Mucklow (A & J) Regulatory News (MKLW)

9 Mar 2005 07:00

Mucklow(A.& J.)Group PLC09 March 2005 A & J Mucklow Group plc 9 March 2005 Embargoed 7.00 a.m. INTERIM RESULTS For the Six Months to 31 December 2004 HIGHLIGHTS • Interim dividend up 7.4% • Occupancy level maintained at 94% • Half year property revaluation surplus £1.53m (+ 0.7%) • Investment property sales of £21.31m • Cash in bank £53.05m POST HALF YEAR END • £33.60m of 11.5% Debenture redeemed at a cost of £48.51m • Debenture interest saving of £3.86m per annum Six months ended 31 December 31 December 2004 2003 • Profit before tax £7.38m £9.60m Adjusted £6.46m £9.05m • Interim dividend per Ordinary share 5.80p 5.40p • Earnings per share 10.52p 15.88p Adjusted 7.92p 11.25p • Net asset value per share 342p 318p Adjusted 375p 351p • Equity shareholders funds £205.41m £190.67m • Group gearing (net of cash) (1)% 7% See note 4 attached for details of the adjustments. For further information, please contact: Rupert Mucklow, Chairman Tel: 0121 504 2121 (direct)A & J Mucklow Group plc Fiona Tooley Tel: 0121 455 8370Citigate Dewe Rogerson Mobile: 07785 703523 www.mucklow.com CHAIRMAN'S STATEMENTResults for the six months to 31 December 2004 Pre-tax profit for the half year was £7.38m compared with £9.60m for thecorresponding period in 2003. The reduction in profit was primarily due to asmaller disposal of residential land, which generated a lower trading profit of£1.08m against £3.66m last year. The interim profit was also partially affectedby the loss of rental income from property sales. As a consequence of property sales, the Group's cash reserves at 31 December2004 had increased to £53.05m and gearing net of cash reduced to -1%. However,since the half year end, £48.51m has been used to buy-back £33.60m of our 11.5%First Mortgage Debenture Stock 2014. The adjusted net asset value per share*, which includes the current value of ourtrading properties but excludes deferred taxation, increased marginally duringthe first six months from 374p to 375p. The Directors have declared an interim dividend of 5.80p per Ordinary share(2003: 5.40p) - an increase of 7.4%. The dividend will be paid on 30 June 2005to Shareholders on the register at the close of business on 3 June 2005. Investment Portfolio Review In the first half year, we continued to experience strong investor demand forfreehold properties, but witnessed very little improvement in the lettingmarket. Despite the buoyant investment market, rental levels have remainedunchanged and property values appear to have stabilised, following substantialrises over the last couple of years. Our investment portfolio recorded a modestincrease of 0.7% in value to 31 December 2004, compared with 5.7% for theprevious six month period. We have found it difficult to acquire development sites and investmentproperties, at prices which would show a viable return on cost. We have activelybid on a number of opportunities without much success. However, while theproperty market remains expensive and tenant demand weak, our main focus istowards maintaining occupancy levels and selling properties with limited growthprospects. Since the beginning of the financial year, we have maintained our occupancy rateat around 94% and sold two investment properties for £21.31m, at a profit of£0.92m over book value. We have also managed to improve the quality of ourinvestment portfolio, by pre-letting a new office development and acquiring alarge, modern warehouse. Construction has started on a purpose built, 1,728 sq m office building atWorcester. The land was acquired in December 2003 for £0.45m and the developmentwill cost in the region of £2.0m to complete. A letting has been agreed at£0.28m per annum and the value on completion in July 2005 will be in excess of£3.5m. In an unconnected deal at Worcester, we acquired a part vacant 4,645 sq mindustrial / warehouse building in November 2004 for £2.32m and immediately letall the remaining space. The property now produces a rent of £0.22m per annum,showing an income return of around 9% per annum. We have continued to capitalise on the strong investment market, to sellproperties which no longer meet our long term investment objectives. DuddestonMill Trading Estate was sold in November 2004 for £6.41m. We developed theindustrial estate in 1978 and have achieved exceptional income and capitalgrowth during our ownership. The majority of leases are now short and prospectsfor future rental growth are limited without considerable capital expenditure.The income at the time of the sale was £0.48m. In December 2004, we sold our largest single office investment, located at DukesGreen, Heathrow for £14.90m. We acquired the property in 1993 for £7.85m, whenit was producing a rent of £0.77m per annum. The rent increased to £1.01m at thelast review. The tenant has a lease expiry in 2017 and a break option in 7years. DTZ Debenham Tie Leung reviewed the value of our investment properties as at 31December 2004. The investment portfolio was valued at £223.13m, which produced asurplus over book value of £1.53m (0.7%). Since the half year end, we have sold two vacant office buildings in Halesowen,West Midlands for £1.48m and agreed to sell another office investment at SheldonCourt, Birmingham for £7.00m, which currently provides an income of £0.52m perannum. Trading Properties The remaining 1.5 hectares of residential land at Darcy Lever, Bolton were soldin the first half year for £1.17m, to show a profit over book value of £1.08m.There are no plans to sell any other trading properties in the current financialyear. DTZ Debenham Tie Leung also reviewed the value of the Trading Properties as at31 December 2004. The value of the Trading Properties was £14.16m, which showedan increase over book value of £12.92m. Debenture buy-back Since the half year end, we have bought in for cancellation a further £33.60m ofour 11.5% First Mortgage Debenture Stock 2014, at a total cost of £48.51m. Theinterest saving to the Group will be £3.86m per annum, but the one-off chargeagainst pre-tax profits will be £14.91m. Following the latest debenturebuy-backs, there remains £15.90m of debenture stock in issue. The one-off charge of £14.91m is tax deductible and the benefit will be used inthe current financial year to offset against tax incurred as a result ofproperty sales. It will also provide the Group with more flexibility on futureborrowings and prepare us for the possible introduction of a new REIT structure. Prospects We have made good progress in the first six months, despite a challengingproperty market and remain optimistic about prospects for the second half year.Our future profits should benefit from the debenture buy-backs and our strongfinancial position will enable us to grow the business, by taking advantage ofany viable investment or development opportunities which may arise. Rupert J MucklowChairman9 March 2005 * See note 4 to the interim results announcement for details of the adjustments. UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT For the six months to 31 December 2004 Six months to Year to 31 Dec 31 Dec 30 Jun 2004 2003 2004 Notes £000 £000 £000---------------------------------------------------------------------------------Rental income 8,523 9,467 17,893 Operating expenses (1,141) (1,139) (2,410) Other income 1,077 3,659 3,659---------------------------------------------------------------------------------Operating profit 2 8,459 11,987 19,142 Profit on disposal ofinvestment properties 924 1,408 1,527---------------------------------------------------------------------------------Profit on ordinaryactivities before interest 9,383 13,395 20,669 Other interest receivableand similar income 844 316 1,021 Interest payable and similarcharges (2,846) (3,252) (6,178) Exceptional interest payable _ (862) (1,632)----------------------------------------------------------------------------------Total interest payable andsimilar charges (2,846) (4,114) (7,810)--------------------------------------------------------------------------------------------------------------------------------------------------------------------Profit on ordinaryactivities before taxation 7,381 9,597 13,880 Taxation 3 (1,047) (47) (1,500)----------------------------------------------------------------------------------Profit for the financialperiod 6,334 9,550 12,380 ---------------------------------------Dividends Preference (24) (24) (47) Ordinary (3,480) (3,239) (7,127)----------------------------------------------------------------------------------Retained profit for thefinancial period 2,830 6,287 5,206 ---------------------------------------Basic and diluted earningsper share (p) 4 10.52 15.88 20.56 ---------------------------------------Adjusted earnings per share (p) 4 7.92 11.25 17.48 ---------------------------------------Dividend per Ordinary share (p) 5.80 5.40 11.88 --------------------------------------- All the above amounts are derived from continuing operations. UNAUDITED CONSOLIDATED BALANCE SHEET at 31 December 2004 31 Dec 31 Dec 30 Jun 2004 2003 2004 Notes £000 £000 £000-------------------------------------------------------------------------------Fixed assetsTangible 223,242 227,317 238,772-------------------------------------------------------------------------------Current assetsTrading properties 1,238 1,202 1,216 Debtors - due within one year 1,227 1,445 1,315 - due after more than 415 443 413 one year Cash at bank andin hand 53,049 38,805 34,464------------------------------------------------------------------------------- 55,929 41,895 37,408Creditors: Amountsfalling due withinone year (16,805) (19,305) (15,860)-------------------------------------------------------------------------------Net current assets 39,124 22,590 21,548 Total assets lesscurrent liabilities 262,366 249,907 260,320 Creditors:Amounts falling due after morethan one year (49,500) (51,500) (49,500) Provisions forliabilities and charges (6,786) (7,061) (7,578)------------------------------------------------------------------------------- 206,080 191,346 203,242 -------------------------------------Capital and Reserves Non-equity share capital 675 675 675 Equity share capital 14,998 14,998 14,998 Revaluation reserve 104,035 99,948 113,084 Capital redemption reserve 11,162 11,162 11,162 Profit and loss account 75,210 64,563 63,323-------------------------------------------------------------------------------Shareholders' funds 206,080 191,346 203,242 ------------------------------------- Attributable to equity shareholders 205,405 190,671 202,567 Attributable to non-equity shareholders 675 675 675 ------------------------------------- 206,080 191,346 203,242 -------------------------------------Adjusted net asset valueper share (p)* 4 375 351 374 Group gearing (netof cash) (%) (1) 7 8------------------------------------------------------------------------------- *Includes surplus on land held as trading properties and excludes deferredtax. The values of freehold and leasehold properties were reviewed at 31 December2004 on an open market basis by DTZ Debenham Tie Leung. UNAUDITED CONSOLIDATED CASH FLOW STATEMENT for the six months to 31 December 2004 Six months to Year to 31 Dec 31 Dec 30 Jun 2004 2003 2004 £000 £000 £000---------------------------------------------------------------------------------Cash flow from operatingactivities 7,731 10,420 17,969 Returns on investments and servicing offinance Interest received 841 326 1,020 Interest paid (2,846) (3,264) (5,904) Premium on redemption ofdebenture stock - (862) (1,632) Non-equity dividends paid (24) (24) (47)--------------------------------------------------------------------------------- (2,029) (3,824) (6,563)---------------------------------------------------------------------------------TaxationCorporation tax paid (1,715) (871) (2,857) Corporation tax refunded 5 108 108--------------------------------------------------------------------------------- (1,710) (763) (2,749)---------------------------------------------------------------------------------Capital expenditure and financialinvestment Purchase of tangible fixed assets (2,723) (540) (664) Sale of tangible fixed assets 21,203 49,514 51,330--------------------------------------------------------------------------------- 18,480 48,974 50,666--------------------------------------------------------------------------------- Equity dividends paid (3,887) - (6,857)---------------------------------------------------------------------------------Cash inflow before financing 18,585 54,807 52,466 FinancingRevolving credit facility - (15,000) (15,000) Repayment of debenture - (2,500) (4,500)--------------------------------------------------------------------------------- - (17,500) (19,500)---------------------------------------------------------------------------------Increase in cash in the period 18,585 37,307 32,966 ------------------------------------ Reconciliation of operating profit to cash flow from operating activities---------------------------------------------------------------------------------Operating profit 8,459 11,987 19,142 Depreciation 23 26 48 Profit on sale of fixed assets (15) (12) (14) (Increase)/decrease in stocks (22) 262 248 (Increase)/decrease in debtors (145) 258 431 Decrease in creditors (569) (2,101) (1,886)--------------------------------------------------------------------------------- 7,731 10,420 17,969 ------------------------------------ Reconciliation of movement in cash to movement in net funds/(debt)---------------------------------------------------------------------------------Increase in cash in the period 18,585 37,307 32,966 Decrease in borrowing in the period - 17,500 19,500 Net debt as at 1 July (15,036) (67,502) (67,502)---------------------------------------------------------------------------------Net funds/(debt) as at 31 December 3,549 (12,695) (15,036) ------------------------------------ STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Six months to Year to 31 Dec 2004 31 Dec 2003 30 Jun 2004 £000 £000 £000-------------------------------------------------------------------------------Profit for the financialperiod 6,334 9,550 12,380 Unrealised surplus onrevaluation of properties 1,527 2,351 15,328 Taxation on realisedrevaluation gains (1,519) (598) (598)-------------------------------------------------------------------------------Total gains and losses forthe financial period 6,342 11,303 27,110 ---------------------------------------------- RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS-------------------------------------------------------------------------------Profit for the financial period 6,334 9,550 12,380 Dividends (3,504) (3,263) (7,174)--------------------------------------------------------------------------------Retained profit for the financial period 2,830 6,287 5,206 Unrealised surplus on revaluation of properties 1,527 2,351 15,328 Taxation on realised revaluation gains (1,519) (598) (598)--------------------------------------------------------------------------------Net increase in shareholders' funds 2,838 8,040 19,936 Shareholders' funds at 1 July 203,242 183,306 183,306--------------------------------------------------------------------------------Shareholders' funds at 31 December 206,080 191,346 203,242 ------------------------------------------------ NOTE OF HISTORICAL COST PROFITS AND LOSSES--------------------------------------------------------------------------------Reported profit on ordinaryactivities before taxation 7,381 9,597 13,880 Realisation of property revaluation gains of previous years 10,576 13,292 13,133-------------------------------------------------------------------------------- Historical cost profit on ordinary activities before taxation 17,957 22,889 27,013 ---------------------------------------------- Historical cost profit for the period retained after taxation and dividends 11,887 18,981 17,741 ---------------------------------------------- NOTES TO THE INTERIM REPORT 1 Accounting policies The interim accounts are prepared under the same accounting policies as the accounts for the year ended 30 June 2004. The interim accounts have not been audited or reviewed by the Group's auditors and do not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The figures for the year to 30 June 2004 have been taken from the Group accounts for that period on which an unqualified report was made by the Group's auditors and which have been delivered to the Registrar of Companies. This interim report was approved by the Board of Directors on 8 March 2005. This interim report will be posted to shareholders and is available for inspection at the Company's registered office during normal office hours. 2 Operating profit analysis Rental income Profit and other income Six months to Six months to 31 Dec 31 Dec 31 Dec 31 Dec 2004 2003 2004 2003 £000 £000 £000 £000--------------------------------------------------------------------------------- Investment 8,523 9,467 8,391 9,240 properties Trading 1,169 3,819 1,077 3,659 properties Administration - - (1,009) (912)--------------------------------------------------------------------------------- 9,692 13,286 8,459 11,987 ---------------------------------------------------- 3 Taxation 31 Dec 31 Dec 30 Jun 2004 2003 2004 £000 £000 £000--------------------------------------------------------------------------------- Taxation based on profit for the period: Corporation tax at a rate of 1,838 2,286 3,222 30% Deferred tax (791) (2,239) (1,722)--------------------------------------------------------------------------------- 1,047 47 1,500 -------------------------------------- The taxation charge is disproportionately low, principally due to the release of the deferred tax provision on property sold in the period. The sale was undertaken in a manner which did not result in the clawback of allowances previously claimed. Tax charged to the profit and loss account on the disposal of investment property in the period amounted to £157,159 (2003: £263,445). In addition, £1,519,330 (2003: £598,173) has been charged directly to reserves in respect of the tax charged amount previously credited to the revaluation reserve. 4 Profit, earnings per share and net asset value per share Profit The adjusted profit before tax shown in the interim results in brief has been amended from the profit before tax as follows: 31 Dec 31 Dec 2004 2003 £000 £000 Profit before tax 7,381 9,597 Premium on redemption of debenture stock - 862 Profit on disposal of investment properties (924) (1,408) --------- --------- 6,457 9,051 ========= ========= Earnings per share The basic and diluted earnings per share of 10.52p (2003: 15.88p) has been calculated on the basis of the weighted average of 59,991,990 Ordinary shares and earnings, net of preference dividend, of £6,310,146 (31 December 2003: £9,526,663). The adjusted earnings per share has been amended from the basic and diluted earnings per share by the following: 31 Dec 31 Dec 2004 2003 £000 £000 Earnings, net of preference dividend 6,310 9,526 Profit on disposal of investment properties (924) (1,408) Tax charged to profit and loss on disposal of 157 263 investment properties Premium on redemption of debenture stock, net of - 604 tax Deferred tax credit (791) (2,239) --------- --------- Adjusted earnings, net of preference dividend 4,752 6,746 ========= ========= Number Number Weighted average Ordinary shares 59,991,990 59,991,990 ========= ========= Adjusted earnings per share 7.92p 11.25p ========== ========== There are no dilutive shares. Net asset value per share The net asset value has been calculated on the basis of the number of equity shares in issue of 59,991,990 and equity shareholders' funds of £205.41m (31 December 2003: £190.67m). The adjusted net asset value has been amended as follows: 31 Dec 31 Dec 2004 2003 £000 £000 Equity shareholders' funds 205,405 190,671 Valuation of land held as trading properties 14,157 14,120 Book value of land held as trading properties (1,238) (1,202) Deferred tax creditor 6,786 7,061 ---------- ---------- 225,110 210,650 ========== ========== Number Number Equity shares in issue 59,991,990 59,991,990 ========== ========== Adjusted net asset value per share 375p 351p ========== ========== This information is provided by RNS The company news service from the London Stock Exchange