portfolio was substantially improved
through refurbishment and redevelopment, the costs of which
amounted to #14.0 million.
Annualised rent at 31 December 1999 was #37.7 million (1998: #30.3
million) equating to a yield of 7.6 per cent (1998: 7.5 per cent).
An analysis of the location of investment property assets and
related loans is set out below:
Balance Total
Sheet Other Property
1999 #m #m #m %
Investment Properties 499.8 499.8 100%
Loan (286.6) (286.6) 100%
Other 35.5 35.5
Equity Investment 248.7 35.5 213.2 100%
Equity as a Percentage
of Investment 42.7%
#m #m #m
Opening Equity 207.6 24.9 182.7
Increase during 1999 41.1 10.6 30.5
Closing equity 1999 248.7 35.5 213.2
London International
Property Property
#m % #m %
Investment Properties 398.1 79.7% 101.7 20.3%
Loan (224.1) 78.2% (62.5) 21.8%
Other
Equity Investment 174.0 81.6% 39.2 18.4%
Equity as a Percentage
of Investment 43.7% 38.5%
#m #m
Opening Equity 173.3 9.4
Increase during 1999 0.7 29.8
Closing equity 1999 174.0 39.2
The increase in equity for London properties of #0.7 million would
have been substantially higher were it not for the fact that we
have extracted equity by way of refinancing some properties during
the year. This has been utilised within investments and other
assets.
Debt Structure Financial instruments are held by the Group
principally to finance holdings of investment properties and to
manage interest and exchange rate risk. This has been
accomplished by borrowing in local currencies from reputable
lending institutions, the purchase of interest rate hedging
instruments and securing fixed rate borrowing arrangements. The
Group has thereby hedged all of its interest rate exposure.
In addition, various other financial instruments have arisen in
the normal course of business and the active management of Group's
treasury activities.
The activities of the Group are mainly financed through share
capital and reserves and long term loans, which are secured
against the properties to which they relate.
The Group has continued to pursue a financial strategy in relation to
its London based portfolio to raise floating rate long term loans
linked to interest rate caps. Caps are normally purchased on a
medium term basis with interest capped at an average rate of 7.6 per
cent in order to provide protection against a rise in interest
rates.
International property acquisitions have been financed through a
combination of long term fixed rate loans at an average interest
rate of 6.1 per cent and floating rate for which the average
interest charge in 1999 was 4.75 per cent. In addition, the Group
entered into forward foreign exchange contracts in order to hedge
its foreign currency translation exposure.
The net borrowings of the Group at 31 December 1999 were #246.2
million, an increase of #56.4 million over the previous year,
reflecting the Group's active refurbishment programme and the
acquisition of new properties.
Of the net debt at 31 December 1999, #107.4 million (45.6 per
cent) represented fixed rate loans.
Non-interest bearing debt amounted to #23.1 million (1998: #19.5
million).
The Group has adopted the requirements of FRS13, which addresses
among other things, disclosure in relation to derivatives and
other financial instruments. If our loans were held at fair value
then the Group's fixed rate debt at the year end would be in
excess of book value by an amount of #14.9 million (1998:
#33.2million) which net of tax at 30 per cent (1998: 31 per cent)
equates to #10.4 million (1998: #23 million). A substantial
amount of this is attributable to one long-term loan secured
against a property with government covenanted income for the
period of the loan which is sufficient (without any increase in
rent over the term of the lease) to cover our interest
obligations.
The contracted future cash flows from the properties securing the
loans are sufficient to meet all interest and ongoing loan
repayment obligations. Only #11.7 million (4.0 per cent) of the
Group's total debt of #286.5 million matures within the next 12
months with #117.8 million (41.1 per cent) maturing after five
years.
At 31 December 1999, #62.5 million (61.5 per cent) of overseas
asset value was financed by local currency borrowings. These
principally related to the acquisition of Vnerparken and Solna
Business Centre.
Distribution At the half year the Company stated its intention to
recommend a distribution to shareholders by way of a tender offer
buy-back in lieu of an interim dividend. This was fully taken up
in November 1999.
With the current share price remaining at a considerable discount to
net asset value, your Board is proposing a further tender offer buy-
back of shares in lieu of paying a cash dividend, on the basis of 1
in 40 at a price of 185 pence per share. This will enhance net
asset value per share and is equivalent in cash terms to a final
dividend per share of 4.625 pence, yielding a total
distribution in cash terms of 7.44 pence per share for the year
(1998: 10.0 pence). In 1998 we were one of the first UK companies to
propose a tender offer buy-back of shares. This was
implemented in addition to the 1998 interim dividend.
At 31 December 1998 there were 112,747,693 ordinary shares in
issue. Since that date the Company has purchased 5,650,907 shares in
the market for cancellation and completed the 1998 year end and 1999
interim tender offer buy-backs of 5,192,218 shares. This has
involved a total cash expenditure of #14.3. The current number of
shares in issue at today's date is 101,962,238 and should the
current tender offer buy back be fully taken up, the number of
shares in issue would be further reduced by 2,549,066 to
99,413,172.
Corporate Structure The strategy has been to continue for the
most part, to hold individual properties within separate
subsidiary companies, each with one loan on a non-recourse basis.
Year 2000 During the year ended 31 December 1999 the Group made
considerable efforts to ensure that neither the systems operating
within its properties nor its domestic computer systems would be
adversely affected by the millennium date change. No issues have
been noted to date.
INVESTMENT REVIEW
We commenced investing outside real property in January 1998. Our
initial objective was to enhance cash returns on the Group's free
cash resources by using the Board's investment expertise and
knowledge of the high technology and internet industry. Since
then the Board's contacts have enabled the Group to make a series of
investments in businesses in this field prior to, or at the time
of, flotation, with a particular emphasis on the Swedish market.
Our investments have produced attractive returns to shareholders. In
1998 our investment division made profits of #0.7 million; in 1999
these profits increased to #4.6 million (#1.7 million of which
was reported in the first half).
Our investments are held in the balance sheet at the lower of
cost or net realisable value. At 31 December 1999 this amounted to
#4.3 million. The Directors believe that the market value of these
investments is significantly higher than this figure. Indeed,
already this year we have made a profit of #1.5 million on the
disposal of our investment in Microcosm Communications Ltd which
cost #0.1 million and was held at the year end at cost. This profit
will be included in our results for the year ending 31 December
2000.
We have a management team with experience in these types of
investments and have formed an Investment Committee comprising
Sten Mrtstedt, Glyn Hirsch, Keith Harris and Patrik Granster to
advise on and to approve significant non-property investments.
Sten Mrtstedt has had thirty years' experience of stock market and
capital management; prior to joining CLS Glyn Hirsch was for
eleven years a corporate finance director at Phillips & Drew
(later UBS Limited) and is a non-executive director of Liontrust
Asset Management plc and Glotel plc; and Keith Harris was Chief
Executive of the Investment Banking Division of HSBC until last
year and is currently the Chairman of Sports Internet Group plc
and Chairman elect of Talisman House plc. Patrik Granster's
experience is set out in the Chairman's Statement.
Some of our key investments are listed below:
Listed Companies Country
* Autofill Sweden - Automated car refuelling
* Cell Networks Sweden - Provider of strategy, design and
technical services related to
e-business solutions
* Cyber Com Sweden - IT consultancy focusing on
integration between core back
office systems and new front office
e-commerce systems
* Effnet Sweden - Develops and sells high speed
routers and firewalls
* Hagstrmer & Sweden - Swedish stockbroker with technology
Qviberg specialisation
Fondkommission
* Iquity Systems Sweden - Development and licensing of systems
solutions and business concepts for
communication via telephony and the
internet
* M2S Sweden - Interactive IT training
* Novestra Sweden - Invests in smaller Nordic IT and e-
commerce companies with high
potential for growth
* PC Express Sweden - Sales and support for Internet PC
sales
* Proffice Sweden - Manpower
* Pronyx Sweden - IT consultancy specialising in
production processes
* Readsoft Sweden - Software company specialising in
automated data capture solutions
* Sectra Sweden - Medical imaging, security and
wireless communications
* Softronic Sweden - Insurance industry technology
management system
* Spray Ventures Sweden - Swedish supplier of low cost
internet access
* Utfors Sweden - Aims to deliver the next generation
of full suite IP based high speed
services and telephone
Unlisted Companies Country
* Artisan UK - Developing software tools to aid
Software Tools development of technical systems
* BIW.COM UK - Building information over the
internet
* Breakertech UK - Protection of digitally distributed
Technologies context
* Easy Travel Sweden - Internet system selling travel
tickets
* Eighteen UK - Golf product retailing over the
Global internet
* Gecko Software UK - Development of software build to
function in conjunction with
existing major Management Framework
Platform providers - Cabletron.
* Mactive Sweden - Software packages for efficient
production of sale and distribution
of paper based and digital
publications.
* Microcosm UK - Fibre-optics
Communications
* Nordic Sensor Sweden - Biotechnology - electronic smell
Technology detection and electronic tongue, for
quality control purposes
* Power Channel UK - Access providers for internet via TV
* YAC.COM UK - Voice, e-mail and fax forwarding
service
* Yellowrent.com Sweden - Internet residential letting
provider
PROPERTY REVIEW
Introduction During 1999 we have continued to enhance our portfolio
through strategic refurbishment and acquisition.
At the Year End the portfolio comprises 44 buildings which are
predominantly offices, totalling 341,099 sq.m. (3,696,603 sq.ft.) of
which 90 per cent totalling 306,760 sq.m. (3,302,000 sq.ft.) is
let or pre-let. Our annualised net rental income currently totals
#37.7 million per annum and this produces a 7.6 per cent yield on
the portfolio of # 499.2 million. Approximately #397.5 million
(79.6 per cent) is located in the UK and #101.7 million (20.4 per cent)
is in Sweden and Germany.
Strategy We continue to target above average returns on equity
whilst exposing our shareholders to lower than average risk.
Portfolio Change The London market strengthened further this
year with competitive demand increasing in both the occupational
and investment markets. Recent interest rate increases have not
had any perceptible impact on confidence.
In the face of increasing rents and falling yields we have not
found any reason to dispose of any properties but have researched
numerous acquisitions.
In March we bought Colne House, Watford for #6.4 million which
showed an initial yield of 10 per cent after costs. The 2,381
sq.m. (25,629 sq.ft.) building is let in its entirety to Hitachi
Europe Ltd. for a term expiring in 2010. The entire property is
sublet to a subsidiary of Cable & Wireless plc thereby offering
active management possibilities.
The major acquisition of the year was the purchase of the now
renamed Solna Business Park in North Stockholm. This property, on a
12.9 acre site, is located in between the city centre and the
airport and totals 112,900 sq.m. (1.215 million sq.ft.) of office,
distribution and warehouse accommodation in four adjacent
buildings. At purchase the net income totalled #2.1million p.a.
(SEK 28.4 million) and on the total acquisition price of #34.3
million (SEK 463 million) shows a net initial yield of 6.1 per
cent reflecting the fact that approximately 30,000 sq. m of space
was un-let. Since acquisition we have agreed a street improvement
scheme with the local authority and we have announced the letting of
8,295 sq.m. (96,071 sq.ft.) to the Posten Sverige AB (IT
department of the Swedish Post Office) increasing the rent by
#0.7 million per annum (SEK 9.7 million).
We have advanced plans for this complex over the coming years
which will eventually include the conversion of most of the
industrial space to offices and planning permitting, an additional
floor, which could provide a further 18,618 sq.m. (200,000
sq.ft.). We hope to achieve this in one of the buildings in the
first quarter of 2000. Our goal, through active management,
environmental improvement and tenant relationships, is to increase
the rent from #4.0 million per annum to approximately #8.9 million
per annum. (SEK122.6 million).
In October we purchased a small freehold office in King Street,
Hammersmith adjacent to one of our serviced offices, London House.
This 1,895 sq.m. (20,399 sq.ft.) building is currently let at #0.3
million p.a. and shows a net initial yield of 9.8 per cent. In the
medium term it provides us with the opportunity to expand the
Business Centre or to undertake a complete redevelopment of the
site should this be the more profitable solution.
Portfolio Management Over the last year we have agreed a number of
rent reviews ahead of expectations to increase the rental income
by #0.3 million p.a.. We have moved several tenants within our
portfolio of buildings to facilitate our refurbishment plans.
Our refurbishment focus this year has been at One Leicester
Square, Vista Office Centre in Hounslow, 230 Blackfriars Road and
Coventry House (near Piccadilly Circus).
Leicester Square 2,689 sq.m. (28,946 sq.ft.) is now complete and
fully let. The majority of the property now comprises a bar, club,
restaurant and nightclub, operated by the Big Beat Group Limited. It
is widely considered to be the most innovative and attractive night-
spot in London.
The refurbishment of 230 Blackfriars Road 5,604 sq.m. (60,319
sq.ft.) to a full city specification has also been completed and
fully let to American Express and the Medical Defence Union.
These two developments will increase the portfolio rent by #3.7
million p.a. on an annualised basis.
The first phase of the Vista refurbishment is complete and
comprised a new reception hall, a state of the art gym, a new
restaurant, a sports multi court and 966 sq.m. (10,400 sq.ft.) of
the vacant office accommodation. Phase 2 is now underway and this
includes a 20 metre indoor swimming pool. Upon completion of
these works this property will offer an attractive range of
facilities to tenants.
Since taking the surrender from Hoechst we have let 4,278 sq.m.
(46,050 sq.ft.) at a rent of #0.7 million p.a. We have also
converted one of the floors into a Business Centre which is
approximately 50 per cent occupied and this will be expanded once
occupation reaches 80 per cent.
Letting of the upgraded accommodation has commenced and we hope
that by the end of 2000 a rental increase of #0.3 million p.a.
should be achieved after a further investment of #0.5 million on
two floors. This follows the surrender of the occupational lease on
the building in 1998 for #8.0 million as reported at the
interim stage.
We expect that the refurbishment of 17 apartments at Coventry
House will be finished during 2000.
These will be made available to let.
During 1999 we let a further 6,163 sq.m. (66,348 sq.ft.)
throughout the portfolio following minor refurbishment to generate an
additional annualised income of #1.0 million p.a..
We have Business Centres in four locations now, totalling 6,474
sq.m. (69,686 sq.ft.). Gross revenues total #1.2 million per
annum and we are actively appraising suitable acquisitions.
1999 has been an active year. We have invested # 14.0 million in
our refurbishment programme in the UK and have increased rents by #
3.7 million per annum. At this stage we anticipate investing up to
an additional #21 million in the properties at Solna and a
further #3.7 million on the UK portfolio and we are considering
extending a number of our buildings this year if planning consent
can be achieved. This expenditure should result in a rental
increase of #4.9 million per annum in Solna and a further #0.5
million p.a. in the UK.
Set out below is an analysis of the portfolio:
Yield
based on
Area Area Year End receivable
sq.m. sq.ft. Book Value rent
Property (000's) (000's) #m %
Inernational 173.7 1,895.1 101.7 8.06
London Property
let > 10 years 58.0 624.7 186.9 7.01
London Property
let 5-10 years 53.1 571.6 122.0 7.47
London Property
let < 5 years 38.9 418.7 56.3 10.47
Referbishment
Projects 17.4 186.9 32.3 4.43
Totals 341.1 3,697.0 499.2 7.55
Yield
Rent based on
Contracted ERV receivable
Receivable Not yet of unlet rent +
Rent receivable space potential
Property Type #m #m #m rents
%
Inernational 8.2 0.7 4.9 *11.25
London Property
let > 10 years 13.1 1.7 - 7.92
London Property
let 5-10 years 9.1 0.2 0.8 8.28
London Property
let < 5 years 5.9 - 0.1 10.66
Referbishment
Projects 1.4 0.2 1.6 *8.89
Totals 37.7 2.8 7.4 *9.14
The above table shows the categories of assets we own and the
future potential available from new lettings and refurbishments
* Yields based on receivable rent and potential rents have been
calculated on the assumption that year end book values will
increase by anticipated refurbishment expenditure of #21.0 million
for international assets and #3.7 million in respect of
refurbishment projects.
Consolidated Profit and Loss Account...
for the year ended 31 December 1999
1999 1998
Notes #000 #000
Net rental income (including associates &
joint ventures) 33,732 28,758
Less: Joint venture (190) -
Associate (1,047) -
32,495 28,758
Other property related 4,907 2,741
income
37,402 31,499
Administrative expenses 2,3 (4,791) (3,397)
Net property expenses (1,427) (1,460)
(6,218) (4,857)
Group Operating Profit 31,184 26,642
Share of joint ventures' operating profit 184 -
Share of associates' operating profit 837 -
Operating Profit including joint ventures 32,205 26,642
and associates
Gains from sale of - 465
subsidiary
Gains from sale of investment property - 2,131
Profit on Ordinary Activities Before 32,205 29,238
Interest
Interest receivable and financial income:
Group 5,675 2,080
Joint Venture - -
Associate 23 -
Interest payable and related charges: 4
Group (20,373) (20,264)
Joint Venture (173) -
Associate (444) -
Profit on Ordinary Activities Before 3, 16,913 11,054
Taxation 6
Tax on Profit on ordinary activities:
Group (2,121) (961)
Joint Venture - -
Associate (4) -
Profit For The Financial 9 14,788 10,093
Year
Dividends 10 - (3,406)
Retained Profit For The 23 14,788 6,687
Year
Basic Earnings per Share 11 14.0p 8.8p
Diluted Earnings per 11 14.0p 8.8p
Share
Consolidated Balance Sheet...
at 31 December 1999
1999 1998
Notes #000 #000
Fixed Assets
Tangible assets 12 499,847 404,966
Investments: 13
Interest in joint
venture:
Share of gross 9,856 -
assets
Share of gross (9,165) -
liabilities
691 -
Interest in associate 6,631 -
Other Investments 391 4,435
507,560 409,401
Current Assets
Stocks - trading 14 - 83
properties
Debtors - amounts falling due after more 15 2,952 2,597
than one year
Debtors - amounts falling due within one 15 5,754 4,735
year
Investments 4,326 3,217
Cash at bank and in hand 36,072 28,975
49,104 39,607
Creditors: amounts falling due within one 17 (33,984) (29,764)
year
Net Current Assets 15,120 9,843
Total Assets Less Current Liabilities 522,680 419,244
Creditors: amounts falling due after more
than one year
Bank and Other Loans 18 (273,962) (211,674)
Net Assets 248,718 207,570
Capital and Reserves
Called up share capital 21 25,491 28,187
Share premium account 23 38,047 49,211
Revaluation reserve 23 117,848 80,707
Capital Redemption 23 3,460 723
Reserve
Other reserves 23 18,977 19,010
Profit and loss account 23 44,895 29,732
Total Equity Shareholders' Funds 248,718 207,570
Consolidated Cash Flow Statement...
for the year ended 31 December 1999
Notes 1999 1998
#000 #000
Net cash inflow from operating 24 37,905 28,389
activities
Returns on investments and
servicing of finance
Interest received 5,978 2,020
Interest paid (19,295) (18,730)
Interest rate caps purchased (925) (51)
Net cash outflow from returns on
investments and servicing of finance (14,242) (16,761)
Taxation (3,344) (899)
Capital expenditure and financial
investment
Purchase and enhancement of (53,970) (51,352)
properties
Sale of investment properties - 41,392
Disposal of other fixed 17 53
assets
Purchase of other fixed (913) (296)
assets
Purchase of own (14,695) (3,614)
shares
Net cash outflow for capital expenditure and
financial investment (69,561) (13,817)
Acquisitions and disposals
Investment in associate (2,072) -
undertaking
Sale of subsidiary undertaking - 2,803
Equity dividends - (3,517)
paid
Net cash outflow before use of liquid resources (51,314) (3,802)
and financing
Management of liquid resources
Cash released / (placed) on 4,824 (10,324)
short term deposits
Current asset (1,790) (1,576)
investments
Financing
Issue of ordinary share capital 162 -
Expenses paid in connection with - (9)
share issue
New loans 101,916 51,733
Repayment of (41,877) (36,310)
loans
Net cash inflow from financing 60,201 15,414
Increase / (Decrease) in cash 25 11,921 (288)
Statement of Total Recognised Gains & Losses.
for the year ended 31 December 1999
1999 1998
#000 #000
Profit for the financial 14,788 10,093
year
Unrealised surplus on revaluation of 41,404 19,478
properties
Currency translation differences on foreign (509) 118
currency net investments
Other recognised gains relating to the 40,895 19,596
year
Total gains and losses recognised since 55,683 29,689
last annual report
Reconciliation of Historical Cost Profits &
Losses.
For the year ended 31 December 1999
1999 1998
#000 #000
Profit for the financial year 14,788 10,093
Realisation of property revaluation gains and 4,050 2,476
losses of previous years
Historical cost profit for the financial 18,838 12,569
year
Reconciliation of Movements in Shareholders' Funds.
for the year ended 31 December 1999
1999 1998
#000 #000
Profit for the financial 14,788 10,093
year
Dividends - (3,406)
14,788 6,687
Other recognised gains relating to the 40,895 19,596
year
New share capital issued 162 3,787
Purchase of own shares (14,468) (3,614)
Expenses of share issue/purchase of own (229) (9)
shares
Net additions to 41,148 26,447
shareholders' funds
Opening shareholders' funds 207,570 181,123
Closing shareholders' funds 248,718 207,570
END
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