Canary Wharf Group - Interim Results - Part 1
RNS Number:1966A
Canary Wharf Group PLC
9 March 2001
Canary Wharf Group Plc
Interim Announcement of Results
Six Months ended 31 December 2000
PART 1
Financial Highlights
Unaudited Unaudited
Six months ended Six months ended
31 December 31 December
2000 1999 Change
---------------- ---------------- -------
£m £m %
Turnover - rents and
service charges 74.2 47.7 55.6
Gross profit 59.6 32.3 84.5
Exceptional item: net
profit on sale of
completed properties - 39.1 -
Operating profit 42.0 62.6 (32.9)
Operating profit
excluding exceptional
item 42.0 23.5 78.7
Net interest payable (19.1) (26.4) 27.7
Profit on ordinary
activities before and
after tax 22.5 36.4 (38.2)
Basic earnings per
share 3.3p 5.3p
Diluted earnings per
share 3.2p 5.2p
Unaudited Audited
31 December 30 June
2000 2000 Change
------------- --------------- -------
£m £m %
Investment properties (1) 2,292.7 2,196.7 4.4
Properties under
construction and
properties held for
development (2) 790.9 472.0
Net debt (856.3) (596.3)
Deferred income (478.4) (445.2)
Other net liabilities (3) (124.4) (107.1)
------------- ---------------
Net assets at net book
value 1,624.5 1,520.1 6.9
Properties under
construction and
properties held for
development (4)
- at Open Market Value 1,954.5 1,432.0
- at present value of
Net Realisable Value 3,254.0 2,590.5
Net Asset Value per
share based on Net
Realisable Value (5) £6.02 £5.31
(1) The Interim Results incorporate adjustment for
revaluation of investment properties. This resulted in a
revaluation surplus of £79.7 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.
(4) Refer to Operating and Financial Review - Valuations of
the Preliminary Announcement for an explanation of the basis
of valuation. Excludes the Shed 35 site which was acquired
during the six months ended 31 December 2000 at a cost of
£57.9 million.
(5) Based on 688,448,629 shares in issue at 31 December
2000 (30 June 2000 - 685,714,629).
AT 31 DECEMBER 2000:
The group's investment portfolio (totalling 4.4 million sq ft) was 99.9%
let.
Properties under construction totalled 6.1 million sq ft of which 4.8
million sq ft (79%) was subject to agreements for lease or sale.
DURING THE PERIOD:
The group restructured its interest in the Riverside site and regained
control of phases 2 and 3 of that development. The land has
planning permission for approximately 1 million sq ft gross of
development.
The group acquired a 6.7 acre site immediately to the north of Canary
Wharf, known as Shed 35. The site has planning permission for
approximately 1.9 million sq ft gross of mixed commercial
development.
Waitrose Food & Home leased 80,000 sq ft in a 200,000 sq ft extension to
the Canada Place Retail Centre.
A 512,000 sq ft building on Heron Quays (HQ1) was pre-leased in its
entirety to Morgan Stanley.
The group exchanged contracts with Clifford Chance LLP to lease 785,000
sq ft in a 1 million sq ft building (HQ5).
The group exchanged contracts with The Northern Trust Company to lease
135,000 sq ft in a 210,000 sq ft building (HQ4).
Contracts were exchanged with The McGraw-Hill Companies to lease 322,000
sq ft in a 500,000 sq ft building (DS4).
Construction commenced on a 600,000 sq ft building on Heron Quays (HQ3).
The group arranged a £1 billion revolving construction loan facility.
RECENT EVENTS
In January 2001 CSFB exchanged contracts to lease a 500,000 building in
its entirety (DS1).
In February 2001 the group reached an agreement, subject to contract, to
lease a 1 million sq ft building in its entirety to Lehman Brothers
(HQ2).
Also in February 2001 the group completed a tap issue of its first
securitisation raising £135.4m including premium and accrued
interest (par value of £120m).
CONTACTS
George Iacobescu
Chief Executive
Peter Anderson
Managing Director, Finance
Canary Wharf Group plc
Telephone: 020 7418 2000
David Beck/Wendy Timmons
Bell Pottinger Financial
Telephone: 020 7353 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
The pace of our leasing and construction program has continued to
accelerate in the last six months. Since our previous year end we
have agreed to lease 3.2 million sq ft, including heads of terms on
a new 1 million sq ft headquarters building for Lehman Brothers. We
therefore now have under construction 12 developments totalling 7.1
million sq ft. To enable Canary Wharf to continue to grow, we have
also acquired a site immediately to the north of Canary Wharf, and
reacquired a site on Riverside.
Our results for the six months ended 31 December 2000 reflect the
group's strong performance during the period. Turnover increased
from £47.7 million for the six months ended 31 December 1999 to
£74.2 million for the six months ended 31 December 2000, an increase
of 55.6%, as a result of the expiration of rent free or rent reduced
periods, rent reviews and the commencement of rent on recently
completed or acquired properties. This resulted in a profit after
interest of £22.5 million in comparison with a loss before
exceptional items of £2.7 million for the equivalent period in the
previous year.
We have for the first time procured a full revaluation of the
investment property portfolio for the purposes of the interim
statement and this resulted in a 4.4% increase in the valuation of
the investment portfolio to £2,292.7 million, in comparison with
£2,196.7 million at 30 June 2000. In addition our external valuers
have undertaken a revaluation of all properties under construction
or held for development, other than the Shed 35 site which was
acquired just prior to the end of the period. On the Net Realisable
Value basis disclosed in previous financial reports, the development
portfolio increased in value by 25.6% in the six months to 31
December 2000 from £2,590.5m to £3,254.0m, reflecting the rapid
increase in rental values during the period and the acceleration of
the development programme as a result of recent lettings. The
aggregate Net Realisable Value of the investment and development
portfolios was £5,546.7 million as at 31 December 2000, representing
an increase in value of the property portfolio on this basis of
15.9%.
Leasing is progressing well. As noted above Lehman Brothers, the
U.S. investment bank, has agreed heads of terms to pre lease a new 1
million sq ft building on Heron Quays. Morgan Stanley has pre
let a 512,000 sq ft building on an adjacent site which will bring
their total occupation in Canary Wharf to over 1.5 million sq ft in
four principal buildings and Credit Suisse First Boston has pre let
500,000 sq ft in a building started speculatively, 5 Canada Square.
This building will bring CSFB's total occupation to over 1.6 million
sq ft.
As part of our policy to have one speculative building underway at
all times, we commenced construction of 5 Canada Square last year.
Following the pre-let of this building to CSFB, we have identified a
600,000 sq ft 32 storey tower on Heron Quays (known as HQ3) as our
next speculative development. This building has been designed as a
multi tenant building. Agreements for lease were also completed
with Northern Trust for 135,000 sq ft and Clifford Chance for
785,000 sq ft, both in buildings on Heron Quays. With HQ3 started
as a speculative building, all of the Heron Quays buildings are now
underway, and they are all scheduled for completion during the
course of 2003. Jubilee Park, a new 5 acre landscaped square, will
form the centerpiece for this phase of development, and the
Docklands Light Railway station at Heron Quays will also be
substantially upgraded to deal with the anticipated increased
passenger numbers.
The five new buildings totalling 3.3 million sq ft on Heron Quays
will be complemented by a new 85,000 sq ft retail mall linking into
the buildings on this part of the development. This will bring the
retail offering to a total of 560,000 sq ft which is equivalent to a
regional mall. With the opening of the Canada Square mall we had
exceptional Christmas holiday season trading, and the sales volumes
on the weekends prove that we are beginning to achieve destination
mall status, with shoppers making a specific journey to shop at
Canary Wharf.
Around Canada Square, in addition to the pre-let to Credit Suisse
First Boston, McGraw-Hill has agreed a pre-let of 322,000 sq ft in a
500,000 sq ft building, which overlooks both Canada Square and the
new Jubilee Park.
To finance the new developments, we completed a £1.0 billion
revolving construction loan with four banks in November. This is the
largest construction loan arranged in the UK for commercial
development. In February we increased or 'tapped' our first
securitisation issue by £120 million, of which £105 million was
rated AAA. In 1997 when we first issued that securitisation, rental
levels were a little over £20 per sq ft and there was still unlet
space in the buildings. Since that time, these buildings have
reached full occupancy and rental income has more than doubled. This
combination allowed us to increase the leverage on this portfolio,
and we were able to achieve a AAA spread of 102 basis points over
gilts, the lowest spread currently trading in the UK commercial
mortgage backed securities sector.
It is not without significance that our investment bank tenants such
as CSFB, Morgan Stanley and Citigroup, including Schroder Salomon
Smith Barney, have all tripled in terms of their space requirements
since arriving at Canary Wharf. We have been able to work
successfully with these tenants to provide them with the expansion
space they require in timeframes much shorter than any alternative.
We have done this by planning future buildings well in advance with
flexible designs, and investing in the pre-staging of buildings by
putting in foundations and rafts, which in many instances have cut
delivery times for large new buildings to less than 24 months.
New tenants outside the banking industry like Clifford Chance and
McGraw-Hill have also been drawn to the quality and efficiency of
the buildings we offer, and proximity to their major clients.
The London office market continues to remain buoyant and vacancy
levels are extremely low in all areas of the London market. The lack
of available space is keeping upward pressure on rental growth. A
large proportion of the known demand for significant blocks of space
have defined time horizons due to lease expiries. Those tenants
requiring a pre-let building of any significant size are concerned
about the strength of this rental growth, but attach even more
importance to the availability of suitable sites in the delivery
timeframe they require. Significant pre-lets have recently occurred
in the City, London Bridge and Paddington further reducing the
number of available sites.
The significant investment in roads, public squares and parks,
retail malls and public transportation infrastructure has allowed
Canary Wharf to develop the critical mass to become London's third
business district. The tenant base that has been attracted to Canary
Wharf includes the two largest global commercial banks, and a
majority of the global 'bulge bracket' investment banks.
We have built exceptionally strong development and construction
teams. Our investment in people and their project management skills
are our most important assets for creating future value. We intend
to capitalise on these assets and remain an active developer,
builder and manager into the foreseeable future.
Canary Wharf has five more sites to develop within the original
estate with the size of the buildings for each of these five sites
yet to be decided. As a first step to extending the original
boundaries of the estate we have recently acquired land for several
million square feet of additional development.
With the company's growth we intend to maintain our policy of only
one speculative building at a time and restrict our activity to
quality tenants that will enable us to continue with the present
methods of financing. Our intention is to maintain an efficient
capital structure with a focus also on capital return. The
additional developments will not significantly alter the timing of a
return of capital.
Canary Wharf has firmly established itself as a thriving and
successful business district. It will continue to grow, and we
believe the management, construction and development teams we have
assembled are best placed to capitalize on that growth and integrate
these new developments into an expanded Canary Wharf for the benefit
of you, our shareholders. The increased pace of development has
also placed additional demands on all of our staff. They have
responded enthusiastically and professionally, working diligently to
meet those challenges and we wish to thank them for their continued,
exceptional effort.
PAUL REICHMANN GEORGE IACOBESCU
CHAIRMAN CHIEF EXECUTIVE OFFICER
BUSINESS REVIEW
Property Portfolio
At the time of approving this Interim Statement over 99% of the
existing completed space in the group's ownership (totalling 4.4
million sq ft net in eleven buildings) was let and a further twelve
buildings (totalling 7.1 million sq ft net) were under construction,
of which 82% is subject to agreed heads of terms, agreements for
lease or sale.
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 22.2
years (or 19.5 years after taking account of tenant break options).
Only 24.3% of the square footage under lease will expire or is
capable of being terminated during the next ten years.
Properties under construction at 31 December 2000 included 8 Canada
Square, a 1.1 million sq ft building which upon completion in April
2002 will be sold to HSBC. Those properties under construction at
31 December 2000 which upon completion it is intended will be held
as investments comprised the following:
Approx. Net Expected
Internal Completion
Property Address Area (sq ft) Date Status
----------------- ------------ -------------- ----------------
5 Canada Square 500,000 May 2002 Agreed to be
leased to CSFB
25 Canada Square 1,220,000 May 2002 Agreed to be
leased to
Citigroup
15 Westferry 175,000 August 2001 Agreed to be
Circus leased to Morgan
Stanley
Canada Place 200,000 September 2002 80,000 sq ft
Retail prelet to
Centre extension Waitrose Food &
Home
DS4 500,000 December 2002 322,000 sq ft
agreed to be
leased to The
McGraw-Hill
Companies
HQ1 512,000 December 2003 Agreed to be
leased to Morgan
Stanley
HQ3 600,000 April 2003 Speculative
HQ4 210,000 June 2002 135,000 sq ft
agreed to be
leased to
The Northern
Trust Company
HQ5 1,000,000 July 2003 785,000 sq ft
agreed to be
leased to
Clifford Chance
LLP
Jubilee Place 85,000 July 2003 Speculative
Retail Centre
(RT3)
------------
5,002,000
============
Significant letting progress was made during the six month period:
* In September 2000 Waitrose Food & Home leased 80,000 sq ft in a
200,000 sq ft extension to the Canada Place Retail Centre. It is
envisaged that this building will also contain a 90,000 sq ft health
club and two restaurants.
* In October 2000 a 512,000 sq ft building on Heron Quays (parcel
HQ1) was pre-leased in its entirety to Morgan Stanley.
* In November 2000 the group exchanged contracts with Clifford
Chance LLP to lease 785,000 sq ft in a new 1 million sq ft building
under construction on Heron Quays (parcel HQ5).
* In the same month the group exchanged contracts with The Northern
Trust Company to lease 135,000 sq ft in an adjacent 210,000 sq ft
building (parcel HQ4).
* In December 2000 contracts were exchanged with The McGraw-Hill
Companies to lease 322,000 sq ft in a new 500,000 sq ft building in
Canada Square (parcel DS4).
Subsequent to the half year, in January 2001, CSFB exchanged
contracts to lease 5 Canada Square, a 500,000 sq ft building which
is scheduled to be completed by the Spring of 2002.
In February 2001, the group agreed heads of terms to pre-lease a 1
million sq ft building in its entirety to Lehman Brothers (parcel
HQ2).
The group has also commenced construction of a further building on
Heron Quays at parcel HQ3 in accordance with its policy of having
one unlet office building under construction at any time to offer to
the market. This will provide 600,000 sq ft of office space and,
like all properties on Heron Quays, will link to an underground
retail mall of 85,000 sq ft.
As well as the properties under construction referred to above, the
group is continuing substructure works on the remaining sites on
Canary Wharf as a preliminary to the development of those parts of
the estate. Construction of other buildings will commence as and
when market conditions allow.
During the six month period ended 31 December 2000 the interests of
the Canary Riverside joint venture partners were restructured. As
part of this restructuring 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. 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 regained full ownership and control of a 4.5
acre area of land which is integral to the Canary Wharf estate and
which has the benefit of planning permission for approximately 1
million sq ft gross of development. A further payment of £1 million
will become due in the event that planning consent is achieved for
significant incremental development on this site.
During the period the group also acquired a 6.7 acre site
immediately to the north of Canary Wharf, known as Shed 35, for a
consideration of £57.9 million (including stamp duty and other
costs). The site has planning permission for approximately 1.9
million sq ft gross of mixed commercial development. The group is
considering what form the development should take and application
will be made for the planning permission to be modified if
appropriate.
Together with the remaining sites on Canary Wharf and Heron Quays,
the land acquisitions in the period increased the group's
development capacity, based on existing planning permissions to
approximately 4 million sq ft net.
Valuation
The group has for the first time undertaken a full valuation of all
properties at the interim stage, other than the Shed 35 site which
was acquired during the period. This property will be revalued,
along with the rest of the portfolio, at the year end. The net
assets of the group, as stated in its consolidated balance sheet as
at 31 December 2000, were £1,624.5 million. In arriving at this
total:
(i) properties held as investments were carried at £2,292.7
million, which represents the Open Market Value of those properties
at that date as determined by the group's external valuers,
FPDSavills or CB Hillier Parker;
(ii) properties under construction and properties held for
development, shown as fixed assets, were carried at £441.6 million
and £161.2 million respectively, representing their cost to the
group; and
(iii) properties under construction shown as current assets,
were carried at £188.1 million representing their cost to the group.
The valuation of the investment portfolio increased from £2,196.7
million at 30 June 2000 to £2,292.7 million at 31 December 2000, an
increase of £79.7 million, net of additions, or 3.6%.
As well as valuing the investment properties, FPDSavills or CB
Hillier Parker have valued all properties under construction,
comprising those properties set out in the table earlier in this
section. Including 8 Canada Square, which upon completion is
contracted to be sold to HSBC and is held as a current asset, the
Open Market Value of properties under construction at 31 December
2000 was £1,604.5 million in comparison with a carrying value for
accounts purposes of £629.7 million.
As regards properties held for development throughout the period,
the valuers have provided joint opinions as at 31 December 2000 that
the Open Market Value was £350.0 million in comparison with a
carrying value for accounts purposes of £103.3 million, excluding
the Shed 35 site which was acquired during the six months ended 31
December 2000 at a cost (including stamp duty and other costs) of
£57.9 million.
At the same time as providing their opinion of the Open Market Value
of properties under construction or held for development, the
valuers were also instructed to give their opinion of the present
value of the Net Realisable Value of such properties. Net
Realisable Value is defined in SSAP 9 (Stocks and Long-term
Contracts) as 'the actual or estimated selling price (net of trade
but before settlement discounts) less: (a) all further costs to
completion; and (b) all costs to be incurred in marketing, selling
and distributing'. This same definition of Net Realisable Value is
reproduced in Practice Statement 21 of the RICS Manual 'Valuations
of Trading Stock and Work in Progress, including Land and
Buildings'. The Net Realisable Value of the group's properties
under construction and properties held for development comprises an
assessment of the total value to the group, arising from owning and
developing those properties, being the aggregate of:
(a) the Open Market Value of the land;
(b) developer's profit;
(c) the effect on value of Enterprise Zone Allowances (EZAs); and
(d) finance holding costs on the site value (and other minor items)
arising from the fact that the land is already in the ownership
of the group.
Thus, Net Realisable Value allows consideration to be given to the
enhancement in value to the group arising from (b), (c) and (d)
which do not form part of the Open Market Value of the properties'
existing state.
The approach adopted by the valuers in arriving at the present value
of the Net Realisable Value at 31 December 2000 was consistent with
that adopted at 30 June 2000.
On the basis outlined above, the valuers' opinion of the present
value of the Net Realisable Value of the properties under
construction at 31 December 2000 was £2,502.0 million. Their joint
opinion of the present value of the Net Realisable Value of
properties held for development at that date was £752.0 million.
The carrying value of the group's properties for accounts purposes
in comparison with the supplementary valuations provided by the
external valuers is summarised in the table below:
31 December 2000
Open Market Present Value
Carrying Value in of Net
Value Existing Realisable
State Value
£m £m £m
Investment properties 2,292.7 2,292.7 2,292.7*
Properties under 629.7 1,604.5 2,502.0
construction
Properties held for 103.3 350.0 752.0
development **
----------- ----------- -------------
Total 3,025.7 4,247.2 5,546.7
=========== =========== =============
30 June 2000
Open Market Present Value
Value in of Net
Carrying Existing Realisable
Value State Value
£m £m £m
Investment properties 2,196.7 2,196.7 2,196.7*
Properties under
construction 325.0 757.0 1,110.5
Properties held for
development ** 147.0 675.0 1,480.0
----------- ----------- -------------
Total 2,668.7 3,628.7 4,787.2
=========== =========== =============
* Investment properties are stated at Open Market Value.
**Excluding the Shed 35 site which was acquired during the six
months ended 31 December 2000 at a cost of £57.9 million.
Operating results
Turnover for the six months ended 31 December 2000 was £74.2
million, against £47.7 million for the six months ended 31 December
1999. Rental income increased from £33.1 million to £56.9 million,
an increase of 71.9%, as a result of the expiry of rent free or rent
reduced periods, rent reviews and the commencement of rent on
recently completed or acquired properties. Service charge income
increased from £11.9 million to £13.8 million, an increase of 16.0%,
due to the increased level of occupancy on the estate.
Miscellaneous income increased from £2.7 million to £3.5 million
over the period, reflecting the increased provision of specific
tenant services (outside of the standard service charge) as
occupancy on the estate increases.
During the six months to 31 December 2000, the lease of a vacant
leasehold property was assigned to a third party. As a result of
this assignment, the surplus provision arising of £2.2 million was
released to the profit and loss account and shown within cost of
sales.
Rents payable and property management costs for the six months ended
31 December 2000 were £14.6 million, net of the release of £2.2
million referred to above for leasehold properties, in comparison
with £15.4 million for the same period in 1999. The underlying
increase in property management costs is the result of the increased
occupancy on the estate.
For the six months ended 31 December 2000 gross profit was £59.6
million, an increase of £27.3 million over the previous period. The
gross profit ratio for the six months was 80.3% in comparison with
67.7% for the six months ended 31 December 1999. The increase in
the gross profit ratio is attributable to the increase in turnover.
Administrative expenses for the six months ended 31 December 2000
were £18.4 million whilst for the six months to 31 December 1999
they were £10.4 million. The six month period ended 31 December
2000 included leasing costs of £5.8 million whereas for the period
ended 31 December 1999 such costs totalled only £0.8 million. This
reflects the high level of leasing activity in the latter part of
2000.
The directors estimate that administrative expenses of £8.3 million
(or approximately 45.1% of the total for the six months ended 31
December 2000) were attributable to the group's corporate and
property investment activities. For the period ended 31 December
1999 administrative expenses attributable to these activities were
estimated at £6.4 million, or 61.5% of the total. The £1.9 million
increase in corporate administrative costs over the previous period
is partly attributable to higher bonus payments to staff reflecting
performance over the last year and the need to retain highly skilled
members of the team. In addition marketing costs increased as a
result of higher sponsorship of and donations to community
organisations and costs associated with our development proposal for
the Royal Docks.
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 2000 such unallocated development overheads totalled £10.1
million, representing approximately 54.9% of administrative
expenses. For the six months to December 1999 development overheads
totalled £4.0 million or 38.5% of the total. The increase in
development overheads is largely attributable to letting costs on
properties where agreements for lease were concluded during the
period. This was combined with 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 2000 operating profit was £42.0
million, in comparison with a profit of £62.6 million for the six
months ended 31 December 1999. Included within the total for the
six months ended 31 December 1999 was a net profit on disposal of
two properties at Canary Wharf totalling £39.1 million. Before this
exceptional net profit on disposal, the operating profit for the six
months ended 31 December 1999 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 December 2000 was £19.1
million, against £26.4 million for 1999. The decrease in net
interest payable is primarily attributable to increased interest
receivable, including a net gain to the group of £4.5 million
derived from the unwind of interest rate swaps relating to certain
deposits that were released from security in the period (Note 2).
In addition, interest payable is stated net of an increased transfer
to development properties of £9.2 million (31 December 1999 - £2.7
million) in respect of the cost of financing construction.
The profit on ordinary activities after interest for the period was
£22.5 million, a reduction in profit of £13.9 million over the
equivalent period in 1999, because of the inclusion in the previous
period of the net profit on sale of completed properties.
Borrowings
At 31 December 2000, net debt (after allowing for cash in hand and
cash collateral) stood at £856.3 million, up from £596.3 million at
30 June 2000 comprising:
At At
31 December 30 June
2000 2000
------------- ----------
£m £m
Securitised debt 944.7 941.8
Loans 93.3 -
Finance lease obligations 676.6 675.1
------------- ----------
Total borrowings 1,714.6 1,616.9
Less: cash collateral for borrowings (477.9) (574.8)
Less: other cash collateral
excluding prepayments (see below) (2.1) (2.3)
------------- ----------
1,234.6 1,039.8
Less: cash deposits (266.6) (236.5)
------------- ----------
Net debt excluding prepayments 968.0 803.3
Cash deposits arising from
prepayments in respect of buildings
contracted to be sold (111.7) (207.0)
------------- ----------
-
Net debt 856.3 596.3
------------- ----------
The increase in gross borrowings from £1,616.9 million to £1,714.6
million is attributable primarily to the commencement of drawings
under the group's new £1 billion revolving construction loan
facility which was arranged during the period. The increase in
gross borrowings was accompanied by a reduction in cash and term
deposits to £858.3 million from £1,020.6 million primarily as a
result of the requirement to fund development costs and the
acquisition of land. At 31 December 2000 the group had undrawn
committed facilities of £901.3 million. At that date the weighted
average cost of the group's debt was 7.2% (30 June 2000 - 7.2%).
Cash flow
Net cash inflow from operating activities for the six months ended
31 December 2000 was £53.2 million in comparison with £49.7 million
for the six months to December 1999. This increase was attributable
to the increase in turnover in the period, offset by movements in
working capital.
Capital expenditure and financial investment for the six months
ended 31 December 2000 was £288.0 million, as compared with £303.2
million for the six months to 31 December 1999. Capital expenditure
for the six months ended 31 December 2000 included land purchases of
£91.7 million and development expenditure of £220.0 million. For
the period ended 31 December 1999, capital expenditure included the
purchase of One Westferry Circus (£85.5 million) and 33 Canada
Square (£288.3 million) together with development expenditure of
£146.6 million but was partially offset by proceeds of £228.3
million relating to the disposal of property.
For the six months ended 31 December 2000, financing cash flows were
£100.0 million, primarily reflecting borrowings under the group's
construction loan facility. For the period ended 31 December 1999,
financing cash flows were £103.4 million reflecting the inception of
a finance lease, net of the repayment of a construction loan.
UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE SIX MONTHS
ENDED 31 DECEMBER 2000
Audited Unaudited Unaudited
Year Six months Six months
ended ended 31 ended 31
30 June December December
2000 Notes 2000 1999
-------- ----- ---------- -----------
£m £m £m
114.4 Turnover - rents
and service
charges 74.2 47.7
Cost of sales
- rents and
property management
(31.5) costs (14.6) (15.4)
-------- ---------- -----------
82.9 GROSS PROFIT 59.6 32.3
Administrative
(23.3) expenses (18.4) (10.4)
Other operating
income
- before
3.3 exceptional 0.8 1.6
item
- exceptional
39.1 item:
net profit on sale - 39.1
of completed
properties
-------- ---------- -----------
102.0 OPERATING PROFIT 42.0 62.6
Share of operating
(loss)/profit of
(0.1) associates 6 (0.4) 0.2
Interest receivable
36.9 - group 2 30.1 16.8
Interest payable
(84.7) - group 2 (49.2) (43.2)
-------- ---------- -----------
TRANSFERRED TO
54.1 RESERVES 22.5 36.4
======== ========== ===========
Basic earnings per
7.9p share 4 3.3p 5.3p
Diluted earnings per
7.8p share 4 3.2p 5.2p
The above results relate to the continuing activities of the group
and the share of associates attributable to the group to the date of
disposal.
The interim results for the six months ended 31 December 2000 were
approved by the Board of Directors on 8 March 2001.
UNAUDITED CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND
LOSSES FOR THE SIX MONTHS ENDED 31 DECEMBER 2000
Audited Unaudited Unaudited
Year Six months Six months
ended ended 31 ended 31
30 June December December
2000 Notes 2000 1999
-------- ----- ---------- -----------
£m £m £m
Profit for the
financial period of
the group and its
share of associates
54.2 - group 22.9 36.2
(0.1) - share of associates (0.4) 0.2
Unrealised surplus on
revaluation of
investment
256.9 properties - group 5 79.7 76.6
-------- ---------- -----------
TOTAL RECOGNISED
GAINS AND LOSSES
RELATING TO THE
311.0 PERIOD 102.2 113.0
======== ========== ===========
UNAUDITED CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2000
Audited Notes Unaudited Unaudited
30 June 31 December 31 December
2000 2000 1999
------- ----------- -----------
£m £m £m
FIXED ASSETS
2,196.7 Investment properties 5 2,292.7 1,970.4
Properties under
182.4 construction 5 441.6 96.4
Properties held for
147.0 development 5 161.2 172.3
Other tangible fixed
3.8 assets 5.7 4.3
6.6 Investments 6 - 6.9
------- ----------- -----------
2,536.5 2,901.2 2,250.3
------- ----------- -----------
CURRENT ASSETS
Properties under
construction and
properties held for
142.6 development 5 188.1 108.1
31.9 Debtors 32.0 40.8
Cash at bank and in
1,020.6 hand 7 858.3 839.1
------- ----------- -----------
1,195.1 1,078.4 988.0
CREDITORS: Amounts
falling due within
(185.0) one year (208.8) (235.5)
------- ---------- ----------
1,010.1 NET CURRENT ASSETS 869.6 752.5
------- ---------- ----------
TOTAL ASSETS LESS
3,546.6 CURRENT LIABILITIES 3,770.8 3,002.8
CREDITORS: Amounts
falling due after
(2,023.6) more than one year (2,145.6) (1,678.5)
Provisions for
liabilities and
(2.9) charges 8 (0.7) (3.3)
--------- ----------- -----------
1,520.1 NET ASSETS 1,624.5 1,321.0
========= =========== ===========
CAPITAL AND RESERVES
Called up share
6.9 capital 6.9 6.8
572.6 Share premium 574.8 571.6
Reserves
971.1 - Revaluation reserve 1,050.8 790.8
61.3 - Capital reserve 61.3 61.3
- Profit and loss
(91.8) account (69.3) (109.5)
--------- ----------- -----------
SHAREHOLDERS' FUNDS - 9
1,520.1 EQUITY 1,624.5 1,321.0
========= =========== ===========
UNAUDITED CONSOLIDATED CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED
31 DECEMBER 2000
Unaudited Unaudited
Audited Six months Six months
Year ended 31 ended 31
ended December December
30 June Notes 2000 1999
2000
--------- ----- ----------- -----------
£m £m £m
NET CASH INFLOW FROM
83.2 OPERATING ACTIVITIES 53.2 49.7
--------- ----------- -----------
Returns on
investments and
(53.1) servicing of finance (27.5) (27.7)
Capital expenditure
and financial
(463.5) investment (288.0) (303.2)
--------- ----------- -----------
(516.6) (315.5) (330.9)
--------- ----------- -----------
Cash outflow before
management of liquid
resources and
(433.4) financing (262.3) (281.2)
Management of liquid
(40.0) resources 192.4 69.2
437.1 Financing 100.0 103.4
--------- ----------- -----------
INCREASE/(DECREASE)
(36.3) IN CASH 7 30.1 (108.6)
========= =========== ==========
Reconciliation of operating profit to operating cash flows
Audited Unaudited Unaudited
Year Six months Six months
ended ended 31 ended 31
30 June December December
2000 2000 1999
--------- ----------- -----------
£m £m £m
102.0 Operating profit 42.0 62.6
Net profit on disposal of
(39.1) properties - (39.1)
0.3 Depreciation charges 0.1 0.2
5.4 Decrease in debtors 0.2 4.2
15.0 Increase in creditors 13.1 21.8
(0.4) Decrease in provision (2.2) -
--------- ----------- -----------
Net cash inflow from
83.2 operating activities 53.2 49.7
========= =========== ===========
Capital expenditure and financial investment
Audited Unaudited Unaudited
Year Six months Six months
ended ended 31 ended 31
30 June December December
2000 2000 1999
--------- ----------- -----------
£m £m £m
Additions to investment
properties and properties
(323.7) under development (220.0) (146.6)
Purchase of investment
(373.8) properties - (373.8)
Acquisitions of development
- properties (91.7) -
235.0 Disposal of property - 228.3
Settlement of deferred
(15.5) acquisition cost - (14.9)
Purchase of tangible fixed
(4.6) assets (3.0) (3.7)
Deferred income relating to
agreements for sale of
19.1 property 26.7 7.5
--------- ----------- -----------
(463.5) Net cash outflow (288.0) (303.2)
========= =========== ===========
Financing
Audited Unaudited Unaudited
Year Six months Six months
ended Ended 31 Ended 31
30 June December December
2000 2000 1999
--------- ----------- -----------
£m £m £m
1.4 Issue of shares 2.2 0.3
(171.2) Prepayment of secured loans - (121.2)
385.0 Issue of securitised debt - -
Drawdown of secured loan and
221.9 finance lease premia 97.8 224.3
--------- ----------- -----------
437.1 Net cash inflow 100.0 103.4
========= =========== ===========
The above cash flows relate to the continuing activities of the
group.
MORE TO FOLLOW
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