Last checked at 26 Sep 2007 07:00
FOR IMMEDIATE RELEASE
26th September 2007
LONDON & ASSOCIATED PROPERTIES PLC:
HALF YEAR RESULTS FOR SIX MONTHS TO 30 JUNE 2007
HIGHLIGHTS
- Since period end acquired 50% outstanding interest in King Edward Court, Windsor for ‚£14.1m - Directly owned portfolio now stands at ‚£249m - Net assets increase further to ‚£103.6m from ‚£101.9m at December 2006 year end - Under UK GAAP net assets would have been ‚£126m - Disposals of mature assets total ‚£44m - Rental income over period grew 7% to ‚£6.2m despite sales - 200,000 sq ft partial redevelopment of Windsor completed and tenants fitting- out - Improved financing margins on Windsor will generate additional ‚£800,000 net profit
"As shareholders can see, LAP is in a sound position. We have completed ourdisposal programme just as the market is showing signs of softening. At thesame time we have cash of ‚£31m and further committed facilities of ‚£24m. Thiswill enable us to take advantage of opportunities to acquire new shoppingcentres should they reach more acceptable levels. Our portfolio is welllocated and, following our disposals, the properties within it have goodgrowth prospects. The quality of the cash flows from our investment propertiesremains strong, our established management teams are confident of deliveringour projects on time and on budget, and I look forward to the future withconfidence,"Michael Heller, Chairman.
Contact: London & Associated Properties PLC Tel: 020 7415 5000
John Heller, Chief Executive Robert Corry, Finance Director Baron Phillips Associates Tel: 020 7920 3161 Baron PhilipsLAP Half Year Report 2007Chairman's StatementI am pleased to report on an active period during which LAP made furthersignificant progress in pursuing its strategy of growing its net asset base.We have continued our policy of ensuring that our portfolio comprisessubstantial property assets with long term growth potential. This was thereasoning behind our acquisition of the outstanding 50% of AnalyticalProperties, our joint venture with Bank of Scotland. Analytical's sole assetis King Edward Court, Windsor, a prime shopping centre in the heart ofWindsor's shopping core.Over the last few years we have deliberately changed the emphasis of ourportfolio and sold assets which we viewed as having matured. We also wished totake advantage of a buoyant market background and, so far this year, we havesold properties with a combined value of ‚£43.9m against a book value, as at 31December 2006, of ‚£41.3m. In the last three years we have sold some ‚£132m ofmature property.Disposals so far this year include The Mall, Dagenham and Saxon Square,Christchurch, for ‚£18.7m and ‚£20.5m respectively. These prices represent netinitial yields of 5.4% and 5.1%. We also sold a house in Notting Hill (part ofthe London Portfolio) and a small retail property in Wolverhampton for acombined ‚£4.8m. All the disposals were in excess of their most recent externalvaluations.Over the six months to 30 June 2007 gross rental income grew by 7% to ‚£6.2mfrom ‚£5.8m despite the portfolio restructuring. However, more significantly,we now have ‚£31m of cash on deposit, even after paying ‚£14.1m for theremaining shares in Analytical Properties. This places us in a strong positionto acquire quickly any suitable retail property that becomes available.
We are already seeing a softening of retail property values and, therefore, we believe that our timing has been good. We are also benefiting from the significant positive differential between the interest earned on the cash proceeds, which we have placed on deposit, and the rental income lost as a result of these sales.
Our total directly owned property portfolio now stands at ‚£249m. Some 60% of this portfolio is located in prime central London and affluent parts of the South East where demand from both investors and retailers for properties in these locations remains strong. We are confident that these assets will continue to perform over the medium term. Total assets under management, including those of Bisichi Mining plc and Dragon Retail Properties, stand today at ‚£344m.
Our net assets at 30 June 2007 were ‚£103.6m compared with ‚£101.9m at the 2006December year end. We do not value our properties at the half-year stage andour net asset figure does not include a property revaluation. Under UK GAAP,the former accounting rules, our net assets at 30 June 2007 would have been‚£126m.We continue to extensively manage the London Portfolio which we acquired for‚£50.3m in September 2006. I have reported previously that our management teamis already making progress and we have made considerable savings on theirrecoverable expenses that are a feature of this portfolio. A short termimpact of these expenses has been a dip in our pre-tax profits to ‚£0.9magainst ‚£1.3m for the same period last year. Profits have also been affectedin the short term by interest payments on the debt used to acquire theportfolio. We are confident that we will increase our profits as ourmanagement and development plans for this portfolio and elsewhere start tobear fruit.
We have benefited from a tax credit of ‚£1.3m due to the write back of part of a tax provision following the disposal of The Mall, Dagenham and the utilisation of tax losses.
Gearing will rise to 120% under IFRS (98% under UK GAAP) following our acquisitions of the London Portfolio and the further 50% holding in Analytical. The latter must now be treated as a subsidiary. Its debt will therefore be shown in its entirety on our balance sheet although the Analytical debt continues to be ring-fenced from the rest of the LAP assets.
We are declaring an interim dividend of 0.65p payable on 25 January 2008 to shareholders on the register as at 21 December 2007.
I will now deal with some of our major properties and projects in more detail.
Windsor
At King Edward Court, the 200,000 sq ft development of new retail units, a supermarket, a hotel and a restaurant is completed and the pre-let units have been handed over to the tenants. The final development cost will be around ‚£22m at which level the project is profitable, and it has been very well received by both tenants and public alike.
Waitrose, Zara, Hennes and New Look are all fitting out their units and expectto open for trading by the middle of next month. Travelodge opened for theAugust Bank Holiday weekend and has reportedly enjoyed excellent occupancylevels. We are near to completing a lease on the one remaining mall level unitto a national fashion retailer while the kiosk is under offer to a juice baroperator.
The rest of King Edward Court continues to trade well and the rents are growing in line with expectations. We have recently concluded a rent review with Next at ‚£252,000 a year, an annual increase of ‚£72,000 and slightly ahead of ERV.
As already mentioned, LAP has acquired the 50% outstanding interest it did notalready own in Analytical Properties for ‚£14.1m from the Bank of Scotland.Analytical's only asset is King Edward Court and we are delighted to now fullyown this high quality shopping centre. We are confident that our partre-development of this centre will produce good returns over the coming yearsas new retailers seek to join the top quality new tenants that we haveintroduced. We also have further initiatives to raise the Centre's income fromexisting levels.We financed the acquisition from our cash resources and refinanced theexisting facility with a new loan of ‚£70m to Analytical Properties from Bankof Scotland. We were able to negotiate improved margins as 100% owner and thisalone will generate ‚£800,000 per annum of additional net profit for LAP.
The London Portfolio
After a year of ownership, the portfolio continues to trade satisfactorily. Wehave begun a ‚£275,000 high quality refurbishment of the vacant flat aboveAntiquarius on Kings Road. Following completion we anticipate letting theproperty at a rent of ‚£1,200 a week. Refurbishment is also underway of thevacant house on Upper Street, Islington, where we expect to achieve a weeklyrent of ‚£800 following expenditure of approximately ‚£200,000.I am particularly pleased to report that we now have full control of ChenilHouse, Kings Road, following a lease surrender, effective from February 2008,from the tenant, Daisy and Tom. The site has a 15,000 sq ft footprint but thefour floors of offices above are only a maximum of 1,100 sq ft per floor. Weare working with our architects and designers to extend the accommodation ofthe upper parts by some 20,000 sq ft and we intend submitting a planningapplication on this project in the near future.
I expect to be able to report on further initiatives to increase the lettable space in the London Portfolio properties in the near future.
Sheffield
Orchard Square continues to thrive from its excellent position in the primecore of Sheffield. It will also benefit from being next to an exciting citycentre regeneration project that is about to commence and which will furtherconsolidate the Centre's position at one of the best locations in this majorcity. The River Island unit we created on Fargate is trading well, and we havenow let the small adjacent unit we built at the same time to The Perfume Shopat ‚£79,000 a year. This equates to ‚£236 Zone A, in line with expectations andfurther assisting in the rent review on another of our units on Fargate thatis currently underway.To the rear, work has started on a new 45,000 sq ft anchor store. This willincorporate the existing TK Maxx unit, the vacant Stonehouse pub that weacquired in 2003, and three kiosks. The entire new unit has been pre-let to TKMaxx at an annual rent of ‚£625,000, an increase of ‚£383,000 over the combinedrent received on the existing units. It is anticipated that the developmentwill cost some ‚£4.5m, including all the tenant incentives, and is scheduledfor completion in Autumn 2008. We will fund these works from our cashresources.As shareholders can see, LAP is in a sound position. We have completed ourdisposal programme just as the market is showing signs of softening. At thesame time we have ‚£31m of cash and further committed facilities of ‚£24m. Thiswill enable us to take advantage of opportunities to acquire new shoppingcentres should they reach more acceptable levels. Our portfolio is welllocated and, following our disposals, the properties within it have goodgrowth prospects. The quality of the cash flows from our investment propertiesremains strong, our established management teams are confident of deliveringour projects on time and on budget, and I look forward to the future withconfidence.Michael HellerChairman26 September 2007
Consolidated income statement for the six months ended 30 June 2007
6 months 6 months Year ended ended ended 30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) Notes ‚£'000 ‚£'000 ‚£'000Gross rental income
Group and share of joint ventures 6,230 5,798 11,840Less: joint ventures - share of rental income (1,026)
(2,281) (3,949) 5,204 3,517 7,891Less: property overheads:Direct property expenses (846) (455) (1,107)Attributable overheads (1,624) (1,015) (3,623)Property overheads (2,470) (1,470) (4,730) Net rental income 2,734 2,047 3,161
Listed investments held for trading 79 32 264Operating profit before adjustments 2,813
2,079 3,425Costs of evaluation - - (1,849)Goodwill impairment - - (7,483)London Portfolio 3 - - (9,332)
Profit on sale of subsidiary investments - - 52Profit on sale of investment properties 375 - -Net gain on revaluation of investment properties - - 21,610Net increase in value of investments held for trading 158 225 680Operating profit after adjustments 3,346
2,304 16,435
Share of profit of joint ventures 369 387 4,358Share of profit of associate 454
120 972 4,169 2,811 21,765 Interest receivable 1 586 350 742Interest payable 1 (3,752) (1,888) (4,182) Profit before taxation 1,003 1,273 18,325Income tax 2 1,254 417 (3,107)Profit for the period 2,257 1,690 15,218 Basic earnings per share 4 2.96p 2.22p 20.00p
Diluted earnings per share 4 2.96p
2.22p 19.97p
Consolidated balance sheet at 30 June 2007
30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) Notes ‚£'000 ‚£'000 ‚£'000 Non current assets
Value of properties attributable to group 170,729
117,913 192,788Obligations under head leases 7,758 8,582 9,340Property 5 178,487 126,495 202,128Plant and equipment 947 964 1,033Investments in joint ventures 15,632 18,398 15,263
Investments in associated company 7,283
6,294 6,872Held to maturity investments 1,834 3,784 1,834 204,183 155,935 227,130 Current assetsTrade and other receivables 4,101 4,212 3,849Interest derivatives 72 - -
Financial assets-investments held for trading 5,071
4,761 4,992Cash and cash equivalents 26,464 6,397 14,555 35,708 15,370 23,396 Total assets 239,891 171,305 250,526 Current liabilities
Financial liabilities-borrowings (3,356)
(3,138) (5,693)Trade and other payables (10,590) (6,764) (11,434) (13,946) (9,902) (17,127)Non current liabilities
Financial liabilities-borrowings (93,600)
(52,502) (99,976)Obligations under head leases (7,758) (8,582) (9,340)Deferred tax (20,970) (11,049) (22,223) (122,328) (72,133) (131,539) Total liabilities (136,274) (82,035) (148,666) Net assets 103,617 89,270 101,860 EquityShare capital 8,232 8,232 8,232Share premium account 5,236 5,228 5,236Translation reserve (560) (318) (517)Capital redemption reserve 47 47 47Other reserves 429 429 429
Retained earnings (excluding treasury shares) 96,766
82,284 94,966Treasury shares (6,533) (6,632) (6,533)Retained earnings 90,233 75,652 88,433Total shareholders' equity 103,617 89,270 101,860 Net assets per share 6 135.93p 117.26p 133.62pDiluted net assets per share 6 135.77p 117.10p 133.47p
Consolidated statement of recognised income and expense for the six months ended 30 June 2007
30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) ‚£'000 ‚£'000 ‚£'000Profit for the period 2,257 1,690 15,218
Currency translation in associate (43)
(342) (541)
Total recognised income and expense for the period 2,214
1,348 14,677
Consolidated statement of changes in shareholders' equity for the six months ended 30 June 2007
Retained Earnings Earnings Share Share Translation Other Treasury ex: treasury Total capital premium reserve reserves shares shares equity ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000Balance at 1 January 2006 8,232 5,228 24 476 (6,632) 81,013 88,341Currency translation in associate - - (342)
- - - (342)Dividend - - - - (419) (419)Profit for the period - - - - 1,690 1,690
Balance at 30 June 2006 (unaudited) 8,232 5,228 (318)
476 (6,632) 82,284 89,270
Balance at 1 January 2006 8,232 5,228 24 476 (6,632) 81,013 88,341Investment valuation in joint venture - - - - - 24 24Equity share options in associate - - - - - 44 44Acquisition of own shares - - - - (40) - (40)Disposal of own shares - - - - 139 - 139Gain/(loss) on disposal of own shares - 8 - - - (20) (12)Currency translation in associate - - (541) - - - (541)Dividend - - - - - (1,313) (1,313)Profit for the year - - -
- - 15,218 15,218
Balance at 31 December 2006 (audited) 8,232 5,236 (517)
476 (6,533) 94,966 101,860
Currency translation in associate - - (43)
- - - (43)Dividend - - - - - (457) (457)Profit for the period - - - - - 2,257 2,257
Balance at 30 June 2007 (unaudited) 8,232 5,236 (560)
476 (6,533) 96,766 103,617
Consolidated cash flow statement for the six months ended 30 June 2007
6 months 6 months Year ended ended ended 30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) ‚£'000 ‚£'000 ‚£'000Operating activitiesOperating profit after adjustments 3,346 2,304 16,435Depreciation 100 80 178Goodwill impairment - - 7,483Costs of evaluation - - 1,849London portfolio - - 9,332Loss/(gain) on disposal of non-current assets 13 (7) (30)Profit on sale of investment properties (375) - -Profit on sale of subsidiary investments - - (52)Net gain on revaluation of investmentproperties - - (21,610)Net increase in value of investments heldfor trading (158) (225) (680)Decrease/(increase) in net current assets 693 (1,036) (129)Interest received 505 411 757Interest paid (3,663) (2,383) (4,980)Income tax paid - (243) (359)Cash flow from operating activities 461 (1,099) (1,138)Cash flows from investing activities 20,792 761 (19,615)Cash flow from financing activities (7,007) (169) 25,849Net increase/(decrease) in cash andcash equivalents 14,246 (507) 5,096Cash and cash equivalents at beginningof period 8,862 3,766 3,766Cash and cash equivalents at end of period 23,108
3,259 8,862
Cash and cash equivalents
For the purpose of the cash flow statement, cash and cash equivalents comprise the following balance sheet amounts:
30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) ‚£'000 ‚£'000 ‚£'000Cash and cash equivalents 26,464 6,397 14,555Bank overdraft (3,356) (3,138) (5,693)Cash and cash equivalents at end of period 23,108 3,259 8,862Notes to the half year report 1. Finance costs 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) ‚£'000 ‚£'000 ‚£'000 Interest receivable 586 350 742Interest payable -Interest on bank loans and overdrafts (2,563) (960) (2,839)Other loans (1,052) (1,052) (2,124)Interest on obligations under finance leases (222)
(220) 36
Total borrowing costs (3,837) (2,232) (4,927)Less : amounts included in the cost ofqualifying assets 85 344 745 (3,752) (1,888) (4,182) (3,166) (1,538) (3,440) 2. Income tax 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) ‚£'000 ‚£'000 ‚£'000 Current tax - 16 -Deferred tax (1,254) (433) 3,107 (1,254) (417) 3,107 The deferred tax release at 30 June 2007 is due to the write back of part of atax provision following the disposal of properties and the utilisation of tax losses.3. Exceptional items 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) ‚£'000 ‚£'000 ‚£'000 Costs of evaluation - - 1,849Goodwill impairment - - 7,483London Portfolio - - 9,332 The costs of evaluation represent costs incurred by the company, prior to thedecision being taken that LAP Ocean Holdings Limited should acquire the wholeof the issued share capital of APL Ocean Limited, the owner of the LondonPortfolio. Goodwill impairment arose on the acquisition of APL Ocean Limitedon 22 September 2006. This goodwill primarily arose as a result of recognisingdeferred tax in respect of property valuations on the business combination andthe goodwill was immediately written off to the income statement.4. Earnings per share 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2007 2006 2006 (unaudited)(unaudited) (audited) Group profit after tax (‚£'000) 2,257 1,690 15,218Weighted average number of sharesin issuefor the period ('000) 76,229 76,129 76,102Basic earnings per share 2.96p 2.22p 20.00p Diluted number of shares in issue ('000) 76,317 76,230 76,205Fully diluted earnings per share 2.96p
2.22p 19.97p
5. Property
Properties at 30 June 2007 are included at valuation as at 31 December 2006, plus additions, less disposals in the period.
6. Net assets per share 30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) Shares in issue ('000) 76,229 76,129 76,229 Net assets per balance sheet (‚£'000) 103,617 89,270 101,860 Basic net assets per share 135.93p 117.26p 133.62p Shares in issue diluted by outstandingshare options ('000) 76,349
76,279 76,349
Net assets after issue of share options (‚£'000) 103,657 89,322 101,900Fully diluted net assets per share 135.77p 117.10p 133.47p 7. Post balance sheet event
On 24 September 2007 at an Extraordinary General Meeting, the shareholders approved the acquisitionby the company of (1) the 50 per cent of the issued share capital of Analytical Properties HoldingsLimited (APHL) that it does not already own from Uberior Ventures Limited and (2) ‚£1,829,000of secured, subordinated B loan stock of APHL.The company made a payment of ‚£14.1 million in aggregate on completion at 25 September 2007.As at 30 June 2007 APHL was treated on the balance sheet within investments in joint ventures.From 25 September 2007 APHL will be accounted for as a fully consolidated wholly owned subsidiary.
8. Financial information
The above financial information does not constitute statutory accounts within the meaning of section 240of the Companies Act 1985. The figures for the year ended 31st December 2006 are based upon the lateststatutory accounts, which have been delivered to the Registrar of Companies;the report of the auditors on those accounts was unqualified and did not contain a statementunder Section 237(2) or (3) of the Companies Act 1985. The six months ended 30 June 2007 uses the same accounting policies as for the year ended31 December 2006, and the half year results have not been audited or subject to review by thecompany's auditors. 9. Board approval
These half year results were approved by the Board of London & Associated Properties PLC on 26 September 2007.
10.Posting to shareholders The half year report will be sent to shareholders by mail. Copies are now available atthe company's registered office: Carlton House, 22a St James's Square, London,SW1Y 4JH and may also be downloaded from the company's website: www.lap.co.uk.
LONDON AND ASSOCIATED PROPERTIES PLC