Warner Estate Hldgs. - Final Results - PART 1
11 12월 1998 - 4:30PM
UK Regulatory
RNS No 9130a
WARNER ESTATE HOLDINGS PLC
11th December 1998
PART 1
WARNER ESTATE HOLDINGS PLC - 1998 PRELIMS
28th successive annual dividend increase
* Warner Estate, the UK property investor, announces that
pro forma NAV per share increased by 15% to 319p (1997:
278p) at 30 September 1998 on the basis, which the
Directors consider shows a fairer view, that share of NAV
rather than market capitalisation is used for stockmarket
property investments, notably the long-standing 13%
holding in Bradford Property Trust, the UK's largest
listed residential property company.
* The audited NAV per share shows 301p (1997: 308p)
reflecting the fall in stockmarket values.
* After purchases and sales, the total value of investment
property rose to #158.2 million from #141.5 million. The
residential valuation produced a surplus of 25% and the
commercial 6%.
* Dividends per share are increased to 13.2p (1997: 12.9p),
representing Warner Estate's 28th successive annual
dividend increase.
* Total rents receivable were #15.1 million (1997: #15.7
million), mainly reflecting the reduction in trading
stock, but voids and overenting both reduced.
* Reflecting reduced trading activity, pre-tax profit was
#9.1 million (1997: #9.7 million) on a revenue basis and
#10.4 million (1997: #12.3 million) including capital
items.
* Philip Warner, Executive Chairman, stated "The Group aims
to maximise total return for shareholders through a
strategy of expansion and active management of its
property investment portfolio, controlled exposure to
trading and development and sound management of risk and
borrowing. Although a slowing UK economy and global
uncertainty have brought uneasiness to the property
market we will continue to implement our strategy and to
take advantage of opportunities such uneasiness may
present."
Enquiries:
Warner Estate Holdings PLC
Philip Warner (Executive Chairman) 0171-493 6480
Peter Collins (Finance Director) 0171-493 6480
Andrew Batty/Jim Neill (Joint Property
Directors) 0171-487 3312
Bankside Consultants Limited 0171-220 7477
Charles Ponsonby
CHAIRMAN'S STATEMENT
FINANCIAL OVERVIEW
I am pleased to report that pro forma net asset value per
share has increased by 15 per cent to 319p (1997: 278p). This
is a new presentation of our net asset value which eliminates
the effects of stock market fluctuations and shows the
relevant value of other property businesses in which we have
invested. The balance sheet shows 301p (1997: 308p)
reflecting the fall in stock market values. However,
excluding property shares, net asset value per share rose from
191p to 219p, also an increase of 15 per cent.
Pre-tax profits were #10.4 million (1997: #12.3 million) and
earnings per share 15.46p (1997: 19.15p). In revenue terms
(which exclude profits and losses on sale of, and provisions
against, fixed assets) pre-tax profits were #9.1 million
(1997: #9.7 million) and earnings per share 13.51p (1997:
14.26p).
The Board recommends a further rise in dividends per share to
13.2p representing the Company's 28th successive annual
increase. The dividend is covered 1.0 times by revenue
earnings and 1.2 times by total earnings.
TURNOVER
Total rents receivable fell from #15.7 million to #15.1
million, mainly reflecting the reduction in trading stock.
Residential rents maintained last year's level with 18 per
cent rental growth countering the effect of sales. Rents from
commercial investments fell slightly due to purchases yielding
less than sales as the Group improved the quality of the
portfolio. While the level of void properties, at 14 per
cent, has risen from last year with a potential of almost #1
million to be added to gross rents. A significant proportion
of this figure (#0.3 million) is due to specific situations at
Ellesmere Port, Hemel Hempstead and Vere Street, London W1,
where property is to be refurbished or redeveloped. The
estimated levels of over-renting and reversionary rents are 11
per cent and 7 per cent respectively of gross commercial
investment rents receivable.
Turnover from property trading was lower at #18.3 million,
compared to #24.7 million last year, as a consequence of
market conditions and our decision to retain our site at
Watford for development.
GROUP OPERATING PROFIT
Operating profit, excluding joint ventures and associate, was
lower at #11.7 million (1997: #13.4 million) mainly as a
result of reduced trading activity referred to above.
JOINT VENTURES
The year saw considerable activity from this aspect of our
strategy and a useful contribution to profit. In October
1997, Six Acre Investments Ltd purchased a shopping centre in
Sale, Greater Manchester for #15 million with scope for
management to add value. In January and May, Consolidated
Estates Ltd and Manordome Ltd purchased three West End
properties for #3.6 million with a view to refurbishment.
Warrington Industrial Investments Ltd sold its industrial
estates at a profit and reinvested part of the proceeds in a
retail investment in Canterbury with potential for lease
restructuring. We have agreed to increase our investment in
Trade Centre Developments Ltd, which was formed to develop the
trade counter equivalent of small retail parks, in order to
accelerate that company's expansion as suitable opportunities
arise. At the year end we reorganised our relationship with
Midland Commercial Properties Ltd, terminating the
partnerships and taking a 50 per cent share in the company
with the objective of sharing its expertise in the West
Midlands.
ASSOCIATED COMPANY
The contribution from Merivale Moore plc included #0.4 million
of exceptional profit.
PROFIT ON SALE OF INVESTMENT PROPERTIES
Residential properties and joint ventures provided this profit
with commercial properties showing a small loss as the Group
disposed of investments in the course of improving the quality
of the portfolio.
INVESTMENT INCOME
Dividend income has again risen, to #2.7 million from #2.5
million, derived mainly from the shareholdings in The Bradford
Property Trust PLC and East Surrey Holdings plc. In addition,
the year saw a welcome first dividend from Ashquay Group Plc.
INTEREST PAYABLE
FRS9, Associates and Joint Ventures, has altered the
presentation of this figure and last year's has been re-stated
accordingly. Interest payable increased by 4.0 per cent to
#8.4 million, reflecting higher interest rates and increased
borrowing. Interest of #0.1 million was capitalised following
the reclassification of the site at Watford for development.
Interest payable was covered 2.2 times by profit before
interest and tax (1997: 2.5 times).
TAXATION
Revenue profits chargeable to corporation tax at the standard
rate, after adjustment for depreciation and disallowable
items, are reduced by capital allowances. With a low charge
on capital profits because of indexation and dividend income
charged at 20 per cent, the effective tax rate was 24.0 per
cent (1997: 19.9 per cent with the benefit of a prior year's
adjustment on capital allowances).
INVESTMENT PROPERTIES
It is our policy to revalue substantially all the Group's
commercial investment properties externally each year. These
have again been valued by Healey & Baker with the remainder
and the residential properties being valued by two suitably
qualified officers of the Group. After purchases and sales,
the total value of investment properties rose from #141.45
million to #158.2 million. The residential valuation produced
a surplus of 25 per cent and the commercial 6 per cent.
In keeping with our strategy of active management to improve
the quality of the commercial portfolio, we made sales of 16
properties for #10.3 million and acquisitions of 12 properties
for #12.3 million during the year. As at the year end, the
yield on the portfolio was 8.9 per cent and on each sector 8.3
per cent for retail, 9.1 per cent for offices and 11.5 per
cent for industrial. 24 per cent of the leases have over 15
years unexpired, a further 24 per cent have over ten years
unexpired and a further 17 per cent have over five years
unexpired.
INVESTMENTS
During the year, the value of our investment in East Surrey
Holdings plc increased from #7.7 million to #8.6 million. I
have already referred to our holdings of property shares under
"Financial Overview" above. We consider that the fluctuations
in stock market values between 1997 and 1998 illustrate and
fully justify our reasons for showing a pro forma net asset
value using the net asset values of the property businesses in
which we hold shares. Part of our strategy is to invest in
complementary property companies and it is the value of the
business, not the share price at a particular moment, which is
relevant. The value of our share of those businesses, The
Bradford Property Trust PLC and Ashquay Group Plc based on the
underlying net asset value, increased by 16.1 per cent from
#44.2 million to #51.3 million.
During the year, we acquired a 10 per cent holding in
Stockbourne plc, a listed property asset manager and leveraged
investor.
TRADING PROPERTIES AND DEVELOPMENT
Our level of stock fell during the year for two reasons.
Firstly, market conditions made it more difficult to find
value. However, we did make acquisitions totalling #10.5
million of mainly retail and industrial property and our
strategy of controlled exposure to trading continues to make a
useful contribution from both profit on sales and rental
income. Secondly, putting long term potential ahead of short
term profit, we transferred our site at Watford to the
investment portfolio for development. Discussions with
adjoining owners are well advanced and we are optimistic that
construction of 75,000 sq ft of retail warehousing will
commence during first half of 1999.
Stock values are stated at the lower of cost and net
realisable value, #20.3 million against #31.0 million at the
previous year end. Although some fell slightly below cost and
have been written down, we are confident that the overall
value is greater than that shown in the balance sheet.
FINANCE
New reporting requirements - The accounts have been prepared
incorporating the requirements of FRS 9 through to FRS 14 and
the 1997 figures restated accordingly. FRS 9 and FRS 13 have
the greatest impact on the Group's accounts. FRS 9 requires
disclosure and incorporation within the accounts of the key
elements of profit and loss and the gross assets and
liabilities of joint ventures. FRS 13, which is not yet
mandatory, requires disclosure of the Group's policy on
financial risk and of information on its funding and hedging
lines. This includes a requirement to disclose the fair value
of fixed rate debt taking account of current rates. As at the
year end, such a valuation would reduce the Group's assets by
#11.3 million, 22p per share, representing a 7 per cent
reduction in pro forma net assets.
Debt - Net borrowings increased during the year by #6.6
million to #82.9 million and gearing from 49 to 54 per cent
largely due to the fall in stock exchange values. On the pro
forma basis gearing was 51 per cent. At the year end 53 per
cent of debt was fixed (1997: 58 per cent), at an average rate
of 9.3 per cent for 12 years. Since the year end rates on the
floating balance have fallen substantially.
Facilities - At the year end the Group had unutilised
borrowing facilities available of #28 million.
STRATEGY AND PROSPECTS
The Group aims to maximise total return for shareholders
through a strategy of:
- expansion and active management of its property
investment portfolio;
- controlled exposure to trading and development; and
- sound management of risk and borrowing.
The year end purchase of 15 properties for #11.5 million from
Legal & General typifies our approach to active management.
Seven properties with an average lot size of #1 million, rack
rented to good covenants with average unexpired lease terms in
excess of 12 years are being retained in the investment
portfolio. The balance, yielding in excess of 10 per cent, is
for sale, one property having already been sold at 15 per cent
above book cost. Similar opportunities will be pursued and
further disposals of non core properties will be made with a
view to improving quality and increasing the average lot size.
While this may initially reduce current income from the
investment portfolio, we expect the strategy to lead to
increasing total returns with a greater emphasis on net asset
value per share than hitherto. The quality of the earnings
stream should improve and revenue will be supplemented by both
trading and an increasing margin between rental income and the
costs of borrowing.
Our residential property investments in Walthamstow, London
E17 performed well. We sell them as they become vacant,
retaining our presence in the residential sector through our
share of the business of The Bradford Property Trust PLC.
Although a slowing UK economy and global uncertainty have
brought uneasiness to the property market we will continue to
implement our strategy and to take advantage of opportunities
such uneasiness may present.
DIVIDENDS
The Board recommends a final dividend per share of 8.90p
(1997: 8.75p), making a total for the year of 13.20p (1997:
12.90). If approved at the Annual General Meeting, the final
dividend will be paid on 9 April 1999 to shareholders on the
register at the close of business on 5 March 1999.
MORE TO FOLLOW
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