RNS No 3658h
CRESTON LAND & ESTATES PLC
20th October 1997
Chairman's Statement
It is with pleasure that I am able to report an increase
in net assets per share for the year ended 30 June 1997
of 50% to 10.27 pence per share. This good result mainly
arose from a combination of the profit for the financial
year of #1,657,000 and transfer to the revaluation
reserve of #1,210,000. The issue of ordinary shares in
connection with the acquisition of Meridian Land Limited
at a price in excess of net asset value per share was
also a contributing factor.
Profit before taxation on ordinary activities amounted to
#1,657,000 compared with #1,503,000 for the previous
year, which included an exceptional credit of #465,000.
Excluding this item there was an increase in profits of
60%. There was no charge for taxation due to the
availability of tax losses and allowances. Earnings per
share were 1.8 pence compared with 2.0 pence for the
previous year and 1.4 pence excluding the exceptional
profit. Notwithstanding the good result, the board have
not proposed a dividend for the year as they presently
consider that the company's cash resources are most
beneficially employed within the business.
The board's strategy over the last two years has had two
principal objectives. Firstly, to enlarge the recurring
income base to produce a positive cash flow after funding
overheads and interest. Secondly, to exploit fully the
group's asset selection and management skills to enhance
the value of its property investments and create property
dealing profits. The steps taken during the year by the
group's executives towards achieving these objectives
have been successful.
Attention has also been given towards improving the
company's financial base. New share capital of
#1,832,000 net of expenses was issued, which was
principally in connection with the acquisition of
Meridian Land Limited. This issue, together with the
profit for the financial year and the transfer to
revaluation reserve, has enabled the group to finance a
proportionately larger property portfolio that in the
present favourable market conditions provides enhanced
opportunity.
A large part of the group's debt was also refinanced with
Bank of Scotland under a #17 million seven and a half
year revolving credit facility. Most of the debt under
this facility is at fixed interest rates with the
consequence that 75% of total debt, excluding convertible
loan stocks and convertible loan notes, is financed at
fixed rates and is repayable in more than five years.
Accordingly, over the medium term the potential threat to
the group's cash flow of higher interest rates has been
considerably reduced.
In the light of opportunities already created the board
is confident of the group's prospects for the current
year. As noted in the Operating Review the last
financial year was extremely busy as well as successful
and, accordingly, I would like to express the board's
appreciation of the very considerable efforts of the
group's employees. I would also like to express the
board's thanks to Mr Ansdell who resigned as a director
in April this year.
RONALD G HOOKER CBE F Eng
Chairman
Operating Review
The last financial year was extremely busy and, in light
of the substantial improvement of 50% in net assets per
share, very successful. The group's property portfolio
increased in size from #24.2 million to #43.7 million and
the rent roll rose by 80% to #4.3 million.
Meridian Land Limited with its #13.3 million property
portfolio was our first corporate acquisition. Its
activities were quickly integrated with those of the rest
of the group. Each property has been considered and
steps have and continue to be taken to maximise their
current value and potential for growth. Meridian's
portfolio contributed a positive cash flow and a modest
revaluation surplus. Trading profits of #380,000 were
also realised on the conclusion of a small joint venture
in Ealing and the receipt of a profit share upon the
completion of a sale at Mizens Farm, Woking to Tag
McLaren Holdings Limited.
A potentially important development for the group relates
to the interest expressed by H M Prison Service in
Middleton Towers, Morecambe, a former Pontins holiday
camp that is owned by a 75% subsidiary. The 65 acre site
is currently being considered for use as a category C
prison and a public enquiry has been scheduled for the
near future to consider the proposed use.
In addition to Meridian's portfolio, four properties were
acquired during the year for a total of #10.1 million
including costs.
St George's Court, New Malden was acquired in October
1996. This office property is let on long leases with
84% of rental income from a major covenant. With the
market continuing to improve for such buildings the
prospect of an enhancement in value is good.
In December 1996 Premier House, Woking was acquired.
This office building, which is located within the town
centre, offers scope for redevelopment or refurbishment
and with office rentals reaching #20 per sq ft we expect
to see enhancement in value. In addition to the offices
there is 8,000 sq ft of retail space that was let to
BeWise Limited for a further two years. Simultaneously
with acquisition a new, 15 year lease was granted to
BeWise, with a landlord's only break option after two
years, and the property was revalued at a surplus.
Brighouse Court, Gloucester a 36,000 sq ft office
building let to five good covenants on predominantly long
leases was purchased in December 1996. The void areas at
the time of purchase have now been let and the property
is expected to be profitably disposed of in the current
financial year.
A retail warehouse in Southampton was acquired in May
1997 with a strategy in mind. Shortly after the
acquisition a lease surrender was negotiated from its
tenant. Steps are underway to re-let the property at an
enhanced rental, which should result in an increase in
value over purchase price.
Three properties were sold during the year, including the
company's former head office at 34 Grosvenor Gardens, at
an overall profit of #424,000. In addition, after a
lengthy delay the Dunblane land was sold, contributing to
profits by #350,000.
Contrary to expectations, the outcome of the planning
application for increased leisure activities at
Dougalston Golf Course, which has been sold subject to
receiving planning permission, remains outstanding. The
remaining 14 acres of land at Springhill, Glasgow are
being marketed and it is hoped to dispose of most of it
for residential development during the current financial
year.
Following the year end, the leasehold interest in 26
Grosvenor Gardens, London SW1 was purchased. The 6,000
sq ft of offices is partly used as the company's new
headquarters and it is anticipated that 4,000 sq ft will
be sublet adding further to the group's growing rent
roll. In addition there is a Mews house with a further
1,200 sq ft of space.
As the Chairman noted in his statement, opportunities
have already been created that provide the basis for
continuing success during the current financial year.
Our intention is to convert that potential into an
increase in net assets per share, but we shall give equal
attention to developing new opportunities to provide the
basis for further growth in later years.
THOMAS P KING
Managing Director
Financial Review
As set out in the Chairman's Statement the group has
pursued a strategy with two main objectives. Firstly, to
enlarge its recurring income base to create a positive
cash flow after deducting overheads and interest.
Secondly, to exploit the group's asset selection and
management skills to enhance the value of its property
investments and create dealing profits. The group's
financial policies have been set to facilitate the
achievement of these objectives.
With the increase in the group's portfolio during the
year, turnover, excluding that relating to property
trading and other significant non-recurring items, rose
to a level approximately equal to overheads and interest
expense. Overheads were carefully controlled with the
main component, administrative expenses, falling
marginally. Looking ahead it remains a priority to
continue to build recurring positive net cash flow.
To facilitate the group's ability to enhance the value of
its property investments and create dealing profits, the
group continued to be fully invested with the consequence
that gearing remained high. The board considers that in
the current favourable property market conditions this
policy offers greater opportunity for growth in net
assets per share. Nevertheless, measures have been taken
to protect the group from the risk, exacerbated by high
gearing, of an increase in interest rates.
During the year a large part of the group's debt was
refinanced with Bank of Scotland under a #17 million
seven and a half year revolving credit facility. The
interest rate on #11.5 million of the facility was fixed
for seven years and a further #2.5 million was fixed for
five years. The balance of the facility is afforded
protection from significantly higher short term interest
rates by an interest rate cap, purchased over three years
ago. In addition to interest rate protection, this
facility enables the company to react rapidly to market
opportunities by eliminating the requirement to enter
fresh loan documentation for each transaction.
As a consequence of the Bank of Scotland refinancing, 75%
of the group's debt, other than convertible loan stocks
and convertible loan notes, is financed at fixed interest
rates and is repayable in more than five years.
Furthermore, the majority of the remaining 25% is also
financed at fixed rates, although repayable within five
years. Other than the Bank of Scotland debt, all of the
group's debt is of non-recourse or of limited recourse to
assets other than those directly financed by such debt.
As referred to in note 14 to the accounts, the #3 million
6% convertible redeemable unsecured loan stock is subject
to redemption in March 1999 or shortly afterwards. The
board has already given consideration to various options
for refinancing this debt. Note 14 to the accounts also
indicates that there are three long term loans with
interest rates that average to slightly more than 13%.
These loans came as part of the acquisition of Meridian
Land Limited. On consolidation a fair value adjustment
has been made in recognition of their high interest
rates, which will be amortised against interest expense
over the periods of these loans.
On 30 June 1997 the group's freehold and long leasehold
property was valued by the directors at #29.3 million.
In relation to property valued at #25.1 million, these
valuations were, as set out in note 8 to the accounts,
based on professional valuations carried out earlier in
the year. In reaching these directors' valuations only
very minor adjustments were made to the professional
valuations of three of these properties. During the year
75% of the group's stock property was also subject to
professional valuations, which confirmed that their book
values were equal to or less than open market value.
CARL D FRY FCA
Finance Director
Consolidated Profit and Loss Account
for the year ended 30 June
1997 1996
#000 #000
Turnover 5,952 8,062
Existing activities 3,987 7,667
Acquisitions 1,965 -
Continuing activities 5,952 7,667
Discontinued activities - 395
Cost of sales (587) (3,882)
Gross profit 5,365 4,180
Existing activities 3,562 4,365
Acquisitions 1,803 -
Continuing activities 5,365 4,365
Discontinued activities - (185)
Administrative expenses (1,541) (1,601)
Operating profit 3,824 2,579
Existing activities 2,085 2,871
Acquisitions 1,739 -
Continuing activities 3,824 2,871
Discontinued activities - (292)
Profit on disposal of investment 424 -
properties
Exceptional items relating to - 465
subsidiaries and associate
Profit on ordinary activities before 4,248 3,044
interest
Net interest payable (2,591) (1,541)
Profit on ordinary activities before 1,657 1,503
taxation
Existing activities 830 1,275
Acquisitions 827 -
Continuing activities 1,657 1,275
Discontinued activities - 228
Tax on profit on ordinary activities - -
Profit for the financial year #1,657 #1,503
Earnings per share 1.8 p 2.0p
Fully diluted earnings per share 1.6 p 1.7p
Dividends - -
Consolidated Balance Sheet
at 30 June
1997 1996
#000 #000
Fixed assets
Tangible assets 29,345 20,371
Investments - 17
29,345 20,388
Current assets
Stocks 14,421 3,899
Debtors 3,313 1,058
Cash at bank and in hand 355 1,470
18,089 6,427
Creditors: amounts falling
due within one year
including convertible debt (4,178) (2,835)
Net current assets 13,911 3,592
Total assets less current liabilities 43,256 23,980
Creditors: amounts falling due
after more than one year
including convertible debt (33,452) (17,735)
Provisions for liabilities and charges (153) (1,000)
Net assets #9,651 #5,245
Capital and reserves
Called up share capital 940 766
Share premium account 3,925 2,267
Revaluation reserve 1,420 264
Special reserve 1,386 1,386
Other reserve (339) (46)
Profit and loss account 2,319 608
Total equity shareholders' funds #9,651 #5,245
Statement of Total Recognised Gains and Losses
for the year ended 30 June
1997 1996
#000 #000
Profit for the financial year 1,657 1,503
Transfer of deferred fees to the
revaluation reserve 1,000 -
Unrealised surplus on revaluation of
properties 210 77
Total recognised gains and losses
for the year #2,867 #1,580
Reconciliation of Movements in Shareholders' Funds
for the year ended 30 June
1997 1996
#000 #000
Total recognised gains and losses for the
year 2,867 1,580
New share capital subscribed 1,832 178
Goodwill transferred to profit and loss account in
respect of subsidiary no longer held - 289
Goodwill written off on acquisition (293) -
Net addition to shareholders' funds 4,406 2,047
Opening total equity shareholders' funds 5,245 3,198
Closing total equity shareholders' funds #9,651 #5,245
Historical Cost Profits and Losses
for the year ended 30 June
1997 1996
#000 #000
Reported profit on ordinary activities
before taxation 1,657 1,503
Net difference between the
profit on the disposal of
assets calculated on historical
costs and that calculated on
revalued amounts 52 -
Difference between historical
cost depreciation charge and the
depreciation charge for the
year based on the revalued amount 2 2
Historical cost profit on ordinary activities before
taxation 1,711 1,505
Historical cost profit for the year #1,711 #1,505
Consolidated Cash Flow Statement
for the year ended 30 June
1997 1996
#000 #000
Net cash (outflow) inflow from
operating activities (4,286) 1,966
Returns on investments and
servicing of finance
Interest received 103 108
Interest paid (3,918) (1,850)
Net cash outflow from
returns on investments and
servicing of finance (3,815) (1,742)
Taxation - -
Capital expenditure and financial investment
Purchase of property (3,296) (974)
Purchase of plant, vehicles and equipment (45) (20)
Sale of property 4,519 75
Sales of plant, vehicles and equipment 16 28
Net cash inflow (outflow) from capital expenditure
and financial investment 1,194 (891)
Acquisitions and disposals
Purchase of a subsidiary undertaking:
Cash, including costs of acquisition (1,159) -
Share issue expenses written off to share
premium (80) -
Cash at bank acquired with subsidiary 1,197 -
Charged cash balance forgone
on liquidation of
subsidiaries - (1,561)
Net receipt from subsidiary in receivership - 25
Net cash outflow from acquisitions and
disposals (42) (1,536)
Net cash outflow before financing (6,949) (2,203)
Financing
Issue of share capital for cash consideration 301 178
New medium term loans 22,192 1,199
Repayment of bank loans (16,373) (640)
Net cash inflow from financing 6,120 737
Decrease in cash #(829) #(1,466)
END
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