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RNS Number:5960Q
Rugby Estates PLC
07 October 2003
7 October 2003
RUGBY ESTATES PLC
Interim Results for the six months ended 31 July 2003
RUGBY WELL POSITIONED FOR THE FUTURE
Rugby Estates Plc ("Rugby"/ "Group"), the London and M4 focused property
company, today announces results for the six months ended 31 July 2003.
Highlights:
- Pre-tax profits of #3.96m (31 July 2002: #17.2m (primarily attributable to the
exceptional sale of the Covent Garden portfolio))
- "Triple net" assets per share 299p (31 January 2003: 297p; 31 July 2002: 297p)
- Interim dividend per share increased by 5% to 1.127p (2002: 1.073p)
- Following property disposals of #14 million during the period, gearing at 31
July 2003, measured against triple net assets is reduced to 16% (31 January
2003: 41%; 31 July 2002: 24%)
- Active management of properties has contributed to capital increases of 5% for
London portfolio (excluding Covent Garden Limited Partnership) and 4% for
property holdings in the M4 corridor
- Formation of London Industrial Partnership Limited, a joint venture with Bank
of Scotland and Merrill Lynch
- Group well positioned to acquire assets and explore other co-investment and
fund management opportunities where its expertise and asset management skills
can be used to manufacture value
David Tye, Chairman, commented:
"Our efforts are focused on maximising income from our current holdings,
particularly through letting void space and settling rent reviews, and on
building our asset management business. Acquisitions will continue to be sought
but, in the present environment, it is more important than ever to identify
opportunities that will add value rather than just to accumulate assets.
However, properties will always be sold when our objectives have been achieved.
Accordingly, in current market conditions, with investor demand generally at
odds with that of occupiers, the Group's gearing is expected to remain modest
for the immediate future with disposals likely to exceed acquisitions. Our focus
will continue to be in London and in the quadrant to the west of London between
the M3 and the M40. While we have considerable scope to expand the portfolio
through increased borrowings, it is unlikely that this will take place to any
significant degree until 2004.
"With the ongoing potential of our existing holdings and asset management
business and the Group's strong financial position, we view the future with
confidence."
For further information:-
David Tye, Chairman
Rugby Estates
020 7632 2200
Andrew Wilson, Chief Executive
Rugby Estates
020 7632 2200
Stephanie Highett/Dido Laurimore
Financial Dynamics
020 7831 3113
CHAIRMAN'S REVIEW
Financial Performance
I am pleased to report a pre-tax profit of #3,963,000 for the six months ended
31 July 2003. The profit for the period is stated after charging #450,000 to
cancel the Group's remaining interest rate swaps. The corresponding figure for
2002 (#17,218,000) was attributable primarily to the disposal of the Group's
Covent Garden portfolio to the ING Covent Garden Limited Partnership ("CGLP")
during that period.
A review by your Directors of the values of the properties held by the Group,
together with those held indirectly, after discussion with the Group's external
valuers, indicates "triple net" assets per share ("NNNAPS") of 299p at 31 July
2003 (31 January 2003: 297p; 31 July 2002: 297p). NNNAPS takes into account
uncrystallised tax liabilities, the market value of debt and the effect of share
options.
Portfolio
During the period, property disposals amounted to #14 million, principally
comprising the sale of Bourne Retail Park, Salisbury, and two buildings in
Clerkenwell, London EC1. Following these transactions, the value of the Group's
portfolio was #42.0 million as at 31 July 2003 (31 January 2003: #54.7 million;
31 July 2002: #56.8 million), comprising #35.1 million of wholly owned
properties, a #3.0 million share of properties held in joint ventures and #3.9
million of indirect property investments.
London remains our core area of activity, representing 63% of the total
portfolio value, with the M4 corridor accounting for 15% and other UK locations
22%. By sector, mixed-used buildings account for 23% of the portfolio, retail
15%, office 31% and industrial 31%.
Covent Garden
Following the sale of our Covent Garden portfolio to CGLP in 2002, we now have
no direct property holdings in Covent Garden. The Group's interests in this area
are now represented through our 9.8% investment in CGLP and our 50% interest in
Covent Garden Estates Ltd, which holds a #6 million property in Neal Street.
The valuation of the CGLP portfolio as at 30 June 2003 had reduced by 5.3% since
31 December 2002 to #117 million, reflecting weak tenant demand for central
London office space. While at 30 June 2003, some 22,000 sq ft, accounting for
14% of CGLP's office space was vacant, the impact on values has been ameliorated
by the mixed-use nature of the properties and continuing strong retail demand.
The Group's attributable share of the net assets of CGLP, based on the valuation
at 30 June 2003, was #3.9 million, and the reduction of #1.1 million during the
period has been reflected in the calculation of NNNAPS. However, in accordance
with the Group's accounting policies, the carrying value in the Group Balance
Sheet remains at cost of #5 million as the reduction is not considered to be a
permanent diminution in value.
Covent Garden is one of London's most vibrant shopping, office and leisure
areas. Notwithstanding quieter market conditions in recent months, there is some
evidence that the central London office cycle is at or near bottom. Accordingly,
we have every confidence in our ability to enhance the value of the existing
CGLP portfolio over time and to identify suitable investment opportunities,
thereby assisting in the future development of CGLP.
London - other
During the period we sold Knights Court, a vacant office building in
Clerkenwell, to a residential developer and 60/61 Britton Street, also in
Clerkenwell, to its tenant for a total of #7 million. We were pleased to achieve
an overall capital value increase of 5% for this part of our portfolio with
value added in certain mixed-use and industrial holdings more than offsetting
the poorer performance of the office components. Since 31 July we have also
contracted to sell our properties at Fulham Road, SW6 and Cowcross Street, EC1
for a combined total of over #4 million.
M4 Corridor
Bourne Retail Park, Salisbury was sold during the period for over #6 million. We
also continued to sell individual units at our holding in Windsor Square,
Reading. Again, I am pleased to report that, through active management, an
overall capital value increase of 4% was also obtained on our property holdings
in this area, our second core geographical focus.
Other UK Locations
No changes took place in this section of the portfolio which, after a programme
of disposals in recent years, now comprises industrial properties in Exeter and
Banbury together with Paradise Circus Shopping Centre, Birmingham.
Rugby Asset Management
The core of our asset management activities continues to be as property advisor
to CGLP. ING Real Estate, CGLP's manager and principal investor, is committed
to establishing CGLP as the investment fund of choice for institutional
investors seeking diversified exposure to central London property. Discussions
with potential major new investors are in progress and we look forward to
continuing growth in both CGLP's equity base and its property portfolio.
In April we were pleased to announce the formation of London Industrial
Partnership Limited ("LIP"), a joint venture with Bank of Scotland and Merrill
Lynch International established to acquire industrial properties within the M25.
Rugby Asset Management Limited has been appointed property adviser to LIP and a
number of potential acquisitions are currently under consideration.
The relationships which we have now firmly established with a number of major
financial institutions provide a firm base for the continued growth of our asset
management business. We continue actively to explore other co-investment and
fund management opportunities where we can offer our expertise and asset
management skills to manufacture value.
Financing
Following the property disposals in the period, net debt at 31 July 2003 was
#5.5 million representing gearing, measured against triple net assets, of 16%
(31 January 2003: 41%; 31 July 2002: 24%).
Finance costs for the period include #450,000 in respect of the cancellation of
the Group's outstanding interest rate swaps. Since 31 July 2003, the Group's
substantial cash balances have been utilised to repay #7.7 million of
borrowings, which at 7 October 2003 amount to just #7 million, all at variable
interest rates.
Dividend
The Board has declared an interim dividend of 1.127p per share (2002: 1.073p),
representing a 5% increase over 2002, to be paid on 26 November 2003 to
shareholders on the register on 17 October 2003.
Our objective continues to be to deliver sustained growth in both dividends and
net assets per share.
Prospects
The market for investment properties continues to be strongly priced while
occupational demand in certain markets, particularly central London offices,
continues to be weak. We believe that acquisition opportunities will be more
attractive in 2004 than at present, both for the Group's wholly owned portfolio
and for those managed by Rugby Asset Management. However, we anticipate that a
market which has been driven by the ready availability of finance rather than
fundamentals will lose some of its impetus, enabling us once again to identify
opportunities where our asset management skills and ability to identify
potential can be combined to manufacture value.
Our efforts are focused on maximising income from our current holdings,
particularly through letting void space and settling rent reviews, and on
building our asset management business. Acquisitions will continue to be sought
but, in the present environment, it is more important than ever to identify
opportunities that will add value rather than just to accumulate assets.
However, properties will always be sold when our objectives have been achieved.
Accordingly, in current market conditions, with investor demand generally at
odds with that of occupiers, the Group's gearing is expected to remain modest
for the immediate future with disposals likely to exceed acquisitions. Our focus
will continue to be in London and in the quadrant to the west of London between
the M3 and the M40. While we have considerable scope to expand the portfolio
through increased borrowings, it is unlikely that this will take place to any
significant degree until 2004.
With the ongoing potential of our existing holdings and asset management
business and the Group's strong financial position, we view the future with
confidence.
David Tye
Chairman
7 October 2003
GROUP PROFIT & LOSS ACCOUNT 6 Months to 6 Months to 12 Months to
31 July 2003 31 July 2002 31 January 2003
Unaudited Unaudited Audited
#'000 #'000 #'000
Turnover: group and share of joint ventures 15,508 75,788 79,190
Share of turnover in joint ventures 89 82 177
_______ _______ _______
Rental income 1,326 1,942 3,550
Fees receivable 191 62 702
Sales of trading stock properties 13,902 73,702 74,761
_______ _______ _______
Group turnover 15,419 75,706 79,013
_______ _______ _______
Property outgoings (144) (255) (368)
Fees receivable (37) (3) (54)
Sales of trading stock properties (9,468) (54,134) (55,217)
_______ _______ _______
Cost of sales (9,649) (54,392) (55,639)
_______ _______ _______
Gross profit 5,770 21,314 23,374
Administrative expenses (1,117) (1,861) (4,242)
_______ _______ _______
Group operating profit 4,653 19,453 19,132
Share of operating profit in joint ventures 82 69 197
_______ _______ _______
Profit before financing 4,735 19,522 19,329
Interest payable -group (947) (2,566) (4,110)
joint ventures - (10) ( 12)
Interest receivable -group 175 272 332
joint ventures - - 3
_______ _______ _______
Profit on ordinary activities before taxation 3,963 17,218 15,542
Taxation (1,198) (5,178) (4,684)
_______ _______ _______
Profit on ordinary activities after taxation 2,765 12,040 10,858
Minority interests (non equity) 1 13 (24)
_______ _______ _______
Profit attributable to members of the parent
company 2,766 12,053 10,834
Interim dividend (note 4) (128) (122) (484)
Special dividend - (5,022) (5,022)
_______ _______ _______
Retained profit 2,638 6,909 5,328
_______ _______ _______
Earnings per share (note 3) - basic 24.3p 81.7p 82.8p
- diluted 24.3p 81.4p 82.7p
Dividend per share - interim 1.127p 1.073p 4.263p
-special - 33p 33p
_______ _______ _______
Taxation relates to the following - group (1,182) (5,168) (4,656)
joint ventures (16) (10) (28)
_______ _______ _______
Joint ventures - share of profit before taxation
Covent Garden Estates Limited (50%) 82 69 170
Rugby Union Partnership (40%) - - 27
_______ _______ _______
82 69 197
_______ _______ _______
GROUP BALANCE SHEET 31 July 2003 31 July 2002 31 January 2003
Unaudited Unaudited Audited
#'000 #'000 #'000
Fixed assets
Tangible fixed assets 114 156 149
_______ _______ _______
Investments in joint ventures -
share of gross assets 1464 1,361 1,508
share of gross liabilities (615) (50) (625)
_______ _______ _______
849 1,311 883
Fixed asset investments 5,019 5,000 5,000
Investment in own shares (note 2) 89 91 77
_______ _______ _______
6,071 6,558 6,109
_______ _______ _______
Current assets
Stocks 29,124 39,294 38,356
Debtors (note 5) 3,367 5,754 3,026
Cash at bank and in hand 9,282 8,349 6,906
_______ _______ _______
41,773 53,397 48,288
Creditors - amounts falling due within one year
Borrowings - (5,351) (2,491)
Other creditors (3,124) (8,742) (6,292)
_______ _______ _______
Net current assets 38,649 39,304 39,505
_______ _______ _______
Total assets less current liabilities 44,720 45,862 45,614
Creditors - amounts falling due after more
than one year
Borrowings (14,733) (12,341) (17,986)
Minority interests - non equity - (245) (282)
_______ _______ _______
Net assets 29,987 33,276 27,346
_______ _______ _______
Capital and reserves
Called up share capital 2,275 2,628 2,275
Share premium account 12,437 12,434 12,434
Capital redemption reserve 1,504 1,151 1,504
Profit & loss account 13,771 17,063 11,133
_______ _______ _______
29,987 33,276 27,346
_______ _______ _______
Investment in joint ventures
Covent Garden Estates Limited 795 1,284 829
Rugby Union Partnership 54 27 54
_______ _______ _______
849 1,311 883
_______ _______ _______
GROUP STATEMENT OF CASH FLOWS
31 July 2003 31 July 2002 31 January 2003
Unaudited Unaudited Audited
Notes #'000 #'000 #'000
Net cash inflow from operating activities 7b 12,143 60,531 65,564
Profit distributions from joint ventures 100 - -
Returns on investments and servicing of
finance
Interest paid (977) (1,534) (4,229)
Interest received 152 272 332
_______ _______ _______
(825) (1,262) (3,897)
Tax paid (2,240) (423) (3,037)
Capital expenditure and financial investment
Payments to acquire tangible fixed assets - (16) (47)
Payments to acquire own shares (12) - (18)
Payments to acquire other investments (19) (5,000) (5,000)
New loans to joint ventures - (539) (539)
_______ _______ _______
(31) (5,555) (5,604)
Equity dividends paid (363) (5,456) (5,577)
Non equity dividends paid to minority (280) (242) (243)
interests
Management of liquid resources
(Increase)/decrease in short term deposits 7a (274) 1,565 621
(Increase)/decrease in institutional cash 7a (1,895) (938) 1,597
funds
_______ _______ _______
Net cash inflow before financing 6,335 48,220 49,424
_______ _______ _______
Financing
Issue of ordinary share capital 3 79 79
Purchase of ordinary share capital for - (5,111) (9,460)
cancellation
New long term loans 7a - 6,056 11,579
Repayment of long term loans 7a (6,131) (49,219) (51,464)
Issue costs of long term loans 7a - (15) -
_______ _______ _______
(6,128) (48,210) (49,266)
_______ _______ _______
Increase in cash 7a 207 10 158
_______ _______ _______
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. The interim financial information has been prepared on the basis of
the accounting policies set out in the Group's statutory accounts for the year
ended 31 January 2003. Fixed annual charges are apportioned to the interim
period on the basis of time elapsed. Other expenses are accrued in accordance
with the same principles used in the preparation of the annual accounts. The
taxation charge is calculated by applying the directors' best estimate of the
annual tax rate to the profit for the period. Fixed asset investments are stated
at cost less any provision required for permanent diminution in value.
2. Investment in own shares represents shares purchased for the purpose
of the Group's All Employee Share Ownership Plan.
3. The calculation of basic earnings per share is based on earnings of #
2,766,000 (July 2002: #12,053,000; January 2003: #10,834,000) and 11,377,360
ordinary shares (July 2002: 14,757,564 January 2003: 13,100,374), the weighted
average number of shares in issue during the period. Diluted earnings per share
are calculated after adjusting for shares issuable under share option schemes.
4. The cost of the interim dividend for 2003 of #128,000 has been
calculated on the issued capital at 7 October 2003 of 11,378,808 ordinary shares
at 1.127p per share.
5. Debtors include #932,000 in respect of #1,241,000 which is
receivable in 2010.
6 Net assets per share
31 July 2003 31 July 2002 31 January 2003
Unaudited Unaudited Audited
#m #m #m
Net assets per balance sheet 30.0 33.3 27.3
Surplus of market value of trading stock
properties over book value 7.6 9.4 10.0
Excess of book value of fixed asset
investments
over share of market value of the
underlying net assets (1.1) - -
_______ _______ _______
Pre-tax net assets 36.5 42.7 37.3
Tax payable on sale of trading stock
properties
at market value (2.3) (2.8) (3.0)
_______ _______ _______
Pro forma net assets 34.2 39.9 34.3
_______ _______ _______
Number of ordinary shares in issue 11,378,808 13,141,831 11,376,808
Pre tax net assets per share 321p 325p 328p
Pro forma net assets per share 301p 304p 301p
Fair value adjustment for fixed rate debt
and
hedging instruments (after tax) - (5p) (2p)
Dilution effect if all share options were
exercised (2p) (2p) (2p)
_______ _______ _______
"Triple net" assets per share 299p 297p 297p
_______ _______ _______
7. Notes to Statement of Cash Flows
31 July 2003 31 July 2002 31 January 2003
Unaudited Unaudited Audited
#'000 #'000 #'000
(a) Reconciliation of net cash flow to movement
in net debt
Increase in cash 207 10 158
Cash (inflow from) increase in loans - (6,056) (11,579)
Repayment of long term loans 6,131 49,219 51,464
Cash outflow to/ (inflow from) short term 274 (1,565) (621)
deposits
Cash outflow to/ (inflow from) institutional
cash
funds 1,895 938 (1,597)
Issue costs of long term loans - 15 -
_______ _______ _______
Change in net debt resulting from cash flows 8,507 42,561 37,825
Other 13 (108) -
_______ _______ _______
8,520 42,453 37,825
Net debt at 1 February 2003 (13,971) (51,796) (51,796)
_______ _______ _______
Net debt at 31 July 2003 (5,451) (9,343) (13,971)
_______ _______ _______
(b) Reconcilation of operating profit to net
cash inflow from operating activities
Operating profit 4,653 19,453 19,132
Loss on disposal of fixed assets - - 6
Depreciation 35 36 68
(Increase)/decrease in debtors (318) (2,555) 712
Decrease in stocks 9,232 44,395 45,333
(Decrease)/increase in creditors (1,459) (798) 296
Other non-cash items 17
_______ _______ _______
Net cash inflow from operating activities 12,143 60,531 65,564
_______ _______ _______
(c) Analysis of net debt
Cash 375 20 168
Short term deposits 1,689 471 1,415
Institutional cash funds 7,218 7,858 5,323
Borrowings (14,733) (17,692) (20,877)
_______ _______ _______
(5,451) (9,343) (13,971)
_______ _______ _______
The financial information herein does not constitute statutory accounts as
defined in Section 240 of the Companies Act 1985. The financial information for
the full preceding period is based on the statutory accounts for the year ended
31 January 2003. Those accounts, upon which the auditors issued an unqualified
opinion, have been delivered to the Registrar of Companies.
Copies of the interim report will be posted to all shareholders and will be
available on request from the company at 14 Garrick Street, London WC2E 9SB.
Telephone: 020 7632 2200
Fax : 020 7632 2222
Email: assets@rugbyestates.plc.uk
INDEPENDENT REVIEW REPORT TO RUGBY ESTATES PLC
Introduction
We have been instructed by the company to review the financial information for
the six months ended 31 July 2003 which comprises the Group Profit and Loss
Account, Group Balance Sheet, Group Cash Flow Statement and the related notes 1
to 7. We have read the other information contained in the interim report and
considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
This report is made solely to the company in accordance with guidance contained
in Bulletin 1999/4 'Review of Interim Financial Information' issued by the
Auditing Practices Board. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company, for our work,
for this report, or for the conclusions we have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
'Review of Interim Financial Information' issued by the Auditing Practices Board
for use in the United Kingdom. A review consists principally of making
enquiries of management and applying analytical procedures to the financial
information and underlying financial data and based thereon, assessing whether
the accounting policies and presentation have been consistently applied unless
otherwise disclosed. A review excludes audit procedures such as tests of
controls and verification of assets, liabilities and transactions. It is
substantially less in scope than an audit performed in accordance with United
Kingdom Auditing Standards and therefore provides a lower level of assurance
than an audit. Accordingly we do not express an audit opinion on the financial
information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 July 2003.
Ernst & Young LLP
1 More London Place
London SE1 2AF
7 October 2003
This information is provided by RNS
The company news service from the London Stock Exchange
END
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