Interim Results

RNS Number:0936E
Basepoint PLC
15 October 2004


Basepoint Plc
Interim Statement

Enterprise, Innovation, Opportunity

Overview - Interim Statement

-  Net assets per share - #2.01

-  Interim dividend of 0.5p per share - payable on 26 November 2004

-  Opening of Gosport centre for SEEDA in May

-  Opening of the new MBEC at Bournemouth International Airport this month*

-  Agreement reached to extend our existing centre at High Wycombe

-  Anticipated new project management contracts for SEEDA

-  Strong occupancy statistics

-  Loss of development opportunity at Farnham with consequential cost and
   income issues
                                         * Basepoint Limited Partnership project

Dividend timetable - Interim

Ex dividend                              27 October 2004

Record date                              29 October 2004

Payment date                             26 November 2004


Report on the 6 months to 31 August 2004

Basepoint has specialised in the development and operation of Managed Business,
Innovation and Enterprise Centres (MBECs) for ten years and focuses on working
to meet the ever increasing demand from smaller SME (small and medium sized
enterprises) for high quality, purpose built business units available on
short-term licence agreements. Over this time the company has established itself
as the premier supplier of such facilities in the South of England.

The importance of the SME sector to the UK economy cannot be overstated
accounting as it does for some 40% of all employment. Basepoint naturally
attracts such businesses with its product although the quality and location of
its centres have proved equally suitable for divisions or departments of larger
organisations. Basepoint's unique style of business focused accommodation and
the supportive environment created encourages a wide range of businesses to
succeed.

By concentrating in its chosen field Basepoint has developed a strategy intended
to maximise profits by:

-  Managing our existing owned centres and maintaining high service levels
   to ensure high occupancy rates and a correspondingly attractive return
   on the capital employed.

-  Procuring new MBECs for ourselves and/or in partnership with others
   generating project management and procurement fees.

-  Applying our management skills to the same high level in operating
   MBECs owned wholly or partly by others to produce an enduring and
   increasing income stream with a much reduced demand on our own capital.

Financial Results

In the 2003 Interim Report we reported that profits had more than doubled in
comparison to the previous corresponding period. At that time and at the end of
the last full financial year we advised shareholders that the current year would
be one of consolidation. Until late in this interim period we were on course to
produce results consistent with that view.

However, in early September we announced that there had been a breakdown in
contract negotiations with the landowners of a site for the development of a new
MBEC at Farnham.

With the documentation at the final stages the company had by this time incurred
considerable costs in the design and planning of this development and had
already gone through the process of obtaining a detailed planning consent.
Furthermore the building contract had been tendered and a contractor selected
for a scheduled start on site in September. As forecast at the time the
cessation of negotiations means we have therefore made a one off provision of
#130,000 in respect of the estimated abortive costs for that project.

In addition to those costs charged in the six months to 31 August, there will
also be an associated loss of development revenue anticipated from that project
for the second half of the financial year amounting to #270,000.
In the first half of the current financial year turnover was #2.9m, an increase
of over 10% against the comparable period last year. Fees and income from the
development of centres declined by #0.15m to #0.45m but income from rents,
telecommunication and management services increased in aggregate by 22% to a
total of #2.45m. The abortive costs are included in Operating Expenses and,
together with the change in mix of turnover, have led to a reduction in
operating margins. In the comparable period last year a profit of #40,000 was
recorded from the sale of investment properties.

Net interest costs are reduced by #43,000 compared to last year. This arises
from a substantial increase in interest receivable and a small increase in
interest payable. Basepoint has used some of its cash resources to forward fund
the Basepoint Limited Partnership in advance of additional capital contributions
by the Partners. The amount advanced at 31 August stood at #2.8m and this
accounts for the major movement in debtors during the period. An advantageous
rate of interest receivable on this loan has led to the higher contribution from
this source. Elsewhere interest costs on the majority of long-term borrowings
are protected with financial instruments but the balance is at variable rates.
Recent upward changes in the base rate have led to a modest increase in the cost
of financing that part.

The combination of all of the foregoing factors has resulted in a profit before
taxation for the period of #0.59m compared to #0.76m in the comparable period
last year.

Taxation at #136,000 (#160,000) comprises current tax of #97,000 (#136,000) and
deferred tax of #39,000 (#24,000).

Investment properties are only valued at the end of each financial year. At the
interim stage there is therefore no revaluation movement to report. The only
change in net assets comes through retained profits which, in this period, have
lifted net assets per share at 31 August to #2.01.

Dividend
Although profit for the period has suffered from the charge for abortive costs,
the Board regards this as a temporary set back and is therefore happy to confirm
that the interim dividend should be maintained at the rate of 0.5p per share
which will be paid on 26 November 2004.

Operations
On the new development side of the business the Basepoint Limited Partnership
has completed the development of its latest centre at Bournemouth International
Airport and this opened for business on 4 October. Work is advanced on the new
MBEC in Swindon which is scheduled to open next January. The site at Farnham was
intended to become a Partnership centre but work is now advancing on other
projects in the development pipeline. These may prove to be suitable for
inclusion in the Partnership in due course.

Over this period we have been working closely with SEEDA (South East England
Development Agency) to bring forward the production of centres for their
programme. Confirmation that we are to be appointed to project manage a
development at Hastings has been received and formal contracts are currently
being prepared. Work is advancing on a further contract which we expect to be
confirmed shortly.

Within our own portfolio of centres we have recently agreed terms with Wycombe
District Council to take a long lease on the site adjoining our existing Cressex
centre. A planning application has been submitted to create a second phase to
the centre and we anticipate that construction will commence later this year. We
will, at the same time, take the opportunity to retrospectively fit a modern
telecommunications system throughout the whole centre which we expect to become
an additional income generator over time.

Basepoint's own portfolio of centres has performed well during the six months
under review with occupancy across the eight centres exceeding 93% of potential
maximum.

The centres at Andover and Crawley are operated by Basepoint for the Limited
Partnership under a management contract. Whilst there has been a steady build up
of occupancy levels Crawley is behind our original expectations. There have been
a number of issues with that centre which have impacted on the centre
performance. These have included a delay in the relocation of an adjacent
household waste recycling plant which is now underway and persistent disruption
from travellers. These and other issues are being addressed and we remain
confident that given time occupancy will reach those levels enjoyed at other
Basepoint centres.

Preparations have been ongoing during the summer for the opening of the
Bournemouth centre and are now beginning for Swindon. Bournemouth opened with
reservations in line with budgeted occupancy. It is anticipated by the
Partnership that they will become profitable when occupancy is approximately
50%. The centre at Gosport, developed and now managed for SEEDA, opened on
schedule in May. Occupancy there is building in line with our forecast and is
currently at 25% and rising. Management fees are being received from all centres
under management. The total number of units, owned or under management and
including Swindon, now stands at 819 across 32,800sq.m.

Strategy
Although the loss of the Farnham project was a disappointment, we believe that
the strategic direction of the company is correct and we will continue to focus
on the objectives set out and described above.

Prospects
The confidence placed in the company and its centres by SEEDA and the interest
in us from other Regional Development Agencies and Local Authorities underlines
the high quality of the company's management team and its product. We have
received preliminary approaches from a number of Authorities who may wish us to
partner them on existing projects owned by them which could add further
management and ownership possibilities for us. Similarly we intend to look for
suitable opportunities to expand the business by acquisition to broaden the
operating base and make more efficient use of the existing group infrastructure.

We are therefore moving forward with confidence in the knowledge that the
company has a good product, a substantial target market and a clearly defined
strategy which should lead to sustained growth. The enthusiasm and energy of all
of our staff will continue to play a most significant part in obtaining success,
not least in bringing forward fresh projects for ourselves, the Partnership,
Regional Development Agencies and others.
                                                                  Robert Cleaver
                                                                 Chief Executive
                                                                 14 October 2004

Consolidated Profit and Loss Account

                          6 months to      6 months to    Full year to
                       31 August 2004   31 August 2003     29 February
                                                                  2004
                                #'000            #'000           #'000

Turnover                        2,900            2,618           5,815

Operating Expenses             (1,241)            (888)         (2,046)
                              -------           ------          ------

Gross profit                    1,659            1,730           3,769
Administration expenses          (865)            (767)         (1,747)
                              -------          -------         -------

Operating profit                  794              963           2,022

Profit on sale of
investment properties               0               40              49
                               ------           ------          ------

Profit on ordinary
activities before interest        794            1,003           2,071
Interest receivable               175               92             192
Interest payable                 (375)            (335)           (700)
                              -------          -------         -------

Profit on ordinary
activities before taxation        594              760           1,563
Tax on profit on
ordinary activities              (136)            (160)           (367)
                              -------          -------         -------

Profit on ordinary
activities after tax              458              600           1,196

Minority Interests                 (3)              (2)             (4)
                              -------          -------         -------

Profit for the
financial period                  455              598           1,192

Dividends                         (56)             (56)           (302)
                               ------           ------         -------

Retained profit                   399              542             890
                               ------           ------         -------

Earnings per share(pence)
Basic                            4.10             5.37           10.67
Fully diluted                    3.99             5.28           10.46


Consolidated Balance Sheet

                                 31 August    31 August    29 February
                                      2004         2003           2004
                                     #'000        #'000          #'000

Fixed assets
Investment properties               32,175       28,252         30,989
Fixtures and fittings                  259          225            251
                                    ------       ------         ------
                                    32,434       28,477         31,240

Current assets
Developments in progress                15          180             24
Debtors                              3,708        1,152          1,703
Investments                             90           90             90
Cash at bank                         2,051        4,704          4,756
                                   -------      -------        -------
                                     5,864        6,126          6,573
                                   -------      -------        -------
Current liabilities
Amounts falling due within one year
Mortgages and loans                   (673)        (511)        (1,006)
Other creditors, accruals and
deferred income                     (3,135)      (2,249)        (2,997)
                                   -------      -------        -------
                                    (3,808)      (2,760)        (4,003)
                                   -------      -------        -------

Net current assets                   2,056        3,366          2,570
                                   -------      -------        -------

Total assets less current           34,490       31,843         33,810
liabilities

Creditors
Amounts falling due after more
than one year                      (11,314)     (10,845)       (11,062)


Provisions for liabilities and        (560)        (430)          (521)
charges

Minority interests                    (175)        (196)          (190)
                                   -------      -------        -------
                                    22,441       20,372         22,037
                                  --------     --------       --------

Represented By
Capital and Reserves

Called up share capital              1,117        1,117          1,117
Share Premium account                5,794        5,785          5,794
Reserves
Revaluation reserve                 11,106        9,790         11,106
Special Reserve account              1,535        1,535          1,535
Profit and Loss                      2,889        2,145          2,485
                                   -------      -------        -------
Shareholders' funds                 22,441       20,372         22,037
                                  --------     --------       --------

Consolidated Cash Flow

                            6 months to    6 months to    Full year to
                              31 August      31 August     29 February
                                   2004           2003            2004
                                  #'000          #'000           #'000

Cash flow statement
Net cash (outflow)/inflow
from operating activities          (932)         2,268           3,827

Returns on investment &
servicing of finance               (200)          (243)           (508)

Taxation                              2              -              (7)
Acquisitions                        (15)            (6)              -
Capital expenditure              (1,234)        (1,494)         (2,976)
                                -------        -------          ------
                                 (2,379)           525             336
Equity dividends paid              (246)          (246)           (302)
                                -------        -------         -------
                                 (2,625)           279              34
Financing                           252           (163)            164
                                -------        -------         -------
(Decrease)/ increase in
cash in period                   (2,373)           116             198
                                -------        -------         -------

Reconcilition of net cash
flow to movement in net debt

(Decrease)/ increase in
cash in period                  (2,373)           116             198

Cash repaying mortgage and
bank loan                          128            672           1,002

Cash received from
mortgage and bank loan            (379)          (509)         (1,157)
                               -------         ------         -------
                                (2,624)           279              43
Net debt at start of period     (7,312)        (7,355)         (7,355)
                              --------        -------         -------

Net debt at end of period       (9,936)        (7,076)         (7,312)
                              --------       --------       ---------

Reconciliation of
operating profit to net
cash (outflow)/ inflow
from operating activities

Operating profit                    794            963           2,022
Depreciation, amortisation
and loss on disposal                 41             53              85

Decrease in development
work in progress                      8          2,279           2,438

(Increase)/decrease in           (2,005)          (419)           (970)
debtors

Increase/(decrease) in              230           (608)            252
creditors                         -----        -------           -----

Net cash (outflow)/inflow
from operating acttivities         (932)         2,268           3,827
operating activities            -------        -------         -------

Analysis of changes   At 1 March       Cash      Other    At 31 August
in net debt                 2004      Flows    Changes            2004
                           #'000      #'000      #'000           #'000

Cash on hand               4,756     (2,705)         -           2,051
Bank overdraft              (394)       333          -             (61)
Debt due within one year    (612)         -          -            (612)
Debt due after one year  (11,062)      (252)         -         (11,314)
                        --------    -------     ------        --------
                          (7,312)    (2,624)         -          (9,936)
                       ---------    -------     ------        --------

Notes to the Interim Report 2004

1.  The interim accounts, which have not been audited, have been prepared on
    the basis of the accounting policies set out in the group's statutory
    accounts for the year ended 29 February 2004.

2.  The assets, liabilities and cash flows attributable to the interests of
    Basepoint plc in the Basepoint Limited Partnership are included in the
    amounts and figures in this Report.
    
3.  The interim results, which were approved by the Board on 14 October 2004,
    are unaudited but have been reviewed in accordance with Auditing Practices
    Board bulletin 'Review of Interim Financial Information' by the auditors.
   
4.  The financial information contained in this interim statement does not
    constitute accounts as defined by section 240 of the Companies Act 1985. The
    financial information for the full preceding year is based on the statutory
    accounts for the financial year ended on 29 February 2004. These accounts,
    upon which the auditors issued an unqualified opinion, have been delivered
    to the Registrar of Companies.
    
5.  The company obtains valuations of its properties on an annual basis and
    accordingly there is no information to report on unrealised gains or losses
    on revaluation in this Interim Report. Unrealised gains on revaluations
    reported in the Financial Statements for the year ended 29 February 2004
    amounted to #1.31m.
    
6.  Basic earnings per share are calculated on the profits after tax as shown
    in the annexed Profit and Loss Account and on the basis of weighted average
    shares in issue of 11,169,588 during the six months to 31 August 2004, the
    year to 29 February 2004 and the six months to 31 August 2003. Fully diluted
    earnings per share are calculated on the profits after tax on the basis of
    weighted average fully diluted shares in issue of 11,472,596 in the six
    months to 31 August 2004, 11,392,979 in the year to 29 February 2004, and
    11,357,868 in the six months to 31 August 2003.

7.  GNG Smith and PA Stansfield were appointed directors of the company on 24
    September 2004 otherwise directors and professional advisers who have served
    during the period covered by this interim report are all as stated in the
    statutory accounts for the year ended 29 February 2004.
    
8.  Copies of the interim statement will be sent to shareholders in due
    course. Copies of this announcement will be available from the company's
    nominated adviser, Smith & Williamson Corporate Finance Limited, No 1 Riding
    House Street, London W1A 3AS for one month from the date of this
    announcement.

                               Registered Office
                               9 Charlecote Mews
                                 Staple Gardens
                                   Winchester
                                   Hampshire
                                    SO23 8SR
                               Tel: [phone]
                           e-mail: [e-mail]
                              www.basepoint.co.uk

Contacts:

Rob Cleaver - Basepoint plc, Chief Executive
Email: [e-mail]
Telephone: [phone]

David Boakes - Basepoint plc, Director of Finance & Operations
Email: [e-mail]
Telephone: [phone]

Nicola Horton - Smith & Williamson Corporate Finance Limited
Email: [e-mail]
Telephone: [phone]



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