RNS No 9627f
BIRKBY PLC
7th July 1998
BIRKBY PLC
Preliminary results for the year to 31 March 1998
KEY POINTS
* Profit before tax up 17% to #11.0 million (1997: #9.4 million)
* Earnings per share increased by 17.5% to 16.8p (1997: 14.3p)
* Proposed net final dividend of 6.5p making a total for the year of 9.0p
* Operating cash flow up 85% to #16.8m
* Record profits from both divisions - achieved substantially from organic
growth rather than from acquisitions. Workspace division profit up 14% to
#9.2 million; retailspace division profit up 18% to #3.3 million.
* Excellent progress in raising occupancy levels and rental rates across
portfolios - average cash equivalent occupancy rate of workspace division
up to 84.6% (1997: 80.5%) and of retailspace division up to 79.3% (1997:
76.4%)
* Satisfactory expansion of portfolio during the period, against background
of inflated property prices - 683,000 sq ft added for #5.7 million
* Majority of acquisitions completed 'off-market', reflected in favourable
purchase prices
* Investment returns of circa 20% within 12/18 months expected from
acquisitions
* Latest acquisition - Glenfield Park Group plc for #6.5 million, the
largest private workspace operator in Lancashire, with portfolio of
510,000 sq ft
* Accelerating rate of acquisition - 760,000 sq ft acquired since year end
at cost of #9.8 million. A further 28 new sites are currently under
offer.
* Encouraging start to new financial year. With a strong balance sheet,
modest gearing and softening property prices, the Board is confident of
further strong progress
Birkby plc:
Bill Cran, Chief Executive
Kim Taylor Smith, Deputy Chief Executive Tel: 0171 377 6677
Biddick Associates:
Zoe Biddick and Katie Tzouliadis Tel: 0171 377 6677
CHAIRMAN'S STATEMENT
Birkby has made good progress during the year to 31 March 1998, with both our
managed workspace and retailspace divisions achieving record profits for the
Group. This reflects the strong demand for premises over the last twelve
months and our success in increasing occupancy levels and rental rates. It is
pleasing to note that the 17% increase in profits was primarily achieved from
organic growth within our existing portfolio rather than from acquisitions.
Despite overheated conditions in the property market during the period, we
also made a number of careful acquisitions, totalling approximately 683,000 sq
ft for an aggregate investment of #5.7 million. The majority of these
acquisitions were made in the final half of the year as prices began to soften
and the full income benefit will not be seen until the current year. We have
concentrated our efforts in purchasing 'off-market' sites, without the use of
agents, the benefit of which is seen in the favourable purchase prices. We
expect all our acquisitions to yield our target rate of return.
Birkby remains the largest operator of managed commercial and retail space in
the UK. The Group's portfolio now totals approximately 6.7 million sq ft over
a total of 177 locations. It is divided into 7,350 individual units, which
are offered for rental on flexible, 'easy-in/easy-out' terms. To date, our
tenant base consists of approximately 4,400 businesses and generates an annual
licence income of approximately #38.1 million.
Results
The Group achieved a profit before taxation of #11.0 million, an increase of
over 17% on the previous year (1997: proforma profit on ordinary activities
before exceptional items of #9.4 million). Earnings per share increased by
17.5% from 14.3p to 16.8p. As at 31 March 1998, consolidated net assets had
risen to #76.9 million, representing an increase of 20% on the previous year.
The Group's net gearing remains low at 38% (1997: 45%), with total net
borrowings at #29.1 million. This includes borrowings of #8.3 million
associated with our instalment credit division, Manor Credit.
Dividend
The Board is proposing to pay a final net dividend of 6.5p, giving a total net
dividend for the year of 9.0p (1997: 8.5p). We have restricted the overall
increase in dividend this year to 6% in accordance with our policy of
maintaining dividend cover of 2 times. The final dividend will be paid on 9
October 1998 to shareholders on the register at 11 September 1998.
Board Changes
After a period of three years, I shall be standing down as Chairman at the
forthcoming Annual General Meeting to resume a non-executive directorship
position. Bill Cran, currently Chief Executive, will be appointed Executive
Chairman. Kim Taylor-Smith, who is presently Deputy Chief Executive and
Finance Director, will assume the role of Chief Executive. Bill Cran will
continue to be actively involved in the strategic development of Birkby while
Kim Taylor-Smith will be responsible for overall operations. I am also pleased
to announce the appointment of Simon Dighton as Finance Director with effect
from the Annual General Meeting.
REVIEW OF ACTIVITIES
MANAGED WORKSPACE - IMEX and Bridge House
Results
The workspace division returned an excellent performance, achieving a profit
before interest and tax of #9.2 million (1997: proforma profit of #8.1
million). This represents 69% of the Group's operating profit. Annual income
rose to #17.1 million from proforma #15.5 million last year. At 31 March
1998, the workspace portfolio totalled 107 operational centres (1997: 102),
divided into approximately 3,700 units, amounting to some 4.9 million sq ft.
The tenant base comprised 2,400 small and medium-sized businesses.
Demand for workspace during the year was strong throughout the UK and
particularly intense for smaller units of around 1,000 sq ft, especially in
the North of England. This underpinned our success in increasing occupancy
levels and rental rates. The cash equivalent occupancy rate during the year
rose to 84.6% (1997: 80.5%), with each percentage increase generating an
additional #200,000 of income. Rental growth, excluding the sites we acquired
during the year, averaged 5.5% and 40% of our portfolio, excluding new sites,
is now fully occupied compared with 24% at the start of the financial year.
We made excellent progress at IMEX Enterprise, formerly British Coal
Enterprise (BCE), which we acquired in January 1997. During the period we
achieved our target of increasing occupancy levels to match those of the
existing IMEX division. This represents an increase of 25% since 1 April 1996,
when we took over the management of BCE.
As a result of our central service operations, IMEX is able to fill spaces in
vacant sites quickly and efficiently, and to improve the performance of new
sites rapidly without any substantial increase in overhead costs. An example
of our success in improving occupancy levels this year was at Greenhill
Business Centre, Glasgow. Acquired as a vacant site in November 1997, we
converted this former factory into a 54-unit workspace centre. By the time of
its opening in early June 1998, 40% of the units had been let. The centre
currently has an occupancy rate of 50% and is comfortably in line with our
stated target investment return.
Our success in increasing occupancy also reflects the strong working
relationships we have established with local councils and economic development
organisations.
Acquisitions and Disposals
During the period, we acquired five new sites and the remaining interest in
two existing ones. Details of the acquisitions and disposals are set out
below.
The Quantum Business Park, Birmingham is now fully let to a single occupier,
yielding an initial return of 58% and, at Washington, we have raised occupancy
from 84.5% to 97.0% over the course of nine months.
In December 1997 we acquired the remaining 50% stake in IMEX Holland, our
joint venture operation, the initial stake having been bought for #1 in 1994.
IMEX Holland operates two estates in Tilburg, South Holland and comprises a
former Phillips factory of 280,462 sq ft and a mill complex of 112,335 sq ft
The estates generate an annual rental income of #600,000 and provide space to
a diverse range of businesses. Although we have no immediate intention of
expanding outside the UK, we are pleased to confirm that the concept of
managed workspace works well in Europe.
Acquisitions 1997/98 Sq Ft Purchase * Current Current
Price annualised Occupancy
licence fee
income
Quantum Business Park,
Birmingham 55,000 #440,000 250,000 100%
Wildon Road/Stirling Road,
Washington 63,034 #720,000 131,000 97%
Greenhill Business Centre,
Glasgow 40,000 #210,000 65,000 50%
West Point Trading Park, Hull 26,138 #485,000 82,000 82%
Gosford Industrial Estate,
Coventry 40,374 #410,000 51,000 60%
Phoenix, Tilburg, Holland 112,335 #584,000 150,000 71%
The Vault, Tilburg, Holland 280,462 #1,716,000 440,700 91%
____________________
617,343 #4,565,000
____________________
Post Year End Acquisitions
Sq Ft Purchase * Current Current
Price annualised Occupancy
licence fee
income
Traction House, Motherwell 115,077 #1,050,000 239,320 80%
Grosvenor Mill,
Ashton-under-Lyne 63,000 #480,000 74,150 72%
Arnold, Nottingham 52,386 #510,000 158,587 87%
Glenfield Park
(5 site portfolio), Lancashire 510,000 #6,475,000 966,000 83%
____________________
740,463 #8,515,000
____________________
Disposals 1997/98
Sale
Proceeds
Western Road Industrial Complex,Birmingham #175,000
Ashington Workshops, Northumberland #275,000
Browning Street Industrial Complex,
Birmingham #395,000
________
#845,000
________
* based on current occupancy exclusive of services
Site Expansion
In areas of heavy demand, we make full use of sites by converting existing
space and building new units on surrounding, unutilised land. This year we
have built additional units at our head office in Birmingham, at Cold
Hesledon, County Durham and at Black Rock Mills in Huddersfield.
Bridge House
Included within the workspace division is Bridge House, which provides
serviced offices from six locations. The company had another successful year
with cash equivalent occupancy rate of 82.8% and contributed #322,000 to the
Group.
MANAGED RETAILSPACE - In Shops
An increase in spending in the lower income sector of the economy, from where
our tenants typically draw their customers, together with a further upgrading
of the portfolio, has contributed to the excellent results from the
retailspace division. In the year under review, In Shops returned a profit
before interest and tax of #3.3 million (1997: #2.8 million). This represents
24 % of Group operating profits. Annual income rose to #24.1 million from
#23.2 million last year. During the period to 7 July 1998, we acquired four
centres and closed one and the In Shops' portfolio now comprises 62 centres.
Demand for retailspace has increased and we made a notable improvement to cash
equivalent occupancy rates, reducing the level of assistance, in the form of
subsidies, we offered retailers. The cash equivalent occupancy rate for the
period was 79.3% (1997: 76.4%) with each percentage increase generating
#260,000 of additional income. The most noticeable improvements were made in
the North-West, Scotland and in some London centres.
Acquisitions and Disposals
Traditionally, In Shops has expanded by taking leases on space within shopping
centres and dividing this space into small units to create a shopping hall.
This strategy relied on our ability to predict the demand for such units over
the period of the lease. However, changes in shopping habits have made this
more difficult. Following the successful trial of Blackpool last year, In
Shops' expansion strategy has focused on acquiring arcades and markets with an
established track record. Details of our acquisitions and disposals are
listed below.
Acquisitions 1997/98
Sq Ft Purchase Annualised Current
Price licence fee Occupancy
income
Clydebank
Shopping Halls, Glasgow 44,000 #667,000 795,000 99%
Wilton Market, Birmingham 22,000 #467,000 384,000 96%
_________________
66,000 #1,134,000
_________________
Post Year End Acquisitions Sq Ft Purchase Annualised Current
Price licence fee Occupancy
income
Northfield, Birmingham 16,648 #777,500 84,000 100%
Eldon Arcade, Barnsley 10,000 #500,000 89,000 95%
__________________
26,648 #1,277,500
__________________
Disposals 1997/98
Supashoppa, High Street, Leven, Fife Surrender of Lease
In the financial year to date, we have added a further three established
markets and one arcade in Barnsley to the network. Since acquiring Wilton
Market, Birmingham we have improved net income by 17.5%, a rise of over
#60,000 per year. In Clydebank, after making improvements to the retail units,
particularly in design and layout, we have increased net income by #944 per
week and raised occupancy levels to 98.7%.
We acquired the freehold of our existing successful retail centre in
Northfield, Birmingham in order to avoid potential onerous rent increases. The
annualised licence fee income of #84,000 referred to above represents the rent
paid by In Shops together with sub-let income from an established retailer.
Eldon Arcade, Barnsley is excellently located and is In Shops' first purchase
of a shopping arcade. Arcades represent a potential new area of expansion for
In Shops. While requiring the same operational skills as a traditional
centre, they are less management intensive.
We successfully disposed of our loss-making centre in Leven, Fife and are
currently in negotiation to dispose of a number of centres this year.
Refurbishment
Where we can see the potential for lifting income, we selectively upgrade
existing centres. In each case so far, the upgrade has attracted higher
customer visits and increased occupancy levels. During the year, we
refurbished our centres in Belfast, Wallsend in Newcastle-upon-Tyne and
Chelmsley Wood in Birmingham. Since the year-end, we have upgraded our centre
in Edmonton, North London and commenced work at Stratford, East London.
Anchor Tenants
We have continued to make progress in introducing large, well-known retailers
to selected centres. This helps to boost customer footfall and, at the same
time, offers secure long-term income. We have strengthened our centres in
Kirkby, Liverpool and Weston-Super-Mare this year with the introduction of
established retailers.
OPERATIONAL IMPROVEMENTS
During the period, we continued the process of improving the operating
structure of the Group. We have paid particular attention to the Central
Service Company, which supports each division and handles four key functions;
Sales & Marketing, Property, Personnel and Administration. The changes we have
implemented, including the installation of a new property management computer
system, are aimed at enhancing the Group's overall operational efficiency and
creating a self-sufficient approach so that we are not reliant on third
parties for business.
This structure improves our ability to exploit 'off-market' opportunities,
raise occupancy levels, monitor key performance areas and maintain a low cost
base. It is also specifically designed to allow further acquisitions to be
quickly integrated within the Group's existing framework with little or no
incremental cost.
PORTFOLIO REVALUATION
At 31 March 1998, in conjunction with the Group's valuers, Eddisons
Commercial, Chartered Surveyors, we undertook a review of our property
portfolio. As a result of increases in property values and rental income, the
revaluation reserve has increased by #10.4 million. We believe the valuation
represents a realistic assessment of the underlying value of the portfolio and
is substantiated by the prices we are currently paying for new sites and from
the profits we have made on the recent disposals.
INSTALMENT CREDIT - Manor Credit
Manor Credit reported a record profit before interest and tax this year of
#960,000 (1997: #824,000). This represents 7% of Group operating profit. A
tight lending policy has been maintained and, as at 31 March 1998, Manor
Credit's outstanding loan book amounted to #11.3 million (1997: #8.7 million)
over approximately 770 agreements, which is a creditable performance given
that we have held borrowings during the year.
CURRENT TRADING AND OUTLOOK
We have made an excellent start to the new financial year. Demand for space
remains buoyant and we are continuing to increase licence fees and raise
occupancy levels.
The property market has softened progressively over the last twelve months and
as predicted our rate of acquisition has gathered momentum. Since the year end
we have acquired five new sites and, today, I am delighted to announce the
acquisition for #6.5 million of Glenfield Park Group plc, the largest private
operator of workspace in Lancashire. Glenfield Park comprises five sites
totalling 510,000 sq ft and provides an initial rental income of #966,000,
excluding service charges. In total therefore, over the last three months,
we have expanded our portfolio by 760,000 sq ft for an aggregate consideration
of #9.8 million. This is well ahead of last year and compares favourably with
our previously stated target of adding 1 million sq ft of space per annum.
Selectivity in acquisitions remains key and we will continue to look for sites
yielding returns of approximately 20% within 12 to 18 months. We expect to
enhance our investment return by dealing "off-market". In addition, we will
continue to dispose of our mature sites in order to re-invest the proceeds in
sites that offer greater growth potential. We will also continue to focus in
particular on developing the workspace division, IMEX.
With our investment in infrastructure over the past years, we have the
capacity to add more acquisitions with little incremental cost and we
currently have a further 28 sites under offer.
Birkby has an excellent record with a strong financial base. The cash inflow
from operations last year was over #16.8 million, representing a return in
excess of 21% on shareholders funds. We have bank facilities of #65 million
and would comfortably operate a much higher level of gearing than currently as
interest is covered a very healthy 5.6 times.
The Directors view both the short and medium term with optimism and look
forward to a year of successful profits and earnings growth.
A M Lewis
Chairman
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 31 March 1998
Statutory Proforma Statutory
1998 1997 1997
Note #'000 #'000 #'000
Turnover:
Continuing operations 46,946 41,434 38,246
Discontinued operations 3,499 19,687 19,687
______ ______ ______
1 50,445 61,121 57,933
Cost of sales (32,322) (39,497) (38,331)
______ ______ ______
Gross profit 18,123 21,624 19,602
Administration expenses (4,771) (10,420) (10,069)
Other operating income 41 210 210
Income from associated undertakings - 95 95
______ ______ ______
2 13,393 11,509 9,838
______ ______ ______
Operating profit
Continuing operations 13,393 11,601 9,930
Discontinued operations - (92) (92)
Profit on part disposal of Hill
Hire plc - 1,723 1,723
Loss on disposal of Milbank
Foods Limited - (1,000) (1,000)
______ ______ ______
Profit on ordinary
activities before interest 13,393 12,232 10,561
Interest receivable and
similar income 416 395 395
Interest payable and similar charges (2,796) (2,545) (1,831)
______ ______ ______
Profit on ordinary activities
before taxation 11,013 10,082 9,125
Tax on profit on ordinary activities (2,752) (2,519) (2,281)
______ ______ ______
Profit for the financial year 8,261 7,563 6,844
Dividends 5 (4,425) (4,187) (4,187)
______ ______ ______
Profit retained for the year 3,836 3,376 2,657
______ ______ ______
Earnings per share: 6
Before exceptional items 16.8p 14.3p 12.9p
FRS 3 basis 16.8p 15.4p 14.0p
CONSOLIDATED BALANCE SHEET
As at 31 March 1998
1998 1998 1997 1997
#'000 #'000 #'000 #'000
Fixed assets
Tangible fixed assets 110,281 95,533
Investments - 163
_______ _______
110,281 95,696
Current assets
Stocks 1,544 5,893
Debtors due after more
than one year 6,451 4,644
Debtors due within one year 8,698 9,201
Cash at bank and in hand 357 741
______ ______
17,050 20,479
Creditors: amounts
falling due within one year (23,514) (31,695)
______ ______
Net current liabilities (6,464) (11,216)
Total assets less
current liabilities 103,817 84,480
Creditors: amounts
falling due after more
than one year (24,200) (17,429)
Provisions for
liabilities and
charges (248) (496)
Accruals and deferred income
Licencees' deposits (2,478) (2,293)
_______ _______
Net assets 76,891 64,262
======= =======
Capital and reserves
Called up share capital 2,458 2,457
Share premium account 21,975 21,943
Revaluation reserve 14,065 3,686
Merger reserve 10,340 15,333
Capital reserves 701 7,708
Profit and loss account 27,352 12,740
______ ______
Equity shareholders'funds 76,891 63,867
Minority interest - 395
______ ______
76,891 64,262
====== ======
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 March 1998
1998 1997
#'000 #'000
Cash inflow from operating activities 16,810 9,103
Returns on investments and servicing of finance (2,380) (1,436)
Taxation (1,737) (1,255)
Capital expenditure (2,470) (2,994)
Acquisitions and disposals (4,943) (5,817)
Equity dividends paid (5,409) (3,926)
_______ _______
Cash outflow before financing (129) (6,325)
Financing 5,599 5,599
_______ _______
Increase/(decrease) in cash in year 5,866 (726)
======= =======
RECONCILIATION OF CASH FLOW TO MOVEMENT IN NET DEBT
1998 1997
#'000 #'000
Increase/(decrease) in cash in the financial year 5,866 (726)
Cash outflow from increase in debt (5,962) (5,416)
______ ______
Movement in net debt during the (96) (6,142)
financial year
Net debt at beginning of financial year (29,019) (22,877)
_______ ______
Net debt at end of financial year (29,115) (29,019)
======= ======
FINANCIAL NOTES
Statutory Proforma Statutory
Analysis of turnover by 1998 1997 1997
business segment: #'000 #'000 #'000
Managed workspace 17,059 15,514 12,326
Managed retailspace 24,129 23,197 23,197
Discount retailing - discontinued 3,499 19,687 19,687
Instalment credit 1,281 1,065 1,065
Property and other 4,477 1,658 1,658
___________ ___________ ___________
50,445 61,121 57,933
___________ ___________ ___________
Inter segmental sales are not a material part of total Group turnover. All of
the above turnover is supplied in the UK with the exception of #210,000 which
is supplied in Holland by IMEX Holland BV.
Statutory Proforma Statutory
Analysis of profit before
interest and taxation by 1998 1997 1997
business segment is as follows: #'000 #'000 #'000
Managed workspace 9,180 8,074 6,403
Managed retailspace 3,260 2,793 2,793
Discount retailing - discontinued - (192) (192)
Commercial vehicle hire - 100 100
Instalment credit 960 824 824
Property and other (7) (90) (90)
________ _________ _________
13,393 11,509 9,838
Profit on part disposal of Hill Hire plc - 1,723 1,723
Loss on disposal of Milbank Foods Limited - (1,000) (1,000)
________ _________ _________
Group profit before
interest and taxation 13,393 12,232 10,561
======== ========= =========
Property and other is shown net of certain overheads incurred by the Group.
The analysis of business segments has been reclassified to better reflect the
operating position of the Group. In 1998, certain costs have been
reclassified from administration expenses to cost of sales (or vice versa) and
the comparatives restated accordingly.
3. The 1997 proforma information includes the results of British Coal
Enterprise Limited ("BCE") with effect from 1 April 1996 rather than the
actual date of acquisition (7 January 1997). This additional
information has been presented in order to facilitate an understanding
of the performance of the business under Birkby's management in 1997, and
provides a more meaningful comparative for the year ended 31 March 1998.
4. Discontinued operations relate to the remaining part disposal of Hill
Hire plc and the disposal of Milbank Foods Limited.
5. The final dividend of 6.5p net is payable on 9 October 1998 to
shareholders on the register on 11 September 1998.
6. The calculation of earnings per share under FRS 3 is based on the profit
for the period after taxation of #8.26m (1997: proforma #7.6m, statutory:
#6.8m) and on the average weighted number of ordinary shares in issue
during the year of 49,147,000 (1997: 48,978,000 ordinary shares). The
earnings per share excluding exceptional items in 1997 is before the
net profit on the disposal of the remaining stake in Hill Hire plc,
together with the exceptional loss of the sale of Milbank Foods Limited.
Earnings per share Earnings per share
before exceptional items under FRS 3
Year ended 31 March 1998 16.8p 16.8p
Year ended 31 March 1997 proforma 14.3p 15.4p
Year ended 31 March 1997 statutory 12.9p 14.0p
7. The financial information set out above does not constitute the Company's
Statutory Accounts for the years ended 31 March 1997 or 31 March 1998 but
is derived from those accounts. Statutory accounts for 1997 have been
delivered to the Registrar of Companies and those for 1998 will be
delivered following the Company's Annual General Meeting. The Auditors
have reported on those accounts; their reports were unqualified and did
not contain statements under Section 237 (2) or (3) of the Companies Act
1985.
8. Copies of the Annual Report and Accounts for the year ended 31 March 1998
will be despatched to shareholders in due course. Copies will be
available from the Company Secretary, Birkby PLC, Warwick House, Spring
Road, Hall Green, Birmingham B11 3EA and the Company's Registered Office.
END
FR SSAFAMUAUFLW
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