Canary Wharf Group - Preliminary Results-Part 3
RNS Number:2240R
Canary Wharf Group PLC
20 September 2000
Part 3
13 FINANCIAL ASSETS
The group's financial assets comprise short term trade debtors
(Note 12) and sterling cash deposits. Sterling cash deposits
totalled £1,020.6 million at 30 June 2000 (30 June 1999 -
£1,016.9 million), comprising deposits placed on money market
at call and term rates. Total cash deposits include £574.8
million (30 June 1999 - £405.9 million) held by third parties
as cash collateral for the group's borrowings, deposits
arising from prepayments in respect of buildings contracted to
be sold of £207.0 million (30 June 1999 - £320.2 million) and
a further £2.3 million (30 June 1999 - £18.0 million) charged
to third parties as security for the group's obligations.
The weighted average rate of interest on fixed rate deposits
at 30 June 2000 was 6.7% (30 June 1999 - 6.5%).
14 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
30 June 30 June
2000 1999
------- -------
£m £m
Bank loans (Note 15) 17.9 107.2
Trade creditors 31.4 26.0
Taxation and Social Security costs 0.9 0.7
Other creditors 0.6 0.9
Accruals 113.6 120.5
Deferred income 20.6 133.9
------- -------
185.0 389.2
======= =======
At 30 June 2000 deferred income included £Nil (30 June 1999 -
£127.0 million) in connection with agreements for the sale,
upon completion, of buildings under construction at Canary
Wharf. The income deferred was recognised upon completion of
construction of the relevant buildings during the year.
At 30 June 2000 accruals included £50.2 million (30 June 1999
- £50.2 million) in respect of the group's remaining
contribution to the Jubilee Line Extension, payable on 1
November 2000.
In accordance with the arrangements agreed for the acquisition
of the CWHL group in December 1995, elements of the CWHL
group's then existing indebtedness were prepaid early.
Further amounts were payable to the vendors (the selling bank
group) from funds set aside for this purpose once certain
conditions had been satisfied and at 30 June 1999 £17.8
million was accrued in this regard, shown as due within one
year. During the year ended 30 June 2000 £15.5 million of the
accrual was released in connection with deferred payments
which were made to the vendors and the balance of £2.3 million
was released to the profit and loss account.
15 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
Creditors due after more than one year comprise:
30 June 30 June
2000 1999
------- -------
£m £m
Securitised debt 923.9 543.7
Term loan - 49.5
Finance lease obligations 675.1 471.8
Deferred income 424.6 405.4
------- -------
2,023.6 1,470.4
======= =======
At 30 June 2000 deferred income of £424.6 million (30 June
1999 - £405.4 million) was held in connection with an
agreement for the sale, upon completion, of a building
presently under construction at Canary Wharf. The income
deferred will be recognised upon completion of construction.
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
year 385.0 24.2 - 197.5 606.7
Deferred financing
expenses (4.8) 0.3 - 0.2 (4.3)
Accrued finance
charges 5.7 2.3 (0.1) 5.6 13.5
Repaid in year - (121.2) (50.0) - (171.2)
---------- ---------- ----- ---------- -------
At 30 June 2000 941.8 - - 675.1 1,616.9
========== ========== ===== ========== =======
Payable within
one year or on
demand 17.9 - - - 17.9
Payable in more
than one year 923.9 - - 675.1 1,599.0
---------- ---------- ----- ---------- -------
941.8 - - 675.1 1,616.9
========== ========== ===== ========== =======
(1) In June 2000 a group company, CWFII, issued £975 million
of first mortgage debentures. The notes comprised:
(a) £475 million term notes
The term notes consist of five tranches, two of which,
totalling £90 million were immediately purchased and are held
by a group company. The principal terms of the tranches are:
Tranche £m Interest Repayment
------- ------- ------- -------
Issued:
A1 240 6.455% By instalment 2009 to 2033
A2 60 Floating By instalment 2003 to 2012
B 85 6.800% By instalment 2005 to 2033
-------
385
Re-acquired:
C 45 6.966% By instalment 2011 to 2033
D 45 Floating By instalment 2011 to 2033
-------
475
=======
The notes are secured on certain property interests of the
CWHL group and the rental income stream therefrom.
The class A2 notes were issued in a principal amount of EUR100m,
with interest payable at three month EURIBOR plus a margin of
0.3%. The A2 notes are fully hedged via a currency swap,
whereby all principal and interest liabilities are swapped
into sterling providing an initial principal of £60 million
and interest payable fixed at 6.995%. Interest on the D notes
is payable at a rate of three month LIBOR plus a margin of
1.75% until July 2005, and thereafter 4.375%. The D notes are
fully hedged using an interest rate collar, with a cap of 9%
and a floor of 5%.
The weighted average maturity of the debentures at 30 June
2000 was 18.2 years. The debentures may be redeemed at the
option of the issuer in an aggregate amount of not less than
£1 million (except class A2 which may not be less than EUR1
million) on any interest payment date, subject to the current
ratings of the debentures not being adversely affected and
certain other conditions affecting the amount to be redeemed.
Tranches C and D may be resold by the group at any time.
(b) £500 million revolving notes
The securitisation allows for £500 million of 'AAA' and 'AA'
rated fully revolving short term notes, of which £250 million
is underwritten for 5 years by a banking syndicate. There
were no immediate proceeds from the revolving notes as they
were repurchased by the Issuer. Drawings will commence once
further fully constructed and leased properties are added to
the securitisation pool. The pricing is based on three month
LIBOR with a margin of 0.40% for the 'AAA' notes and 0.50% for
the 'AA' notes. The commitment fee is 0.25% of the £250
million underwritten. Hedging is not required until first
drawdown.
(2) In December 1997 the company's subsidiary, CWF, issued
£555m of first mortgage debentures, the principal terms of
which are:
Tranche £m Interest Repayment
------- ----- -------- ---------
A 270 7.230% By instalment 2004 to 2027
B 80 7.425% By instalment 2004 to 2027
C 120 Stepped fixed By instalment 2006 to 2027
D 85 Floating By instalment 2007 to 2020
-----
555
-----
The debentures are secured on certain property interests of
the CWHL group and the rental income stream therefrom.
Interest on Tranche C increases in steps from 5% payable until
October 1999, to 9.535% payable from October 2006. Interest
on Tranche D is payable at LIBOR plus 1.1% until January 2003
and thereafter 3.1%, but the company has entered into an
interest rate cap arrangement so as to cap the portion of
interest linked to LIBOR at 8.5%.
The weighted average maturity of the debentures at 30 June
2000 was 16.7 years. The debentures may be redeemed at the
option of the issuer in an aggregate amount of not less than
£1 million on any interest payment date, subject to the
current ratings of the debentures not being adversely affected
and certain other conditions affecting the amount to be
redeemed.
(3) At 30 June 1999, £94.4 million of a construction loan
facility of £200 million had been drawn down. This loan was
prepaid in November 1999. The construction loan carried
interest at a margin of 0.95% over LIBOR and was secured by
first ranking fixed and floating charges over the properties
which were subject to the financing, by second ranking charges
over certain other assets of the CWHL group and by a guarantee
from CWHL.
(4) In June 2000 a £50 million five year loan secured by
first ranking fixed and floating charges over the retail and
parking facilities within the first phase of Canary Wharf was
prepaid. The loan carried interest at a margin of 0.85% over
LIBOR.
(5)In November 1999 the group granted a long lease in 33
Canada Square. An inferior interest in the property was
immediately granted back and the 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.
(6) The group's obligations under certain finance leases are
secured by first ranking fixed and floating charges over the
property which is the subject of those finance leases and over
certain cash deposits (Note 24). The weighted average rate of
interest implicit in the group's finance leases is 7.4%.
(7) Loans and finance lease obligations falling due after
more than one year are repayable as follows:
Finance Finance
Loans Leases Loans leases
2000 2000 1999 1999
----- ------- ------ -------
£m £m £m £m
In more than one year
but less than two
years - - - -
In more than two years
but not more than
five years 60.1 - 49.5 -
In more than five years 863.8 675.1 543.7 471.8
----- ------- ------ -------
923.9 675.1 593.2 471.8
===== ======= ====== =======
(8) After taking into account interest rate hedging entered
into by the group, the interest rate profile of the group's
financial liabilities at 30 June 2000 was:
At 30 June 2000
------------- ------------ ----------
Floating rate Fixed rate
financial financial
liabilities liabilities Total
------------- ------------ ----------
£m £m £m
Securitised debt 87.0 854.8 941.8
Construction loan - - -
Term loan - - -
Finance leases 448.4 226.7 675.1
------------- ------------ ----------
535.4 1,081.5 1,616.9
Less: Cash collateral
for borrowings (Note (424.5) (150.3) (574.8)
13)
------------- ------------ ----------
110.9 931.2 1,042.1
============= ============ ==========
At 30 June 1999
------------- ------------ ----------
Floating rate Fixed rate
financial financial
liabilities liabilities Total
£m £m £m
Securitised debt 86.0 469.9 555.9
Construction loan 94.4 - 94.4
Term loan 50.1 - 50.1
Finance leases 248.6 223.2 471.8
------------- ------------ ----------
479.1 693.1 1,172.2
Less: Cash collateral
for borrowings (Note
13) (269.3) (136.6) (405.9)
------------- ------------ ----------
209.8 556.5 766.3
============= ============ ==========
The group's floating rate liabilities comprise sterling
denominated bank borrowings, debentures and finance leases
which bear interest at rates linked to LIBOR.
In respect of the group's fixed rate financial liabilities:
30 June 2000 30 June 1999
-------- -------- -------- --------
Weighted Weighted Weighted Weighted
average average average average
interest period interest period
rate fixed rate fixed
-------- -------- -------- --------
% Years % Years
Securitised debt 7.1 17.9 7.4 17.3
Finance leases 10.0 15.5 10.0 16.3
(9) In accordance with FRS 13 (Derivatives and Other
Financial Instruments: Disclosures) the group is required to
disclose the fair values of its financial assets and
liabilities and at 30 June 2000 these were as follows:
30 June 2000 30 June 1999
------- ------- ------- -------
Book Fair Book Fair
Value Value Value value
------- ------- ------- -------
£m £m £m £m
Primary financial
instruments held or
issued to finance the
group's operations:
Cash on deposit earning
- floating rates of
interest 724.0 724.0 629.4 629.4
- fixed rates of 296.6 329.9 387.5 437.1
interest
Short term financial
liabilities and
current portion of
long term borrowings (17.9) (17.9) (107.2) (107.4)
Long term borrowings (923.9) (962.8) (593.2) (664.1)
Finance leases (675.1) (704.1) (471.8) (540.6)
Derivative financial
instruments held to
manage interest rate
and exchange rate
profile:
- interest rate swaps - - - 49.6
- interest rate caps 2.7 1.5 2.6 2.3
- currency swaps - 2.7 - -
The fair value of the interest rate swaps and sterling
denominated fixed rate debt and deposits have been determined
by reference to prices available on the markets on which they
are traded. All other fair values shown have been calculated
by discounting cash flows at the relevant zero coupon LIBOR
interest rates prevailing at the balance sheet date.
During the year £3.8 million was realised on certain interest
rate hedges. These hedges were entered into in anticipation
of the group's securitisation completed in June 2000 and the
gains have therefore been deferred and will be recognised over
the term of the debt. Other than the above no gains or losses
on derivative financial instruments have been recognised in
the year.
16 PROVISION FOR LIABILITIES AND CHARGES
£m
Provision for amounts payable in
relation to partially vacant
leasehold properties:
As at 1 July 1999 3.3
Release to profit and loss account (0.4)
-----
As at 30 June 2000 2.9
=====
At 30 June 2000 the directors reassessed the requirement for a
provision in respect of partially vacant leasehold properties
and as a result of this assessment the provision was reduced
by £0.4 million.
Deferred taxation:
There was no potential or unprovided deferred taxation at 30
June 2000 or 30 June 1999.
If the group's investment properties were sold at their
market value, a tax liability of approximately £201.3 million
(30 June 1999 - £165.8 million) would arise. As the company
has no intention to sell its investment properties and it is
not expected that any liability will arise in the foreseeable
future, no provision for this contingent liability has been
made.
17 SHARE CAPITAL
Authorised Issued, allotted and
fully paid
2000 1999 2000 1999
------- ------- ------- -------
£m £m £m £m
Ordinary shares
of1p each 10.0 10.0 6.9 6.8
======= ======= ======= =======
Movements in issued share capital:
Number
Number of ordinary shares in issue at 30 June 1999 684,060,129
Issue on exercise of options (see Note (7)) 1,654,500
----------
Number of ordinary shares in issue at 30 June 2000 685,714,629
==========
(1) Warrants over 26,867,000 ordinary shares are held by IPC
Advisors Limited, a company owned by a trust for the benefit of
(inter alios) the Paul Reichmann family. These warrants are
exercisable until 26 December 2005 at a price of 450 pence per
share.
(2) In December 1997, the Company granted to European
Investment Bank warrants to subscribe for shares in the Company
in the event of admission to a recognised stock exchange.
Pursuant thereto a total of 8,925,233 such warrants were issued
and became exercisable on 2 April 1999. In April 2000 these
warrants were transferred to IPC Advisors Limited. They remain
exercisable until 1 April 2006 at a price of 330 pence per
share.
The subscription price for, and the number of shares subject
to, both issues of warrants are subject to adjustment in
certain circumstances, such as capitalisation or rights issues.
(3) On 3 March 1998 options were granted to 17 senior
executives including two executive directors under the Canary
Wharf Group plc 1997 Executive Share Option Plan to subscribe
for 4,977,000 ordinary shares. As a result of a bonus issue of
shares on 1 April 1999, and in accordance with the terms of
this Plan, the number of ordinary shares under option doubled
to 9,954,000 shares and the option price was halved to 79.5
pence per share.
(4) On 31 March 1999 options over 10,354,167 shares, with an
option price of 400 pence per share, were granted to fifteen
senior executives, including two executive directors. Also on
31 March 1999 an award of 455,579 shares was made to 43
executives under the terms of the Canary Wharf Long Term
Incentive Plan. These awards are all subject to performance
criteria.
(5) Under the terms of an agreement with a former director of
CWHL, options over 184,417 shares were granted to him at a
price of 330 pence per share. These options are exercisable
until 31 March 2004.
(6) On 12 April 1999 176,129 ordinary shares were issued at a
subscription price of 331.5 pence per share to Canary Wharf
Trustees Limited as trustee of the Canary Wharf Share
Participation Plan on behalf of 409 participants.
(7) During the year ended 30 June 2000 1,654,500 ordinary
shares were issued at a subscription price of 79.5 pence per
share following the exercise of options under the Canary Wharf
Group plc 1997 Executive Share Option Plan. An award of 14,285
shares was also made to an employee under the Canary Wharf Long
Term Incentive Plan.
At 30 June 2000 the following warrants to subscribe for, options
over and rights to receive ordinary shares, remained outstanding.
Exercise
Nature Number of price per
of ordinary ordinary
Person entitled Right shares share (p) Exercise period
---------------- ------- ---------- --------- ---------------
IPC Advisors Ltd Warrant 26,867,000 450.0 01/04/99 to 26/12/05
IPC Advisors Ltd Warrant 8,925,233 330.0 02/04/99 to 01/04/06
Share Option
Plans:
17 employees 75% current, 25% from
including 2 01/01/01, all until
directors) Option 8,115,500 79.5 03/03/08
15 employees Phased, commencing on
(including 2 31/03/02, all until
directors) Option 10,354,167 400.0 03/03/09
Former director
of CWHL Option 184,417 330.0 01/04/99 to 31/03/04
Long Term
Incentive Plan Shares 455,479 - 31/03/02 to 30/03/09
(44 employees) Shares 14,285 - 21/10/02 to 20/10/09
Share
Participation
Plan(409
employees) Shares 176,129 -
18 RESERVES
Share
Group: Premium Revaluation Capital Profit &
Account Reserve Reserve Loss Total
------- ------- ------- ------- -------
Equity reserves: £m £m £m £m £m
At 1 July 1999 571.3 714.2 61.3 (145.9) 1,200.9
Issue of shares
under Executive
Share Option Plan 1.3 - - - 1.3
Revaluation of
Investment
properties - 256.9 - - 256.9
Movement for the
financial year - - - 54.1 54.1
------- ------- ------- ------- -------
At 30 June 2000 572.6 971.1 61.3 (91.8) 1,513.2
======= ======= ======= ======= =======
19 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
£m
Shareholders' funds as at 1 July 1999 1,207.7
Issue of share capital 1.4
Profit for the financial year 54.1
Revaluation surplus 256.9
-------
Shareholders' funds as at 30 June 2000 1,520.1
=======
20 PENSION SCHEMES
The group operates two defined contribution pension schemes.
The assets of these schemes are held in independently
administered funds. The pension cost charge, which amounted
to £1,455,744 in the year (year ended 30 June 1999 -
£1,035,548) represents contributions payable by the group to
the schemes.
21 RECONCILIATION OF OPERATING PROFIT TO OPERATING CASH FLOWS
Year Year
ended ended
30 June 30 June
2000 1999
------- -------
£m £m
Operating profit 102.0 25.0
Net profit on disposal of
properties (39.1) -
Depreciation charges 0.3 0.2
Decrease in debtors 5.4 5.4
Increase in creditors 15.0 12.6
Decrease in provisions (0.4) (0.7)
------- -------
Net cash inflow from operating
activities 83.2 42.5
======= =======
22 ANALYSIS OF CASH FLOWS Year ended Year
30 June ended
2000 30 June
1999
------- -------
£m £m
Returns on investments and Servicing
of finance
Interest received 38.4 32.4
Interest paid (40.8) (39.1)
Interest element of finance lease (44.7) (35.0)
rentals
Financing expenses (6.0) (1.4)
------- -------
Net cash outflow (53.1) (43.1)
======= =======
Capital expenditure and financial investment
Year ended Year
30 June ended
2000 30 June
1999
------- -------
£m £m
Additions to investment properties
and properties under development (323.7) (297.6)
Purchase of tangible fixed assets (4.6) (0.7)
Purchase of investment properties (373.8) -
Settlement of deferred acquisition
costs (see note below) (15.5) -
Disposal of properties 235.0 -
Deferred income relating to
agreements for sale of property 19.1 426.2
------- -------
Net cash (outflow)/inflow (463.5) 127.9
======= =======
In accordance with the arrangements agreed for the acquisition
of the CWHL Group in December 1995, further net deferred
payments of £15.5 million were made during the year ended 30
June 2000 to the vendor (the selling bank group) from funds
set aside for this purpose at the time of acquisition.
Acquisitions Year ended Year
30 June ended
2000 30 June
1999
------- -------
£m £m
Investment in subsidiary undertaking - (7.0)
------- -------
Net cash outflow - (7.0)
======= =======
Management of liquid resources
Year ended Year ended
30 June 30 June
2000 1999
------- -------
£m £m
Cash placed on deposit not available
on demand (195.8) (327.9)
Cash withdrawn from deposit accounts 155.8 89.2
------- -------
Net cash outflow (40.0) (238.7)
======= =======
Financing Year ended Year ended
30 June 30 June
2000 1999
------- -------
£m £m
Repayment of Senior Secured/Capital
Notes - (366.6)
Issue of shares 1.4 572.5
Repayment of secured loans (171.2) -
Issue of securitised debt 385.0 -
Drawdown of secured loan and finance
lease premia 221.9 132.4
------- -------
Net cash inflow 437.1 338.3
======= =======
23 ANALYSIS AND RECONCILIATION OF NET DEBT
Other
non-
1 July Cash cash 30 June
1999 flow changes 2000
------- ------- ------- -------
£m £m £m £m
Cash at bank 1,016.9 3.7 - 1,020.6
Amounts on deposit not
available on demand (744.1) (40.0) - (784.1)
------- ------- ------- -------
272.8 (36.3) - 236.5
------- ------- ------- -------
Debt due after 1 year (593.2) (330.2) (0.5) (923.9)
Debt due within 1 year (107.2) 89.6 (0.3) (17.9)
Finance leases (471.8) (159.4) (43.9) (675.1)
------- ------- ------- -------
( 1,172.2) (400.0) (44.7) (1,616.9)
------- ------- ------- -------
Amounts on deposit not
available on demand 744.1 40.0 - 784.1
------- ------- ------- -------
Net debt (155.3) (396.3) (44.7) (596.3)
======= ======= ======= =======
Year ended
30 June
2000
-------
£m
Increase in cash in the year 3.7
Increase in debt and lease financing (400.0)
-------
Change in net debt resulting from cash flows (396.3)
Non-cash movement in net debt (44.7)
-------
Movement in net debt in year (441.0)
Net debt at 1 July 1999 (155.3)
-------
Net debt at 30 June 2000 (596.3)
=======
24 CONTINGENT LIABILITIES AND FINANCIAL COMMITMENTS
As at 30 June 2000 certain members of the group had given
fixed and floating charges over substantially all of their
assets as security for certain of the group's borrowings and
finance lease obligations as referred to in Note 15. In
particular, various members of the group had, at 30 June 2000,
given fixed first ranking charges over cash deposits totalling
£574.8 million and may be called upon to make a further cash
deposit of up to £14.4 million.
As security for the issue of £555 million of securitised debt
(see Note 15) the company has granted a first fixed charge
over the shares of CWF and a first floating charge has been
given over all of the assets of CWF.
As security for the issue of up to £975 million of securitised
debt (see Note 15) the company's indirect subsidiary, Canary
Wharf Finance Holdings Limited, has granted a first fixed
charge over the shares of CWFII and a first floating charge
has been given over all of the assets of CWFII.
In October 1998 the group entered into an agreement for the
construction of a headquarters building for the HSBC Group.
Liquidated damages are payable by the group in the event that
it fails to comply with certain contractual obligations in
this agreement by a specified date, which may be extended by
force majeure and delay by the HSBC Group. The directors
believe that, on the basis of current progress and the
building programme, no liability to the HSBC Group will arise
under the above provisions.
The group is obliged to make a further contribution to the
capital of the company developing Canary Riverside, by way of
subscription for additional shares, to enable the company to
complete the purchase of the southern parts of Canary
Riverside. The maximum amount to be contributed is £2.7
million plus interest.
Commitments of the group for future expenditure:
30 June 30 June
2000 1999
------- -------
£m £m
Under contract 699.6 631.6
======= =======
The commitments for future expenditure relate to the
completion of development properties where construction was
committed at 30 June 2000.
Commitments of the group for the next financial year in
respect of operating leases are analysed as follows:
Land and Land and
buildings buildings
30 June 30 June
2000 1999
------- -------
£m £m
Annual commitment for which the leases
expire:
Between two and five years 0.7 0.7
After five years 0.2 0.2
======= =======
END
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