RNS Number:5390K
Rugby Estates PLC
30 April 2003
30 April 2003
RUGBY ESTATES PLC
Preliminary Results for the year ended 31 January 2003
RUGBY REPORTS RECORD PROFITS AND STRONG PROGRESS IN ITS ASSET MANAGEMENT AND
CO-INVESTMENT BUSINESS
Rugby Estates Plc ("Rugby" / "Group"/ "Company"), the London and M4 focused
property company, today announces results for the year ended 31 January 2003.
Highlights:
* Pre-tax profit up 240% to #15.5m (2002: #4.6m)
* Triple net assets per share up 2% to 297p (2002: 325p less 33p special
dividend)
* Total dividend per share increased by 10% for the seventh consecutive
year to 4.263p (excluding 33p special dividend)
* Year end gearing 41%, reduced to 34% following post year end property
sales
* Formation of ING Covent Garden Limited Partnership and subsequent doubling
to #125 m of assets through the acquisition of the Strand Island
investment for #66m
* Total property disposals of #75 m, including #64m to ING Covent Garden
Limited Partnership
* Formation since the year-end of London Industrial Partnership Limited, a
joint venture with Bank of Scotland and Merrill Lynch. Rugby Asset
Management appointed as property adviser with the intention of acquiring
#100m of industrial assets within the M25 over the next two years.
David Tye, Chairman, commented:
"The year under review has been pivotal in repositioning Rugby Estates as
primarily a co-investing value-added property asset manager.
"With a low level of borrowings, we are well positioned to grow our wholly owned
portfolio when suitably attractive acquisitions are identified. However,
increasingly over the next few years, we expect to use our capital as seed corn
for larger, management fee driven transactions and for the acquisition of
properties which present special situations where we can add value.
"With the potential of our existing holdings, our growing asset management
business and the Group's strong financial position, we view your company's
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
I am delighted to report a pre-tax profit of #15,542,000 for the year ended 31
January 2003. The 240% increase above the corresponding figure for 2002
(#4,580,000) is attributable primarily to the disposal of the Group's Covent
Garden portfolio to the ING Covent Garden Limited Partnership ("CGLP") during
the period. Triple net assets per share ("NNNAPS") were 297p at 31 January
2003. After allowing for the special dividend of 33p per share paid after
completion of the Covent Garden transaction, this represents an increase of 2%
for the year (31 January 2002: 292p (adjusted)). NNNAPS takes into account
uncrystallised tax liabilities, the market value of debt and the effect of share
options.
The Covent Garden transaction, which comprised the sale of almost 60% of the
Group's portfolio for #64 million and a #5 million investment in CGLP, has
enabled substantial capital to be returned to shareholders through the #5
million special dividend, paid in May 2002, and through share buy-backs. This
transaction also generated #700,000 of management fee income during the year for
Rugby Asset Management and, together with other net disposals both during the
year and since the year end, has enabled underlying gearing to be reduced to its
present 34%. In total, 3,840,000 shares (25% of issued share capital as at 31
January 2002) were purchased for cancellation at an average price of 244p,
increasing NNNAPS by approximately 4%.
The year under review has been pivotal in repositioning Rugby Estates as
primarily a co-investing value-added property asset manager. We have today
announced a new joint venture with Bank of Scotland and Merrill Lynch to acquire
industrial properties in London. This is a further example of how we can
leverage our expertise to create asset management fee earning opportunities,
enhancing returns on our capital. With a low level of borrowings, we are well
positioned to grow our wholly owned portfolio when suitably attractive
acquisitions are identified. However, increasingly over the next few years, we
expect to use our capital as seed corn for larger, management fee driven
transactions and for the acquisition of properties which present special
situations where we can add value.
Although, generally, the market for investment properties is strongly priced,
occupational demand in certain markets continues to be weak. However, we are of
the firm belief that market conditions will present opportunities where our
asset management skills and ability to identify potential can be combined to
manufacture value. Our focus will continue to be in the London area and in the
quadrant to the west of London between the M3 and the M40.
Buying into the right location at the right time is a potent combination both
for ourselves and for our clients and co-investors. We continue to make
acquisitions which combine these two criteria in any sector where inherent value
can be unlocked by proactive real estate initiatives. The skill of recognising
the opportunity, coupled with the ability, and often the patience, to work the
upside is at the heart of our success. Exiting a holding at a particular time,
whether in the property cycle generally or for a particular situation, is the
final key element of any property strategy. Our motivation has remained
unchanged for the last 20 years; realisation of profit drives our deals, net
asset value enhancement naturally follows.
With great sadness I must report the death during the year of Gerald Dennis, who
had served as a non-executive director and chairman of the remuneration
committee since flotation in 1994. My fellow directors and I shall continue to
miss his wise counsel in both our corporate and business affairs. In September
2002, I was pleased to welcome Andrew Tyrie, MP and economist, to the board as a
non-executive director and the new chairman of the remuneration committee.
Given the continued good results, the board proposes a final dividend of 3.19p
per ordinary share, bringing the total regular dividend for the year to 4.263p
per share. This represents the seventh consecutive annual increase of 10%.
With the potential of our existing holdings, our growing asset management
business and the Group's strong financial position, we view your company's
future with confidence.
Our objective continues to be to deliver sustained growth in both dividends and
net assets per share.
David Tye
Chairman
30 April 2003
CHIEF EXECUTIVE'S REVIEW
The year under review was one of considerable activity, with over #150 million
of purchase and sale transactions carried out, both in the group's portfolio and
on behalf of CGLP. I am pleased to report significant growth in our asset
management and co-investment business and further progress in repositioning the
portfolio within the Group's core areas of activity. Additional disposals since
the year end have substantially reduced the void element of the Group's
portfolio.
Portfolio
During the period, property disposals amounted to #75 million, comprising the
sale of the Covent Garden portfolio and properties in Edinburgh, Swindon,
Wakefield and Portsmouth. One acquisition was made in London for #8 million and
#5 million was invested in CGLP. As a result of these transactions, the Group's
portfolio value was #55 million as at 31 January 2003 (2002: #113 million).
London remains our core area of activity, representing 61% of total portfolio
value, with the wider M4 corridor accounting for 22%, Birmingham 8% and other UK
locations 9%. By sector, mixed-use properties account for 34% of the portfolio,
with the remainder evenly balanced between retail, office and industrial.
The portfolio return for the year was 6.6%, comprising 5.5% income return and
1.1% capital growth. Capital returns were adversely affected by sale costs of
the Covent Garden portfolio and a reduction in the valuation of two office
properties in Clerkenwell (one of which has been sold since the year end).
These factors together reduced total returns by approximately 2.5%.
Since the year end, nearly #9 million of property disposals have reduced the
current portfolio to #46 million. The effect of these disposals has been to
reduce current rental income from #3.4 million at the year end to #3.1 million,
the estimated rental value ("ERV") of voids from #1.0 million to #0.3 million
and total ERV from #5.0 million to #4.0 million. The consequent reduction in
net borrowings is appropriate in current uncertain market conditions and will
enable us to move quickly to take advantage of new opportunities as they arise.
Covent Garden
The Covent Garden portfolio, comprising 15 buildings let to 65 tenants, was sold
to CGLP for a total consideration of #64 million. As part of the transaction,
the Group invested #5 million for an initial 20% interest in CGLP. We now have
no direct property holdings in Covent Garden, the Group's interests there being
through our investment in CGLP and our 50% interest in Covent Garden Estates
Ltd, which holds a 4,000 sq ft mixed use property in Neal Street.
Covent Garden is one of London's most vibrant shopping, office and leisure
areas. Notwithstanding quieter market conditions in recent months, we have
every confidence in our ability to enhance the value of the existing CGLP
portfolio over time and to identify suitable acquisitions, thereby assisting in
the future development of CGLP as it attracts more investors. In December 2002
we acquired on behalf of CGLP the Strand Island investment in Covent Garden for
#66 million, effectively doubling CGLP's property assets to over #125 million,
while generating substantial additional current and future fee income for Rugby
Asset Management. Following this purchase and the associated injection of #26
million of new capital into CGLP, Rugby's #5 million investment now represents
9.8% of the equity of the enlarged vehicle. CGLP's target is #250 million of
assets and we are optimistic that this will be achieved over the next two years.
London - other
During the year we acquired Westbourne House, Westbourne Grove, London W2 for #8
million, equivalent to #280 per sq ft freehold. This mixed-use, multi-let
building produces a net initial yield of nearly 7% and, with an average passing
rent of only #20 per sq ft, offers potential to add value through proactive
hands-on management.
Since 31 January 2003 we have sold the vacant office building at Knights Court,
Clerkenwell at its year end valuation of #2.5 million and further disposals of
our holdings in Clerkenwell are planned for 2003.
Occupational demand for offices in central London continues to be generally weak
and the strong retail performance of recent years will not continue
indefinitely. However, we do see good opportunities in industrial/distribution
properties within the M25. Accordingly, as explained below, over the next few
years we will be very active in the industrial property sector in London as
adviser to, and co-investor in, London Industrial Partnership Limited.
M4 Estates
After London, our second major geographical focus is the broader M4 corridor,
the quadrant to the west of London between the M3 and the M40. In recent years,
our activities in this area have had a strong actual or potential development or
redevelopment component and we expect this to continue over the next few years.
During the period, we sold our industrial holding at Drakes Way, Swindon for
over #3 million, a price which fully reflected its long-term secure income. We
also commenced the sale of individual units at our holding in Windsor Square,
Reading. Since the year end we have sold Bourne Retail Park, Salisbury, at its
31 January 2003 valuation figure of over #6 million. During 2003 we expect to
make further sales at Windsor Square and at Fenchurch Court, Oxford. The
industrial property at Rose Kiln Lane, Reading is a key to two potential future
redevelopment opportunities which are being actively pursued.
Other UK Locations
We have continued to make disposals outside our core areas with the sale of our
mixed-use holding in Edinburgh, a retail parade in Wakefield and an industrial
property in Portsmouth, for a total of #7 million. Further sales are planned
over the next year which will leave Paradise Forum in central Birmingham as our
only significant longer-term strategic holding. Paradise Forum is at the heart
of Birmingham City Council's plans for the comprehensive redevelopment of the
area between Brindley Place and the city centre and we are actively engaged in
progressing these plans.
Rugby Asset Management
Our appointment as property advisor to CGLP for its seven-year life will form
the core of our asset management activities over the next few years, providing a
firm base for expansion. Total fee income for the year was #700,000, compared
with #300,000 last year, and assets under management (including the Group's
portfolio) increased to #180 million (2002: #104 million).
We are delighted to announce the formation of London Industrial Partnership
Limited ("LIP"), a joint venture with Bank of Scotland and Merrill Lynch. The
Group will invest #2 million for an 11.8% equity interest and Rugby Asset
Management has been appointed Property Adviser to LIP. Initial equity and debt
facilities total #85 million and over the next two years LIP is aiming to
acquire #100 million of industrial properties within the M25. Over LIP's
planned five year life we will be seeking opportunities to add value through
active management and a vigorous acquisition programme is now commencing. Rugby
Asset Management will receive ongoing management fees, together with fees for
acquisitions and disposals and a potential performance fee at the termination of
the joint venture if certain target returns are achieved.
Asset management fees have been a welcome but variable contributor to profits
over the past few years. The relationships we have now firmly established with a
number of major financial institutions, coupled with a growing acceptance of and
appetite for collective and indirect property investment vehicles, provides a
firm base for further growth of our asset management business over the next few
years.
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 substantial net property disposals in the year, net borrowings at
31 January 2003 were #14 million (2002: #52 million), a gearing ratio of 41%
(2002: 104%) measured against triple net assets of #34 million (2002: #50
million). If sales contracted since the year end, the investment commitment to
London Industrial Partnership and short term debtors and liabilities were
assumed to be settled for cash immediately, the Group's net borrowings at 30
April 2003 would be approximately #11.5 million, equal to 34% of triple net
assets.
In order to hedge the Group's exposure to variable interest rates, a number of
interest rate swaps were entered into in previous years when total borrowings
and gearing levels were much higher than at present. Finance costs for the year
of #4.1 million (2002: #4.1 million) include #2.2 million (2002: # nil) of
exceptional charges relating to early loan repayments and the cancellation of
the majority of the Group's swaps. At 31 January 2003, the fair value
adjustment for the remaining swaps amounted to 2p per share, after tax, and the
average cost of borrowings had been reduced to 5.5% per annum.
Future Prospects
During 2003, we will continue to focus on our asset management business, seeking
acquisitions for both CGLP and LIP and developing new business concepts and
relationships. While taking into account general market conditions, we will
make acquisitions where we can see opportunities to add value through active
management. Our present low gearing allows us to take advantage of such
opportunities and provides the resources to co-invest in collective and
indirect property vehicles. Such co-investment demonstrates our commitment to
other investors, thus enabling us to leverage a relatively small amount of
equity into much larger property holdings from which we can earn returns derived
from our human as well as financial capital.
Andrew Wilson
Chief Executive
30 April 2003
PORTFOLIO STATISTICS
2003 2002
# million # million
Group properties 46.8 110.3
Share of joint ventures 2.9 3.1
Indirect property investments 5.0 -
______ ______
Total (market value) 54.7 113.4
______ ______
Rental income - current 3.4 6.3
- ERV 5.0 9.7
______ ______
2003 2002
Capital value by sector % %
Office/retail 34 53
Office 22 20
Retail 21 12
Industrial 23 15
______ ______
100 100
______ ______
Capital value by region % %
Covent Garden 14 57
Other London 47 16
M4 Corridor 22 13
Other 17 14
______ ______
100 100
______ ______
Rental value by sector % %
Office 47 48
Restaurants, cafes 12 18
Other Retail 20 15
Industrial 21 19
______ ______
100 100
______ ______
Current income by unexpired lease term % %
0-5 years 50 40
6-10 years 33 24
11-15 years 7 15
Over 15 years 10 21
______ ______
100 100
______ ______
Group Profit and Loss Account for the
year ended 31 January 2003
Notes 2003 2002
#000 #000
Turnover: Group and share of joint ventures 79,190 20,034
Less: share of turnover in joint ventures (177) (259)
______ ______
Group Turnover 1 79,013 19,775
Cost of sales 1 (55,639) (8,694)
______ ______
Gross Profit 1 23,374 11,081
Administrative expenses
- payments to cancel share options - (256)
- other (4,242) (2,741)
______ ______
Group Operating Profit 19,132 8,084
Share of operating profit in joint ventures 197 264
Profit on disposal of investment properties
- group - 75
Provision against other investments - (50)
______ ______
Profit before Financing 19,329 8,373
Interest payable - group (4,110) (4,110)
- joint ventures (12) (34)
Interest receivable - group 332 343
- joint ventures 3 8
______ ______
Profit on Ordinary Activities before Taxation 15,542 4,580
Taxation (4,684) (1,448)
______ ______
Profit on Ordinary Activities after Taxation 10,858 3,132
Minority Interests (24) (500)
______ ______
Profit attributable to members of the parent company 10,834 2,632
Dividends 2 (5,506) (589)
______ ______
Retained Profit 5,328 2,043
______ ______
Earnings per Ordinary Share - basic 3 82.8p 17.2p
- diluted 3 82.7p 17.1p
Tax relates to following - group (4,655) (1,393)
- joint ventures (29) (55)
Group Balance Sheet at
31 January 2003
2003 2002
#000 #000
Fixed Assets
Other tangible fixed assets 149 176
______ ______
Investments in joint ventures - share of gross assets 1,508 1,387
- share of gross liabilities (625) (664)
______ ______
883 723
Other investments 5,000 -
Investment in own shares 77 92
______ ______
6,109 991
______ ______
Current Assets
Stocks 38,356 83,689
Debtors 3,026 3,199
Cash at bank and in hand 6,906 8,966
______ ______
48,288 95,854
Creditors: amounts falling due within one year 8,783 9,870
______ ______
Net Current Assets 39,505 85,984
______ ______
Total Assets less Current Liabilities 45,614 86,975
Creditors: amounts falling due after more than one year 17,986 55,076
Minority interests (non-equity) 282 500
______ ______
Net Assets 27,346 31,399
______ ______
Capital and Reserves
Called up share capital 2,275 3,025
Share premium account 12,434 12,373
Capital redemption reserve 1,504 736
Profit and loss account 11,133 15,265
______ ______
Equity Shareholders' Funds 27,346 31,399
_______ ______
Group Statement of Cash Flows for the
year ending 31 January 2003
2003 2002
#000 #000
Net Cash Inflow from Operating Activities 65,564 4,837
Dividends and Profit Distributions from Joint Ventures - 420
Returns on Investments and Servicing of Finance
Interest paid (4,229) (4,157)
Interest received 332 349
______ ______
(3,897) (3,808)
______ ______
Tax Paid (3,037) (1,869)
Capital Expenditure and Financial Investment
Payments to acquire tangible fixed assets (47) (81)
Receipts from sales of investment properties - 1,565
Receipts from sales of tangible fixed assets - 131
Payments to acquire own shares (18) (92)
Payments to acquire other investments (5,000) -
New loans to joint ventures (539) -
______ ______
(5,604) 1,523
______ ______
Equity Dividends Paid (5,577) (551)
Non-equity dividends paid to minority interests (243) -
Management of Liquid Resources
Decrease in short term deposits 621 6,069
Decrease / (increase) in institutional cash funds 1,597 (6,673)
______ ______
Net Cash Inflow / (Outflow) before Financing 49,424 (52)
______ ______
Financing
Issue of ordinary share capital 79 155
Purchase of ordinary share capital for cancellation (9,460) (1,196)
New long term loans 11,579 8,377
Repayment of long term loans (51,464) (7,509)
______ ______
(49,266) (173)
______ ______
Increase / (Decrease) in Cash 158 (225)
______ ______
Notes:
1. The Group's principal area of continuing activity is that of property
investment, management and trading. It operates within one geographical market,
the United Kingdom. Turnover, cost of sales and gross profit are analysed as
follows:
Turnover Turnover Cost of Cost of Gross Gross
2003 2002 Sales Sales Profit Profit
2003 2002 2003 2002
#000 #000 #000 #000 #000 #000
Rental Income:
Trading stock properties 3,550 6,183 (368) (616) 3,182 5,567
Investment properties - 99 - (2) - 97
______ ______ ______ ______ ______ ______
Total 3,550 6,282 (368) (618) 3,182 5,664
Sales of trading stock
properties 74,761 13,193 (55,217) (7,908) 19,544 5,285
Management fees
receivable 702 300 (54) (168) 648 132
______ ______ ______ ______ ______ ______
79,013 19,775 (55,639) (8,694) 23,374 11,081
______ ______ ______ ______ ______ ______
2. Dividends per ordinary share
2003 2002
#000 #000
Special 33p per share (2002: nil) - paid 5,021 -
Interim 1.073p per share (2002: 1.022p) - paid 122 155
Final 3.19p per share (2002: 2.853p) - proposed 363 434
______ ______
5,506 589
______ ______
3. Earnings per ordinary share are calculated using profit after taxation and
minority interests of #10,834,000 (2002: #2,632,000) and the weighted average
number of ordinary shares in issue during the period of 13,082,082 (basic)
(2002: 15,309,991) and 13,100,374 (diluted) (2002: 15,404,977).
4. Triple net assets per share of 297p at 31 January 2003 are stated after the
inclusion of surpluses of #10.0 million (2002: #27.8 million) arising on the
valuation of trading stock properties, including the Group's share of joint
ventures, deducting the taxation liabilities of #3.0 million (2002: #8.3
million) which would arise if such assets were realised at the valuation
amounts, the fair value adjustment referred to in note 5 and the dilution effect
of share options of 2p per share (2002: 4p). The number of ordinary shares in
issue at 31 January 2003 was 11,376,808 (2002: 15,124,543).
5. The Board has assessed the market value of the Group's fixed rate debt and
hedging instruments. The notional adjustment, after tax at 30%, as at 31
January 2003 was as follows:
2003 2002 2003 2002
Pence Pence
#000 #000 per share per share
(Adverse)
Group (283) (1,255) (2.5) (8.3)
6. Notes to the Statement of Cash Flows
2003 2002
#000 #000
a) Reconciliation of net cash flow to
movement in net debt
Increase / (decrease) in cash 158 (225)
Cash (inflow) from increase in loans (11,579) (8,377)
Repayment of long term loans 51,464 7,509
Cash (inflow from) short term deposits (621) (6,069)
Cash (inflow from) / outflow to
institutional cash funds (1,597) 6,673
______ ______
Movement in net debt 37,825 (489)
Net debt at 1 February 2002 (51,796) (51,307)
______ ______
Net debt at 31 January 2003 (13,971) (51,796)
______ ______
2003 2002
#000 #000
b) Reconciliation of operating profit to
net cash (outflow) from operating
activities
Operating profit 19,132 8,084
Loss on disposal of fixed assets 6 -
Depreciation 68 91
Other non cash items 17 -
Decrease in debtors 712 7,056
Decrease / (increase) in stocks 45,333 (8,095)
Increase / (decrease) in creditors 296 (2,299)
______ ______
Net cash inflow from
operating activities 65,564 4,837
______ ______
Analysis of net debt
Cash 168 10
Short term deposits 1,415 2,036
Institutional cash funds 5,323 6,920
Borrowings (20,877) (60,762)
______ ______
(13,971) (51,796)
______ ______
7. Movement in Equity Shareholders' Funds
2003 2002
#000 #000
At 1 February 2002 31,399 30,397
Retained profit for the year 5,328 2,043
Purchase of Ordinary Shares for
cancellation (9,460) (1,196)
Issue of Ordinary Shares 79 155
________ ________
27,346 31,399
________ ________
8. The financial information set out in this announcement does not constitute
the company's statutory accounts, within the meaning of Section 240 of the
Companies Act 1985, for the years ended 31 January 2003 or 2002.
The statutory accounts for the year ended 31 January 2003 will be finalised on
the basis of the financial information presented by the directors in this
preliminary announcement and will be delivered to the registrar of companies
following the company's Annual General Meeting.
The results for the year ended 31 January 2002 have been extracted from the full
accounts for that period which have been delivered to the registrar of companies
on which the auditors have given an unqualified report and did not contain a
statement under s237(2) or (3) of the Companies Act 1985.
This announcement is prepared on the basis of the accounting policies as stated
in the previous years financial statements.
9. The Annual General Meeting (AGM) will be held on the 25 June 2003. If
approved at the AGM, the final dividend of 3.19p per ordinary share will be paid
on 1 July 2003 to shareholders on the register on 9 May 2002.
10. The Annual Report & Accounts will be available from Rugby Estates' offices
at: 14 Garrick Street, London, WC2E 9SB (tel: 020 7632 2200) from Friday 30 May
2003.
11. The slide presentation to analysts will be available at
www.rugbyestates.plc.uk later today, 30 April 2003.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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