RNS No 9603Q
TOWN CENTRE SECURITIES PLC
13 October 1999
PART 2
Finance Director's Report
Profit and Loss Account
The segmental analysis for the first time shows an allocation of
the group interest charge which reveals the car park profit
before taxation of #1.319 million and earnings after tax of
#0.949 million using a full tax rate. Borrowings have been
allocated based on capital expenditure since the restructuring of
car parking activities as a separate group at 30 June 1997.
Intra-group borrowings are now on an arm's length basis and will
be substantially replaced by separate banking facilities during
the current year. Following this restructuring the group's
investment in the car parking group can be calculated at #9.297
million as at 30 June 1999.
The charge for taxation continues to benefit from efficient
structuring of the group's activities and from tax allowances in
respect of capital transactions. We continue to provide for tax
on a prudent basis.
Net Assets
The financial highlights show a pro-forma net assets per share
figure split between property activities and car parking. It is
difficult to combine the results of two businesses when one is
valued on the basis of assets and the other using earnings.
However we believe that the pure accounting basis of
consolidation does not give shareholders a clear basis for
valuation, so we have added a pro-forma net assets calculation.
This makes two adjustments to the accounts net assets figure:
* an adjustment to reflect our belief that the car park
business is worth more that the sum of it's individual assets;
* a directors' current valuation of the development properties
which are not revalued in the accounts.
The pro-forma calculation shows net assets per share of 165p
compared to the accounts basis of 154p.
Borrowings at the year end amounted to #134.433 million including
long term fixed rate debenture stock of #87.5 million and #40
million of bank borrowings maturing in the next four years. An
interest rate swap agreement gives us a fixed rate on #30 million
of the bank borrowings.
The disclosures required by Financial Reporting Standard 13 are
included for the first time. These disclosures are complex
and will allow for the effect of our fixed interest debt
arrangements to be assessed. However, I would like to stress
that the calculations in respect of the #85 million Mortgage
Debenture Stock are purely theoretical. It is the group's
firm conviction that this debt will be repaid at par in the year
2021 not at current value. There is therefore no basis for any
adjustment to pro-forma net assets.
Year 2000 Compliance
The group has undertaken a full review of the risks associated
with the impact on the business by Year 2000. To ensure that the
groups systems are Year 2000 compliant a project team has
performed testing and remedial work. We have also established
contingency plans to ensure that we will be ready to take
appropriate action should any problems occur, to limit the
effects on our business. Whilst we have made every effort to
ensure that we will achieve Year 2000 compliance, in common with
other companies we can not offer a guarantee that we will not be
affected in any way. The costs associated with the costs of the
project are not significant.
Consolidated Profit and Loss Account
Year ended 30 June 1999
1999 1998
#000 #000
Gross revenue
Continuing operations 29,485 29,341
Acquisitions 1,620 -
______ ______
31,105 29,341
====== ======
Operating profit
Continuing operations 22,012 21,816
Acquisitions 242 -
______ ______
22,254 21,816
Profit on disposal of fixed assets 1,792 152
Exceptional loss on revaluation
of investment - (2,592)
______ ______
Profit before interest 24,046 19,376
Net interest payable 11,231 10,848
______ ______
Profit before taxation 12,815 8,528
Taxation 2,052 2,632
______ ______
Profit after taxation 10,763 5,896
Dividends 5,067 5,079
______ ______
Profit retained for the year 5,696 817
====== ======
Earnings per ordinary share of 25p each
(1998 restated)
Underlying 6.9p 6.8p
On reported profit and diluted 8.8p 4.8p
Dividend per ordinary share of 25p each 4.3p 4.1p
Statement of Total Recognised Gains and Losses
Year ended 30 June 1999
1999 1998
#000 #000
Profit for the year after taxation 10,763 5,896
Unrealised surplus on the revaluation
of properties 6,460 7,718
Unrealised deficit on the revaluation
of investment in Stylo plc - (6,408)
Unrealised (deficit)/surplus on the
revaluation of other investments (63) 69
______ ______
Total recognised gains relating to the year 17,160 7,275
====== ======
Note of Historical Cost Profits and Losses
Year ended 30 June 1999
1999 1998
#000 #000
Reported profit before taxation 12,815 8,528
Realisation of investment revaluation gains 4,679 3,357
______ ______
Historical cost profit before taxation 17,494 11,885
====== ======
Historical cost retained profit 10,375 4,174
====== ======
Consolidated Balance Sheet as at 30 June 1999
1999 1998
#000 #000 #000 #000
Fixed assets
Intangible assets 2,689 -
Tangible assets 324,679 307,234
Investments 1,082 4,078
_______ _______
328,450 311,312
Current assets
Trading properties 289 291
Debtors 7,510 7,299
_______ _______
7,799 7,590
_______ _______
Creditors (due within one year)
Bank overdraft (secured) 6,615 10,020
Loan capital (secured) 17 18
Other creditors 20,646 21,213
_______ _______
27,278 31,251
_______ _______
Net current liabilities (19,479) (23,661)
_______ _______
Total assets less current
liabilities 308,971 287,651
Creditors (amounts due after
more than one year)
Loan capital (secured) (127,801) (111,845)
_______ _______
181,170 175,806
======= =======
Capital and reserves-equity
interests
Called up share capital 29,480 32,558
Share premium account 4 1,544
Capital redemption reserve 1,374 -
Special reserve 3,151 -
Property revaluation surplus 103,676 101,895
Other reserves 332 395
Realised capital reserves 11,134 4,663
Profit and loss account 32,019 34,751
_______ _______
Shareholders' funds 181,170 175,806
======= =======
Consolidated Cash Flow Statement
Year ended 30 June 1999
1999 1998
#000 #000 #000 #000
Net cash inflow from operating
activities 21,984 23,162
Returns on investments and
servicing of finance
Interest paid (11,266) (10,880)
Taxation (2,475) (773)
Capital expenditure and
financial investment
Purchase of investment
properties (28,300) (14,006)
Purchase of development
properties (275) -
Purchase of car park
properties (5,780) (5,088)
Purchase of intangible
assets (695) -
Purchase of other tangible
assets (238) (361)
Proceeds from sale of
investment properties 25,456 9,266
Proceeds from sale of listed
investments - 127
Proceeds from sale of other
tangible assets 18 18
Purchase of investments (144) -
(Increase)/decrease in own
shares held in trust (24) 58
______ ______
(9,982) (9,986)
Acquisitions
Purchase of investment in
subsidiary undertakings (2,222) -
Equity dividends paid (5,046) (5,071)
______ ______
Net cash outflow before
financing (9,007) (3,548)
Financing
Shares issued on take up of
options 7 158
Expenses associated with
capital reorganisation (100) -
Repurchase of share capital (3,485) -
Loan repayments (19) (1,058)
New loans 16,009 -
______ ______
Net cash inflow/(outflow)
from financing 12,412 (900)
______ ______
Increase/(decrease) in cash 3,405 (4,448)
______ ______
The group statement of cash flows should be read in conjunction
with the notes to the accounts.
Notes to the Accounts
1. Basis of preparation
The foregoing statements are not the Group's statutory accounts.
The Group's statutory accounts for the year ended 30th June 1999,
on which the Company's auditors, PricewaterhouseCoopers, have
given an unqualified opinion in accordance with Section 235 of
the Companies Act 1985, are to be delivered to the Registrar of
Companies. The Group's statutory accounts for the year ended
30th June 1998 have been filed with the Registrar of Companies.
2. Segmental analysis
Property Car park 1999
investment operations Total
#000 #000 #000
Gross revenue 23,971 7,134 31,105
Intra group rents 791 (791) -
Property expenses/cost of
sales (1,148) (4,177) (5,325)
_______ _______ _______
Net rents/profits 23,614 2,166 25,780
Administrative expenses (3,346) (180) (3,526)
_______ _______ _______
Operating profit 20,268 1,986 22,254
Interest (10,564) (667) (11,231)
_______ _______ _______
Profit before taxation
(ongoing revenue activities) 9,704 1,319 11,023
======= ======= =======
Net operating assets 175,410 9,297 184,707
======= =======
Dividend payable (3,537)
_______
Net assets 181,170
=======
1998
#000 #000 #000
Gross revenue 24,917 4,424 29,341
Intra group rents 694 (694) -
Property expenses/cost of sales (2,007) (2,162) (4,169)
_______ _______ _______
Net rents/profits 23,604 1,568 25,172
Administrative expenses (3,186) (170) (3,356)
_______ _______ _______
Operating profit 20,418 1,398 21,816
Interest (10,781) (67) (10,848)
Profit before taxation
(ongoing revenue activities) 9,637 1,331 10,968
======= ======= =======
Net operating assets 171,297 8,025 179,322
======= =======
Dividend payable (3,516)
_______
Net assets 175,806
=======
Car park operations include the results of Universal Parking
Group Limited for the period from 1 December 1998 being turnover
of #1,620,000 and operating profit of #242,000 after
amortisation of goodwill of #59,000.
3. Net interest payable
1999 1998
#000 #000
Debentures 8,891 8,893
Mortgages 29 25
Bank interest 2,435 2,331
Interest receivable (124) (401)
______ ______
11,231 10,848
====== ======
Interest payable on loans repayable after five years included
above amounts to #8,925,000 (1998 #8,918,000).
4. Taxation
1999 1998
#000 #000
Based on the group profit at 30.75%
(1998 31%)
Corporation tax 2,541 2,713
Deferred taxation 40 (152)
_____ _____
2,581 2,561
Prior year adjustments:
Corporation tax (559) 73
Deferred tax 30 (2)
_____ _____
(529) 71
_____ _____
2,052 2,632
===== =====
The corporation tax charge for the year has been reduced
principally by the effect of capital allowances on investment
properties.
The directors estimate that a tax liability of #10.6 million
would arise in the group (company #10.7 million) if the revalued
assets were disposed of at the amount stated in the accounts.
There is no other significant unprovided liability for deferred
taxation.
5. Dividends
1999 1998
#000 #000
Interim paid 1.30p per share (1998 1.27p) 1,530 1,563
Final proposed 3.00p per share (1998 2.85p) 3,537 3,516
_____ _____
5,067 5,079
===== =====
6. Earnings per share
The earnings per share is calculated on profit for the year of
#10,763,000 (1998 #5,896,000) and on 122.3 million (1998 123.3
million adjusted) ordinary shares, the weighted average number of
shares in issue during the year.
The number of dilutive potential ordinary shares arising from
share options is 488,000 (1998 172,000). The dilutive potential
ordinary shares have no impact on earnings per share.
1999 1998
Earnings Earnings
per per
Earnings share Earnings share
(restated)
#000 pence #000 pence
Earnings and earnings per
share 10,763 8.80 5,896 4.78
Profit on disposal of
fixed assets (1,792) (1.47) (152) (0.12)
Exceptional loss on revaluation
of investment - - 2,592 2.10
Prior year taxation adjustment (529) (0.43) 71 0.06
_____ _____ _____ _____
Underlying earnings and earnings
per share 8,442 6.90 8,407 6.82
===== ===== ===== =====
Adjusted earning per share information has been shown to
facilitate comparison.
7. Intangible assets
Group
Acquired
Intangible
Goodwill assets Total
Cost #000 #000 #000
Arising on acquisition (see below) 2,053 - 2,053
Car park concession - 695 695
___________________________
At 30 June 1999 2,053 695 2,748
Amortisation
Charge for the period (59) - (59)
___________________________
Net book value at 30 June 1999 1,994 695 2,689
===========================
The car park concession will be amortised over its useful life of
5 years.
Acquisitions
On 30 November 1998 the company acquired 100% of the issued share
capital of Universal Parking Group Limited. No fair value
adjustments have been made and the book and fair value of assets
and liabilities acquired were:
#000
Tangible fixed assets 393
Debtors 408
Creditors (435)
Debt (169)
Taxation (197)
_____
Net assets -
Goodwill 2,053
=====
Satisfied by:
Consideration 2,000
Acquisition expenses 53
_____
2,053
=====
Deferred consideration up to a maximum of #1,062,000 is payable
dependent upon the results for the year ended 31 March 2000. No
provision has been made in these accounts based on current
forecasts.
The cash outflow in respect of the acquisition of #2,222,000
comprised #2,053,000 and #169,000 of assumed debt. The goodwill
is being amortised over 20 years.
8. Tangible fixed assets
Investment properties at valuation
Freehold Long
leasehold
#000 #000
Valuation at 1 July 1998 248,202 32,910
Expenditure 24,494 3,806
Disposals (22,143) (1,521)
Increase/(decrease) in value on revaluation 7,390 (930)
_______ _______
Balance at 30 June 1999 257,943 34,265
======= =======
Valuation at 30 June 1999 292,208
=======
The above freehold and long leasehold investment properties have
been revalued as at 30 June 1999 on the basis of open market
value by Montagu Evans, Chartered Surveyors, (other than freehold
properties which have been valued at #4,753,000 by the
directors).
Development properties Freehold
#000
Valuation at 1 July 1998 12,886
Additions 275
______
Valuation at 30 June 1999 13,161
======
Operational car park properties
Long Short
Freehold leasehold leasehold
#000 #000 #000
Balance at 1 July 1998 6,914 4,872 260
Additions 3,911 1,869 -
Amortisation - - (29)
______ ______ ______
Balance at 30 June 1999 10,825 6,741 231
====== ====== ======
Net book value at 30 June 1999 17,797
======
Whilst it is the group's policy to depreciate tangible assets
other than investment properties, the estimated useful life and
residual value of freehold and long leasehold operational
properties are such that depreciation is immaterial.
Fixtures, equipment and motor vehicles
Cost Depreciation
#000 #000
Balance at 1 July 1998 2,910 1,720
Acquisition of subsidiary undertakings 1,103 710
Additions 238 -
Disposals (65) (47)
Depreciation charge for the year - 290
_____ _____
Balance at 30 June 1999 4,186 2,673
===== =====
Net book value at 30 June 1999 1,513
=======
Total tangible assets 324,679
========
9. Loan capital (secured)
1999 1998
#000 #000
Parent Undertaking
6.5% Mortgage 2004/7 326 339
7% Mortgage 2005 32 37
10.5% First mortgage debenture
stock 2021 87,492 87,527
Bank loans 2001/3 39,968 8,960
_______ _______
127,818 96,863
Subsidiary Undertakings
Bank loan - 15,000
_______ _______
127,818 111,863
Less amounts repayable within one
year, all of which relates to the
parent undertaking (17) (18)
_______ _______
127,801 111,845
======= =======
The debenture mortgages and bank loans are secured by fixed
charges on properties owned by the company and its subsidiary
undertakings.
10. Financial instruments
The Group has adopted the requirements of FRS 13, Derivatives and
other financial instruments. The group has taken advantage of the
exemption, that short term debtors and creditors be excluded from
the following disclosures. The exemption on the ground of
practicality from providing comparatives has also been exercised
where appropriate.
All financial liabilities are denominated in sterling.
Liquidity risk
The maturity profile of the group's financial liabilities at 30
June 1999 is set out below:
Bank Debenture Mortgages
borrowings stock Total
#000 #000 #000 #000
In one year or less or
on demand 6,615 - 17 6,632
In more than one year but not
more than two years 10,000 - 19 10,019
In more than two years but not
more than five years 29,968 - 73 30,041
In more than five years - 85,000 249 85,249
_____________________________________
46,583 85,000 358 131,941
Debenture issue premium
allocated to future periods - 2,492 - 2,492
_____________________________________
Gross financial liabilities 46,583 87,492 358 134,433
_____________________________________
The group has undrawn floating rate loan facilities as set out
below:
#000
Expiring in one year or less 6,685
Expiring in more than two years 15,032
______
21,717
______
The facilities expiring in one year are overdraft facilities
subject to annual review. Other facilities are available to
provide funding for future investments.
Interest rate risk
The interest rate risk of the group's financial liabilities at 30
June 1999 after taking account of interest rate swaps is as
follows:
Book value Weighted Weighted
average average
#000 rate % period years
Debenture stock 85,000 10.50 21.8
Mortgages 358 6.62 4.4
Bank fixed rate liabilities 30,000 7.40 8.5
_______ ________ _______
115,358
Bank floating rate liabilities 16,583
_______
131,941
_______
Bank fixed rate liabilities include interest rate swaps which
have the effect of transforming floating rate liabilities into
fixed rate liabilities.
Floating rate financial liabilities bear interest at rates based
on LIBOR, some of which are fixed in advance for periods up to
six months.
Fair values
The fair values of the group's financial liabilities at 30 June
1999 are set out below:
Book Fair Fair value
value value adjustment
#000 #000 #000
Fixed rate instruments 87,850 126,937 (39,087)
Derivative instruments
Interest rate swaps (notional
principal #30,000,000) - 1,323 (1,323)
_______ _______ _______
Fair value adjustment 87,850 128,260 (40,410)
_______ _______ _______
Tax at 30% 12,123
=======
The fair values are determined by prices available from the
market on which the financial liabilities and derivatives are
traded. All gains and losses arising from hedging instruments
crystallised during the year have been recognised in the profit
and loss account.
11. Called up share capital
Authorised
164,879,000 (1998 174,000,000) ordinary shares of
25p each #41,220,000
===========
Issued and fully paid Number Nominal
of shares value
000 #000
Balance at 1 July 1998 adjusted for
capital reorganisation 123,404 30,851
Buy back of own shares (5,496) (1,374)
Issued on take-up of options 12 3
_______ _______
Balance at 30 June 1999 117,920 29,480
======= =======
On 3 September 1998 the issued share capital of 130,231,000
shares was reorganised, consolidated and subdivided into
123,404,000 shares of 25 pence each.
On 8 April 1999 the company purchased in the market 5,496,000
ordinary shares for cancellation.
The exercise of all options outstanding at 30 June 1999 would
result in the issue of a further 2,657,000 ordinary shares
(adjusted to reflect the reorganisation of share capital),
analysed as follows:
Number of shares
000
1984 Executive Share Option Scheme 614
1994 Executive Share Option Scheme 1,573
1997 Executive Share Option Scheme 216
SAYE Schemes 1995-1998 254
_____
2,657
=====
12. Notes to the cash flow statement
a) Reconciliation of operating profit to net cash inflow from
operating activities
1999 1998
#000 #000
Operating profit 22,254 21,816
Depreciation 290 321
Amortisation of goodwill 59 -
Amortisation of lease premium 29 28
Decrease in trading properties 2 232
Decrease in current asset investments - 90
Decrease/(increase) in debtors 146 (143)
(Decrease)/increase in creditors (746) 870
Share of profits of associated undertakings (50) (52)
______ ______
21,984 23,162
====== ======
b) Analysis of changes in net debt
As at Other As at
1 July 1998 Cash flow movements 30 June 1999
#000 #000 #000 #000
Bank overdraft (10,020) 3,405 - (6,615)
Loan capital due within
one year (18) - 1 (17)
Loan capital due after
more than one year (111,845) (15,990) 34 (127,801)
________ ________ ________ ________
(121,883) (12,585) 35 (134,433)
======== ======== ======== ========
c) Reconciliation of net cash flow to movement in net debt
1999 1998
#000 #000
Increase/(decrease) in cash 3,405 (4,448)
Net increase/(decrease) in loans (15,990) 1,058
Other non-cash movements 35 31
________ ________
Change in net debt (12,550) (3,359)
Opening net debt (121,883) (118,524)
________ ________
Closing net debt (134,433) (121,883)
======== ========
13. Unaudited pro-forma net assets per share
The consolidated balance sheet shows net assets of #181,170,000
(1998 #175,806,000) which does not adequately reflect the full
value of two specific groups of assets:
Development properties
The development properties included as a separate category of
tangible fixed assets show a total at 30 June 1999 of #13,161,000
(1998 #12,886,000) comprising three sites in Manchester, Leeds
and Glasgow. The Manchester and Leeds sites are cleared
development sites with planning permission where development is
anticipated in the near future. The directors therefore believe
that it would be inappropriate to value these sites until the
details of the development schemes have been finalised and it is
possible to arrive at an appropriate appraisal of the value of
the properties. However the directors believe using comparative
information that the value of these sites is not less that as
stated below.
Car park business
The consolidated balance sheet includes all the assets and
liabilities of the car park business comprising the properties
owned as well as the assets and liabilities in respect of the
management contracts. The directors believe that it is the
profits and cash flows of this business which should form the
basis for its valuation and for this reason the accounts shows a
full analysis of the profit and loss items attributable to car
parking down to the level of profit after taxation. As Town
Centre Securities PLC is normally assessed on the basis of its
net assets per share an adjustment is needed to exclude the net
assets attributable to car parking activities. It is then
possible to calculate the value of the car park business based on
the earnings information provided. In the pro-forma calculation
below a price earnings ratio of 15 has been used for illustrative
purposes only.
1999 1998
Net Net Net Net
assets assets assets assets
per per
share share
(restated)
#000 pence #000 pence
Net assets and net assets
per share 181,170 154 175,806 142
Development properties per
accounts (13,161) (12,886)
Development properties at
current directors' valuation 22,000 18,000
Car parking net assets per
accounts (9,297) (8,025)
Car parking business valuation 14,235 14,205
_______ _______ _______ _______
Pro-forma net assets per share 194,947 165 187,100 152
======= ======= ======= =======
END
FR NFEEAFLXNFAN
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