Canary Wharf Group - Interim Results - Replacement
RNS Number:9742G
Canary Wharf Group PLC
9 March 2000
The issuer has made the following amendment to the "Canary Wharf Group PLC,
Interim Results" announcement released today at 7:02am under RNS No 9499G.
In the consolidated profit and loss account for the six months ended 31 December
1999, the amount transferred to reserves for the six months ended 31 December
1999 should read £36.4 million and not £6.4 million as previously shown.
All other details remain unchanged.
The full corrected version is shown below.
INTERIM ANNOUNCEMENT OF RESULTS
SIX MONTHS ENDED 31 DECEMBER 1999
FINANCIAL HIGHLIGHTS
Unaudited Unaudited
Six months Six months
ended ended
31 December 31 December
1999 1998 Change
£m £m %
Turnover - rents and service
charges 47.7 35.6 34.0
Gross profit 32.3 21.1 53.1
Net profit on sale of
completed properties 39.1 - -
Operating profit 62.6 5.0
Net interest payable (26.4) (41.4)
Profit/(loss) on ordinary
activities before and after
tax 36.4 (36.5)
Basic earnings/(loss) per
share 5.3p (7.3)p
Diluted earnings/(loss) per
share 5.2p (7.3)p
Unaudited Audited
31 December 30 June
1999 1999 Change
£m £m %
Investment properties (1) 1,970.4 1,479.0
Properties under (2)
construction and
properties held for
development 376.8 535.4
Net debt (441.2) (155.3)
Deferred income (412.9) (532.4)
Other net liabilities (3) (172.1) (119.0)
------- -------
Net assets at net book
value 1,321.0 1,207.7 9.4
1. The interim results do not incorporate any adjustment for
revaluation of investment properties other than in respect
of those properties which were completed or acquired during
the period. This resulted in a revaluation surplus of
£76.6 million.
2. Properties under construction and properties held for
development stated at cost.
3. Including accrual for final contribution to the Jubilee
Line Extension of £50.2 million
AT 31 DECEMBER 1999:
- The group's investment portfolio (totalling 4.3 million sq.
ft. in ten buildings) was over 99% let.
- Properties under construction totalled 3.2 million sq. ft.
of which 2.3 million square feet was pre-let or subject to
agreements to be sold upon completion.
DURING THE SIX MONTHS ENDED 31 DECEMBER 1999:
- 17 Columbus Courtyard, a 200,000 sq. ft. office building
pre-let to CSFB, was completed and transferred to investment
properties.
- 20 Columbus Courtyard, a 270,000 sq. ft. office building,
was completed and sold to CSFB.
- 33 Canada Square, a 560,000 sq. ft. office building was
completed and subsequently repurchased from Citibank.
- A finance lease on this building was completed which is
expected to raise net proceeds of £34 million.
- 1 Westferry Circus, a 217,000 sq. ft. office building was
acquired from Texaco.
- Construction of the 65,000 sq. ft. Canada Place retail
centre continued on schedule and is scheduled to open on 28
March 2000.
RECENT EVENTS
- In February 2000, 15 Westferry Circus, which when complete
will provide 175,000 sq. ft. of office space, was pre-leased
in its entirety to Morgan Stanley Dean Witter.
- Also in February 2000, Citigroup agreed to lease a further
315,000 sq. ft in 25 Canada Square.
- Following these lettings, the group announced that it would
commence construction of 5 Canada Square, a 530,000 office
building, and a 180,000 sq. ft. retail building to the east
of Canada Square which will house a food store, department
store, health club and restaurants.
- The Group has announced its intention to undertake a
securitisation of certain buildings on the estate which is
expected to raise net proceeds in the order of £500 million.
Paul Reichmann, the Chairman, stated:
"Development at Canary Wharf has progressed at a rapid pace
and it has been particularly pleasing to see the completion of
several projects begun during the last few years and the start
of the final phase of the project. The quality office market
in Central London continues to be in short supply,
particularly the larger units. At the same time merger and
acquisition activities in many company sectors is driving
unprecedented demand over truncated timeframes.
We remain convinced that the Group's development strategy, to
advance development on a number of sites, will be the key to
maintaining the high level of take up that we have achieved to
date. Recent leasing activity has set new highs for headline
rents, and the level of pre-let enquiry is very strong."
CONTACTS
George Iacobescu
Chief Executive
Peter Anderson
Managing Director, Finance
Canary Wharf Group plc
Telephone: 0207 418 2000
John Coles/Wendy Timmons
Bell Pottinger Financial
Telephone: 0207 353 9203
A copy of the Interim Statement will be sent to shareholders
and copies will be made available to the public on request to
the Company Secretary at the registered office, One Canada
Square, Canary Wharf, London, E14 5AB.
CHAIRMAN'S AND CHIEF EXECUTIVE'S STATEMENT
Development at Canary Wharf has continued at a rapid pace and
it has been particularly pleasing to see the completion of
several projects begun during the last few years and the start
of the final phase of the project. The second half of 1999 saw
the completion of the construction of three buildings, the
acquisition of one of these buildings and the acquisition of a
further building.
As recently announced, headline rents have set new highs and
the level of pre-let enquiry is very strong. Morgan Stanley
has pre-leased 15 Westferry Circus, a 175,000 square foot
office building that we started speculatively in 1999 and
which will be completed in the Spring of 2001. Citigroup has
leased an additional 315,000 square feet in the 25 Canada
Square tower, bringing their total occupation at Canary Wharf
to nearly 1.5 million square feet. Leases to KPMG, Bear
Stearns, CSFB and Morgan Stanley to satisfy their expansion
requirements were signed in the period, underscoring the need
for us to continue to develop space to accommodate existing
tenants' needs.
As a result of these major lettings, and in keeping with our
strategy of having one speculative building underway at all
times, we will proceed with 5 Canada Square, a 530,000 square
foot building that will complete the office development around
Canada Square. This building has been designed by Skidmore
Owings and Merrill to accommodate either a single occupier or
a multi-tenanted strategy, and is capable of providing three
40,000 square foot trading floors if required.
Our retail development activities have been a standout
achievement. At the end of March 2000 we will open a 65,000
square foot fashion-led mall with 27 shops at the concourse
level, which has been fully pre-let to leading names including
Next, French Connection, Gap, HMV and Mont Blanc. The success
we experienced in pre-letting this development, and the high
sales levels of the shops and restaurants in our existing
retail complex reflects the growing population at Canary
Wharf, as well as its popularity with visitors and local
residents making increasing use of these shops.
In anticipation of the arrival of new tenants, in particular
HSBC and Citibank, we will be expanding further the retail
complex with the development of Churchill Place, a 180,000
square foot building on the east side of Canada Square which
will include a food store, department store, health club,
bookstore and restaurants. Advanced negotiations with the
operators for all these uses are underway. This will bring the
total retail square footage at Canary Wharf to 425,000 square
feet. The Jubilee Park development to the south of the Jubilee
Line station will be able to accommodate an additional 85,000
square feet of retail, bringing the total to over 500,000
square feet which approaches regional mall status. Our
challenge is to make Canary Wharf a destination mall with
increased weekend trading. With ample parking and our superior
public transport links we are confident we can achieve this
goal.
The Canary Wharf Group construction team deserves special
mention. They currently have 3.2 million square feet of
construction underway in addition to the significant
infrastructure requirements related to these buildings and the
substructure construction for the Jubilee Park development
which will ultimately provide up to 3 million square feet of
office development.
In the six months to 31 December 1999 the construction team
completed three office buildings totalling over 1 million
square feet. In September we reached practical completion of
17 Columbus Courtyard, a 200,000 square foot building which is
fully leased to CSFB and linked to their existing headquarters
complex. In December we reached practical completion of a
270,000 square foot extension to the existing CSFB
headquarters building. We were able to complete this
extension in less than two years because the foundations and
basement parking levels had previously been completed. This
'pre-staging' up to street level has become an important part
of our future development strategy. Just before the end of
the year we completed 33 Canada Square, the 560,000 square
foot U.K. headquarters of Citibank. All three of these
projects came in on time and under budget.
During this period we also took the opportunity to acquire two
tenant owned buildings on the estate. In September we acquired
1 Westferry Circus, the European headquarters of Texaco on a
sale and partial leaseback basis. The purchase price was £82.9
million for the 217,000 square foot building and reflected an
investment yield of 7.6%. The demand for immediately available
space on the estate enabled us simultaneously to lease to CSFB
the 74,000 square feet Texaco did not occupy. We secured a
favorable price through speed of execution, our familiarity
with the building, and being able to agree a surrender of
Texaco's lease in an adjoining building that we immediately
leased to the European Medical Evaluation Agency to meet their
expansion needs. The package we offered Texaco illustrates the
advantages of having control over the estate for tenants as
well as ourselves.
In December we acquired Citibank's interest in their 560,000
square foot headquarters building at 33 Canada Square. In the
original 1996 transaction with Citibank, their lease provided
an option to acquire an ownership interest in the completed
building. Since 1996 their real estate strategy has changed
and they asked whether we would acquire their interest.
Citigroup has leased 915,000 square feet in the adjoining
tower and we are linking these buildings together. It was
therefore clearly desirable to consolidate ownership. The
consideration agreed with Citibank in connection with this
transaction results in an investment yield of 7.0%.
We will be financing both building acquisitions in the long-
term debt markets at a cost of funds below their acquisition
yields. In principle, we remain open to the opportunities of
acquiring other tenant owned buildings on the estate, on the
firm proviso that we can achieve reasonable terms and
structure a transaction that enhances shareholder value.
The opening of the Jubilee Line has had a major positive
impact, both in terms of ease of travel to Canary Wharf, and
also in terms of perception. Canary Wharf is now fully
integrated with the transport infrastructure of London. One of
the additional benefits to us is that all sectors of the
market are now considering Canary Wharf. The Jubilee Line
brings us within 15 minutes of the West End, and we are 15
minutes from the City on the DLR which now also runs through
to Lewisham. This new 'time proximity' is being clearly
recognised by prospective tenants. The development of the
Jubilee Line has been a tremendous achievement.
We remain confident about maintaining the pace of development
at Canary Wharf for the remainder of the current year and
beyond.
BUSINESS REVIEW
Property portfolio
At the time of approving this Interim Statement over 99% of
the existing available space in the Group's ownership
(totalling 4.3 million square feet in ten buildings) was let
and four buildings (totalling 3.2 million square feet) were
under construction. In addition the Group owns land on which
it proposes to build a further 5.2 million square feet.
During the six month period ended 31 December 1999 the Group
completed construction of three properties, one of which was
retained as an investment property (17 Columbus Courtyard) and
the other two were sold (20 Columbus Courtyard and 33 Canada
Square). 17 Columbus Courtyard is a 200,000 square foot
office building which has been let in its entirety to CSFB.
20 Columbus Courtyard is a 270,000 square foot office building
which was sold to CSFB under the terms of an agreement entered
into in December 1997. 33 Canada Square is a 560,000 square
foot office building which was acquired by Citibank under the
terms of an agreement entered into in December 1996.
Subsequently this property was repurchased from Citibank who
will occupy the entire building on the basis of a 27 year
lease.
During the period the company also acquired 1 Westferry
Circus, a 217,000 square foot building, for a consideration of
£82.9 million.
Properties under construction at 31 December 1999 comprised:
Approx.
Net
Property Address Internal Expected
Area Completion
(sq ft) Date Status
15 Westferry 175,000 May 2001 Pre-leased to Morgan
Circus Stanley Dean Witter
10 Canada Square 1,100,000 April 2002 Agreed to be sold to
HSBC Group
25 Canada Square 1,220,000 May 2002 915,000 sq. ft
agreed to be leased
to Citigroup
Canada Place 65,000 March 2000 Pre-let
Retail Centre
---------
2,560,000
=========
In February 2000 15 Westferry Circus, which when complete will
provide 175,000 square feet of office space, was pre-let in
its entirety to Morgan Stanley Dean Witter. Also in February
2000, Citigroup took a further 315,000 square feet in 25
Canada Square. Following these lettings, the decision has
been made to construct the 500,000 square foot office building
designed for 5 Canada Square.
The 65,000 square foot Canada Place retail centre is scheduled
to open on 28 March 2000 with all retail units having been pre-
let. The decision has now been made to commence construction
of Churchill Place, a 180,000 square foot retail building on
the east side of Canada Square.
As well as the properties under construction referred to in
the above table, the Group has commenced substructure works on
the former Heron Quays, as a preliminary to the development of
that part of the estate. Substructure works have also
commenced on a further two properties at Canary Wharf.
Construction of other buildings will commence as and when
market conditions allow.
The Group's investment properties are under lease to a roster
of high quality tenants which provide a diversified income
stream. At the date of approving the interim statement the
weighted average unexpired lease term for the office portfolio
was approximately 20.5 years (or 16.4 years after taking
account of tenant break options). Only 22% of the square
footage under lease will expire or is capable of being
terminated during the next ten years. As a result of the
expiry of rent free periods, stepped rents and rent reviews,
the Group's aggregate rental income will increase
significantly over the coming years.
Valuation
At 31 December 1999, the Group's investment portfolio was
carried at an amount of £1,970.4 million representing the
amount of the open market valuation at 30 June 1999 together
with:
1. the cost of subsequent fitouts;
2. the open market value as at 31 December 1999 of 17 Columbus
Courtyard which was completed during the period;
3. the open market value as at 31 December 1999 of 1 Westferry
Circus which was acquired from Texaco on 27 September
1999; and
4. the open market value of 33 Canada Square which was
acquired from Citibank on 21 December 1999.
The Group's properties under construction, held for
development and held as current assets were carried at an
amount of £376.8 million at 31 December 1999, representing
their historical cost.
Operating results
Turnover for the six months ended 31 December 1999 was £47.7
million, against £35.6 million for the six months ended 31
December 1998. Rental income increased from £22.6 million to
£33.1 million, an increase of 46.5%, primarily as a result of
the expiry of rent free or rent reduced periods. Service
charge income increased from £9.2 million to £11.9 million, an
increase of 29.4%, due primarily to the increased level of
occupancy on the estate. Miscellaneous income reduced from
£3.8 million to £2.7 million over the period.
Rents payable and property management costs for the six months
ended 31 December 1999 were £15.4 million, in comparison with
£14.5 million for the same period in 1998. The increase in
cost is the result of the increased occupancy on the estate.
For the six months ended 31 December 1999 gross profit was
£32.3 million, an increase of £11.2 million over the previous
period. The gross profit ratio for the six months was 67.7%
in comparison with 59.3% for the six months ended 31 December
1998. The increase in the gross profit ratio is attributable
to the increase in turnover.
Administrative expenses for the six months ended 31 December
1999 were £10.4 million, whilst for the six months to December
1998 they were £16.7 million, including costs totalling £2.6
million relating to the preparation of the Group for the
flotation of its shares on the London Stock Exchange which
took place on 1 April 1999. The six month period ended 31
December 1998 also included leasing costs of £4.8 million
whereas for the period ended 31 December 1999 such costs
totalled only £0.8 million.
The directors estimate that administrative expenses of £6.4
million (or approximately 61.5% of the total for the six
months ended 31 December 1999) were attributable to the
Group's corporate and property investment activities. For the
period ended 31 December 1998 administrative expenses
attributable to these activities were estimated at £9.4
million, or 56.3% of the total, including the £2.6 million
attributable to the company's flotation.
The remainder of administrative expenses are attributable to
unallocated overheads associated with the Group's development
programme which are expensed to the profit and loss account
(as opposed to costs directly attributable to and capitalised
as part of the cost of particular buildings). For the six
months ended 31 December 1999 such unallocated development
overheads totalled £4.0 million, representing approximately
38.5% of administrative expenses. For the previous period
development overheads totalled £7.3 million or 43.7% of the
total. The decrease in development overheads was partly
attributable to letting costs in the previous year
attributable to 10 Canada Square. This was offset by an
increase in development overheads associated with the
increased pace of development on the estate. The directors
consider that these development overheads will in due course
reduce to an insignificant level upon completion of the
development programme.
For the six months ended 31 December 1999 operating profit was
£62.6 million, in comparison with a profit of £5.0 million for
the six months ended 31 December 1998. Included within the
total for the six months ended 31 December 1999 was a net
profit of £39.1 million on disposal of two properties at
Canary Wharf (33 Canada Square and 20 Columbus Courtyard).
33 Canada Square was the first major building to be commenced
at Canary Wharf after a gap of five years. The disposal of
this building generated an incremental cash profit to the
Group of £7.3 million before allocations in respect of
contributions towards the JLE and historical land and
infrastructure. In addition, the Group entered into a finance
lease transaction which is expected to generate a gain to the
Group of £34.0 million. Allowing for this gain, the
completion and sale of 33 Canada Square is expected to
generate a total gain in cash terms of £41.3 million. After
cost allocations in respect of the JLE and historical land and
infrastructure, the disposal of 33 Canada Square generated an
accounting loss of £5.4 million. The gain from entering into
the finance lease will be recognised over the term of the
lease in accordance with applicable accounting standards.
In the case of 20 Columbus Courtyard, the disposal of this
building generated an incremental cash profit to the Group of
£48.0 million, before allocations in respect of the JLE and
historical land and infrastructure. After such allocations,
an accounting profit of £44.5 million was earned.
Before the exceptional net profit on disposals, the operating
profit for the period was £23.5 million. The improvement in
the underlying operating profit earned by the Group is
primarily attributable to the increase in turnover.
Net interest payable for the period to 31 December 1999 was
£26.4 million, against £41.4 million for 1998. The reduction
in net interest payable was primarily attributable to the
repayment of the Group's Senior Secured and Capital Notes in
April 1999. After interest, the profit on ordinary activities
for the period was £36.4 million, an increase in profit of
£72.9 million over the equivalent period in 1998, driven
primarily by the net profit on sale of completed properties,
the increase in rental income and the reduction in net
interest payable.
Borrowings
At 31 December 1999, net debt (after allowing for cash in hand
and cash collateral) stood at £441.2 million, up from £155.3
million at 30 June 1999, comprising:
At 31 At 30
December June
1999 1999
£m £m
Securitised debt 558.0 555.9
Loans 50.3 144.5
Finance lease obligations 672.0 471.8
-------- --------
Total borrowings 1,280.3 1,172.2
Less: cash collateral for
borrowings (407.4) (405.9)
Less: other cash collateral
excluding prepayments (see below) (8.7) (18.0)
-------- --------
864.2 748.3
Less: cash deposits
(164.2) (272.8)
-------- --------
Net debt excluding prepayments 700.0 475.5
Cash deposits arising from
prepayments in respect of
buildings contracted to be sold (258.8) (320.2)
-------- --------
-
Net debt 441.2 155.3
-------- --------
The increase in gross borrowings (as set out above) from
£1,172.2 million to £1,280.3 million is attributable primarily
to the inception of a new finance lease, stated initially at
£197.5 million, offset by the repayment of the Group's
construction loan facilities. The increase in gross
borrowings was accompanied by a reduction in cash and term
deposits to £839.1 million from £1,016.9 million primarily as
a result of the requirement to fund development costs and the
acquisition of two buildings. At 31 December 1999 the Group
had undrawn committed facilities of £170 million. At that
date the weighted average cost of the Group's debt was 7.4%
(30 June 1999 7.5%).
Cash flow
Net cash inflow from operating activities for the six months
ended 31 December 1999 was £49.7 million in comparison with
£75.0 million for the six months to December 1998. The
reduction was attributable to movements in working capital
balances which served to offset the underlying increase in
operating income.
Capital expenditure and financial investment for the six
months ended 31 December 1999 was £303.2 million, as compared
with a net inflow of £246.4 million for the six months to 31
December 1998. Capital expenditure for the six months ended
31 December 1999 included the purchase of 1 Westferry Circus
(£85.5 million including stamp duty and acquisition expenses)
and 33 Canada Square (£288.3 million including acquisition
expenses), together with development expenditure of £146.6
million, but was partially offset by proceeds of £228.3
million relating to the disposal of property. The net inflow
for the previous accounting period was attributable to
prepayments relating to agreements for the sale of certain
buildings on completion being in excess of construction costs
incurred during that period.
For the six months ended 31 December 1999, financing cash
flows were £103.4 million reflecting the inception of a new
finance lease, net of the repayment of a construction loan,
against £80.4 million for the equivalent period in 1998.
UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE SIX
MONTHS ENDED 31 DECEMBER 1999
Unaudited Unaudited
Six Six
Audited months months
Year ended ended
ended 31 31
30 June December December
1999 Notes 1999 1998
£m £m £m
£m
Turnover - rents and
79.6 service charges 47.7 35.6
Cost of sales
- rents and property
(27.9) management costs (15.4) (14.5)
------- -------- --------
51.7 GROSS PROFIT 32.3 21.1
Administrative
(27.8) expenses (10.4) (16.7)
Other operating
income
- before exceptional
1.1 item 1.6 0.6
- exceptional item:
net profit on
sale of completed
- properties 5 39.1 -
------- -------- --------
25.0 OPERATING PROFIT 62.6 5.0
Share of operating
profit/(loss) of
(0.2) associates 0.2 (0.1)
35.6 Interest receivable
- Group 2 16.8 18.0
Interest payable
(103.2) - Group 2 (43.2) (59.4)
------- -------- --------
PROFIT/ (LOSS) ON
ORDINARY ACTIVITIES
(42.8) BEFORE TAX 36.4 (36.5)
(44.6) Dividends paid - -
-------- --------
TRANSFERRED TO
(87.4) RESERVES 36.4 (36.5)
======= ======== ========
Basic earnings/(loss)
(7.9p) per share 4 5.3p (7.3p)
Diluted earnings/
(7.9p) (loss) per share 4 5.2p (7.3p)
The above results relate to the continuing activities of the
Group and its share of associates.
UNAUDITED CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS
AND
LOSSES FOR THE SIX MONTHS ENDED 31 DECEMBER 1999
Unaudited Unaudited
Six Six
Audited months months
Year ended ended
ended Notes 31 31
30 June December December
1999 1999 1998
£m £m £m
£m
Profit/(loss) for the
financial period of
the Group and its
share of associates
(87.2) - Group 36.2 (36.4)
(0.2) - Share of associates 0.2 (0.1)
Unrealised surplus on
revaluation of
128.0 properties - Group 5 76.6 -
------- -------- --------
TOTAL RECOGNISED
GAINS AND LOSSES
RELATING TO THE
40.6 PERIOD 113.0 (36.5)
======== ======== ========
UNAUDITED CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 1999
Audited Notes Unaudited Unaudited
30 June 31 31
1999 December December
1999 1998
£m £m £m
FIXED ASSETS
1,479.0 Investment properties 5 1,970.4 1,346.1
Properties under
84.8 construction 5 96.4 35.3
Properties held for
140.6 development 5 172.3 80.3
Other tangible fixed
0.6 assets 4.3 0.9
6.7 Investments 6.9 6.8
------- -------- --------
1,711.7 2,250.3 1,469.4
------- -------- --------
CURRENT ASSETS
Properties under
construction and
properties held for
310.0 development 5 108.1 213.2
32.0 Debtors 40.8 29.5
1,016.9 Cash at bank and in hand 6 839.1 984.6
------- -------- --------
1,358.9 988.0 1,227.3
CREDITORS: Amounts
falling due within one
(389.2) year (235.5) (351.4)
------- -------- --------
969.7 NET CURRENT ASSETS 752.5 875.9
-------- --------
TOTAL ASSETS LESS
2,681.4 CURRENT LIABILITIES 3,002.8 2,345.3
CREDITORS: Amounts
falling due after more
(1,470.4) than one year (1,678.5) (1,783.8)
Provisions for
(3.3) liabilities and charges (3.3) (4.0)
------- -------- --------
1,207.7 NET ASSETS 1,321.0 557.5
======= ======== ========
CAPITAL AND RESERVES
6.8 Called up share capital 6.8 2.5
571.3 Share premium 571.6 -
Reserves:
714.2 Revaluation reserve 790.8 588.7
61.3 Capital reserve 61.3 61.3
(145.9) Profit and loss account (109.5) (95.0)
------- -------- --------
SHAREHOLDERS' FUNDS -
1,207.7 EQUITY 1,321.0 557.5
======= ======= =======
UNAUDITED CONSOLIDATED CASH FLOW STATEMENT FOR THE SIX
MONTHS
ENDED 31 DECEMBER 1999
Audited Unaudited Unaudited
Year Six months Six months
ended ended ended
30 June 31 December 31 December
1999 Notes 1999 1998
£m £m £m
NET CASH INFLOW FROM
42.5 OPERATING ACTIVITIES 49.7 75.0
-------- -------- --------
Returns on
investments and
servicing of
(43.1) finance (27.7) (13.1)
Capital
expenditure and
financial
127.9 investment (303.2) 246.4
(7.0) Acquisitions - (7.0)
Equity dividend
(44.6) paid - -
------- -------- --------
33.2 (330.9) 226.3
-------- -------- --------
Cash (outflow)/
inflow before
management of
liquid resources
75.7 and financing (281.2) 301.3
Management of
(238.7) liquid resources 69.2 (349.4)
338.3 Financing 103.4 80.4
------- -------- --------
(DECREASE)/
175.3 INCREASE IN CASH 6 (108.6) 32.3
======== =======
The above cash flows relate to the continuing activities of
the Group
Reconciliation of operating profit to operating cash flows
£m £m £m
25.0 Operating profit 62.6 5.0
Net profit on disposal of
- properties (39.1) -
0.2 Depreciation charges 0.2 0.1
Decrease/(increase) in
5.4 debtors 4.2 (0.5)
12.6 Increase in creditors 21.8 70.4
(0.7) Decrease in provision - -
------- -------
Net cash inflow from
42.5 operating activities 49.7 75.0
======= =======
UNAUDITED CONSOLIDATED CASH FLOW STATEMENT FOR EHT SIX
MONTHS
ENDED 31 DECEMBER 1999 (CONTINUED)
Capital expenditure and financial investment
Unaudited Unaudited
Audited Six Six
Year months months
ended ended ended
30 June 31 31
1999 December December
1999 1998
£m £m £m
Additions to investment
properties and
properties under
(297.6) development (146.6) (155.4)
Purchase of investment
- properties (373.8) -
- Disposal of property 228.3 -
Settlement of deferred
acquisition cost (see
- note below) (14.9) -
Purchase of tangible
(0.7) fixed assets (3.7) (0.8)
Deferred income relating
to agreements for sale
426.2 of property 7.5 402.6
------- ------- -------
127.9 (303.2) 246.4
======= ======= =======
In accordance with the arrangements agreed for the acquisition
of the Canary Wharf Holdings Limited Group in December 1995 a
further deferred payment of £14.9 million was made to the
vendor from funds set aside for this purpose at the time of
acquisition, following the satisfaction of certain conditions,
during the period ended 31 December 1999.
Financing
£m £m £m
Repayment of Senior
(366.6) Secured and Capital Notes - (24.6)
Flotation proceeds
572.5 (net of fees) - -
- Issue of shares 0.3 -
Decrease in short term
- borrowings (121.2) -
Drawdown of secured loan
and finance lease
132.4 premiums 224.3 105.0
------- ------- -------
338.3 Net cash inflow 103.4 80.4
======= ======= =======
NOTES TO THE INTERIM STATEMENT FOR THE SIX MONTHS ENDED 31
DECEMBER 1999
1. BASIS OF PREPARATION
The Interim Statement has been prepared having regard to the
guidance in the non-mandatory statement issued by the
Accounting Standards Board, 'Interim Reports', and on the
basis of the accounting policies set out in the Group's
financial statements for the year ended 30 June 1999. The
Interim Statement does not incorporate any adjustment for
revaluation of investment properties at 31 December 1999,
other than in respect of those properties which were completed
or acquired during the period.
The financial information for the year ended 30 June 1999 has
been extracted from the Group's financial statements to that
date. These statements received an unqualified auditors'
report and have been filed with the Registrar of Companies.
2. INTEREST
Unaudited Unaudited
Audited Six months Six months
Year ended ended
ended 31 31
30 June December December
1999 1999 1998
£m Receivable: £m £m
35.6 Bank interest receivable 16.8 18.0
======= ======== ========
Payable:
65.8 Notes and debentures 20.5 38.4
9.2 Bank loans and overdrafts 5.9 1.9
35.0 Finance lease charges 19.5 21.0
------- --------- ---------
110.0 45.9 61.3
Less:
Interest at 6.5% (year
ended 30 June 1999 6.7%,
six months ended 31
December 1998 8.3%) on
development financings
transferred to
development properties
(6.8) (Note 5) (2.7) (1.9)
------- -------- --------
103.2 43.2 59.4
======= ======== ========
3. TAXATION
No provision for corporation tax has been made in the
consolidated results of the Group for the six months to
December 1999 due to the availability of tax losses brought
forward from previous periods and other tax reliefs available
to offset the profit for the period.
NOTES TO THE INTERIM STATEMENT FOR THE SIX MONTHS ENDED 31
DECEMBER 1999 (CONTINUED)
4. EARNINGS PER SHARE
Basic earnings/(loss) per share are calculated by reference to
the profit/(loss) attributable to ordinary shareholders and on
the weighted average of 684.2 million shares in issue (June
1999 - 544.3 million, December 1998 - 500.0 million).
The calculation of diluted earnings per share for the six
months ended 31 December 1999 is based on profit attributable
to ordinary shareholders of £36.4 million and the diluted
weighted average of 693.3 million shares. The difference
between the basic weighted average number of shares and the
diluted weighted average comprises the following:
Shares
m
EIB Warrants 1.2
Share Options 7.4
Long Term Incentive Plan 0.5
--------
Total 9.1
========
These instruments were not dilutive at December 1998 or June
1999 and were therefore excluded from the calculation in
accordance with FRS14.
5. INVESTMENT PROPERTIES AND PROPERTIES UNDER DEVELOPMENT
Properties Properties
Investment under held for
properties construction development
£m £m £m
Freehold properties held
as tangible fixed assets:
As at 1 July 1999 1,479.0 84.8 140.6
Additions 1.4 51.2 31.7
Acquisition of investment
properties 373.8 - -
Transfer of completed
property 39.6 (39.6) -
Revaluation of completed
and acquired property 76.6 - -
------- -------- --------
As at 31 December 1999 1,970.4 96.4 172.3
======= ======== ========
Of which, subject to lease
and finance leaseback
arrangements 1,099.4 - -
======= ======== ========
Historical cost 948.0 96.4 172.3
======= ======== =======
Freehold properties held
as current assets:
As at 1 July 1999 310.0
Additions including
interest on development
financing 113.4
Disposal of completed
properties (315.3)
--------
As at 31 December 1999 108.1
========
During the six month period ended 31 December 1999 the Group
completed construction of three properties, one of which was
retained as an investment property and the other two were
sold. The property completed and retained as an investment
property (17 Columbus Courtyard) was revalued at 31 December
1999 by CB Hillier Parker, Surveyors and Valuers, on the basis
of Open Market Value in accordance with the Appraisal and
Valuation Manual published by the Royal Institution of
Chartered Surveyors ('Open Market Value'). This resulted in a
surplus upon revaluation of £53.4 million which has been taken
to revaluation reserve.
Construction of 33 Canada Square was completed on 1 December
1999. This building was constructed for Citibank as their UK
headquarters under an agreement for lease entered into in
December 1996 (the 'Agreement for Lease'). Under the terms of
the Agreement for Lease, Citibank was granted a lease of 999
years on 1 December 1999 pursuant to which rent was payable
for a term of 51 years, calculated by reference to a formula
agreed in 1996. The first quarter's rent under this lease was
received from Citibank on the date of completion. In
accordance with the Agreement for Lease, the grant of the 999
year lease to Citibank included cross options to commute the
rent excercisable at different times by both Citibank and the
Group. As a result of the fixed rent payable under the lease
and the existence of the cross options to commute the rent,
the property was treated as having been disposed of on 1
December 1999. This resulted in a loss on disposal of £5.4
million. Prior to the date of disposal the Group entered into
a finance lease transaction (Note 6) which is expected to
generate a gain to the group of £34 million. In accordance
with applicable accounting standards this gain will be
recognised over the term of the finance lease.
Subsequently, on 21 December 1999, the Group acquired from
Citibank its interest in 33 Canada Square subject to a lease
to Citibank of the building, and 120 car parking spaces, for a
term of 27 years. The new lease provides for upwards-only
rent reviews to open market every five years. The Group
agreed a valuation of the building, subject to the new
occupational lease, of £288.0 million. A payment of £87.9
million was made by the Group to Citibank on acquisition which
represented the difference between the agreed valuation and
the capitalised value of the amounts receivable by the Group
under the terms of the existing 999 year lease. The building
was valued during December 1999 by FPDSavills, Chartered
Surveyors, on the basis of Open Market Value at £300.0 million
resulting in a revaluation surplus, after allowing for and
acquisition costs, of £11.7 million.
On 27 December 1999 construction of 20 Columbus Courtyard was
completed and the building was sold under the terms of a
development agreement entered into in December 1997. The
disposal of this property resulted in a profit on disposal of
£44.5 million.
On 27 September 1999 the Group completed the acquisition of 1
Westferry Circus, a 217,000 square foot office building, for a
consideration of £82.9 million. The building was valued at 31
December 1999 by CB Hillier Parker, on the basis of Open
Market Value at £97.0 million resulting in a revaluation
surplus, after allowing for stamp duty and acquisition costs,
of £11.5 million.
Other than 17 Columbus Courtyard, 33 Canada Square and 1
Westferry Circus, which were valued on the basis of, and are
stated at Open Market Value effective December 1999, the
Group's investment properties are stated at Open Market Value
as at 30 June 1999 as valued by either FPDSavills or CB
Hillier Parker, plus subsequent additions at cost.
Properties under development at 31 December 1999 which are to
be retained are carried at their fair value at the time of the
acquisition of Canary Wharf Holdings Limited by the company in
December 1995, less subsequent disposals plus additions at
cost. Properties under development which are contracted to be
sold are carried at the lower of cost (namely fair value at
date of acquisition plus subsequent additions at cost) and net
realisable value.
6. NET DEBT
The amounts at which borrowings are stated comprise:
Finance
Securitised Construction Term lease
debt loans loan obligations Total
£m £m £m £m £m
At 30 June
1999 555.9 94.4 50.1 471.8 1,172.2
Drawn down
in period - 24.2 - 197.5 221.7
Deferred
financing
expenses 0.2 0.3 0.1 0.1 0.7
Accrued
finance
charges 1.9 2.3 0.1 2.6 6.9
Repaid in
period - (121.2) - - (121.2)
------- -------- ----- ------- -------
At 31
December
1999 558.0 - 50.3 672.0 1,280.3
======= ======= ===== ====== ======
Payable
within one
year or on
demand 14.0 - 0.7 - 14.7
Payable in
more than
one year 544.0 - 49.6 672.0 1,265.6
------- ------ ----- ------- -------
558.0 - 50.3 672.0 1,280.3
======= ====== ===== ======= =======
On 1 November 1999 the Group granted a long lease in 33 Canada
Square. An inferior interest in the property was immediately
granted back and this lease back has been accounted for as a
finance lease. The obligation to pay future rentals under the
finance lease was stated at inception at £197.5 million. The
Group's obligations under the finance lease are secured by
first ranking fixed and floating charges over the property.
During December 1999 the Group concluded a one year £170
million loan facility, none of which was drawn down prior to
the period end. The new loan is secured by first ranking
fixed and floating charges over certain property at Canary
Wharf and bears an interest rate of LIBOR plus 0.5 percent.
At 31 December 1999 the Group held sterling cash deposits
totalling £839.1 million (30 June 1999 - £1,016.9 million),
comprising deposits placed on money market at call and term
rates. Total cash deposits included £407.4 million (30 June
1999 - £405.9 million) held by third parties as cash
collateral for the Group's borrowings, £258.8 million (30 June
1999 - £320.2 million) of prepayments in respect of buildings
contracted to be sold upon completion of development and a
further £8.7 million (30 June 1999 - £18.0 million) charged to
third parties as security for the Group's obligations.
Unsecured cash deposits totalled £164.2 million at 31 December
1999 (30 June 1999 - £272.8 million).
The movement in net debt for the six months ended 31 December
1999 was as follows:
Other 31
1 July Cash non-cash December
1999 flow changes 1999
£m £m £m £m
Cash in hand, at bank 1,016.9 (177.8) - 839.1
Amounts on deposit not
available on demand (744.1) 69.2 - (674.9)
------- ------- ------ ------
272.8 (108.6) - 164.2
------- ------- ------ ------
Debt due after 1 year (593.2) - (0.4) (593.6)
Debt due within 1 year (107.2) 92.8 (0.3) (14.7)
Finance leases (471.8) (180.7) (19.5) (672.0)
------- ------- ------ ------
-------- ------- ------- ---------
(1,172.2) (87.9) (20.2) (1,280.3)
------- ------- ------ ------
Amounts on deposit not
available on demand 744.1 (69.2) - 674.9
------- ------- ------ ------
Net debt (155.3) (265.7) (20.2) (441.2)
======= ======= ======= =======
Six months
ended
31 December
1999
£m
Decrease in cash in the six months (177.8)
Increase in debt and lease financing (87.9)
--------
Change in net debt resulting from cash flows (265.7)
Non-cash movement in net debt (20.2)
--------
Movement in net debt in six months (285.9)
Net debt at 1 July 1999 (155.3)
--------
Net debt at 31 December 1999 (441.2)
========
7. SUBSEQUENT EVENTS
On 25 February 2000, Morgan Stanley Dean Witter agreed to
lease the entirety of 15 Westferry Circus, which upon its
completion in May 2001 will comprise an office building of
175,000 square feet.
On 28 February 2000, Citigroup agreed to lease a further
315,000 square foot. in 25 Canada Square, taking their total
commitment in that building to 915,000 square feet.
END
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