RNS No 4478a
BIRKBY PLC
2nd December 1998
BIRKBY PLC
UK's leading provider of managed commercial property to small businesses
Interim results for the six months ended 30 September, 1998
KEY POINTS
* Property portfolio substantially expanded - over 1.1m sq ft added for
total of #15m - already beating annual acquisition target
* Pre-tax profit rose by 20% to #5.98m (1997: #4.97m)
* Earnings per share lifted 20% to 9.1p (1997: 7.6p)
* Interim dividend increased to 2.6p (1997: 2.5p)
* Investment return of 20% within 12/18 months expected from acquisitions
* Demand for both light industrial space and retail space buoyant
* Excellent progress at Workspace Division, IMEX:
- profit before interest and tax up 23% to #5.47m
- 4% rise in current annualised rental income from 31 March 1998
(excluding new sites)
- 22 new sites added at cost of #13.2m during the period to 30
November 1998
- current cash equivalent occupancy rate of 84.7% (including new sites)
* Good progress at Retailspace Division, In Shops:
- profit before interest and tax up 20% to #1.52m
- current cash equivalent occupancy rose by 1.3% to 83.6%
- continuing acquisition of arcades - Barnsley and Accrington added
- refurbishment programme progressing well - work completed at 3 centres
- successful disposal of underperforming centre in Essex
* Outlook remains extremely positive - Board expects continuing profitable
organic growth combined with further acquisitions
Enquiries:
Birkby plc: Kim Taylor Smith, Chief Executive Tel: 0171 377 6677
Nikki Smith, PR Manager Tel: 0121 778 2233
Biddick Associates: Zoe Biddick and Katie Tzouliadis Tel: 0171 377 6677
CHAIRMAN'S STATEMENT
INTRODUCTION
I am delighted to report that Birkby has made excellent progress during the
first half of the year to 30 September 1998. Demand for both light industrial
space and retail space during the period has been buoyant, enabling us to
increase our occupancy levels and rental rates. In addition, in a softening
marketplace, we have substantially expanded our property portfolio, having
acquired over 1.1 million square feet of space. This is an excellent
achievement and means that we have already exceeded our annual acquisition
target for the year.
RESULTS
Group profit before tax for the six months ended 30 September 1998 increased
by 20% to #5.98 million (1997: #4.97 million), with earnings per share rising
by 20% to 9.1p (1997: 7.6p).
Since the beginning of the financial year, the Group has invested #15.3
million and anticipates further opportunities throughout the year. Bearing
this in mind, the Board of Directors recommends an interim dividend of 2.6p
(1997: 2.5p) which will be paid on 6 April 1999 to shareholders on the
register on 5 March 1999.
REVIEW OF ACTIVITIES
We are confident that all of our acquisitions will achieve our target rate of
return within 12 to 18 months. The Group now manages over seven million
square feet of space, across 191 locations, providing 7,800 units for rental
and generating an annual licence fee income of #40 million.
Workspace Division - IMEX
The workspace division now accounts for 74% of Group profits and generates an
annual licence fee of #18.2 million. For the six months to 30 September 1998
profit before interest and tax was #5.47 million (1997: #4.45m), an increase
of 23% on the previous year. Including acquisitions, the division now operates
127 sites throughout the UK and an additional two sites in Tilburg, Holland.
The demand for flexible workspace units remained buoyant across the country
with particularly strong demand experienced in the north of England.
Excluding the new sites acquired during the period, the current annualised
rental income rose by 4% from 31 March 1998, reflecting both increases in
rates and occupancy. Adjusted for the new sites, the current cash equivalent
occupancy rate currently stands at 84.7%.
Since the beginning of 1998, we have seen greater movement within our centres;
the traditional effect of a slowdown in the economy. Our experience is that
in times of economic uncertainty, existing customers will downsize into
smaller units while new customers move in, attracted by the flexibility we
offer. Our average customer occupies 1,500 sq ft, employs 2/3 people and pays
#100 per week and this end of the market has always proved particularly
resilient to a hardening in the economy.
Key statistics for the workspace division are given below:
Current At 31 March 1998
Number of workspace centres 129 107
Total sq ft 6.0 million 4.9 million
Number of units 4,056 3,658
Max. annualised rental income #21.5 million #18.1 million
Annualised rental income #18.2 million #15.3 million
Cash equivalent occupancy rate 84.7% 84.6%
Workspace acquisitions and developments
We have been taking advantage of the continuing softening in property prices
during 1998 and our acquisitions programme has been extremely active. During
the period to 30 November 1998, including those purchases we announced in July
with our final results, we have added a total of 22 new sites for an aggregate
consideration of #13.2 million. I am delighted to report that these
acquisitions are integrating well and we are making good progress in raising
occupancy levels.
Our most significant acquisition in the first half was Glenfield Park Group
plc, the largest private workspace operator in Lancashire, for #6.5 million.
The Glenfield portfolio of five well maintained sites has integrated well with
our existing operation and is performing ahead of expectations. Plans are
underway to convert unutilised space in Blackburn and some of the larger units
are in the process of being sub divided into smaller units. In addition, the
acquisition of Glenfield has given us an excellent opportunity to establish a
new regional office in the north west.
We have been particularly keen to expand our presence in the north east where
demand for space has been high. In July, we bought a portfolio of 11 sites
comprising 275,000 sq ft, from Easington District Council for a total
consideration of #3.7 million. In November, we extended our north east network
further with the acquisition of the Barrington Industrial Estate, Ashington,
from Wansbeck District Council for #463,000. The site comprises 15 units
totalling some 30,702 sq ft with scope to increase income by raising occupancy
levels. These acquisitions reflect the excellent working relationships we have
established with local authorities in our regions and underline the importance
of these relationships in providing a source for potential acquisitions and
customer inquiries. On our part, we are pleased that the success of our
business helps to regenerate local economies.
In November, we acquired a site in Rotherham, South Yorkshire for #375,000,
bringing the total number of our sites in the Yorkshire region to 30. The site
complements our existing centre at Templeborough, near Rotherham and comprises
17,000 sq ft of modern industrial units. It is currently let to a single
occupier, returning 14.2% net. We intend to subdivide the units when the
tenant vacates at the end of the year.
Within our portfolio, we own a significant amount of undeveloped land and
where demand is strong we will develop and build additional units, provided
our investment criteria of 20% return within 12 to 18 months can be satisfied.
Examples of this are the 18 new units of 1,000 sq ft each that are in the
course of construction at Bilston Glen, Edinburgh where the existing centre is
fully occupied. Work has also commenced to divide Traction House, Motherwell
purchased in May this year from the receivers. The site, formerly a bus depot,
comprises 115,077 sq ft and will be broken into smaller units. Work has also
commenced on building 14 new units totalling 37,000 sq ft at Hucknall,
Nottingham and we anticipate starting construction on a further 12 units
totalling 14,000 sq ft at Trentham, Stoke and on 4 units totalling 11,500 sq
ft at Templeborough in the new year.
Retailspace Division
In Shops, which accounts for 20% of Group profit before interest and tax, has
continued to perform well and is trading ahead of last year. Profit before
interest and tax rose by 20% to #1.52m (1997: #1.27m).
In common with other retailers, our customers have experienced a quiet summer.
Although customer footfall within our centres has remained steady, the retail
spend is down. Against this background, we have worked hard and have increased
both income and the quality of our retailers, with an increase achieved of
3.8% in maximum licence fee. Cash equivalent occupancy is currently 83.6% up
1.3% on the same point last year and performance is ahead of expectations.
Key statistics for the retailspace division are set out below:
Current At 31 March 1998
Number of retail centres 62 61
Number of units 3,415 3,444
Max. annualised rental income #27.2 million #25.9 million
Annualised rental income #21.7 million #20.5 million
Average cash equivalent
occupancy rate for period 79.9% 79.3%
Current cash equivalent occupancy rate 83.6%(20.11.98) 82.3%(21.11.97)
We are approaching the important Christmas trading period where activity at
this time of year acts as an indicator of future performance, particularly in
the new year, when many retailers reduce their trading. Although it is still
too early to tell, we are seeing some encouraging signs. Forward notices are
down on the previous year and lettings and enquiry levels are up.
Retailspace Acquisitions and Developments
The continuing focus for In Shops is the acquisition of established arcades or
markets and the upgrading and strengthening of the current portfolio. Further
acquisition opportunities are currently being explored and will be taken where
the investment represents the required rate of return.
Arcades represent an exciting opportunity for In Shops as the concept is
similar to our existing centres. However, arcades are less management
intensive. Eldon Arcade, Barnsley was the first arcade to be purchased by In
Shops and its acquisition was announced with our annual results. In September,
we purchased for #750,000 a second arcade in Accrington. The arcade totals
over 16,900 sq ft and is divided into 21 units, with office space above. The
arcade is currently 60% let and shows an initial return of 14% but with a
concentrated lettings campaign we are confident of increasing this further.
During the period we have been successful in disposing of a loss making centre
in Grays, Essex. We have taken the opportunity of assigning our lease to an
established retailer in advance of the opening of The Bluewater Shopping
Centre located nearby.
Our programme of selectively upgrading existing centres and introducing
established retailers as anchor tenants in order to increase footfall
continues to progress well. In the six months to 30 September 1998, we
completed works at our centres in Edmonton, North London, Stratford, East
London and the Swan Centre in Birmingham. Furthermore, we have let 7,000 sq ft
of space at the Swan Centre to Scoops (part of Grattan plc) and Bewise opened
on 24 November in our Greenock centre.
Instalment Credit
Manor Credit, which accounts for 7% of Group profit before interest and tax,
has continued to increase profitability even within the tight constraints
imposed by the Group. As the Group is currently investing heavily in new
acquisitions, borrowings have been restricted to #8m. As at 30 September 1998,
the division contributed profits before interest and tax of #0.54m (1997:
#0.45m), an increase of 20% on the same period last year. A policy of tight
control ensures bad debts and arrears remain low and the loan book amounted to
#11.1 million, spread across 719 agreements.
Financial Review
In the six months under review, the consolidated net asset value of the Group
has increased by 3.5% from #76.9m to #79.6 m. The cash flow of the Group
continues to be particularly strong and generated #7.5m (1997: #6.3m) in the
six months to 30 September 1998. Capital expenditure, of which almost all
related to either the acquisition or development of new sites, totalled #15.3m
(1997: #2.0m) and total net indebtedness now stands at #39.6m (1997: #27.2m).
This equates to gearing of 49.8% (1997: 41.2%). With facilities of #65m
available the Group is ideally placed to make further substantial
acquisitions.
Current Trading and Outlook
Prospects for the Group remain extremely encouraging. We have made excellent
progress during the year, having successfully integrated over one million
square feet of new space into our portfolio and, at the same time, increased
the return from our existing network.
We believe that there are many more opportunities for us in the current
property market to realise our acquisition criteria of a 20% return on capital
within 12 to 18 months. With the benefit of our strong cash flow and the
significant funds we have available, we expect our acquisition programme to
continue vigorously.
The Board looks forward with optimism to reporting further successful and
profitable organic growth in 1999, combined with more acquisitions.
Bill Cran
Chairman
SUMMARISED PROFIT AND LOSS
ACCOUNT
for the six months ended 30
September 1998
Six months Six months Year to
ended 30 Sept ended 30 Sept 31 March
1998 1997 1998
#000 #000 #000
TURNOVER
Continuing operations 22,507 20,081 46,946
Discontinued operations - 3,499 3,499
_________ _________ _________
22,507 23,580 50,445
========= ========= =========
OPERATING PROFIT
Continuing operations 7,396 6,147 13,393
Discontinued operations - - -
========= ======== =========
PROFIT ON ORDINARY ACTIVITIES
BEFORE INTEREST 7,396 6,147 13,393
Interest payable (net) (1,419) (1,179) (2,380)
_________ _________ _________
PROFIT ON ORDINARY ACTIVITIES
BEFORE TAXATION 5,977 4,968 11,013
Taxation (1,494) (1,242) (2,752)
_________ _________ ________
PROFIT FOR THE FINANCIAL PERIOD 4,483 3,726 8,261
Dividends (1,268) (1,229) (4,425)
_________ _________ ________
RETAINED PROFIT FOR THE
FINANCIAL PERIOD 3,215 2,497 3,836
========= ========= ========
Earnings per share
FRS 14 (basic and fully diluted) 9.1p 7.6p 16.8p
Dividend per share 2.6p 2.5p 9.0p
SUMMARISED CONSOLIDATED BALANCE SHEET
as at 30 September 1998
At 30 Sept At 30 Sept At 31 March
1998 1997 1998
#000 #000 #000
FIXED ASSETS
Tangible assets 127,036 97,275 110,281
Investments - 240 -
________ ________ ________
127,036 97,515 110,281
======== ======== ========
CURRENT ASSETS
Stocks 718 2,251 1,544
Debtors: due after more than one year 5,781 5,794 6,451
Debtors: due within one year 11,157 8,536 8,698
Cash at bank and in hand 72 194 357
________ _______ _______
17,728 16,775 17,050
Creditors: amounts falling due
within one year (35,773) (29,805) (23,514)
_________ _________ ________
NET CURRENT LIABILITIES (18,045) (13,030) (6,464)
_________ _________ ________
TOTAL ASSETS LESS
CURRENT LIABILITIES 108,991 84,485 103,817
Creditors: amounts falling due
after more than one year (26,335) (15,812) (24,200)
PROVISIONS FOR LIABILITIES
AND CHARGES (415) (198) (248)
ACCRUALS AND DEFERRED INCOME (2,690) (2,369) (2,478)
________ ________ _______
NET ASSETS 79,551 66,106 76,891
======== ======== =======
CONSOLIDATED CASH FLOW STATEMENT
for the six months ended 30 September 1998
Six months Six months Year to
ended 30 Sept ended 30 Sept 31 March
1998 1997 1998
#000 #000 #000
CASH INFLOW FROM OPERATING
ACTIVITIES 7,491 6,298 16,810
RETURNS ON INVESTMENTS AND
SERVICING OF FINANCE (1,560) (1,179) (2,380)
TAXATION (358) (191) (1,737)
CAPITAL EXPENDITURE (10,526) (2,169) (2,470)
ACQUISITIONS AND DISPOSALS (4,821) 165 (4,943)
EQUITY DIVIDENDS PAID - (1,134) (5,409)
--------- --------- ---------
Cash (outflow)/inflow before financing (9,774) 1,790 (129)
FINANCING 1,247 (1,605) 5,995
--------- --------- ---------
(DECREASE)/INCREASE IN CASH IN PERIOD (8,527) 185 5,866
========= ========= ========
OPERATING PROFIT 7,396 6,147 13,393
Profit from associated undertakings - (20) -
Depreciation charges 692 630 1,346
Loss on sale of fixed assets 61 - 11
Decrease in stocks 826 44 675
Increase in debtors (1,329) (92) (659)
(Decrease)/increase in creditors (155) (411) 2,044
--------- --------- --------
NET CASH INFLOW FROM OPERATING
ACTIVITIES 7,491 6,298 16,810
========= ========= =======
ANALYSIS OF NET DEBT
At 1 April At 30 Sept
1998 Cash flow 1998
#000 #000 #000
Cash at bank and in hand 357 (285) 72
Overdrafts (4,472) (8,242) (12,714)
--------- --------- ---------
(4,115) (8,527) (12,642)
Debt due within one year (1,000) (300) (1,300)
Debt due after one year (24,000) (1,700) (25,700)
--------- --------- ---------
(29,115) (10,527) (39,642)
========= ========= =========
END
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