Canary Wharf Group - Interim Results - Part 2
RNS Number:1968A
Canary Wharf Group PLC
9 March 2001
PART 2
NOTES TO THE INTERIM STATEMENT FOR THE SIX MONTHS ENDED 31 DECEMBER
2000
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 2000.
The Interim Statement incorporates a revaluation of all investment
properties held by the group as at 31 December 2000, in line with
evolving industry practice. The comparative results for the six
months ended 31 December 1999 only included a revaluation of
investment properties that were acquired or completed during that
period.
The financial information for the year ended 30 June 2000 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
Year Six months Six months
ended ended 31 ended 31
30 June December December
2000 2000 1999
-------- ---------- -----------
£m Receivable: £m £m
36.9 Bank interest receivable 25.6 16.8
Net gain from interest
- rate swap unwind 4.5 -
-------- ---------- -----------
36.9 Total 30.1 16.8
======== ========== ===========
Payable:
44.4 Notes and debentures 32.8 20.5
Bank loans and
7.3 overdrafts 2.1 5.9
44.7 Finance lease charges 23.5 19.5
-------- ---------- -----------
96.4 58.4 45.9
Less:
Interest at 6.7% (year
ended 30 June 2000 -
6.7%, six months ended
31 December 1999 -
6.5%) on development
financings transferred
to development
(11.7) properties (Note 5) (9.2) (2.7)
-------- ---------- -----------
84.7 Total 49.2 43.2
======== ========== ===========
During the period ended 31 December 2000 the security held over cash
deposits totalling £94.3 million held by the group's finance lessors
was released and at the same time interest rate swaps relating to
these deposits were unwound resulting in a net gain to the group of
£4.5 million. This amount is included within interest receivable.
Interest payable of £9.2 million (year ended 30 June 2000 - £11.7
million, six months ended 31 December 1999 - £2.7 million) has been
transferred to development properties (Note 5). The amount
transferred includes £8.2 million attributable to the cost of funds
forming part of the group's general borrowings which are utilised in
financing construction (year ended 30 June 2000 - £9.0 million, of
which £3.9 million related to the six months ended 31 December 1999
and was expensed for the purposes of the group's Interim Statement
at that date).
3. TAXATION
No provision for corporation tax has been made in the consolidated
results of the group for the six months to December 2000 due to the
availability of tax losses brought forward from previous periods and
other tax reliefs available to offset the profit for the period.
4 EARNINGS PER SHARE
Basic earnings per share are calculated by reference to the profit
attributable to ordinary shareholders of £22.5 million (year ended
30 June 2000 - £54.1 million, six months ended 31 December 1999 -
£36.4 million) and on the weighted average of 687.3 million shares
in issue (June 2000 - 684.7 million, December 1999 - 684.2 million).
The calculation of diluted earnings per share for the six months
ended 31 December 2000 is based on the profit attributable to
ordinary shareholders of £22.5 million (year ended 30 June 2000 -
£54.1 million, six months ended 31 December 1999 - £36.4 million)
and the diluted weighted average of 699.3 million shares (June 2000
- 692.4 million, December 1999 - 693.3 million). The calculation of
the number of shares which are dilutive is based on the number of
potential shares outstanding as adjusted for the difference between
the exercise price and the weighted average share price for the
period. The difference between the basic weighted average number of
shares and the diluted weighted average comprises the following:
Shares
million
Warrants 6.1
Share Options 5.4
Long Term Incentive Plan 0.5
---------
Total 12.0
=========
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 2000 2,196.7 182.4 147.0
Additions including
interest 16.3 143.9 15.3
Acquisitions of development
properties - - 93.1
Transfer of properties
under construction - 115.3 (115.3)
Transfer from properties
held as current assets - - 14.9
Transfer from investments
(Note 6) - - 6.2
Revaluation 79.7 - -
---------- ------------ -----------
As at 31 December 2000 2,292.7 441.6 161.2
========== ============ ===========
Of which, subject to lease
and finance leaseback
arrangements 1,227.1
==========
Historical cost 1,010.3 441.6 161.2
========== ============ ===========
Freehold properties held as
current assets:
As at 1 July 2000 142.6
Additions 60.4
Transfer to properties held
as fixed assets (14.9)
-----------
As at 31 December 2000 188.1
===========
On 6 November 2000, the group entered into an Agreement for Lease
with Clifford Chance LLP for the lease of 785,000 sq ft in a new 1
million sq ft building under construction on Heron Quays (parcel
HQ5). The group has acquired the sub-leasehold interest (with
approximately 17 years unexpired) in 200/202 Aldersgate Street, a
437,000 sq ft office building in the City of London, and has
underlet the premises to Clifford Chance for a term of approximately
7 years at the same rent as that under the sublease. Clifford
Chance have the right to terminate their lease on giving not less
than three months notice following practical completion of HQ5, in
which event the group will dispose of its interest on the open
market or sublet the premises.
On 27 November 2000 the group completed the purchase of a 6.7 acre
site immediately to the north of Canary Wharf, known as Shed 35.
The consideration for this acquisition was £57.9 million, including
stamp duty and other acquisition costs. The group acquired the
property in conjunction with a partner who has a minority interest.
The property is carried at cost. The minority partner's share,
which is included in the total acquisition cost, is carried at £2
million and the directors are of the opinion that its value does not
and will not exceed this amount.
On 7 December 2000 the group's interest in the Canary Riverside
joint venture was varied so as to achieve a reconstruction of the
interests of the joint venture partners. As part of this
reconstruction the group's share in the completed first phase of
Canary Riverside was transferred to the other two joint venture
partners for a nominal sum.
This investment had a book value of £6.2 million (Note 6). A
payment of £34 million was also made to the two remaining partners
to buy out the contract relating to phases 2 and 3 of the
development. As a result of this transaction the group has
regained full ownership and control over phases 2 and 3 which has
the benefit of planning permission for approximately 1 million sq ft
gross of development. A further payment of £1 million which has
been accrued at 31 December 2000, will become due in the event that
planning consent is achieved for significant incremental development
on the site.
In accordance with evolving market practice, the group's investment
properties have been revalued externally as at 31 December 2000 on
the basis of Open Market Value. These valuations were undertaken by
either FPDSavills Commercial Limited, Chartered Surveyors, or CB
Hillier Parker Limited, Surveyors and Valuers. Each property has
been valued individually on a free and clear basis and not as part
of a portfolio and no account has been taken of any intragroup
leases or arrangements. No allowance has been made for any seller's
expenses of realisation nor for any taxation which might arise in
the event of disposal. The surplus arising on the interim
valuations (£79.7 million) has been transferred to the revaluation
reserve. At 31 December 1999, revaluations were only undertaken of
poperties completed or acquired during the six months then ended.
Properties under construction and properties held for development at
31 December 2000 which are to be retained are carried at their fair
value at the time of acquisition of the Canary Wharf Holdings
Limited group in December 1995, less subsequent disposals plus
additions at cost, subject to any provision for impairment.
Properties under construction which are contracted to be sold on
completion are carried within current assets at the lower of cost
(namely fair value at date of acquisition plus additions at cost)
and net realisable value.
At 31 December 2000 properties under construction held as fixed
assets included £15.5 million (30 June 2000 - £6.3 million) in
respect of financing costs.
6 INVESTMENTS
Investments in
associated
undertakings
£m
---------------
Cost:
At 1 July 2000 9.3
Share of post acquisition loss after tax (3.1)
Transfer to properties held for
development (Note 5) (6.2)
---------------
At 31 December 2000 -
---------------
Provision against unrealised profit on
sale of land
At 1 July 2000 (2.7)
Release of provision 2.7
---------------
At 31 December 2000 -
---------------
Net book amount
A 31 December 2000
-
---------------
At 30 June 2000
6.6
---------------
Net charge to profit and loss account (0.4)
---------------
In May 1997 the group sold an undeveloped plot of land at Canary
Wharf to Canary Riverside Holdings Pte Limited ('CRH') in which it
acquired a 20% equity interest in the 'A' ordinary shares of that
company. CRH, which is incorporated in Singapore, is engaged in the
development and operation of the first phase of the Riverside site
at Canary Wharf and the other shareholders comprise two companies
registered in Singapore, Hotel Properties Limited ('HPL') and
Pidemco Land Limited. On 7 December 2000 the company's interest in
CRH was transferred to the other two shareholders for a nominal sum
in conjunction with the consolidation of interests referred to in
Note 5.
In February 1997 the group acquired a 50% interest in the shares of
Canary Riverside Management (UK) Limited ('Manco'), a company
registered in England and Wales. Upon formation Manco was 50:50
jointly owned with HPL and was established to manage the development
of first phase of the Riverside site. Manco ceased trading with
effect from 31 October 2000.
The results of the above associates attributable to the group up to
the date of disposal or cessation of trade have been derived from
the associates' management accounts for the six months ended 31
December 2000.
7 NET DEBT
The amounts at which borrowings are stated comprise:
Finance
Securitised Construction lease
debt loans obligations Total
----------- ------------ ----------- -------
£m £m £m £m
At 1 July 2000 941.8 - 675.1 1,616.9
Drawn down in
period - 97.8 - 97.8
Deferred
Financing
expenses 0.5 (5.4) 0.1 (4.8)
Accrued finance
charges 2.4 0.9 1.4 4.7
----------- ------------ ----------- -------
At 31 December
2000 944.7 93.3 676.6 1,714.6
=========== ============ =========== =======
Payable within
one year or on
demand 20.3 - - 20.3
Payable in more
than one year 924.4 93.3 676.6 1,694.3
----------- ------------ ----------- -------
944.7 93.3 676.6 1,714.6
=========== ============ =========== =======
In November 2000 the group concluded a seven year, £1 billion
revolving construction loan facility of which £97.8 million had been
drawn down prior to 31 December 2000. Drawings under the facility
are secured by first-ranking fixed and floating charges over the
properties which are subject to the financing and by the guarantee
of the parent company. Drawings bear interest at a margin of 1%
over LIBOR and are repayable on the date falling three months after
the scheduled completion date for the property being financed,
subject to the group's ability to extend on certain conditions.
At 31 December 2000 the group held sterling cash deposits totalling
£858.3 million (30 June 2000 - £1,020.6 million), comprising
deposits placed on money market at call and term rates. Total cash
deposits included £477.9 million (30 June 2000 - £574.8 million)
held by third parties as cash collateral for the group's borrowings,
£111.7 million (30 June 2000 - £207.0 million) of prepayments in
respect of buildings contracted to be sold upon completion of
development and a further £2.1 million (30 June 2000 - £2.3 million)
charged to third parties as security for the group's obligations.
Unsecured cash deposits totalled £266.6 million at 31 December 2000
(30 June 2000 - £236.5 million).
The movement in net debt for the six months ended 31 December 2000
was as follows:
Other
1 July non- 31
2000 Cash cash December
flow changes 2000
--------- ------- ------- ----------
£m £m £m £m
Cash in hand, at bank 1,020.6 (162.3) - 858.3
Amounts on deposit
not available on
demand (784.1) 192.4 - (591.7)
--------- ------- ------- ----------
236.5 30.1 - 266.6
--------- ------- ------- ----------
Debt due after 1 year (923.9) (92.4) (1.4) (1,017.7)
Debt due within 1
year (17.9) - (2.4) (20.3)
Finance leases (675.1) 22.1 (23.6) (676.6)
--------- ------- ------- ----------
(1,616.9) (70.3) (27.4) (1,714.6)
Amounts on deposit
not available on
demand 784.1 (192.4) - 591.7
--------- ------- ------- ----------
Net debt (596.3) (232.6) (27.4) (856.3)
========= ======= ======= ==========
Six months
ended
31 December
2000
£m
Decrease in cash in the six months (162.3)
Increase in debt and lease financing (70.3)
-------------
Change in net debt resulting from cash
flows (232.6)
Non-cash movement in net debt (27.4)
-------------
Movement in net debt in six months (260.0)
Net debt at 1 July 2000 (596.3)
-------------
Net debt at 31 December 2000 (856.3)
=============
8 PROVISION FOR LIABILITIES AND CHARGES
Provision for amounts payable in relation to leasehold properties:
Six months
ended
31 December
2000
-----------------
£m
As at 1 July 2000 2.9
Release to profit and loss account (2.2)
-----------------
As at 31 December 2000 0.7
=================
During the six months ended 31 December 2000 a vacant leasehold
property was assigned to a third party. The surplus provision
arising as a result of this assignment (£2.2 million) was released
to the profit and loss account.
9 RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS
£m
Shareholders' funds as at 1 July 2000 1,520.1
Issue of share capital under the group's
share option schemes 2.2
Profit for the period 22.5
Revaluation surplus 79.7
----------------
Shareholders' funds as at 31 December 2000 1,624.5
================
END
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