14th Feb 2005 07:00
St. Modwen Properties PLC14 February 2005 St. Modwen Properties PLC Preliminary results for the year ended 30 November 2004 A twelfth successive year of record results St. Modwen Properties PLC is a property development and investment companyconcentrating on regeneration. It has four particular areas of specialism: towncentre regeneration; partnering industry in its restructuring; renewal ofbrownfield land; and heritage restoration. Highlights * Profit before tax increased by 15% to £40.3m (2003: £35.0m) * Earnings per share up 24% to 25.0p (2003: 20.1p) * Net assets per share increased by 20% to 221.4p (2003: 186.0p) * Total dividend per share of 7.6p (2003: 6.6p), an increase of 15% * Acquisition of more than 1,600 acres boosts hopper of future opportunities to record levels Anthony Glossop, Chairman, comments: "During the year, we increased significantly the scale of our developmentactivities, acquired more than 1,600 acres of land across the UK, and enteredinto a number of additional development partnerships with government bodies andlocal authorities. We also expanded our network of regional offices, extendingour presence into Yorkshire and the South West. "The Company's current financial year has started exceptionally well with atotal of over £13m of property profits already completed or under contract. Itherefore look forward with confidence to another year of progress for thecompany." 14 February 2005 ENQUIRIES: St. Modwen Properties PLC www.stmodwen.co.ukAnthony Glossop, Chairman On 14 February - 020 7457 2020Bill Oliver, Chief Executive thereafter - 0121 456 2800Tim Haywood, Finance Director College Hill www.collegehill.comAlex Sandberg / Gareth David 020 7457 2020 A presentation will be held at 11.00am today at College Hill, 78 Cannon Street,London EC4 Print resolution images are available to view and download fromwww.vismedia.co.uk ST MODWEN PROPERTIES PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 30 NOVEMBER 2004 CHAIRMAN'S STATEMENT Results I am pleased to report on a twelfth successive year of record results; a year inwhich we increased significantly the scale of our development activities and onein which we acquired more than 1,600 acres of land across the UK for futureredevelopment, together with further town centre regeneration opportunities. Profits before tax increased by 15% to £40.3m (2003: £35m) earnings per sharegrew by 24% to 25.0p (2003: 20.1p) and net assets per share increased by 20% to221.4p (2003: 184.9p restated). The results reflected a 5.5% growth in net rental income, a 35% growth inproperty profits and a £26m (5.5%) revaluation uplift on the investment propertyportfolio. Our key performance measurement of total pre-tax return on average shareholdersfunds was 27.1% (2003 : 24.1%). Dividends Your board is recommending a final dividend of 5.1p (2003 : 4.4p) per ordinaryshare, making a total distribution for the year of 7.6p (2003 : 6.6p), anincrease of 15% . This final dividend will be paid on 29th April 2005 toshareholders on the register on 8th April 2005. Strategy We remain committed to the strategy which has underpinned your company'scontinued prosperity. Through a network of regional offices - in the year weannounced the establishment of further offices in the South West and Yorkshire -we carry out a programme of regeneration in our areas of speciality. Theseare: town centre regeneration; partnering industry in its restructuring;brownfield land renewal; and heritage restoration. Much of the programme iscarried out with partners from both the public and private sectors. The key to this strategy is the continuing acquisition of well-located futureopportunities to top-up the hopper. We then need each year to marshal thoseopportunities through planning or further site assembly, to enable a regular andgrowing stream of deliverable projects. Our financial objective is to double the size of the company every five years;an objective we have met for more than a decade. Trading Your company has had a good year in all aspects of its strategy. Major new acquisitions included 600 acres of Corus's Llanwern steelworks, theremainder of MG Rover's Longbridge site, a 478 acre former MoD storage site atLong Marston, Warwickshire, a former power station site of 100 acres at Meaford,near Stone in Staffordshire, the remaining half of the Kirkby shopping centre(from our former joint venture partners) , and the Malls shopping centre atBasingstoke. In addition, we entered into a number of development relationshipswith government bodies and local authorities. Real progress was made in marshalling the next tranche of schemes coming out ofthe hopper, as is demonstrated in the Chief Executive's review. A notablefeature of these schemes is the step change in scale that is becoming evident.Mixed use town centre regeneration schemes such as Edmonton, Wembley andFarnborough produce completed values in the order of £100m or more. This givesus the experience and credibility to approach even larger schemes, such as theElephant & Castle, with greater confidence. The Chief Executive's review also demonstrates the large number of schemes thatwere brought forward to contribute to profit in the year or are ready tocontribute in the coming year. Also as previously reported, we sold our investment in the Pubmaster operationto Punch Taverns realising a profit of £4.9m. Governance Corporate governance is an area of increasing focus amongst commentators andregulators. There is a view, held by some, of an increasing risk thatentrepreneurism and hence financial performance, will be damaged by an overlyprescriptive "tick-box" culture. As a company that has always sought to manage its affairs to the higheststandards of integrity and business competence, your board takes propercognisance of corporate governance initiatives. Any departures, however minor,will be for good reasons in the spirit of the regulations and will be fully andopenly explained. It is our view that most regulatory initiatives can, indeed, be used asopportunities to create actual benefit for the company, rather than being merematters of compliance. For example, the work initiated on risk assessment,health and safety and environmental performance have all improved the focus andperformance of the business. Directors and Employees Following the Annual General Meeting in April 2004, I succeeded Sir StanleyClarke as chairman and Bill Oliver, who had already been responsible for theday-to-day operations of the company for the previous year as managing director,became chief executive. Sir Stanley remained on the board as a non-executivedirector and our life president. Sadly in September Sir Stanley Clarke died after a long and courageous struggleagainst cancer. Not only did we lose an inspirational and charismatic leader, wealso lost a good friend. Fortunately, Sir Stanley had always been adamant thatbusiness should never depend on one individual and had worked consistently inhis later years to make sure that St. Modwen would not suffer on his departure. The greatest tribute to him is that the business has continued as normal, whichis demonstrated by these strong results. These could not have been achievedwithout the exceptional team of people employed at all levels and my personalappreciation goes to my board colleagues, all employees and to you, ourshareholders, for their continued support. Following Sir Stanley's death, his son Simon Clarke who is deputy chairman ofNorthern Racing PLC, joined the board as a non-executive director, to representthe continuing substantial interests of the Clarke / Leavesley families. PaulRigg, former chief executive of West Sussex County Council, was also appointedas a non-executive director to fill the vacancy left by the retirement of SirDavid Trippier at the last Annual General Meeting. Prospects The company has, yet again, had a good start to the year with transactionsalready exchanged or completed that will give rise to property profits in excessof £13m. We are expecting that 2005 may, in some respects, be a more challenging year forthe property industry than recent years have been. Nonetheless, I am lookingforward with confidence to another year of progress for your company. ANTHONY GLOSSOPCHAIRMAN ST MODWEN PROPERTIES PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 30 NOVEMBER 2004 CHIEF EXECUTIVE'S OPERATIONAL REVIEW 2004 Highlights A 35% increase in property profits to £34.0m (2003 : £25.2m) was the main driverbehind a 15% increase in pre-tax profits to £40.3m (2003 : £35.0m). We continue to operate a broad-based development and disposal programme,covering the distribution, retail, industrial, office and residential landsectors of the market. Over 35 property disposals were completed in the period, with six propertiesearning over £2m and a further five properties in excess of £1m. Three distribution facilities were completed in the year. A 270,000 sq.ftmanufacturing, distribution and head office complex was constructed in the yearfor Duraflex at Tewkesbury; the fit-out contract was completed for the 317,000sq.ft distribution facility built in 2003 in Stoke-on-Trent for Screwfix; andfollowing refurbishment and reletting we sold a 240,000 sq.ft distribution unitat Telford. In retail development we sold the 57,000 sq.ft first phase of our WorcesterRetail Park and completed the land assembly and disposal of a 10-acre site for aTesco supermarket at Stafford. We completed the rationalisation of our industrial estate at Huddersfield,relocating the principal tenant into refurbished accommodation. Most of theland and buildings were then sold during the year, in three separate disposalsfor a total consideration of £7.3m, with a 25,000 sq.ft trade park underconstruction at the year-end. We also took advantage of a strong investmentmarket and sold our properties at The Beeches, Saltney and at Capenhurst, as weconsidered we could not add significant additional value to them by furtherasset management or redevelopment. We continued the construction of our office development at the Quinton BusinessPark, Birmingham. On Phase I, a 25,000 sq.ft building was let to the HighwaysAgency and sold in the year to Standard Life. Three further buildings totalling50,000 sq.ft are under construction on Phase II, for completion during 2005. Wewill be relocating the group head office and the Midlands regional office toQuinton in August 2005. Our brownfield residential land programme produced two significant disposalsduring 2004. Firstly, the sale of 8.5-acres at Springfields, Stoke on Trent,which was the remainder of the site of a redundant tile works and secondly afurther 15-acre tranche of the former MoD site at Hilton, Derbyshire. Regional Review The future growth strategy of the group will be secured by expanding andstrengthening our regional structure. During the year we recruited a furtherseven development and construction staff to strengthen our four existingregional teams and to enable two further offices in Yorkshire and the South Westto be operational early in 2005. The Midlands is our most established region with total property assets,including our share of properties held in joint ventures, of £258m as at 30thNovember 2004. The region generated net rents of £17.1m during 2004. The sites at Avonmouth, Llanwern, Quedgeley, Dursley and Taunton have beentransferred from the Midlands region to establish the South West office. Sites at Sheffield, Darlington, Huddersfield, and Doncaster have beentransferred from the Midlands and North West regions to the newly formedYorkshire office. Acquisitions were made during the year at Longbridge, Birmingham, where a totalof 414 acres was acquired in two transactions with MG Rover on a sale andleaseback basis for a total consideration of £57.5m. MG Rover has been granted35-year leases at initial rents totalling £5.0m with 2.5% to 3.0% fixed annualuplifts. At Llanwern, South Wales, we acquired 600-acres of non-operational land fromCorus for £17.5m. Positive discussions have been held with Newport Councilregarding the inclusion of the Llanwern site within the draft development planfor the East of Newport Expansion Area which is the subject of a planninginquiry in 2005. A 478-acre site was also acquired at Long Marston, Stratford upon Avon from theDefence Estates for £12m. This site has 983,000 sq.ft of existing industrialbuildings which currently produce a rent of £1.0m per annum. The site will berun for income in the short term, pending the agreement of a redevelopmentstrategy with the local authority. We have been selected by Cannock Chase Council as preferred developer for twosites in Hednesford Town Centre; and by South West Regional Development Agencyfor a 33-acre employment site in Ludgershall, Wiltshire. Significant progress has also been made in bringing forward sites forredevelopment from within the hopper. A resolution to grant planning permissionhas been obtained for the Goodyear site at Wolverhampton. This 88-acre sitewill be redeveloped to provide 39-acres of residential development, 85,000 sq.ftof offices, neighbourhood retail and a 525,000 sq.ft rationalised Goodyearplant. Demolition and ground remediation works will commence in 2005. Planning permission was also obtained for the first phase of the Longbridgedevelopment with Advantage West Midlands; for an office development at Oldbury,Birmingham; and for an Asda supermarket and multi-storey car park in Walsall The North West region based at Warrington had total property assets, includingour share of properties held in joint venture, of £126m as at 30th November2004. The region generated £9.2m of net rents during 2004. The remaining 50% share of the Kirkby Shopping Centre, Merseyside, was acquiredduring the year from our joint venture partner, Mars Pension Trustees, with whomwe had jointly owned the centre since 2001. The consideration was £11.25m withan initial yield of 7.6%. Masterplans have been discussed with KnowsleyBorough Council for the redevelopment of the centre and surrounding area. We have been selected as the preferred developer by Liverpool City Council forthe £40m Great Homer Street regeneration project, which includes a largesupermarket, market hall and other retail, health centre and communityfacilities. Planning permission will be pursued in 2005, together with landassembly to enable a site start to be made in 2007. We have also been selected as preferred developer by Liverpool Land Company on a£40m employment scheme on the East Lancs Road. A number of smaller property acquisitions were completed during the year atBurnley and Widnes. At our major district centre development at Harpurhey, East Manchester, a jointventure with Manchester City Council and Asda, the letting and construction wassubstantially completed during 2004. The 120,000 sq.ft of new retaildevelopment has been sold post year-end. Planning permission has been obtained for the residential development of the9-acre former Asda site at Halebank, Widnes, which will now be remediated andbrought forward for sale in 2005. Planning has also been obtained for 200,000sq.ft of B8 warehousing at Accrington; for a 90,000 sq.ft extension to ouremployment site at Wigan and for two smaller mixed-use schemes at Simms Crossand Liebig Court in Widnes The London region had total property assets, including our share of propertiesheld in joint venture, of £202m as at 30th November 2004. The region generated£11.6m of net rents during 2004. The London region has seen a substantialincrease in the scale of our town centre regeneration activities, with majorschemes being undertaken at Edmonton Green, Wembley and Basingstoke and plansare now being prepared for a comprehensive redevelopment of our Elephant &Castle shopping centre. Edmonton Green is the first of these mixed-use town centre regeneration schemesto commence on site. Demolition began in November on this project whichincludes a new leisure centre for the council, a new bus station, 173residential apartments, a 66,000 sq.ft Asda supermarket, a health centre and anadditional 80,000 sq.ft new retail space. The new development together with theretained existing retail will have a total end value of approximately £100m. During the year, we were selected as the preferred development partner byBedford Borough Council for a major town centre redevelopment of the bus stationarea in Bedford. We have subsequently commenced initial site assembly,acquiring three properties with a value of £5m and anticipate submitting aplanning application in 2005. In November we acquired a 65% leasehold interest in the Malls shopping centre inBasingstoke for £29.9m through our joint venture company Key PropertyInvestments. The rent receivable from the 290,000 sq.ft of retail space iscurrently £2.2m per annum which represents an initial yield of 6.8%. We willseek to maximise the income in the short term whilst there are significantredevelopment opportunities to be pursued in the medium term. Planning permission was obtained for our joint venture development at WembleyCentral, where agreement has now been reached in principle with Network Railwhich will enable demolition to commence above the station in 2005. Planningpermission was also obtained for a major mixed-use town centre regeneration atHatfield, where site assembly has now commenced with the acquisition of a numberof properties post year-end. The North Staffordshire region had total property assets of £34m as at 30thNovember 2004. Our major heritage project at Trentham Gardens, Stoke-on-Trent, commenced onsite during 2004 with the completion of the 65,000 sq.ft garden centre and theopening of the first phase of the retail village being achieved in the autumn.The levels of trade recorded to date at Trentham are higher than previouslyforecast, which gives us confidence for the second phase of construction whichwill commence in 2005. We have acquired the 100-acre site of the former Meaford power station for£2.75m. The site has the benefit of a resolution to grant planning permissionfor up to 1.2m sq.ft of B1, B2 and B8 uses, subject to the completion of aSection 106 Agreement relating to off-site highway works. A number of smaller acquisitions were completed during the year at Burslem,Hanley and Crewe. Planning permission and all other approvals have been obtained to enable theconstruction to commence in 2005 on a major £8m highway improvement scheme toaccess the A50 at Trentham Lakes. This will release a further major tranche ofdevelopment on this manufacturing and distribution park. Planning applicationshave also been submitted to redevelop the former Victoria football ground forresidential and office uses and to continue our successful trade park and officedevelopment at Etruria Valley. The Hopper As itemised within the regional reviews, 2004 was a very active period, with atotal of over 1,600 acres having been acquired for the hopper for a totalconsideration of £130m and adding £8.8m per annum of initial rent to the groupportfolio. After the year-end, in the Midlands region, we have acquired a 20-acre site inTelford for £2.25m. The site comprises a 58,000 sq.ft industrial unit togetherwith 16-acres of vacant land. The site will be run for income with a long-termstrategy of redevelopment. Revaluation The investment property portfolio showed a total revaluation increase, includingour share of joint venture properties, of £26.1m, a 5.5% uplift in value. Thevaluations of the retail properties have benefited from a yield reduction ofcirca 1.25%, which accounts for £18m of the total revaluation uplift. Marshalling We have made a strong start to the new financial year, despite the fact thatmarshalling projects from the hopper into actual delivery remains a challengebecause of the increasing complexity and delays of the planning process. BILL OLIVERCHIEF EXECUTIVE ST MODWEN PROPERTIES PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 30 NOVEMBER 2004 FINANCIAL REVIEW 2004 Comments on the Results Our corporate objective remains to double net asset value per share every fiveyears, whilst paying a progressive dividend. In the five years ending 30thNovember 2004 we have exceeded this target, with net asset value per shareincreasing by 122%, and dividends per share by 100%. Over this five year period, the total annualised shareholder return was 30.5%per annum compared with 13.1% from the FTSE Real Estate index, and 4.1% from theFTSE 250 index. (source: HSBC / Datastream). The continued progression of the share price (up 18% in the year to 305p on 30November 2004) lifted the market capitalisation of the company to £368m, placingit comfortably in the FTSE250 index of leading shares. Profit and Loss Account Net rental income received in the year, including our share of rent from jointventures, increased by 5.5% (£2m) to £38.4m. Acquisitions in the yearcontributed £4.5m additional rent (of which Longbridge, and the remaining halfof Kirkby Shopping Centre contributed £4.3m), helping to offset the £2.9m ofrental income lost on disposals (principally Belle Vale Shopping Centre andWorcester Retail Park). Following the recent acquisitions of Long Marston, The Malls Basingstoke, andthe remainder of MG Rover's site at Longbridge, the gross portfolio rentreceivable, including our share of rent from joint ventures, increased by 15.1%(£5.9m) to £44.8m as at 30th November 2004. A number of our sites are currentlybeing managed in such a way as to enable development in the near future. Thistends to lead to a higher level of voids. During the year under review, however,we managed to reduce our overall voids from 13.9% to 13.1%. We also added £0.4mto the annual rent roll from net lettings, even after allowing for voids createdin preparation for development. Property profits (which comprise profits on sale of both development propertiesand investments) increased by 35% in the year to £34.0m (2003: £25.2m). Theseprofits were again achieved from a broad range of projects, of which 11contributed more than £1m. Included in these profits was £12.5m from sales ofindustrial and distribution properties, £6.4m from retail developments, £2.4mfrom office developments, £7.8m from the sale of residential land and £4.9mrelating to the disposal of our investment in Pubmaster. Overheads increased during the year by £1.6m to £14.9m, principally as a resultof recruitments and the regional expansion needed to match our increasedactivity. We continue to adopt the policy of satisfying employee share options, whenexercised, by purchasing the required number of shares in the market place,rather than issuing new share capital, which would dilute returns for existingshareholders. With 5.1m outstanding options (held by 112 employees), and asignificant share price increase in the year, the impact has been a charge tothe profit and loss account of £3.8m (2003: £4.2m). The company's option schemes(which comprise the SAYE scheme open to all employees, and the executive shareoption scheme, which is available to 36 senior and middle managers anddirectors) remain an important tool in the recruitment and retention of keystaff, and in aligning employee interests with those of shareholders. The triennial valuation of the company's final salary pension scheme (which hasbeen closed to new entrants since 1999) as at 5th April 2003, showed a deficitof £3.9m. The company has therefore provided £1.5m (2003: £1.2m) in theaccounts, a sum which includes the regular cost of current service, and theamortisation of the past service deficit, as required under SSAP 24. Mindful ofthe ever-increasing cost associated with final salary schemes, the company tooksteps during the year to limit its exposure by introducing employeecontributions, extending the normal retirement age and capping certain benefits. Finance Costs have increased to £17.2m (2003: £16.0m). Average group borrowingsincreased by £19m to £184m due to the steady programme of acquisitions in theyear, while average joint venture borrowings remained unchanged at £159m.Despite rising interest rates during the year, the beneficial impact of thecompany's hedging strategy, and selective renegotiation of facilities resultedin a reduced weighted average rate of interest payable as at 30th November 2004of 6.2% for company borrowings (2003: 6.4%). The cost of joint ventureborrowings, which were not hedged to the same extent, rose to 5.8% (2003: 5.3%). The Group's borrowings are at variable rates of interest, although we activelymanage our interest rate exposure using interest rate swaps. At the year-end,56% of company net borrowings were hedged in this way (2003: 96%), and 51% ofjoint venture borrowings (2003: 58%) The Group does not capitalise interest on its developments or its investments,but expenses all interest as it arises. Taxation - the effective rate of tax charge for the year, including provisionfor deferred taxation, has fallen to 24.5% (2003: 28.4%) due to the availabilityof industrial building and capital allowances on recent acquisitions, and landremediation relief for expenditure on brownfield renewal. It is anticipatedthat, with the continued utilisation of capital allowances, the effective ratewill remain below the standard rate of Corporation Tax. Benefit from taxplanning activities is only recognised when the outcome is reasonably certain. Cash Flow The company continues to produce a strong cash flow, based on recurring netrental income of £38m and an ongoing programme of asset disposals, whichgenerated £42m in the year. This enabled us to fund a £60m developmentprogramme, together with property acquisitions of £130m during the year, withonly a £92m increase in net debt. Furthermore, in managing our development programme we pay particular attentionto its financing profile, controlling the timing of land payments and sales andthe receipt of progress payments to optimise cash flows. This enables us toundertake an ever-increasing scale of development activity without excessivegearing. Balance Sheet Investment Properties - the total value of investment properties, including 100%of joint ventures, increased by £140m during the year to £615m Expenditure onthe portfolio totalled £138m, of which the largest transactions were the £57m MGRover acquisitions at Longbridge and £30m in our 50% joint venture company KeyProperty Investments Limited, in respect of the acquisition of The Malls,Basingstoke. The independent valuation at 30th November 2004 resulted in an uplift on ourshare of the portfolio of 5.5% (£26.1m). This revaluation increase reflects amarket value movement of £18.3m on our retail properties. The remaining upliftrepresents added value from the management and development of specific assetswithin the portfolio. Although many of our sites are situated in disadvantagedareas that currently qualify for relief from Stamp Duty Land Tax, this benefit,because it is potentially temporary, is not recognised within the valuation. Nordoes the valuation include any hope value from future development activities orchanges of use. Assets held in work in progress are carried at cost, notincluded in the annual valuation. Other Investments - Our 27.2% stake in Northern Racing PLC, an AIM-listedcompany, has been accounted for in accordance with UITF 31 (Exchanges ofbusinesses). As a result, the carrying value of our investment at 30th November2004 is £9.6m. This represents the fair value of the assets acquired, plus postacquisition profits. Under UITF 31, we are not permitted to recognise the AIMmarket value of our stake, which, at the share price of 195p on 30th November2004, was £18.7m. The 2003 comparative balance sheet has been restated in accordance with UITF 38,Accounting for ESOP Trusts, to show the £1.3m investment in own shares as adeduction from shareholders' funds. Gearing and Financing As a result of the strong programme of acquisitions during the year, Group netborrowings have increased to £227m (2003: £135m), representing a gearing ratioof 85% (2003: 60%). This is still at the lower end of our preferred gearingrange of 75% to 125%, and therefore gives us ample headroom and flexibility tomove swiftly to undertake further development and acquisitions. At this level,we have undrawn committed facilities of £96m. In addition, the Group's share of debt within joint ventures, which is securedsolely upon the assets within the relevant joint venture, was £99m (2003: £97m). The Group is financed by shareholders' funds and bank debt of varying maturityprofiles, which is appropriate to the needs of the Group and reflects the typeof assets in which it invests. At 30th November 2004, the weighted average debtmaturity was 7 years (2003: 5 years). Bank facilities, excluding joint ventures, totalled £327m at the year-end(2003: £219m). Net Asset Value per share In calculating net assets per share of 221.4p, a provision has been made fordeferred tax on the potential clawback of certain capital allowances. Thecompany actively manages its tax affairs to ensure that this situation will notarise, and indeed this year's tax charge has benefited from such management.Without such a provision there would be a notional uplift of £5.3m or 4.4p pershare (2003: £3.9m or 3.2p per share). The effect of the fair value adjustment (FRS13) of marking the Group's interestrate derivatives to current market value would be to produce a notionalliability after tax of £0.4m or 0.3p per share (2003: £0.3m or 0.2p per share).The effect of providing deferred tax on future disposals of investmentproperties would be to produce a notional liability of £24.6m or 20.3p per share(2003: £18.3m or 15.1p per share). An adjustment to restate the company's investment in Northern Racing PLC tomarket value, would provide a notional uplift after tax of £6.2m or 5.2p pershare (2003: £7.6m or 6.3p per share). The adjusted net asset value after these adjustments has increased by 17.5% to210.4p (2003: 179.1p) (see Note 13). Triple net asset value, that is afteradjusting only for deferred tax on investment properties and marking derivativesto market value, has increased by 18.4% to 200.8p (2003: 169.6p). International Financial Reporting Standards ("IFRS") The Group will be required to adopt IFRS when preparing accounts for the yearended 30 November 2006. In next year's accounts we will identify the principaladjustments required for IFRS reporting, and present a pro-forma reconciliationof our UK GAAP numbers to IFRS in order to demonstrate the nature and extent ofthe likely adjustments on transition. Tim HaywoodFinance Director ST MODWEN PROPERTIES PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 30 NOVEMBER 2004 Group Profit and Loss Account For the year ended 30 November 2004 2003 Notes £'000 £'000 --------------- --------------TurnoverGroup and share of joint ventures 1 130,140 136,081Less: share of joint ventures' turnover (12,886) (13,304) --------------- --------------- 117,254 122,777 --------------- ---------------Operating profitGroup operating profit 33,801 34,538Share of operating profit in joint ventures 9,808 9,486Share of operating profit in associates 967 1,550 --------------- -------------- 1 44,576 45,574 Profit on sale of investments 1 12,964 5,389 Net interest payable 2 (17,202) (15,937) --------------- --------------Profit on ordinary activities before taxation 40,338 35,026 Taxation on profit on ordinary activities 3 (9,861) (9,954) --------------- --------------Profit on ordinary activities after taxation 30,477 25,072 Equity minority interest (464) (989) -------------- ---------------Profit attributable to shareholders 30,013 24,083 Dividends 4 (9,132) (7,914) --------------- ---------------Transferred to reserves 20,881 16,169 ========= ======== Basic earnings per ordinary share 5 25.0p 20.1pDividend per ordinary share 4 7.6p 6.6p All activities derive from continuing operations. A statement of the movement in reserves is shown in note 10. ST MODWEN PROPERTIES PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 30 NOVEMBER 2004 Group Balance SheetAs at 30 November 2004 2003 Restated Notes £'000 £'000 --------------- ---------------Fixed assetsTangible assets 6 367,238 269,023InvestmentsJoint venturesShare of gross assets 147,765 123,795Share of gross liabilities (105,777) (100,480)Share of net assets 7 41,988 23,315Associated companies 7 10,167 9,198Other investments 7 - 6,000 --------------- --------------- 419,393 307,536 --------------- ---------------Current assetsStocks 8 118,032 77,510Debtors 12,312 23,801Cash at bank and in hand 3,652 92 --------------- --------------- 133,996 101,403 Current liabilitiesCreditors: amounts falling due within one year (47,098) (51,710) --------------- ---------------Net current assets 86,898 49,693 --------------- ---------------Total assets less current liabilities 506,291 357,229Creditors: amounts falling due after more than one year (230,513) (127,941) Provisions for liabilities and charges 9 (5,305) (2,970) Equity minority interests (3,103) (2,981) --------------- ---------------Net assets 267,370 223,337 ========= =========Capital and reservesCalled up share capital 12,077 12,077Share premium account 10 9,167 9,167Merger reserve 10 9 9Capital redemption reserve 10 356 356Revaluation reserve 10 114,236 89,974Profit and loss account 10 133,499 113,019 --------------- --------------- 269,344 224,602 Treasury shares (1,974) (1,265) -------------- ---------------Equity shareholders' funds 267,370 223,337 ========= =========Net assets per ordinary share 221.4p 184.9pFair value net assets per ordinary share 13 210.4p 179.1pGearing 85% 60% ST MODWEN PROPERTIES PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 30 NOVEMBER 2004 Group Cash Flow Statement For the year ended 30 November 2004 2003 Restated Notes £'000 £'000 £'000 £'000 ------------ ------------ ------------ ------------Net cash inflow from operating activities 11(a) 14,919 31,010 Dividends received from joint ventures 1,378 6,000 Returns on investments and servicing of financeInterest received 397 176Interest paid (12,383) (11,124)Dividends paid to minority shareholders (344) (613) ------------ ------------ Net cash outflow from returns on investments (12,330) (11,561)and servicing of finance Taxation (9,902) (4,571) Capital expenditure and financial investmentAdditions to investment properties (106,580) (13,177)Additions to operating properties and other (1,188) (165)tangible assetsSale of investment properties 31,666 38,347Sale of financial investments/tangible assets 10,885 10 ----------- ----------- (65,217) 25,015Acquisitions and disposalsInvestment in joint ventures and associates (11,669) (66)Equity dividends paid (7,943) (7,187) ----------- ----------- Cash (outflow)/inflow before use of liquid (90,764) 38,640resources and financing FinancingPurchases of own shares (2,320) (151)Amounts received under share option schemes 750 317Redemption of loan notes (14) (19)Increase/(decrease) in debt 99,572 (44,839) ------------ ------------ Net cash inflow/(outflow) from financing 97,988 (44,692) ------------ ------------Increase/(decrease) in cash in the year 11(b) 7,224 (6,052) ======= ======= ST MODWEN PROPERTIES PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 30 NOVEMBER 2004 Group Cash Flow Statement (CONT'D)For the year ended 30 November Reconciliation of net cash flow to movement in netdebt 2004 2003 £'000 £'000 Increase/(decrease) in cash in the year 7,224 (6,052)Cash (inflow)/outflow from increase/decrease in debt (99,572) 44,839Loan notes redeemed during the year 14 19 ----------- ----------- Change in net debt resulting from cash flows (92,334) 38,806Net debt at 1 December (134,968) (173,774) ------------ ------------Net debt at 30 November (227,302) (134,968) ======= ======= ST MODWEN PROPERTIES PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 30 NOVEMBER 2004 Supplementary StatementsFor the year ended 30 November 2004 2003 £'000 £'000 ------------- --------------Group Statement of Total Recognised Gains and LossesProfit for the year 30,013 24,083Taxation on realisation of prior years' revaluation surpluses (2,213) (1,231)Unrealised surplus on revaluation of group investment properties 21,030 12,272Unrealised surplus on revaluation of properties held by joint ventures 5,044 2,189Unrealised surplus arising on acquisition by associate - 886 -------------- ---------------Total recognised gains and losses since last annual report 53,874 38,199 ========= ========= 2004 2003 £'000 £'000 -------------- ---------------Note of Historical Cost Profits and LossesReported profit on ordinary activities before taxation 40,338 35,026Realisation of property revaluation gains of earlier years 1,812 5,564 -------------- --------------- 42,150 40,590 ========= =========Historical cost profit for the year after taxation, minority interests 20,480 20,502and dividends ========= ========= 2004 2003 Restated £'000 £'000 Group Reconciliation of Movements in Shareholders' FundsProfit attributable to shareholders 30,013 24,083Dividends (9,132) (7,914) --------------- --------------- 20,881 16,169 Unrealised surplus on revaluation of group investment properties 21,030 12,272Unrealised surplus on revaluation of properties held by joint ventures 5,044 2,189Unrealised surplus arising on acquisition by associate - 886Taxation on realisation of prior years' revaluation surpluses (2,213) (1,231) -------------- --------------Net additions to shareholders' funds 44,742 30,285Opening shareholders' funds 223,337 194,317Prior years' effect of UITF38 - (1,417) --------------- --------------- 268,079 223,185Purchase of own shares (2,320) (151)Shares transferred to employees 1,611 303 ------------- -------------Closing shareholders' funds 267,370 223,337 ======== ======== ST MODWEN PROPERTIES PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 30 NOVEMBER 2004 Notes to the Financial Statements (CONT'D) 1.Turnover and Profit Analysis 2004 2003 -------------------------------------- ---------------------------------------- Cost of Cost of sales sales Turnover Profit Turnover Profit £'000 £'000 £'000 £'000 £'000 £'000 Rental income ------------- ----------- ----------- -------------- ----------- -----------Group 33,285 (4,139) 29,146 31,608 (4,644) 26,964Share of joint ventures 10,991 (1,692) 9,299 10,852 (1,370) 9,482 Property developmentGroup 82,498 (62,021) 20,477 88,495 (68,792) 19,703Share of joint ventures 1,895 (1,334) 561 2,452 (2,347) 105 Other activities 1,471 (2,461) (990) 2,674 (1,533) 1,141 ------------- ---------- ----------- -------------- ---------- ----------- 130,140 (71,647) 58,493 136,081 (78,686) 57,395 ======= ===== ======= ======Share of operating profit in associates 967 1,550 Administrative and other operating expensesGroup (14,832) (13,270)Share of joint ventures (52) (101) ---------- ----------Operating profit 44,576 45,574 Profit on sale of investment 4,883 -Profit on sale of investment 8,009 5,213properties - group- joint ventures 72 176 ---------- ----------Profit before interest 57,540 50,963 ====== ====== 2.Net Interest Payable 2004 2003 £'000 £'000 ------------ -----------Interest payable on bank and other loans and overdrafts 12,397 11,065Interest receivable (437) (176) ------------ -----------Group interest charge 11,960 10,889 Share of joint ventures' net interest 5,002 4,746 Share of associated companies' net interest 240 302 ------------ ------------ 17,202 15,937 ======= ====== ST MODWEN PROPERTIES PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 30 NOVEMBER 2004 Notes to the Financial Statements (CONT'D) 3.Taxation on Profit on Ordinary Activities(a) Analysis of Charge in Period 2004 2003 £'000 £'000 £'000 £'000 ---------- ---------- ---------- ----------Current taxUK corporation tax on profits of the period 9,640 9,124Adjustments in respect of previous periods (2,174) (165) ---------- ---------- 7,466 8,959 Share of joint ventures' taxation 1,151 1,214Adjustments in respect of previous periods (460) 34 ---------- ---------- 691 1,248 Share of associates' taxation 73 312Adjustments in respect of previous periods (391) 204 ---------- ---------- (318) 516 ---------- ----------Total current tax (note(b)) 7,839 10,723 Deferred taxOrigination and reversal of timing differences (note 9) 1,205 (1,009)Share of joint ventures' origination and reversal of 817 240timing differences --------- ---------Taxation on profits on ordinary activities 9,861 9,954 ===== ===== (b) Factors Affecting Tax Charge For Period 2004 2003 £'000 £'000 ---------- ---------Related Shares:
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